Rate Support Grant
Orders of the Day — Pensioners' Payments and National Insurance Contributions Bill
Mr Graham Page (Crosby)
I beg to move,
That the Rate Support Grant Order 1972, a copy of which was laid before this House on 30th November, be approved.
If it be your wish, Mr. Deputy Speaker, perhaps we could debate at the same time the second motion,
That the Rate Support Grant (Increase) Order 1972, a copy of which was laid before this House on 30th November, be approved.
This Rate Support Grant Order which I am moving is the fourth such order to be made under Section 2 of the Local Government Act 1966. For the first time it covers only one year. Previous orders have covered two years. On this occasion, the order is for the final year before local government reorganisation.
In making each such order, successive Governments have had to have regard to the growth of services and the need to restrain public expenditure. This year the need to keep down the level of rates, as a part of the national effort to control inflation, has been a primary consideration. I am very grateful that the local authorities, through their associations, have agreed with us on the importance of this objective.
First, the mechanics of the rate support grant. In consultation with representatives of local government, we first seek to arrive at a realistic estimate of what local authority expenditure is likely to be in the year in question, based on the continuance of existing policies and the levels of services. Then we take account of the extent of possible improvements to those services. Finally we consider the overall rate of grant that should be provided in respect of the total forecast expenditure thus agreed with the local authority associations. All the figures we are discussing this evening in connection with the order are global totals representing the sum of the activities of some 1,400 local authorities. There are, of course, wide variations between individual authorities.
The negotiations between the local authorities and my Department deal with a difficult and complex subject. I pay tribute to the teams of local government and central Government officials who jointly collect the information and prepare the analyses which form the basis for these discussions. Many hours are spent on detailed exploration of the material and examination of means to improve forecasts and so on. I wish to express our appreciation of the spirit in which this year's complicated consultations were carried out and the very close agreement which was eventually achieved.
In arriving at forecasts of current expenditure for next year we are guided by the evidence of performance in past years and by the best projections available to us of significant factors for the future. But obviously, behind this apparently abstract financial calculation and this sort of counting of heads there is a serious concern with the contribution which local government makes to the standard of life of our people. We all know of the need for more and better schools and roads, more police, better services for the old and infirm and so on. But it is ironic, perhaps, that we all have less enthusiasm to pay the rates and taxes to meet the expenses of those services.
In the assessment of relevant expenditure, the Act requires my right hon. and learned Friend the Secretary of State to take into account both the needs of developing services and the extent to which having regard to economic conditions, it is reasonable to develop them over the relevant years.
To deal with the major items of services, I will mention first education. Education with its associate services accounts for about half of the relevant expenditure, and the relevant expenditure works out at £5,216 million. The House will have the opportunity at another time to debate the comprehensive review of the future of this service recently produced by my right hon. Friend the Secretary of State for Education and Science, but that wonderful 10-year programme which she has put before the House does not involve any measurable expenditure to come into the accounts for next year, so that for the purpose of this order it has not been necessary to take into account any extra expenditure in that respect. But we have taken fully into account the fact that expenditure on education generally and on further education in particular is rising more rapidly than we forecast two years ago. We have also taken into account the extent to which those same factors will continue to lead to a growth in education expenditure.
Coming to another major item, health and personal social services, the Government welcome the development of the health services in 1971–72 and have provided for continued growth, growth in real terms, of about 4½ per cent. a year prior to the transfer to area health authorities which is planned for 1974. The personal social services are growing fast and need to continue to grow. The forecasts provide for growth between 1971–72 and 1973–74 of 10 per cent. a year in real terms, and during those two years there is provision for an increase of over one-third in social work staff and for a 50 per cent. increase in expenditure on services for the handicapped. These are the sort of things and the quite substantial figures which we have had to take into account in ascertaining the whole relevant expenditure.
Another important item is that of the police. The Government are concerned that deficiencies in the strength of the police should be made good as soon as possible, and the estimate of expenditure included in this item of relevant expenditure provides for as many as 4,000 additional policemen. This will be a greater increase than has been achieved previously in any recent years; but the Government believe that the figures can be reached and, indeed, we shall encourage police authorities in their recruitment efforts.
Finally, on the items in expenditure, we have made provision for a steady growth in expenditure on the matters with which my Department is particularly concerned, the environmental services generally.
Having considered all these service forecasts separately and then having added them up, it became quite apparent that overall they represented a very substantial increase in expenditure at a time when it was important that public expenditure should be restrained. We ask each local authority to continue to make every effort to secure economies, and we believe it should be possible to secure those economies. In recognition of that, we have made a token reduction of £10 million in the overall forecast.
The report which my right hon. and learned Friend the Secretary of State laid before the House provides more details of the calculations we have made and the factors we have taken into account. From the report, the House will see that the aggregate forecast of relevant expenditure finally arrived at is the figure of £5,216 million I have mentioned. After allowing for inflation, this is about 12½ per cent. greater, in real terms, than the expenditure actually incurred in 1971–72. One may complain about this increase of local government expenditure, but at the same time there is the demand for sustained growth in the services which local government provides, not only in quantity but in quality as well, and we must meet the fact that local government expenditure will rise in this way. It represents over £2 a week for every man, woman and child in England and Wales.
I turn to the question of the rate of grant which the Government are to provide in support of this expenditure. We are dealing this year with a higher rate of expenditure than previously, at a time when the Government are anxious that the level of rates should be held down as an act of deliberate policy in the national interest. If that is the Government's policy, as it is, obviously the Government have to come in to assist in keeping the rates down to a reasonable level.
The Government's immediate policy with regard to rates is to keep the overall rise in rates to a level compatible with the Government's policies on prices and incomes while recognising, of course, that local variations will be inevitable. That is the immediate policy. In the longer term I go much further than that. My aim is to bring rates down. This is such a revolutionary idea that I would not expect to achieve it in a matter of a year. One delaying factor is that the battle must not be destructive.
In value for money, rates really are the best buy. Think of all the services which one gets for the rates one pays—roads, schools, sewerage, refuse collection and disposal, street lighting and a host of other services. Therefore, in bringing rates down we must not bring down the quantity or quality of those services. Local authority expenditure on local authority services is likely to increase. But I do aim at reducing the share of that expenditure which the householder has to pay—not this coming year, because although by local government reorganisation we have given councils the great opportunity to achieve business efficiency in the administration of local affairs, the new councils will not be born until 1974 and, like every other conception and birth, it gets worse before it gets better.
In the meantime we can get the system of rating fair and just as between one ratepayer and another. That is indeed what is done by rating revaluation, which comes before the public at just about the same time as we are debating this order. The present rateable value of a house—that figure which appears in the rate demand note as the figure by which the council's so-much in the pound is multiplied in order to tell the ratepayer what he owes—is based on the amount of rent one could have got for the house 10 years ago.
The House will not be surprised to learn that a tenant will pay one and a half times more for it now; at least, that is the average over all the dwellings in the country. Of course it may be that the neighbourhood has gone down a bit in those 10 years and the houses on the other side of the dual carriageway may have become very much more fashionable and select. If so, the former has been paying more than its fair share of the rates and it is time that the properties were revalued and fairness and justice restored. That is what we have done in revaluation.
If at the moment the rateable value is £100—that is the rent one would have got for one's house 10 years ago—from 1st April next it will be about £250. That jump would not have been so big if the last Labour Government had not postponed the revaluation which was due five years ago. Not only would the jump have been smaller but the injustice as between one ratepayer and another would have been much less.
How does this revaluation affect the rates one has to pay, and how do we take it into account in the rate support grant? To coin an unfortunate phrase, how does it affect the £ in one's pocket rather than the on the valuation list? Perhaps I may be a little elementary, because I have found that so many reports on this in newspapers have not really grasped the situation. Taking round figures, suppose that rates this year were 100p in the £; on a rateable value of £100 one pays £100 in general rates. Next year the rateable value may be £250. For the local council to get the same amount out of the householder the rates will be 40p in the £, instead of 100p in the £.
Each spring the council decides how much it needs in order to run the town until the following spring. If it can manage on the same amount as last year, the rate poundages—that is, the rates in the £—will be only two-fifths of this year's figure. If this year's figure was 100p in the it will come down next year to 40p in the £. I am sorry if I am being elementary to some hon. Members, but one needs to take it right down to basic facts like that.
I am aware that in some towns the average increase in rateable value of dwellings has gone up beyond the average of two and a half times. The average increase in rateable value of industrial and commercial property has gone up less than two and a half times. Particularly is that the case in the city represented by the hon. Member for Birmingham, Small Heath (Mr. Denis Howell). The result is that in any town or city like that, the householder will have to bear a larger share of the total rates to be collected by the town or city. But the fact is that in other towns exactly the opposite will happen. It may happen in two towns next to each other. I see that Southampton gains out of the revaluation, while Portsmouth loses—not very much either way, but that is how it works.
Variations seem to work throughout the country in that way. If in Birmingham the earnings are such that people are prepared to pay higher rents for their property than, for example, in Bradford where the earnings are low, that is obviously represented in the revaluation. Generally speaking, it is the conurbations which come out worst, and I realise the need to ensure that future grant distribution is fairer in the conurbations than it has been in the past. I must not anticipate any future legislation on local government finance; I merely say that I am aware of the fact.
I have been basing my figures and examples on assuming that the council will collect the same amount in total next year as it has collected this year, but we all know that the cost of wages and materials has gone up since last year and there will be a growth in the services provided by local councils. The council will not be able to manage on exactly the same amount next year as it has done this year. This is where the Government help with the rate support grant. Next year the Government will pay 60 per cent. of what the local council spends on providing the local government services I have mentioned. Industry and commerce will pay in rates about half the remaining 40 per cent., and the householder comes in to contribute by paying in his rates the remaining 20 per cent. So the householder pays one-fifth of the cost of the services which he gets out of his local council.
The 60 per cent. from the Government is the largest-ever contribution that any Government have made to local authorities. It is £400 million more than that which they decided to give last year on a 58 per cent. basis. If the 58 per cent. basis had been carried forward into this year, the real increase would be £104 million more than last year. But we are determined to see that that contribution goes mainly to the householders. The very substantial sum of 6p in the £ will be knocked off every rate-paying householder's bill. Therefore, in the sum I worked out the final figure of rate poundage would be 34p in the £ and not 40p in the £. This would appear on the rate demand note: 40p in the £ minus 6p The operative rate poundage is 34p.
Of the £104 million extra this year—the extra caused by raising the rate support grant from 58 per cent. to 60 per cent.£61 million will be taken up by the 6p subsidy to the rate-paying householder. The domestic ratepayer will also benefit from one-half of the balance, so the rate-paying householder will benefit from a subsidy of £83 million. Against that must be set the redistribution of burdens arising from revaluation, which I estimate at £20 million, making a net benefit to the domestic ratepayer of over £60 million.
I said that my aim was to bring the rates down. I mean not only the rate in the £ but the actual amount payable by the householder. I have mentioned four ways in which that can be done: streamlining local government and administration; increasing the general grant from the Government towards local government expenditure, the 58 per cent. up to 60 per cent.; subsidising the rate-paying householder by making his rate poundage less than that applying to industrial and commercial property; and improving the rate rebate scheme. All these are carried out now by means of this rate support grant and other orders put before the House.
There are further ways of reducing the householder's rates. The first is by transferring whole items of local government expenditure from the books of the council's treasuries to the books of the Government's Treasury. People have spoken about this for a long time. I must not anticipate today what may be contained in any Bill to deal with local government finance. Another way to reduce the householder's liability would be to allow the local councils to levy other forms of taxation. I shall not mention any particular tax or it would be headlined tomorrow, followed by a question mark, "Local councils' tax" on something or other. Those are ways in which one might reduce the liability of the rate-paying householder.
To return to the subject of next year's rates—the 60 per cent. rate support grant—provided that the authorities exercise restraint on their expenditure we are satisfied that the record level of grant which we are now providing, combined with the high level of domestic reduction, should ensure that the increase in the rates in general can be kept down to a level consistent with increases in the prices and costs which have to be met. We recognise there will be local variations.
May I mention two other items closely connected. We are taking steps to help the domestic ratepayers to pay their rates by increasing the limit of income which applies for the rate rebates. The rate rebate scheme helps those with low incomes to pay their rates. Under a draft order which has just been laid those income limits will be increased by 12½ per cent. in line with the general increase in social security benefits payable since last October. The higher income limits will operate from 1st April 1973—that is to say, applying to income for the previous six months—so that this will bring into account those who are receiving pensions from last October. Without this order several hundred thousands of people would have been taken out of the rate rebate scheme. By means of this order we are keeping up to the figure of about 800,000 to one million those who are to be entitled to rate rebates.
The £10 bonus payable to pensioners, a subject we have already discussed, will not count as income for rate rebate purposes. My Department has sent a circular letter to all rating authorities drawing their attention to the relevant fact. It might be helpful to mention that since some hon. Members have received letters from constituents on this matter.
Bearing in mind the record high level of grant and the high level of the domestic element which we are now providing, I am satisfied that the rate support grant as a whole is fair and is one which will enable local authorities to play their part in our overall strategy. I commend the order to the House.
Mr Denis Howell (Birmingham Small Heath)
I got the impression that the Minister was trying to send the rest of us to sleep, not necessarily talking in his own sleep. No doubt he wished to avoid some of the urgent issues to which we should be turning our attention. This is not just the usual discussion which Parliament holds at this time of the year about local government services and rating. This is a debate about the whole of local government finance and rating in the middle of an economic crisis of some magnitude—such magnitude that it has caused the Government to take the extraordinary step of freezing all increases in wages and salaries for the time being.
That is the backcloth to this debate. If there is to be any additional burden imposed on the ratepayer at a time when he is unable to negotiate an increase in wages or salaries, this is obviously a matter of major concern.
This debate is also being held on the day before the Inland Revenue deposits with every local authority in the land the new valuation lists which will disclose the new rateable value of every factory, office, shop and dwelling place in the country. It might well seem odd, to say the least, that such a debate is being held the day before this vital information is available to the House and the public. In advance of such information we have had an unprecedented public relations build-up by the Government, attempting to assure householders that there is no need for their rates to go up by more than the 5 per cent. expansion of local government services, or thereabouts, which the Government would like to see.
This campaign was brought to a head last week by the Prime Minister speaking at the Guildhall in the presence of a number of us. He said:
The battle against inflation lies at the heart of all our work in Government at the present time. Among the main aims of this policy is the achievement of steadier prices, including steadier rates.
The Prime Minister and the Government have based these exaggerated hopes for steadier rates in many parts of the country on two main factors.
First of all, there is the new rate support grant in which the Government are paying, for the first time, 60 per cent. of the relevant expenditure of £3,130 million. Secondly, the new valuation lists will provide no reason for the general burden of rates to be increased. Indeed, in his speech the Minister has gone out of his way to say, about the valuation, that this is an average of a 2½ per cent. increase. He said that he thought there would be local and regional variations. I will return to this point later. For millions of domestic ratepayers these hopes of rate stability are already proving to be meaningless.
I begin by looking at the effect of Government assistance to the local authorities. The Government justify their claim of 60 per cent. assistance by calculating that the total of all local government expenditure for the year 1973–74 will be £5,216 million, a figure which the right hon. Gentleman gave twice in his speech. That figure is disputed by the representatives of the towns and cities in England and Wales. They believe it to be far too low. They might be right, because it seems that insufficient account has been taken of the cost of expanding a number of our essential services. I shall mention one or two.
The educational service is one example, and the Minister went out of his way to say that it would not create additional expenditure in the next financial year. The local authorities advise me that they believe the figure for educational expansion is inadequate to take account of the raising of the school-leaving age, the expansion of nursery education and changes in teaching standards and improved curricula. If that is right it would be totally unrealistic in those circumstances for the Government to allow for an improvement factor in education next year of 3 per cent. against 3½ per cent. this year. A reduction of 1/7 in the improvement factor for education is in itself a revealing figure.
There is also the question of highway maintenance. We have had the Marshall Committee Report on highway maintenance which called for a much higher level of expenditure in this sphere. The Government have recognised the force of that demand and commendably have moved in the right direction by announcing a considerable increase in the size of the maintenance programme for trunk roads. If the Government recognise the force of the need for much greater expenditure on trunk roads, it must follow ipso facto that the local authorities, which have many other local roads to maintain, should also be making similar provision. After all, the local authorities have a responsibility for many roads in this country which bear a much greater volume of traffic than many of the trunk roads.
It is amazing in these circumstances, therefore, that the Government have cut back the local authority road maintenance programme by £10 million. The order allows for an increase in road maintenance of 2·8 per cent., and the Association of Municipal Corporations tells me that its advisers believe that there is little hope of keeping to that figure except by allowing for a
considerable deterioration in present standards.
It seems, therefore, that most local authorities, under pressure from road users, will not allow that to happen and that inevitably much more will be spent on road maintenance than the Government are allowing for in the rate support orders.
The Minister then referred to a further cut which the Government insist must be saved through increased efficiency. I am happy that the Minister paid tribute to the co-operation of the local authorities, but he did not tell us that this was yet another issue on which they are putting forward serious resistance. It is just not on for the Government to demand saving of this sort in local government when the national Government are unable to demonstrate in their field of activities that they can make similar savings in efficiency.
This is a recurring theme. I know that both Conservative and Labour Ministers have demanded increased efficiency from local Government. But after a number of years in which deliberate cuts have been made to allow for increased efficiency the point must be reached where the local authorities are entitled to say that there is no room for further maneouvre.
Nor have the Government been generous or realistic about the effect of inflation upon local government. The rate support order now before the House spells out the cost of inflation to local government for the current year. It is the staggering sum of £410 million. The ratepayers must find 42 per cent. of that burden, which is £172 million. Most local authorities, before they start to levy next year's rate, must impose upon their ratepayers a hefty increase to meet the Government's inflation this year. That is a factor which is disturbing many finance committees throughout the country.
Another source of major dispute between the local authorities and the Government comes under the heading of non-relevant expenditure. That is expenditure which does not rank for grant, including such items as payment for concessionary bus fares and rate fund contribution to the housing revenue account. On that item alone there is a difference of £25 million between the assessment of the central and local government negotiators.
I have spoken to a number of experts on local government finance, and I am not surprised to find that I have not met one who believes, on the basis of the figures, that it will be possible for local authorities to get their rate increase down to 5 per cent., which is the figure being demanded of them by the Government, much less to carry out the expansion of services which we all know is so drastically required in so many parts of the country. I refer to the services of a whole range of activities other than those to which I have already referred, and about which many of my hon. Friends will be talking later.
Before I pass from the general review of these orders I shall quote what the Minister said two years ago on 10th December 1970. I do so because the Minister took great pride in telling us that this is the most generous rate support settlement that there has ever been. He talked about the virtues of revaluation, which he claimed would restore fairness and justice. The House will remember that two years ago the Minister was urging the cutting back of the form of rate relief which the Labour Government were providing for householders. That was an additional 5d. every year. Two years ago he cut that down by half. He said:
It seems to us on this occasion that the effect of the 5d. reduction each year has been to shield the domestic ratepayer from virtually all the increases that have taken place in local authority spending. The Government do not consider it appropriate that the domestic ratepayer should be so insulated from the cost of services."—[OFFICIAL REPORT, 10th December 1970; Vol. 808, c. 797–8.]
A different song was sung from the Dispatch Box tonight. Yet one more Government policy stood on its head. The domestic ratepayer, who was not to be shielded from these chilly winds two years ago, is now to have unprecedented and generous support by the Government. The speech of the Minister two years ago fairly reflected what the Labour Government were trying to do. It was a generous acknowledgement that we were succeeding in that direction. The reason why the Government wanted to depart from that is that they wanted to redress the balance against the domestic ratepayer in favour of the industrial and commercial ratepayer. Two years later the wretched Minister eats his own words and stands the Government's policy on its head.
Now, revaluation. As I have made clear, the Opposition believe that the Government's treatment of local government finance in this year's review will provide crisis enough for most authorities in the next financial year. It is already clear that the effects of the new valuation on many ratepayers will be catastrophic. I hope that the Minister who replies will spell out what he thinks that the local authorities I shall mention should do in the circumstances with which they will be confronted by the Government's action.
Mr Denis Howell (Birmingham Small Heath)
I shall spell out in detail exactly what I think about the present revaluation. Figures are already available to one or two of us and will be available to the nation generally tomorrow. The ratepayers of a large number of towns, when they see their new valuations tomorrow and believe that the job will be too great now because it has been postponed in the past, will prefer not to receive the "fairness and justice", to quote the Minister's words, at the hands of the Government, and would rather have further postponements until the Government get the matter right.
Mr Martin Maddan (Hove)
The hon. Gentleman talked about those who would perhaps suffer and would like revaluation to be postponed again. Will he say something about those who will gain, and who perhaps gained five years ago?
Mr Denis Howell (Birmingham Small Heath)
It frightens me when I think that I have only just announced that I will speak about revaluation. Before I have said one word on the question hon. Members opposite are so anxious about the subject that they interrupt me and ask me to augment my speech before they have even heard it. If they are patient with me I shall return to it. I assure the hon. Member for Northants, South (Mr. Arthur Jones) that there will be nothing soporific about this part of my speech.
The new valuation will have very serious effects for many ratepayers. In some places there has been a major switch of the rate burden from industry and commerce on to the backs of domestic ratepayers, about whom I am most concerned. The Government state that the new valuation proposals will multiply present rateable values by two and a half, and the proposals in the orders are based on that assumption.
If the information I have is accurate it is clear that in several towns industrial valuations will rise by appreciably less than the average while domestic valuations are likely to rise by at least three times existing figures.
Officially we are not supposed to know anything about the new figures until 12 noon tomorrow, but some of us have received information in advance of that time. The Government have certainly received information in advance of that time.
I used the word "soporific" because the Minister skated over what he knows to be the devastating effect of revaluation in many cities and did not come clean with the House.
Mr Harold Gurden (Birmingham, Selly Oak)
The hon. Gentleman is saying that he has figures which are not publicly known until tomorrow. Did the Government give him the figures? If not, where did he get them?
Mr Denis Howell (Birmingham Small Heath)
That is a stupid intervention, becauses not only have I the figures but the hon. Gentleman himself has them. The City Treasurer of Birmingham provided a report for the leader of the Labour group in Birmingham, who sent it to every Birmingham Member, including the hon. Gentleman. Therefore, he knows perfectly well where I got the figures. Incidentally, when Councillor Yapp sent me that report he said that a copy had also been sent to the regional officer of the Department as a matter of courtesy—that is how Birmingham does things—so that the Government should know exactly the information being made available to Birmingham Members.
Mr Harold Gurden (Birmingham, Selly Oak)
The hon. Gentleman understands perfectly well what I am saying. He has told me only that he obtained the figures from a colleague in Birmingham. I am asking how the information came into Mr. Yapp's possession so that he was able to forward it to me and the hon. Gentleman.
Mr Graham Page (Crosby)
There is nothing secret about the matter. The valuation lists were dealt out to the local authorities as they were ready, so that they could see them as soon as possible. The date by which they must be in the hands of the local authorities is tomorrow. We have not all had the opportunity of looking at every valuation list, but the hon. Gentleman is quite at liberty to look at the one from Birmingham.
Mr Denis Howell (Birmingham Small Heath)
That is not in the least the position. The right hon. Gentleman has bailed out his hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden). It is his hon. Friend who should have known where Councillor Yapp got his information. Everyone else in the Birmingham group of Members knows that information.
For the reasons the right hon. Gentleman gave, Birmingham has had the advantage of being able to make a detailed analysis of the position in that city, certainly a more detailed analysis than most other cities have been able to make. As a result of revaluation, without allowing for any increased rate requirements next year, domestic ratepayers in Birmingham will have to pay an extra 14·3 per cent. in rates to produce the same revenue as this year. In other words, the cost of standing still for Birmingham will be 14·3 per cent. to the domestic ratepayer, and that is after taking into account the total of the Government's domestic relief allowances. It is a most serious situation. That in itself will be a major blow to Birmingham and to many other cities and urban areas, as I think the right hon. Gentleman recognised in part of his speech.
Birmingham is not alone. Similar fears have reached me from other parts of the country. Wolverhampton expects the shift of the burden on to the householders to be about 12 per cent. following revaluation. Norwich believes that smaller houses and old people's bungalows in particular will be hard hit there. I hear that Leeds and Sheffield await tomorrow's news with great trepidation. Manchester is another city where householders will lose out, as the Minister mentioned at his Press conference today. I did not have Southampton on my list, but I am grateful to the right hon. Gentleman for telling the House that it should be added to the list of towns that will be hit by revaluation.
Mr Denis Howell (Birmingham Small Heath)
I am sorry; I thought that the right hon. Gentleman said it the other way round.
The urban areas around Bristol—the commuter belt—I am told, are likely to be affected dramatically both in north Somerset and south Gloucestershire. Derby expects its householders to be 5 per cent. worse off as the result of revaluation without taking account of any other factors. So one could go on.
Mr Denis Howell (Birmingham Small Heath)
No, very few parts of the rest of the country will gain. What most ratepayers fear is that when their rateable values have been put up to by two-and-a-half times, which is the average, nevertheless, by some sort of Parkinson's Law, domestic rates will continue to rise whatever happens to rateable values.
Tomorrow, tens of thousands of ratepayers will be in for one of the biggest shocks of their lives when they realise the shift in the emphasis of the rate burden from industry to domestic ratepayers, and when they realise that they have been gazumped by the Government in respect of the rate burden.
Things cannot stand still. It is impossible for local authorities to believe that the Government have got inflation under control. I do not think that the Government themselves believe that, whatever claims they may make for their policy. In the local government service in the last three years inflation has been about 14 per cent. Even if the needs element in the Government grant is raised to reduce the general effect on local government to 10 per cent., it is not the Government's policy to meet the whole of that because the Government grant-aid local government finance is on the basis of 60 per cent. Apart from the switch of emphasis, local authorities next year will have to find 40 per cent. of the cost of inflation. If these figures are true—they are likely to be an under-estimate—it will mean for Birmingham an increase of 27·6 per cent. to the domestic ratepayer to keep present services intact and to allow for inflation. That is a phenomenal situation for any local authority to face. It is the height of deception for the Government to say that the Birmingham rate rise can be kept down to 5 per cent. or anywhere near that figure.
In his speech at the Guildhall last Wednesday the Prime Minister made another interesting comment:
It would be totally unreasonable for revaluation to be used as an excuse for increasing the total demands made upon the ratepayer. This would be extremely damaging to our efforts to restrain inflation.
Birmingham, Wolverhampton, Manchester and the rest now know that for them the Prime Minister's words are meaningless. Either the Government did not appreciate the effect of revaluation in those towns or the people in the conurbations have been grossly misled. Or perhaps the Prime Minister was grossly misled in the brief that was offered to him for his Guildhall speech.
What is the position in Birmingham and other cities? Birmingham is probably the most dramatic case. The choice before it is real and ludicrously impossible to operate. I hope that the Minister will concentrate on this matter, because we want Government advice about what we in Birmingham should do about this problem.
It seems that there are two alternatives in Birmingham. The first is to ignore the Government's determined policy to keep rate rises down to 5 per cent., which cannot be done on any calculation. The second is to put a large number of employees out of work. I am informed that, in terms of the effects of revaluation and inflation, if Birmingham intends to keep within the Government's limit of a 5 per cent. increase for ratepayers it will mean the sacking of between 2,500 and 3,000 people. This will involve teachers, police officers, administrators, social workers and the like. We have only to consider the matter for a few moments to realise that such a situation is unthinkable. Clearly Birmingham cannot set about systematically making redundant that number of essential workers.
If Birmingham cannot get rid of that large number of workers to meet the Government's limit of a 5 per cent. increase, the other alternative becomes a tremendously stark piece of reality. Birmingham ratepayers face an increase of over 27 per cent. during phase two of the prices and incomes policy, as I am reminded by my right hon. Friend the Member for Grimsby (Mr. Crosland).
Birmingham and other authorities would like to hear the Minister tonight say which of these options he expects them to adopt. Does he wish to see a tremendous and dramatic increase in the rates to keep services intact and to keep people at work, or does he expect a wholesale laying-off of the magnitude I have described to the House? It is clear beyond doubt that the Government must involve themselves in trying to produce a solution to this problem—a problem which has arisen as a result of revaluation and Government action.
There is one practical solution available to the Government. This solution was provided in 1963 when we last had a revaluation. I quote from Command Paper 1663 issued in 1963. Under the title "Revaluation for Rates in 1963", the document states in paragraph 15:
It is within the Minister's powers to make an Order derating houses solely in those few areas where the increase in the householder's share is greatest".
If that provision could have been made in 1963, as it was, it can be made in 1972.
This has been a day on which the Opposition have facilitated the Government's essential legislation. Therefore, if the Government wish now to re-enact the 1963 provision properly to cushion the ratepayers of those towns which have been unfairly hit by revaluation, in the midst of a wage freeze, the Opposition will be glad to give them every co-operation to pass that essential legislation through the House.
Mr Eldon Griffiths (Bury St Edmunds)
I should like to be sure what the hon. Gentleman is saying Is he saying that revaluation is unfair and therefore that action should be taken again to postpone it?
Mr Denis Howell (Birmingham Small Heath)
I am not saying that at all. I am saying that it has produced an impossible and unacceptable situation in Birmingham and many other places and that in the middle of a wage freeze it is placing an extra burden on householders in Birmingham and other cities. I am saying that, faced with that situation and the Government's own wage freeze, right hon. and hon. Gentlemen on the Government side should take these extra powers now by order, as was the case in 1963, to derate those householders and so save them from the effect of such a monstrous situation.
After all, it was not my party which in 1963 produced that solution. It was a previous Conservative Government. In the event it was never used. But of course we were not then in the middle of a wage freeze with all the damaging social consequences which must follow for the Government if additional burdens of this kind are piled on the ratepayer.
I am making an offer on behalf of the Opposition which I think is reasonably generous. It is that in the middle of this wage freeze and even before phase two is made known, the domestic ratepayer in the areas affected should be cushioned from such a savage result as seems likely to be the case in Birmingham. I hope that the Minister and his colleagues will consider it.
The difficulty that we are in is that the Minister held a Press conference today. I hope it is not true but I understand that he has specifically ruled out any hope of Government intervention in this matter along the lines of the 1963 solution. I am told by a colleague who was at the Press conference that when the Minister was asked about the 1963 revaluation he said that he did not intend to make use of that sort of machinery. I hope he will think again. He must be made to think again, otherwise the effect on the Government's own economic policies will produce wholesale chaos in cities like Birmingham—
Mr Denis Howell (Birmingham Small Heath)
The Under-Secretary says "Incredible". I want to face him with the situation. What does he think the workers in the factories and offices of Birmingham will do if they have a 27 per cent. increase forced upon them for payment of their rates in a situation where the Government are telling them not only that they cannot have any wage increase but that they cannot even negotiate future wage increases? If ever there was a prescription for industrial anarchy, that is it.
Ministers have to defend this action tonight. But they cannot discuss the rating situation in isolation from the general economic situation facing the country and from the economic constraints they seek to impose upon the work force, especially in the cities that I have been discussing.
The Government's statutory wage freeze is a significant factor in the situation which Ministers in the Department do not appear to have taken fully into account. I am certain that this is not only a prescription for anarchy. It will play into the hands of those elements which wish to see industrial unrest. It is the ordinary people who have no wish to be locked in combat with the Government on this or any other matter. That is the position of the vast majority of trade unionists and decent, law-abiding citizens. They do not want confrontation. Unless the Government change their attitude on this matter they will create confrontation and industrial unrest in places where we ought to be striving most for a peaceful solution.
The alternatives are wholesale sacking and the undermining of essential services. That will be resisted with equal outrage. Either way, neither the Government nor the nation can afford to such a confrontation. It must be headed off. If the Government persist in their present course they will become completely discredited in major industrial strongholds such as Birmingham. Wolverhampton and Manchester.
I understand that at his Press conference this afternoon, and again in his speech, the Minister said that the reason for the plight in Birmingham was that wages were too high. [Interruption.] That is the logic of what the Govern-are saying. I am told by someone who was present that that was what the Minister said. If he did not, I am willing to be corrected.
Mr Graham Page (Crosby)
I certainly did not say that. I said that if wages are higher and people were prepared to pay higher rents in Birmingham than in Bradford, where wages are at a low level, they must expect the revaluation in Birmingham to be higher than in Bradford.
Mr Denis Howell (Birmingham Small Heath)
We shall come on to rents affecting this matter. The Minister has confirmed that the revaluation in Birmingham arises directly from the fact that, to use his phrase, wages are higher than the national average. I find that a most revealing statement. It explains partly why the Government are refusing to intervene. They feel that in many of our industrial cities wages are too high and that rates can be allowed to go up. I presume they believe that that is one way to deal with the situation.
The situation in Birmingham and elsewhere has not been brought about by the size of the wage packet. It results from the Government's complete failure to control land and house prices.
Mr Denis Howell (Birmingham Small Heath)
What has that to do with it! The Minister would not make a remark like that if he had been in hisposition more than five minutes. He must know that housing valuations are decided by the value of houses. The Inland Revenue has to fix the rateable valuation of a house according to its letting value. Therefore, if houses and land prices are going up, it automatically follows—that is why we are in this pickle—that the Inland Revenue must reflect that fact in the rateable values that it fixes. Ratepayers are on the receiving end of the calamitous failure of the Government's policy in this respect.
The right hon. Gentleman said in an intervention that higher wages meant that people were prepared to pay higher rents. What a ludicrous statement by a Minister at the Dispatch Box in the light of the Government's insistence on Birmingham putting up rents when that city has said that there is no reason to put them up. If the forcing up of rents is a factor in these distorted valuations, that is added blame which must be attached to the Government.
It is not only Government policy which is being discredited, but the rating system itself. This has been proved to be obsolete to thousands of ratepayers. The distortions that we shall see in many cities as a result of revaluation will simply finish it off. Therefore, we in the Labour Party must press on urgently with our inquiry into the whole future of local government finance and finding an alternative to the rating system.
One other matter that was brought to my attention today in Birmingham—it should be mentioned in this debate—is the administrative chaos that is bound to follow in the rating Department as a result of this revaluation. In 1963, at the last revaluation, there were 40,000 appeals in Birmingham alone against the new assessments. The view of the appropriate officials in Birmingham is that on the basis of the proposals to be published tomorrow they expect to receive no fewer than 100,000 appeals. It will be impossible to process them. I gather that 10 years after the last revaluation some appeals are still outstanding in the city. That will give the House an idea of the magnitude of the load that we are about to place on the Birmingham rating system, and it will apply elsewhere to a greater or less degree.
The House has no alternative, it seems to me, but to support the two orders, for the obvious reason that if we vote against these miserable measures we shall cut off the supply of the finance—inadequate as we believe it to be—to local government. Obviously, therefore, we shall not vote against the orders, but very soon after the House reassembles we shall return to these vital and urgent matters, especially as by then hon. Members will have had an opportunity to study the new valuation lists which come into effect tomorrow.
The situation cannot be left as it is. If the Government's policy is to retain any credibility, either economically or in terms of local government finance, they must use the Christmas Recess to find some way of ensuring that the demands on all ratepayers—particularly in our large industrial conurbations—meet their high hopes of retaining the standard of local government services to keeping the rate burden within the limit of an extra 5 per cent. We are entitled tonight to ask the Minister to spell out to Birmingham and to other local authorities exactly how he believes it is possible to do that in the circumstances that I have outlined.
Mr Joseph Kinsey (Birmingham, Perry Barr)
I propose to follow what was said by the hon. Member for Birmingham, Small Heath (Mr. Denis Howell). I disagree with his figures of sackings of Birmingham council employees. If economies are to be carried out in Birmingham when the Socialists are in charge they immediately try to frighten us with the sort of figures that would be incurred in making such economies. They do not look round for other means of drawing in the purse strings in order to obtain what everybody wants; namely, good rate expenditure.
I shall work on the same figures as those used by the hon. Gentleman. They are in a letter sent to us by the Leader of the Birmingham City Council on 8th December. They give cause for considerable concern, and here I speak for my hon. Friends the Members for Birmingham, Edgbaston (Mrs. Knight), Birmingham, Selly Oak (Mr. Gurden), Birmingham, Handsworth (Mr. Sydney Chapman) and Birmingham, Yardley (Mr. Coombs). We are all concerned about the figures.
I was heartened by one point made by my right hon. Friend. I think that he is looking closely into the matter, and he has hinted that there may be a way in which he will move to help us. We recognise that the order provides generous increases in help for the domestic ratepayer section of the rate element, and I applaud the Government on their intention to back their actions on the freeze policy by keeping the rate increase within a 5 per cent. limit, but they must ensure that that intention is carried out.
This help comes at the same time as the further proposal for rating valuation in the quinquennial review. The proposals, as detailed by the hon. Member, show a great distortion affecting Birmingham. He referred to Derby and Sheffield, which are also adversely affected. Although the hon. Member did not appear to realise it, we on this side know that the valuation lists are drawn up by an independent body, not the Gov- ernment or the councils, so neither party can influence them. When they are carried out generally, they are dynamite and very unwelcome. No one has ever thrown his hat in the air about the quinquennial review.
The last revaluation, which should have been done in 1968 by the Labour Government, was cancelled because it was unpopular. That decision carried the firm smack of a runaway Government. As a result, now it is even worse. These are the things which must be taken into account when we review the position this time.
It is amazing that, whatever Government are in and however it affects everybody else, this system always affects Birmingham adversely. Birmingham has been penalised not only on rate grants but, for instance, in the 1956 review. That cost us £1,700,000. Liverpool got £1 million more. Good luck to Liverpool, but very bad for Birmingham.
In 1969, when there was another bit of shifting around of the Government grant by the Labour Government, the success of Birmingham's housing policy in overspill—it was the best in the world—affected the needs element and cost us another £1 million reduction. In industrial policy, we had IDC's that affected our earning capacity and produced a worse position. The same is true of the nationalisation of gas and electricity undertakings, without compensation, and the regionalisation of the bus services, also without compensation. We view with fear the wider reorganisation of local government which will take away land that we own outside the city boundary.
I wonder what Ministers have against Birmingham. Every time that something like this is done, we are given a bashing. All Governments treat all sections of life the same way. One does not dare to be successful. If one is foolish, someone steps in and helps. If a city is not prosperous, it does not have to foot the bill: the Government helps. As it applies to individuals, so it seems to apply to cities.
Now we see how the revaluation and the support grant combine to give the figures for Birmingham. The Birmingham Evening Mail on Thursday 14th December carried headlines warning of a 25 per cent. city rate rise. This cannot be the intention of the Government, but let us examine the figures. I take into account the fact that the figures come from a party which opposes the Government and the fact that there is always some profligate spending by such a party. Free contraception on the rates is one item that has come up in advance of anything else, and other items have to be taken into account.
The figures provided by the City Treasurer, which my right hon. Friend has in his Department, make grim reading for the Birmingham citizens. Over the country as a whole, there is a 2·56 per cent. increase in rateable values. The domestic share is about 1·8 per cent. of that increase. But in Birmingham the position is different. I quote from the letter sent to us:
Average figures as usual conceal substantial variations and I would like to draw your attention to the drastically unfavourable situation which is likely to result in Birmingham and in fact in any area with a substantial proportion of industrial and commercial property where domestic property sustains a much higher proportionate rate of increase.
The present rate in Birmingham is 105p in the £, less 10·5p, which equals at the present time a 94·5p domestic rate.
It is anticipated that the total rateable value for the city will increase 2½ times giving an equivalent rate of 105p divided by 2½, equalling 42p.
That is less 6p, so we are down to a 36p domestic rate.
Taking the separate rates of increase for different groups of property as at present envisaged, the equivalents on the old basis would be as follows: Industry would pay 105p, a decrease of 8·4p; commerce would pay 96·6p, a decrease of 8·4p;"miscellaneous" is down by 16·8p; but the domestic element rises by 13·5p, and this is where the anomaly comes in and this is the area at which we ask the Minister to look, because this is without allowing any increase in expenditure in the coming year to meet the inflationary expenditure of the city and its growing needs. The expenditure increase is likely to be about 12½ per cent., which will probably be reduced to 10 per cent. by the new rate support element.
When we read the 10p table which has been sent to us we see that once again there is a complete anomaly, because in regard to industry and a 10 per cent. increase, we find that industry rises by 1·3p and commerce by 1·3p, and miscellaneous is down 8p. But the domestic rate value goes up by 26·1p, and even if we were to be able to keep the increased rate required down to 5 per cent. as requested by the Government—and that is an impossible situation—this would still mean a domestic rate increase of 21p.
Those are the figures sent to us by Birmingham, and at this time I see no basis for challenging them. However, if the Opposition can help in that direction we shall be grateful. Obviously, we have this distortion in Birmingham because, as we have said, other authorities pay less, and Leeds and Liverpool are two of those.
We see why the Department of the Environment, granting this increase in the domestic relief, related it to an overall rateable value increase in the country of 2·6 per cent. But Birmingham's increase is 3 per cent. It is obvious that other local authorities are to pay less, because the average is 2·56 per cent., and they gain doubly not only by having a lower rateable value but by having it then increased by this further amount. In some cases they get relief which the Birmingham City Treasurer suggests they do not require, although I would not expect ratepayers in those areas to agree with him. Nevertheless, Birmingham is asking that help is distributed fairly throughout, and I support Birmingham in that. Conservative hon. Members will wholeheartedly support that suggestion. It is the Government's declared intention to do just that. Surely if we intend to alleviate the swing from non-domestic to domestic properties we should relate relief to the areas where such relief is required. This is what we are asking the Government to direct their attention to.
The situation in Birmingham will be even worse. The valuation of some of the properties there will go up more than that of other properties in order to get the average of 3 per cent. This will mean a particularly heavy increase for some of the people in the city to bear. People will rightly ask "Why should we help the Government to tackle inflation under these conditions?" I have no need to emphasise Birmingham's industrial position and its importance in the context of the industrial wage rate in the country.
There is a way out, and it has been done before. The Minister can ensure that the grant aid is directed to the areas where it is most needed. The precedents were in 1956 and in 1963. In 1956 the revaluation showed a 20 per cent. swing against commercial properties. The Government acted and had that redressed, and rightly so. In 1963 provision was made for a revaluation order. I do not think it was ever used, but the provision was made. We now request my right hon. Friend to do exactly the same thing again. I think he hinted at it at one stage at the Dispatch Box, and I shall carefully read the report of his speech to see whether he does intend to do this.
I echo the points that my right hon. Friend made. I am very pleased that he made them. We need this rating system reform very badly indeed. The present system is so anomalous. Those on slender means bear burdens equal to those carried by their better-off neighbours, and that cannot be right. The system is silly enough as to class central heating as a taxable item and to exempt from taxation all other forms of heating. Such a system definitely needs overhauling. If the Minister can reform it successfully I am sure we shall all be grateful to him. In Birmingham we shall certainly be grateful to him, even though he cannot reform the whole scheme, if he amends the scheme to ensure that the domestic ratepayer in Birmingham is helped and does not have to nay this swingeing increase of 25 per cent.
Mr Robert Cant (Stoke-on-Trent Central)
It was inevitable, I suppose, that this debate should spill over somewhat into the possible future debate on local government finance. I must say that I am beginning to have certain misgivings about the rating system for which for a long time I have had a great deal of affection.
When I went to my adopted city of Stoke-on-Trent in 1945 I soon realised that the previous Member of Parliament, Mr. Andrew MacLaren, whose name some hon. Members may remember and who was a great apostle of the taxation of land values—the idea of a single tax—influenced the people of Stoke-on-Trent greatly. I regarded this as a rather esoteric rating philosophy, but as one has moved into this period in which property and land values have gone absolutely crazy, and one hears hon. Members on this side of the House talking about the nationalisation of land, I am increasingly coming round to regarding the taxation of land values as a way out of this situation. However, we must not be led on to that subject.
We have all come richly endowed with our city treasurers' briefs. I have mine on the seat beside me. I think Stoke-on-Trent is another of those cities which are coming off very badly as a result of revaluation.
I know that the Minister for Local Government and Development, who opened this debate, spoke of "little local variations". That is likely to turn out to be equally the sort of euphemism which a former leader of the Conservative Party, I think Mr. Macmillan, spoke of when he mentioned "little local difficulties". Those little local difficulties rapidly assumed the tremendous proportions of some of the little issues mentioned by the Minister.
It is all very well to say that rateable values will increase two and a half times on the average, taking global figures into account. In Stoke-on-Trent they are going up 2·68 times. That may not seem a very great deal but when one speaks of millions of pounds of rateable value it can be an extremely important matter. That little local variation will adversely affect the fortunes of Stoke-on-Trent.
The next point equally affects Stoke-on-Trent—namely, the effect of increased rateable values on domestic establishments vis-à-vis commerce and industry Here Stoke-on-Trent is affected because domestic ratepayers currently provide about 47·5 per cent. of the rateable value but under revaluation this proportion will increase to 52·5 per cent. That is a massive change.
On the Government benches I see honourable men. I do not deny that. The Minister is a very persuasive man. His judgments are well balanced. In listening to him I do not go to sleep. Unfortunately my regard for him increases. I tap myself on the back of my hand in case my political affiliations stray too far.
What are the Government bent upon? Is it self-destruction? Perhaps. One should not try to save them from that. Perhaps it would be a happy release for the many hon. Members opposite who cannot follow the Prime Minister in all his policies or twists, turns and changes of mind.
Here we have yet another financial burden, another increase in price which will fall upon the people of the country. One can estimate the figure for 1973. Let us forget the terrible year 1972. Let us think of the value added tax, the common agricultural policy, rent increases, the growing devaluation of the £, the increase in the interest rate, and now the increase in rates. The latest and most authoritative assessment of what this will amount to in total is a 9 per cent. increase in prices during 1973, not counting the wage increases which are supposed to be responsible for the whole of the present inflationary situation.
It is very difficult to find a way out of this mess especially when one thinks of the increase in the interest rate that has occurred to date. Increases in future rates of interest are confidently predicted by the Economist and the Financial Times as the Government once again change their mind and begin to follow the philosophy advocated by the right hon. Member for Wolverhampton, South-West (Mr. Powell) and operate a money supply squeeze.
How can we find a way out of this situation? Various suggestions have been made. The White Papers of 1963 have been referred to and the hon. Member for Birmingham, Perry Barr (Mr. Kinsey) referred to the action taken by the Government in 1956. My city treasurer has another suggestion. In his opinion, and I hope I get him right because I am not very good at these valuation matters, what has happened in previous revaluations is quite simply that the Government have made an alteration in the deduction which produces net rateable value from gross rateable value to keep the effect of the percentages the same as we move to a higher band of rateable value.
Let me give an illustration from Stoke-on-Trent. At the moment, and this may surprise the Minister, the average net rateable value of a house in Stoke-on-Trent is only £45. We are not a poor city. I must say that in case this is reported in the local Press. But we are not a wealthy city like Birmingham, Manchester and other such places. We are just a humble satellite that seems to revolve around those great conurbations. As the Government are arranging this revaluation, the deduction percentage falls significantly.
Taking the average rateable value in Stoke of £45, which is £74 gross, the deduction percentage is 39 per cent. But under the new dispensation the new gross rateable value will be £224 and the deduction percentage will be only 26 per cent., with the new rateable value being £165. In previous revaluations that percentage has been retained. Without any doubt, although the position looks generous—these global figures can be thrown around—the fact is that the 6p increase in the domestic element of the rate support grant does not give us more than about £500,000 as a contribution towards the rates. We do not think this is by any means enough. It will not cover the inflationary pressure which is likely to develop next year and it will make very little contribution to any growth in services which the Government would like us to carry on.
Despite the fact that Stoke-on-Trent is developing quite rapidly in terms of improving its infrastructure, its roads and vital sewers, and above all in terms of magnificent, almost gradiose, land reclamation schemes, we have still lost population. Unfortunately we are losing the younger population, the married couples with children. Those who have studied local government finance even in the most abbreviated and simple form will appreciate that children are a significant factor in the determination of the rates for grant.
Our plea is for the Government to have another look at the contribution they will make to the rates of Stoke-on-Trent. As long as we get the money, we do not mind what formula they use. We do not want to hold back the development of services in any way. We do not want to impose an intolerable burden on the citizens of Stoke-on-Trent in terms of an increase in rates which has arisen almost entirely because the burden has been lifted from industry and placed on the backs of the domestic ratepayers.
Having recently been in the Land Compensation Bill Committee I know that the Government team on the Front Bench is in a generous mood. It is responsive to suggestions from the Opposition. I hope that this grant tradition will be carried on in the season of good will.
Mr Arthur Jones (Northamptonshire South)
The hon. Member for Stoke-on-Trent, Central (Mr. Cant) was dealing essentially with constituency points, although I was interested in his reference to the different between gross and net value for rating purposes. He seemed to imply that the Government had some hand in the percentage reduction. I cannot think that he is right. It is essentially a matter for the valuation officer, and, as I understand it, the reduction from gross to net is dependent upon the cost of the maintenance of property, management and so on. Therefore, I do not believe that this is a matter in which the Government should be involved.
The Rate Support Grant Order embodied a new conception for most of us when it was introduced in the Local Government Act 1966, and tonight is the last occasion on which, as I understand it, we shall be discussing a rate support grant order as such. Both sides of the House will agree that it has served a very useful purpose as a method of supporting local government expenditure. It is sensitive to local circumstances and to the standard of services, combining the needs element, the resources element and the domestic element and, in addition, a number of specific grants related mainly to the police and administration of the law. Those of us who try to understand the system as best we can have recognised the incredible computations involved. I offer my congratulations to those who were responsible for its conception, but those who were responsible for operating it are perhaps to be congratulated more heartily because it has been a difficult grant aid to administer.
I have been at most of the debates we have had on rate support grants, and I have noticed from year to year how both front benches have stuck closely to their briefs when introducing the complications of the percentages this way and that. When they reached the political aspect they were able to put their brief to one side, but not until they had dealt closely and carefully with the facts and figures. I do not think I am being unjust to the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) if I recall that when as a Minister he replied on behalf of the Government of the day he confessed that he did not understand the point. He is to be excused for that admission, because I am sure that the same can be said of most people who have had to deal with the "nuts and bolts" of the system.
Tonight, therefore, we say farewell with mixed feelings, perhaps with feelings mainly of relief. My right hon. Friend the Minister made no revelation about the reform of local government finance, but I am sure he will agree with all hon. Members that we look and hope for a simpler system. Local government revenues and the whole rating system depend upon proper administration, including a periodic revaluation. The last was in 1963.
I recall the occasion at the Guildhall last week, as does the hon. Member for Small Heath, when the Prime Minister was referring to the effects of revaluation and the rate precept. On that occasion I happened to be sitting opposite the right hon. Member for Coventry, East (Mr. Crossman), who, when the Prime Minister remarked that the revaluation of 1969 was not proceeded with, said "And very wise, too." Whether it was wisdom or whether the motive were different from that, I leave hon. Members to judge for themselves.
I also remember the right hon. Member for Coventry, East saying in this House that he proposed to do away with the rating system. Anybody who could say that and at the same time try to administer local government is flying in the face of the administrative problems that doing away with the concept of rates implies. I pressed the hon. Member for Small Heath about revaluation, and I am disappointed that we did not have the benefit of his views on the matter. The hon. Gentleman nodded his assent when I quoted his right hon. Friend as saying that it was wise not to have a revaluation in 1968. But to say that prejudices the whole conception of local government finance. He may well have a case for much of what he said tonight, but a lot of that stems from the fact that the revaluation of 1968 was not effected. Consequently, a substantial amount of the blame rests upon him and his colleagues.
I am sorry that we did not have an opportunity to hear the hon. Gentleman's views. I will give way now if he cares to think that he has missed the opportunity. I see that he will not rise to that. However, I congratulate the Government in going ahead with the rating revaluation, which is five years overdue. It is a decade since rating values were updated, and we cannot have the sort of disruptive speech which we had from the hon. Member for Small Heath if we want to achieve a balanced judgment and a revitalisation of local government finance.
My right hon. Friend said that he hoped to bring down the rate demand. I know that he has done all that lies within his power, but the evidence is that local authorities will find it difficult to stay within the Government yardstick in that respect. My right hon. Friend went further when he said that he wants to get the rates down. That must mean a reduction of services in some way, or he was saying that in the context of the reform of local government. If rates are to be less significant in local government finance in the future, there is justification for saying that it will be possible to get the rates down. However, the tremendously varied and wide services for which local government is responsible, and which are demanded both by local communities and central Government, are the subject of a continuing demand for extension in quantity and, very properly, quality.
The dilemma for those who have the responsibility of conducting local government finance is the continuing demand upon them by central Government for an extension of their services. They face the tremendous dilemma of being demanded to extend, yet the advocacy of central Government calls for a reduction of extension or a reduction of the expansion of the extension. My right hon. Friend also referred to bringing business efficiency into local government affairs. I have never seen that as a possibility. Local government services are administered not on a cost/effective basis but upon a cost/benefit analysis basis. Therefore, I look for greater and increased improvement in management in local government. The Baines Report has pointed the way in many respects. The hon. Member for Small Heath said that there is not that much leeway for economies. I share that view, although there is much to be said for management effectiveness and the streamlining of administrative procedures.
I welcome the increase of about 2 per cent. in the rate support grant arrangements for next year. Many people in local government circles believed that the increase of resources found by central Government would mean reduced local responsibility. I have never held that view. There will still be local responsibility and accountability of local communities. The debate shows that we all look forward to the reform of local government finance.
Mr Kenneth Marks (Manchester, Gorton)
As I was not present at the Guildhall dinner I will not follow the hon. Member for Northants, South (Mr. Arthur Jones) in an attempt to retail the conversation pieces that occurred at the tables.
I am interested in what has been said about the absorbing of people from industry. The Conservative manifesto for the last election stated:
Some present government activities could be better organised using competent managers recruited from industry and commerce. Plans to achieve this new style of government are well advanced. It will be more efficient and less costly. Detailed policies set out in this document will also lead to reductions in the weight of government spending.
We have listened to hon. Members opposite congratulating the Government on increasing the weight of Government spending, just as they congratulated the Government two years ago on halving the increase in the domestic subsidy. Some hon. Members opposite will follow almost anything.
The hon. Member for Birmingham, Perry Barr (Mr. Kinsey) raised the question of alternative economies. The only one he got round to was the free contraceptives on the rates being cut out. I gather than the other place will be asking us to look after that from a Government angle. I wonder when hon. Members on the Government side will tell local councils what they must cut if they are to be held to an increase of only 5 per cent.
We have inadequate information with which to debate this huge amount of £3,000 million, one of the biggest items of spending the Government must make. There should be a comprehensive report with the order, not a 12-page report from the Secretary of State with a few lines on various items. There is no attempt to quantify individual items in the various categories or to correlate items with previous forecasts of public expenditure. There is a great deal of information about public expenditure for 1976 but not so much about public expenditure for 1973.
We debate the order just before Christmas, almost as an afterthought to the debate on the motion that the House should adjourn tomorrow for the Christmas Recess. Parliament should take this debate and the whole subject much more seriously. We debate it, strangely enough on the day before local treasurers are to be told what the revaluations will be and a month before they are given the analysis of what they mean in terms of the proportion of rates from industry, commerce and so on. We are not dealing only with cities of the size of Birmingham and Manchester, with their computerised methods, but with smaller boroughs and districts. The figures are based on averages, and hidden in the averages are acute financial problems, especially for the large cities, but also for the older industrial towns and those places, usually the same, with acute social problems.
Negotiations between the Government and the local authority associations are carried out with a secrecy that must be the envy of the Defence Department. There is no public discussion and little public awareness of the issues. This is not the open government we were promised. Days are allotted to debate in the House on the Army, the Navy and the Royal Air Force. Why is not similar time allotted to education and particular branches of it, to roads, to personal social services or to the police services? The provision of time to debate defence matters is written into our system. It is time it was written in for the other services.
We are told that the total revenue forecast for the purpose of the order is £5,216 million. That was not a figure agreed by the local authorities; theirs was higher. We are told that the forecast for education is £2,622 million. There are 10 lines of print on education in the report of the Secretary of State. There is only one on the urban programme, which is a vital part of the debate.
On education, the report says:
The expenditure envisaged in education allows for the expected increase in the number of school pupils occasioned mainly by secondary pupils continuing in school…and for the increased numbers of teachers expected to be employed in the schools.
But what is the estimated increase for the raising of the school leaving age? The local authorities that will have the largest
increase in spending because of the raising of the school leaving age will be those where voluntary staying on has been at its lowest. They include the industrial towns of the North of England. Will they receive sufficient help?
The basic grant payment under Section 2 of the Act is based on population, with an additional sum based on the number of persons under 15 years of age. Why 15? Has it not yet percolated through that the school leaving age has been raised to 16 and that in the year in question all children will be staying at school until they are 16? I know that the 1966 Act states the age as 15, but should not that have been amended along with the other provisions for raising the school leaving age?
There may be authorities which do not have 20 per cent. of their population in school. Will the Minister tell us which authorities will not qualify for that supplementary payment? Could it be some of the Lancashire towns, or Stoke-on-Trent, which has lost its younger population? I am sure that my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) meant the younger population between 20 and 30 who are often the parents of young children. In any case, that supplementary payment is very small. The sum to be multiplied under that paragraph is 15p, but under the paragraph dealing with the under-15s it is £1·89, and there is a substantial difference.
The Secretary of State's report continues:
The forecasts allow for the continuing high demand for further education, including a rapid growth of advanced work in polytechnics.
What increase was allowed? If the polytechnic in my area is to do the additional work required of it by the Government, its estimate next year will have to be increased by 20 to 25 per cent. more than this year. Is that the norm? Is that the figure on which the Government has been working. If it is not, what is the figure?
Parents of children in the 15 to 16 age group now staying on compulsorily have extra commitments as a result, and so have the local authorities. It seems to be Government policy to raise the school leaving age, with which I wholeheartedly agree, but not to make adequate provision outside the classroom. For example, the Secretary of State for Social Services refuses to exempt these young people from prescription charges.
The recent White Paper "Education: A Framework for Expansion" said:
Expenditure per head on books, while varying considerably among authorities, has on average been below what is recommended by the Association of Education Committees as necessary to achieve a good standard of provision. The Government believe that local education authorities will generally recognise the importance of an adequate supply of books in schools and hope that, where this is necessary, they will aim at improving standards.
The Minister has reminded us that the White Paper and all the blurb we have had about nursery schools and so on will not apply to this year or next year but may apply after that. What figure has been used for non-teaching spending, particularly on books and equipment? Do the Government expect all local authorities to come up to the standards asked for by the Association of Education Committees, with the aid of this grant brought up to date to 1972 prices?
The figure can be quickly calculated. I hope that the Minister will answer this question.
I now turn to revaluation. The new lists go to the treasurers tomorrow and the analysis goes to them on 26th January. But they will have a job to get through the necessary work of estimating and deciding on the allocation of rates in the short time available after that. The Prime Minister has already warned local authorities against using revaluation as an excuse for putting up rates. Some local authorities—and I include all the local authorities in my area—will have no choice, because they do not conform to the average fixed for the country as a whole. While the general domestic rateable values were increased two and a half times and industrial values by a little, perhaps two and a quarter, in some towns the gap will be much wider. It is in the industrial cities and towns largely in the North of England that this will happen.
Many factories and workshops in our area are not new, and unfortunately there has not been the industrial investment which should have taken place. One problem is that new industry which comes to the area often goes into old buildings such as cotton mills, which have been designed for different purposes. The rateable value in those cases will not increase by anything like as much as two and a half times—indeed I have heard the figure of only two times suggested.
In these areas revaluation will mean a heavier load on the domestic ratepayer than the national average. The Prime Minister must not try to pass the buck and blame in advance local authorities such as Birmingham, Manchester and Leeds for what is inevitable. Domestic ratepayers in my area will not only suffer because of the revaluation. They will also suffer because of the closing down of some of the factories. There will be no rates at all coming from those prem- ises as compared with the situation last year.
There are a number of anomalies which are recognised by everybody in the rate support grant system. The Government's Green Paper on local government finance recognised these anomalies. They are accentuated by the increases which are provided for in the order. I draw the Minister's attention to the research on the rate support grant system which was carried out by Godley and Rhodes in the Department of Applied Economics at Cambridge. It was calculated that some authorities gained and others lost because of these anomalies. The towns that lost were Bootle, whose loss was equivalent to 6p in the £, Middlesbrough, the Hartlepools, Birkenhead. Sunderland, Grimsby, Kingston-upon-Hull, Liverpool, South Shields, Salford, Bradford and Oldham.
Mr Kenneth Marks (Manchester, Gorton)
Manchester was not included in the sample but I imagine that it would be somewhere around the Liverpool figure. The ones that gained the most were Eastbourne, Blackpool, Bournemouth, Bath, Brighton and Oxford. There are two politically significant towns contained in the sample.
I sum up by saying that there are big cities and also industrial boroughs and urban districts, for example, Oldham, Irlam—which already has the loss of its steelworks to cope with—Denton and Audenshaw. Towns large and small will suffer. The pressure on the social services will be tremendous. Manchester has lost out in terms of provision for the disabled because it has had this other burden thrust upon it at this early date. It is not only the disabled but all those who are affected by the social services who will be under heavy pressure. The preventive health services are under pressure. This will apply to cleansing services and the collecting of refuse, which means not only the emptying of dustbins but all the extra work which will flow from activity in clearance areas.
Furthermore the police will have to cope with an influx from other towns and their problems will be quite severe. Then there are problems affecting the roads, and there will be urgent need for more parks and recreational space. These are problems which particularly face these areas and the surrounding towns even more than they affect the country as a whole.
These problems cannot be measured by a mere counting of heads. They go much deeper. There is more to unemployment than simply paying out unemployment benefits. It brings in its wake a whole series of social problems with which a local authority must deal.
Revaluation means a much heavier burden on the domestic ratepayers of local authorities than the new grants allow for. It means a heavier burden than that on towns which have a lot of highly-rated dwellings, for instance. The anomalies in the rate support grant system tell against them. They have a bigger proportion of increase in the number of 15 to 16-year-olds in school, and the grants do not take full account of that. Because of inflation this year and last year they have to find a great deal of money next year for the higher costs of this year, and the grants do not cover all of that. The necessary spending above the estimates for the country as a whole for this year may be £365 million, of which the councils will have to find about£150 million, and that out of next year's rates.
This rate support grant order is not the glorious handout that Government publicity and the Press have made it out to be. It has not faced the real problems of people living in the cities. These are matters that the Government have to face after this debate. I see some danger that the Government may view them as a political opportunity to try to discredit those towns and their councillors. The Prime Minister's speech last week was an example and it was not honest politics.
I urge the Government to reconsider the special problems of the conurbations and to see whether more cannot be done before these rates come into force.
Mr Martin Maddan (Hove)
We are debating this order in what might be described as an interregnum with the Bill concerning local government finance to be brought before us and local government reorganisation to take effect in 1974. Therefore we must recognise that any matters that we discuss tonight are of a temporary nature and that we cannot seek through this order to put right all the wrongs in local government finance. This is not the opportunity for us to do that.
I thought that the hon. Member for Manchester, Gorton (Mr. Marks) made a thoughtful and constructive contribution in the way he always does in these debates. I shall deal later with one or two of the points he mentioned. But it will be better if I go through what I wish to say in the order in which I intended originally to say it.
I begin by pointing out that we have to see rates as part of total taxation. For those who pay them they are not an isolated impost. We pay income tax, purchase tax—we shall be paying VAT—SET, petrol tax and all sorts of other taxes to sustain public services and public order. It is worth saying that the total burden has been brought down in recent years by the present Government. When the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) talked about rates and a policy of confrontation, I noticed that he did not say that as a result of the reductions in the general weight of taxation on individuals there should have been some amelioration in the relations between citizens and the Government and that they should have acted as an emollient—
Mr Martin Maddan (Hove)
Perhaps not if it had come from the hon. Gentleman. People may believe it if it comes from me. Therefore let me emphasise that we have to see rates in the context of the total burden of taxation.
Paragraph 7 of the explanatory paper points out that local government commitments are rising faster than public commitments as a whole. We all know that the rate burden is increasing. There can be no question that because of their nature rates create social hardships. I welcome the increase in the domestic element which helps to alleviate those burdens. However, we must press upon the Government the need for additional sources of revenue to the rates under the control of local authorities which, I hope, their setting within limits the rate at which those taxes should be levied in their own areas.
I am not keen on local government being financed more and more by the Exchequer. Despite what my hon. Friend the Member for Northants, South (Mr. Arthur Jones) said about this not eating away at the independence of local government, in looking at how the health services are run—they are not run by local government—we see them controlled almost totally from the centre because they are financed almost totally from the centre. I do not want that to happen to local government.
I should think that enough has been said tonight about the deficiencies of the method of rate support grant to make us realise that in any system there will be deficiencies, because anything of this kind has to work on averages. Yet, as all hon. Members who have spoken have said, there are local variations which cannot be covered by a national formula. Therefore, apart from the objection to having more local government finance supplied by the Exchequer, in my view it is impossible to supply it fairly.
I strongly advocate the introduction or the allocation to local authorities of taxes in addition to the property tax, and having them control the rate at which they are levied in their areas, thus increasing their independence, financial mastery and responsibility.
Inevitably we have heard a great deal about revaluation. I welcome revaluation as being overdue for five years. We heard a great deal about the plight of Birmingham. I always feel strongly for hon. Members representing Birmingham constituencies, but I wonder why they should suddenly say how terrible it is that the basis of the rates is to go up because of the increased value of properties. If our incomes go up the base of our income tax is raised and we pay more. I find nothing strange in the fact that if the base on which rates are levied goes up comparably with other areas, people should pay more.
Mr Thomas Price (Westhoughton)
I am glad that the hon. Gentleman has raised this matter. I did not hear the earlier part of his speech. I served on valuation committees in days when the hon. Gentleman was not a Member of this House. When I reminded the late lamented Minister at the Ministry of Housing and Local Government, Mr. Henry Brooke, as he then was, on a famous occasion in Committee that if revaluation took place the basis would go up by at least 300 per cent., he said that I was grossly exaggerating the position. In fact that was what happened in the event. But rates are not supposed to go up. The rate poundage is supposed to be reduced in reverse order to the increase in the rateable value. There are other mutations of this matter which I should like to argue, but I cannot at this stage. Anyway, I want to deal with something else.
Mr Martin Maddan (Hove)
We always enjoy the hon. Gentleman's interventions. He has, of course, recalled a prophecy with which I am not familiar.
It cannot be supposed that the effect of a change in the rating system will be identical on every local authority area in the country. We predicate an increase in local government expenditure of, I think, 5 per cent., and it cannot be thought odd if, as a result of all this, some ratepayers pay more in the period 1973–74 about which we are talking and which I imagine will not be a period of total freeze on remuneration.
I shall not comment on the Birmingham situation. It is not for me to do so, but if my hon. Friend cares to do so in winding up I shall, with others, listen with great respect to what he says. I do not think we can dodge the issue of revaluation, because if we are to maintain the rates—and we are bound to have the rates whatever other taxes are introduced for local government—anything that can be done to improve them is to be welcomed. If the valuations are not brought up to date from time to time hey become more and more unfair as between ratepayers within a given authority and between ratepayers in the country as a whole. I therefore welcome any step that improves the position.
I welcome too what my right hon. Friend emphasised about the improvement in rate rebates for the worse-off sections of the community. That is extremely welcome, particularly to people in a constituency such as mine.
I want to make short comments on three detailed points. The first is about the police. I very much welcome the provision for 4,000 additional policemen. The maintenance of the defence and safety of people is the primary duty of the Government before all else, and nothing else can fructify unless that is achieved.
The hon. Member for Small Heath said how terrible it was that more money was to be given to the maintenance of major roads, and he thereby supposed that less would be devoted to minor roads. I hope very much that less will be given to minor roads. I know of no country in the world where minor roads, used as little as they are, have so much money spent on them as in this country.
Mr Martin Maddan (Hove)
I shall be pleased to bump along the roads in Somerset, if that is what would happen to me, because it is a great waste of public money to try to bring minor roads up to a standard which is not only inappropriate to their purpose but usually adds to traffic dangers and destroys the environment by encouraging fast-moving traffic where it is not appropriate.
This year we are spending 10 per cent. more on roads than last year. Projections of the increase in total traffic show that by 1980 it will be about 50 per cent. more than it is now. If we go on increasing our expenditure in real terms by 10 per cent.—as is the case between this year and last—we shall double the expenditure on our roads for an increase in traffic of only 50 per cent.
There are fashions in these things, sometimes requiring that more and more must be spent and must go on being spent, far beyond the point when that rate of increase is appropriate. I was therefore glad to see the emphasis on principal roads. If one makes a priority of something, one should not be ashamed to admit that something else becomes a posteriority. If the principal roads are our priority, let us not be ashamed to say that the minor roads are a posteriority.
The hon. Member for Gorton mentioned the Cambridge study. I have not read it recently, so perhaps he will correct me if I quote wrongly from memory. That study, however, had to select certain criteria by which to make its comparisons. On the selection of criteria depends which way the results go. I am sure that those who did the study tried to do the very best and most objective job, but they subjectively chose criteria and it was on those criteria that their comparisons were made.
Areas like East Sussex, for example, where I am concerned, and West Sussex, where I am not concerned but where the situation is much the same, are suffering under the present system of rate support grant because of the vast growth of the population in their State schools and of the social services because of the vast number of the elderly in those areas. Neither of those commitments is fully reflected in the formulae on which these grants depend.
Mr Kenneth Marks (Manchester, Gorton)
It is true that the authors of the study chose their own objective, but it was equalisation. Their argument, rightly, was that some of the rate support grant elements were based on historical tradition rather than on the pure idea of equalisation.
Mr Martin Maddan (Hove)
I am sure the hon. Member is right, but my point is that one's conclusion is produced by the way one considers a subject. In the end someone has to make a decision, and that is part of my general case against relying more and more heavily on central Government grants to cover local government expenditure. But we shall have rates and grants far into the future. When that future comes—1974 onwards—I hope that my last point will be taken into consideration.
Mr Arthur Blenkinsop (South Shields)
I do not agree with the hon. Member for Hove (Mr. Maddan) about minor roads. There is some anxiety that there has been pressure to restrict expenditure on minor roads for some time, and in some of our towns the situation has become critical. The idea that one can cut back much further in this area seems to me to be extremely doubtful. This matter should be considered selectively and carefully.
The hon. Member mentioned the need for alternative sources of revenue. We have all talked about this, but I doubt whether we will find alternative sources which do not fall foul of the same criteria which lead us to dislike rates and rateable values and their incidence on many people in our constituencies. We could more hopefully have moved towards alternative sources of revenue had we adopted different areas for our future local government, had we been brave enough to move into provinces or regions. This would have been far more suitable for any concept of new, independent sources of revenue, or certainly a fairer basis for levying any form of tax, and so on, that might be proposed.
However, I agree very much with what my hon. Friend the Member for Manchester, Gorton (Mr. Marks) has said. He set out extremely lucidly many of the main arguments and directed attention to some of the issues which concern us all deeply. We are concerned about the fact that there are at any rate very strong elements of evidence to suggest that our older industrial towns are getting a hammering, both through the rate support grant as it is at present operating and, even more particularly, under the revaluation as it is likely to take place. I am not as fortunate as my hon. Friend in being provided so lavishly with information, but in the industrial North East we fear that because of our very industrial position we are likely to be seriously affected by the revaluation and that that, added to other effects upon us, will make matters even more serious.
It is impossible for us to join in a paean of praise to the Government for their generosity to the domestic ratepayer when at the very best all they are doing is reversing some of the evils they committed earlier. As my hon. Friend pointed out, one way of getting plaudits is to do something that is quite monstrously wrong and then, over a period of a year or two, to remove a few of the monstrosities as one goes along and expect to be regarded particularly favour- ably in that way. That does not create a very warm feeling in our minds.
We all need to look at the implications of these orders for our constituencies. It is logical and right that we should do that. Some of us represent areas which are desperately trying to overcome well-known deficiencies of the past, where we have all the associated social problems linked with unemployment—not merely some of the worst unemployment figures in the country but also welfare implications which impose particularly heavy burdens upon us.
We see no hope whatever of getting anywhere near the figure of a 5 per cent. increase to which the Government have referred unless, as my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) suggested, we are prepared to cut in a ridiculous way the development of essential services and to get rid of some of our well-qualified staff. That we shall certainly not do.
There are obvious immediate jobs which we have to tackle and which are all the more obvious because we are urgently trying to pull ourselves out of very serious unemployment and other situations, and naturally we have to meet at least our share of the cost of all this. For example, on Tyneside we have the problem of meeting part at least of the cost of the major new sewerage development. We are all delighted that we are now able to undertake this—it is a very important job—but it is bound to impose a charge upon all the constituent authorities. We have to accept that cost. This is all part of the figures which we have to bear in mind.
I have mentioned already the social services which are inevitably linked with our problems of heavy unemployment. We are bound to face special charges in connection with the exciting developments, which we all welcome, in passenger transport and the further prospects of an even more dramatic kind; and I understand that heavy costs are to be imposed as a consequence of the new police authorities. These are all figures which will bear heavily upon an authority like mine, which is an old industrial area seeking to move out of the old conditions in order to attract new industry, eager to put a new face on the whole condition of living in the area.
These are the reasons why anxieties which have been expressed in other parts of the country should be even more heavily accentuated in an area like mine and why we cannot be satisfied with the figures produced by the Government. We hope even at this stage that we may look forward to proposals which may help us. There was some indication from the Minister of a recognition of the difficulties in relation to the rate support grant. We shall certainly look forward to the possibilities in the new legislation, although I appreciate that we cannot expect very much from the present Government.
Mr Julius Silverman (Birmingham Aston)
There seems to be some misconception certainly by the hon. Member for Hove (Mr. Maddan) concerning the basis of the complaint of Birmingham—and not only Birmingham, although Birmingham is probably the greatest sufferer in this respect—about the rate increase which has been described by my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) and the hon. Member for Birmingham, Perry Barr (Mr. Kinsey).
The Prime Minister said in his recent speech that there was no reason why the revaluation in itself should mean increased rates for anybody. He was quite wrong. Birmingham proves it. Probably he assumed, as some people have assumed, that if there is an increase in the assessment, there is a corresponding decrease in the rate poundage. If that were correct, and if the increase were equally distributed over every section of domestic hereditaments, industrial, commercial and miscellaneous hereditaments, no doubt that argument would apply; but it does not. This is why the Prime Minister is quite wrong, and why he is arousing hopes and expectations which will not be realised. I am not assuming that he did it knowingly. He did it because he does not know anything about the subject. He does not know how the system operates.
Birmingham has already been dealt with, and it is worth while repeating some of the figures which have been given. It is expected that after the improvement in the domestic element is taken into consideration and after the inevitable in- crease by inflation in the cost of services, which has been conceded by the Prime Minister as being inevitable, by somewhere in the region of 10 per cent., the contribution by the domestic ratepayer in Birmingham will be increased by more than 27 per cent. That is a catastrophic increase and there is bound to be an outraged reaction by Birmingham ratepayers.
I suppose that the Government, whatever methods they choose, desire to control inflation and wish the workers to accept the price freeze and eventually to restrain industrial wage demands. How will one do that in Birmingham when the ratepayer will face a 27 per cent. increase on his rates? The workers will say "This 5 per cent. principle is a lot of hokum. It applies to my wages but does not apply to anything else." One of the first sufferers will be the council tenant who in many cases is faced with a considerable increase in his rent under the Housing Finance Act and this great increase in his rates. How will he react? How can one persuade the worker to apply the principle of moderation when making wage demands?
In Birmingham some people will be better off in consequence of revaluation; some will be worse off. Industry is better off; miscellaneous and commercial hereditaments are better off. It is the poor domestic ratepayer who will suffer. That will happen because of the uneven development in rating valuation. In Birmingham the domestic rate has increased by a factor of three because of revaluations whereas the valuations for industry and commerce have increased 2·3 times and miscellaneous valuations by only 2·1. The consequence of the disturbance in the balance will be that the commercial and industrial ratepayers may be better off or in the same position in spite of the increase in the total rate demand whereas the domestic ratepayer will be very much worse off.
My hon. Friend the Member for Small Heath suggested that the Government could have used methods to correct that position. For instance a different method was used in 1956 when the Government decided to give a reduction of 20 per cent. on all industrial and commercial hereditaments. There is no reason why there should not be variations between different areas to ensure that a measure which may benefit some areas does not hit other areas very hard.
The Government announced that there might be some modification or improvement in the rent rebate scheme. This will basically comprise a standstill arrangement. The rent rebate scheme now affords, in spite of inflation, benefit to an extremely restricted segment of society. A drastic increase must be made before the system will give any real benefit. The Government ought to look at the measure again. It is all very well for them to expect local authorities to confine their rate increases to 5 per cent. That is nonsense in the case of Birmingham.
One bears in mind that local authorities comprise essentially a labour-intensive industry. As my hon. Friend the Member for Small Heath has said, Birmingham could confine rate increases to 5 per cent. only if it sacked about 2,500 to 3,000 men, about 5 per cent. of its total labour force including the police forces. Such a course of action would prove disastrous to Birmingham, which has a high rate of unemployment. That would not be a realistic way of dealing with the situation.
I therefore ask the Government to look at the position again. If they wish to obtain acceptance of a policy of wage restraint and some sort of an end to inflation, they should try to curb the extraordinary inflationary rate demand which will be the consequence of this policy. They should adopt a more elastic way of dealing with matters. Otherwise I can assure them that their chance of getting any policy of moderation in wages is practically nil.
We want to hear what the Minister has to say, whether the orders will be persisted in, with all their drastic consequences, or whether there is still the opportunity of looking at them again. The 1972–73 order will fatally affect the rates for 1973–74 in Birmingham and many other large cities.
An hon. Member on the Government side said that he objected to increased Government assistance for local government finance because it would take away local authority independence. I do not believe that. Already the Government are capable, however much they give, of restricting to whatever extent they wish the activities of a local authority. When the Housing Finance Act is in full operation the Government will not pay anything; in many cases they will be making a profit. Yet that will not prevent them from dictating the terms upon which local authorities act, dictating the level of rents and rebates and all sorts of other things.
This has nothing whatever to do with the amount which the Government contribute. The independence of local government depends upon how much independence the Government wish to give to it. The policy upon which we embarked of a progressive reduction of the domestic element in the rates, beginning with an average reduction of 5p per annum, was a good one. Basically the income of the Exchequer is derived much more equitably in that way. If that policy had been persisted in and accelerated it would have been the best way of dealing with the problem. This is the opposite of what is happening now, when the domestic ratepayer in Birmingham has to pay a great deal more. It is a burden which he will not accept without a completely outraged reaction.
Mr Eldon Griffiths (Bury St Edmunds)
We have been debating the rate support grant order for the last full year before local government reorganisation. As the House has recognised, it is an important measure involving enormous sums of money—an aggregate forecast of relevant expenditure of £5,216 million which, after allowing for inflation, is about 12½ per cent. greater in real terms than the expenditure actually incurred in 1971–2. To put it in more homely terms, it represents about £107 for every man, woman and child in England and Wales.
The debate has ranged widely. It has touched revaluation and the Government's policies for the control of inflation; has given hon. Members an opportunity to air their local treasurers' briefs and it has given the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) a chance to exercise his considerable penchant for exaggeration and scare-mongering.
I was struck by the contrast between the hon. Gentleman's speech and the contributions made by his hon. Friends the Members for Stoke-on-Trent, Central (Mr. Cant), Manchester, Gorton (Mr. Marks) and South Shields (Mr. Blenkinsop). Each spoke with moderation and good sense whereas the hon. Member for Small Heath, speaking on behalf of the official Opposition, treated the House to a 48-minute speech which was a farrago of misrepresentations and grotesque exaggeration.
I noted some of the phrases used by the hon. Member. He said that the great city of Birmingham would descend into wholesale chaos, into a major catastrophe, into devastation and administrative anarchy. He spoke of the possible sacking by Birmingham of thousands of policemen and school teachers. From what I know of Birmingham, I believe that that great city will be there tomorrow and next year. It will have a measure of complaints but it will not descend into wholesale chaos and administrative anarchy.
Throughout the hon. Gentleman's speech there was no mention whatever of the fact that these orders will provide for a substantially increased proportion of local authority expenditure being borne by the Government—indeed, from 58 per cent. to a figure of 60 per cent. He did not indicate that this was the largest ever increase.
Mr Eldon Griffiths (Bury St Edmunds)
The hon. Member did not say that the additional sum of £400 million would he a considerable increase in help amounting to £8 per head for everybody in the country. There was not one word about the help that is being given to the domestic ratepayer, namely an increase from 10·5p to 15·4p in the £ to help hold down increases in rates. Nor did he make one comment on the extra help to some 800,000 people on lower incomes in the shape of the new income limits on rate rebates at a cost of £2¾ million.
The hon. Member did not mention any of those things. He repudiated, on behalf of the Labour Party, the whole principle of the process of revaluation. He reminded me very much of the statement that was once made by his right hon. Friend the Member for Coventry, East (Mr. Crossman) some years ago at this Dispatch Box. The right hon. Gentleman, speaking then as Minister of Housing, said that we must get rid of the rates. Labour's idea of getting rid of the rates was to put them up enormously during its period of office.
I shall come to the hon. Gentleman's more sensible points in a moment—
Mr Kenneth Marks (Manchester, Gorton)
The hon. Gentleman is giving the impression that during the time of the Labour Government rates rose continuously. Labour Members have been at pains to point out that the 5p increase each year in domestic rate subsidy meant that domestic rates stayed pretty well as they were for several years.
Mr Eldon Griffiths (Bury St Edmunds)
I am happy to respond to the hon. Member for Gorton, who makes a reasonable speech in a reasonable manner, but he will not forget that it was the Labour Government which on one notorious occasion removed the whole rate increase support from the local authorities and left them completely in the lurch.
I come now to the two general points I wish to make—
Mr Denis Howell (Birmingham Small Heath)
I thank the Minister for giving way and for saying that he is coming to the two main points that we are raising about what Birmingham should do in the situation in which it finds itself. I do not object to his reply in response to my speech, because when hon. Members read my speech in HANSARD they will see that I dealt specifically with every one of the points that the Minister now accuses me of not dealing with. May I take up the point about chaos and confusion? The hon. Gentleman will recall that I applied that description to the 100,000 appeals against rating valuation assessments which the city treasurer now estimates he will receive. If that will not create chaos and confusion in Birmingham, I should like to know what will.
Mr Eldon Griffiths (Bury St Edmunds)
The hon. Member may write whatever footnotes he wants to his speech, but he delivered himself of a farrago of nonsense.
The two main points I must make in dealing with the orders are that in making these orders successive Governments have had regard to the growth in services which all our people want and, at the same time, the need to restrain expenditure which the ratepayers also want. This year the dominant consideration has been the need to mitigate the rise in the level of rates as part of our national effort to counter inflation.
I am very glad that the local authorities, through their associations, have agreed with the Government on the aims of this policy and on the main elements of the joint action which is necessary to achieve it. In so doing the local authorities, which must bear the brunt of the action in the localities, have shown a much more responsive attitude than have the official Opposition.
My second point is that the figures we are discussing are forecasts of global totals. They can be no more than that. Within these totals there are, of course, wide variations between individual authorities. That, too, is as it should be because a local authority is free to spend more or less than the forecast if it chooses so to do. But the amount of the grant paid by the Exchequer will not vary except to take account of variations in prices and costs. So if the forecast expenditure of a local council is, for example, £1 million, with grant at 60 per cent., the amount the Government will provide will be £600,000. But if the local authority chooses to increase its £1 million to £1,200,000 the grant remains the same and its proportion is therefore only 50 per cent. Conversely, if it spends only £950,000 the effective rate of grant is something better than 60 per cent.
In short—I am stating the obvious, but it is necessary to state it for all that—the choice is for the local authorities to make, because it is they who are responsible for the level of services and it is they who must face the music if their electors are dissatisfied with the services provided or with the level of rates charged to pay for them. Anything that the authorities choose to spend over and above what we have forecast will fall entirely on the ratepayers. But if, as the Government hope, they spend less than the forecast, the whole of the savings will accrue to the ratepayers.
Mr Kenneth Marks (Manchester, Gorton)
Surely the global forecast must be based on the proportion allocated, for example, to the raising of the school leaving age and the proportion of expenditure on school books.
Mr Eldon Griffiths (Bury St Edmunds)
I will come to the hon. Gentleman's speech in a moment. I was making one or two general observations.
Hon. Members have referred to a variety of aspects of the expenditure which is taken into account. The hon. Member for Small Heath said in opening that the local authority associations disagreed with the expenditure estimates. However, I am advised that the figures of relevant expenditure were agreed with the local authority associations to within £27 million out of a total of £5,200 million. Moreover the difference was not about what would be spent but upon the improvement which, as a matter of policy, should be achieved.
The hon. Member for Small Heath also referred to education. The only difference that arose during the prolonged and cordial discussions was whether the improvement in non-teaching costs should be 3 per cent. or 4½ per cent. That is a difference of £13 million in £2,600 million of relevant expenditure, which is only half of 1 per cent.
The hon. Member for Gorton referred in a thoughtful speech to the question of children up to 15 years of age. They are included in the base payment, which reflects generally the special costs of childrens' services. The real variations in education costs are fully reflected by the education supplementary payments, which take account of the numbers of children in schools of different types. The hon. Gentleman made a number of detailed points which I will study carefully in the morning. I will write to him with detailed answers to the points he raised.
The hon. Member for Small Health referred to road maintenance. I am advised that the local authorities over the years, and certainly this year, accept that any increase of more than 1 per cent. per year represents a real improvement in the standard of road maintenance. The figures which we have allowed for 1973–74 are 13 per cent. higher than the amount spent in 1971–72. Over that two-year period there is room for a substantial improvement in road maintenance standards.
My hon. Friend the Member for Hove (Mr. Maddan), who has given much thought to local government finance, referred to the police. The police account for half of all specific grants. The Government are well aware of the public's concern for law and order. My hon. Friend will know that the White Paper on public expenditure which was published yesterday indicates the high ranking that the Government give to the police service in the nation's financial priorities. We are concerned that the deficiencies in police strengths should be made good as soon as possible. As my right hon. Friend said, the estimate of expenditure agreed with the local authorities provides for 4,000 extra policemen. That is the greatest increase that has been achieved for many years.
The additional cost of providing that specific amount is £14 million. Having been, in opposition, the adviser to the Police Federation, I can say that that is in striking contrast to the period when the Opposition were in power, when police numbers fell regularly year by year.
Mr Thomas Price (Westhoughton)
To put the matter in perspective, the hon. Gentleman should also state that although police recruiting was unsatisfactory under the Labour Government, there is now high unemployment and there is always better recruitment to the Army and the police when there is mass unemployment in industry.
Mr Eldon Griffiths (Bury St Edmunds)
I will not pursue that argument except to say that my experience of the police is that they do not look to the ranks of the unemployed for their recruits.
Other hon. Members have spoken to a variety of subjects contained within the estimates. Reference has been made to the health and personal social services. The orders provide for their continued growth in real terms at 4½ per cent. a year, and in the personal social services, which are of great importance to the standard of living of ordinary people, there is provision for an increase of social staff of more than one-third and for an increased expenditure on services for the handicapped of just on 50 per cent. I hope that these increases will be welcomed.
In the general field of the environmental services, the Government can be reasonably proud of what they have managed to do about derelict land clearance, in the provision of grants for eyesore improvements, slum clearance, and the general improvement grants which have made better the housing conditions in many older twilight areas. This has been a success story. For every £ provided for home improvements in 1969–70 we are now making provision for nearly £5. It is a measure of the massive improvement in the living conditions of thousands of people that in 1970–71 improvement grants by local authorities to private owners were double those made in 1969–70 and those made in 1971–72 were double those made in 1970–71. This is an illustration of the very large increase that the central Government have given and continue to give to local authorities to improve the quality of life of people in some obsolete industrial areas.
The hon. Member for Stoke-on-Trent, Central rightly spoke of the dramatic improvements in his city. I have seen some of them, such as the slum clearance, the improvements in twilight housing, the derelict land clearance programme, the tree planting and so on. The hon. Gentleman should reflect that against the background of that massive improvement it is only reasonable that an independent review body should revalue the property of Stoke-on-Trent in an upward direction.
Mr Robert Cant (Stoke-on-Trent Central)
I am somewhat deflated by that last sentence. I was hoping to exploit the Under-Secretary's generous mood and ask whether in the expenditure to which he is referring for 1973–74 we could look forward to an extension of life of the special environmental schemes.
Mr Eldon Griffiths (Bury St Edmunds)
This is a matter for my right hon. and learned Friend. I will convey to him the hon. Gentleman's views.
My hon. Friend the Member for Hove made a number of suggestions about possible changes in the whole financing of local government. My hon. Friend will understand that I am not able to pursue that subject, but I assure him that his suggestions will be considered by my right hon. and learned Friend on the whole question of legislation dealing with local government finance.
I make it clear to those hon. Members from Birmingham who have spoken that the orders are not confined to Birmingham. On the contrary, they concern the whole country. I have seen the estimates that Birmingham, Stoke-on-Trent, Sheffield and many other cities have made of the effects of revaluation on their domestic ratepayers. Although the final figures are not yet available to us from all authorities, it seems likely that the estimates of those cities are not far from correct.
It is only right to point out in a national forum and not in the city council chamber of Birmingham that although some cities are hard hit by revaluation, there are other cities which benefit considerably. It may be helpful to quote some examples from the league table of revaluation on the basis of the preliminary figures available to me. Birmingham undoubtedly loses—that is, its rates go up, and sharply. But Bradford gains. [Interruption.] I am speaking of the domestic rate, because that is what the debate was about. Darlington gains; Stoke-on-Trent loses; Doncaster gains; Eastbourne gains; Manchester loses; Leeds gains; Portsmouth loses; Southampton gains; Sunderland gains; Wolverhampton loses. The right hon. Member for Grimsby (Mr. Crosland), who speaks on local government for the Opposition, is not here, perhaps because he knows that his town gains.
I apologise if I sounded like the BBC announcer after the First Division football matches on Saturday afternoon. The point I am making is that this is a national revaluation. What it seeks to do is to bring about fairness, and the result is that in some areas there will be an increase and in others there will be a decrease, relatively speaking.
Mr Eldon Griffiths (Bury St Edmunds)
Because the revaluation is based on an objective, impartial review of the real rental values of properties in each area. I hope that the hon. Gentleman, for whom I have considerable respect, is not following his hon. Friend the Member for Small Heath, who spoke for his party, in rejecting the whole concept of an impartial review body making such a revaluation.
Mr Julius Silverman (Birmingham Aston)
I am not opposed to the principle of revaluation. Some form of revaluation is clearly implicit in the rating system. The only point is that these increases and decreases are not just due to the fact that some domestic property goes up more than others; it is due to the balance between the domestic and the commercial and industrial hereditaments in the same local authority. That is what creates the imbalance and unfairness.
Mr Denis Howell (Birmingham Small Heath)
I do not want to follow the hon. Gentleman's example of personal abuse. Before he leaves that point I must ask him the simple question which will face the city councils of Birmingham, Manchester, Wolverhampton and the other places he mentioned. A 27 per cent. increase in rates in order simply to stand still is, by any standard, catastrophic. What does the Minister expect the city councils concerned to do about that sort of increase when the Government are demanding a wage freeze for the ratepayers in those places?
Mr Eldon Griffiths (Bury St Edmunds)
The hon. Gentleman must recognise that the present Government, if not his party when they were the Government, believe that local authorities can, should and will manage their own affairs. If he had listened to me a little earlier, he would have realised that the decision is up to the local authorities. If they wish to spend more than the forecast figure, they will have to bear the consequences from their own resources. If they decide to spend somewhat less, the proportion of grant to their expenditure will be greater.
My hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) pointed out that the revaluation had been carried out by an independent body. I well understand that the hon. Member for Small Heath does not like independent bodies.
Mr Eldon Griffiths (Bury St Edmunds)
When an independent review body produced the recommendation of the Boundary Commission on parliamentary constituencies, his Government whipped his party through the House to reject the results. Here again we have an independent review body. The hon. Gentleman's Government, when presented with such a body's findings in the 1960s, postponed the revaluation, and we are now putting right his Government's error many years ago in running away from what was then found to be needed.
The domestic ratepayer will be helped next year by three actions that the Government are taking. First, there is the increase in the relief to be given to all domestic rate poundages. As my right hon. Friend says in his report to the House, the amount by which rating authorities are to reduce the rate pound-ages which would otherwise be levied on domestic hereditaments has been prescribed by the Secretary of State as 6p. I hope the House will recognise that that is the most generous support that has ever been provided to local authorities. It is equivalent to an increase before revaluation of from 10·5p to 15·4p—that is to say, an increase of almost 50 per cent. in help for domestic ratepayers. That cannot be bad in any man's language.
Secondly, domestic ratepayers will share in the benefits arising from the increase in grants generally. Indeed, of the £104 million in extra grants arising from the increase from 58 to 60 per cent. the increase in the domestic element will take £61 million, the remaining £43 million going to relieve all rates generally.
Finally, the poorest households will benefit from the new income limits for rate rebates announced today by my right hon. Friend.
Looking to the future, in fixing their rates next year authorities will have to take a view about the rate of movement of costs and prices during the coming year. The Government have not yet announced the second phase of their counter-inflationary policy, but provided that authorities exercise a reasonable restraint on their expenditure we are satisfied that the record level of grant which we are now providing, combined with the large amount provided to hold down the domestic element, will ensure that the increase in rates in general can be held down to a level consistent with the increases in prices and costs that the authorities will have to meet.
We recognise, as did my right hon. Friend the Prime Minister at the Guildhall, that there will be local variations. Some of these will be due to revaluation, and in some areas domestic ratepayers will have to bear a larger share of the total burden than they did in the past. But the whole House will recognise these facts. Agreement has been reached with the local authority associations on all but a handful of items in this large amount of money, and we are satisfied that we have made healthy provision for the satisfactory development of local authority services. In doing so we have helped them and the country to contain inflation.
Equally the financial help offered by the Government to local authorities and ratepayers must be seen for what it is, namely, the largest amount of help ever given to local authorities and ratepayers, greater absolutely and greater relatively as a proportion of local authority expenditure. We are providing an extra £400 million, equivalent to more than £8 per head for every man, woman and child in England and Wales. We are increasing the domestic element and thereby helping to shield the householder by about 50 per cent. at a cost of £61 million. We are also increasing the rent rebate limits to help the worse off.
All these things taken together demonstrate that we have put right the failure of the previous Government to allow revaluation to proceed. They went in for government by postponement, and we have refused to do that. This policy and these orders demonstrate also the Government's concern to improve the environment and the quality of life of our people, to help to contain inflation and, at the same time, to give assistance to the ratepayer.
Mr Charles Morris (Manchester Openshaw)
We have just listened to a ministerial reply which in the view of many of us is little short of scandalous. The hon. Gentleman has not said to what extent the ratepayers of Manchester, Birmingham and other major cities will suffer as a result of revaluation. Let the Minister indicate to the ratepayers of these county boroughs the extent to which they will suffer as the result of the rating revaluation.