Burden on Ratepayers

Roads – in the House of Commons at 12:00 am on 13th March 1967.

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6.22 p.m.

Photo of Mr Frederic Harris Mr Frederic Harris , Croydon North West

I beg to move, That this House deplores the heavy and ever-increasing burden imposed on ratepayers as the result of the policies of the present Government; notes, in particular, that high interest rates, increases in taxation, and inadequate provision by way of general and rate support grant have accentuated the difficulties of local authorities and individual ratepayers; deplores the fact that rebates provided for individual ratepayers are, in part, being provided at the cost of other ratepayers and are, in any event, inadequate; and calls upon Her Majesty's Government to take early action to redeem their election pledge to give early relief to ratepayers. At the outset, I express my sincere appreciation to the hon. Member for Woolwich, West (Mr. Hamling) and to all hon. Members, including the right hon. Lady the Minister of Social Security, who took part in the previous debate for their kindness in letting me have time to move and discuss the second balloted Motion today. It looked rather a tight fit at one stage. This is the first time in 19 years that I have been privileged to win a place in the Ballot, although I have gone in for it consistently on every occasion. Naturally, therefore, I chose one of my pet hobby-horses, the burden on the ratepayers, even if I have only got in, as I say, by a short head.

This is a matter of vital importance, as I think you know, Mr. Speaker, remembering that you were always very interested in it, particularly at this time of year. My Motion deplores the heavy and ever-increasing burden imposed on ratepayers as a result of the policies of the present Government and it draws attention to the reasons for it.

At the last two general elections, the Labour Party promised the country that, if it was elected, people would no longer be subject to further heavy increases in rates. In passing, I must say that it promised the same to the taxpayer, too. We all know what happened in that direction, and I expect it will happen again in the next Budget on 11th April.

In the past two and a half years, ratepayers throughout the country have had, on average, an overall increase of about 25 per cent. in their rates, which certainly justifies my description of "heavy and ever-increasing" applied to the burden shouldered by ratepayers generally. This year, fortunately—I am the first to admit it—there has been an all-out attempt by the Government and local authorities to stabilise the rates. I have no doubt that the Minister will make particular reference to that, but, of course, if the Government had done nothing this year, there would have been a tremendous outcry directed at the Labour Party, especially at a time when people's incomes are virtually all frozen.

As far as I can tell, the domestic ratepayer, helped through the standard rate relief of 5d. in the £, will have to pay, on average, a very slight increase—not much more than 1 per cent., I expect the Minister will tell us—but we still have to remember that, in contrast to the domestic ratepayer, factories, shops and other non-domestic ratepayers will have to meet an increase of about 5 per cent. This is no mean increase, and in one form or another it will, without doubt, eventually be passed back to the public.

In any event, at what cost have the Government done their stabilising act this year? No doubt, they will claim that for householders the relief has come in the main as a result of their scheme by which £23 million of domestic element has been set aside in the new rate support grant for 1967–68 for the benefit of the domestic ratepayer. I imagine that if none of the unusual circumstances of this year had obtained the domestic ratepayer would once again have had to meet an increased demand of about 1s. in the £, but, because of the 5d. support grant, it has been brought down to about 7d.

What else has happened to close the gap? With great regularity last autumn, the Government instructed local authorities to hold down their rate increases by reviewing all claims for expenditure. This has meant that local authorities have cut back drastically on their spending commitments. My own town of Croydon has cut back by about £570,000, which represents about 7d. in the £ in the Croydon rate. Second, some authorities have taken the opportunity to reduce the level of their rate poundage as a result of a change in the interest rates on consolidated loan funds. But this means that such authorities are really mortgaging their future, for, while there will be a reduction in the cost of loan charges in the early years of the loans in question, there will inevitably, and regrettably, be an increase in later years.

First, on the subject of cuts, will the Government give a clear indication on some sort of global basis of what commitments have been cut and how many commitments have merely been rephased so that, in effect, sharper rate increases may be expected by ratepayers in April next year? I have no doubt that a good many authorities have been rephasing their capital schemes on which they had hoped to embark during the next 12 months. If the tempo of capital spending is permanently reduced, annual savings will be effected but if, in yielding to the Government's pressure, local authorities attempt in the year 1968–69 to push ahead again with their retarded schemes, then, as The Timessaid on 7th March, there could be some swingeing rate increases to follow in 1968.

In anticipation of substantially higher demands for rates in the years ahead, I would also like to know from the Government why they have not honoured their pledge to the electorate in their 1964 election manifesto "New Britain ", which at page 14 categorically said that Labour would transfer a larger part of the cost of teachers' salaries from the rates to the Exchequer. The same question came up today at Question Time. This might be just a case of passing the burden from the ratepayer to the taxpayer, but at least it would spread the burden. I would like to know why the Government have not implemented that promise. If it were carried out, it would certainly have a substantial effect on rates in general.

I remember, too, when the Leader of the House indicated that the Government had in mind an altogether new system for rating finance. That was only a short while ago. This could well be the case, because in Labour's 1966 manifesto, "Time for Decision", page 18 stated that there was an area in which tax reform was urgently required in the rating system and that a Labour Government would introduce major reforms in local finance. I would like to know from the Minister whether the Government have something up their sleeve for the near future. Those of us who are closely interested in such rating generally and its unfair effects upon individual ratepayers, with all its various anomalies, would certainly like to know what the Government have in mind. My Motion indicates how Government policies substantially increase the costs of local authorities.

I would like to tell the Minister on a lower plane where some savings in cost could be achieved. I refer to avoidance of duplication that is occurring, particularly in London, in such matters as planning between the Greater London Council and the local authorites, such as Croydon. Croydon has complained strongly. It is a planning authority in itself and yet the G.L.C. gets involved in local details of planning rather than overall principles.

I always said that that would happen when Croydon was pushed into Greater London. If time were available I could give plenty of chapter and verse for what I am saying. Some control might, of course, be necessary for the small local authority which was not able to be properly advised professionally. It is, however, absurd, in respect of land transactions by large towns and cities with long-established, experienced valuation departments.

At a time when valuers are in very great demand, particularly as a result of the considerable work caused by the Land Commission Act, this duplication of effort should immediately be eradicated. If the Government looked into the matter properly they would find that there could be a great saving in manpower and that the efficiency of the country would be increased by much more rapid decisions.

I sometimes wonder whether the public realise what big business local government is today. As we in the House know, local government expenditure is reaching something like 40 per cent. of the national budget. Adoption by the local authorities of more modern, commercial, streamlined administrative methods could bring about vast savings to the ratepayer. That is emphasised by the fact that about 6 per cent. of the working population is employed by local authorities.

Some local authorities have been very farsighted in calling in management con- sultants. I believe that Bromley and Bournemouth, for example, have done this and I gather that large savings have been achieved. It might be a very good idea for the Government to make similar recommendations to other local authorities, particularly the larger ones, and to have an all-out efficiency drive in this direction, which could easily reduce expenditure by about 2½ per cent., which would represent about £100 million a year. Such a target would be well worth striving for and I strongly advocate that the Government should pursue this course.

My Motion also deplores the fact that rebates provided for individual ratepayers are often still far too inadequate and are, in any event, provided at the cost of the other ratepayers. Croydon, for example, has had to appoint 12 additional staff to do this work. Naturally, all this has to be paid for by the other ratepayers. In addition, however, the council has to bear 25 per cent. of the allowances which are given by way of these rebates, and this again has to be provided by the other ratepayers.

All that the Government, in effect, have done in giving that easement to such deserving cases is to place the cost of those reliefs upon the other ratepayers. This is simply a juggling operation at their expense. Obviously, in the main, this relief should have come in total from the Exchequer. Again, therefore, it would have been on a broader basis rather than on the specific shoulders of the local ratepayers, which is very unfair. When this matter was discussed previously in the House, we on this side stressed that aspect of it.

It is important to make the point that the abandonment until 1973 of revaluation for rating purposes, which was to have been carried out next year, was to my mind a retrograde step. If the rating system is to be kept at maximum efficiency, frequent revaluations are surely necessary to keep pace with changing values if we are to have any kind of buoyancy in the system. What has happened is that because of the Land Commission Act and the Capital Gains Tax, valuers in the Inland Revenue have had so much extra work that this postponement has become compulsory. In effect, the rating system is suffering on behalf of national taxation.

Another point is that over the years I campaigned to make nationalised industries pay proper rates, particularly for offices. This, I admit—and I am grateful to the Government—has been achieved, but it should not be the end of the road. It should be followed by all nationalised properties of an ordinary commercial or industrial character being separately rated in the normal way. Only by these means will there be rating justice to individual local authorities.

Crown properties, too, of an ordinary character should be rated in the usual way and not made the subject of Crown distribution in lieu of rates. When the Post Office becomes a public corporation, I trust that all Post Office properties will likewise be rated in the same way as privately-owned properties. At present, Post Office properties are subject to contribution in lieu of rates. Again, I suggest that as in Croydon, the Government should take immediate steps to ensure that all local authorities see that council tenants who can afford to do so pay proper economic rents for council dwellings. If I were asked again what an economic rent would be, I would say that it was one which was not directly subsidised by other ratepayers.

In all my years in the House I have campaigned for the correction of rating anomalies. I was for years the only Conservative Member who advocated the abolition of industrial derating, which we managed to achieve in two main bouts. The points which I have made tonight are at least worthy of the closest consideration. The Government may feel that in the present year they have bought time to avoid yet again a further substantial demand, particularly upon the domestic ratepayer. Unless, very soon, we have sight of the promised major reforms in local finance, we shall find that this is a temporary relief and will be followed, regrettably by dramatic increases in later years. Therefore, I request the Government in the strongest terms to redeem their pledges at the last two elections to give permanent, early relief to ratepayers and to face the issue instead of dodging it.

6.40 p.m.

Photo of Mr James MacColl Mr James MacColl , Widnes

The hon. Member for Croydon, North-West (Mr. Frederic Harris) has deployed his case very successfully and it is only courteous to him that I should rise now and not risk missing the opportunity of dealing with the points which he has made.

On these occasions it is customary to congratulate an hon. Member on his success in the Ballot. However, this time I feel a certain amount of commiseration with the hon. Gentleman, because when he went in for the Ballot he was not to know how very successful the Government's policy had been in keeping down rates. He began his speech very fairly with a series of points where the Government had dealt with the problem, saying that it had worked and that rates had not increased in the way that he had feared.

One particular point he dealt with was the share of rates borne by the domestic ratepaper. As he said, probably more than any other hon. Member he was responsible for forcing his party to take into rating the full value of industrial hereditaments.

The position is that whereas in about 1955 the share of the domestic ratepaper was 60 per cent. and in the last year of the Conservative Administration it was 48 per cent., this year it was 47 per cent. and next year it will be about 46 per cent. That shows that we are succeeding in keeping down the share of the domestic ratepayer.

As he acknowledged, one of the reasons has been the all-out effort of local authorities to keep down their expenditure. I should not myself have chosen this moment to have a debate on the subject, in case it looked as if one did not pay full tribute to local authorities of all parties for their wisdom and statesmanship in meeting the national need and doing this. They have done it, and it is something for which the Government are extremely grateful.

In a time when the rate support grant was going forward, we had hon. Members opposite vying with each other in their prophecies of gloom. It was rather like Hexham prophesying its thousands and Chester its tens of thousands. One right hon. Gentleman opposite prophesied that we should see an increase of 10 per cent. However, the hon. Member for the City of Chester (Mr. Temple) thought that that was pusillanimous stuff and said that it would be 20 per cent. I have not the complete picture, but it is not my fault that we are having the debate now and have to take the existing picture. As far as we can tell at the moment, general rates are going up by less than 5 per cent., and domestic rates are going up by less than 1 per cent.

Photo of Mr John Temple Mr John Temple , City of Chester

The hon. Gentleman attributes something to me which was said by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton). It was he who mentioned the figure of 20 per cent.

Photo of Mr James MacColl Mr James MacColl , Widnes

I will check my reference again, but I think that the hon. Gentleman will find that he was so intoxicated by the chase, when he thought he had the Government on the run, that he ventured a figure. In any event, I am happy to take the figure of an ex-Minister and a Front Bench spokesman for the Opposition.

What is the position in Croydon? After reorganisation, rates went up by 1s. 6d. That was not our fault, and the hon. Member for Croydon, North-West criticised the last Conservative Administration for it. The hon. Gentleman said that they would go up again this year, nearer to 20 per cent. In the event, they went up only 10 per cent.

Photo of Mr Frederic Harris Mr Frederic Harris , Croydon North West

I did not say anything about the Croydon rates going up 20 per cent.

Photo of Mr James MacColl Mr James MacColl , Widnes

The hon. Gentleman is obviously another of those who forget in the full heat of the chase. He said it during the Second Reading of the Rating Act. Croydon's general rate is going up by 3d. Because of the Government's policy the domestic rate will go down by 2d.

Take the case of Harrow, which is another Conservative Greater London borough. There the rate is going down by 10d. In the case of Hemel Hemp-stead, which is an expanding borough, the position is unchanged. Those are all boroughs on behalf of whom there has been agitation in the House for something more to be done to keep down the appalling burden of rates.

The other point about which the hon. Gentleman complained was the inade- quacy of the rate support grant, and he asked what was to happen. Local authority expenditure was going up by about 9 per cent., and the Government took the responsibility of saying that that was too high in the public interest. They did not say that it would mean cuts and that services would go down, but that it would not be so easy to make improvements which we should all like to see. With the Government cuts, the increase was estimated at 4½per cent. The position now is that we are paying 1 per cent. more on this increased expenditure and directing those payments specifically to help domestic ratepayers.

The hon. Gentleman asked if that did not mean swingeing increases next year. We shall increase the proportion which we are paying under the rate support grant next year, and we shall also double the amount which goes into the domestic element. That indicates that we are taking steps to deal with the difficult problems which arise from the fact that the burden on the local authorities is liable to go up as the social services and the population increase.

The hon. Gentleman talked rather coldly about the rate rebate scheme and dismissed it as being of no particular value. However, let us compare it with the Act which the last Conservative Government produced. The hon. Gentleman may not know that there was one, but his Government introduced a scheme for rebates in 1964. Under that scheme, £212,000 was paid out to poor ratepayers in three years. Under our scheme £15 million has been paid out in one year, which is more than 60 times as much. That means that something like 1 million people on average are getting half their rates met out of the grant.

I did not myself check the hon. Gentleman's figures, but my hon. Friend the Member for Croydon, South (Mr. Winnick), who is a little more cautious before he ventures into this sort of discussion, took the trouble by means of a Question to obtain the figures of what was happening in London. Under the Tory Act, Croydon was paid nothing, and Harrow was paid nothing. Under our Act, Croydon is getting £130,000, and Harrow is getting £88,500. That is clear evidence of the effectiveness of our scheme.

The hon. Member says that it is a monstrous injustice that we are asking a local authority to pay 25 per cent. of the cost itself. We think of that as being reasonably fair. We think that in any scheme where the local authority is getting the advantage of a more just rate system it is only reasonable that it should pay a fair part of the cost.

Again, what was the position under the Tory Government? Did the Tory Government pay 75 per cent. of nil? No. They paid 50 per cent, of nil. Either the hon. Gentleman's complaint is that nobody ever really thought that the Tory scheme would work or would produce any money, and therefore that was the reason why it had a low grant of 50 per cent., or it is irresponsible to criticise us, who have produced a very much more effective scheme—it is not perfect, but it is a scheme that is producing results—and are paying half as much again as a proportion of the figures. These show that we are not only succeeding in holding the rate increase but that we are increasing the proportion that is borne on central Government funds.

Photo of David Winnick David Winnick , Croydon South

Would my hon. Friend not agree that this sum of money which has been granted, more than £130,000, shows the amount of acute hardship suffered by those living on small fixed incomes prior to the Act being passed?

Photo of Mr James MacColl Mr James MacColl , Widnes

It does indeed show that. It also shows the number of people who were not getting the kind of help they needed. My only regret is that more people are not applying for the rebates. That is a problem that does arise, in persuading people to use the opportunities open to them.

The hon. Member asked me about the long-term picture, about what was going to happen. We can say quite reasonably that we have produced an effective scheme in conditions of very great difficulty and in conditions of great economic crisis. Everybody is demanding reductions in public expenditure. One cannot open a newspaper without seeing calls for the slow-down of increases in public expenditure. When we take steps to slow down the increase in local expenditure, and to shift more of it over to the central Government, it does not lie in the mouth of the Con- servative Party to blame us that we have not been able to do more. Of course, we would like to do more, but we are satisfied with what we have done. We have done sufficient to show the seriousness of our intention to do a great deal more as we get the opportunity.

The position about the long-term future of local government finance is that it must depend very much upon the future of local government organisation. The hon. Gentleman mentioned the question of education. That is a very good example of it. A lot depends on the size of the education authority in the future, and that is something which the Royal Commission is looking at. Upon that will depend the kind of local government financial scheme that we need. It has often been said in the House that the final answer to the reorganisation of local government finance must depend upon the position of local government reorganisation. These are some of the things that we have been able to do.

The hon. Gentleman mentioned the question of high interest rates. Under the Housing Subsidies Bill, which has now passed through the House, the major item of capital expenditure is shielded by the new subsidy, which is based on paying the difference between the market rate and 4 per cent. That is the major part of local government capital investment. The adjustments which we made—they are complicated and technical, and I will not detain the House by describing them now—to the mortgage loans pools and the Consolidated Loans Funds by altering the rate to 5 per cent. from 3½ per cent. credited to local authorities, are of considerable help to local authorities, particularly in the field of housing, who use those two different methods.

The quota arrangement for borrowing from the P.W.L.B. means that over half the local authority capital expenditure is financed at a rate of 6 per cent. or less. That particularly helps the small authorities, to whom the P.W.L.B. quota is of more importance and significance than it is to the large authorities.

These show that against the background of great difficulties, all the evidence is that our policy is doing a tremendous lot to keep down the burden of rates, and this year we have had the smallest increase in rates for years.

It is quite true that in past years the argument has been advanced, and questions have been asked whether the rate is increasing in terms of compound interest. To get a picture of the sort of uncontrolled building up of the rate burden, 10 years ago the increase in rates per head was something like 19½ per cent. The first year of the Labour Government, when we were in difficulties, in getting our policy in order to cope with the economic and financial difficulties, the increase was 12 per cent. In the current year it is 10·8 per cent. I have no doubt that next year it will be very much less than that.

Although I am very glad to have had this opportunity to put before the House the facts of the situation, the hon. Gentleman was singularly ill-judged in moving his Motion at this time, at the very moment when every day we see in the newspapers headlines snowing rate increases of nil or reductions.

6.57 p.m.

Photo of Mr John Temple Mr John Temple , City of Chester

I should like to add my congratulations and those of the House to my hon. Friend the Member for Croydon, North-West (Mr. Frederic Harris) for the-way in which he moved this Motion, and more particularly on the very long-drawn-out battle which he has fought on behalf of the ratepayers.

This debate has possibly been worthwhile if only to give a moment of pleasure to the Parliamentary Secretary. It is so very rare that the Government think that they have a good case, that it is really a cause for congratulations, and my heart warmed to see the Joint Parliamentary Secretary in such a happy mood. I stress the fact that it was a "moment", because I am afraid that these moments of joy for ratepayers are very passing phases indeed.

I had a most interesting letter from the Secretary of the Rating and Valuation Association, who explained how this moment of pleasure had been brought about. He said that Local authorities have entered into the spirit of the freeze. So one can see local authorities standing like icebergs, their expenditure frozen to the ground, really enjoying themselves "in the spirit of the freeze". But had the Conservative Party been in power, local authority expenditure would have been able to have been paid for out of the growth in the economy which always takes place during our periods of office.

I have to remind the Parliamentary Secretary, even in this moment of ecstasy which he is having over the rate situation, that there are some matters of sleight of hand which very often mask the true picture. He has to realise that in this year 1967–68 there will be very severe drawing on balances by many local authorities throughout the country. In the County of Cheshire, where I live, there will be a rate increase of 3d. in the £, but there will be a drawing on balances also of about 3d. in the £ in order to stabilise rates. In another county, of which I have news, that is Derbyshire, the rate at the moment should have been 9s. 11½d., but they levied a rate of 8s. 6d. because they were drawing on their balances to an enormous extent to keep the rate poundages steady.

This state of affairs is being brought about by the generosity of local authorities in meeting the present Government. I do not criticise them for that. They are doing their best in the national interest, but one must realise that their rate balances are being drawn on very heavily indeed.

I have news of two very poor counties—

It being Seven o'clock, the Proceedings on the Motion lapsed, pursuant to Standing Order No. 5 (Precedence of government business.)