Sitting of 26 February 1982

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Petition

  Nurses' Pay
  9.34 am
  Mr. Bob Cryer: Mr. Speaker, I have much pleasure in presenting this petition. Well over 18,000 signatures are attached to it, mostly from nurses but supported by doctors and other National Health Service staff, patients and members of the public. The petition has been organised by nurses working at Airedale general hospital in my constituency who are members of the Royal College of Nursing and they are supported by nurses of other trade union organisations.
  They share a common disgust at the 4 per cent. pay limit imposed by the Government. Their pay claim is 12 per cent., which only keeps up with inflation. Lack of response by the management side has made nurses more than ever determined to seek a just pay award, as the petition reflects. They point out that a student nurse in the first year receives £3,290 per annum while a first-year police constable receives £5,610 per annum. Nurses do a valuable, deeply appreciated job and wish to concentrate their energies on the job instead of fighting what they regard as a hard-hearted and uncaring Government who are trying to erode the jewel in the crown of our public service—the National Health Service.
  The petition states
  That Her Majesty's Ministers have made various pledges to nurses working in the National Health Service, and that to honour these pledges Her Majesty's Government should give nurses special consideration in respect of pay for the financial year 1982–83, and further set up a mechanism by April 1982 to ensure that the pay of nurses will be maintained at a satisfactory level in the future.
  Your Petitioners pray that your Honourable House will ensure that the Government honour the pledges which it has made to bring nurses' pay up to a satisfactory level, and to maintain it in the future.
  And your Petitioners, as in duty bound, will ever pray &c.
  I beg leave to present the petition.
  To lie upon the Table.

Orders of the Day

  Rating System (Abolition) Bill
  Order for Second Reading read.
  9.37 am
  Sir Hugh Fraser: I beg to move, That the Bill be now read a Second time.
  I hope that, as local government finance is a minefield as regards one's friends, relations and constituents, as well as the enemies that one may make on the Government Front Bench, I shall be permitted to stick closely to my notes. I must also warn the House that I propose to speak for a great length of time; those who wish to refresh themselves should perhaps leave the House at this early hour and return perhaps on a happier day.
  Mr. John Heddle: Next Friday.
  Mr. Neil Thorne, South): My right hon. Friend will talk out his Bill.
  Sir Hugh Fraser: The Bill seeks to abolish the powers of local authorities and water authorities to levy all rates on the present systems of assessment. It asks for reform to be brought forward within one year. I am glad to see my hon. Friend the Under-Secretary of State for the Environment on the Front Bench. I hope that he will teak back to the Cabinet the story that we believe that the Government have lost their resolve on rating reform despite the pledges of the Conservative Party since 1964 to make it a major matter of political import and action.
  Although the short title of the Bill is the Rating System (Abolition) Act 1982, is it not similar to that passed by the Dublin Dail in the 1970s which abolished domestic rates altogether? Irish rates are very Irish and were based on revaluations last carried out between 1863 and 1865. Nevertheless, this Bill and my remarks are far more radical and controversial than anything in the Government's Green Paper, which states:
  "the system of domestic rates has become particularly controversial as spending has grown in times of high inflation."
  That is an understatement. In my view, for industry and commerce, which enjoy no general rate rebate or abatement, the problem is even harsher. Indeed, commercial and industrial rates have become a far heavier impost than the whole of corporation tax and, in several industries, they now exceed profits.
  The Bill goes wider than the Government's Green Paper "Alternatives to Domestic Rates" and includes all rating. However, so huge are the sums and so large the issues that these matters can be discussed only in the totality of local government finance. I go even further: so huge is the ask of raising the £30,000 million that local government now spends, and so difficult is the sum to find, that something must be said about the whole structure of taxation in Britain.
  Over the past decade, the central failure has become clear and increasingly apparent. When local government was reorganised between 1972 and 1974, its basic financial reorganisation in an age of inflation was never properly considered. This House never even debated the Layfield report. The cart was put before the horse and has stayed there ever since.

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  Ever since 1975, when the late Anthony Crosland declared the party to be over, the daily battle of attrition between central and local government has intensified with the bemused and mystified taxpayers and local ratepayers both on the losing side.
  When Neville Chamberlain introduced the Local Government Bill 1929, according to that great constitutionalist Sir Ivor Jennings, only one other person understood it—Mr. Sydney Webb. Many more are cognoscenti on these matters in 1982 but few of us can pretend to be experts or fully to understand the detailed application of either the old method of assessing the rate support grant on regressional analysis or even the latest model with its "clawbacks", "holdbacks", "grant abatements" and threats of "super holdbacks". I hope that the Under-Secretary, who is cognisant in these matters, will bear with me in these remarks.
  I ask the House to consider the broad principles. The situation has never been more confused or critical. Seldom has the public been angrier or more bewildered; that becomes clearer every day as we learn about the rate assessments to be levied by the various local government elected representatives.
  The first issue, of course, is the philosophical and political relationship on finance between central and local government. Central Government have an obligation to ensure that their general policies are pursued by local government. They must retain overall responsibility for national, economic and social objectives. The whole House can agree on that aspect. However, central Government also have an obligation to protect ratepayers suffering undue taxation from the vagaries, extravagances or follies of local government. We all know of such examples and observe the public affluence of new town halls in seas of private squalor and of the executives, responsible for local activities, having salaries raised in 18 months from £9,000 to £20,000 a year. Another example are the rate jumps—of no less than 66 per cent. in West Yorkshire, in Avon of 40 per cent. and in some of the West Midlands areas of well over 20 per cent.
  The past relationship between local government and central Government has generally been harmonious. An exception to that rule was Poplar in the 1930s. That relationship is now violently controversial and they even contend in the law courts. I differ from the views expressed at the Labour Party's local government conference in Sheffield because centralism, with all its faults, is preferable to chaos. Of course, centralism can go too far. Local authorities must be given opportunities to exercise initiatives. It is difficult to balance the situation, but it is important that the enormous economic burdens that Government keep throwing on local authorities, without adequate finance, are better controlled.
  That has been a political ploy, but from 1958 onwards, when more of the educational weight was placed on local authorities, the situation worsened. That weight is almost unbearable today. Examples of that are the minor antinuclear preparations, inadequate grants, legislation on children in the 1970s and the Chronically Sick and Disabled Persons Act 1970. Dozens more Bills, introduced by private Members, were pushed on local authorities without giving them adequate resources to deal with them.
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  The results of that policy are seen today. Police forces throughout the country have suffered from the cuts imposed on them by local authorities. The prime object of central Government—to ensure that their general broad policies are carried out—fails.
  My first main point, therefore, relates to the abatement and reform of rates. The duty lies with Parliament. This House must no longer thrust on local government costs which should be met by the central Exchequer or decree extravagances which should not be permitted.
  Secondly, if local government is to be properly understood and controlled, the situation, so well set out by that scarcely Conservative economist, Professor Wynne Godley, must be avoided. His pamphlet on local government finance said
  "that the public has no means whatever of telling whether the level or rate of change in local authority expenditure and the burden of rates is a result of decisions by local government or impositions by the central authority."
  I beg the Government to do two things—first, to have a greater understanding and to clarify the so-called "unhypothecated" rate support grant so that the public is clear on the proper standards and the boundaries of discretion governing local authorities. That was not done, even after the 1980 Act.
  Who are the public to inform if there are no pencils or school books? Are the LEA or central Government to blame? We are always told that it is central Government—whichever Front Bench one sits on—who are to blame. However, it is difficult for members of a rating authority to be fair or free judges because the information is simply not available. I much welcome the concept of an audit commission so that there can be comparison between expenditure in various authorities.
  Some would resolve this problem by doing away with rates and local government. Strangely enough, it was a course contemplated by that benign individual Arthur James Balfour, who led and mystified my party at the turn of the century when county councils were only a few years old.
  Mr. John Stokes: Philosophic doubt.
  Sir Hugh Fraser: Indeed.
  To some it is a course that has distinct appeal—for example, the French system of intendance. A Minister of the Interior or Minister of Education can look at his watch and say "At this very moment every child is studying geography". A return to the Cromwellian major-generals would undoubtedly rejoice the souls of the Foot family. A system of regional commissioners is another possibility. Such a system under the direction of the late Herbert Morrison ran Britain extremely effectively during the war years. There is the American system of town managers. The Dutch appoint burgomasters for life. A system of town bands and Whitehall management would, I am sure, be broadly rejected by the House.
  There are the lesser iconoclasts who would abolish certain tiers of local government. I am sure that it would not be generally unpopular to consider the abolition of the GLC and ILEA. The GLC has recently proposed a doubling of its precept with what amounts to a 100 per cent. jump in rates. If responsibility for education were given to the London boroughs and responsibility for London Transport to the Secretary of State Transport, Mr.

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  Livingstone would be left alone in his dreams of glory in a building that would be empty save for planners and protected only by the London fire brigade.
  Mr. Christopher Murphy: Sell it off.
  Sir Hugh Fraser: The savings would be considerable.
  Mr. Anthony Grant: The building could be used as a London Tranport museum, perhaps.
  Sir Hugh Fraser: There is a halfway stage, which is for local government to work on assigned revenues from central Government, as happens in Holland. That has been proposed by my hon. Friend the Member for Kensington (Sir B. Rhys Williams). That would mean that the cost of education, for example, would be returned to central Government, wholly or in part. The House has ordered that variations on that scheme be investigated. Apart from the burden that would be placed on central income tax, I suspect that each Member of Parliament would have to deal with issues such as where Nelly's daughter should go to school instead of such matters being dealt with by the local authorities. It would not be as cheap or as efficient as the present system.
  Another possibility—perhaps a more effective way of saving money—would be to centralise the finance of all the police forces in a national police force, but that is perhaps not politically acceptable.
  I regard the debate on the ratio between central and local taxation as somewhat academic. Too often central Peter merely robs local Paul or vice versa. We are faced with the unfortunate fact that Britain is beginning to run out of taxable resources.
  For equalisation and control purposes, central support must be about 40 per cent. at the minimum. Members will note that recently rate support grant from central Government has been moving downwards. It has fallen from 66 per cent. in 1979 to 59.1 per cent last year and it is now 56 per cent. That means that, after specific grants have been deducted, the block grant to assist local authorities to meet their costs is about 42 per cent.
  This is not a matter of surprise when we consider the level of central taxation and the Government's pledge to reduce it, and the lack of buoyancy in revenues, which even now is threatened in the oil sector. In so far as the move downwards has reduced local extravagance, it is to be welcomed. In so far as it has made local government more responsible, it is to be saluted. In so far as it pushes domestic and industrial rates through the roof, it is producing a crisis. The resolution of that crisis needs something far more fundamental and realistic than proposals for holding referendums on the rates. I am glad that the Government have abandoned that programme.
  I am a believer in local government, but its preservation by making it more understandable and more answerable is an end in itself as well as being the only way in which local taxation can be broadened, and broadened it has to be. The burden is falling on too narrow an area. It is being placed on narrow shoulders that are now overweighed by it. This taxation must fall on more, or on all who benefit. They must make a contribution.
  I think especially of two groups—in some instances bodies corporate—that are more or less immune, and certainly directly immune, from domestic rates. First, there are those who are earners but not occupiers.
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  Secondly, there are those who through ownership profit from the occupation of others. In the latter part of my speech I shall turn to the broad future and system of taxation. What I propose may seem radical and it will be unpopular with some of my right hon. and hon. Friends.
  What can be done? In considering the answers we must turn to the Green Paper. It was introduced by the Government but it might have been introduced by Fabianus Cunctator himself. It is really a Fabian pamphlet that tells us that almost nothing can be done and that what can be done will almost surely be wrong. I salute the conversion of my right hon. and hon. Friends to the thinking of the extreme Left or middle Left.
  Sir Ronald Bell: Was not Fabianus Cunctator a rather successful general?
  Sir Hugh Fraser: He was a successful general only at the end of a very long period, and time is short.
  Mr. Douglas Hogg: He fought a delaying action.
  Sir Hugh Fraser: It takes years even to move from central to capital value assessments. A reduction in central Government valuation machinery would take, according to the Green Paper, six or seven years. For a variety of good and bad reasons there has been no updating of rental values in England and Wales since 1973. We must deal with things as they are and try to improve the lot of industrial and domestic ratepayers.
  I shall run swiftly through the possibilities that are contained in the Layfield report and in other reports before I turn quickly to the Green Paper. First, local authorities could raise more funds through fees and other charges and could reduce their own expenditure by privatisation of the sort that we have seen in Southend and other boroughs. The winning of expertise and the losing of layers of unnecessary management can be extremely valuable.
  Leaving house rents out of these considerations, I believe that there should be a new liberalisation of the powers of local authorities to make charges based on local political decisions. The House will know that in certain areas local authorities are restricted. They should be set free from a number of statutory controls. The sums that could be raised are considerable. Such areas include education, policy and resources, social services, police, records and museums, fire, planning and probation. The House will be grateful to know that I shall not go into the details. The schedules for Staffordshire alone amount to about 130 pages of small print.
  Secondly, there must be a broadening of the domestic ratepaying base. Anyone who benefits from local authority services should pay the full domestic rate. If they are to avoid such payments, that should be done by subsidies from central Government.
  What I am about to say will be painful and unpopular. I believe that Crown properties, nationalised industries, charities, kindred bodies such as clubs and associations, voluntary organisations and, most controversial of all, farm buildings, which since 1929 have been exempted, should be subject to the valuation office. This will not be popular, but logic seldom is.
  Mr. Heddle: That point may need some clarification, particularly as the hon. Member for Croydon, North-West (Mr. Pitt) is present, who no doubt will continue his romantic affair with site value rating when he speaks. Does

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  my right hon. Friend agree that only agricultural land has received the privilege of derating since 1929, not productive agricultural buildings?
  Sir Hugh Fraser: I understand that farm buildings were derated in 1929.
  Mr. Ted Graham: The hon. Member for Lichfield and Tamworth (Mr. Heddle) makes an important point. We are discussing the broad totality of how to spread the burden borne by domestic ratepayers as widely as possible. Surely the right hon. Member for Stafford and Stone (Sir Hugh Fraser) will refer to the possibility of bringing agricultural land into the rating system.
  Sir Hugh Fraser: If the hon. Gentleman will wait, I will come to the most controversial part of my speech.
  Some adjustments can be made between the rate support grant and the domestic element. Those are technical and are set out clearly in detail in the White Paper in chapter 4, paragraphs 18, 19, 20 and 21.
  I note that the Government are considering a re-rating of industrial and commercial premises. I wonder why. I should have thought that it was a strange and dangerous expedient in an economy that is based on the "supply side" to consider that rather than the most important thing, which is that derating rather than re-rating should be the main objective of the Conservative Government.
  At the moment all domestic rates are derated by 181/2 per cent.—even more heavily in London. There is no such advantage for industry, which is crying out for help. The CBI has been marching, petitioning and picketing the headquarters of the local authority in Avon with cause. I am sure that some parts of the CBI's memorandum on empty premises and some schedules in the 1967 Act could be adopted without undue harm to the Exchequer.
  My hon. Friends will wish to discuss the various proposals for further tax in the Green Paper. The tax basis must be broadened. What I would most bear in mind after the unpopularity of such a move is the time factor. A limited sales tax or a poll tax would be the best and quickest starters with, of course, the abatements currently received by ratepayers. Putting a poll tax at around £50 per head per annum and allowing for supplementary benefit and the rest, the sum raised would be about £l1/2 billion. That would be fair and would at least ensure that domestic and industrial rates did not increase beyond the levels of taxation.
  A greater question that the House must face is whether the forthcoming needs of this country for the maintenance of its effective basis of services, buildings and so on can be met from the present rating system or even the present system of national taxation. If local government is in a bad way, the environment is even worse off. Local government is burdened with debt and financial confusion and is running out of resources. The environment is entering a spiral of obsolescence and decay. What applies to urban areas is now becoming true of rural areas, particularly in facilities such as prisons, housing, canals, sewers, roads, railways and telecommunications. Government after Government for the last decade and more have cut billion after billion from capital expenditure.
  I shall give some of the figures to show what has happened to local government's capital expenditure,
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  excluding housing. In 1975 it was about £3 billion. Today, at 1975 prices, it is about half that amount. The task is enormous. To put that right needs new resources and a new national dedication.
  Even if the Government succeed in their fight against inflation and even if local authorities reduce their expenditure by 10 per cent., the damage done and being done cannot be put right overnight, nor can the tax structure be changed immediately. We need a target for both.
  In the past there have been efforts to meet some Government expenditure, although not, alas, capital expenditure, by the institution of various taxes on capital. They have fallen on the rich, not purely out of spite, malice and jealousy but on the higher argument that wealth and unearned income is the child of a whole nation's endeavour and a growing improvement of the environment. However, so far, all those efforts have proved futile, like the Labour attempts in the Town and Country Planning Act to tax development values or the Community Land Act, both of which follies have been rightly abandoned, because they were taxes in restraint of trade and produced little or nothing.
  We are still burdened with one foolish Act, the Development Land Tax Act, which inhibits activity. We still have a capital gains tax, the yield of which is small and the impact of which is unjust and unfair and can be easily avoided. Apart from a modified capital transfer tax—it used to be called death duties—those taxes should be abolished as we look to a new and broader conception.
  That conception is the idea of a new capital taxation that should be hypothecated to one purpose only, the redemption of our infrastructure to make England a pleasant, if not green, land. The conception, if not as old as the hills, for England at least is as old as the laws of the Norman Conquest. The property laws continue to be based on the Norman concept of tenure—that all land is in tenure from the Crown. Historians in the House will recall that over a period military tenure imposed by the Norman kings was modified to cash payments known as scutage. When that was abandoned the phrase "scot free" came into use. That did not refer to my compatriots but it enriched the language and the nobility by meaning that those people were free of paying scutage.
  Mr. Douglas Hogg: They did not pay their debts.
  Sir Hugh Fraser: The basic conditions of the law remain. Freehold means freedom from rent to the Crown. Today the Crown means the Crown in Parliament. The basis of my idea is that when the details have been properly worked out there should be a Crown rent on all land, whether privately or publicly owned.
  Some hon. Members may call that proposal feudal and reactionary; others may call it revolutionary. I see shades of Henry George and Lloyd George with his cry:
  "The land belongs to the people."
  However, the people and the national need have created basic values. Some will call my proposal a tax on land. One thing one cannot do is move land to the Bahamas, the Channel Islands or even the Isle of Man. Some trusts, pension funds, urban property owners and municipalities have become as rich and powerful as the medieval church and almost as free of tax as if the held land, as the bishops did, in tenure spiritual.
  Mr. Douglas Hogg: Is my right hon. Friend proposing anything more than what I believe was called the old schedule 8 Act?
  Sir Hugh Fraser: It is not dissimilar, but I am making it a good deal wider.
  Often, property owners are like the monastic or clerical dead hand, with neither development nor movement, only perpetual accumulation. As a capitalist, I believe that the time has come for a new dissolution of these orders or monasteries and a shake-up of the system, and a wider spread of property, which is the true foundation of a property-owning democracy. That is, after all—I speak as a Roman Catholic—what the Reformation effected. It brought about an economic revolution and unleashed private enterprise on a scale never before seen. That cannot be done at one stroke. The assessment of values takes time. I am calling not for panic action but for orderly progress and consideration. Something of that kind should become a fiscal objective.
  Ownership—not occupation, buildings or improvements—should he the main basis of property taxation. It is so broad that it is the only logical basis. If one takes into account the huge sums involved, running into hundreds of billions of pounds, the burden will not be so very onerous. The variations are immense. An acre in the north of Scotland or Wales is lucky to be worth a fiver, whereas in Holborn or Mayfair it is cheap at £5 million. The golden mile in the City, with some of its 32 million sq ft at £25 per sq ft, raises an astronomical sum for its 700 acres. Whitehall, too, must be worth a bob or two, unless some of the wild men of the Opposition get hold of the place, when the current use value for the House of Commons will drop to zero.
  I view these proposals in a kinder light than merely that of taxation. It is a rent that we all owe to our past, to the people and to generations to come. Morally, there is no question but that it is the activities of the nation as a whole, its history and infrastructure and the advancement of our civilisation on this small over-populated island, which have created the intrinsic values of our land. Therefore, I ask for the proposals to be considered seriously.
  For the benefit of the Opposition, I shall finish by quoting from a letter of resignation from a Labour Minister. It said:
  "What I fear much more than a sudden crisis is a long, slow, crumbling through the years until we sink to the level of a Spain, a gradual paralysis, beneath which all the vigour and energy of this country will succumb."
  The Minister concerned was the late Oswald Mosley. For the benefit of my right hon. and hon. Friends who consider my proposals revolutionary, I shall quote from the inaugural speech of a man who was my friend, John Fitzgerald Kennedy:
  "If free society cannot help the many who are poor, it cannot save the few who are rich."
  10.14 am
  Mr. William Pitt: Before entering into my love affair, if that is what it is, with site value rating, I shall quote from a speech by my noble Friend Lord Beaumont of Whitley who said:
  "It is to the local government of this country that we must try to give as much independence as possible and as much opportunity as possible"—[Official Report, House of Lords, 10 February 1982; Vol. 427, c. 229.]
  Mr. Barry Henderson: On a point of order, Mr. Deputy Speaker. Is it in order for an hon. Member to quote speeches from the other place other than those by Ministers?
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): The hon. Gentleman is correct. I draw the attention of the hon. Member for Croydon, North-West (Mr. Pitt) to the fact that it is not in order to quote from speeches in the other place other than by Ministers.
  Mr. Pitt: In that case, I shall not continue the quotation. I was near the end, anyway. I was merely quoting one sentence.
  Those supporting the thesis of Lord Beaumont of Whitley cannot gain much hope from the Government's Green Paper that that thesis will be put into practice. After agreeing that local government has traditionally enjoyed some discretion, the Green Paper says, in paragraph 1.11:
  "The Government, however, has overall responsibility for all public services, including those provided by local authorities, and for national economic objectives."
  As the right hon. Member for Stafford and Stone (Sir H. Fraser) said, the Government's Green Paper offers no comfort that we shall at last have a reformation of the rating system. I agree with much of what the right hon. Gentleman said.
  If we are to examine how to levy local taxation, three important points should be borne in mind. First, the scheme must be practicable. Secondly, it must be fair. Thirdly, it must be cheap. Overall, it should foster accountability to the electors and taxpayers. Financing for local requirements should be drawn, as far as is practicable, from local people. Therefore, I draw attention to the proposals made by the Liberal Party to the Layfield committee.
  The Layfield report was never debated and there was much in it apart from the Liberal proposals which would have borne consideration. I shall describe three of the more important proposals which the Liberal Party made to that committee and which were endorsed by the party council in 1975. First, it advocated the return to the local authority of a fixed proportion of revenue from income tax, to be distributed in accordance with needs—in other words, a local income tax.
  Secondly, the present rating system should be replaced by a system of site value rating of all land. Thirdly—and this was perhaps the most important, and certainly the most radical step that the Liberal Party suggested—local authorities should be given the opportunity to raise additional revenue from specific resources such as tourist taxes, charges for the use of roads and amenities, and lotteries. In the event of what we hope will be an alliance Government, that income tax would eventually be levied by regional assemblies.
  I shall deal with some of those taxes. First, there is the site value rating tax or, as some prefer to call it, the land value tax. Hon. Members may be aware of the Whitstable experiment, which was a success. Tax on site values or tax on land value, whatever one calls it, is a tax on the land occupied, not on the rentable value. It is no accident that there have been no rent assessments for many years. One reason why rent cannot be related to the rateable value of a property is that the amount of rentable property is declining so fast that it is now too small to be assessed. As the right hon. Member for Stafford and Stone said, the land is still there. I echo the words of Lloyd George:
  "The land belongs to the people."
  Mr. Heddle: Is the hon. Gentleman advocating nationalisation?
  Mr. Pitt: The land belongs to the people, not to the State, which is what nationalisation would mean.
  Considerable benefit would accrue from a tax on land by site value. I do not suggest that the land should be taxed at site value on a local basis, because that would be impractical and would impose a heavy bureaucratic duty. A national land value tax redistributed through local authorities would bring taxation from a tangible asset which is immovable and can be assessed always in relation to its capital value. It would not be a declining asset, as rents and the notional rent upon which rates are assessed now are.
  Secondly, there are opportunities for local authorities to raise tax. That is not uncommon in capital cities in Europe. Many Western countries levy tourist taxes. I spoke the other day about a subsidised transport system for Greater London. One way in which that system could be subsidised would be a broader base from which local tax could be levied.
  Local authorities could consider imposing tourist taxes and charges for the use of roads or amenities, although I do not entirely concur with that. I believe that we should be able to provide most of our roads from local authority taxation, but I can see conclusive arguments for large urban motorways being toll roads. The motorway system in France is effectively a toll road system and brings in considerable revenue. Those of us who travel through France regularly may complain about it, but it certainly benefits the people for whom the revenue is collected. I am not a gambler, and I find the thought of gambling abhorrent, but there is an argument for having lotteries for specific local authority promotions.
  I agree entirely with all those who say that local authorities are rapidly losing their independence. Before I came to the House I worked for six and a half years for the London borough of Lambeth. [HON. MEMBERS: "Oh!"] I assure hon. Members that the borough of Lambeth is not so tyrannical as many people think. [HON. MEMBERS: "Just incompetent."] Whether it is incompetent is for others to judge. During that time I saw increasing erosion of the authority's independence to create a proper environment in the deprived inner city area of Brixton, in which I worked and of which I have considerable knowledge, because time and again it was hidebound by the taxation system of the Government. Local authorities must be sprung from that. They must be able to raise their own taxes and local income tax to provide a real income on which to build their independence. An interim measure to take some load off domestic rates could be introduced immediately, pending the introduction of regional taxation by a Liberal alliance Government.
  Mr. Douglas Hogg: I am interested to hear the hon. Gentleman mention regional taxation. Is he implying a further reorganisation of local government? Very few areas are now big enough to meet their own expenditure through revenue from within their own boundaries, so the introduction of regional income tax must involve further reorganisation of local government. Is that alliance policy?
  Mr. Pitt: I am talking about a radical reorganisation of the government of this country when the alliance takes control. [HON. MEMBERS: "Answer the question."] I have just answered it.
  Local income tax could be introduced immediately at a low rate of 1 or 2 per cent., but it would be appropriate to set it at a level sufficient to cover about two-thirds of the expenditure of a needy district and all the expenditure of a prosperous district, the balance being provided by an equalisation grant from the Government calculated according to an objective statutory formula and not subject to ministerial fiat. Taken out of the somewhat complicated gobbledegook, that means that in a prosperous area such as Croydon local government tax could be taken from the whole population, because all of them can afford it. In areas which are not prosperous, and in country areas in which the population is sparse or incomes are low, Government intervention could make up, say, 30 per cent. by way of grant. Separately collected local income tax would provide a viable revenue source for districts and enable rates to be replaced by a land value tax, but I shall not burden the House further with my love affair with site value rating.
  The right hon. Member for Stafford and Stone, who has, unfortunately, left the Chamber, referred to the derating of commercial premises. We, too, are concerned that a number of commercial premises suffer an increasingly heavy burden in their proportion of the rates. I entirely agree that they are suffering unduly from the large increase in rates, which results mainly from the activities of the Secretary of State for the Environment. The Liberal Party would support, in certain measure, the derating of industrial premises. This would greatly assist the profitability of many small businesses and the Government should consider it as a matter of urgency.
  10.14 am
  Mr. Barry Henderson: I hope that the hon. Member for Croydon, North-West (Mr. Pitt) will forgive me if, in the interests of brevity, I do not directly pursue the points he made. We must all be grateful to my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) for introducing the Bill and for the manner in which he introduced it. The debate comes at an appropriate and helpful time for hon. Members to share their views on the subject, as I hope that the House will be taking final decisions before long.
  In that context, it is unfortunate that so few Opposition Members are present. There is only one Labour representative.
  Mr. Graham: If the hon. Member is saying that there are 11 Conservative Members present and more than 300 absent, I am happy for that to be placed on the record.
  Mr. Henderson: When I counted at the beginning, there were 16 Conservative Members and only two Opposition Members. Interestingly enough, that is roughly the proportion in which domestic ratepayers contribute directly to the costs of local government. The ratio varies in different areas, but about £1 in every £6 of local government expenditure is produced by domestic rate. I do not think that most domestic ratepayers know that. With great justice, they groan under the burdens of high rates on many households, but they still meet only £1 in every £6 that local government spends.
  Sir Ronald Bell: Perhaps we may carry the argument one stage further. Because they provide only one-sixth of local government expenditure, all the pressure from them is for greater expenditure, which explains why local government expenditure constantly increases. If they paid six-sixths we should not hear so many demands for greater expenditure.
  Mr. Henderson: I am sure that my hon. and learned Friend makes a valid point. I hope to persuade the House of a different way to deal with these matters.
  If we had no existing rating system and sought to invent a system of local taxation, I do not believe that we should devise the system that we now have. At one time, I was so incensed by the injustice of rates that I was prepared to abolish them at any price, even if the price were 100 per cent. rate support grant or its equivalent. I am still just as incensed by the injustice of rates, but I have had to modify my view for two main reasons.
  First, it is essential that there should be a significant element of directly attributable local taxation in local government expenditure. Secondly, if we moved entirely to the central raising of finance that would have the disadvantage, as my hon. and learned Friend said, that people would not directly associate taxation with the expenditure that they demanded.
  Let us consider taxation and representations as an aspect of the justice of the issue. Industry and commerce complain bitterly about the extent to which they, compared with domestic ratepayers, bear the rates burden. Let me give the example of Scotland in 1980. I shall not give the figures in detail. If the total estimated rate income in all regions of Scotland were 7, 2.6 was raised by domestic rates, 1.9 by commercial subjects, 0.8 by industrial subjects, and 1.7 from other sources. Thus, of the total income of the regions from rates of one kind or another, 2.6 came from domestic subjects, with commerce at 1.9—not very far behind. Nevertheless, commerce has no say in the administration of local authority policy. I do not suggest for a moment that we should go back to the business vote. That would be wholly wrong. It would be unjustified in democratic theory, and it would be of no consequence in decision making.
  The second aspect of justice involved here is the burden of tax that is related to the ability to pay. Tax in rates was generally held to be a manageable burden for most families when I was a boy. Since then, the situation has changed significantly. Now it is one of the largest single costs of a family, not one of its lesser costs.
  Having spoken about justice as an abstract consideration, important though it is, we must also think about the practicalities of the matter—for example, the cost of raising revenue against the income that is derived from it. We must also consider the identity of purpose. What is the tax raised for, and who does it come from? I have come to the view that there is no single solution to the problem. No one likes rates. Indeed, no one likes any form of taxation. Therefore, we should have a radical review of the overall requirement for money by local government and discover how, most reasonably and sensibly, that might be raised in current circumstances, not those of the nineteeth century.
  We have become accustomed to rates, although that does not make us like them to any greater extent. If the rate burden were not as heavy as it is, people would thole it better. Moreover, many people who vote in local
  1094
  elections do not contribute to that taxation. If we accept that there will always be an input from central taxation towards local government costs, the proportion should be a matter of judgment at any given time. For my part, I believe that it should be between a minimum of one-third and a maximum of three-quarters. If there is to be an input from central taxation, and if we accept that the proportion from rates is at a reduced level of burden, rating can be a reasonable way of getting some of the income for local authorities.
  A third element is required to balance the equation. I have in mind a poll tax. We should devise a formula—I shall not weary the House with the details, but I shall be happy to give to them to my hon. Friend the Minister—to provide on a generally agreed basis a proportion of local government income from central Government, and similarly from year to year a regularly quantifiable and foreseeable income for local authorities from the rating system. Where a local authority deviates substantially' here I am talking about the deviant local authority, not the normal local authority—from the norm, the extent of its deviation should not directly affect either the Government contribution or the rating contribution, but should affect most directly the poll tax contribution. The extent of deviation clearly becomes a matter on which the electorate can take a view. That would make the poll tax particularly valuable.
  I accept that the poll tax involves difficulties. Some hon. Members will say that it has a regressive element and I agree. However, that argument is met by the balance of the three different elements of taxation in local government finance. If a substantial element of local income comes from central taxation, which by and large is progressive rather than regressive, that offsets the marginal argument of the regressiveness of a poll tax. We should set against that argument the element of justice long looked for. The justification for local government being locally organised and managed and responsible to its electorate has not and cannot be fulfilled unless there is a much more direct correlation between the local electorate and the extent to which it will pay for its decisions.
  10.37 pm
  Mr. John Cartwright: I agree with much of what the hon. Member for Fife, East (Mr. Henderson) said, and I accept his analysis of the need for local accountability. I am not quite so attracted to his solution to the problem, as I shall explain later.
  I am sure that we are all grateful to the right hon. Member for Stafford and Stone (Sir H. Fraser) for giving us this opportunity to debate such an important issue. I am sad that so few Opposition Members are present.
  There is an attraction for a Social Democrat in debating this issue, because it is one of the few issues in which Social Democrats are not in a worse position in terms of policy than either of the other parties. On virtually every other policy the existing established parties can wheel out conference decisions, but when it comes to local government finance they are in as much of a quandary as the rest of us. The Conservative Party has been committed to the abolition of domestic rates since 1974, but has still not discovered what to put in their place. The Labour Party set up the Layfield committee in 1974, but did not take much account of its findings and, again, has not produced an alternative view.

  1095
  That underlines what the hon. Member for Fife, East said, that in this difficult area there is no ideal solution. In a sense, we have been looking for the philosopher's stone by which we could give local authorities a buoyant and vibrant source of income which would provide a painless way of paying for services. We must tell our constituents that there is no painless way of paying for those services and that the costs have to be met.
  Perhaps I should declare an interest. Originally I was a member of the Layfield committee, although I resigned when I was elected to this House. One of the problems in our approach to local government finance—it emerged in an earler intervention—is that we have tended to look at local government structure in isolation from local government finance, and then at finance in isolation from structure. In an ideal world we should look at the two together, because what makes sense in revenue terms for one sort of structure does not make sense for another.
  Politicians seldom have that ideal world. It may be difficult to persuade electors to go for another wholesale reform of local government, even though there is a great deal of evidence that the 1963 reorganisation in London, and the 1972 reorganisation outside London, have not worked. They have complicated local government and led to duplication, confusion, bureaucracy and waste.
  The problem of local accountability was underlined by the hon. Member for Fife, East. The dependence of local authorities on Government grant has done more than anything else to undermine the freedom, autonomy and independence of local authorities. We must devise a system that weans local authorities away from that dependence on the great exchequer in the sky which they expect to produce money for all their local services.
  Five times as much local government spending comes from sources of income that are not under its control as from the one tax that it controls—the rating system. Not everybody pays rates directly. Only about 8 per cent. of local government income comes from ratepayers who vote in elections. That underlines the need to increase accountability and interest in what goes on in our town halls.
  A responsible local authority must not concern itself simply with how it spends money. It must address itself to how to raise money to pay for the services that it wants to provide, and how to persuade its electors to vote for higher levels of taxation in order to provide those services. That is not a comfortable situation for local councillors to be in. However, I do not believe that people in local government can have it both ways. They cannot have autonomy and freedom to do what they want if the bill is being met by somebody else. They must understand that there must be a more direct relationship between providing services and paying for those services.
  That is why any system of reform in local government finance that provides genuine accountability must be based on two major factors. First, there must be a reduction in the level of Government grant. Ideally, the grant should be reduced to provide an equalisation mechanism—something which addresses the wide disparities in terms of resources between individual local authorities. Secondly, there must be a local tax which is borne directly by local electors in each local authority.
  Mr. Douglas Hogg: That is an interesting point and I am sympathetic to it. If the hon. Gentleman wants a tax to produce a sufficient product to reduce Government support to the kind of proportion that he has put forward—as I asked his hon. Friend the Member for Croydon, North-West (Mr. Pitt)—will he not have substantially to widen and enlarge the local government areas? That means a further reorganisation of local government. Does the hon. Gentleman not find that an awesome prospect?
  Mr. Cartwright: I touched on that point earlier. I said that in an ideal world one would want to relate the taxation base to the structure of local government. In an ideal world I would want regional authorities to provide overall regional economic planning. functions, and so on. In an ideal world, I would want a single tier, rather than the current two-tier system, of local government. The reform of local government finance will be much easier in that ideal world.
  I shall try to explain a little later how, short of that ideal, we might have a reformed structure which would meet some of the aims I have set out in terms of accountability. Again, I underline the point that we will not come up with an ideal solution to this problem. If there were an ideal solution, some Government would have stumbled upon it by now. In a sense, one is looking for the least unacceptable solution to those problems.
  Because of the need for a local tax source that would be borne directly by the voters, such things as sales taxes, petrol taxes and so on are ruled out. They would be confusing to the electors who would not know where their taxes were going. They would produce a complex jungle of taxation which would go directly against the clear line of responsibility between those who pay and those who spend the taxes which I want to see. That is why one is forced back, however one looks at the problem, to Layfield's basic finding that a local income tax is the only new source of local taxation worthy of further consideration. The major arguments against a local income tax are ones of practicality and administration rather than of principle.
  Mr. Heddle: The hon. Gentleman has touched upon the Layfield proposal for local income tax. He referred to the fact that he was a member of the Layfield committee before his election to the House. Will he confirm that the Layfield committee did not advocate the abolition of the rating system and its replacement by a local income tax? What it said was that a local income tax should be considered as a supplement to the existing rating system.
  Mr. Cartwright: The hon. Gentleman prejudges what I am going to say. I will take that into account. There is no one system that can sweep away the existing rating system and replace it with one simple straightforward tax. There is a variety of reasons. If local income tax replaced the whole of the income from domestic and non-domestic rates, the burden of direct taxation would be much too high. Therefore, there is a case for retaining the rating system but in a different form.
  A number of hon. Members have said that the problem is that too much of a burden is placed on the rates. Too much strain is being put on the rate base. Rates could be reformed fairly simply—I do not necessarily agree with my hon. Friend the Member for Croydon, North-West (Mr. Pitt) about site value rating, although I would not rule

  1097
  it out—by using capital values rather than notional rental value. There is a good deal more information to support valuation on a capital basis rather than on a notional rental basis, which often confuses ratepayers, particularly when the valuations are out of date.
  If we gave up a system of property tax—which is what rates are—which is fairly simple to administer and fairly cheap to collect, and has a guaranteed product at the end of the day, it would not be long before the Government saw it as a marvellous source of taxation and reinstituted a property tax. Most Western countries have a property tax of some sort. There is a strong case for retaining the rating system on a reformed basis at the lower level of local government but introducing something different at the upper level.
  A poll tax has much support from Conservative Members. However, I am hesitant about a poll tax. It would be regressive unless it were allied with a system of rebates. To have a rate system plus rate rebates, and a poll tax system plus poll tax rebates, would be a recipe for a considerable extension of bureaucracy and all the problems of administration involved in a rebate system. As practising politicians, we should be careful before we erect any barriers which deter people from registering themselves as electors on the electoral register. A poll tax might have that effect on potential local electors.
  I return to the question of local income tax. The argument in favour of a local income tax is that it would tap 5½ million people who pay income tax but who do not contribute towards rates in a direct way. The Layfield committee suggested that the Revenue would administer the tax, but that the level would be set by the local authority, and that is probably the best model to examine.
  Mr. Henderson: Is the hon. Gentleman suggesting that the locally defined income tax would be raised as part of the centrally raised income tax? Otherwise, there would be a substantial new cost for administration on a vast scale. However, if it is done by means of central taxation, is there not a great danger that no one will see the difference between them?
  Mr. Cartwright: Conservative Members are one jump ahead of me every time—[Interruption.] However, I was just about to make that point. I said that I would argue for a local income tax that was administered by the Revenue, in order to cut administration costs, and that the local authority would set the rate in order to guarantee local accountability, but I was about to say that the element of local taxation must be clearly placed on the pay slip. In that way people would know how much they paid each week or month to central Government and to their local authorities. Contrary to the present system, people would know how much was being deducted from their incomes for the payment of local services.
  I am passionately in favour of reducing the pain threshold, so that people know how much is being taken out their pockets to pay for local services. That is the only way to achieve more involvement in local government. Local income tax would not be directed towards replacing the rating system and would certainly not replace a reformed domestic rate. It would aim to reduce dependence on Government grant and on the non-domestic rate. The non-domestic rate is not a proper local tax. It is an accident whether a local authority has a high level of
  1098
  non-domestic rateable value. As has been said, local industry and commerce are not involved in the way in which the money is spent.
  Therefore, there may be a case for saying that the income from the non-domestic rate should go into the national Exchequer to provide the income for some of the grant from central Government, which pools and equalises the variations in local tax bases. Although there are political problems in having two different local taxes, such a system has much to commend it. It would overcome the problem of precepting. I have always been a member of the lower tier of local government and I feel that there is a strong argument for getting away from the nonsense of precepting, which enables the upper tier of local government to precept the lower tier. Ultimately, the electorate knows only that they are paying to the lower tier and they do not understand how much goes to the upper tier.
  Mr. Douglas Hogg: I simply wish to clarify the hon. Gentleman's point. He is obviously contemplating the idea that two sources of revenue should be available to local authorities—local income tax and rates. Is the hon. Gentleman arguing that the lower tier should derive its income exclusively from rates, with no precepting requirement?
  Mr. Cartwright: That is exactly my point. I recognise that there is a political danger, because many will argue that we would then have two levels of local government taxation instead of one. However, the strength of the system would be that people would know what they were paying to the lower level and as a result of their tax deductions would have a clear understanding of the amount that they were paying to the upper tier. That would avoid the situation in London, where cuts are being made in borough services to accommodate the increased spending of the GLC and the Inner London Education Authority. People would understand the amount that they were paying for the proportion of individual service.
  Sir Albert Costain: Can the hon. Gentleman explain why the hon. Member for Croydon, North-West (Mr. Pitt) spoke and then walked out of the Chamber as soon as he rose to speak, and why another Liberal Member came into the Chamber and the walked out? Do they not agree with the hon. Gentleman's policy?
  Mr. Cartwright: I do not know whether they agree with all my policy. There is a fair measure of overlap. The hon. Member for Croydon, North-West said that he had another pressing engagement and, as the hon. Member for Folkestone and Hythe (Sir A Costain) will know from his long experience, that is not unusual on a Friday. The hon. Member for Isle of Ely (Mr. Freud) made sure that I would be all right on my own. I assured him that I would be and that I did not need his valuable moral support. Therefore, there is nothing untoward or suspicious about the disappearance of those two hon. Members.
  A quotation from Layfield underlines the issue:
  "There is a strongly held view amongst us that the only way to sustain a vital local democracy is to enlarge the share of local taxation in total local revenue and thereby make councillors more directly accountable to local electorates for their expenditure and taxation decisions."
  That is crucial. It is far better that local electors—and not the Secretary of State—should sort out overspending councillors.

  1099
  Layfield concludes:
  "On balance, we consider that the administrative cost involved in introducing a local income tax for this purpose would be justified. After many decades of uncertainty in the realm of local government finance the time has come for a choice on the issue of responsibility."
  Before we decide which system of local tax we want we must first settle the issue of responsibility. Do we want a centrally controlled and directed system, or do we believe in local accountability? I believe in the latter.
  10.55 am
  Mr. Anthony Grant: I support the hon. Member for Woolwich, East (Mr. Cartwright) in one respect. He said that the number of Labour Members attending a debate on such an important matter was deplorable. Admittedly, the Labour Party has sent three of its Members into the Chamber, but throughout the debate only one Labour Member has been present. That is not good enough, and the hon. Gentleman confirmed that.
  Like other hon. Members, I thank my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) for having given us an opportunity to hold a wide-ranging debate on a subject of immense concern both to us and to our constituents. In my constituency, rates are a matter of burning concern. Harrow did badly last year out of the rate support grant, and, by an arithmetical quirk, it has done extremely badly this year as well. Recently too we have had to suffer what can only be described as the GLC "Livingstone lunacy" of a 100 per cent. increase in GLC rates. Therefore, we are most concerned.
  Many years ago rates were of little concern. In those days the amount of work undertaken by local authorities and the amount of money raised was relatively small.
  1100
  Approximate rough justice was done by rating and extracting money on the basis of property ownership. However, as time passed, more and more demands were made. People began to say that the authorities must help them from the cradle to the grave. The House placed ever greater burdens on local government. As time went on the inequities became more glaring.
  We can now no longer tolerate a system in which two adjacent houses are exactly the same and rated equally yet one of those houses is occupied by a fairly impoverished old-age pensioner who lives alone, while the other is inhabited by four wage earners—or even four dole receivers—whose income is much greater. They pay the same for their local services. That is not rough justice—it is just roughness.
  The long-suffering ratepayers are not prepared to go on with the system for ever. Manifesto commitments are one thing. I have never believed much in them. They are more for far Left fanatics than for realistic and pragmatic parties. However, long-suffering ratepayers are not prepared to go on for ever with the present system. It is fundamental that there is no substitute for good housekeeping by a local authority. As my hon. Friend the Member for Fife, East (Mr. Henderson) said, in an ideal democracy irresponsibility by a local authority is punished at the local elections, but the absurd situation has almost been reached, certainly in parts of London, where those who pay rates have no vote and those who vote do not pay rates. That makes local democracy an empty shell.
  What are the alternatives? Since I came to the House there has been much debate on the subject. We have had the Layfield report and a Green Paper.
  It being Eleven o'clock, MR. SPEAKER interrupted the proceedings, pursuant to Standing Order No. 5 (Friday sittings).

  Multi-Fibre Arrangement
  11 am
  The Minister for Trade (Mr. Peter Rees)rose——
  Mr. Michael Cocks: On a point of order, Mr. Speaker. I seek your guidance on a highly unsatisfactory state of affairs that has arisen. It is a convention of this House that when the Government make a statement the Opposition are given a copy of it half an hour beforehand so that they can study it and give a considered response to the Minister. I freely acknowledge that from time to time the half hour is contracted and may be only 20 or 25 minutes, but we have always taken an understanding view. Today the Opposition's Front Bench spokesman was handed a copy of the Minister's statement one minute before 11 o'clock. In the best interests of the House, that situation cannot be tolerated.
  I know, Mr. Speaker, that you cannot protect us under Standing Orders because a convention of the House is something that is accepted and honoured as far as possible but is not a right enshrined in the Standing Orders. However, the Government have put the Opposition in an intolerable position, and I ask you, Mr. Speaker, to find some way of relieving us in the future from such difficulties.
  This is no light statement. The multi-fibre arrangement is of vital interest to tens of thousands of workers in the textile industry. Therefore, Mr. Speaker, would you consider the position in which my hon. Friend has been placed and possibly initiate some sort of action, perhaps through the usual channels, to remedy the position?
  It is not easy on a Friday to find a way of intervening in the Government's business. Therefore, may I also draw your attention, Mr. Speaker, to the winding-up speech in the debate on Welsh affairs last night? A most unfortunate reference was made by the Secretary of State for Wales to my right hon. Friend the Member for Rhondda (Mr. Jones). It is reported in c. 1072 of today's Hansard. I hope that the Government will find an early opportunity of restoring fully the damage done to my right hon. Friend's reputation.
  Several Hon. Members rose——
  Mr. Speaker: Order. Before I call anyone else on the original point of order, may I first deal with the latter point, because I was in the Chair at 10 o'clock last night. There was a rather loud conversation between two right hon. Members. The conversation was not addressed to the whole House. However, it was rather a loud conversation.
  The House knows that it is absolutely our of order to make any suggestion that any right hon. or hon. Member has had too much to drink. That was the clear implication. I have no doubt that the conversation was private. No point of order was raised with me, or I would at once have risen. However, I am sure that an opportunity will be taken to put the matter right. I believe that that ought to be done, since the remark is now in Hansard.
  Mr. Peter Rees: Further to the first point of order, Mr. Speaker. I deeply apologise to the House that the convention was not observed to the full on today's statement on the multi-fibre arrangement. The circumstances, which I hope the House will understand, are that the discussions were not concluded until very late last night. It was considered better to make a statement today because of the concern that I know is felt in the House
  1102
  about these matters rather than wait until Monday. I appreciate that these are highly technical matters and I should have preferred that Opposition spokesmen were fully in possession of the details in advance.
  I offer my apologies. I hope that the House will feel that there is ample opportunity to do justice to the subject, if not completely today, at least in the questions that will be put to my Department on Monday. There is at least one question which, subject to the Chair's direction, might give rise to some supplementary questions to enlarge upon matters which any hon. Member believes that I have not dealt with satisfactorily in the statement today.
  Mr. Bob Cryer: Further to that point of order, Mr. Speaker. The Opposition have appreciated that the Government have made statements from time to time on the multi-fibre arrangement. It is clear from today's exchanges that there has been a regrettable lapse in the provision of information to the Opposition Front Bench.
  I have one point to make for your consideration and possible influential help, Mr. Speaker. The MFA is complicated and highly technical. The Opposition Front Bench spokesman speaks on behalf of the Labour Party, but Back Benchers also have to deal with the technical complexities. Textile workers in our constituencies are much concerned about the matter and we must deal with the arrangements.
  It is not good enough to issue copies of statements so late and to only a few right hon. and hon. Members on the Front Bench. On technical matters such as this the Government should issue copies more widely so that other hon. Members can grasp the information and ask more probing questions.
  Mr. James Lamond: Further to that point of order, Mr. Speaker. I support my hon. Friend the Member for Keighley (Mr. Cryer). What he said in this instance applies to all statements by the Government No harm would be done to the Government if they allowed hon. Members who are interested in a statement to receive a copy half an hour before it is made. As a result hon. Members' questions would be more informed and probing. I cannot see that that would be bad for the Government or the country.
  Mr. Speaker: I am sure that what has been said by the hon. Members for Keighley (Mr. Cryer) and Oldham, East (Mr. Lamond) and by the Opposition Chief Whip will have been noted with care by the Government Front Bench. There has obviously been a slip-up this morning about a convention. It is not a rule, but a very strong convention, which both parties, whenever they have the privilege of sitting on the Government Benches, normally observe.
  Mr. Peter Rees: With permission, Mr. Speaker, I should like to make a statement on the special Foreign Affairs Council to discuss textiles which took place in Brussels yesterday.
  I am glad to be able to tell the House that the Council agreed that the Community should sign the extended multi-fibre arrangement which was adopted by the GATT Textile Committee in Geneva on 22 December last. The Council also authorised the Commission to start negotiations immediately on new MFA bilateral agreements with supplying countries. These should come into effect on 1 January 1983 when the current agreements expire.

  1103
  These negotiations will take place within a framework of revised global ceilings for imports of the eight most sensitive textile and clothing products—the so-called group I products. These new ceilings will apply to all imports from low-cost sources both from our MFA partners and from the Community's preferential suppliers and will include all outward processed trade. The ceilings represent a firm commitment by the Community to regulate imports in these highly sensitive categories. They take account of planned cutbacks in imports which will be the subject of negotiations with the Community's dominant suppliers together with other technical adjustments aimed at reducing the total liability of the Community. The rate of growth which will be allowed on these quotas will be very small. For the United Kingdom the overall annual growth rate in this especially sensitive area will be roughly 1 per cent.
  Furthermore, the Council agreed that annual growth rates for the less sensitive products outside group I should also be kept very low. In view of recent trends in consumption they will in general be lower than those negotiated with supplying countries under MFA 2.
  Considerable concern has been expressed to me by hon. Members and by representatives of the industry about the possibility of the proposed new anti-surge mechanism which is designed to prevent too rapid a take-up of under-utilised quotas being nullified by an exceptional surge of imports under the quotas in the course of 1982.
  I am glad to tell the House that at the insistence of the United Kingdom the Council agreed on special measures to counteract this possibility. First, rapid anti-dumping or countervailing action will be taken in appropriate cases. Secondly, in particularly serious cases, action will be taken as a matter of urgency under the general review clauses in the existing bilateral agreements so as to reach a solution related to quantities. Those are major innovations and will, I hope, help to reassure the House about this potentially difficult problem.
  The Council also considered the treatment to be given to outward processed goods. Industrial requirements in this sector vary widely within the community. I am glad that, after considerable discussion, our colleagues in the Community were able to meet our requirements on this difficult point. I confirm that we shall be under no obligation to open special quotas for additional outward processed goods, which is in accordance with the wishes of the United Kingdom industry with which we have kept in close touch throughout the negotiations. The only exception will be any such trade offered to the dominant suppliers as compensation for the cutbacks in their normal trade which I mentioned earlier.
  The stage is set for the Commission to begin its bilateral negotiations which will determine the precise quotas for each country and each product. The mandate given to the Commission is a tough one, including points established at earlier Councils, which have been reported to the House—for example, reduced flexibility in the use of some quotas, a commitment to consult under the general review clauses in the event of recession, together with the cutbacks on the dominant suppliers and the anti-surge mechanism which I have already mentioned. All that is in addition to the generally more restrictive global ceilings and growth rates agreed yesterday.
  The Commission is to report back to the Council in the autumn on progress made. Until then, we cannot be certain precisely what quotas will emerge. However, the Council
  1104
  decided yesterday that in the absence of the satisfactory renewal, in good time, of the bilateral agreements, the Community would notify its withdrawal from the multifibre arrangement by the end of this year.
  As I think I have made clear, yesterday was not the end of the story. We shall be monitoring progress in the negotiations very carefully to ensure that the special interests of the United Kingdom industry are kept fully in mind by the Commission. If the Commission fulfils its mandate—I have every confidence it will—I think that there can be no doubt that the new MFA bilateral agreements will, by any definition, be significantly tougher than those currently in force, and the already high degree of protection afforded to the United Kingdom industry will be substantially enhanced, thus enabling the industry to continue the process of restructuring and modernisation upon which it is already embarked.
  Mr. K. J. Woolmer: Will the Minister accept that the manner in which the statement has had to be made is thoroughly unsatisfactory to the Opposition? The House will appreciate that my questions and observations can be only an instant view rather than the considered view that the House would normally expect. Will the Minister assure the House at once that the Government will make some amends by ensuring that a full debate will take place on this matter, which is important for more than 600,000 workers in this country? They would expect nothing less than a full debate on what could be the determination of their jobs and their future.
  Does the Minister recognise that many aspects of his statement, and of its omissions, will continue to cause great concern in the textile and clothing industries? As those industries have lost 120,000 jobs under MFA 1 and 200,000 jobs under MFA 2, will the Minister accept the vital importance of negotiating an MFA 3 that stems that huge job loss? Does the Minister accept that by basing future growth of low-cost imports on existing quotas instead of the actual level of imports, there can still be an increase of imports over the next four and a half years of at least 22 per cent., causing a further substantial loss of British jobs? That will not be taken account of, or limited, by the measures that he has announced.
  Does the Minister recognise the grave doubts that exist about the proposed anti-surge mechanism? Will he ensure that group II and III products are covered, so that products such as men's and boys' jackets and bed linen are included, because the potential import growth there is 100 per cent. or more? Will the hon. and learned Gentleman spell out what compensation would be offered to countries affected by anti-surge action?
  Exactly what has been agreed on cutbacks to dominant suppliers? Details were lacking from the hon. and learned Gentleman's statement. As expansion of outward processing by the United Kingdom or our partners in Europe poses a serious threat to our imports and exports through free circulation, will the Minister spell out his assessment on the effect on this country of outward processing and what safeguards will be available to us because of its impact on us through our EEC partners?
  Does the Minister accept that most attention has been given to group I products? As they account for only 50 per cent. of low-cost imports, may I turn his attention to the group II and III products? What average growth rate of imports will be permitted? It will not be satisfactory to the House, the industry or the trade unions to be told that the

  1105
  rate will be lower than last time, when it was an average of 5 per cent. That will be totally inadequate to deal with the problems of the industry with products such as suits, jackets, dresses, skirts and dozens of others.
  Will the Minister assure us that he will consult the trade unions and industries concerned before reaching a view in the autumn on the acceptability of the bilateral negotiations? Will he start consultations with those parties immediately to discuss alternative plans in the event of the need to withdraw from the MFA? If plans are not drawn up the House will not be aware of the alternative to withdrawal
  The statement is full of words such as "tough" and "firm", but when the small print is read the industry will still have grave reservations. I hope that the Minister will assure us that we shall have a full debate so that those reservations can be discussed.
  Mr. Rees: The question of a full debate is one for the usual channels, but the House will recognise that we have made full and regular reports on the progress of the negotiations. I reported in November and my right hon. Friend the Secretary of State for Trade reported in December. There was also a debate in July and the House cannot claim that we have withheld any information or been backward in reporting the course of the negotiations.
  I do not want to go over ground that was covered earlier, but it was because of our anxiety to give the House a report at the earliest opportunity that a full copy of my statement was not given to the hon. Member for Batley and Morley (Mr. Woolmer). I can only repeat my apologies. I hope that the House will recognise that it was because of my anxiety to give it a full report at the earliest opportunity that we are here this morning when negotiations were only concluded in Brussels late last night. Subject to the direction of the Chair, the matter could perhaps be ventilated again during Question Time on Monday.
  The Government are acutely aware that jobs have been lost in the industry. I have repeated many times during debates in the Council that about 150,000 jobs have been shed in Britain over the past 18 months. I am entitled to say that, when the full bilateral agreements have been negotiated, they will be found to be an infinitely tougher MFA than the preceding one.
  In response to the hon. Member for Batley and Morley's request for further information and a debate, I should emphasise that it will not be possible to judge the detail of the quotas, which will be of paramount importance for the industry and those who work in it, until all the bilateral negotiations have been concluded.
  The Commission is enjoined to report back to the Council in the autumn, when we shall be able to see whether the quotas negotiated in the bilaterals are reconcilable with the global ceilings and the broad principles set for the Commission as a framework for the negotiations.
  The hon. Member for Batley and Morley asked a number of questions, including what compensation would be paid in the event of the anti-surge mechanism being invoked. We did not consider it wise precisely to lay down what compensation should be awarded. The countries affected would then see precisely what kind of a trade-off there was. That must be a matter of negotiation, which is the most practical approach.
  1106
  Cutbacks for dominant suppliers will be 10 per cent. on average.
  The hon. Gentleman asked me about the consequences of outward processing. As I said in my statement, it will be only as possible compensation in the bilaterals arid not as a consequence of the anti-surge mechanism. It will arise only in the bilateral agreements with the dominant suppliers, where we might take some outward processing as compensation for the cutbacks. In no other case are we accepting an additional outward processing quota. That is not to say that, as part of the quotas as a whole, some part might not be taken up as outward processing, but there will be no additional outward processing over and above the quotas negotiated. That is a different position from that requested by several of our European partners.
  As regards contact with trade unions and employers, in the brief period that I have held this position I have received many such delegations. I have been to north-east Lancashire. I hope very much to go to Yorkshire. My door is always open. We have encouraged consultation. We shall be delighted to continue the process when the bilaterals have been concluded.
  Mr. Nicholas Winterton: Is my hon. and learned Friend aware that basing the 1983 quotas on the quotas already established for 1982 and not on recent actual imports to this country undermines any possibility of relating the future growth of low-cost imports to the expected annual growth in United Kingdom domestic demand? Did the Council of Ministers agree growth rates for products outside the sensitive ones covered in group I? If not, how can the negotiations be allowed to proceed? If the Government claim that future growth rates will be lower than under MFA 2, is my hon. and learned Friend aware that the talk of future growth rates is absolutely academic, especially if the growth is to be measured from the unacceptably high base proposed for 1983 quotas? Does he agree that what really matters is the starting point from which growth is to be, allowed under MFA 3?
  Mr. Rees: I recognise the industry's concern that the new quotas should have started from the 1980 actual imports rather than the 1982 quotas. It was the position that the United Kingdom Government would have preferred and the one that I stated clearly at the outset of negotiations. However, as our debates in the Council proceeded, it became apparent that we could not command sufficient support for me to stand on that. Naturally, it was a matter of regret. We should have preferred to start from the 1980 actual imports.
  I remind the House that had we started from the 1979 actual imports we might have got a slightly different figure. The industry would naturally wish to pick the actual level of imports in the year which showed the lowest possible figures. As I said, if we are to juggle with figures, it might be helpful also to look at 1979. Unfortunately, we could not establish the position in Brussels. On the best advice, we realised that it would not have been negotiable in the Geneva negotiations. I have to make the point again and again that this is a process of international negotiation. It is not possible for the United Kingdom unilaterally to impose its own solution.
  I know my hon. Friend's deep concern for the textile industry. I hope that he will recognise mine, too. I hope that it will be some consolation to him to know that the growth rates in the sensitive products in group I will be

  1107
  well below those under the previous MFA. For the United Kingdom they will be about 1 per cent. They will not be far in advance of that for the less sensitive products in groups II and III.
  Mr. Cryer: Will the Minister confirm that, by basing the level of imports on the 1982 quotas, a growth rate of 1 per cent. in sensitive areas means an effective potential growth of 23 per cent., which in turn means a potential loss of many thousands of jobs in the textile industry?
  Can the hon. and learned Gentleman enlarge on his comments on the anti-surge mechanism and in particular his claim that rapid anti-dumping action will be taken? He will appreciate that the Commission has been lethargic about anti-dumping action and that it has depended on the industry providing information, which is often difficult to get, on which to base a case. Can he assure the House that the United Kingdom Government have sufficient weight of representation to make sure that action is speedy and effective?
  Could the Minister also say more about the compensation concerned with outward processing being negotiated during the bilaterals? It is a particularly sensitive area, and the industry will be anxious until it knows how much is involved. I realise that the precise details are for negotiation.
  The Minister says that progress will have to be made on the bilaterals by the autumn; otherwise, we should withdraw from the MFA. Will he give us regular reports on the negotiations and tell us in good time what alternatives there are to withdrawal from the MFA, so that the House has the information before the situation is upon us?
  Mr. Rees: The hon. Gentleman suggests 23 per cent. as the possible growth figure. That is a little speculative. I should not underwrite the figure. The hon. Member for Batley and Morley (Mr. Woolmer) suggested 22 per cent., which shows a difference between them. If the hon. Member for Keighley (Mr. Cryer) puts down a question, I shall see whether we can give a figure, but he is taking the worst possible case and a hypothetical situation. It does not give full weight to the likely growth rate of 1 per cent. for the United Kingdom in sensitive products, nor to the operation of the anti-surge mechanism.
  The hon. Gentleman says that the anti-dumping procedures have not always worked as expeditiously as we should have liked. I referred to that issue in the context of 1982. It has been pointed out that if the anti-surge mechanism does not come into operation until 1983, and operates by reference to imports in the preceding year, there will be a temptation for low-cost importers to flood the United Kingdom markets in 1982.
  That issue was identified by the Government and by employers and employees in the textile industry. There was a considerable debate on it yesterday in Brussels. To meet the United Kingdom's legitimate anxieties, it was agreed that if there was a flood of imports it could be checked partly by reference to the anti-dumping mechanism, but by other methods too. The anti-dumping mechanism will be only one weapon that could be invoked to ensure that there will not be a flood of imports which would weaken the impact of the anti-surge mechanism in later years.
  1108
  It is always open to a country to take up its quotas for direct trade with outward processing, but I was endeavouring to establish clearly in Brussels—it is now clearly recorded as part of the framework for subsequent bilateral negotiations—that there would be no quotas for the United Kingdom for outward processing over and above the normal trade quotas with the exception of the dominants. The dominant suppliers will be cut back by an average of 10 per cent. a year over the full period. It was thought right to offer them some compensation, but that is for negotiation and will certainly not be in excess of the full amount of their cutbacks.
  Being international agreements, the bilaterals will be available to the House as they emerge, one hopes, in the course of the summer. It would be a little premature to plan for a failure of the bilaterals and a withdrawal from the MFA, but it is a subject to which considerable thought must be given. I naturally hope that, after the considerable time, effort and thought spent on the negotiations, the bilaterals will be successfully concluded in due time within the framework set down and finally concluded last night in Brussels.
  Several Hon. Members rose——
  Mr. Speaker: Order. I propose to call the four hon. Members who have been rising.
  Sir Charles Fletcher-Cooke: Will my hon. and learned Friend accept from me, if not from others, congratulations on his strenuous and successful efforts to produce for the future better security for the textile workers than has been achieved in the recent past? Will he accept that we are particularly pleased that he has made the conclusion of successful bilateral agreements a condition for the further negotiations on the multi-fibre arrangement? Is he aware that that is absolutely essential?
  Will my hon. and learned Friend say a little more about the dates? He said that if it looked as though the bilaterals would not be successfully concluded in September, we should have to consider an immediate withdrawal from our otherwise complete signature of the protocol. Can we have some sort of deadline for this? As he knows better than anyone else, the negotiations are apt to drag on. There ought to be some deadline by which we can judge that the satisfactory arrangements for which we all hope in the bilaterals will not be achieved, so that we—not just Europe—having made that judgment, can withdraw altogether from the negotiating position.
  Mr. Rees: I am most grateful to my hon. and learned Friend for his kind opening remarks. I know that he has deep knowledge of and concern for the textile industry, representing the constituency that he does.
  It is implicit in my hon. and learned Friend's question—it is a point that I have stressed before—that it will be impossible to judge the ultimate success of this multi-fibre arrangement until the bilaterals have been concluded. It is only in the bilaterals that the precise quotas, the actual figures—the matters which naturally concern the employers and the employees in the industry more than any rather generalised principles or theories—can be established. None the less, it was necessary to try to establish a broad framework within which the bilaterals should be concluded. That is why so much time and effort have been devoted to the negotiation, not only in Geneva but in Luxembourg and Brussels.

  1109
  With regard to dates, the Commission has been asked to report back by the end of September on the course of the bilaterals, and there is a very firm deadline. If the bilaterals do not measure up to the framework of principal matters being negotiated and constructed, notice must be given by the last day of 1982 by the Community as a whole of withdrawal from the protocol negotiated in Geneva.
  Mr. Stanley Cohen: Does the hon. and learned Gentleman recognise that some of us have grave concern because of the areas that we represent? Does he appreciate that over the last few years there has been a job loss of about 30 per cent. in the clothing industry? That was stated in the Chamber last year and has not been questioned.
  Does the hon. and learned Gentleman appreciate that about 2,000 jobs per month were being lost in the textile industry in Britain? He may recollect that a group of parliamentarians reported to the House that they had been to Taiwan only to find that cloths produced in textile mills there had, woven into the edge of the cloth, "100 per cent. British" and "Made in Huddersfield". That was pure counterfeiting. The firms in Taiwan were able to export those materials to Britain, and the import duties that we imposed were about 10 per cent. I hope that the Minister will assure the House that he will look into that matter. If our textile industries export materials, they pay duties of about 90 per cent. We talk about fair competition. I hope that the Minister will look at that example of totally unfair competition.
  We can export cloth to Hong Kong, and suits are produced from that material and exported back to us at a lower price than that at which our own industry can produce them.
  These factors justify the demands from the Opposition Benches for a full and extensive debate. I hope that the Minister will consider it.
  Mr. Rees: Of course we are concerned with counterfeiting. We have heard of bad cases such as the one to which the hon. Gentleman, who has a deep knowledge of these matters, has referred. It is a continuing problem. It does not arise specifically in the context of the multifibre arrangement. It is something that any Government must be vigilant about.
  The hon. Gentleman may be reassured to know that additional customs officers have been recruited to deal precisely with that problem. If the hon. Gentleman knows of any cases and can bring them to my attention, I shall see that they are followed up in the most rigorous manner possible.
  Mr. James Hill: The Select Committee on Industry and Trade has recently finished a report on the multi-fibre arrangement. My hon. and learned Friend gave able evidence to the Committee. Will he agree that the report should be necessary reading for everyone with a constituency textile vote? During questioning by the Committee, my hon. and learned Friend was frank and open. When I questioned him about the British Crown colony of Hong Kong, he confirmed that he would protect the textile industry of Hong Kong by his endeavours. Will he give me a brief statement on how he has been able to push the textile industry of Hong Kong, bearing in mind that Hong Kong imports a great deal of finished cloth from the United Kingdom?
  Mr. Rees: It would be presumptuous of me to recommend to the House or to any hon. Member the reading of the Select Committee's reports. I have read and re-read them. If a personal view is in order, I would agree that the recent report is a powerful document and not one that I would be disposed to ignore.
  I have said in the Chamber and in our debates in Brussels that Hong Kong deserves special attention, not only because of its political ties with Britain but because it is an entirely open market. That distinguishes it from, for example, the three other dominant suppliers.
  I do not think that it is for me to push the textile industry of Hong Kong. Hong Kong has a remarkably flexible group of entrepreneurs. I will not say that they are well able to take care of themselves, but it is not for me to push their products. I spent a whole morning with them in Hong Kong before Christmas, endeavouring to reassure them that the United Kingdom, having its constitutional responsibility for Hong Kong, had stressed its position in our debates in Brussels. I should like to think that they were reasonably reassured by what I told them.
  Although there will be a cut in the quotas for Hong Kong, I had it recorded that in negotiating that position and negotiating the compensation for them, account should be taken of the fact that it is, of all the dominant countries, the only one with an entirely open market for both British and Community products.
  Mr. James Lamond: I appreciate that the Minister—like all Ministers in all Governments—must try to strike a balance between the consumer and the producer of textiles in Britain. I congratulate him on the tough stand that he has taken in the negotiations, although I must express, together with hon. Members on each side of the House, disappointment that he was unable to achieve the level of actual imports as the basis for increases in the future.
  Will the Minister bear in mind the fact that a very good and sensible test of acceptability in negotiations is the extent to which the agreements allow low-cost imports to Britain to rise above the recent actual levels of trade, and the relationship between that increase and the expected 1 per cent. annual growth in domestic demand? The Minister will find that the 23 per cent. mentioned by my hon. Friend the Member for Keighley (Mr. Cryer) will not be far wrong if the worst comes to the worst.
  Mr. Rees: I am grateful for the Hon. Gentleman's kind opening words. I know of his deep concern and interest in the problem. I hope that he will accept it from me that the United Kingdom's opening position—which we maintained until it became apparent that we were more or less isolated—was that the quotas of the new MFA should start from 1980 actual levels. However, it was a matter of negotiation and it became apparent, to my regret, that our position was not sustainable.
  Whether the figure of 23 per cent. is absolutely accurate or not—I take the general thrust of what the hon. Member for Keighley said—I hope that it is a little gloomy, unless of course the expansion of demand in the home market is such that there will be scope not only for that amount of imports but for considerably increased production in the domestic mills. The hon. Gentleman should take into account not only the low growth rates that have been negotiated but the fact that under-used quotas may in certain circumstances be suppressed—as was reported to

  1111
  the House before Christmas—and also the new anti-surge mechanism that I hope will prevent the sudden disruptive surges for which even the best organised business cannot reasonably plan.
  I hope that a fair balance has been struck. The hon. Gentleman was kind enough to refer to the difficulties of reconciling the interests of consumers and producers, but there are two other dimensions to the problem. There are the expectations of the Third world, with which I have no doubt the hon. Gentleman and many other hon. Members are concerned, and the interests of our exporting industries. The House will recall that, on other occasions when the United Kingdom has been thought to have adopted too rigorous a position, our exporting industries in the developing world have been prejudiced. Anybody concerned with such negotiations must be sensitive to that sort of dimension to the problem as well as to the interests of the textile industry.
  Mr. Woolmer: I remind the Minister that he did not deal with the problem of group H or III, which the House will know cover about 100 products, including suits, jackets, dresses and shirts. They are significant employers and industries. Will the Minister be more specific and recognise that the previous average growth rate of 5 per cent. is far beyond what it is possible to accept in the next MFA? Will he give the House rather more information about his thinking in that direction? How far below the previous figure will we go? Will it be nearer to 1 per cent. than to 5 per cent?
  Secondly, does the Minister recognise that outward processing threatens our export markets to Europe and is also a potential threat because of the free circulation of outward processed products being imported from other EEC producers, who will increase their outward processing? How does he believe that that will affect Britain? What will be the additional possible amount of outward processed imports as a result of compensating the dominant suppliers, who after all are the dominant suppliers by definition?
  Thirdly, is the Minister willing to start consultations now with the trade unions and employers about an alternative approach if we withdraw in the autumn? The position will be untenable and totally unsatisfactory if we threaten to withdraw in the autumn but there are no alternative proposals. Neither those with whom we are negotiating nor our Ministers and trade unions will be satisfied if they are caught in the autumn and told that there is no credible alternative.
  Finally, will the Minister reconsider whether he, as the Minister intimately concerned with the negotiations, agrees that the House is entitled to a full debate on the matter? Since the previous debate 12 months ago, tens of thousands of jobs have been lost. I recognise that that is not the fault of the Minister, but the position is grossly unsatisfactory and outside the House it will be seen as such. I press him, because I know that he is intimately concerned with the industry, to tell the House that he at least is prepared to give his support to a full debate. Nothing less will satisfy the industries.
  Mr. Rees: I prefer not to commit myself to a precise figure on groups H and III, in case my mathematics is incorrect. As the hon. Gentleman will appreciate, there was a great mass of debate yesterday and the threads must
  1112
  be drawn together. As I said, it was partly the difficulty of drawing those threads together that prevented me from giving a copy of my statement to the hon. Gentleman earlier. He will realise the complexity of the matter and should realise that, if one arrives back late at night after a full day's negotiation that was preceded by negotiations in what is known as the article 113 committee and Coreper, it is sometimes difficult to sort out the approprate facts to give to the House. However, I shall endeavour to write to him about that, in the hope that I will set his mind at rest.
  It has not been found in practice that there has been much seepage of outward processing from other EEC countries. That may not be a total reassurance to the hon. Gentleman but beyond that he will be aware of the impact of article 115 and he will see what can be done to toughen the operation of that article if it should become apparent that there is a massive seepage of outward processing from, for example, Germany, which is concerned with the matter and which has its own links with Central Europe and Yugoslavia, However, I shall bear that point in mind.
  As to the dominant suppliers, the cuts during the period of the MFA will average 10 per cent. Compensation will certainly not exceed that amount, but it is subject to negotiation. I cannot say precisely what will be negotiated with each dominant supplier but a clear ceiling was set by the Council yesterday.
  I recognise the force of what the hon. Gentleman says about plans for an alternative regime should the Community, against my hope and expectation, be obliged to withdraw from the MFA. However, it would be a little premature to start full-scale consultations on that now. It is rather early to anticipate failure. I hope that, from everyone's point of view, practical and successful bilateral negotiations will be concluded. If there is to be withdrawal, notice must be given by the end of this year, so there will be plenty of time, if the Commission reports that it cannot achieve a conclusion of bilaterals within the framework, to consider the question then.
  I hope that the hon. Gentleman recognises that, in the brief time that I have been in my present position, my door has alway been open to those on both sides of industry and to hon. Members who represent constituencies especially affected for discussions on the implication of what has been achieved and the objectives that we should set.
  The question of a full debate is a matter for the usual channels. My view may be canvassed, but whether my hon. Friend the Patronage Secretary will take much account of it I do not know. However, a debate would probably not be meaningful now, because practical men on both sides of industry will be concerned about the actual quotas which can be extracted only from the bilateral negotiations. It is better to wait until we can appreciate it in the round so that the House can judge whether adequate protection has been achieved for the industry, as I hope—within the broad principles laid down—it will be. However, I must say to the House——
  Mr. Speaker: Order. We are now taking the time of a Private Member's Bill. I shall allow the Minister to finish his sentence.
  Mr. Rees: The last debate was in July 1981 and this is the third statement that has been made on this issue.
  Mr. Speaker: I sympathise with the hon. Member for Harrow, Central (Mr. Grant). I know that he wishes to

  1113
  attend a memorial service for one of our former colleagues. I am sorry that this exchange has gone on for so long.
  Mr. Nicholas Winterton: On a point of order, Mr. Speaker. My hon. and learned Friend the Minister said that he would send a personal letter to the Opposition Front Bench spokesman on this subject—the hon. Member for Batley and Morley (Mr. Woolmer). Would it be appropriate, Mr. Speaker, for you to rule that that letter might be sent to all hon. Members present this morning or, appropriately, put in the Library?
  Mr. Speaker: Those remarks have been heard.

  Rating System (Abolition) Bill
  Question again proposed, That the Bill be now read a Second time.
  11.51 am
  Mr. Anthony Grant: I was referring to the methods whereby alternatives to the present rating system could be devised.
  The three most attractive methods are a sales tax, local income tax and a poll tax. Although I much favour the taxing of spending rather than the taxing of working, and although the sales tax works satisfactorily in many countries where a federal system exists, in a crowded island such as Britain it would not be a practical proposition. It is not much of a starter because of such problems as cross-border shopping and trading.
  A local income tax would be much fairer than the present system. However, although in future there may be, through computers and other methods, a more convenient way of collecting it, the present administrative and bureaucratic objections are so great as to warrant rejection of that idea. Therefore, the most attractive alternative is the poll tax. It can be simple, easy to collect and, provided that there are not too many alternatives, it could be inexpensive to collect.
  Paragraph 7.14 of the Green Paper "Alternatives to Domestic Rates" shows that a £30 per head poll tax could yield approximately £1,200 million in revenue. The present domestic average rate payment per domestic hereditament throughout the country is about £236 per year. Therefore, if one assumes that the average household consists of two adults per hereditament, allowing for empty properties, one understands that, in order to get a complete transfer to a poll tax, it might mean that £ 120 per head would be necessary.
  Such a tax, as Opposition Members have said. might be too regressive and burdensome to begin with. I therefore conclude that a combination of a poll tax arid a much reduced domestic rate might be the proper alternative. However, I believe that the poll tax must be used and developed.
  Three ways exist in which the present domestic rate, in the short run, and before we manage to put through these major reforms, could be reduced and, thereby, some relief given to the hard-pressed ratepayer. First, a tremendous amount of saving can be achieved by encouraging what is called "privatisation"—the use of private enterprise in local authorities. For example, the amount of refuse collection carried out by private enterprise amounts to only 1 per cent., compared with much more—between 20 and 30 per cent.—in the United States and with higher levels too in other countries.
  I declare an interest in the Pritchard Services Group, a subsidiary of which secured a contract in Wandsworth which will save the people of that borough a great deal of money. There is, of course, also the example in Southend. If that idea can be translated throughout local authorities, the saving to ratepayers will be substantial.
  Mr. Graham: Absolute rubbish.
  Mr. Grant: My second point is rather more controversial but it is a belief I have held for a long time. It is obvious to anyone that the biggest item on the rate demand is education. The biggest category on the education bill is teachers' salaries. Who is responsible, by

  1115
  statute, for maintaining the supply of teachers in Britain? Under the Education Act 1944 and other Acts, the Secretary of State for Education and Science is responsible. Therefore, it is a national responsibility and it would be of substantial relief to the ratepayer if the cost of teachers' salaries were transferred from the rates to the Exchequer.
  Two arguments are advanced against that idea. First, it is said that money thus saved would be frittered away by spendthrift councils rather than given as benefits to ratepayers. However, that argument could be overcome simply by proportionately reducing the rate support grant to account for it. Secondly, it is said that the transfer would interfere with local choice. However, local choice nowadays is much more imaginary than real. There is no real local bargaining over teachers' pay. Bargaining is conducted nationally through the unions under the Burnham system.
  Mr. Douglas Hogg rose——
  Mr. Grant: No, I prefer not to give way for a reason I will explain at the end. I was saying that the idea of local choice is somewhat illusory so far as teachers' pay is concerned.
  My third suggestion is one which will specifically help London ratepayers but it might act as an example elsewhere. We do not want any more local government reform after the last upheaval but London ratepayers generally, and especially those in my constituency, would benefit if the Greater London Council were abolished or substantially altered. Its housing function has largely—in my view wisely—gone and it would have no education function if ILEA were abolished, as I believe it should be. The GLC has proved itself incapable of dealing with London Transport. Recently it wasted £250,000 of London ratepayers' money on advertising in The Guardian. That was an abuse of an authority's function.
  A small part of the GLC could be maintained to deal with certain roads, perhaps the river frontage, and some amenities and planning. Apart from those functions I believe that County Hall should be turned to a more useful purpose. The most useful one that I can think of is that of a London Transport museum.
  I hope that the Minister will take my suggestions on board and consider them. I must apologise to my hon. Friend and to the hon. Member for Edmonton (Mr. Graham) because I am about to leave the Chamber for a short while. I have been in my place since the debate started but I am to attend the memorial service of a much loved former colleague, the late Sir Douglas Glover. Some hon. Members will remember him very well.
  The Bill is a blunt instrument. We do not have to agree with all the options but I hope that, as a means of stimulating reform of our crazy rating system, it gets a Second Reading.
  11.57 am
  Mr. Christopher Murphy: The "abolition of rates torch" appears to be handed from one Conservative colleague to another as each Session of this Parliament leads to the next. As a past holder of the flame, I congratulate my right hon. Friend the Member for
  1116
  Stafford and Stone (Sir H. Fraser) on ensuring that it burns brightly by introducing this Bill, which I am privileged to co-sponsor.
  I congratulate also Ministers at the Department of the Environment on producing the Green Paper "Alternatives to Domestic Rates". The Green Paper was requested by many hon. Members, including myself, and the debate that I instigated on 1 June 1981 gave the Under-Secretary of State for the Environment, my hon. Friend the Member for Pudsey (Mr. Shaw), the opportunity to say that our wishes were to be met, for which we were most grateful.
  Recognising the Government's commitment to the abolition of the domestic rating system, one is immediately struck by the wealth of options that are being put forward. Clearly there is a need to find an acceptable method of providing local authorities with finance that is neither archaic nor unfair, but it is imperative that the objective is not lost in a welter of good-intentioned but differing schemes that might prevent us from arriving at a solution sooner rather than later.
  It is surely self-evident that we must act quickly to end the current domestic rating system. That is in the interests of those whom we seek to serve and it is one of their dearest wishes. I appeal to the Government to ensure that legislation on this crucial subject is carried within the lifetime of this Parliament.
  I am sure that all my hon. Friends recognise that there is a danger that alternative local forms of taxation might not greatly improve the situation for the already hard-pressed household, although I have a reasonable faith in a poll tax to overcome the major difficulties. Should that prove to be so, we should not refrain from considering raising all or at least the greater part of the cash required through national taxation and distributing it to local authorities, which to an extent is the system that we now operate.
  The councils would then keep their freedom to decide how those assigned revenues should be spent, according to their needs, as well as in line with their statutory obligations, and still maintain local accountability. It might be possible to allow a relatively small additional sum to be raised by individual councils, subject to certain limits, in much the same way as parish councils have the right to levy up to a 2p precept. That could be done perhaps by way of a poll tax to cover the cost of special requirements. Fees and charges, as well as lotteries, could provide an extra source of finance. In addition, greater emphasis on privatisation would help to reduce local government costs.
  Though I accept that the abolition of domestic rates is the priority commitment, the Bill has the great advantage of seeking to abolish the complete rating system. That is definitely to be applauded. There can be little justification for non-domestic rates and water rates continuing to be levied under the old iniquitous system.
  The industrial and commercial ratepayers in my constituency of Welwyn and Hatfield feel just as strongly about the need to abolish rates as do my domestic ratepayers. I believe firmly that we have an obligation to those people to overcome their problems at the earliest opportunity.
  Non-domestic rates are having an increasingly detrimental effect on the wealth-creating and job-creating sector of our economy, to a large extent in consequence of excessive rate demands by local authorities, over which there is no control or sanction. Business men suffer acutely

  1117
  from "taxation without representation". The net result of the rate that they pay is a tax on production rather than on the results of production.
  While assessing the alternatives to the domestic rating system we should not ignore the implications for the non-domestic ratepayers as well. It is to be hoped that as decisions are made on abolishing domestic rates the Government will consult the business and commercial community about the abolition of non-domestic rates.
  Water rates payers are placed in the illogical situation of having their water charges based on outdated hypothetical rented values rather than on consumption. In the way that other modern essentials such as gas and electricity reflect use, so, too, must water, with an increased commitment by water authorities to water meters.
  The Bill emphasises the determination to end the rating system. Although the considerable problems in finding acceptable alternatives are fully recognised, the inherent good sense of such a measure will be applauded throughout the country.
  The Republic of Ireland faced the same problem some years ago and showed clearly in its inimitable Irish style how political will can eradicate rates. Councils there still strike a rate, but the Dublin Government cover the amount, thus leaving the householder to pay Op in the pound. Perhaps that is a solution with a touch of blarney, but it is a solution none the less.
  12.3 pm
  Mr. Neil Thorne: I congratulate my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) on his success in the ballot and on his choice of subject. I admire his technique of concentrating the Government's mind by demanding the abolition of the present rating system. I shall watch with interest the reactions of the Minister and of the Government Whips to the proposal. My right hon. Friend has more experience of such things than I do, and, therefore, whatever happens is hardly likely to be a surprise to him.
  I do not agree with much of what my right hon. Friend has proposed. The present system has existed since the time of Queen Elizabeth I. For most of that time it has been considered to be a fair tax as the size and location of the accommodation, whether residential, industrial or commercial, was for a long time an indication of the ability to pay. However, in more recent years those responsible for running local government have, on the one hand, had a wide range of extra responsibilities thrust upon them by successive Governments, and, on the other, have acquired the taste for financial engineering and profligacy. Spend, spend, spend at the expense of those who must pay the local tax has been the order of the day in some areas.
  We note that only one-sixth of the cost of rates is paid by voters. For those reasons, the burden of rates on property has become unbearable and the demand for the abolition of rates has become a popular cry. Several options have been put forward, including local income tax, sales tax and a poll tax.
  Income tax is already too high and is responsible for the black economy. Previous Governments have levied income tax at an even higher rate than at present and this has forced the taxpayer to look for ways round it. It has caused much growth in the black economy and consequently yielded false figures for unemployment.
  1118
  A sales tax is also impractical, because, in a country of this size, any substantial variation in the tax charge would cause a major alteration in shopping patterns and would be unfair to traders struggling to make a living. A local petrol tax would be especially unfair and in heavily taxed areas would cause an enormous waste of fuel. One can imagine what would happen if the petrol tax in London were paid to Mr. Livingstone and the tax rate immediately outside Greater London was much lower. The entire population would spend their weekends driving out from London to fill their tanks with cheaper petrol.
  The poll tax has been criticised, especially by Opposition Members, who believe that it might discourage their supporters from including their names on the voters' list. I do not share that view. We must move towards the American system of self-assessment in tax matters. Ft would be simple to include a declaration on the rate payment form so that everyone over the age of including foreign nationals resident here, would be included. Obviously students and others would require an adjustment of their allowances to take account of that.
  A modest flat rate charged on all adults would acknowledge both the ability of householders to pay and the cost to the local authority of the services provided. A s it would not provide sufficient revenue on its own. some form of local property tax would be inevitable. We must recognise that if property were not taxed on a local basis it would soom attract the eye of a future Government, as few countries do not have some form of property tax.
  Commercial and industrial rates should be based on capital values, and an urgent revaluation is needed to correct the unrealistic distortion caused by out-of-date valuation lists. The rate poundage on commercial and industrial property should be assessed nationally and the figure should be laid down by the Government, as they are the ones who have to pick up the cost of unemployment benefit if taxes are so high as to make employers lay off their labour. Employers already pay for refuse collection and other services. For them, therefore, rating is a form of property tax.
  Residential property should also be dealt with on a capital basis. The present system, which arises out of rental value, creates an unfair distortion which is particularly disadvantageous to flat dwellers. The hon. Member for Hackney, South and Shoreditch (Mr. Brown) said recently that many of his constituents lived in flats which attracted far higher rateable values than some houses on the South Coast. That is because there is these days much more evidence of rentals for flats than for houses. The whole exercise should therefore be on a capital basis.
  As a chartered surveyor, I should like to see a much simplified form of valuation. I believe that some form of banding is merited, so that the calculations will be less intricate. Moreover, alterations to property, which are an essential right in a broadly-based property-owning democracy, should not be taken into account between valuations unless the alteration exceeds 10 per cent. of the size of the hereditament.
  If local taxation were based on a modest poll tax, with a nationally determined commercial and industrial rate paid to the Government and distributed in rate support grant, this would leave the balance to be raised from local residents, who actually have the privilege of electing their local authorities. In a well-managed local authority area the rate poundage could be very low indeed. In areas in

  1119
  which the local authority is profligate it would be considerably higher, but the solution to that would then lie entirely in the hands of the local electors.
  12.11 pm
  Mr. John Heddle: I join other hon. Members in extending congratulations to my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) not only on the selection of this relevant subject, but on its timely presentation today. My right hon. Friend has presented his Bill just 12 days after Mr. Hugo Young, in his much-read and much-respected column in The Sunday Times, speculated on the idea that a Cabinet meeting earlier this month had suggested that wholesale rate reform might not feature in the life of this Parliament. The point was then taken up by Philip Webster, the local government correspondent of The Times, last Friday.
  The timeliness of the debate is enhanced by the appearance on the steps of the offices of Avon county council this week of representatives of the south-western branch of the Confederation of British Industry, protesting at the swingeing increase in rates levied by the council on industry and commerce in the area.
  The debate is even more timely in that I share with my right hon. Friend the privilege of representing a seat in the West Midlands, where only yesterday, as reported in today's Birmingham Post, Walsall metropolitan borough council decided to levy a 22 per cent. increase on ratepayers across the board.
  Mr. Stokes: We have heard a great deal recently from the hon. Member for Walsall, North (Mr. Winnick) about how bad things are in the West Midlands. Surely one of the most dreadful things is this rate increase in his own borough.
  Mr. Douglas Hogg: Where is he?
  Mr. Heddle: My hon. Friend the Member for Halesowen and Stourbridge (Mr. Stokes) is a most assiduous attender of Friday debates, which are in themselves a pleasure as they usually enable hon. Members on both sides to reach some consensus, some agreement and accommodation on matters of mutual interest. It is therefore depressing, indeed, to note once again not only that the Labour Benches are completely denuded—save only for the hon. Member for Edmonton (Mr. Graham), who is himself an exception in any event as he is a regular attender, and we are pleased to see himbut that the Social Democrat Benches and those occupied from time to time by hon. Members representing the Liberal cause are completely vacant. The Liberal and SDP voice on rating reform will therefore go unheard.
  Mr. Tristan Garel-Jones: I thank my hon. Friend for giving way, and I apologise to the House for having just come into the Chamber. However, I am sure that he knows that I am a regular attender at Friday debates. Does it not surprise my hon. Friend that the Social Democratic Party, which makes such play of the fact that it is the defender of Parliament, shows such contempt for Parliament, not only on Friday, but in general? The Members of that party simply do not come to the House.
  Mr. Heddle: I am obliged to my hon. Friend.
  The hon. Member for Croydon, North-West (Mr. Pitt) spoke about the Liberal alternative to the present rating
  1120
  system, and subsequently we heard the views of the hon. Member for Woolwich, East (Mr. Cartwright), representing the Social Democratic Party. My right hon. Friend's Bill is timely, because it enables us to put under the parliamentary microscope the views of those two parties, which have decided to come to an accommodation, either in the short term or in the long term.
  The hon. Member for Croydon, North-West said that the Liberal Party maintains its romantic and historic attachment to site value rating as well as to levying a further charge on an already hard-pressed electorate by way of local income tax and a regional tax. In answer to an intervention by my hon. Friend the Member for Grantham (Mr. Hogg), the hon. Gentleman did not tell us whether the Liberal Party was in favour of establishing a further tier of local government in the form of regional government.
  Mr. Douglas Hogg: Was it not clear from what the hon. Member for Croydon, North-West (Mr. Pitt) said that his party's scheme could be implemented only if it were associated with yet a further reform of local government? Anyone who heard his speech must have assumed that the Liberal Party was calling for a further reorganisation of local government.
  Mr. Heddle: My hon. Friend is right. I hope that other Conservative Members, and, indeed, the hon. Member for Edmonton, on behalf of the Opposition, will continue to press the Liberal Party and the Social Democratic Party, because we, as elected Members of the House, have a duty to the electorate as a whole to endeavour to press them to explain their policies and say how much they would cost. After all, we in the Conservative Party have to do that.
  There is a further reason why my right hon. Friend's Bill is timely. It enables Conservative Members to hear from the hon. Member for Edmonton the Labour Party's view on local government reform. I have the greatest respect for the hon. Gentleman, as I think he knows, but I do not have the same respect for the views of the right hon. Member for Manchester, Ardwick (Mr. Kaufman), the Environment Shadow spokesman. Perhaps the hon. Member for Edmonton will today explain his party's policy on local government reform, with particular reference to rating reform. At the annual conference of the Labour Party last year the right hon. Member for Ardwick said that the only alternative was local income tax.
  In an endeavour to elicit the views of the Social Democratic Party, I intervened in the speech of the hon. Member for Woolwich, East. The hon. Gentleman had reminded us that he had been a member of the Layfield committee, which had been set up by the Labour Government in 1974. He did not answer my question. I asked him to confirm that the Layfield committee of inquiry into local government finance, which reported in 1976—which report the Labour Party did not debate and on which it took no further action—recommended that local income tax should be considered as a possible additional form of local taxation, but not as a substitute for the amount of money raised through the rating system, towards local government finance.
  Given the remarks made almost 12 months ago by the right hon. Member for Ardwick on behalf of the official Opposition, I hope that the hon. Member for Edmonton will advise us of the official Opposition's position.
  As is usual and right on such occasions, I declare an interest. I am consultant surveyor and a consultant partner

  1121
  to a firm of chartered surveyors, which I believe derives very little income from handling rating appeals. Therefore, my interest is tenuous. However, I am a fellow of the Rating and Valuation Association, which is in favour of the rating system almost as it stands. In that I am at variance with it and come closer to the views of my right hon. Friend the Member for Stafford and Stone. However, the association gave me considerable help by providing me with background statistics and data prior to the booklet that I wrote nearly two years ago on behalf of the Conservative Party entitled "The Great Rate Debate".
  The House is the fountain head of a very adult and much-respected democracy. We are described as the Mother of Parliaments. Perhaps we are also the father of local government. Unfortunately, the son has almost outgrown his father and has become something of an embarrassment to his parents. Local government, which is largely funded by the rating system, is now big business. Hon. Members have said that local government now costs £30 billion per annum. That is about one-quarter of the nation's total expenditure and about 6.5 per cent. of the gross domestic product.
  However, local government provides about 10 per cent. of our jobs. One in ten work in local government. My hon Friend the Member for Harrow, Central (Mr. Grant) pertinently pointed out that the cost of local government could be reduced and that the burden on the shoulders of domestic and industrial ratepayers could be alleviated if local government's power to recruit labour were reduced and if it were to put out as much work as possible to the private sector. I refer, for example, to the repair and maintenance of housing. Park maintenance could be put out to local horticulturists. I could name 10 to 20 different trades that could do the work more effectively and efficiently—and probbly much more cheaply—than local government.
  The rating system is under great threat. There are probably 365 different reasons for hon. Members to criticise the rating system. However, there are 365 options available. Therefore, hon. Members must reach a consensus. The chorus of resentment will continue to grow until it reaches a crescendo. Britain will witness the ratepayers' rebellion similar to that that took place in California. It is the Government's duty to recognise that. Local accountability is under cross-examination and, perhaps most importantly, local democracy is under threat.
  That is why I agree with many of the views expressed by my right hon. Friend the Member for Stafford and Stone. He regretted the fact that the Government paid only scant regard to the contribution made by industrial and commercial ratepayers in the Green Paper "Alternatives to Domestic Rates". The consultation period expires on 31 March. I accept that my hon. Friend the Under-Secretary of State may not be privy to the Cabinet discussions, but I should like to press him gently. In his column in The Sunday Times, Hugo Young speculated on those discussions, as did Philip Webster in last Friday's edition of The Times. Will my hon. Friend ensure that the Green Paper is debated on the Floor of the House as soon as possible after 31 March?
  The time is ripe for a wholesale overhaul of local government finance, with a view to reconciling permanently the relationship between central Government and local democracy. Failure to do so—and this is what frightens me about the views of the right hon. Member for
  1122
  Ardwick—will sound the death knell of local government. It will herald the entrance of municipal socialism and, at a stroke, we shall arrive at the threshold of a corporate State. That is why time is not on our side. The lifetime, of this Parliament—this shorthold—expires in 1984 I sincerely hope that our shorthold will be renewed and become a long leasehold. One accepts that in a democracy it is unlikely to become an ecclesiastical freehold. It is no coincidence that unless we act now—before 1984—the Orwellian concept of 1984 and the corporate State might just happen. I underline that rating reform, root and branch, should be part and parcel of the Government's programme.
  Hon. Members have already recited the reasons why their constituents and mine criticise the present system. I do not propose to till the same soil again. I do not propose to put under the microscope of the House the defects of the alternatives, such as the poll tax, propounded in the Green Paper. I agree with the hon. Member for Woolwich, East about that. I agree that a poll tax, if used as a substitute for the rating system, would be highly regressive. The Green Paper says that to replace the domestic rating system with a poll tax would cost the equivalent of £:1.20 per head a year. There are at least two adults in most households and that means that it would cost £240 per household. That would bear heavily upon the poorer members of the community. Unless it was coupled with an effective rate rebate scheme, it would not be a suitable alternative. Setting up an effective means of rate rebate would simply mean transferring money out of the Government's pocket to local government's purse. The object would be defeated.
  My hon. Friend the Member for Ilford, South (Mr. Thorne) dwelt on the possibility of a local sales tax. That would put up the cost of living in shopping basket terms. It would put up the cost of food and favour the big cities and conurbations where most of the large stores and supermarkets are situated. It would discriminate against the small towns and villages. Most importantly, it would discriminate against the small shopkeepers who serve small towns and village communities so splendidly.
  Mr. Douglas Hogg: Not only that; a sales tax would not remove the need for some form of Government support for local government finance.
  Mr. Heddle: I agree wholeheartedly. The local payroll tax principle would be singularly inappropriate at present with falling output and rising unemployment. Such a tax would tend to fall most harshly on labour-intensive industries, as opposed to capital-intensive industries.
  Mr. Garel-Jones: Will my hon. Friend explain the complications that could arise from cross-border shopping.
  Mr. Heddle: I am grateful to my hon. Friend for giving me the opportunity to endorse and confirm what he has said and to explain again that it would favour the large cities and conurbations and discriminate against the small towns and villages. The practical effect of that would be that people living, for example, in the mother of the Midlands, the beautiful city of Lichfield, would drive to the Minworth hypermarket on the outskirts of Birmingham or to the Birmingham Bullring at nine o'clock on a Saturday morning.
  Mr. Garel-Jones: Could they get to Watford?
  Mr. Heddle: They probably do not know what delights await them in Watford, but I would rather retain their custom in Lichfield, so I shall not be tempted down the M1 to the constituency that my hon. Friend serves so assiduously.
  It is vital that not only the House, but the ratepaying public should understand the implications of the introduction of a form of local income tax. About £4·6 billion is raised in domestic rate revenue. Substituting local income tax for that would cost the equivalent of a 6p increase in the standard rate of tax. About £5·6 billion is raised through the industrial and commercial rate element and if the whole rating system, including that element, were abolished, the cost would be equivalent to an increase of 13p in the standard rate.
  In order to regenerate British industry and to get Great Britain Ltd. to balance its books and play an active and vital role in the world economy, it is necessary to increase the incentive to work and not reduce it. Increasing the standard rate of tax by 6p or 13p would be a disincentive to work and would encourage more people to ask "Why should I bother to work?"
  The hon. Member for Woolwich, East served on the Layfield committee and I hope that he will bear in mind the cost of administering a system of local income tax. The Layfield report said that the introduction of local income tax, either as a substitution or an addition, would require the recruitment of another 12,000 civil servants by the Inland Revenue. In 1976 the report estimated the cost of that increased administration at £50 million. Inflation in the intervening years has increased that figure to well over £100 million.
  Do we need another 12,000 tax-gatherers and can ratepayers and taxpayers afford another £100 million on top of our national debt?
  Mr. Douglas Hogg: Does my hon. Friend recall that the Layfield committee said that the total public and private costs—it emphasised the private costs—would be well over £100 million? If we inflate that figure by four years of increases in costs, we are talking of about £300 million.
  Mr. Heddle: My hon. Friend anticipated my remarks. The cost borne by the Inland Revenue would have to be matched by a similar sum borne by employers. Therefore, the 1976 figure of £50 million rises to £100 million.
  Mr. Richard Shepherd: I am grateful to my hon. Friend, who has a neighbouring constituency to my own. I am sure that he is aware that the Inland Revenue is introducing computers and that towards the end of the decade it will be able to make many of its transactions in a computerised form. Does that not alter my hon. Friend's calculations? Has he made any adjustment in his estimate of the cost of revenue collection?
  Mr. Heddle: The computerisation of income tax is referred to in the Green Paper, but my hon. Friend will know that such computerisation will not come on stream for at least 10 years. The reform of the rating system is urgent and cannot wait that long.
  The hon. Member for Woolwich, East wishes to intervene. I shall give way to him and then bring my remarks to a conclusion, because I know that other hon. Members wish to speak.
  Mr. Cartwright: The hon. Gentleman makes a fair point about the cost of administering a local income tax scheme. I would make exactly the same point about computerisation. The Layfield estimates were based on a non-computerised approach. The sad thing about comparing the Green Paper estimate with the Layfield estimate of date is that the length of time needed to bring in local income tax is now even longer than at the time of the report. Does the hon. Gentleman agree that if there were a real political drive and commitment to introducing local income tax the time could be reduced?
  Mr. Heddle: The hon. Gentleman addresses his question to the wrong person. I said earlier that I did not believe that local income tax, either in substitution or as an additional form of taxation, is a suitable alternative, because it would increase the standard rate of tax and reduce the incentive to work. I am not a convert to the concept of local income tax.
  I am a convert to the 13 recommendations that I shall put to the Minister. Some have already been mentioned. I was particularly interested in the comments of my hon. Friend the Member for Fife, East (Mr. Henderson). I believe that the solution lies in a pot-pourri of alternatives. We must retain a form of local property taxation. All other Western democracies have done so. Countries which, from time to time, have bowed to ratepayers' anger and abolished the rating system have, with the notable exception of Eire, always reintroduced a form of local property tax.
  I start from that basic premise that some form of taxation brought about by the ownership of property should be the base for raising local revenue, but it should be linked directly to those who benefit from the services provided by the local authority. Only then can they, as voters, go to the polls at municipal, district and county council elections, and, as "shareholders", agree with what the "directors"—the councillors—have done and determine whether they have provided a return on the money paid. That is where the present system, whereby the major contributor to the rate fund—the industrial and commercial ratepayer, who by hand and brain creates wealth and jobs—is totally disenfranchised.
  One of my recommendations, although not top of my priority list, is to reintroduce the business vote. I accept my hon. Friends' criticism that, in electoral terms, save in one or two marginal wards, it will not make a great deal of difference. But it was petty party political prejudice that persuaded the Labour Government in 1969 to enact the Representation of the People Act, which denied the industrial and commercial ratepayer the right to decide how the local council should spend his money.
  The American War of Independence came about because of taxation without representation. If the good health of local democracy is to continue it must be made democratic by the reintroduction of taxation with representation.
  Mr. Richard Shepherd: What is my hon. Friend's concept of voting by local businesses? Many businesses in both our constituencies are owned by large corporate bodies, perhaps with headquarters in London. Who would exercise the vote, and what numbers does my hon. Friend envisage?
  Mr. Heddle: My hon. Friend and I have discussed the matter informally recently. Time is against me, so I merely

  1125
  remind the House that the Local Government Act 1972 enabled local employers to nominate a member of staff, provided that he had been employed with the firm for 12 months, to stand for election to a council although he may not be a ratepayer in the borough in question. In that way, industry and commerce could have a voice. At present it has no voice, no vote and no sanction.
  Mr. Garel-Jones: Will my hon. Friend make it clear to the House—and to others in the country who may be following the debate—that those of us who are advocating the business vote are not in any way suggesting that the number of votes should be linked to the amount of money paid into the rate fund? That is an absurd allegation that is frequently made by the Opposition. Will my hon. Friend make it clear that we are not making such a suggestion, and that this is much more a matter of principle than of any particular effect that it is likely to have on voting patterns or results of elections?
  Mr. Heddle: I am most grateful, as always, to my hon. Friend. I agree with him. It is a question of principle. We are talking about local accountability and local democracy, yet we are denying the right to vote to those who contribute so much in terms of rate revenue and the provision of jobs, and who also have to pay for other services, such as refuse disposal over and above their rate contribution.
  My hon. Friends have referred to the enormous part that the education budget plays in the equation. The teachers' salaries element of the rate support grant should be transferred from the county councils to Whitehall, where they are negotiated nationally through the Burnham committee. That would reduce the rateable revenue and the rate base very considerably, because 70 per cent. of all local government expenditure is on education, and 70 per cent. of that 70 per cent. relates to teachers' salaries.
  If that were taken out of the equation, rateable values would be reduced very considerably, and therein would lie the large reservoir between the amount paid and the amount that the local authority would wish to raise. It would enable the local authority to go to its electorate and say "This is what we want to raise, this is what we want to raise it for—may we have your vote and your endorsement of our policies?"
  The amount that an individual pays in rates should be an allowable deduction for income tax purposes. That is the practice in Australia and New Zealand, and I have not heard any good reasons why it should not be done in Britain.
  I agree with my hon. Friend the Member for Ilford, South, who suggested that the assessment of domestic properties should be on a capital value basis rather than on a hypothetical, outdated, rental value basis. I agree with him wholeheartedly about banding in that respect.
  I do not think that hon. Members have dealt in sufficient detail with whether relief should be granted to those on low incomes and to the disabled by way of rebates on charges made by water authorities. Such rebates were available to them before local government reorganisation in 1974, and that practice should be restored.
  Legal aid should be available to ratepayers to enable them to challenge their rating assessments in the valuation courts, because the system is incomprehensible. If they were entitled to legal aid, those who raise the rate could be subject to cross-examination. The present system
  1126
  unduly favours those who consume services but do not pay rates. Council tenants appear, perhaps, to be protected from the effect of rate increases. Consequently, any increase in their rent—which includes a disproportionately small element of the rate—is blamed upon the Government, but perhaps wrongly. Perhaps they should direct their fire at the profligacy of the local authority. Therefore, the rent and rate components should be separated so that the council can be seen by its tenants to be accountable and to be prudent, although I accept that the arrangements for rebates and benefits should be lumped together.
  Furthermore, rating revaluations should take place once every five years, and they should not be fudged or procrastinated for short-term political purposes. I, too, believe that Crown properties should be rated properly in the same way as commercial and industrial property. Also, the Government should deny local authorities the right to levy void rates. If one is not occupying premises beneficially, one does not receive the services. Ipso facto, one should not pay rates. However, it is true that the Government have moved some way in that direction in the Local Government, Planning and Land Act 1980, by allowing local authorities to levy void rates only up to 50 per cent. of the total.
  Mothball relief should also be given. The CBI has made this point, and I incorporated it in my Ten-Minute Bill last June—the Rating (Business Premises Relief) Bill. If a firm is not using all its machinery productively because of the recession, the local authority does not have the right to receive a rate for machinery that is idle and not contributing to the prosperity of the company. Large businesses in industry and commerce should be able to pay their rates by instalments, just as the domestic ratepayer and the small business man are able to do, because cash flow to commerce is at least as important as cash flow to the councils.
  I wholeheartedly agree that, as we have accepted the derating of agricultural land and buildings since 1929—it was introduced when the British economy was at the depths of a world-wide recession—we should recognise today the position of industry and commerce and have, as part of the equation, industrial derating either in whole or in part.
  With those 13 recommendations, I suggest to my hon. Friend the Minister that time is not on our side, that the patience of the ratepaying electorate is running out and that, whatever Hugo Young said in The Sunday Times on 14 February, it is our duty as Members of Parliament to transmit the anger, concern and frustration of our constituents—domestic arid non-domestic—to the Government.
  12.46 pm
  Mr. Ted Graham: For those hon. Members who have been in the Chamber all morning, this has been an enjoyable, good-humoured and valuable debate. Of course hon. Members on each side of the House will consider the matter from different points of view, but there is a common thread, which is that there is much dissatisfaction with the present system. The argument u ill be whether we can provide a better means of raising the local element of the money that must be spent on local services.
  I wish to begin, as most hon. Members, by congratulating the right hon. Member for Stafford and

  1127
  Stone (Sir H. Fraser) on initiating this debate. He has struck a popular chord not only in Britain but in the House. Reference has been made to other debates initiated by hon. Members here today. I believe that we cannot have too many debates or arguments because I am as interested as other hon. Members in the subject. However, today we are asking when we shall come to a conclusion about the best means that we can deploy.
  Mr. Garel-Jones: As the hon. Gentleman expands on the way in which the Opposition will consider the problems, will he try to reassure the House and Watford borough council, which is Labour-controlled and with which I hope to have a series of discussions, that the Labour Party will approach the problem with the intention of arriving at a consensus with the Government? It is important if we are to reform the rating system that it should be done with some sort of all-party agreement. We cannot have a party political disagreement on such an important matter.
  Mr. Graham: That should be avoided if at all possible. However, by the nature of this aspect, we are concerned with public expenditure and not only how it should be raised, but also about the things on which it should be spent. There will be some differences across the Floor of the House on the levels of public expenditure. The Opposition are committed to satisfying the needs of their constituents and the people of Britain. If those needs must be met by raising moneys locally or nationally, we are prepared to will the means to do it.
  Mr. Bob Cryer: Will my hon. Friend not accept that the rates question is now to the forefront purely because the Secretary of State for the Environment embarked on a deliberate vendetta against local authorities by cutting back on the rate support grant so that the local authorities controlled by Labour councillors, desperately trying to maintain services to people, are bound to consider an increase in rates revenue—although that may be unpopular—in order to help the weakest in society: the mentally handicapped, the old, and the sick? Local authorities are desperately trying to help them and the blame for their present difficulties lies fairly and squarely on the backs of the present Tory Government.
  Mr. Graham: I substantially agree with my hon. Friend's remarks and I intend to deploy my main argument to show that the Under-Secretary of State for the Environment has much explaining to do today in defending the present attitudes of his Department and Secretary of State on the rates and local expenditure issues.
  However, I am delighted to see the right hon. Member for Stafford and Stone in his place because I paid tribute to his initiative in again bringing this matter before the House. I also pay tribute to the Government for bringing forward the Green Paper at this time. However, I share the view of the right hon. Member that the Green Paper was, in effect, bland—all things to all men—and that it certainly would not be the answer to the problems that he fairly described.
  I assume that in a civilised society it is our responsibility to arrange our affairs so that our people's needs are met by a system of support, both from the centre
  1128
  and locally. I have not detected many arguments this morning for meeting the needs. Our argument concerns how the money is raised and who pays for it. Those who talk of abolishing rates give it credence by suggesting that somehow or other it is possible not only to reduce, but to make more equitable and painless the raising of revenues for local services.
  The blunt truth is that, however it is done, public expenditure must be paid for by the public. A thread which ran through some of the Government speeches decried local expenditure levels per se. The Government are tackling this issue by deciding that the man in Marsham Street knows best—whoever he may be. The Opposition reject that approach; not of limiting central funding or grants, but of hog-tying the ability of locally elected people to decide what they consider is best and needed for their electors. We are anxious, of course, to hear not only what the Government have to say about the motion and Green Paper, but whether they intend to legislate this Session.
  The hon. Member for Lichfield and Tamworth (Mr. Heddle) is the latest of many of his colleagues anxious to know about the reports of what Hugo Young alleged to have heard recently as "a fly on the wall" in No. 10.
  With the rating system, the House has many options. The present Prime Minister played a major part as Opposition environmental spokeswoman in 1974 and it is as well to remind the House of the manifesto pledge then given to the country. On transferring expenditure, the Conservative manifesto stated:
  "First, we shall transfer to central government in the medium term, the cost of teachers' salaries up to a specified number of teachers for each local education authority. Expenditure on police and the fire services will qualify for increased grants from the Exchequer. We shall see that this saving is passed on to the ratepayer.
  Fairer taxes.
  Secondly, within the normal lifetime of a Parliament we shall abolish the domestic rating system and replace it by taxes more broadly based and related to people's ability to pay."
  Mr. Murphy: We did not win that election.
  Mr. Graham: Exactly. In its manifesto the Conservative Party stated what it would do if it formed the next Government. In its 1979 manifesto it did not take up the earlier statements on rating. The Prime Minister merely stated in the preamble to the manifesto on which
  Conservative Members were elected:
  "It contains no magic formula or lavish promises. It is not a recipe for an easy or a perfect life."
  On more than one occasion when the 1974 pledge has been raised it has been said that although rating reform is important and will be accomplished it will not be accomplished in the lifetime of one Parliament.
  On 14 February in his column in The Sunday Times
  entitled "Inside Politics", Hugo Young wrote:
  "Last December another solemn commitment was given, this time to reform the domestic rating system, and a Green Paper was published to which even at this moment interested bodies are preparing weighty responses. What the Cabinet decided was, in effect, that they were wasting their time. If not exactly futile, this time-consuming consultative exercise will not bear fruit during the lifetime of the present Parliament. There will be no Bill in the next and last Session. This is what Mr. Heseltine, the responsible Minister, was seeking time for. He was advised not to try too hard."
  Many hoops have been tossed about the Chamber during the debate but what conclusions does Hugo Young believe the Cabinet came to on 4 February, only three weeks ago? He wrote:

  1129
  "Nothing decided now, it was established, could be brought into effect before 1988. So it was concluded 'Why take on a burden which would not win a single vote in 1988?"
  We understand from Hugo Young that the winning or losing of votes is crucial when we are considering reform of the rating system.
  Mr. Garel-Jones: According to Hugo Young.
  Mr. Graham: That is right. We do not have to rely on Hugo Young alone when trying to establish the Government's intentions this Session. The Local Government Finance (No. 2) Bill is being considered in Committee and during the Committee's deliberations the following exchange took place:
  "Mr. Kaufman: My hon. Friend says that Parliament may be legislating for several decades—a generation or more. We need to know from the Government whether that is so. The Minister said that this is an interim measure. We have not yet been told whether the first four clauses are interim, although we asked him about that. He did not feel it appropriate to answer us then. But now we read in the press that the Government have abandoned their intention of carrying out rating reform in this Parliament.
  The Minister for Local Government and Environmental Services (Mr. Tom King): Really?
  Mr. Kaufman:If the Minister cares to deny that, we shall be most grateful to hear it. I am sure that my hon. Friend will gladly give way to him for such a denial, which the Committee, the House and the whole country would welcome. However, if it is true that the Government have abandoned their intention to carry out rating reform——
  Mr. Tom King: I am happy to deny that."
  —[Official Report, Standing Committee
  , 23 February 1982; c. 287.]
  In other words, the Government have not abandoned their intention to carry out rate reform.
  Mr. Murphy: The hon. Gentleman referred to the Conservative Party election manifesto of 1974. I remind him that in the 1979 election manifesto the commitment to the abolition of domestic rates was restated, but with the added and understandable proviso that the reduction of income tax must take priority. Does he not agree that that was a responsible way of approaching the abolition of domestic rates?
  Mr. Graham: What the hon. Gentleman has said is substantially what I have said. The priority to abolish domestic rates has been downgraded. The hon. Gentleman was entitled to mention that reducing income tax took priority over rate reform. He is aware that a close scrutiny of the situation will reveal that there has not been a reduction in the standard rate of income tax.
  Mr. Murphy: But the Government have reduced the standard rate of income tax from 33p to 30p.
  Mr. Graham: That is right, but the people are more heavily taxed now than they were in 1979. So much for that election pledge.
  The Minister has an opportunity today to tell the House whether the words of his right hon. Friend the Minister of State should be accepted or whether the opinion of Mr. Hugo Young is to be given credence.
  The present rating system has few friends in the House or in the country. Before we go overboard against the present system without having thought the matter through, we should acknowledge that it has a number of features that we may regret losing under some other system. By and large there has been a carte blanche condemnation of the present system. I shall not advocate that the present system should remain in totality. However, we need to remind ourselves of some of its commendable features.
  1130
  If rates were wholly or partly abolished, there would be a need for a new form of local tax. If local government does not have a local source of revenue it is arguable that it would disappear and be replaced by local administration or services with all decision making at the centre. Rates are a cheap tax to collect and are difficult to evade.
  The financial, general and rating statistics of the Chartered Institute of Public Finance and Accountancy for 1980–81 show that 402 rating authorities is England and Wales estimated that it would cost them £123 million to raise £11,312 million in rates. I shall put the proposal for the abolition of domestic rates into perspective. Even after taking into account domestic rate relief and rate rebates, domestic rates still produce about £3,600 million to £4,000 million in a year. If that amount had to be raised by an increase in national taxation, about 6p would be added to the basic rate of tax.
  Mr. Henderson: Do those figures relate specifically to England and Wales or to Great Britain?
  Mr. Graham: They are the figures for England and Wales.
  The present system of domestic rates can be and often is criticised as an imperfect and unfair method. Representations have been made to me by action groups of the National Association of Ratepayers and my local ratepayers' and residents' associations.
  The simple solution of the National Association of Ratepayers is to abolish all rates and to heap the burden on central taxes. I can imagine the Government's reaction. Hon. Members have said that the 30p rate of income tax should be reduced to 25p, and at present there is an attempt to do so. If the rates burden is heaped on central taxation, that 30p would certainly rise to 36p.
  I shall make the following proposals in favour of the present system. Rates are cheap to collect. They allow concessions to be made easily and discreetly for the elderly and others. They are based on property rather than on individuals. They are therefore difficult to evade. They are familiar—they may not be liked, but at least they are well understood—and, once fixed, the amount payable is easily calculated by both the ratepayer and the local authority. Before abandoning the present system, we should heed those advantages.
  Mr. Murphy: The hon. Gentleman asserts that raves are well understood. Will he reflect on that? It is my experience, and I suspect his also, that constituents are often unsure who is responsible for which service and do not understand which part is the county rate and which the district rate, let alone the intricacies of the rate support grant. I wonder whether the hon. Gentleman's description is accurate.
  Mr. Graham: I disagree that people do not understand the system which has existed for so many years and has been changed many times. I believe that the principle of rating is well understood. It is well understood that the rates are based on the valuation of the rental income which could accrue. I can appreciate that people do not know who is responsible, to whom they pay rates and why waiver rates seem to be increasing, but, although the system may be disliked, it is well understood.
  Mr. Garel-Jones: I am sure that the House is grateful to the hon. Member for his careful and responsible approach to the problem. In describing the lines along

  1131
  which the Opposition are thinking—I accept that they must be tentative—will he reassure the House, as I requested at the outset, that the Opposition will seek all-party agreement on the matter? Although there may be disagreements between Labour and Conservative Members about how and at what level expenditure should be made, I am sure that he agrees with me that there can and should be agreement about the new method of raising revenue.
  I reject the assertion of the hon. Member for Keighley (Mr. Cryer) that the Government are in some way trying to discriminate against Labour councils. Last year, Watford borough council, which is Socialist-controlled, received a more favourable settlement than any of the other councils in Hertfordshire, more of which are Tory-controlled. As my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) knows, most Tory councils in Hertfordshire and hon. Members representing that area campaigned strongly as a result of the especially favourable treatment which Socialist-controlled Watford received from the Government. I hope that the hon. Member for Edmonton will reject the idea that this is some form of party political game. It is important for the country that a consensus should be achieved.
  Mr. Graham: On the latter point, many Conservative-controlled councils have been aggravated by the way in which the proposals, which they neither wanted nor liked, turned out, and I imagine that some London boroughs are now reflecting on the strictures placed on them by the Government in the light of what has happened with the supplement this year.
  The hon. Member for Watford (Mr. Garel-Jones) will understand that in the matter of consensus the major responsibility must lie with the Government to propose what they feel is best and it is the job of the Opposition to react. I shall describe what the Opposition have in mind. I am grateful to the hon. Member for Watford for saying that he appreciates that our proposals must be tentative. That must be so, not least because of the time scale and because we are in Opposition. I imagine that the Government are anxious to minimise any disturbance, which could be catastrophic, in carrying out plans, and to achieve maximum collaboration. If any major change is possible "any change will be major and have significant repercussions: otherwise it is not worth while—the Opposition want to play a constructive part in it.
  The incredible mess that the Government got into in attempting to legislate piecemeal on local government expenditure and the purpose of rate expenditure is well known. Against the wishes and experience of all who work in local government, they bludgeoned through the Local Government, Planning and Land Act 1980. The unloved block grant provisions were condemned root and branch and were passed only through a squalid deal with Conservative supporters in another place. There is no argument about that. All three major associations of councils opposed the system, but we now have to live with it.
  My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and his successor, my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), have given notice that a future Labour Government will repeal the block grant provisions and I
  1132
  am happy to reaffirm that pledge today. Any system that the Labour Government consider to take its place, if the present system still prevails, will return to local government the power to take local decisions on how to raise the funds required to meet the needs of local communities, keeping central determination for the allocation of taxes in accordance with national imperatives and yardsticks. We would abandon any pretence that central Government know best what local people need. There would be no nauseating hypocrisy and talk of giving councillors freedom and independence and the right to run their own affairs while strangling, starving and bullying them into submission.
  Sir Ronald Bell: The hon. Gentleman has made a very important statement. Does it mean that there would therefore be no question of attempting to force comprehensive schools upon local authorities which do not want them?
  Mr. Graham: The hon. and learned Gentleman will know that I am not here as a spokesman on education, but it is well known that Labour Party policy supports comprehensive education.
  Nor would we leave out of our considerations the examination of raising revenue from agricultural land. Unlike domestic, industrial and commercial property, agricultural land is exempted under the present system. There is a strong case for including such land as a source of revenue in a thorough-going review of the rating system.
  The right hon. Member for Stafford and Stone seeks to widen the net for catching revenue, but agriculture is specifically excluded. In The House Magazine, in which he fairly set out what he hoped that his Bill would accomplish, he referred to
  "the need to make the impact of local taxation more widely felt and understood. At the moment 7,000,000 ratepayers enjoy some form of relief and as the burden of domestic rates is increased so the number of those responsible for paying full rates and responding politically is likely to diminish".
  If we are serious about considering alternatives to the present domestic rating system, we should include the possibility—I put it no higher than that—of a change in the present derating of agricultural land as a source of some income to achieve that object.
  There is not much to be said to for a local sales tax, which might be extremely regressive. It would be administratively cumbersome for traders to account for the tax collected. Moreover, as a number of hon. Members have said, it could significantly distort shopping patterns. I give one illustration. If local authority A declared a 15 per cent. tax on petrol sales and neighbouring authority B only a 10 per cent. tax, consumers might be encouraged to buy petrol in area B to the detriment of traders in area A.
  A sales tax would be more regressive than rates. It would impinge on all the purchasers of goods, regardless of ability to pay, but administration would be more complicated if traders had to inspect pension or social security books before making tax-free sales and pensioners and recipients of benefit might be unwilling to advertise their position in order to obtain tax concessions from shopkeepers. The yield would be uncertain and budgeting would be far more difficult.
  The local income tax option is one that the Labour Party would not rule out, in whole or in part. It is often

  1133
  canvassed as a logical and a more equitable means of raising local revenue. Certainly, it is well worth considering. First, however, we should decide whether we want a local income tax as a means of reducing the rate burden, or as a means of cutting the Exchequer grant. If we had a local income tax option, I see little sense in keeping down the upper limit by statute or ministerial direction. We are told in the Green Paper that the domestic rate, if replaced by local income tax, would call for a 5p additional income tax for local purposes. Incidentally, Layfield suggested a maximum of 8p.
  We are serious about local democracy, whereby local people approve what their councils propose. When a local community wants to expand a service, is told what it will cost, and votes for a council pledged to carry out its wishes, surely that local income tax revenue source should not be inhibited.
  If the national income tax base is amended to accommodate a local income tax to make the local income tax administratively feasible, we are told that certain simplifications will be needed. However, greater simplicity in income tax often implies less fairness, equity and progression in tax rates. I emphasise, therefore, that a local income tax is a possible runner, and the Labour Party is considering it closely.
  Mr. Richard Shepherd: Is not the central criticism of a local income tax the same as the one that the hon. Gentleman made about a local sales tax, that it will encourage people who are subject to higher local income taxes to move to other areas, and that that would be at the expense of possibly poorer areas? Because of the distribution of income throughout Britain, there are already biases in certain areas which enable them to have lower taxes to fund their own expenditure. A local income tax would compound the problem.
  Mr. Graham: At this stage we should look at a combination of the present rating system with a local income tax pitched at a certain level. We should look at the element of national taxation and the amount that will be subvented for local expenditure. The hon. Member is right to the extent that if a person wished to pay as little tax as possible he would have the option of moving to an area with a low local income tax. With it, of course, comes a low level of service, by and large. Therefore, we must consider the quality of the services that are provided by locally raised revenue.
  Mr. Shepherd: I thank the hon. Gentleman for giving way again. That is part of what I said. I also said that already in the income distribution across the country the higher income groups tend to collect together. So there are already local authorities which, by a lower local income tax, generate much higher revenues than other areas which unfortunately have merely low incomes.
  Mr. Graham: The hon. Gentleman is right. There is the problem of balance, and there is the problem of each local community having to decide its own priorities against the background of its own resources. The Government have the major responsibility of legislating as to what that community can or cannot do.
  I want to say a word about the poll tax, which has received some support and some condemnation. The Green Paper, which has been of great help, shows that it would work out at about £120 per adult. However, we
  1134
  believe that a poll tax is regressive. A party point was made by the hon. Member for Lichfield and Tamworh, but what the hon. Member for Woolwich, East (Mr. Cartwright) said is perfectly valid. Regardless of who a person votes for, there is a tendency for people not to vote in local elections—or, sadly, in national elections A poll tax of perhaps £120 of £150 levied on the basis of a person's presence in a house on a certain date, or on the electoral register, could be an inhibition. This should not inhibit people from going on the register, since all could be treated alike.
  Mr. Henderson: Nowadays, practically all electoral registers—certainly those in. Scotland—are produced by computers. There is no need for the traditional concept of the electoral register being made on a specific night in October and coming into force the following February. There is no technical reason why the register could not be up to date at all times. That would be very helpful in other respects as well as in this case.
  Mr. Graham: The hon. Gentleman has demolished the argument that ipso facto the person who does not wish to pay the poll tax can evade being on the register. However, the more opportunities that there are for evasion under any system, the greater will be the cost to those who do not evade the system. A poll tax is a crude and unattractive alternative to the domestic rates.
  The word most frequently used these days in Government circles is not "abolition", but "reform" of the rating system. So be it. The Opposition will look at a reform of the present rating system as a part of a major restructuring of the total taxation system. That will involve more progression in income tax rates, the introduction of a wealth tax, changes in company taxation and a constant and unremitting running battle against tax avoidance and evasion.
  1.22 pm
  Mr. Douglas Hogg: It is always a pleasure to listen to and to follow the hon. Member for Edmonton (Mr. Graham). He brings to these debates an openness of mind and a sense of candour and generosity which, regrettably, is not true of all hon. Members. My only regret is that there are not more of his hon. Friends behind him to benefit from his experience and the lessons that he gives.
  I join with other hon. Members in congratulating ray right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) on bringing this Bill before the House. He has done the House a great service by giving an important impetus to the debate on rates. He and other hon. Members are right to emphasise the sense of injustice and resentment that people feel about the rating system.
  Two criticisms can be made of the rates. First, the obligation to pay is in no way related to the ability to pay. Secondly, there is an unfortunate and unjustified discrimination between the householder and the non-householder. That sense of resentment will not speedily 30 away. We must think urgently about our proposals for reform.
  I am sceptical of the idea that one can simply replace the present system of financing local government expenditure. Many hon. Members talk about local income and sales taxes. The hon. Member for Edmonton and my hon. Friend the Member for Ilford, South (Mr. Thorne),

  1135
  fully dealt with the issue of local sales taxes. A local sales tax is not desirable. It would discriminate among areas and distort the local economy. In particular, it would affect those who have no vote, such as the commercial undertaker.
  I am more sympathetic to local income tax. I was impressed by the speech of the hon. Member for Woolwich, East (Mr. Cartwright) who has now temporarily left the Chamber. His case requires careful consideration. Its substance was twofold. First, that the Government's subvention should be reduced to a minimum. Secondly, that a distinction should be drawn between the two major tiers of local authorities, giving the power of rating to the junior tier, district councils, and the power of raising money through a local income tax to the senior level, county councils. That argument must be considered carefully.
  Perhaps the hon. Member for Woolwich, East has not taken all the problems into account. My hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) referred to the cost, and that point needs no further refinement. My hon. Friend also pointed out that there would be an immediate and substantial on-cost to wage earners. That is not in the national interest and would not be readily acceptable. I think that the hon. Member for Woolwich, East acknowledged the justice of my point that most county authorities would find it extremely difficult to raise sufficient funds through a local income tax.
  As a result, if that system were adopted we should still need a mechanism for supporting most county council areas. I speak of county council areas, because I happen to represent one, but the same applies to most great metropolitan areas. Therefore, although there is merit in the hon. Gentleman's argument, he did not give sufficient weight to the objections. Although I do not rule the system out, I view it with scepticism.
  Having said that, I am under some obligation to suggest an alternative. We could reduce the sense of injustice by a carefully balanced package of reform, which would contain three elements. I would transfer responsibility for one or more major areas of expenditure to the central Exchequer. Education is an obvious candidate. There are three ways of approaching the issue. First, we could make central Government responsible for the education service. I am against that idea, because it would be unacceptable to local authorities. Secondly, we could transfer responsibility for teachers' salaries or education staff salaries—which are slightly different—to central Government. Thirdly, my right hon. and learned Friend the Member for Runcorn (Mr. Carlisle), a former Secretary of State for Education and Science, pointed out that we could make a block grant that is directly related to the needs-related expenditure requirement. He made that suggestion on 16 February 1982 and it should be given serious consideration.
  Therefore, first, I would transfer a major area of responsibility that is presently borne by local authorities to central Government. Secondly, the rate burden paid by individuals should be made tax allowable. Indeed, I support the remarks made by my hon. Friend the Member for Lichfield and Tamworth. Rates should be tax allowable and deductible against income tax. However that is not to say that there is no argument about the level. We could argue that there should be a ceiling or that tax should be
  1136
  deducted only at basic rate. Those who are below the tax threshold but who are not on supplementary benefit would not gain anything from such an approach. Therefore, we might have to build into the system some form of credit payment. These matters are the subject of discussion, debate and negotiation. The principle is that rates should be tax deductible, otherwise there is double taxation, and that is objectionable.
  The third element in the package is a capitation or poll tax. I agree with the hon. Members for Edmonton and Woolwich, East that in part it is regressive. However, that objection carries weight only if one endeavours to raise a major sum by a capitation tax. Limiting the amount to, say, £1,000 million would involve a payment of about £25 per head. The same objections do not arise as when raising a larger sum.
  I take the broad view that reform is needed. Any such reform should contemplate the retention of rates. We must transfer to the central Exchequer a major area of financial expenditure presently borne by local authorities—for example, education. Rates should be tax deductible, subject to discussions. There should be a capitation tax, set at a fairly low level. That package of measures, in various proportions, would go a long way towards alleviating the sense of injustice felt by our constituents.
  I represent Grantham, in Lincolnshire, which is a rural area. My constituents and I are struck by the fact that Front Bench Members and Departments of State do not fully appreciate the difficulties of those who live in rural areas. We are constantly reminded, perhaps rightly, of the great difficulties experienced by people who live in the city centres. I do not denigrate that. There is a problem, but my constituents experience great problems living in country areas. There are many schools to run, and many roads to maintain. Transport is a major problem. One can go on multiplying the difficulties that rural areas face. I believe that in setting the rate support grant insufficient weight is placed on sparsity. I hope that the Under-Secretary of State will take on board the fact that hon. Members who represent rural areas believe that insufficient weight is given to the sparsity factor. He is a reasonable man and anxious to please and has always been most helpful.
  I have been criticising my hon. Friend, albeit mildly, but in Lincolnshire we are grateful to my right hon. and hon. Friends who make these decisions for the substantial increase that we received this year in the transportation grant. That has well-nigh doubled, and for that we are grateful.
  Sir Albert Costain: I represent a seaside resort. We have difficulty in the amount that we have to spend on tourists and day trippers who come from the towns. The ratepayers in my constituency feel aggrieved that they do not get sufficient credit for that.
  Mr. Hogg: My hon. Friend is right. His constituents are fortunate in having such an assiduous representative who brings these points to the attention of the Ministers responsible. I am sure that his constituents will be grateful.
  Another point concerns agricultural land. I am sorry that the hon. Member for Edmonton has temporarily left the Chamber. Nevertheless, no doubt he will take the points on board.
  If we were starting from scratch, we would probably not exempt agricultural land from rating. It is difficult in

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  the abstract to construct a reasonable argument for doing so. But we are not starting from scratch. I bitterly oppose any suggestion that agricultural land should be brought into the rating system.
  I have two arguments in support of that general proposition. First, the farming community plans its investment on certain factual assumptions. One factual assumption, justified by experience, is that the income generating asset—land—will not be subject to rating. That has been the experience for many years. To introduce a rating element would distort the assumptions and impose substantial burdens upon an industry which, even after a slight recovery in 1981, has a level of profitability substantially below that of four or five years ago.
  Mr. Richard Shepherd: Does not the proposition about imposing taxation apply to all other areas and to businesses in particular, and also when there is a variation in rates?
  Mr. Hogg: That is not as attractive an argument as my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) seems to think. The reason why it is not attractive is that people make their investment decisions on factual assumptions. The factual assumption, justified by history, is that agricultural land will not be subject to rating. That has been so for decades. To introduce it now, and certainly to introduce it suddenly, would have a crippling effect on the industry.
  My hon. Friend the Member for Aldridge-Brownhills represents an urban constituency. Understandably, his interests are directed towards the advancement of his constituents. That brings me to my second argument. If we bring agricultural land into rating, costs inevitably will be substantially increased. Farmers will not be able to absorb those costs. My hon. Friend has probably not read the 1982 agriculture review. I do not blame him. Why should he? Farmers are over-borrowed. The cost of servicing is high and the level of profitability is not as good as it was in 1976.
  Mr. Richard Shepherd: That describes industry generally.
  Mr. Hogg: That may be so, but I am dealing with farming. My hon. Friend would do well to consider that, if we seek to impose upon agriculture an additional burden, output costs will be increased. The farmer will recover that cost from the consumers, some of whom are my hon. Friend's constituents. His constituents would not like that much. My hon. Friend should pause for reflection before making that proposal.
  I conclude as I began by thanking my right hon. Friend the Member for Stafford and Stone for giving us the opportunity to discuss an urgent and important matter.
  1.38 pm
  Mr. John Stokes: This has been a good debate. My right hon. and hon. Friends must regret that for most of the four hours only one Member for the Labour Party has been present—although for a short time there were two—and there has been hardly any representation from the Liberal or Social Democratic Parties. On a subject as important as rates, that is deplorable.
  I support the Bill. It has been supported by many right hon. and hon. Members from the West Midlands and elsewhere in England. I am particularly glad to support my
  1138
  right hon. Friend the Member for Stafford and Stone (Sir H. Fraser), because he and I were in politics together at Oxford in the middle 1930s, 45 years ago. I can sty truthfully that today we both hold the views that we held then. I know that my right hon. Friend will not mind if I say that he was then, in part, an eccentric and is now, in part, an eccentric, although, of course, an attractive one. The House could do with many more like him, although I cannot agree with everything that he said in his interesting speech.
  The Bill is short and to the point. It would compel the Government to devise a proper balance in the financial arrangements between central and local government and would bring greater fairness to domestic ratepayers and to commercial and industrial ratepayers. By forcing the Government to spread the rate burden more fairly, it would bring home to all electors in local government a sense of financial responsibility, which, sad to say, is often lacking.
  Looking back, most people would agree that the Government, in the early 1970s, made a catastrophic mistake by reorganising local government as they did. Not only were old place names destroyed for ever, but people lost their familiar landmarks which were so loved in England, and the new authorities, so often remote from those whom they were supposed to serve, allowed a vast new bureaucracy to be created which has been more difficult to control than even the Civil Service. The creation of new water authorities—which has not been mentioned today—caused similar, if not greater, problems.
  Rates are so high largely because of the swollen staffs employed by many local authorities and because salaries are too high following the Clegg report, which based its recommendations on erroneous comparisons between public and private enterprise. Now that the Government are rightly demanding economies in local government, councils are tending to reduce services instead of cutting out unnecessary staff. For instance, I am told that many architects' departments in local councils are still at full strength even though there has been such a diminution in the rate of council house building. If ratepayers had the real democratic control that they should have, such excesses would not be allowed.
  The present system of rating is so manifestly unjust that it must be altered. Whereas many old people on low or fixed incomes are householders and ratepayers, many younger wage and salary earners who, as we all know are comparatively well off, but do not own property, get off scot free. I was interested to hear the origin of the phrase "scot free" from my right hon. Friend the Member for Stafford and Stone. I shall always remember it.
  The present state of affairs should not be allowed to continue. It means that councils can be extravagant and increase rates because they know that many voters are not ratepayers.
  Mr. Graham: Surely the argument ought to include the fact that, although many people do not pay rates, they may pay taxes and a considerable proportion of that tax paid to the Government is sent back to local authorities to support local services.
  Mr. Stokes: As always, the hon. Member has been fair. However, he has not covered the whole argument, but only part of it.

  1139
  There is another gross unfairness in the present system. Commercial and industrial property is rated without having any representation. In the West Midlands this has had a particularly baleful effect on many companies that are struggling to survive in the world recession. One of the most respected companies in the area, GKN, which has large businesses all over the West Midlands, has made its protests loud and clear, but I doubt whether the Labour-controlled West Midlands county council has the sympathy and understanding of industry that a council in that part of the world ought to have.
  Most people also agree that there should be a review of which charges should properly fall on local ratepayers and which should be taken over by taxpayers. An obvious area for consideration is education, which takes such a high proportion of local authority budgets. There is much to be said for all education expenditure, or at least teachers' salaries, falling on the national Exchequer.
  When the Government consider a new system of rating—I hope that they will do so in this Parliament—it will be necessary to look at the structure of local government. I believe that the GLC could be abolished, along with the metropolitan and county councils. In the words of W. S. Gilbert, they "never would be missed" and great savings could be made.
  When private manufacturing industry is cutting the number of its employees to the bone, it is outrageous that there have been such small economies in local government staffs. A rating system that was more accountable to every adult living in a locality would make councils much more accountable to ratepayers.
  I should like the present system of rates to be superseded by a poll tax paid by every adult. There would have to be an arrangement to ensure that it did not bear too heavily on the less well off, but I believe that it would prove to be the most practical solution.
  I am glad that my hon. Friend the Member for Harrow, Central (Mr. Grant) mentioned the important role that the private sector could play in doing some of the work that councils carry out by direct labour. That would lead to not only greater efficiency, but a considerable reduction in costs. One has only to see employees of local firms clearing or sweeping the roads, or digging up paths, to appreciate the enthusiasm with which they do their work. In addition, their productivity is much higher than that of council employees.
  Much as I admire my right hon. Friend the Member for Stafford and Stone, I do not agree with his somewhat revolutionary remarks about the feudal structure of this country, but the Bill has produced a good debate and if it forces the Government to think radically and rapidly it will have served a useful purpose.
  1.48 pm
  Mr. Richard Shepherd: I join other hon. Members in paying tribute to my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) for giving us the opportunity to debate a central issue, which, as my hon. Friend the Under-Secretary of State for the Environment knows, has concerned a number of hon. Members for a long time. I remember my hon. Friend replying to an Adjournment debate last June on the domestic rating system.
  1140
  I am pleased to follow my hon. Friend the Member for Halesowen and Stourbridge (Mr. Stokes), who has diligently represented the interests of businesses and ratepayers in the West Midlands for many years and in difficult times. My hon. Friend the Member for Grantham (Mr. Hogg), who is temporarily absent from the Chamber, with his usual forensic expertise, cut a swathe through many of our prejudices and misconceptions about the rating system and the pressures on it.
  I take issue with one point, albeit in my hon. Friend's absence. One of his assumptions grieves me and must grieve other hon. Members representing industrial and urban constituencies. In representing an agricultural constituency, he assumes that increases in agricultural costs can be passed on to the consumer. Manufacturing industries would be flourishing if that were so. Having to respond to the nature of market discipline controls and restrains prices. One of our great problems is that the agriculture industry assumes that it can pass on costs per se. The assumption is reinforced by the CAP. My hon. Friend's proposition conspires against the consumer.
  I wholeheartedly support the splendid motion to abolish the rating system. The central consideration is whether we are satisfied with the present constitutional arrangements between central Government and local government. If we are satisfied, we should merely consider means to trim or to redistribute the way in which a local authority, accountable to a local electorate, raises its funds.
  In time and with diffidence I have come to the clear belief that the only way to achieve financial sanity is to return to the Government the responsibility for funding local government. I do not necessarily mean to take away from the local authority the administration of its services, but merely to ensure that they are wholly funded from the Government. The centre is best placed equitably to raise funds. As I have always argued, the means should be through PAYE.
  I advance that cause in the full understanding that it shifts the responsibility from local authorities to raise funds to meet their perceived needs. My conclusion is reinforced by an article in my local paper, the Express and Star, yesterday, which gives notice of a rate rise of 22 per
  cent. It states:
  "Rates in Walsall must go up by 22 per cent. to protect hundreds of council jobs and maintain essential services, so the town's Labour policy chiefs have decided.
  The rise is a staggering increase of 26p in the pound on rates bills.
  It means that the average ratepayer, living in a three bedroomed house, will be paying more than £450 a year—an increase of £82 in the past 12 months."
  Such sums are not inconsiderable. They should not be regarded separately from central taxation.
  Mr. Henderson: I believe that my hon. Friend's local authority is Labour controlled. Mine is Conservative
  controlled. The day before yesterday it spent time arguing whether the rate increase should be 1p or 1½p. Does that not show that the problem is as much the responsibility of local authorities as of the Government? If all funding came from the Government, would not the local elector lose his ability to make a judgment on the local authority?
  Mr. Shepherd: My hon. Friend's point has value. I am concerned about the capriciousness with which rates are levied and the variation in rates, even in similar localities. I am impressed by the diligence of my hon. Friend's local authority in restraining rate increases, but in the past year

  1141
  in the borough of Kensington and Chelsea rates were increased by about 50 per cent. because the Government altered the basis on which they calculated the sum to which the borough was entitled.
  Mr. Heddle: I am concerned about the direction in which my hon. Friend's thoughts are moving. I believe that they will lead to centralism, in which case local councillors in the Walsall metropolitan borough would become mere pawns and puppets of the Government.
  My hon. Friend has just referred to the swingeing rate increase of 22 per cent. in Walsall, which will have an enormous effect on jobs in his constituency. Would he consider the record of the Walsall metropolitan borough council in collecting rent revenue? Would he agree that the £3 million which the Walsall metropolitan borough council is owed by its tenants, and which it will conveniently write off, illustrates that if the local authority was responsible for raising its own money it would be even more responsible for ensuring that it recovered the amount that it was rightly due to receive by way of rents?
  Mr. Shepherd: I am grateful to my hon. Friend for his intervention. He is familiar with the circumstances of my own authority, as his constituency adjoins it. I agree that we have to concentrate on the relationship between the centre and local government. The only way, perhaps, in which to enforce accountability and responsibility on an authority is to make it responsible for raising the greater proportion of its funds, if not all of them. But I am nervous of going along that path, for the truth of life is that to change an authority, or to change the ratepayers' perception of the duties and responsibilities of an authority, takes time.
  Over recent years, partly by legislation in this Chamber and partly by our own response to our constituents, we have encouraged the belief that, generally speaking, the services and duties of local authorities and of authorities in general should be ever increasing. My fear or anxiety is that a local authority, when addressing itself to its responsibilities—which have accrued enormously over the past 20 years or so—goes through a tremendous shock period while it retreats back to a perception of what a community can afford.
  My central theme over the recent months in which we have talked about the question is that one cannot look separately at local authority rates and Government finances. They are one central tax burden. The problem is that in this Chamber we have encouraged the belief that in some curious way they are separate. When I urge on the Government that they should increase a service or impose a duty, that is often done without a full appreciation of what it means to a local authority in revenue terms. That is the great difficulty that has grown up over the past 20 years.
  In order to get a perception of the burdens that we are placing on local authorities, we have to look at the problem from the centre. That is why I wholeheartedly support the intention behind the Bill, although not all the statements of my right hon. Friend the Member for Stafford and Stone.
  I have grown up in a community which looks back to the historical origins of local government as some sort of Renaissance borough which provided a poor law for its citizens, and gave a local dignity, pride and identity to the community—the beginnings of nationhood. That is
  1142
  perhaps part of the romantic history of local government. It has become a much drearier thing in recent years, because it has become all-pervading and increasingly the instrument of the Government in providing national services locally. While recognising that, how do I also pay deference to and recognise some of the worthwhile qualities of local government and the ability of a local community to distinguish what is its own particular pride?
  In addition to Government funding I would give a local authority the right to raise a poll tax of some sort, to be fixed perhaps annually in the Budget, so that the authority could raise in that way a tax of no more than £10 per elector.
  Mr. W. R. Rees-Davies: I hope that my hon. Friend will not go too far in that direction. I am sure that he recognises that one would need the two taxes, a poll tax and also!a supplementary tax—or perhaps the transfer of teachers' salaries to the central Budget. Whatever system is used, the two taxes are needed. If people paid as much as they pay for their television licence in a year—£48—that would raise about £2 billion, or the whole of the district council taxes, and still leave something towards the county precept. The hon. Gentleman must agree that £10 would be too low.
  Mr. Shepherd: My hon. and learned Friend may not have understood, or perhaps I did not state it clearly enough, the purpose behind my abolition of the rate s, which is to transfer to the Government the whole cost of local government. However, in order to recognise a local authority's ability to expand upon its sense of identity and spend money on the matters that are of importance to the local community, I would give it a limited ability to raise money along the lines that I have set out.
  In my local authority, which covers three constituencies and has an electoral population of about 200,000, if the local councils were to determine to raise £10 per elector, that would be £2 million. That is still a considerable amount of money to spend on, for example, local swimming baths or on a project close to the local community. That is the element that I would give to the local authority.
  The burden of my argument today is to support that of my right hon. Friend the Member for Stafford and Stone by saying that I believe, although recognising the great constitutional implications, that it would be better, in the interests of the community, to accept that times have changed since we placed those burdens and duties on local authorities and that we should take away the rights of local authorities to levy domestic rates.
  2.1 pm
  The Under-Secretary of State for the Environment (Mr. Giles Shaw): There can be no doubt that the debate about the Bill of my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) has produced another excellent Friday morning. Those of us—the hon. Member for Edmonton (Mr. Graham) is one—who appear to have been on the formula for Friday mornings for some weeks now, welcome the high standard of the debate today. Therefore, I add my congratulations to my right ho a. Friend not only on his good fortune in winning a significant place in the ballot, but on his radical zeal in bringing before the House a measure of such importance.
  It is interesting that there has been a wide range of contributions. For the benefit of those who have not been

  1143
  keeping a score, the poll tax, as one of the alternative measures offered by the Green Paper, has attracted the greatest numerical support among hon. Members in the Chamber today. Some five or six hon. Members have, in one form or another, found a use for the poll tax, some in whole and some in part—a very marginal part according to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd). Local income tax has attracted two supporters. It may be significant that both came from the other side of the House. The hon. Member for Edmonton gave it a fair wind and the SDP spokesman, the hon. Member for Woolwich, East (Mr. Cartwright), also felt that that was a direction in which his party might wish to go.
  My right hon. Friend the Member for Stafford and Stone believed that a poll tax of £50 might have a part to play. However, he was looking for a system that would broaden the base of the existing revenue-raising power. That was a matter reflected by several hon. Members. Both my right hon. Friend and my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) discussed agricultural rating. The position under the Rating Act 1971 has added to the exemptions of agricultural buildings that are free from rates any building used for the keeping or breeding of livestock. That also includes birds kept for the production of food. There is a reasonably wide exemption from agricultural rating.
  The general breadth of my right hon. Friend's remarks shows that we should be considering pretty hard the way in which local authorities have operated their finances. He particularly referred to the ravages of capital expenditure cuts which have been such a feature over the past 10 years or so of local authority spending, when the revenue accounts were increasingly higher on extremely large work forces and bureaucracies maintained at ratepayers' expense. My right hon. Friend the Secretary of State has been keenly conscious of the need to reverse that process and that is why we made so much progress on those aspects.
  The hon. Member for Croydon, North-West (Mr. Pitt), who is not in his seat, raised the matter of site valuation rating. In his absence, I remind the House that the Layfield report was damning on that aspect; it concluded that the proposal would not provide a suitable or firm enough base for raising local revenue, that the practical difficulties were formidable, that a decade was needed to put it into use and that there would be a long period of transition thereafter. So much for the Liberal Party's efforts to introduce site valuation rating.
  Sir Ronald Bell: I remind my hon. Friend that the SDP-Liberal alliance partner of the hon. Member for Croydon, North-West was too polite to describe that matter as nonsense, but made it fairly clear that he thought that it was.
  Mr. Shaw: I doubt whether that will be the last element of disagreement between those two uneasy partners.
  My hon. Friend the Member for Fife, East (Mr. Henderson) raised a most interesting point when suggesting that poll tax would have a useful balancing role to play, particularly for those authorities which exceeded their expenditure guidelines or my right hon. Friend's attempts, in Government terms, to restrain local authority spending. His suggestion would have a fairly dramatic
  1144
  effect on a local citizen registered for payment of the poll tax.
  The hon. Member for Woolwich, East clearly believed that a reduced central Government grant was necessary as he would prefer more local authority direct financing and more emphasis to be placed on income tax. He stated that some 5.5 million people currently pay income tax but do not pay rates. That was a fair observation.
  My hon. Friend the Member for Harrow, Central (Mr. Grant) also felt that poll tax might have a role to play. He said that income tax would be far too costly to administer at local level and, of course, added his considerable voice to the many others calling for the abolition of the Greater London Council.
  My hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) rightly emphasised the importance of reducing costs. This argument has been bedevilled by the fact that the rating system has recently been used as a most repressive system to raise infinitely more money, over shorter periods and from a decreasing number of ratepayers, than local authorities have been wont to do for generations previously. Therefore, he is right to say that emphasis should be laid on attempts to reduce costs.
  My hon. Friend the Member for Lichfield and Tamworth asked for the business vote to be re-introduced. If he examines the Green Paper, he will note on page 52 that when the vote existed before 1969, of the 2 million business ratepayers in England and Wales, only 150,000 were entitled to vote. There are vast discrepancies in his understanding interest in ensuring that that proportion of the contributors to the rate fund have a say in the electoral mechanism. It is not merely a matter of reintroducing the system that existed in the earlier part of this century.
  Mr. Rees-Davies: Before my hon. Friend leaves the poll tax, as a question of fact, are the figures right which were put in another place, that the average sum needed for districts, if they raised their funds by way of a poll tax, would be approximately £25 per year per person on the electoral roll and that that would broadly cover the district? Of course, it would need to be supplemented by another form of taxation. However, can my hon. Friend say what sort of figure his Department would have in mind for the payment of the poll tax by an individual on an electoral basis, assuming that every person on the electoral roll—which must include their Lordships—would be levied?
  Mr. Shaw: My hon. and learned Friend is correct in quoting the Layfield conclusion. The conclusion in paragraph 7.14 in the Green Paper states:
  "A flat-rate poll tax at an average rate of, say, £–25 £30 a head a year, for example, could raise £1,000–£1,200 million. The cost of enforcement could not be expected to be proportionately reduced, however, although a scheme of poll tax at low rates would be somewhat cheaper to enforce".
  The main argument about a poll tax concerns the exemptions that would have to be made in levying the tax. There has always been an understanding that many persons who would be registered for it would come into the disadvantaged category and should not be charged at the full rate. The extent of the exemptions would clearly have an effect on how far local authorities could raise their total revenue from that source.
  The hon. Member for Edmonton gave us—I think for the first time—some official observations from the

  1145
  Opposition Front Bench on this issue. It was interesting that he was somewhat in favour of widening the tax base to include agricultural land. He did not feel that a sales tax would be a suitable vehicle and he did not rule out the prospect of a local income tax. He was disinclined to consider that a poll tax would be suitable as he found it too regressive.
  The hon. Gentleman's main concern was to ensure that local taxation is set within a total national tax review and is part of a package of tax reform. I understand that that is what the Labour Party might wish to see done. We take a different view because we believe that the impost of the rating system is such that it requires urgent examination and reform.
  My hon. Friend the Member for Grantham (Mr. Hogg) argued strongly that we should transfer education to the Exchequer. That argument was echoed by other of my hon. Friends. That would be one way of reducing substantially the burden of the rating system. My hon. Friend, too, felt that a poll tax would have a part to play.
  My hon. Friend the Member for Halesowen and Stourbridge (Mr. Stokes) was rightly critical of local bureaucracy and the unfairnesses which the rating system produces. He felt that a poll tax on adults would be acceptable.
  My hon. Friend the Member for Aldridge-Brownhills concluded his remarks by saying that, although there is a strong case for a poll tax at a marginal rate, he is more concerned about a total transfer of the local tax system to the central Exchequer. I think that my hon. Friend is the only hon. Member strongly to advocate a total removal of local government finance to the centre.
  Sir Albert Costain: How does my hon. Friend answer the argument that if people are taxed when registering for voting it will not seem as if they are buying votes?
  Mr. Shaw: This is a matter for consideration. In replying to the debate I am not involved in taking up the pros and cons of each of the options that are set out in the Green Paper. I am anxious to ensure that all the comments made by hon. Members are taken into consideration—I can assure them that they will be—in the Government's review prior to determining how they should proceed from the Green Paper.
  My hon. Friend the Member for Folkestone and Hythe (Sir A. Costain) is right to draw attention to the substantial problems that are linked with registration for poll tax purposes. That is one of the reasons why the hon. Member for Edmonton and his party are not greatly attracted to it.
  I wanted to take up the comments made by those who have participated in the debate to emphasise that there is a wide range of view and a genuine anxiety to make progress. There is a genuine need to respond to the Government's consultation paper. Therefore, we are extremely grateful to my right hon. Friend the Member for Stafford and Stone that he has introduced the Bill at this time to allow this wide-ranging debate to take place.
  It comes as no surprise to hon. Members that the debate about rates has gone on for many years. Domestic rates have been on the statute book for almost four centuries. They have had an extremely long life as a means of levying a contribution from local householders towards the cost of local services. Their longevity must imply that for most of those centuries domestic rates have done their job in an acceptable and effective way. I noted how many
  1146
  comments were made that showed that the system might have a permanent role to play if sufficient modifications were made. There was not a complete rejection of the idea that the domestic rate was a tax that could be made more equitable, given some careful reappraisal.
  In recent years, as hon. Members are aware, the system has not enjoyed as much acceptance as for past hundreds of years. The system has been giving problems. Those problems have been so serious that the Government rare fully convinced of the need for radical reform, including, if necessary, the abolition of domestic rating, as proposed by my right hon. Friend in his Bill. That conviction is reaffirmed in the Green Paper.
  It would be no exaggeration to say that the debate on the reform of the rating system is almost as old as the system. However, it was the problems of the massive rate increases in recent years that followed the reorganisation of local government in the mid-1970s that threw the shortcomings and inequities of the present domestic rating system into sharp relief. Some of those increases in the mid-1970s were enormous and far outpaced the rate of inflation.
  But it was not only the size of the increases that sapped public confidence. It was also the fact that the burden of providing the finance for local services often appeared to be shared on an arbitrary and unreasonable basis between householders and non-householders and between different classes of ratepayer. The heavy rate increases imposed by some authorities over the past two years have again brought those doubts to the fore and further weakened the credibility of the system of domestic rating in its present form.
  The result of that upheaval in the mid-1970s and the alarm that it gave rise to on the part of the ratepayers was the appointment by the Government of the committee of inquiry into local Government finance, known as the Layfield committee. It published its report in 1976. [am glad that this point was brought out clearly by my hon. Friend the Minister for Lichfield and Tamworth. The report's main recommendation was the introduction of a system of local income tax to supplement, not to replace, the existing rating system. The committee was drawn to that solution mainly on the grounds that it would reinforce local accountability.
  The Labour Government published a Green Paper in May 1977 rejecting the arguments for a supplementary local income tax. No doubt the hon. Member for Edmonton will be able to review his party's stance on that. Apart from deciding to move to capital valuation rather than a rental basis for rating domestic property, the Labour Government offered no radical proposals for reform of local revenues.
  The Conservative Party in its manifesto of 1979 said clearly that, while reducing taxation must take precedence for the time being, the abolition of the domestic rating system still remained an objective. The recent Green Paper is an important step forward in the process of discharging our long-held commitment to the reform of domestic rates.
  The reaction of some people to the Green Paper has been that it is no more than a sort of "Son of Layfield", going over the old territory. For the most part, such comments have been intended to be slighting, though in fact comparison with Layfield can perhaps be regarded as a modest compliment. It is certainly true that the broad issues of local government finance, including the question of whether new local revenues are needed, have been

  1147
  examined repeatedly and more or less thoroughly over the years. Layfield laid down much useful groundwork on the issues discussed in the Green Paper, and the report is a major work that is bound to be a fixed point of reference for any further examination of matters of local government finance.
  I must make it clear that the Green Paper does not claim to be the final word on the subject. It offers a range of options. It does not lay claim to the Layfield report's breadth or depth in considering local government finance. The Layfield committee's terms of reference were:
  "To review the whole system of local government finance in England, Scotland and Wales, and to make recommendations."
  Mr. Graham: Will the Minister give some indication of a time scale?
  Mr. Shaw: The House will indeed be told that before I sit down.
  The terms of reference of the review which produced the Green Paper are narrower and more specific. They are, in effect, to consider alternative ways of raising the £4.8 billion raised at present through domestic rates. That much narrower intention is backed up by a clear commitment to reform on the part of the Government.
  Perhaps I could turn now to the major criticisms levelled against the way in which the present domestic rating system works. Most of the criticisms that we hear from ratepayers concern fairness in some way or other, as today's debate has reflected. In the words of the Green Paper:
  "The burden of domestic rates is shared unfairly between different kinds of household."
  For example, a single person, perhaps a widow living on her own in what was her family home, on a modest fixed income' finds that she must pay the same through the rates towards the cost of local services as the family in a similar house next door which may consist of husband, wife and children, one or more of whom may be earning.
  There are three separate but related elements in the problem. The first is that a household with only one person in it is likely to draw much less on local services than a household with several members, although their rate bills are the same for similar accommodation. Simply, in terms of the value that each household gets for its money, it can clearly be argued that this is unfair.
  Secondly, the size of the two households' rate bills is not directly related over the whole range of incomes to ability to pay. Some people argue that this problem has become something of a myth nowadays, and that the solitary widow and the larger household struggling to make ends meet on a modest income are protected from hardship by the rate rebate scheme. It is certainly true that rebates help, and that they have the effect of relating rate bills to income for the worse off. But any Member of Parliament or councillor knows from his postbag that the anomaly has certainly not been eliminated by the rate rebate scheme.
  Thirdly, only heads of households are directly liable to contribute through the rates to the cost of local services. This means, for example, that no grown-up child living in a household headed by one of its parents has any personal liability to local taxation.
  There are other problems, too. Some people criticise the extent to which rate bills vary in different parts of the
  1148
  country, notwithstanding the principle of equalisation on the basis of rate poundage on which the present rate support grant system operates—a system, incidentally, that is infinitely to be preferred to the previous system which was based purely on the local authority's history of expenditure. Others feel that the hypothetical rental basis of rateable values sometimes produces unfairly high assessments for flats compared with those for houses.
  At this stage in our consultations I do not intend to say a great deal about the options in the Green Paper. The House has contributed a great deal of useful thought on these matters today. I shall say a word, however, about the presence of a reformed system of domestic rating, which my right hon. Friend's Bill would appear to sweep away altogether, as one of the options in the paper.
  First, one cannot consider what to put in the place of the present system without at the same time considering the present system itself.
  Sir Hugh Fraser: The Bill would sweep away the present method of assessment of rates, not rates themselves.
  Mr. Shaw: I am grateful to my right hon. Friend for the correction. The Bill, of course, seeks to
  "Abolish the power of local authorities and water authorities to levy rates on the present system of assessment."
  However, I put it to my right hon. Friend that, although it is on the technicality of assessment, I am sure that it would remove entirely the authorities' method of raising revenue by that means.
  The shortcomings of the present system tell us about the pitfalls that alternatives would have to avoid. Experience of the present system is the source from which we have to derive the criteria that we have to apply when we try to assess the strengths and weaknesses that this or that new local tax will produce. I am sure that every hon. or right hon. Member who has spoken today will have observed this for himself. So the chapter on domestic rates in the Green Paper is there very largely as an essential part of the process of defining the terms in which discussion of the alternatives must take place.
  Nevertheless, reformed domestic rates also appear in the Green Paper as a genuine option in their own right. A number of hon. Members reflected that view here today. I accept that, for some people, this is an unwelcome inclusion. Perhaps my right hon. Friend is one of those people. I say to them and to my right hon. Friend that domestic rates are a tax which has been shown by long experience and in varying circumstances to be practicable, has virtues from the point of view of enforcement, accountability and financial control, and which we could not reasonably have ruled out of consideration altogether in the light of the arguments advanced for it by many, and particularly by the local authorities. I can assure the House, however, that the Government's opinions on the matter are genuinely open. In particular, I assure my right hon. and hon. Friends that there is no truth whatever in suggestions that have appeared recently in the press that the Government have decided, before the consultation period on the Green Paper has even come to a close, that there will be no radical reform. I should like to make it clear that the Government have not reached any conclusions and will not do so until after 31 March this year, which is the closing date for comments on the Green Paper.

  1149
  So I say to my right hon. Friend the Member for Stafford and Stone that, in introducing his Bill and pressing the Government to fulfil their commitment to reform, he is pushing at an open door. I hope that it emerges from everything that I have said that he and the Government are absolutely at one on the need for a better way than the present system of domestic rates of raising money from local people towards the costs of their local services.
  However, for the moment—this is an important issue—there appears to be, for the moment, no consensus, be it in local government, among academics, among the professions or among ratepayers themselves, about the direction that reform should take, although I agree with my right hon. and hon. Friends who have said today that there is a clear consensus that reform is desirable. That is clear to us all. Where we move from there is infinitely more debatable. For that reason, as I am sure my right hon. Friend in his generous heart of hearts knows, I have to say to him that his Bill is not acceptable to the Government. He would not want me—and it would be discourteous—to go into the complications of its drafting, and say that it is deficient in this or that technical respect, or that its effect would differ from its intention in this or that way, such as the possible confusion between the method of assessment and the system itself. The first problem is that his Bill would abolish the rating system from 1 April 1983, without putting anything in its place. His radical zeal, which we have always admired, had its place in making that decision when he drafted his Bill.
  My right hon. Friend can, of course, quite reasonably say that the legislation that would be required to set up a new system of revenues is a job that is beyond the resources of a Back Bencher, and that the Government should take it on. But, as I have explained, we are not in a position to do so at present, because we do not yet have the information that we need to decide on what the new system of revenues should be. The Government's aim is clear enough: it is to make progress as rapidly as possible towards a new or reformed system of domestic rates which will be seen to be fair and which will be more widely acceptable, both among those who currently contribute towards the revenues concerned and among those whose job it will be to operate the system and put the revenues to good use. It is that kind of consensus that we hope it will be possible to achieve out of the results of consultation on the Green Paper, for which we have set a closing date of 31 March 1982. It would not be responsible, in the meantime, if this House were to accept in principle that a major source of the revenue of local government should be abolished from next year without provision for an alternative source of income.
  This brings me to the second major problem, which is one of timing. As the Green Paper makes clear, it is simply not possible for any fundamental change in the local taxation system to be put into operation overnight. For one thing, radical change would have to be preceded and accompanied by close and detailed consultations of the interests concerned to make sure that we ended up with a sound and workable scheme. This in itself would rule out the date of 1 April 1983. The need for integration with computing developments currently taking place on arrangements for value-added tax and pay-as-you-earn would delay the introduction of a local sales tax or income tax——
  It being half-past Two o'clock, the debate stood adjourned.

  SUCCESSION TO THE CROWN BILL
  Order for Second Reading read.
  Hon. Members: Object.
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Objection taken——
  Mr. Michael English: On a point of order, Mr. Deputy Speaker. Hon. Members cannot object to something that has not been moved, and it cannot be moved because the Queen's consent has to be signified.
  Mr. Deputy Speaker: Order. The hon. Gentleman is a very experienced parliamentarian. He knows that, under Standing Orders Nos. 1 and 5, opposed business cannot be taken at this time.
  Second Reading deferred till Friday 5 March.
  Mr. English: On a point of order, Mr. Deputy Speaker. I do not think that it is appropriate that the Queen's consent should have to be given for a Bill of this nature. It was never given to the Act of Settlement or to the Treaty of Union with Scotland. Indeed, the whole procedure of the Queen's consent was invented in 1728.
  Mr. Deputy Speaker: Order. The hon. Gentleman knows that that is not a point of order. I may say to him for the future—indeed, for next Friday—that Mr. Speaker is entirely satisfied that the Queen's consent is required for his Bill.

  RELIEF FROM FORFEITURE BILL
  Order for Second Reading read.
  Hon. Members: Object
  Mr. Deputy Speaker: Second Reading what day? No day named.

  RACE RELATIONS AND IMMIGRATION BILL
  Order for Second Reading read.
  Hon. Members: Object.
  Mr. Deputy Speaker: Second Reading what day? No day named.

  CHILDREN'S HOMES BILL
  Read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  GARDEN SUPPLIES (SUNDAY TRADING) BILL
  Order read for resuming adjourned debate on Question—[12 February]—That the Bill be now read a Second time.
  Hon. Members: Object.
  Debate to be resumed upon Friday 2 April.

  DOGS (MISCELLANEOUS PROVISIONS) BILL
  Order read for resuming adjourned debate on Question—[19 February]—That the Bill be now read a Second time.
  Hon. Members: Object.
  Mr. Deputy Speaker: Debate to be resumed, what day? No day named.

  RESTRICTIVE TRADE PRACTICES (AMENDMENT) BILL
  Order for Second Reading read.
  Hon. Members: Object.
  Mr. Deputy Speaker: Second Reading what day? No day named.

  Drugs (Illegal Imports)
  Motion made, and Question proposed, That this House do now adjourn.— [Mr. Berry.]
  2.33 pm
  Mr. Alfred Dubs: I welcome this opportunity to raise the question of the control by Her Majesty's Customs of the illegal importation of hard drugs into the United Kingdom. At the outset, I must declare an interest. I am an adviser to the Society of Civil and Public Servants and I have had a great deal of help from it in getting background information for this debate. I have also had information from one or two other organisations. I am grateful for the help that I have received.
  There can be no doubt about the seriousness of the hard drugs problem in Britain. I am concerned specifically with narcotic drugs, especially heroin, although that is not in any way to minimise the problem of other dangerous drugs, such as barbiturates. A few days ago the Home Office published some figures of narcotics addicts. They show the alarming increase in 1981 of addicts known to doctors and receiving treatment. The increase was the biggest for over 10 years. The figure in 1981 was 3,800, compared with 1971 of 1,426.
  In case any hon. Member should think that, despite the seriousness of addiction, there are not many addicts, I should point out that most addicts are not registered. The number of addicts is likely to exceed the number of registered addicts in a ratio of anything between 5:1 and 25:1. Therefore, there may well be about 20,000 hard drug addicts, to which must be added the number of barbiturate addicts.
  I do not need to spell out the tragic consequences for a drug addict. On occasion, the consequence may be death. Addiction certainly causes illness, and possibly family breakdown, crime and imprisonment. The available Home Office figures show that addicts tend to be younger than before and that a small proportion are known to be as young as 16. Anyone who has seen a heroin addict trying to inject himself will know only too well what a tragedy it is.
  There are four basic approaches to the problem. The first is to put more pressure on foreign Governments to minimise the likelihood that drugs will be produced in those countries and shipped to Britain. However, in some of the source countries there is political instability and it may not be easy for the Government concerned to exercise effective control.
  The second approach is for the police to increase surveillance, to catch the dealers and thus to prevent the drug's use. The third approach is to provide improved facilities for the treatment and rehabilitation of drug addicts. All the available evidence suggests that our resources for treatment and rehabilitation are seriously overstretched. Those working in the community say that they cannot cope with the number of people who need help. The fourth approach is to control the illegal import of drugs at the point of entry into Britain, and that is my main concern today.
  By any standards, Customs officers appear to be doing a good job in catching at least some of those who bring hard drugs into Britain. Last year heroin seizures more than doubled and reached a total of 87 kilograms, which, according to the Home Office, have an estimated street value of £16·5 million. The total amount of drugs seized

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  last year is estimated to have a street value of £52 million. It is alarming that the great bulk of the heroin that came to Britain and was seized was destined for United Kingdom consumption. It is estimated that at least 80 per cent. of the seized heroin was intended for the United Kingdom market and not for transhipment to other countries. Last year, 87 kilograms were seized, compared with just over 2 kilograms in 1975.
  I suppose that cocaine is a slightly less serious drug than heroin, although I do not minimise its seriousness. Last year cocaine seizures amounted to 13.5 kilograms, compared with 9.25 kilograms in 1975. However, it is the great increase in heroin seizures that gives us pause for thought. Of the heroin seized, 55 to 60 per cent. came from Pakistan, 25 to 30 per cent. from Turkey, about 8 per cent. from the Lebanon and 7 per cent. from Thailand or the golden triangle. That contradicts the popular belief that almost all heroin comes from the golden triangle. In addition, there were smaller seizures from India, Syria and other countries.
  It may be argued that, given the great increase in the amounts seized, all is well because we are catching the stuff as it comes into Britain. However, the evidence is against that. One indicator is the street price of heroin. It is impossible to be specific, but the best estimate is that the street price is between £50 and £70 per gramme. The price has been stable for two or three years, but is estimated to have fallen by about 20 per cent. since 1978. That suggests that we are not catching all the heroin that comes into Britain, because if the price is stable the supply is probably reaching the domestic market.
  Further evidence that all is not well comes from agencies concerned with drug addicts. Mr. David Turner of the standing conference on drug abuse said recently that there had been a major rise in addiction in Britain. If that is so, and we are facing a major crisis, we must consider the question of the adequacy of customs controls.
  A feature of the last 10 years and more has been the enormous increase in the movement of people and cargoes in and out of Britain. There has been no commensurate increase in the number of Customs officers. Let us consider the position at Heathrow. In 1971 there were 13.4 million inward passengers from international destinations. By 1981 the number had reached 22.5 million—an increase of 67 per cent. in the inward movement of people. In the same period the number of uniformed Customs officers declined from 352 to 331.
  Over the 10-year period there was a 40 per cent. increase in the volume of cargo, but a decline in the number of Customs officers dealing with cargo from 155 to 121. The number of inward passengers through Dover increased by over 50 per cent., but the number of Customs officers to cope remained static over the 10-year period.
  Perhaps the best example of the pressures on Customs officers is the change in passenger controls at the points of entry. Before 1968 every passenger was liable to be checked by a Customs officer at the airports or ports. The Finance Act 1968 changed that procedure and introduced the red and green channels. When the channels were first introduced it is estimated that about half the passengers going through the green channel were spoken to by Customs officers and about 20 per cent. were examined to see whether they had brought anything in to the country illegally.
  Today it is estimated that 1 per cent. of the people going through the green channel are challenged by Customs
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  officers. That is a direct reflection of the increased number of people going through and the lack of Customs officers to deal with them.
  Before 1977 there was a manual system of Customs clearance for cargo. At that time about 15 per cent. of cargo consignments was examined. The best estimate for today is that 5 per cent. of cargo consignments from die EEC are examined and about 10 per cent. from non-EEC countries.
  The Customs investigation division, on the basis of information, works internally to examine and try to catch people who smuggle stuff in. Its work, successful as it is, is to a large extent dependent on information from static or uniformed Customs officers at the points of entry. The conclusion is inescapable. We are asking too much of a limited force of Customs officers. They know that they are being asked to do the impossible. We need urgent action to bring the import of hard drugs under some form of more positive control.
  Some years ago when I arrived in San Francisco from the Far East I remember seeing a sign above the Customs shed which said:
  "Be patient. A drug free America is worth waiting for."
  That is symbolic of the American Government's determination, in spite the difficulties, to apply tight Customs control at the point of entry.
  The Budget is due shortly. I appreciate that the Minister is unable to anticipate the Budget statement, but I hope that it will not contain proposals that might lead to a reduction in the number of Customs officers. I hope that the reverse is true. I hope that the Government will propose to increase surveillance at the points of entry. I appreciate that a cost is involved. Extra Customs officers cost money, and with the Government's obsession about public spending it will be difficult for them to eat their words and provide extra Customs officers. Nevertheless, that is worth doing. If the Government do not do so there will be enormous social cost in terms of more addicts of hard drugs who will have to be coped with within the limited resources of the NHS and other agencies. The need is urgent and I hope that the Economic Secretary to the Treasury will have something hopeful to say about the problem.
  2.45 pm
  The Economic Secretary to the Treasury (Mr. Jehn Bruce-Gardyne): I congratulate the hon. Member for Battersea, South (Mr. Dubs) on raising an important matter and I assure him that no one in the Government is complacent about the drug problem that we face or the problem of control.
  The hon. Gentleman will appreciate that a number of points that he made in the early part of his speech are matters for the Home Office or the Foreign Office. had better not comment on those, but I shall ensure that his remarks are drawn to the attention of my right hon and hon. Friends. I shall concentrate on the specific problem of control, because that falls within the aegis of the Customs and Excise, for which the Treasury is answerable in the House.
  I do not quarrel with arty of the figures that the hon. Gentleman gave, although I draw different conclusions from them. The hon. Gentleman drew attention to the enormous growth of traffic through our airports in the past 10 or 15 years and to the contraction in the number of Customs officers involved in checking that traffic. The

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  growth has been exponential and traffic through our airports could not be comprehensively checked at the point of entry—not only without enormous staffing costs, but without intolerable interference with normal traffic. However many additional staff we were prepared to contemplate, we could not seek a solution down that road.
  I am sure that the hon. Gentleman knows that the nature of drug trafficking is such that physical control at the point of entry is almost impossible, because even minute quantities of drugs can do enormous damage and have a high value on the street. Such quantities can easily be concealed on persons or in vehicles and a simple physical check is unlikely to detect it in most cases.
  I am told that some professional operators have adopted a new technique of putting drugs in a condom and swallowing it. When they are detected, the Customs officers are faced with the extremely disagreeable task of sorting out the results—to put it discreetly. The sophistication of drug traffickers has grown enormously, and the problems of detection have grown with it.
  I am glad that the hon. Member for Battersea, South paid tribute to the success that the Customs and Excise has enjoyed in its extremely difficult task. He was right to do that. The hon. Gentleman quoted the figures for detection and the haul last year and drew attention to the considerable growth in detection rates and goods seized since 1975. The hon. Gentleman makes a fair point in saying that that does not necessarily prove that the rate of detection is rising commensurately. It may prove that the traffic has grown alarmingly. I would not necessarily dissent from that view.
  The Customs procedures for tackling this serious problem have become infinitely more sophisticated. I am told that dogs are being trained and that they have proved extremely successful in detecting heroin. All the time detection techniques are trying to keep up with the pressures.
  There has been a contraction in the total number of Customs and Excise officers deployed, for the reasons that the hon. Gentleman touched on. The number is down to about 2,400. But there has been a conscious effort to get the necessary savings at the blunt rather than the sharp end. The number of headquarters staff has been reduced by about 12 per cent., compared with an overall reduction of about 8 per cent. But that is not the whole story.
  The investigation division has been substantially increased. In the past 12 months it has been increased by
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  70. If there is evidence of a need further to strengthen the division, we shall not hestitate to take the necessary steps. Mobile control is the most effective way to deal with the menace.
  All Customs staff due to be employed on duties that could result in the detection of drug smuggling are given special training. Mechanical aids are available to examine places of concealment. One hundred and fifty investigation officers work full time. A substantial proportion concentrate exclusively on hard drugs. During major operations those officers are supplemented by other investigators and, where appropriate, by the Customs staff generally.
  Although there has been some reduction in the volume of Customs controls, the Customs believes that it has been achieved by deploying efforts away from areas where results are meagre and concentrating on more fruitful fields. Greater emphasis is being placed on local initiative and expertise and less on routine controls. That is a crucial point. With the increasing sophistication of the hard drugs traffic, routine controls are likely to yield increasingly nugatory results.
  The Government entirely share the hon. Gentleman's concern about the continuing threat to health and social welfare posed by the importation of drugs in general and hard drugs in particular. I am afraid that a total defence is not within the bounds of possibility without a massive increase in controls, which, as I said, would be unacceptable not only because of the cost but because of its impact on the freedom of movement of passengers and the flow of trade.
  We are not remotely complacent. There are no grounds for complacency. I am satisfied that we have maintained a high standard of control and I know that Customs and Excise will continue to exercise a close watch in this important area. I assure the hon. Gentleman that the Government will continue to support the efforts made by the Customs service to control this pernicious trade.
  I cannot—as I am sure the hon. Gentleman will understand—start to divulge now the contents of my right hon. and learned Friend's Budget that will be announced in 10 days' time. If I did, I should very rapidly be frog marched out of office. We shall take careful note of the hon. Gentleman's points. I am grateful to him for raising the subject on the Adjournment, and we shall certainly not allow any form of complacency to dog our steps.
  Question put and agreed to.
  Adjourned accordingly at five minutes to Three o'clock

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