I beg to move,
That the Rate Support Grant Order 1966, dated 14th December 1966, a copy of which was laid before this House on 14th December, be approved.
There is an accompanying Report—House of Commons Paper No. 252—which explains the considerations leading to the provision of the Order. It may be convenient to the House, Mr. Speaker, if, with this Motion, we also discuss the next Motion on the Order Paper:
That the General Grant (Increase) Order 1966, dated 9th December 1966, a copy of which was laid before this House on 12th December, be approved.
I am obliged, Mr. Speaker.
Because we are starting the debate late, and because I know that many hon. Members wish to take part in it, I propose to speak as briefly as I can, avoiding unnecessary details, and giving as concise a description as I properly can of what The Times, on 16th December, referred to as "formulas of intimidating complexity". My hon. Friend the Joint Parliamentary Secretary will provide any supplementary information when he replies to the debate.
The Rate Support Grant Order is the first Order to be made under Section 2 of the Local Government Act, 1966, and it may help hon. Members if I start by describing how the new grant system works. Its distinctive feature is that for the first time the aggregate of Exchequer assistance to local authorities' revenue expenditure, excluding housing subsidies, will be fixed for two years ahead and will be revised only to take account of unexpected increases in the level of pay and prices.
Part of this aggregate of Exchequer assistance is allocated for distribution through specific grants, including grants in aid of rate rebates, and the remainder is to be distributed through the medium of a new grant, known as the rate support grant.
The rate support grant is divided into three parts—the needs element, the resources element and the domestic element. The needs element may be des-scribed as an enlarged and improved general grant.
It replaces the general grant and also the specific grants hitherto paid in respect of school milk and meals, and of the maintenance of classified roads and improvement of the less important of such roads. Like the general grant, the needs element is to be distributed on the basis of objective criteria, of which population is the most important.
The resources element corresponds broadly to the present rate deficiency grants and will be payable to local authorities whose rate resources per head are below the national average.
The third element—the domestic element—is entirely new. Under the Act, local authorities are required to reduce the rates on domestic property by an amount in the £ to be fixed by the Minister, with smaller reductions in the case of mixed properties; the domestic element is intended to make good the resulting loss of revenue.
This is the broad framework. The aggregates of the rate support grants for the years 1967–68 and 1968–69 and the amounts of the three elements, the formulae for the distribution of the needs element, and the amounts of the reduction to be made in the rates on domestic properties are all determined by the first Order which is now before the House. I shall discuss them all in more detail later.
I want now, however, to retrace my steps and say something more about how the aggregate of Exchequer assistance is determined. It is this which fixes the total grant income of local authorities; everything that follows is, in a broad sense of that term, a matter of distribution.
Before determining the aggregate assistance, the Minister is required by the Act to consider three sets of factors. The first is the current level of prices, costs, and remuneration, and the latest available information as to the rate of relevant expenditure. For this purpose relevant expenditure means all rate fund expenditure, with the exception of contributions to housing revenue accounts and trading accounts. Secondly, the Minister must have regard to any probable fluctuation in the demand for services resulting from circumstances prevailing generally in England and Wales, and not under the control of local authorities. Thirdly, he must take into consideration the need for developing those services and the extent to which, having regard to general economic considerations, it is reasonable to develop them.
These considerations are very much the same as those governing the fixing of the aggregate amount of the general grants, and the procedure followed is also taken from the general grant. Estimates of expenditure in terms of mid-1966 prices for the two grant years and also for 1966–67 were collected from all major authorities and a sample of county districts, and they were also asked to provide comparable figures of actual expenditure in 1964–65 and 1965–66.
The total estimated expenditure for 1967–68 was £2,662 million and for 1968–69 £2,830 million; for 1966–67 the estimate was £2,440 million. Actual expenditure on the same range of services in the two previous years, adjusted to bring the figures on to the same price basis, was £2,116 million for 1964–65 and £2,248 million for 1965–66. On a constant price basis, actual expenditure in 1965–66 was thus about 6 per cent. up on 1964–65; the estimate for the current year shows an increase of about 8½ per cent. in 1965–66, and the estimates for 1967–68 and 1968–69 show increases over the previous year of about 9 per cent. and 6¼ per cent. respectively. Taking the period 1964–65 to 1968–69 as a whole, the projected increase in expenditure is almost exactly one-third.
These large increases are much in excess of any rate of growth in the national product that the nation has been able to achieve in recent years. The level of expenditure in 1965–66 is a fact, and it is too late to do very much by way of reducing the level of expenditure in the current year. But for 1967–68 and 1968–69 we have had to ask ourselves very seriously whether we can afford the high rate of growth in local expenditure which these figures suggest; and the answer is that we cannot.
Under present circumstances, the first priority must be to strengthen the economy and improve the balance of payments. To do so we shall have to accept over the next year or two a much smaller growth in the national product than we had hoped for. Against such a background a sharp rise in public expenditure, whether central or local, would compel us to hold back private investment or cut private consumption.
We have, therefore, decided that we must try to hold local expenditure in 1967–68 and 1968–69 to a substantially lower level than that forecast. There is nearly always an element of inflation in estimates built up from a large number of returns, as these are, but eliminating that will not be enough. We must lower our sights a bit for the time being. The expenditure figures on which we have based our grant calculations are given in the Report. They are for each year about 6 per cent. below the local authority estimates. I know that these savings will no be easily achieved. They will call for more than a strict attention to economy, necessary though that is. They are bound to mean some slowing down in the development of services; but that, in our judgment, is what the situation requires. I need hardly add that they do not imply any criticism of the local authorities.
Councils are now busy examining their estimates for next year. I want to impress on them the need to scrutinise every item with particular care and to ask, "Can it wait?". I am not suggesting that there should be no development of services; the estimates of expenditure which we have accepted leave room for growth. But we must distinguish more sharply between the essential and the merely desirable.
To take one example, we must provide the schools and teachers necessary to educate our growing child population, but we can make do for a bit without some of the projected improvements to our towns and some of the amenities we are planning, much as we should all like to see them. That is the sort of distinction which we want local authorities to draw.
We have discussed our proposals with the associations of local authorities and the Greater London Council. I should be misleading the House if I did not make clear that they are very doubtful about the possibility of realising the suggested savings, and consider that we have seriously underestimated the difficulty of making changes in the pattern of expenditure. But they recognise the pressures of the economic situation and they have assured me that local authorities will, given a clear lead, co-operate to the full in restraining the growth of expenditure. I very much appreciate the spirit in which they have received our decision.
I am extremely grateful to the right hon. Gentleman for giving way. Before he leaves that part of his speech would he confirm that the Prime Minister's statement with regard to schools expenditure on 20th July still stands, in that the Prime Minister said that there would be no cuts in projected school expenditure?
I confirm that that is the case. I shall be touching on education expenditure a little later.
The totals of relevant expenditure which the Government have decided to adopt as the basis for determining the aggregate of Exchequer assistance are £2,557 million for 1967–68 and £2,726 million for 1968–69, both at mid-November prices. A distribution of these totals between the principal services is given in Appendix A of the Report. That gives some idea of the pattern of expenditure which the Government believe to be appropriate, but I must emphasise that actual expenditure on the various services will depend on the decisions of local authorities.
On that basis, we have determined the aggregate of Exchequer assistance at £1,381 million for 1967/68 and £1,499 million for 1968/69, that is to say 54 per cent. and 55 per cent. respectively of the totals of relevant expenditure I have just given. At present, Exchequer grants meet approximately 52¾ per cent. of relevant expenditure, and these increases in the percentage are in line with the Government's policy of progressively increasing the proportion of local expenditure met from grants.
How much more grant local authorities will receive than they would have received if the present system had contined will depend on how much they spend, and on what services. But if the pattern of their spending matches the figures given in Appendix A, I estimate that the extra grant will amount to £40 million for 1967/68 and £77 million for 1968/69.
As I explained earlier, the aggregate of the rate support grants is arrived at by deducting from the aggregate of Exchequer assistance the amount which it is estimated will be distributed by way of specific revenue grants. I estimate that those grants will amount to £127 million for 1967/68 and £137 million for 1968/69. The Table in Appendix B of the Report shows how the totals are built up.
Highway grants are not included in that list, because specific highway grants in future will be confined to expenditure on the improvement of principal roads. As they will be paid in capital form they do not figure here. Current expenditure on highways and street lighting will be assisted in future through the rate support grant, and so will expenditure on school milk and meals.
On the other hand, the list includes four new specific grants. Two of these—in aid of the acquisition of public open space, and of urban development—replace assistance previously given through the general grant. The grant in aid of the reclamation of derelict land makes help generally available for a purpose for which grant is at present available only in development areas. The grant to local authorities with an unusually high proportion of Commonwealth immigrants breaks fresh ground.
The aggregate of the rate support grants is, therefore, £1,254 million for 1967/68 and £1,362 million for 1968/69. The amounts of the three elements for the two grant years are specified in article 3 of the Order. The domestic element, to take the smallest first, is £23 million for 1967/68 and £47 million for 1968/69. The corresponding reductions which local authorities are required to make in the rates levied on domestic properties are fixed at 5d. for the first year and 10d. for the second. Taking England and Wales as a whole, this relief is equivalent to nearly half the average annual increase in rate poundage since revaluation.
The second element in the rate support grant is the resources element, which corresponds to the present rate deficiency grant. The amounts of the resources element are fixed by the Order at £204 million for 1967–68 and £217 million for 1968–69. These sums are what we estimate would have been payable by way of rate deficiency grants if all the other grant changes had been made—but rate deficiency grants retained—and local authorities had incurred relevant expenditure equal to the accepted estimates.
The needs element takes the remainder of the rate support grant, amounting to £1,027 million for 1967–68 and £1,098 million for 1968–69. These amounts represent, in effect, what would otherwise have been payable by way of general grant and discontinued specific grants, together with that part of the extra grant not absorbed by the domestic element or the new specific grants.
The formula for distributing the needs element, which occupies the remainder of the Order, is closely modelled on that for the general grant. The factors are, for the most part, the same and the relative weight they carry is much the same. Nearly two-thirds of the money is to be distributed on the basis of so much per head of population, but there are two big changes to which I should draw the attention of the House.
The first is the introduction of a new factor to distribute part of the grant on the basis of mileage of principal and other roads. This is a result of the decision that Exchequer assistance towards the maintenance of roads and the improvement of roads other than principal roads should be channelled in future through the rate support grant.
The second big change is in the education factor, which ensures that local authorities with a bigger education load get a bigger share of the grant. Under the general grant, what the individual authority received depended simply on the number of its primary and secondary school children. Under the new system of education units, the numbers of pupils and students at the different stages of education will be weighted in rough proportion to their average cost and account will also be taken of the number of school meals supplied.
The distribution formula carries a fair measure of agreement among local authorities generally, although there are of course, inevitably those who lose by the changes and others who would like to see further changes made to deal with their particular problem. We shall watch the working of the formula very carefully and if experience shows that changes are needed there is power to introduce them in the next rate support grant Order.
Is the right hon. Gentleman aware of the very grave concern among education authorities at the total amounts provided for in the Orders? The figure I have been given is that the rate for education over the country as a whole would have to go up by 10 per cent. even if we just stood still, with no element for improvement whatever. The three aspects about which grave concern is expressed are the question of hook allowances for schools, discretionary awards for higher education and the training of technicians and the consequences of the Industrial Training Act. If the right hon. Gentleman still occupied the position he held in 1960 on this side of the House—the position which I now hold—he would have been the first to be intensely critical of this Order.
I hope the right hon. Gentleman will forgive me if I do not go into the rather detailed points he made. On a constant price basis, the education figures, including meals and milk, as I have mentioned, show a rise of 6 per cent. between 1965–66 and 1966–67. The authorities' original forecast gave rises of 9·2 per cent. between 1966–67 and 1967–68 and 6 per cent. between 1967–68 and 1968–69. The figures accepted after negotiation show rises of just over 5·8 per cent. between 1966–67 and 1967–68 and between 1967–68 and 1968–69. This compares with an increase of 2·6 per cent. and 6·1 per cent. in the totals for all services. So I do not think that it can be said that the development of education is being held back by the financial estimates we have accepted for grant purposes.
How can the right hon. Gentleman be sure that this percentage will be devoted to education under the new arrangements? It may well happen that, at local level, education will not give it the same priority for grant expenditure and that rate expenditure will have to rise correspondingly. Indeed, the whole rationale of the general grant system we introduced was that the present situation could not arise because the Government would pay due regard to the estimates of relevant expenditure brought forward by the local authorities.
There is, on the other hand, the power of the Department of Education and Science to make sure that a high standard of education is maintained. The right hon. Gentleman cannot have it both ways. If he wants local government to function, it must have a wide range of choice. Under these proposals that we have accepted there will be a great deal of scope for them to extend the education system during the next two years.
I want to complete what I was about to say, because it is important to get this clearly on the record.
Perhaps the right hon. Gentleman will wait to deploy his case later in the debate, because I want now to say a word about the General Grant (Increase) Order.
This takes account of increases in pay and costs on general grant services which have taken place since the last increase Order a year ago. The largest item of increase relates to an actuarial adjustment to teachers' superannuation. The figures in the Order are agreed with the local authority associations.
I am sure that the House would like to thank the Minister for the way in which he has introduced these two Orders. He has tried—and I am not too surprised by it—to keep the temperature down as far as possible and to make these Orders sound as dull as he could. At the same time, he has shown that he can swim strongly through the muddy waters. He is probably wise to leave some of the more detailed questions to his hon. Friend the Joint Parliamentary Secretary. I shall rely on my hon. Friend the Member for City of Chester (Mr. Temple). Both my hon. Friend and the Joint Parliamentary Secretary know more about these matters than anyone else in the House.
It is very important, however, that laymen should not be overwhelmed by these mathematical calculations and complexities. Everyone was delighted when the Postmaster-General the other day said that he believed in Santa Claus. Unfortunately, as far as the ratepayers are concerned, the effect of these two Orders is that the Government have shot Santa Claus straight between the eyes. When one strips away all the technicalities with which the right hon. Gentleman presented the Orders to us, what they mean is that next year the ratepayer will receive the largest rate bill in his life, and in the year following as well, and probably in the year after that.
Probably the rates will rise by about 10 per cent., or £120 million. When I wanted to intervene towards the end of the right hon. Gentleman's speech, it was on the point that there has in fact been no agreement about these proposals. There has been no agreement on the basis on which the Government's figures are presented. It is irrelvant, as my right hon. Friend the Member for Birmingham, Handsworth (Sir E. Boyle) pointed out, to talk about percentage increases which may or may not take place in education expenditure on the basis of the figures which the Government have presented, because those figures are not accepted.
I want to try and put the Orders in perspective against the background of the Government's promises and their programmes in relation to local government expenditure and the growing burden upon the ratepayers. The great mortgage fraud of last week is followed this week by the great fraud upon the ratepayers. The substantial gap between the Government's election promises and the provisions of the Local Government Act, 1966, is already on record. So, too, is the fact that a Conservative Government would have made far more generous provision to relieve ratepayers. I do not want to repeat that today, because it is not necessary and does not arise directly under these Orders.
What is not disputed and has never been disputed by hon. Members opposite is that rates will rise next year by about 10 per cent. and that the average rate-payer will have the highest bill in his life. All the relief to the domestic ratepayer amounts to, as the Minister himself says, is only half the anticipated increase in the average increased rate demand. That is an Irishman's cut, if you like, Mr. Speaker.
But, of course, there will be wide variations between one area and another and between one local authority and another and for the moment this is the riddle wrapped in the enigma. We might have to return to the charge against the Minister and the Government when we know, but at the moment we do not know exactly how individual areas will be affected.
Certainly these two Orders must be understood by the House and the public to represent a very severe setback to any hopes which the ratepayers had of early relief. Under the Local Government Act, 1958, the Government are bound to meet their obligations to grant increases for certain specified purposes, and the General Grant Increase Order, as the Minister has said, is based on that procedure. There is no dispute about this and I will not say more about it.
Tonight, we need to concentrate on the Rate Support Grant Order which is made by the Minister in the exercise of his powers under Section 2 of the 1966 Act. We would all like to thank the Minister for the very full report which he has laid before the House in association with the Rate Support Grant Order. It has been extremely helpful. I think that my hon. Friend the Member for the City of Chester would like to join with me in thanking both the Minister and the Parliamentary Secretary for the readiness with which they have endeavoured to give us as much notice about the Government's proposals as was possible in all the circumstances.
The Minister said that the declared purpose of the Act was to shift the balance of expenditure from rates to taxes by 1 per cent. per annum. That is what his predecessor kept telling the House and it is to that that the Minister reverted tonight. But that can be brought about only if there is agreement on the estimated expenditure on which the Government grants are based, otherwise it is—and everybody in the House knows that I use these words with care and moderation—a fraud on the ratepayers. Paragraph 3 of the Order fixes the aggregate amount of Exchequer grants at £1,381 million for 1967–68 and £1,499 million for 1968–69. These figures, according to paragraph 11 of the Minister's report, represent respectively 54 and 55 per cent. of what is described as the "accepted relevant expenditure."
Naturally, there are always discussions, and often disputes, with local authority associations about the estimates on which Government grants are based, but I believe that this is the very first time when the figures on which the Government's share is calculated have been disputed at the end of the day. Therefore, on this occasion we have a situation in which it can be said of the so-called "accepted relevant expenditure" that it is neither accepted nor relevant. It is not accepted or relevant not only because the Government have not agreed the local authorities' estimates of expenditure—there might be room for dispute there—but because their decisions are deliberately based on what is quite manifestly the wrong set of figures.
The report shows that in 1967–68 local authorities are to get £105 million less than they estimated they required and £104 million less in 1968–69. But paragraph 7 of the report says:
The estimates were based on the level of prices, costs and remuneration at 30th June, 1966.
As the local authorities have been quick to point out, while the original estimates put before the Ministry were necessarily in terms of June, 1966 prices, the final figures fixed by the Government are supposed to take into account, as they always have in the past, all increases in prices and remuneration and so on since the end of June. Consequently, it has been asserted—and I have no reason to dispute it—that the real cut in local authority spending plans is not far short of £160 million next year. While the Minister's report says in paragraph 9:
Allowance has been made for the fact that actual expenditure is likely to fall some way short of estimate
there seems to be not the slightest evidence to be found anywhere in support of that assertion.
In calculating this relevant expenditure, it is clearly vital to begin with the right base. Otherwise, all this talk of percentage increase has no meaning. Yet it appears that the Government have preferred to work in this case quite arbitrarily on the basis of actual expendi- ture in 1965–66 rather than on the estimated expenditure for 1966–67 which is now virtually known. Surely the Minister must agree that the 1966–67 position must be a clearer guide to future expenditure and commitments.
All one can say is that this is hardly a happy augury for the start of the new rate support system. In so far as the Government are paying this agreed percentage of grant, the 54 and 55 per cent. in the two years, respectively, not on what the local authorities will be spending, but on an artificially low estimate, the ratepayer will have to make up the difference, or the services will have to be cut. These are the only alternatives.
Clearly, at a time of economic difficulty—and heaven knows that no one disputes that this is such a time—local authorities must accept their share of financial stringency. But can the local authorities, with all the good will in the world, cut back their expenditure as the Government expect them to do for the current year? The Minister admitted that there were difficulties about that. But can they, with rate estimates for 1967–68 in active preparation if not actually completed, cut back in 1967–68 to the extent that the Government are demanding, that is, to the extent in effect of about £160 million'?
One thing which I would like the Parliamentary Secretary to clarify in his mopping-up operation when dealing with what has been taken into account in assessing the grant is the extraordinary statement made by the Minister Without Portfolio in another place on 28th November. In the Committee stage of the Land Commission Bill, having said that the betterment levy would be collected by the Commission and paid to the Exchequer, he went on to say:
…"I hasten to add that the Exchequer has taken into consideration the expected yield of £80 million in deciding on the additional grants to be paid under the Local Government Bill, so that already to a large extent the amount of money which will be collected by this process of levy on private transactions will be going to the very things to which my noble friend has suggested it ought to be going."—[OFF ICI AL REPORT, House of Lords, 28th November, 1966; Vol. 278, c. 491.]
I would be very grateful if the Parliamentary Secretary would tell us just what that means. How has this allowance been made and in what way and how much are the local authorities assumed to be getting from this source?
As I said, whatever happens, the ratepayers or the services will suffer. Let the public make no mistake about who is to blame. The blame lies entirely on the Government. The White Paper itself in paragraph 9 says:
It is clear that over the two years ahead the rate of growth of the economy will fall short of that postulated in the National Plan and in this situation the growth of public expenditure must be restrained to prevent it pre-empting too large a share of the national product.
Well, well! Truth will out—at any rate, in time. The House will recall that on 30th March this year, two days before the General Election, the Prime Minister was asked by my right hon. Friend the Leader of the Opposition how he proposed to pay for his programme which was based on a growth rate of 4 per cent.—and these are my right hon. Friend's words—
now that it is absolutely apparent that that growth rate is not going to be achieved".
The Prime Minister replied, and I quote his words as reported in The Times of 30th March—
It is only apparent to Mr. Heath; it is not apparent to us. We shall pay for our programmes out of the provision in the National Plan involving a growth rate of 4 per cent. The National Plan stands and we intend to fulfil it.
In paragraph 9 of the Minister's Report, the Minister made it perfectly clear that the Government will not. I hope the Minister checked with the Prime Minister before he wrote that paragraph. No doubt, if we asked the Prime Minister at Question Time whether the pledge still stood, he would say, "Yes".
The House will note this categorical assurance from the Prime Minister came two days before the General Election and after the Labour Government had been in office for about 16 months. So there are no alibis this time, as the Daily Mirror assured us, and no one else to blame.
Once again the Government have been caught making a pledge only to break it within months. I can well imagine the reaction of right hon. and hon. Gentlemen opposite if a Conservative Government had cut local authority expenditure by anything like the extent which is now being insisted upon. Paragraph 9 of the Report says that the failure over the
two years ahead to fulfil the National Plan will
require, not merely the utmost economy in all branches of administration, but also some slowing of the development of some services.
In fact, it now looks as if there must be not merely a slowing down of the rate of development, but an actual cutting back of the services. The difficulty is that any substantial cut-back of local authority expenditure is always a long-term exercise. With loan charges now at higher rates of interest and beginning to be felt in relation to projects that were commissioned, say, three years ago, and with schools being built that need staff which the Minister said we must have, how are these cuts to be made? These commitments cannot be cut. Certainly, the start of various future programmes can be slowed down, and the Minister referred to town centre and urban redevelopment. Those have already been slowed down, but it is difficult to see how cuts of the order of £160 million can be achieved in the near future.
The table on page 11 of the Report shows the reduced total of £2,557 million of local government expenditure, which is, of course, at June prices. It shows how that is made up in terms of expenditure on education, on health, welfare, police, child care, and so on. What we really need to be told by the Parliamentary Secretary is by how much local council spending on each of these items—on education, on health, welfare, police, child care and so on—has been cut. Perhaps in winding up he will give us this information.
As it is, Section B of the Report, headed "Development of Services" may well mislead both the House and the country into the impression that the expansion of major services can still go ahead under the grants as given in these Orders. Paragraph 13 of the Report says:
Development of the Education service, including the school meals and milk services, will lead to a steady increase in expenditure.
It goes on, in paragraph 14, to say:
Numbers will increase in every sector of the service.
But education accounts for more than half of the total expenditure of the counties and the county boroughs. Who
is to pay for these increases in the light of the cuts that have been imposed by the Government?
According to Sir William Alexander, secretary of the Association of Education Committees, reporting in the Observer on 18th December,
Either rates will have to go up more sharply than the Government intend or it will not be possible for local education authorities to carry out the policies which the Government have laid down.
That is the point which my right hon. Friend the Member for Handsworth was making. As Sir William pointed out, the great bulk of education expenditure is irreducible. Teachers' salaries, loan charges, salaries of non-teaching staff, major awards to universities, which local education authorities have to pay under statute, are irreducible. Where are the cuts to be made? Is the raising of the school-leaving age in 1970 to be deferred, or will there be some slowing down in further education? The House is entitled to know whether that is the Government's intention. It is important to establish that whatever happens is the responsibility of the Government. They cannot shuffle off this responsibility. They can not put the onus on local education authorities to make these cuts because they have not got the money or because they cannot comply with requirements which we think are unreasonable.
Do the Government agree with Sir William's assessment, which my right hon. Friend supported this afternoon, that to keep the policies intact with the grants now announced there will have to be a 10 per cent. increase in the rates for education? Or will it be more, as I myself suspect?
In this connection, we would like to know what has happened to another of the Government's election pledges. On page 14 of the Labour Party's 1964 election manifesto, just after the categorical pledge about "early relief to ratepayers", there is an equally categorical pledge to
transfer the larger part of the cost of teachers' salaries from the rates to the Exchequer".
This obviously refers, and it was taken by everyone to refer, to that part of the cost now falling on the rates. Yet judging by his reply at Question Time on 6th December, the Minister does not even
know that the pledge was given, because he answered rather blandly by saying,
The larger part is borne by the Exchequer ".
I hope the Minister or the Parliamentary Secretary will take the opportunity to clarify the position. Does the pledge still stand, or has it now been abandoned? I will give way to the Minister now if he likes. Is it abandoned? Will he tell us? [HON. MEMBERS: "Silence."] We can draw our inferences from the Minister's silence. Perhaps that is one of the "odds and ends" which he is leaving to the Parliamentary Secretary to clear up at the end of the debate. He has certainly given the impression that he does not know what pledges have been given by the Government or by the Prime Minister on teachers' salaries, the National Plan, or anything else. There have been so many pledges given and broken that it is hard to keep up with them.
Apart from the dangerous cuts in Civil Defence which the House heard about recently, the Government appear to rely largely on cuts being made under the heading of "General administration and miscellaneous." It is certainly a matter for grave concern that the staffs of local authorities have risen by over 150,000 since October, 1964.—[An HON. MEMBER: "Why?"] My hon. Friend asks, "Why?". It is mainly because of the extra statutory duties cast upon them. They are part of the extra administrative burden generated right down through the whole economy by 26.000 additional civil servants. The Prime Minister seemed to think at Question Time that this was a very productive exercise. The ratepayers will not think that, or the taxpayers when we come to the next Budget.
In its 1964 election manifesto the Labour Party promised that it would end what is called
the present parsimony in the supply of public funds
for recreation, the youth service, and so on. It is these items—town planning, clean air, improvement grants, and the like, with which the Minister should be very much concerned, which are the chief candidates for the chopper.
Here again, it is for the Government to say quite clearly and definitely, now that they expect local authorities, who the Minister says have asked for a clear lead to cut down on these matters, and to explain by how much. The decisions have to be taken by the Government They cannot be taken simply by local authorities, who have been encouraged by the Labour Party's election promises to think that the green light has shone and that they can go ahead. Unfortunately, some of them have gone ahead. Now the Minister tells them to stop. But it is too late.
All this is a very far cry from the days when hon. Members opposite were going about the country and saying, "All you need is a Labour Government. Things will be much easier for the local authorites. Interest rates will be lower. Exchequer grants will be bigger. A larger part of the burden of local expenditure will fall on the Exchequer and be taken from the ratepayers". It has not happened. We have to aprove these Orders tonight because, without them, the local authorities would have nothing from the Exchequer. But we call upon the Government to give a clear assurance that they will review the situation if, as we fear, the estimates on which these Orders are based prove to be unrealistically low, with a disproportionately higher burden imposed on the long-suffering ratepayers.
I am particularly glad to take part in this debate because the county council for the constituency which I have the honour to represent has for some time felt great concern about the possible effect upon it of the new Local Government Act, and I fear that, to a considerable extent, the Order supports that concern.
Before dealing with the particular case of the Cambridgeshire and Isle of Ely County Council, the area of which comprises the City of Cambridge, I have some general comments to make. I agree with the right hon. and learned Member for Hexham (Mr. Rippon) when he says that the cuts in local authority estimates are greater than would appear from a comparison of the figures in paragraphs 8 and 10 of the Paper, for the simple reason that they are not strictly comparable in that the local authority estimates here quoted are at June, 1966, prices whereas the figures given in paragraph 10 are, I understand—the right hon. and learned Gentleman confirmed this—at November prices.
One comparison gives figures of cuts of £105 million in 1967–68 and £104 million in 1968–69, but put on the same basis and taken with local authority estimates at November, 1966, prices, the cuts are about £161 million in 1967–68 and £176 million in 1968–69.
Paragraph 11 of the Paper refers to the percentage of local authority expenditure met by Exchequer grant, namely, 54 per cent. of relevant local authority expenditure in 1967–68 and 55 per cent. in 1968–69. However, if one notes that the figures quoted for local authority estimates in paragraph 9 are at June prices, one finds that the percentage can be somewhat different. The global amount of Exchequer grant of £1,381 million in 1967–68 and £1,499 million in 1968–69 are as a percentage of accepted relevant expenditure 54 and 55 per cent.
I have taken the figures to be correct, but perhaps I should have checked them—but if one compares them with the local authorities' forecast at June, 1966, prices, they are seen to be considerably less, about 51 per cent. and 53 per cent. of their estimates of expenditure at June prices. If one goes further and compares them—I think that this is the correct basis—with the local authorities' own estimates for 1967–68 and 1968–69 at November prices, the global Exchequer grants are seen to be only about 50 per cent. of those figures in both 1967–68 and 1968–69.
I fear that local authorities will have considerable difficulty in cutting their estimates without having to cut their services, because I believe that their forecasts were not unreasonable and they did their best to give accurate and reasonable forecasts. I appreciate that, in present circumstances, there must be a slowing down in the expansion of services, but I fear that this may well lead to a standstill in these services, if not to some reduction, if local authorities are to avoid an increase in rate-borne expenditure in 1967–68 and 1968–69.
Paragraph 11 of the Paper tells us that it is estimated that local authorities will receive about £40 million more in grants for 1967–68 and £77 million more for 1968–69 than they would have received had the present system continued, and the Minister referred to this point in his speech. It should be remembered, however, that not all local authorities will benefit equally. Moreover, out of the £40 million extra in grant for 1967–68 £23 million is accounted for by the domestic element, and the highways and supplementary grant to the G.L.C. and county boroughs absorbs, I understand, a further £11 million. Thus, out of the £40 million one is left with only £6 million, and part of this, if not the whole, may well be taken up by increases in specific grants. I hope that the Parliamentary Secretary will tell us something about this when he replies to the debate.
The Cambridgeshire and Isle of Ely County Council has for long felt great concern about its share of Exchequer grant, and it has in the past been extremely dissatisfied with the situation under the 1958 Act. Unfortunately, as paragraph 39 of the Paper makes plain, the distribution formula for the needs element is modelled on that for the general grant. This, I believe, is partly the burden of my authority's complaint. It has always felt that the general grant affected it adversely.
The Cambridgeshire and Isle of Ely County Council has for years contended that the introduction of the general grant under the 1958 Act in place of major percentage grants has cost the present county council and its predecessor, the Cambridgeshire County Council, upwards of £250,000 a year in reduction of grant which it would previously have received under the earlier Act, and it has consistently objected to this formula, which, unfortunately, is continued in the present Act and given effect by the Order.
Under the present formula, the needs element for Cambridgeshire is, so I am advised by the county council, among the lowest per head in England, and it is at least £1 per head less than the average. A deficiency in the needs element of at least £1 a head, which is to be continued under the new formula, will involve, so this authority believes, a loss of not far short of £300,000 a year. The estimate at the moment is upwards of £291,000. This is equivalent to a rate of 6d. in the £, of which probably 3d. in the £ would be borne by the ratepayers in my own constituency of Cambridge.
There is a special loss which is peculiar to Cambridgeshire and to Cambridge and Oxford, although it is offset in the case of Oxford, due to the inclusion of transient or extraneous university population of 9,000 to 10,000 for the purposes of determining the supplementary grant for education units. This is calculated by the authority to be likely to lead to a further loss of up to £150,000 in grant. This is offset in the case of Oxford by reason of the fact that Oxford, unlike Cambridge, has higher than average rating resources, whereas Cambridgeshire, including the City of Cambridge, has only average rating resources.
Many of the formulae and calculations in the Grant Order are extremely hard to comprehend and I find it hard to evaluate these arguments. I very much hope, however, that my hon. Friend the Joint Parliamentary Secretary will feel able to give an assurance that he will have regard to the adverse possibility, which the Cambridgeshire and Isle of Ely County Council believe to be a reality, that it will be seriously and adversely affected by the Order and that my hon. Friend will give an undertaking to enter into discussions with the authority in case rectification is possible.
I have a great deal of sympathy for the hon. Member for Cambridge (Mr. Robert Davies) in the views which he has expressed, because the county in which his constituency lies is adversely affected by the Order and as I shall show the county of which I am a representative is even worse affected.
This Rate Support Grant Order confirms lamentably the fears which I expressed during the passage of the Local Government Act, 1966. The change from the present arrangements under the general grant system to the new system which is now proposed will mean a rise in rates in my constituency of between 2s. 3d. and 2s. 9d. in the £. That is a very serious matter. It is especially serious for those constituents who can least afford to pay such increases.
This increase comes at a time when, as the Minister well knows, many of my constituents already complain of the high level of rates under the present system. That applies especially to those ratepayers who live in houses built during the last five years, which includes the people who have come to our county under town development schemes.
During the Report stage of the Act, the Joint Parliamentary Secretary tried to mollify me somewhat by saying that the average rates paid by my constituents were about £40 a year. I was not in a position to challenge that when the hon. Gentleman said it, but inquiries which I have since made have convinced me that this figure was both out of date and misleading. I do not accuse him of intentionally misleading—I know him so well that I know he never would—but I consider that the figure of £40 is out of date because it is clear that people living on our new housing estates are paying £50 to £60 a year in rates, and now they will have to pay this large increase of at least 2s. 3d. in the £ and possibly as much as 2s. 9d. This is a result of Government policy, in spite of the Government's pledge to give early relief to ratepayers. It is a deplorable situation, and the Government must be held responsible for it.
To maintain the standard of essential services to which the hon. Member for Cambridge has referred and which are expected, rightly so, by the Government, by Parliament and by the people—and services which, incidentally, are perhaps lower at the standards being operated than is really desirable—and to provide them for the increasing population which we are getting, the County of Huntingdon and Peterborough will have to spend £1 million more in the coming financial year than in the present financial year. It will get only between £100,000 and £200,000 of that extra £1 million from the grant proposals which are now before us. That will leave an additional amount of expenditure of at least £800,000 to be found by the ratepayers. This is on top of all the extra tax burdens which the Government have imposed. What a Christmas present! What a price to pay for 2¼ years of Socialist Labour Government!
On 14th December, the Minister wrote to me in response to a petition which I had sent to him from ratepayers in my constituency requesting a rate freeze. I recognise the substance of the Minister's arguments against a rate freeze and I understand the reasons he has given for not having one, in the conclusion of his letter, however, after referring to the hope that economies would be made, the Minister said this:
I am sure, therefore, that any rise in rates next year will be kept to the bare minimum"—
a bare minimum of 2s. 3d. in the £—
and, in addition, the provisions of the Local Government Bill will help to keep down the rates for householders; but no one can say that there will not be a rise at all. I shall, of course, continue to bear in mind your comments on the possible effects of town development schemes.
I am at least grateful for that hope for the future. No words of mine are necessary, however, to point out the irony of what the Minister wrote to me last week now that we know how the Order will affect the ratepayers in my constituency.
On a number of occasions this year I have warned the Minister and his predecessor and the Parliamentary Secretary of the bad effect which this new rate support system would have on rapidly-expanding communities in largely rural counties. It is now obvious that the pleas which I made fell on deaf ears, or possibly, as an alternative, that the Minister was so anxious to give still further help to cities, which have much higher rateable values than we have, that he does not care about counties like ours, which are doing their best in the national interest to relieve the overcrowding in those cities and to achieve a better distribution of population. In return for our efforts under the town development schemes, however, such counties are now reaping a miserable reward.
I cannot but feel strongly about this. I cannot but feel strongly because of the pleas which I have made and because of the pledges and the pretensions which the Government have put forward from time to time. This is a most regrettable evening in this House.
My intervention in this debate will be a very brief one indeed. The formulae for calculation of grant are of so complex a nature as to demand a very high degree of mathematical skill which is not to be found among most laymen. From time to time politicians are accused of being desiccated calculating machines, but I doubt whether, even if that were true, they would at the drop of a hat be able to tell their local authorities whether this change in the financial structure of support would be to their advantage or disadvantage.
There is among local authorities an understandable feeling of disquiet and uncertainty with regard to the future, and my County Council of Cardigan is certainly no exception to that rule. I would stress this point with regard to my constituency, that there is such an imbalance in the economic structure, whereunder only 6 per cent. of the population are engaged in manufacturing industry and 83 per cent. of the population in service industry, that there are some very real fears indeed that there may well be here an anomalous situation which may not conform to the average pattern and which to those who drafted this legislation might well have appeared as a result of the spot checks which were made in some 10 per cent. of the county districts. There is fear that this may be the case.
I would, therefore, ask the Parliamentary Secretary whether he would give me the assurance, that the total amount of grant received in my constituency in the years 1967–68 and 1968–69 will be at least equivalent to the support which is received at the present moment, and in addition to that, that there will be an adequate sum for increased expenditure, bearing in mind the average level of such increases and also remembering, with regard to a county like Cardigan, that there are often heavy pressures upon it to bring its services up to the very minimum which is required if it is to carry out its statutory obligations.
Secondly, I would ask the hon. Parliamentary Secretary whether he would be able to give some indication as to the amount of the resources grant—if he can tell us when information can be given to councils of that amount. To a local authority like the County Council of Cardigan it is of the utmost importance when it is working to a very strict budget, and when it is planning—even in the short term, and certainly for the long term—that there should be at the earliest possible moment such information given to it.
I would be most grateful indeed to the hon. Gentleman if he could give me the assurance for which I ask, and some information about the resources grant.
I beg to move,
That the debate be now adjourned.
I think it quite disgraceful that the Minister should come to the House and ask the House to pass an Order involving no less than £2,600 million of public money, equivalent to 6s. 6d. in the standard rate of Income Tax over two years, before that Order has been considered by the Statutory Instruments Committee.
It is absolutely scandalous that this enormous sum of money should be voted—that it should be debated—tonight, when we do not even know whether the Order is defective or not. Moreover, if the Order is found to be defective the House will already have taken a decision upon it.
I have done a certain amount of research this afternoon and I know of no case where a Minister has ever come to the House for anything approaching this colossal sum of money without its having been cleared by the Statutory Instruments Committee, and yet this is the invitation which is put before the House tonight. Moreover, of course, the Select Committee has not even had an opportunity to consider it. It is not that the Committee has fallen down on its task. The Minister did not arrange for the Act to be printed and available until 10 o'clock yesterday morning; it was not until 10 o'clock yesterday that the Act was available; and, of course, the Select Committee could not possibly deal with it before.
This is the way the Government have organised their business in a matter concerning £2,600 million of public money. It is shattering; it is a desperately bad way of treating the House of Commons, seriously to invite it to debate the merits of an Order of this kind rushed through in this way. The Bill—
Order. In his opening remarks, the hon. Member moved the Adjournment of the debate. I think that it would be for his convenience and that of the House if I announced that I am unable to accept that Motion.
It is perfectly in order for a Statutory Instrument to be discussed even before it has been to the Select Committee on Statutory Instruments. Therefore, I am unable to accept this as a reason for exercising the discretion of the Chair in accepting such an Adjournment Motion. The hon. Member is perfectly in order in adducing this as an argument for the rejection of the Order, but I cannot accept his Motion.
With great respect, Mr. Deputy Speaker, the point I was trying to make is that we are not in a position to know whether we can accept or reject the Order till we know whether or not it is defective. That we do not know. It is certainly agreed that an Order is needed, or there will not be any funds for local authorities. I was not suggesting that it was out of order for the Government to do what they are doing, merely that it is a disgraceful thing for them to do.
Order. I can only say to the hon. Member that I have announced the decision of the Chair, to enable him to address himself more closely to the Order, and not to his Motion, which I have to reject.
Of course, I accept your Ruling, Mr. Deputy Speaker.
This puts the House now in an intolerable position—to debate the merits of an Order which may be defective. The Minister cannot tell that it is not defective. It has not been considered by the Select Committee, to decide whether it is. It cannot be amended by the House because there is no procedure for doing so. Therefore, we are left in the impossible position where we are asked to approve—because otherwise there is no money for local authorities at all—£2,600 million on an Order which cannot be amended and may be defective. This is truly an extraordinary proposition which the Government are putting to us tonight.
Obviously, my hon. Friend has studied this. It would be a great help to many of us if he could tell us what the consequences would be if the Order were, in fact, found to be defective, and what the effects on local authorities and their planning would be.
How I wish that I could give my hon. Friend a description of what would happen. There would be a truly remarkable situation. The House of Commons would have passed the Order; the Statutory Instruments Committee might then report the Order to be defective; but if it reported it to be defective, I cannot imagine what redress would be available to the House, which would, anyway, by tomorrow afternoon have gone into recess.
This brings out all the more reason for the Government's withdrawing this Order for tonight. Since the debate is not to be adjourned, could the Order not be withdrawn and reintroduced by the Government when we know whether or not it does meet with the minimum requirements of the Statutory Instruments Committee? If the Government maintain the opposite proposition, they are saying in effect that the Statutory Instruments Committee is a purposeless body and that it is a pure procedural charade to submit Statutory Instruments to it. If they think that, why do they not do something about it? Presumably they do not think that.
It is not unprecedented to have an Order considered on the Floor of the House on which the Statutory Instruments Committee has not yet reported, but this Order deals with a sum of money of enormous magnitude, and it has an immediate effect on every ratepayer in the country. It affects not only ratepayers, but children at school, and people in receipt of welfare services. It goes right to the heart of the life of just about every person in the country, even those well under voting age. To treat this Order in such a cavalier manner and then to propose that the House goes into recess tomorrow not knowing whether the Order is defective or not is such an extraordinary way of treating the House of Commons that only the present Government would have thought of doing it.
When one comes to the specific details of what is offered to us as a potentially valid Order, we are in considerable difficulty. The Act only came out at 10 o'clock yesterday morning, and this immensely complicated Order has been available only since the 14th of this month, when it was laid upon the Table. It is extremely difficult to calculate what the specific effects will be in the areas from which individually we come. I say "areas" because the county areas are very much larger than any single constituency.
When one thinks of the promises that have been made in the last two years by Ministers as a result of many actions which they have taken, including altering local government boundaries, that no hardship will fall on the ratepayer, and then when one sees the likely consequences of this Order if it is passed, many of those promises will prove to be just as hollow as many of the Labour Party's election promises have already.
If anyone would care to tell the Minister what has been said, since he does not bother to be present in the Chamber for this short debate, I ask him to withdraw the Order. By all means bring it before the House again tomorrow, but I ask him to withdraw it now if for no other reason than that it is a quite intolerable precedent for the wholesale authorisation of public expenditure to do it in this manner. I know of no stronger way of protesting against this grotesque practice than in the words which I have used.
It is axiomatic that local government should be facing difficulties during the next two or three years, arising as much from structural difficulties as from the geographical areas which are now being reviewed by the Maude Commission. They are difficulties which are made all the more difficult by the present economic situation, and certainly by the measures taken on 20th July, but I do not think that it comes very well from hon. Gentlemen opposite to try to contract out of their share of responsibility for what has arisen since we assumed power, which has led to the cut in local government grant from the Government.
Town halls all over the country will be facing a difficult winter and perhaps a difficult two years in view of the fact that what they anticipated from the Government White Paper in respect of the rate support grant will not come up to expectation. I believe that that will greatly affect my own London Borough of Havering, which is a new borough on the fringes of London.
Although it is really a subsidiary matter, there is one point of some relevance which I should like to raise. If, increasingly, we are to put heavier burdens on local authorities in education and allied areas of activity, we must have a greater sharing of financial respon- sibility—not just from the Treasury and the Government, but, rather, from within the local authorities themselves. In that connection, I refer to the rate equalisation schemes. The Westminster City Council, which is one of the Inner London authorities, has a rateable value of about £104 million. That is, equal to the rateable values of Manchester, Liverpool and Birmingham added together.
The present scheme, which has been in operation in one form or another roughtly from 1867, although it has had many refinements made to it, has operated in allowing the wealthier boroughs to assist the less wealthy. At present, the outer fringe boroughs like the London Borough of Havering are not receiving the assistance from the London Equalisation Scheme to which they are entitled.
The matter was referred to in paragraph 955 of the Royal Commission's Report. It says:
This raises the question whether a new scheme should he introduced to take the place of the London Rate Equalisation Scheme and, if so, whether it should apply over the whole area of the Council for Greater London or whether its application should be limited to the present area of the Administrative County of London.
Under the Local Government Act, 1963, the Minister has power already to allow this equalisation scheme to apply to the outer London boroughs, and here I refer to Section 66(1) of the London Government Act, 1963, dealing with the equalisation of rates, which says:
The Minister may, subject to and in accordance with the subsequent provisions of this section, make as respects the whole or any part or parts of Greater London a scheme or schemes for the purpose of reducing disparities in the rates levied in different rating areas of Greater London other than the Temples.
I respectfully submit that local authorities on the fringes of London would accept their disappointment arising from the grant scheme if they could feel that there was a sharing of responsibility throughout the whole of the London area.
Is the hon. Gentleman aware that, in the new formulae under the Rate Support Order, the present Government have done away with the rate product reduction factor and, therefore, helped the wealthier authorities to the detriment of the less wealthy authorities in London?
There is, in fact, an equalisation provision. The hon. Member for City of Chester (Mr. Temple) is wrong.
I should like to finish by saying that the new boroughs which were created by the previous Administration face enormous difficulties.
No, I will not give way again.
During the coming months, they will be faced with agonising decisions whether to cut back drastically on plans which they have already drawn up or whether to increase rates dramatically. That will be an agonising choice. It will be taken all the easier if they know that the sharing of the burden will be equal on all London boroughs.
I think that my right hon. and learned Friend the Member for Hexham (Mr. Rippon) had it about right when he described this Order as the great fraud. It is one of the many frauds being perpetrated by the Government, and I feel sure that in due course they will pay the price for it.
The right hon. Gentleman the Minister admitted that some authorities would lose under the provisions of this Order, and I represent one of them. He went on to say that there was a broad measure of agreement among local authorities. I rather think that this is a case where perhaps, on a domestic matter in this country, we are breaking what has now become quite a famous principle, the sixth principle, in a now famous international dispute—no oppression of the majority by the minority, or of the minority by the majority. I think that we are in breach of that with this Order, and I am very glad that the hon. Member for Cambridge (Mr. Robert Davies) assisted me in putting the case for the County of Cambridgeshire and the Isle of Ely, which is one of the authorities in the minority to which I have just referred.
During the debates on the Local Government Bill I represented how the effect of this new system of grant for Cambridgeshire and the Isle of Ely would be detrimental to the ratepayers and not beneficial, and I explained and admitted how bitterly Cambridgeshire felt about the way in which the 1958 Act was beginning to work out, how they were approximately £250,000 a year worse off than they otherwise would be, and how strongly Cambridgeshire had represented the need for changing the then system in any event. Hon. Members will, therefore, understand how disappointed we are when we see in paragraph 39 that the distribution formula is to be modelled on the general grant. I regret that the existing unsatisfactory formula is to remain the foundation of the new one.
Paragraph 39 goes on to talk about changes which have to be made in that basic distribution formula to take account of certain facts. These changes make the position worse, and not better, for they include, for instance, the provision about highways, which will certainly reflect adversely on the finances of county councils. Therefore, I say that the basis of calculating the needs element ought not to be accepted in its present form.
In paragraph 11, referred to by the hon. Member for Cambridge, we see that local authorities will receive £40 million more in grants for 1967–68 than they would have received had the present system continued. It sounds marvellous until one begins to work out what it means. It means, in fact, that the county councils will be worse off. The hon. Member for Cambridge explained how that would be so, and I look forward to hearing how the Joint Parliamentary Secretary reconciles those two opposites.
Cambridgeshire and the Isle of Ely are particularly hard hit, because the county rate in the £ for the current year is already the third highest in the country. The reason for that is that the general grant per head of the population is so low, and under the new formula the needs element for this county is amongst the lowest, more than £1 per head less than the average. There are five other counties similarly placed, but at least three of these have more than average rating resources, and this offsets their difficulties to some extent. Cambridgeshire and the Isle of Ely have no more than standard resources, and therefore average expenditure can only be met from a high rate.
There is a further special factor in this county, and it is in connection with the undergraduate population. This also applies to Oxford, although the County Borough of Oxford has higher than average rating resources, and is not affected in the same way that we are. During the passage of the Local Government Bill I referred to this, and the Joint Parliamentary Secretary replied, but he did not altogether clear up the point, because the essence of it is that whereas the undergraduates are included in the total population and attract grant on that basis, the effect overall when the supplementary grants are taken into account is that the undergraduates are a minus quantity.
I have been taking advice about this White Paper No. 252. In parenthesis, may I say how difficult this has been in the extremely short time that we have had to consider it. I have been taking advice, in particular, about paragraph 40(b,ii). It looks double Dutch to me, but I am told that when reduced to simple terms it means "£73 per education unit minus £14·6 per head of population". If this advice is right, the effect is that this supplementary grant is equivalent to taking away from recipient authorities £l·35 more per head than is given to them by the basic population grant. The population grant is £13·25—this is paragraph 40(a)—and under paragraph 40(b,ii) it seems that £14·6 is to be taken away. This seems to be a ridiculous way of setting about things, but if that is right, then I think that it may explain why the inclusion of undergraduates in the population count of Cambridgeshire and the Isle of Ely is a minus quantity to the county as a whole.
During the debate on the Local Government Bill the Joint Parliamentary Secretary said:
If we find…that this problem gets worse under the new grant as opposed to the old grant…we can adjust the formula in such a way as to take that into account"—[OFFICIAL REPORT, 20th October, 1966; Vol. 734, c. 465.]
That was something to be thankful for, but we now know that this grant will not work properly and will have to be adjusted. How much more sensible it would have been to have had a new
system, which admittedly we needed, and which would take into account the special factors particularly relating to the smaller authorities which I have sought to describe.
I shall not go over all the points made by the hon. Member for Cambridge, because to do so would be tedious. I have consulted my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) who, to save time, will not seek to take part in this debate. We both feel very strongly that the needs of this county, which has made representations so clearly and for so long the need for a new system, are not being met under this Order, and I hope that the hon. Gentleman will make a real attempt to clear up this point and explain how he thinks they will benefit, because at the moment it seems that they will not do so.
I shall take up the time of the House only for a few minutes in order to express my concern about the effect that this Order will have in an area like Bedfordshire—a concern which I am sure is shared by my hon. Friend the Member for Bedford (Mr. Brian Parkyn). It is quite impossible to limit increases in expenditure to the levels envisaged in the Order in a county of this type. The only result will be an abnormally large increase in the county rate. It has been estimated in some quarters that this may be as much as 6d. in the £ of the county precept. This would be undesirable at any time, but it is particularly undesirable at the present time, in view of the prices and incomes policy, and I ask my right hon. Friend again seriously to consider my previous suggestion that this is a year when not only rents but rates should be frozen, and when a Government subsidy should be found to enable local authorities to maintain and expand their essential services.
Having said that, I do not suggest for a moment that the party opposite would in any way be more generous. I hate to tread a well-worn path, but history in 13 years showed that generosity was the least of their qualities. This period showed a considerable increase in rate levels.
My feeling is that the provisions for growth in this Order are inadequate for a county like Bedfordshire. The Minister has suggested that provision must be made for teachers and schools. In Bedfordshire we are shortly to embark on another overspill project in Houghton Regis, which in this area is welcomed. We also have a considerable natural growth, which means that we shall have thousands more in our population and thousands more children to be educated. This cost has to be borne by the Bedfordshire authority, but while the population is expanding in this way the President of the Board of Trade is still rather reluctant to provide us, with the further industrial growth and diversification which could help not only this but other problems.
The inevitable result will be that a bigger and bigger burden will be borne by the householder-ratepayer. In fact, the Leighton Buzzard rate in the County of Bedfordshire was the highest in the country during 1966–67. I appeal to the Minister to consider the Order again and to see in what way further help can be given to special growth areas—areas which are expanding rapidly, like Bedfordshire. Can he make special provision for these areas in order to keep the rates down to a reasonable level?
When the Minister opened the debate he did his best to pour oil on troubled waters. Unfortunately for him the oil has done little to allay the turbulent waves of disillusionment and fears of the consequences of this thoroughly inadequate Rate Support Grant Order.
Fears of the consequences have been expressed by hon. Members on both sides of the House. One hon. Member opposite talked about agonising decisions, and my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) provided the House with figures illustrating the likely increases in his own county in next year's rates. The hon. Member for Bedfordshire, South (Mr. Gwilym Roberts) expressed his concern, added to that of others. He said that he did not imagine that if my right hon. Friends were in power local authorities would be treated with any greater generosity.
Unfortunately, I have not the local government figures as a whole, but I have as one example—and it is the main item of expenditure under local government—the figures for education, which show that in 1954–55, 3·2 per cent. of the national product was spent on education, whereas in 1964–65, 5·1 per cent. was spent on education, which proves that my right hon. Friends were far more generous than have been the present Government.
I do not think that it is adequate, and I will come to that later. Under the title "Stringency in the Town Hall"—it might also have said "in the county hall"—The Times' leading article, on the subject of this Order, said:
The White Paper issued this week suggests that the Government are making a firm effort to retard the growth of local authority expenditure.
"Suggests", yes. But how on earth is this expected to be achieved, at least in the short term, and what effect will these suggestions have in the meantime on the ratepayer?
It is one thing to say, as the White Paper does, that the rate increase for local authority expenditure is too high to be acceptable under current economic conditions, but it is quite another to achieve a cut in the increase when, as my right hon. and learned Friend the Member for Hexham (Mr. Rippon) said, local authority estimates for next year are already in an advanced state.
The Minister said that local authorities should distinguish what is essential and what is desirable. I do not know whether he has ever served on a local authority, but I know, from having fought in a local authority finance committee on behalf of education, that the chairmen of county finance committees—and of county borough finance committees, no doubt—continually press on their committees the need to recognise this point. All the Minister is doing is reiterating the point. He should realise much more than he apparently does to what an extent local authority committee chairmen are forced to cut down on what even they are inclined to think is essential.
Second, it is difficult to achieve a cut in the increase when a great proportion of existing local authority expenditure is a direct result of central Government action. Section B of the White Paper deals with the development of services. It needs little imagination to realise that a great deal of money must be involved, whatever the Government may say about limiting, the advance in total expenditure.
According to the White Paper, local authority estimates of increases were 9·1 per cent. for 1967–68 and 6·3 per cent. for 1968–69. The Government have scaled this down to increases of 4·8 and 6·6 per cent., respectively. These figures have to cover normal growth, for instance in the school population and development of services and must take account of increases in the cost of living, which are bound to affect local authorities, like everybody else.
It is highly relevant to know that the cost of living has risen by about 9 per cent., in the last two years. If this rate continues, the Government's grant figures are likely to cause a deterioration rather than a development in local authority services, unless rates are to rise sharply to counteract the ill effects of inadequate grants.
Local authorities are being put in an impossible position. They will have to cut services or increase rates or both. Whichever they choose, they will incur the wrath of the people in their areas. It is they who will have to "carry the can" for Government actions. No wonder local authority service is not the most popular of occupations. This is yet another example of the Government's ability to pass the buck. It is like Selective Employment Tax, which has caused retailers and others to raise their prices while the Government, far from taking the blame, castigate all price increases
It is important that local authority forecasts for two years ahead should be based on a continuing development and expansion of local authority services. The Government are slowing this down. As the Chairman of the County Councils Association's Local Government Finance Committee said:
…if this slowing down of local authority services is necessary for national financial reasons, then clearly county councils will wish to co-operate, but the Government's policy must be made clear to the public and ratepayers in particular at all levels.
Education is in a particularly dangerous position at a time of financial stringency because it represents the greatest proportion of local authority expenditure. When councils are looking for savings—and I speak from experience on this matter—the natural reaction is to lop something off the largest spender. However, the great bulk of educational expenditure is irreducible. Local education authorities are obliged to pay teachers' salaries, loan charges and many other expenses. How on earth are they to make cuts?
My right hon. Friend the Member for Birmingham, Handsworth (Sir E. Boyle) quoted Sir William Alexander, who made some pertinent comments in last Sunday's Observer. What do the Government want? I am sometimes inclined to think that they expect local authorities to carry out Government policy without any added expenditure whatever. The Government seem to think, for example, that no money is necessary for the reorganisation of secondary education. They appear to take the view that if some of the examples of botched up schemes produced by Labour controlled councils do not cost much. Conservative controlled councils should introduce similar schemes costing similar amounts.
Educationists were extremely concerned even before the Rate Support Grant Order was announced. With the abandonment of the National Plan, there was a gnawing fear about educational development and the Secretary of State for Education and Science has done nothing to allay that fear. The Conservative Party always felt that the education section of the National Plan was unsatisfactory, since it showed a slowing down of the rate of increase in educational expenditure compared with the five years before the Plan was to come into operation. Now our dissatisfaction is exacerbated by both the Rate Support Grant and by the equivocal statements of the Secretary of State.
When asked on 3rd November whether the National Plan's estimates of educational expenditure remained a firm commitment, the Secretary of State replied:
It is too early to say whether or how the programme for education might be affected by
recent changes in the economic prospects."—[OFFICIAL REPORT, 3rd November, 1966; Vol. 735, c. 138.]
Last week, my right hon. Friend the Member for Handsworth asked whether the Government's latest proposals—those which we are considering—for local government finance were consistent with the rate of growth which had occurred under the previous Conservative Government, to which the National Plan had referred. The Secretary of State again evaded the question and did not give a clear answer. Perhaps he did not know what he really thought at this stage. Perhaps he may have been giving consideration to the possibility of an increase in the school meals charge, which would go some small way to overcoming the other difficulties that will face local education authorities—
The National Plan was absolutely specific on the point that in each year during the last ten years we have been spending, in real terms, 5 per cent. more on each child at a primary school and 10 per cent. more on each secondary school child. My question was whether that projection was to be continued for the future. That seemed to me to be a very simple and straightforward question.
I am grateful to my right hon. Friend for emphasising that point, to which we shall want a reply, as will the whole country. I believe that, whatever the reply, it must be depressing, which means that the Government have another dilemma. They have two alternatives, both unattractive: they can abandon the National Plan forecasts of expenditure on education, or they can retain those forecasts in which case they are accepting the fact that there will be a huge increase in the rates. Which is it to be? That is the question that we want the Parliamentary Secretary to answer this evening.
Two years ago, when the present Leader of the House introduced the first general grant order under a Labour Government, he repeated the policies that had been outlined by Labour spokesmen and by the Labour manifesto, which were to the effect that a greater proportion of local authority expenditure would in future be provided by central government. It seems now that this is another promise that has gone by the board. I am appalled at the prospects for local government maintenance and development of services, and for the ratepayer, with the extra burdens he must bear.
Some hon. Members opposite have been speaking as champions of the ratepayers, and I would agree with what they have had to say in that respect. But the only way to give effect to this championship of the ratepayers is by getting an increased amount of money from the national Exchequer. Yesterday, hon. Members were, and probably tomorrow they will be, wearing different hats and, under them, calling for cuts in taxation. They sometimes forget that the people whom they champion one day are also those that need championing on the other days, and that the taxpayers and ratepayers are often, but not always, the same people, or the same class of people. This is one of the—
But would not my hon. Friend agree that, whatever its failings, the Income Tax system is fairer than the rating system in that the criterion for charge to Income Tax is that people pay according to their means, whereas under the rating system they pay according to the accommodation they occupy individually, whether they are old-age pensioners or people earning £60, £70 or £80 a week?
There would be very few hon. Members who would disagree with that statement. The ins and outs of the rating system, which were simple when first introduced have long been overtaken, and it is one of the items that the Royal Commission on local government has in mind in its deliberations.
I do not think that it is accepted outside the House that on one day it can be argued that the rates must be kept down and on the next day the same group of people can argue that taxation must be kept down. Services must be paid for one way or the other.
This dilemma is highlighted to some degree in the system of block grants. Over the past few years there has been an interchange of points of view on this subject between the Tories when they were in Government and between Labour Members when they were in opposition. When the block grant system was introduced, the then Labour Opposition strongly opposed it. They said that they did not like the block grant system and pointed to all the anomalies in it, anomalies which have been discussed to some degree tonight by the right hon. Member for Birmingham, Handsworth (Sir E. Boyle).
Education facilities can greatly vary between one local authority and another. A local authority is given a block grant and it is left to the authority to decide whether education will do better than housing or vice versa. This is an interchange. Some of my right hon. and hon. Friends now defend the block grant system and try to make it work better than it is working. They have a case for saying that, if there is to be a complete reorganisation of local government, including local authority powers—not only as to boundaries but as to finance as well—it might be advisable to keep the present block grant system, adapt it slightly, and try to make it work in the interim period before the Local Government Commission reports, which will be in about 18 months time. It would be fortunate if the Commission's recommendations, whatever they may be, were implemented within the next three or lour, possibly five, years. Therefore, whether we like the present local authority financial position or not, we shall be stuck with it for the life of this Parliament at least and for part of the next one.
It is true that the general grant system attracted great controversy in 1958, as I well remember. During the debates on that Measure it was the firm statement of the then Government that there should always be a margin in the relevant expenditure recognised by the Government for development. The hon. Gentleman has spoken about adapting the present system. For the first time since the Act was passed, we have really had a savage cut in the relevant expenditure of local authorities. This is the great difference. It is a very unpleasant adaptation.
Cuts are always unpleasant, whether they are made by a Labour Government or by a Conservative Government. I agree that this is not a pleasant Measure to support, but I do not think that either my right hon. Friend or his colleagues have joy in saying, "In present circumstances we have had to ask local authorities to reduce their expenditure". No Minister of Housing would like having to do that.
Many of us came to the House after service with local authorities. I am speaking of elected service as distinct from service as an officer—for instance, as town clerk or surveyor. In regard to the amount of money needed by local authorities and to local authority efficiency, I wish I could believe that national government was as efficient as local government. I wish I could believe that Members of Parliament had as much influence in making policies and had as much ability to probe how those policies were being carried out as local councillors.
We are now to have two specialist committees. If we are concerned about the prestige and influence of the House, a specialist committee on housing and local government might be a very useful body to have, especially as there has been no prior consultation with Members of Parliament on these two Orders. We have had no part in arranging any of the details included in the Orders. Organisations outside the House—for instance, the A.M.C.—were no doubt consulted before these decisions were taken. One way of ensuring the continuing prestige and authority of Parliament would be the recognition that the House should be one of the bodies consulted before decisions are made and presented to us in this form. If we are to play such a part, it must be before we are presented with an Order as we are tonight.
We can either accept the Orders before us, which would be desirable—I shall support them if there is a Division—or we can reject them because we do not believe that they contain all that they should. But that is a very limited rôle for us to play. We cannot amend the Orders in any way. We can suggest, as hon. Gentlemen opposite have suggested, that they should be changed in one way or another, but our effect on the Orders tonight is almost nil. That is not a good position for Parliament to be in.
The very deep concern of my own local authority is shared by many hon. Members, regardless of which side of the House they sit. The effect on balances of this necessary action by the Government in asking local authorities to reduce their expenditure has not been mentioned so far. The balances have never been too high, in my opinion. Certainly, we in Liverpool shall try to hold the services as they are at the moment, but we are one of the cities which need a vast expansion of services.
It is all very well to say that town centre development should be held back. That might be all right for Chelmsford and some other places in the South, but town centre development is very desirable for cities like Liverpool, Birmingham, Glasgow and Manchester. Very deep concern is felt about the effect Government decisions are having, and have had, on local authority finances in the North-West. In Liverpool and other areas local authorities will do all they can to comply with the Minister's request, but they have very grave doubts whether they will be able to do so. That is not the happiest situation to be in.
Perhaps the Minister could re-examine the type of criteria included in the General Grant Increase Order. At present, it is limited to increases in costs, remuneration and prices. There may be, and I think that there is, a case for widening the Minister's discretion to bring in that type of increase Order.
Although I shall support the Orders tonight, I hope that in the not too distant future a real adaptation of local finance can be introduced and carried through the House to help our constituents.
I was very interested in the suggestion of the hon. Member for Liverpool, West Derby (Mr. Ogden) on consultations between the Government and hon. Mem bers. I do not know whether he served with those of us on the Standing Committee, but we then tried very hard to persuade Ministers to give us the information which would flow from their proposals. At that time they said that it was premature, and they could not tell us just what the effects of their proposals would be.
I hope to show that, rather than make an assessment of need, the Government have set a figure of the increased expenditure in local Government and have conditioned the whole of their thinking to that expansion of expenditure. I think that the hon. Member for Liverpool, West Derby is very unlikely to see the fulfilment of his wish. If he is familiar with the criticism of most of the local authority associations which have been engaged in the discussions with the Ministry he will know that it flows from the very limited time there has been for those discussions. The local authority associations have been very critical about that.
It is clear that in their approach to local government expenditure under the Orders the Government are showing their determination to limit expenditure to a particular growth rate. It has been suggested that the figure may be 6 per cent. That seems to be borne out by a comparison made on an arithmetical progression at 6 per cent. for the four years from 1965 to 1968–69—the year which we are considering tonight—and the Government's forecast.
In other words, the Government have already decided the growth rate of their share of the contributions to local government expenditure, and the Order is determined in that way. In his opening remarks, the Minister admitted that the Government were lowering their sights a little. I think that that is a fair statement, and that it reflects some of the comments that have been made from both sides of the House that the Government will clearly be responsible for a lowering and limitation of expansion of local government services. I am sure that they are facing up to this and I can well understand their reluctance to designate the particular services which are to be affected.
I hold the view that there must be a limit to the growth of expenditure in the
public sector, but hitherto the grant support system, despite control exercised by loan consent, has led to open-ended arrangements in local government expenditure. Local authorities have understandably extended their services, rivalling one another in many aspects and, to some ex tent, in the grand nature of some of the schemes that we see throughout the country. But they are urged and encouraged by Government Departments in this and as recently as February, 1966, in the White Paper on Local Government Finance, England and Wales, paragraph 9 said:
The Government are convinced that the need is not to lower present standards of service, but to raise them.
During the intervening six months, the Government have found it impossible to implement this hope. Indeed, they have now to be influenced by the requirements laid down in paragraph 15 of the White Paper:
Local authorities could be asked to submit estimates of expenditure for the following two years and this would be examined in the light of the need to develop services and of the Government's declared aim of containing the growth of public expenditure.
The Government have had to face the financial realities and have found it impossible to implement the hopes of the White Paper expressed in paragraph 9. They have had to take a decision on the total of grant to be made available for the two years with which the Order is concerned. Local authorities, having been asked to prepare their budgets for the next two years, estimated, for 1967–68 their expenditure at £2,718 million and the forecast determined by the Minister is £2,557 million; for the subsequent year the respective figures were £2,902 million and £2,726 million. These represent cuts against the estimates of grant total to local authority expenditure of £161 million and £176 million.
This exercise is one of a number of its type that we have seen called for by the Government during the past two years. It is a sham procedure. It is shameful to some extent and, in the context of this inquiry, the evidence is that it has been completely wasteful. It has the appearance of sweet reasonableness and of an apparent anxiety to take into account views other than those the Government hold. But, all along, I suspect that Ministers have had their briefs, have known what they intended to do, and in this case what increased expenditure they were prepared to support. The local authority associations have had to submit an impossibly tight programme of consultations—if, indeed, they can be described as such, for I am told that the discussions on the forecasts were twice postponed at the request of the Ministry.
As late as between 22nd and 24th November the Department was still producing detailed papers for consideration. Advisers to the local authority representatives were left with just a weekend to prepare a brief for the elected representatives to discuss the matter further with the authorities on 29th November, just three weeks ago.
This can be no good way to deal with matters of this importance and magnitude under a completely new and untried grant system. The County Councils Association termed these negotiations "grossly inadequate". The A.M.C. is quoted as having said:
The many counter arguments put forward by the representatives of the Association at various stages and the serious handicaps under which the discussions took place are ignored".
Some treasurers of authorities received their copy of the Order only yesterday afternoon. It is no wonder that throughout local government there is great cynicism about the Government's proposals and their handling of the so-called negotiations.
There is also serious concern that they cannot be implemented without serious damage to many local government services. I am sure that reduced expenditure will affect the planning departments, the domiciliary services, child welfare and important new work in connection with the resettlement of families with particular difficulties.
I see that two hon. Members representing Bedfordshire constituencies are present. The Treasurer of the Bedfordshire County Council is quoted as having said:
Local authorities have been constantly under pressure from Whitehall to improve services and enlarge their scope. This has resulted in the incurring of long term liabilities on the understanding that the cost would be shared between national and local funds. In these circumstances it is a breach of faith to withhold grants without proper notice".
I also have a quotation from Alderman Porter, who is the Chairman of the
Finance Committee of the Bedfordshire County Council, and who says:
Certainly, so far as Bedfordshire is concerned it will be quite impossible to limit increases in expenditure in 1967/68 to the levels as envisaged in the Order. In consequence there are clear indications that there will be an abnormally large increase in the County Rate".
The hon. Member for Bedfordshire, South (Mr. Gwilym Roberts) spoke of a 6d. increase, but I think that it is unlikely to be limited to that figure.
Hitherto, there have been appeals to local government to curtail expenditure which, under the terms of this Order, will now formally be required to be curtailed. Will the Government now instruct the various Departments which deal with local government services not to continue to press for the extension and expansion of the services with which they are concerned? In the Minister's own words, in the context of many local government services this means a lowering of standards. I am sure that a recognition of this is the necessary and honourable course which the Government have to take in the circumstances envisaged in the Order.
Apart from the Minister, only the hon. Member for Liverpool, West Derby (Mr. Ogden) has said that he would support the Order, although even he criticised it. From both sides of the House there have been criticisms about the method of drawing up the Order with the local authorities associations and about its presentation and about its effect on ratepayers and local authorities generally in the next two years. I cannot think of any other Order, even in the economic circumstances mentioned in the Minister's statement, which in effect, has been a cut. I cannot think of any Order which has been brought to the House in such inauspicious circumstances, and I will predict that the Minister will not be able to adhere to the provisions of that Order during the forthcoming two years. That is my prediction. He may like to confirm that he agrees with me. He does not do so, but he will.
In the meantime, what this Order does can be summed up for the public in the phrase "Pay more for less". That is what it adds up to. There are some little things in it about which we can be quite pleased. The provision for residential accommodation for the aged and infirm and the welfare services for the handicapped is to be increased. That is highly welcome. But we also see in one of these columns that school milk and meals are taking about 4 per cent. of all local authority expenditure listed as relevant for the purposes of this Order. That is increasing. The hon. Member for Liverpool, West Derby (Mr. Ogden) said that is was all very well for hon. Members to say they do not like all these increases in rates which will follow, but what items should be cut? That is the implication of what he said. Cuts would have to be made unless there were compensating increases in taxation.
The work done for the nation by local authorities contains many very important elements. If these are to be sacrified because of the Government's economic failure and the policy which has stemmed from that, it is right and necessary that there should he changes in the statutory obligations laid upon local authorities.
I hope the Parliamentary Secretary will confirm that there is a statutory obligation upon local authorities to supply school milk and meals to those who wish to have them. He will no doubt confirm that that is the case. It is ludicrous when 4 per cent. of all local authority expenditure is going on school milk and meals, and, at the same time, services such as education proper, care of the aged and infirm and the disabled of various sorts, which by common consent should be expanded, are halted or even cut.
We cannot let this Order go through without making a firm statement upon that. I appreciate that it might not be possible or particularly fair to cut out expenditure on school meals and milk all at one fell swoop, but even if it were halved it would make a very great difference. It might be said that this is very callous, because children of large families, where the breadwinner is not earning very much, would be particularly badly hit. That is not what I want to see. Welfare workers with many years of experience are agreed that there are many ways in which that difficulty can be overcome.
In raising this matter, I am not suggesting that we should withdraw help from children in need. What I am suggesting is that we should require parents to pay for the feeding of their children if that is what is required to enable the education services and the welfare services for the elderly to continue to develop along the lines which the community wishes.
I have referred to the leading article in The Times on this Order, and I brought the cutting to the House. These words caught my eye:
…unsuppressed indignation defying the frustration of circumstances".
I thought that that was exactly how we all feel about this Order, and then I discovered that I had turned to the wrong side, to the obituary notice on Mr. Walt Disney. But those words very well describe how we feel and how the local authorities feel in the circumstances.
I thought it unfortunate that in the Minister's Report refuse disposal and parks were bracketed together, with a line to themselves. It may be right that the same policy should be adopted for parks as for refuse disposal, but the implication seems to be that the development of open spaces for the use of the public is not regarded in the right hon. Gentleman's Ministry as a particularly pleasant activity for the bringing of enjoyment and amenity to a locality. It is a pity that this should be so. It is a pity also that provisions for the implementation of the Clean Air Act, in which progress is being made, should be cut, the more so as it is now evident that dirty air is a large contributory factor, though not the only one and probably not the main one, to lung cancer and bronchitis, which the Minister of Health is so keen to reduce.
My right hon. and learned Friend the Member for Hexham (Mr. Rippon) asked about the proposal to reduce the element borne by domestic ratepayers by 5d. in the £ next year and 10d. thereafter. Is this regarded as an adequate fulfilment of the pledges which the Government made to ratepayers at two elections? I hope that the Parliamentary Secretary will give us a direct reply. In these circumstances does he consider that a reduction of 5d. next year and 10d. the year after in the rate poundage borne by domestic ratepayers is an adequate fulfilment of the pledges made by his party?
There is a very big cut in what is classified as relevant expenditure, which, perhaps, one might well call approved expenditure, in the administration of local authorities. My right hon. and learned Friend pointed out that the local authorities had had put on them by the Government very many burdens which, it was said when the various provisions were going through the House, would be costly to administer. How does the Parliamentary Secretary regard the alternatives now facing local authorities, and what course does he recommend them to adopt? Does he recommend them to allow the standard of their administration to falter and decline, or does he recommend them to push up the local rate to a very high level to maintain the necessary administrative stature to meet the burdens which have been put upon local authorities by his right hon. Friends?
It is not surprising that there has been so much criticism of the Order. It is not difficult to conclude that it will not stand the test of time. Ministers would do better to be honest rather than to try to make this sleight of hand—that is what it amounts to. Pledges have been made and broken. This Order is another pledge. It purport to show the public that the Government are managing to reduce local authority expenditure. That is even what The Times leader, when I read the right side of it, thought it was all about.
I predict with certainty that the passage of these two years will prove that that is not so and show that we are going through an elaborate charade in criticising Government decisions to which the Government have no chance of adhering. The Government have abused the House in the manner in which they have brought forward the Order. They have abused the ratepayers in not fulfilling their pledges. They have abused the local authorities by putting them in an impossible position. The amount of abuse which they have meted out to others will be meted out to them before very long.
As with other local authorities, Hertfordshire is in a serious dilemma because of the Order, which makes a cut of 6 per cent. in the Government grant needed by local authorities—a total of £161 million. The hon. Member for Liverpool, West Derby (Mr. Ogden) said that this side of the House when, in power, had also made cuts, as if they were comparable. The biggest cut before this was in 1962–63, of £25 million, compared with local authority estimates. A cut of £25 million may perhaps be dealt with, but how local authorities at this late stage can absorb a cut of £161 million is completely beyond me.
Local authority expenditure is steadily expanding in real terms—we do not have to consider the effects in inflation—as we can see from past figures. Last year, there was an increase over the previous year of 6 per cent. This year the probable increase in expenditure is 8½ per cent. The estimate for next year is of a requirement of 9·1 per cent. and 3·2 per cent. is allowed for that increase. This figure, of course, does not appear in the White Paper, perhaps because it is too embarrassing to the Government, although the Minister was frank enough to speak of a 6 per cent. cut—from 9·1 per cent. to 3·2 per cent.
This will be appallingly difficult. The Government leave local authorities with a decision whether to cut services or to have substantial increases in rates. Much of the expansion represents capital repayments and interest charges on capital works already in progress, and such items as furnishing and staffing of new schools, health and welfare premises. It really is impossible to make drastic cuts in these types of expenditure unless we are to leave as empty shells buildings when we have completed them. That, I trust, is not the intention of the Government.
Of course, many people would applaud the decision to streamline rate-borne expenditure, but this, after all, is already the subject of very careful pruning at the estimates stage. The White Paper, however, from paragraph 12 onwards talks about expansion of services. It is really laughable unless the Government intend a massive increase in rates. Paragraph 14 talks about a steady expansion of teachers. What do the Government mean by this? Do they intend an expansion in the education service, which, after all, represents more than 50 per cent.—in Hertfordshire, 75 per cent.—of our expenditure? Or do they intend that to be cut?
Hertfordshire suffers, as do other areas with rapidly expanding population, because of the factor which is not recognised, and which my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) mentioned. Hertfordshire has been in this position for a long time; we have been an expanding area for years, for the whole time since the general grant was first brought in, and, in consequence, now we find that we are losing £1½ million as compared with the average of the general grant for the whole country.
The original theory was the projects pay for themselves by the increase in rateable values, but this does not work out in practice. Hertfordshire's have steadly increased over the years. In expanding areas such as new towns there is heavy expenditure on roads which are not principal roads, and so are not, under the new scheme, grant-aided. At present, it is the transitional provisions which cushion the effects, but unless something is done by the Ministry of Transport in relation to this the situation will become very severe in areas with a rapidly expanding population.
My hon. Friend the Member for Hove (Mr. Maddan) spoke of school meals. I agree very much with what he said. Of course, the Government retain the power to vary the charges for school meals, but as now the whole charge falls on local authorities would it not be much better to let the local authorities themselves decide on the charges, subject, perhaps, to the minimum charge laid down by Parliament? Then there would be the possibility, where there is a reasonably wealthy area, that it should be enabled to raise from parents more in charges for school meals. There is no need to harm anyone, as my hon. Friend said, but this would give that right to local authorities, if they felt it reasonable to increase those charges.
Hertfordshire is profoundly disappointed at the grant it will receive. The ratepayers are faced with a substantial rate increase, or with cuts in services, and, in particular, in education. This is a very far cry from the Labour Party's election pledge to bring urgent relief to ratepayers by transferring a greater proportion of costs to the central Government. When, inevitably, rates rise next year, let it be remembered that the fault lies with the Government and not with the local authorities.
Having sat here the whole afternoon, I have a sense of relief that I am at last standing on my feet, although that is conditioned to some extent by the knowledge that so many of the things which I wanted to say have been said far more adequately by other hon. Members already—not that that well stop me saying them again. I cannot speak with authority on rating matters, as can my hon. Friend the Member for the City of Chester (Mr. Temple), who is to wind up from this side of the House. I can only speak as a ratepayer and as the representative of ratepayers in Buckinghamshire.
I want to claim the melancholy privilege of saying that Buckinghamshire is one of the most heavily rated counties in the country, despite what has been said by hon. Members on both sides making claims for their own areas. It is an acknowledged fact that the county of Buckingham has been expanding at something like three and a half times the average rate for England and Wales and has suffered rate increases equivalent to three times the average rate increases for the rest of the country over recent years. So that it has experience of heavy and swingeing increases over quite a long period of time.
It was with that in mind that I looked at the explanatory memorandum to see what relief was to be given to the hard-pressed county of Buckingham. I looked in vain. Nevertheless, having heard the debate and having realised that the Order has not a friend in the world, except a few people on the Government Front Bench, one is almost disposed out of sheer charity to come to its rescue. However, that is carrying charity too far. Nevertheless, I can well understand the anxiety of the Government at the mounting expenditure of local authorities at a pace which is gathering momentum year after year. It is a very serious problem. It is a pity that they did not appreciate the full extent of the problem when they were making their election promises, particularly during the last election when they had no excuse for not knowing the financial state to which they had reduced the country in their previous 12 or 18 months' operations.
Tempted as I am to support the Government in their praiseworthy effort to reduce local authority expenditure, I cannot do so on this occasion. When I looked through the Order, as far as I was able to understand it, it seemed to me that, far from achieving an actual reduction in local authority expenditure, all that was to happen was that they would transfer the burden of expenditure from the Government and, ultimately, the taxpayer to the ratepayer. As that was likely to hit Buckinghamshire particularly badly, naturally I reacted against it violently.
In the debate on 20th October on proposed Amendments to the Local Government Bill, I tried to persuade the Minister to give to Buckinghamshire the benefit of the relief given to the Metropolitan area, because it is on the fringe of the Metropolitan area. I failed in that. In a sense, this Order adds insult to injury, because there was a very good case for the Amendment which I moved on that occasion and, had it been accepted, perhaps the impact of the Order on Buckinghamshire would have been less severe.
Just as other hon. Members on both sides of the House have tried, I have tried to calculate the actual cuts in local government expenditure which have been dictated by the Government. At the beginning, I was misled by the figures shown in paragraphs 8 and 10 into believing that the respective figures were £105 million and £104 million. It was only when the Association of Municipal Corporations came to my aid in the form of a letter which I received only this morning that I realised that those were not the figures and that the actual reduction in expenditure was more than 50 per cent. greater than one would have thought at first sight by the sheer arithmetical deduction of one set of figures from the other in paragraphs 8 and 10.
I do not think that it should be left to outside bodies to explain Government White Papers and to make the facts crystal clear to hon. Members. I think that in making comparisons in White Papers the Government should compare like with like. If they use November, 1966 to arrive at one set of figures, they should use the same basis to arrive at the other. I find it most disquieting that when an Order and a White Paper are presented to us so suddenly, without adequate time to examine them, and to get advice on them, it is only by the alertness of the association to which I have referred that I am able to get the information which I should have had in the first place.
It seems that the Government have made their calculation—and this has been referred to by both sides of the House—on the basis that expenditure for 1966–67 will be below the estimate of £2,440 million. I do not know on what evidence they base their expectations. I cannot see that there is any evidence at all to assume that expenditure will be less than the estimate already given to us. We all know that local authorities are fully committed to their expenditure for the 1966–67 period, and therefore the chances are that the estimates will certainly be reached, if not exceeded.
Following on that, they have apparently calculated on the basis of a 6 per cent. growth rate per year in the following years, and this is the limit to which they are going to allow growth to take place in the services provided by local authorities. As has been stressed emphatically by both sides of the House, the growth in the services provided by local authorities does not come about only because of the pressure of increases in population, but because of pressure from the Government themselves to implement Government policies. It is the Government's deliberate attempt to persuade local authorities to increase the scope of their services which has caused local authorities to accept greater liability and to go in for schemes of much greater expenditure. I am not at the moment saying that this is necessarily the wrong thing to do, but it is rather disgraceful when, on the one hand, they encourage local authorities to expand their services, and suddenly hit them with a sledge hammer in this way and say that they must cut back their services, even though at this stage it is impossible so to do.
I am sure that my hon. Friend will agree that in respect of educational services it is right to follow whatever lead is given by whatever Government in improving them.
My right hon. and learned Friend is right. Indeed, it would be tragic if many of the services which have been expanded were cut back, but they will not be. Local authorities will have to go on with their existing commitments. If they are wise they will go on with some of the commitments which they have expanded, such as the educational one to which my right hon. and learned Friend has referred, and this will mean that rates will rise.
When my town clerk spoke to me this morning to urge me to intervene in this debate, he was too stunned by the impact of this White Paper and the information which he had received from his association to do more than say to me in a broken voice, "Do your best for us", because he knows only too well what will be the effect of this.
The local authorities and all the councillors who are elected to these bodies will bear the unpopularity which rightly belongs to the Government. They will be told, "What the devil do you mean by putting up the rates like this? We have had our incomes frozen, prices are frozen, and yet you, the local authority for Blankshire, are putting on this swingeing increase in rates which will be a tremendous burden to us, and in many cases be difficult for individuals to meet. Why are you doing it?" It is the local authorities who will bear the unpopularity for this Order.
The Government must have the courage to say quite clearly that any increase in rates, and any curtailment in services which take place, if any curtailment can at this late stage take place, are the result of Government action, and Government action only. If there is to be any criticism of the actions which follow this Order, it must be directed fairly and squarely at the Government and the benches opposite.
This is not to say that what they are doing may not be right in the long term. I am not arguing that at the moment. But they must accept full responsibility. They must not try to hide behind local authorities and palm off on them the unpopularity that they should take upon themselves. [An HON. MEMBER: "They Probably they will. In Buckinghamshire, which is still expanding rapidly and taking a great overflow from the cities—and which in my constituency is growing at an amazing rate—whether Government policy is changed or not we shall suffer an increasing rate burden until such time as I hope that the wealth which comes into the area enables us to catch up.
As my right hon. and learned Friend says, it will be a long time. I plead with the Minister to consider the special position of some of our county areas which have problems akin to those of Buckinghamshire—rapidly growing areas near to large conurbations and therefore affected by the high prices ruling in those conurbations. I hope that he will look at these problems and see whether it is not possible to give these areas much more help than they have been given so far. I have tried unsuccessfully to draw the Minister's attention to this problem on a previous occasion, and I am trying again tonight.
I shall not vote against the Order. I appreciate that it must be passed. However, I do not think that it can be effective. It will probably have to be revised after the first year's experience. I hope that in the course of revision the Minister will take into account the specialised problems of highly rated counties—highly rated through no inefficiency of local authorities but because of the special circumstances with which they have to contend.
Having taken part in many debates on grant Orders I can say that this is the most friendless grant Order that has ever been debated in my time. I was almost sorry at one point for the Minister. felt that he was taking the rap which should have been taken by the Chancellor and, indeed, the Prime Minister, because the decisions that have brought about this Order have definitely been Cabinet decisions to cut back the rate of growth expenditure by local authorities.
I was not surprised when the Minister gave a rather cursory explanation of the Order. I am sure he did not wish to enlarge on the very unpleasant repercussions which will flow from it. I am exceedingly sorry for the Parliamentary Secretary; he has to reply to the debate. He has one friend in the Chamber, who said that he would not vote against the Order; that shows the degree of friendlessness that the Order has. There is no doubt why the Order has been produced in this form. It is because it is being brought in against zero growth in the economy. When the hon. Member for Liverpool, West Derby (Mr. Ogden) was speaking he asked how we had been able to achieve our rate of progress. The answer was that during our term of office there was always growth in the economy, and the taxation base was always buoyant that, unfortunately, is not the case today.
The Government, as usual, are facing both ways. The Chancellor of the Exchequer is going overseas and telling foreign bankers that austerity measures are working in this country and that he is cutting back on public expenditure. On the other hand, departmental Ministers—and I am glad to see a representative of the Home Office here—are constant by issuing circulars to local authorities urging more growth in practically every conceivable service.
Regrettably, production is now static. Local authority expediture is rising, and if there is no cut back in the scope and quality of local government services the people who will suffer will be the ratepayers.
It is against that background I want to examine the Order.
In passing, I must make one comment on the General Grant (Increase) Order, which today has received little comment. That is because it was brought in under the 1958 Act, a Conservative Measure, Which has proved extremely satisfactory. I am very glad that that Order has received no criticism. This is indeed a commendation of the 1958 Act of the Conservative Government.
In picking up one or two of the important points which have been made during the debate, I wish to thank my right hon. and hon. Friends, as well as hon. Members opposite, for their contributions. My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) pointed to the extraordinary rise in rates which is expected in his county. I am sorry to say that I think that his prognostications will be proved to be correct.
My hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop), Cambridgeshire (Mr. Pym) and Northants, South (Mr. Arthur Jones) drew attention to the very tight timetable under which the preparations for this Measure have been calculated. In Standing Committee, I spent an hour and a quarter— it was the longest speech I have made in my parliamentary career—drawing attention to the fact that it would be impossible to adhere to the timetable. Even the Statutory Instruments Committee, at this late stage, has criticised the haste with which this Measure has been brought before the House.
My hon. Friend the Member for Devizes (Mr. Charles Morrison), in a particularly interesting speech, drew attention to the concern which is felt among education authorities at the effects of the Order. My hon. Friend the Member for Hove (Mr. Maddan) drew attention to the fact that local authorities are in many instances administering services which are placed upon them statutorily by the central Government and that they therefore have no option but to carry out those services to certain standards. My hon. Friend the Member for Wycombe (Mr. John Hall), in a particularly powerful speech, made a number of the points which I shall make as I develop my speech.
It was significant that from the benches opposite the hon. Member for Cambridge (Mr. Robert Davies) showed tremendous prescience. He had got his calculation entirely right. The hon. Member said that local authorities would be receiving more like 50 per cent. of relevant expenditure in 1967–68 and 1968–69 rather than the figures claimed by the Government. This is a severe criticism and I hope that the Joint Parliamentary Secretary will at least reply to his hon. Friend.
What we on this side object to is that this decrease in assistance to local authorities is being dressed up as an increase. We agree with the local authority associations that the base year should have been 1966–67. The estimates for that year can be proved to be fairly accurate. The year is three-quarters past and the right starting point for the new rate support grants undoubtedly should have been the current year's expenditure of local authorities rather than escalating by a doubtful multiplication the totals for 1965–66. This looks like a cynical exercise in putting the blame for cuts upon the local authorities. Frankly, however, I would have expected this from the present Government, because local authorities are employers, in the same way as there are employers in industry, and the Government are trying to put the blame for all rises in costs upon employers. This includes local authorities as employers.
I was interested in the Press reaction to this grant Order. The Government's Press hand-out department must have been working at rather less than its usual high standard, or perhaps it was meant to bamboozle the newspapers. Certainly, the White Paper is extremely confusing. It struck me that prescient papers like The Guardian would not have got things wrong if the Press hand-out had been more explicit.
The Guardian had a headline "Rate cut 5d." Of course, there is a rate cut of 5d. in the domestic sector, but that very much masks the true effect of the Order upon ratepayers. The Daily Mail, which is always particular in getting its facts right, described the cuts as £209 million in the two years when the correct figure should have been £335 million.
On the second day after publication of the Order, however, The Times came out with a leader, and by that time the penny had dropped. The Times said on 16th December:
The real job of squaring popularly approved social programmes with financial stringency now passes to Town and County Halls.
Here we have the truth. The real task of carrying out these financial cuts is thrown to the town and county halls, and this is another case of the present Government "passing the buck", as usual.
I turn now to the Order and the White Paper, because this debate is being held against a background of gargantuan public expenditure in the local authority sphere. Speaking at the annual dinner of the Rural District Councils' Association, a happy occasion, the Minister of Housing and Local Government—thinking, I suppose, that he could get over a rather important figure in a comparatively easy manner; I am not criticising him for quoting the figure on that occasion—said that local authority expenditure was now exceeding £4,000 million a year.
That is a formidable figure, but I asked the right hon. Gentleman some questions about his forecasts for future exuenditure on local government and my Parliamentary Question was transferred to the Treasury. Thus, we see who is really responsible for containing local government expenditure. It is the Treasury—and, significantly, the estimates of the Treasury were considerably below the estimates of the Minister of Housing and Local Government in regard to the total of local authority expenditure.
During the period of this grant Order the total of local authority expenditure will push past five American billions of pounds per annum, a formidable figure. It is made up as to two-thirds of current expenditure, and 80 per cent. of that current expenditure is within this Rate Support Grant Order. This amount of £5,000 million makes defence expenditure look like peanuts. I remember the time when local authority expenditure passed defence expenditure, but it is now running at double the rate of defence expenditure in this country.
It was against these enormous figures that the Government set out in their White Paper certain aspects of policy. They state in paragraph 9 that
… the rate of growth of the economy will fall short of that postulated in the National Plan. …
Whose fault is that? It is not the fault of the local authorities that the figures in the National Plan have failed to materialise. It is not the fault of the ratepayers, but of the central Government. The whole responsibility for this is, therefore, fairly and squarely on the shoulders of the central Government, who go on to say, in paragraph 9:
… the growth of public expenditure must be restrained …".
We agree, but we ask that the Government should be absolutely explicit about where they wish these cuts to come; otherwise, the whole odium will fall on local authorities. Local authorities have been budgeting with this restraint in mind.
Cmnd. 3150 gives a clue about what is to be done during the period of severe restraint, for it states in paragraph 21:
Local authorities have been urged to ensure proper economies in expenditure.
So local authorities have already been enjoined to be careful about future expenditure. It is against that background that their estimates for the two succeed-
ing years were made. Against their budgeting on this careful basis, they have had, in the first year, £160 million knocked off their estimates, and rather more in the second year.
Over the years local authorities have been extraordinarily accurate in forming their estimates of future expenditure and have been within 1 per cent. in their estimating taking the last few years of the actual out-turn of expenditure in the local authority sphere. I am afraid that unless local authority services are to be slashed substantially, ratepayers will be in for an extremely difficult time.
The White Paper which the Minister has issued with this grant Order is very explicit on the development of services. Expansion is expected in practically every service—in education, in local health, fire, child care, and administration of justice. There is a slight increase in expenditure on refuse disposal and parks. Highway expenditure drops in what I call the neutral zone largely because no one knows whether the principal roads have yet been designated. I understand that they have not. So no one knows the effect of the new proposals for highway expenditure.
Police expenditure is estimated to expand substantially. If it is in excess of the growth rate postulated in the calculations, the effect will be to diminish the rate support grant that will be available to all ratepayers. One item in which there is a very severe cut is in general administration and miscellaneous expenses, with which I will deal later. I do not believe that scale of economy can be effected there.
At the end of the White Paper we have the general provisions for distribution by counties and county boroughs. Time and time again I have asked the Minister to tell us who will be the gainers and the losers, and to let us have the figures. We have been blindfold throughout all our discussions on the Local Government Bill, and again on this grant Order. Had the Minister been more explicit, we could have had a much better informed debate. As The Times says, these particular formulae "are of intimidating complexity". I should have thought that the Minister would have been able to help the House very much more than he has to thread its way through the complexities.
The right hon. Gentleman forecast that the 5d. domestic relief that he is offering to domestic ratepayers would meet almost half the increase in rates that was generally expected. I expect the general rise in rates to be something in excess of 10d.—I have estimated it at Is. I further estimate that local authorities will not be able to attain anything like the cuts they are expected to make. If they achieve half the cuts, they will be doing extremely well, in which case there will be a general rise in rates of 6d.
My right hon. Friend the Member for Hexham (Mr. Rippon) expected a general rate rise of something over 10 per cent. I put the figure at 15 per cent. My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) put the figure for his area at 20 per cent. He is probably in one of those areas that I described as losers. So what we are talking about is an average increase of rates of 15 per cent., less a small domestic rebate, and of something well in excess of that in some cases. The sheer lateness of the Government's announcement makes it extraordinarily difficult for local authorities already estimating for 1967–68 to cut back expenditure for next year.
A lot has been said about domestic relief, but nothing about the effect of these enormous increases in rates on commerce and industry. One hon. Member mentioned their effect on the cost of living and on the price level. Without doubt, shopkeepers who at present are struggling to keep prices steady will have the full impact of the increases of rates which will flow from this rate support grant Order. If retail prices go up, the blame will quite definitely lie with the Government.
It may not have escaped the notice of right hon. and hon. Members that industrial profits at the present time are falling. The Government wish to encourage exports. Against this particular background, heavy industry will receive an enormous increase in rates.
In industry at present there are firms which are struggling to keep alive. There are firms which are making no profits at all. I know of one firm in my constituency which, last year, made a net loss of £130,000 and its rate burden is £40,000 a year. The Government cannot say that in all sectors of industry the increased rate burden can be set off against profits. The impact will be the most severe on businesses which are struggling for survival and on small businesses in the early stages of growth. They will be hit precisely twice as hard as affluent businesses.
I said that I would return to the figure for administration and miscellaneous services, because it is here where the Government expect a very severe cut indeed. Several of my right hon. and hon. Friends have said that, if the cut is not achieved in this sector or in any other sector, it may well have to be taken in the educational sector. I do not believe that local authorities will be able to cut their expenditure on administrative and miscellaneous services 20 per cent. below their estimates. This is the figure which is postulated within these calculations.
The Government are adding to the administration problems of local government right across the board. Many of the administration problems, such as the administration of the Rent Acts, rate rebate schemes, and the new mixed hereditaments, are statutory obligations laid upon local government. I would not think that there can be much cutting here in administration.
I am supported in this, because this sector is a sector of minutiae. To put it in the vernacular, every mickle makes a muckle. I refer here to the effect on administration of the Selective Employment Tax. Mr. H. R. Page, the City Treasurer of Manchester, draws attention in a very interesting article in Local Government Finance to the extra administrative cost due to the impact of the Selective Employment Tax on local authorities. He does not say that it is a very big impost, but it is one of the additional administrative costs.
Referring to the way in which the tax is collected, because local authorities hand over most of their National Insurance contributions on a bulk basis, Mr. Page says in this article:
The absurdity begins—to use a current phrase—to escalate.
He goes on to say this:
that is, the Departments—
believe that increased productivity means cutting out all unnecessary activities, then S.E.T. is the antithesis of productivity.
Mr. Page ends on a rather mournful note:
goodness me, what an unnecessary waste when we have so many important things to do.
Mr. Page is someone I have admired at a distance for many years. I have never had the honour of meeting him. He has no politics whatsoever, but I believe his criticism to be very much "on the ball" and extremely pungent.
It is for these sorts of reasons that I do not believe that this cut of 20 per cent. can possibly be effected in the administrative and miscellaneous sector. I could go over a number of the other miscellaneous services which are statutory and which are bound to be carried out by local government—the operation of such things as weights and measures services, the public health inspectorate, and the town and country planning legislation. All those functions are laid upon local government; local authorities are bound to carry them out. I forecast with a degree of confidence that it will be quite impossible for local authorities in this particular sphere, which is the second largest sphere of relevant expenditure, to achieve anything like a 20 per cent. cut-back.
I agree that there are major difficulties in cutting back local government expenditure, particularly without direct orders from the Government. We have heard no further explicit orders tonight. The White Paper of February, 1966, Cmnd. 2923, said at paragraph 9:
… the need is not to lower present standards of service, but to raise them;
I wonder if that dictum of February, 1966 stands or has gone overboard like a number of the Government's other pronouncements.
An Economist article of 29th October was interesting. It said that local govern- ment, given freedom, could often provide adequate services more cheaply. "Given freedom" means freedom from some of the statutory obligations which lie on local government. I believe that that is a way in which we might seek to give local government a better chance of achieving the economies we all desire throughout the local government services. But none of us desires a severe cut-back in the scope of those services.
I am very glad to see the Minister of Health is present, because I was going to mention one other aspect of the Economist article. It said that if the local authorities sought to cut back in domiciliary health services and their other health services, particularly the home help services, that would add very considerably to the cost of the health service in the country, because the people concerned would not be cared for by home helps etc. but would have to be cared for by the National Health Service. If the Government insist on this type of cuts they may make cuts in a sector which will cost Government overall rather more in public expenditure throughout our economy.
It has been mentioned from this side of the House that capital expenditure decided on many years ago is coming to fruition. Everyone wants that capital expenditure to be useful, but it will, I am certain, generate more expenditure by local authorities.
I am quite clear that the responsibility for lopping back local authority expenditure lies with the present Government. Labour has produced the stagnant society and I am afraid that it is the public which will feel the pinch. All in local government—I mean by that those volunteers who are serving in local government and the local authority officers—are doing their best in an impossible position. They are being told on the one hand to economise and on the other to expand services. The plain fact is that under Socialism Britain cannot afford expansion. The only things going up at present are the cost of living and the rates.
I cannot understand how the Leader of the House could claim in a speech at the weekend that the Government had cured inflation. He is a tremendous optimist. The Government should be in the dock for failing the nation. The Prime Minister should take the responsibility for the cuts which are being imposed on local government. Many Departments are involved. The Minister of Housing and Local Government cannot possibly be responsible for all his right hon. and hon. Friends who are issuing Ministerial Circulars urging more expenditure. Each and every Minister, led by the Prime Minister, should say exactly where the cut-backs should take place.
It is abundantly clear tonight that the high hopes of the National Plan and the false hopes of the White Paper before this year's General Election have been abandoned.
Perhaps I might begin with the nearest thing to an apology which I have to make. If, by any chance, my right hon. Friend has erred in regard to paying adequate respect to the Statutory Instruments Committee, which is not admitted, I can only say that the reason was that we were extremely anxious to get all the information available not only to the House but to the local authorities. They, as the hon. Member for City of Chester (Mr. Temple) rightly said, need all the time they can have between now and the estimates. We had a little difficulty with another place over some Amendments which had to be cleared out of the way. This delayed the Royal Assent, so that we were pressed for time. We were, therefore, very anxious to get the Order out and available for discussion as soon as we could.
Section I of the Local Government Act, which has only just been passed, directs that, in fixing relevant expenditure and the grant, the Minister must have regard to economic conditions. That is not new. Virtually the same words are in the 1958 Act. Therefore, it is the duty of the Government to have regard to the economic position. It is because of the economic position that we are not able to provide for the kind of increase in local government expenditure that everyone in the House has said he would like to see and no one more than a spending Department would like to see. But if the Government are doing their job with any kind of responsibility, they have to have regard to economic conditions, and if the right hon. and learned Member for Hexham (Mr. Rippon) does not know that we are in the middle of a desperate economic crisis then everybody else does.
It is not cured but we have gone a very long way indeed on the road to curing it. The effect of the Government's policy on exports has been referred to as well. Exports last month were at an all-time high—higher than they had been in the previous month. The balance of payments situation has been steadily improving over the last few months. This is not the record of a Government who have faltered or failed to stand up to the economic crisis. It is the record of the Government who have tackled that crisis with determination—determination to do the job even at the risk of losing some popularity.
It is against this background of determination that we must view the situation. The right hon. Gentleman said that we had shot Santa Claus straight between the eyes. I am sorry to say, five days before Christmas, that we must tell the House and the country that there is no Santa Claus. There is no way of getting more money to spend on social expenditure and local government services except by increasing the national income and it is essential to make this clear.
My right hon. Friend has been asked to accept responsibility for the cuts that have been made in the relevant expenditure. That was accepted in the White Paper. It has been stated by my right hon. Friend and I have no hesitation in repeating it. Of course we accept responsibility for the cuts.
There are really two kinds of cut. There is an element of what one might call "fat" in estimating. There is bound to be. In aggregating the estimates of a vast number of local authorities, as we have to do, there is always a certain amount of over-estimating. But, as my right hon. Friend said, that is not the whole story. He has said that, with our present level of national income, we cannot have more local government expenditure than we are allowing for. If we had more, he said, we would find ourselves again in economic troubles and again facing inflation and again in difficulty with our monetary position.
It is curious that among all the many quotations which have been produced in the debate those which have not been produced are those which have spoken of the inflationary effect of public expenditure and of the importance of keeping it down. What we have had tonight, quite understandably, in the face of an attempt to control public expenditure, has been a scolding for not spending more. I do not quarrel with that and it is quite understandable. However, if a Government are fit to govern, at the moment they have to take responsibility for saying to local authorities and the nation that we cannot afford at present to go beyond this level.
I want to make clear the limits of what we are saying. We are not saying that there has to be a cut in the standard of services. The hon. Member for Northants, South (Mr. Arthur Jones) said that my right hon. Friend had spoken about reducing growth and lowering the standards of services, but he was not correct. My right hon. Friend spoke about reducing growth. He is satisfied that the level of relevant expenditure at present is enough to keep the services going at the level at which they have been going for the past two years, but he recognises that there has been and has to be some slowing down of growth, some decelerating of the natural ambitions of local authorities to improve their services.
I would like for a moment to consider the position of education. We have been asked questions about the standard of education. This is important not only because education is a very important service, but because it is the biggest in relevant expenditure. My right hon. Friend the Secretary of State for Education and Science studied the original forecasts which came in and found that those for teaching staff, pupils and students, required revision—they were not fully accurate. That did not mean that in all cases they had to be reduced. The figures for 1968–69 show an increased estimate for teachers' salaries, because my right hon. Friend is satisfied that there will be an increase in the number of teachers in the service by then. My right hon. Friend said last week, I think, that there was no intention to defer raising the school-leaving age, which answers the right hon. and learned Member for Hexham.
We have heard a good deal about education generally and the failure of the National Plan. The estimate in the National Plan is for an increase in education expenditure of 5·8 per cent. per annum from 1964–65 to 1969–70. In fact, under the Rate Support Grant Order the increase for 1966–67 to 1967–68 will be 5·8 per cent. and for the year 1967–68 to 1968–69 it will be 5·8 per cent. and for the year 1965–66 to 1966–67 it has been 6 per cent. We have thus kept up within the target set by the National Plan. My right hon. Friend the Minister of Health assures me that the position is the same—
I am still not clear how the hon. Gentleman can be sure of that figure, bearing in mind that this after all is still in the nature of a general grant. Surely, if there is a very large cut in the allowed relevant expenditure, a cut of more than £100 million, it is precisely in education, which is by far the biggest spender, that there is the biggest chance of a cut in the amount spent on the service and, incidentally, the biggest chance of a very large rate increase. What I am puzzled about is how the Government can be so confident about the figures which the hon. Gentleman has announced.
These are the estimates which are provided for in grant. It is true, and it has always been true since 1958, that in education expenditure there is a discretion. Every local authority has a discretion. In many local authorities there is liable to be bickering between the finance committee and the education committee on how much to spend on education. My right hon. Friend has made it clear what allocation is available in the grant for education expenditure.
As my right hon. Friend the Minister for Housing and Local Government pointed out, he has also power to check that the standard of services is maintained. The right hon. Gentleman's argument is the straight argument that we should have a special grant for education. The last Government were firmly against it, and we have not in these proposals departed from that.
Will the Parliamentary Secretary be dealing with the point that I put to him, that one needs to know which estimates have been cut within the table on page 11? Will he show that there has been no cut in education and it is estimated that the cuts should come somewhere else?
I gave the right hon. and learned Gentleman the figure—or if I did not, I should have done. I said that the figure for educational expenditure would be 6 per cent. between 1965–66 and 1966–67. The position regarding education is that the growth over the previous year will be 5·7 per cent. in 1967–68 and 6·1 per cent. in 1968–69.
Perhaps the Parliamentary Secretary misunderstood what I said. There is a table on page 11 which shows the total of accepted expenditure, and how that is built up. We should like to know what cuts, in terms of figures, the Government have made, item by item, and how the £104 million and £105 million are made up, because they are at June 1966 prices.
It would be difficult to give a detailed breakdown of the actual cuts, because the final figure is fixed as a global figure. The figures which I gave are the important figures. They are the answer to the suggestion that the new proposals will mean a cut in education, the major service. It is quite clear from those figures that we are allowing for a reasonable expansion of education.
I was going on to say that my right hon. Friend, the Minister for Health, was satisfied that in the field of welfare and health a substantial increase has been allowed which will enable local authorities to expand those services.
We were asked to dictate to local authorities how they were to spend their money. The point was put that if we were saying to local authorities, "This is all that is available in the way of grant", we ought to say how it is to be allocated. If the right hon. Gentleman is seriously putting that before the House, then it is a most remarkable and heretical view of the working of both the control of expenditure and the grant system. Surely, the point of the grant system is that, having fixed the total amount of grant, having calculated its distribution on the basis of an objective formula, one should leave it to local authorities to get on with the job. One does not say to them that they have to cut this, that or the other figure. If we had produced an appendix to the Paper which said that local authorities were allowed to spend so much on particular services, there would have been a hullabaloo. We should have heard in the debate about the dictatorial attitude of the Government and of the brusque way we were treating local authorities.
Will the hon. Gentleman refer to paragraph 27 of the Paper, "General administration and miscellaneous"? By an abstruse calculation one can arrive backwards at the local authorities' estimates from the data given there. As I said earlier, a decrease of 20 per cent. is expected, and I asked the Parliamentary Secretary whether he thought that a 20 per cent. decrease could be achieved in fact.
As I said before, a certain amount of this is over-estimating or represents estimated growth which we think is too large, but we are quite clear that we do not believe that these new grant figures will lead to a diminution in the quality in services. What we say is that, although it is quite understandable that local authorities should make the criticism and want to improve their services—we all do—in the present situation it cannot be done.
Several questions were asked about the estimates and about why we had not yet produced an accurate apportionment of the grant as between local authorities. Various estimates have been made of the amount which each authority will get. There is no mystery about this. We are not trying to hide anything. The simple reason is that we have not yet got from the local authorities their final estimates for next year. It is fairly early in the financial year; there are three months to go before the normal preparation of final estimates. All the figures given by hon. Members about the position in their own local authorities are rather speculative because they cannot have been through the normal processes of finance committee determination and final estimate. They are not final figures, and we cannot, therefore, hope to have final figures.
Beyond saying in general that we have no reason to believe that there will be any drastic reductions in grant for any local authorities, we can do more than wait until some time next year, when we shall have the figures available. We are anxious to produce them, and we should deal with them as soon as the final figures are available, but we are in that difficulty at present.
My hon. Friend the Member for Horn-church (Mr. Alan Lee Williams) spoke of the particular difficulties of the Borough of Havering and the difficulties in London. It is really for the London boroughs and the Greater London Council together to discuss and work out an equalisation grant which they want to have put into the Order. We are quite happy to meet them and do what they think is right. But the inner London boroughs have higher average domestic rate payments than in the outer London boroughs, and certainly higher than in Havering. Therefore, I doubt that there is a case for doing what the outer London boroughs want to do. However, if after negotiation and argument the Greater London boroughs desire to do that, we shall be happy to meet them.
The formula we have produced is a better formula than the one under the old Order. It is more sensitive to changes. The new education units introduced make in a more sensitive mechanism for distributing the grant among the education authorities. On the whole, therefore, there is every reason to believe that, although some authorities are bound to feel that they would like more—this is natural; people do not say that they would like less—it will do justice as between council and council.
The right hon. and learned Gentleman does rather jump his arguments. He says this, and has said this repeatedly during our debates that we have had on these matters, but—The hon. Gentleman the Member for the City of Chester says he is right. All I can say is he has not succeeded in convincing the local authority associations, whose authority the hon. Gentleman regards as being so sacrosanct, that there is a case for adjusting grant to meet the special needs of those particular areas. Our position, as I have said in earlier de- bates, is that we do not think there is a case for it either, but if we are wrong, we can always alter the terms of the formula when the next rate support grant is made.
In finishing I would remind the House of what the position really is. After listening to some of the speeches made—allegations against the Government of swindling, allegations that this is carping, mean behaviour by the Government, and all the rest of it, I would remind the House what the Government are doing for local authorities for the next two years. Take the position of this year, 1966–67. The total amount of the grant is £1,261 million. If we apply that same formula, the formula which hon. Gentlemen opposite have claimed is so magnificent, to the expenditure of the next year, it would have given £1,341 million. We are giving £1,381 million, which is £40 million more than if we had given what hon. Gentlemen opposite spent an hour in Standing Committee upstairs asking us to do, and £120 million more than they are getting for the current year. That is the measure of our failure to rise up to our responsibilities! In addition to that, as the House well knows, we are making this new, extremely effective relief of domestic ratepayers through the domestic element, where we are giving 5d. of the grant for the domestic element. I think that is a good illustration how the new grant is fair, and adjusted to the needs of the moment.