Local Government (Rate Support Grant)

Part of the debate – in the House of Commons at 12:00 am on 9th December 1968.

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Photo of Mr Peter Walker Mr Peter Walker , Worcester 12:00 am, 9th December 1968

The tone of the Minister's speech was, alas, typical of speeches made by Ministers under this Administration when introducing unpopular or difficult measures. At the time of devaluation the people were told that that step would not be hard on them. Whenever unpleasant Budgets have been introduced, Government spokesmen have gone out of their way to explain that tough economic measures would not have an adverse effect on the people.

The right hon. Gentleman's speech today was absolutely in that tradition. He said, in effect, "We will take the measures necessary in the interests of the economy, but they will not harm anybody; all the services will continue to be improved and local authorities will not have to put up the rates." In other words, the right hon. Gentleman said that this was not a hard measure which was needed to meet a difficult economic situation, but a generous grant to local authorities.

While that was the theme of the right hon. Gentleman's speech, the same theme has constantly run through speeches made by Ministers of the Government, and this has discredited this Administration. They are never willing to say, "The economic situation is bad and, therefore, many of the services which we cherish dearly must be cut. There will be difficulties for local authorities and it will be a tough year." Ministers of this Government never have the guts or courage to say that. They go out of their way to attempt to illustrate that their measures will have no adverse effects on the people.

I have never heard a more classic example of this than the Minister's speech today. The right hon. Gentleman knows, from the information available to him, that this Order will mean a deterioration of many local authority services. Indeed, he said exactly that in a circular which he sent to local authorities at the time of the publication of the January White Paper, which stated that the Government accepted that economies on the scale proposed involved a slower growth in many services, and in some cases a temporary lapse in standards. We have heard nothing today about a temporary lapse in standards or a failure to improve basic services. We have only heard about the generosity of the Order.

The right hon. Gentleman asked my hon. Friends and I what we would do. I assure him that if, in our judgment, the economic situation was very bad—for example, as bad as we were told it was a fortnight ago—then, obviously, we would have to be as tough as this and perhaps even tougher; but we would tell the country precisely what the position was and what we were doing. However, if the economic situation was as the Chancellor of the Exchequer said it was last Saturday, then we would probably be more generous. It is difficult to answer this sort of question when a Government like the present one are in power. Only last Sunday we were told in newspaper headlines that the Chancellor was optimistic about the whole economic situation.

Presuming that the economic situation is serious and that we are to have enormous adverse balance of payments this year, then the Government, who have got the economy into this condition, must take tough, hard measures and—however much they deplore doing things against their political beliefs and faiths—they must also make the position clear. But today the Minister failed to have the courage to explain the position. Instead, he tried to pretend that he was making a generous grant which would do no basic harm to either the services or the rates.

In fact, much harm will be done. The Order will mean a considerable deterioration of some services. It will also perhaps mean substantial increases in rates. Some cities have already estimated that they may, as a result of the Order, have to increase their rates by as much as 2s. or even 2s. 6d. in the £. This is bound to have a serious effect on education and the welfare services.

The whole tone of the White Paper explaining the Order gave the impression that no great harm would be done. Even the Minister's Press hand-out on the day when the White Paper was announced was headed: Rate relief in 1969–70 and 1970–71. The first paragraph told us: Exchequer rate relief for domestic ratepayers will be increased by 5d. to 1s. 3d. in the £ for 1969–70 and by a further 5d. to 1s. 8d. in the £ in 1970–71. The whole atmosphere created by the Press handout was that the Order would be good for domestic ratepayers. [HON. MEMBERS: "Hear, hear."] Hon. Gentlemen opposite cry "Hear, hear", yet they know, from the figures supplied to them by local authorities, that the grant to which they have agreed will mean either a severe cut in some basic services or an increase in the rates. They have not, however, had the courage to say which basic services they would prefer to see cut to maintain the rates at their present levels.

In the same way, the White Paper skated over all these difficulties. If important talks are going on—and we gather that they are going on with the world's economic leaders—then I guarantee that that White Paper would not be circulated at the talks to illustrate the sort of tough measures which the Government are taking to cure the ills of our economy. Instead, the White Paper was designed to pretend that nothing was being done to cut back on public expenditure. The Government have been completely and utterly two-faced on this subject.

Looking at the history of the rate support grant and the background to this matter, it is interesting to note the attitude of the Labour Administration from the time they came to power. At first, we had strong promises that the rates would be reduced. The main promise in the 1964 manifesto was that the cost of teachers' salaries would be transferred from the ratepayer to the taxpayer. This the Government have not done.

The next classic promise affecting this grant concerned the whole question of the cost of finance to local authorities. It was the Prime Minister who, speaking at a Parliamentary Press Gallery luncheon and commenting that local councils were being hampered by high interest rates, said: Since our general economic policy rejects the over-reliance on monetary weapons as the means of regulating the economy, interest rates will return to a very reasonable level. When he made that speech Bank Rate was 4 per cent. Today, it is nearly 7 per cent. and in the interim it has been higher.

After those promises—about interest rates being reduced and the cost of teachers' salaries being transferred from the ratepayer to the taxpayer—one would imagine that by now the burden on the ratepayer would be considerably less. Quite the opposite has occurred. During the first two years of office of the Labour Party rates went up by about 11 per cent. in each year. Then we had the National Plan, which promised a basic growth in all our social services and a considerable growth in expenditure on education.

There followed the rate support grant and, as the Minister said, this is the second Order affecting that grant. It is interesting to note that the first Order was introduced in exactly the same atmosphere as this. There was a political and economic crisis facing the Government. It is also interesting to note how, at that time, the Government appealed to local authorities to reduce expenditure. The Government explained that it was a temporary measure.

In December, 1966 the Joint Parliamentary Secretary to the Ministry of Housing and Local Government—speaking in a debate precisely like this one—said: 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. He went on: 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. Thus, local authorities were told—and told by the present Minister of Housing and Local Government, remember—how much he regretted the circumstances in which the Order was being introduced and the amounts involved in it.

Also in that debate, the Minister of Housing and Local Government said: I know that these savings will not 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."—[OFFICIAL REPORT, 20th December, 1966; Vol. 738, c. 1261–323.] Therefore, the Order made two years ago by the present Minister of Housing and Local Government was one that he considered tough and hard for local authorities to comply with, and one which meant a cutting down of services.

The fact is that that Order allowed for a growth rate of 6 per cent. a year, but today the right hon. Gentleman is asking for a growth rate next year of 3 per cent. As for that 4½ per cent. which he seems to have invented by a most remarkable juggling of figures—well, if it is not fictitious but is a 4½ per cent. rate, why was it not put in the White Paper? It is not even mentioned there. The right hon. Gentleman knows that a growth rate of 3 per cent. is the reality he referred to. Therefore, after two years of difficult conditions as described by the Minister, we have the Government saying, "We were very tough two years ago, but we shall be even tougher for the next period."

The Minister responsible must know how difficult it is for a local authority to be perpetually cutting. A local authority can do all sorts of things for a time. It can decide not to replace vehicles, or not to maintain buildings, or put aside other than immediate repairs. But as these conditions continue it has to replace those vehicles, it has to maintain those buildings, it has to do those repairs. So with the continuance of this terrible squeeze for a further period, local authorities are being faced with very real and immense problems.

On the original grant, local authorities wanted increases of 8·3 per cent. and 9·1 per cent. for each of the two years. That was reduced by the Government to about 6 per cent. That meant that in the original first Order the Minister reduced local authorities requirements by £105 million and £104 million for each of those two years. A pledge was then given that there would be increase Orders. If wages go up as a result of Government action, and other costs go up, and interest charges go up, local authorities have a perfect right to increase Orders.

Such an increase Order was introduced, appropriately enough, just after another economic crisis—the devaluation crisis in 1967. My hon. Friend the Member for Crosby (Mr. Graham Page) asked the Minister about the cost of devaluation and whether there would be an increase Order as a result. The Joint Parliamentary Secretary replied: The hon. Gentleman knows about Part I of the Act, and he knows that, if the grim forebodings which he and other hon. Members have given vent to about devaluation take effect, this matter can be lookd at again in a further Order."—[OFFICIAL REPORT, 14th December, 1967; Vol. 756, c. 755.] That was on 14th December.

In January, only a few weeks later, the Prime Minister announced to the House that, irrespective of what happened, there would be no increase Order for 1968–69. I must ask the Minister to give the local authorities an absolute guarantee that having been told there could be increase Orders we will not once again have the Prime Minister or the Chancellor of the Exchequer saying, "No increase Orders. You must duly meet all of this yourselves." We are now told about two difficult years ahead, when already the Government have announced a series of inflationary measures, and already under this system local authorities have believed that they could get increase Orders and were suddenly told that increase Orders were not available. We have had that broken promise.

But what must be upsetting the local authorities is that the whole atmosphere of proper negotiation has disappeared. In the White Paper in July the Government made it clear that there was to be a 3 per cent. increase for 1969–70. That was laid down before any negotiations started. I want to draw the attention of the Minister to the wording of his own White Paper. I do not, of course, accuse him of deliberately deceiving his readers, but I would point out that the atmosphere of the White Paper implies that the local authorities had agreed with him. I see that the right hon. Gentleman nods. He knows that, as I say, I do not accuse him of deceiving deliberately.

Paragraph 12 of the White Paper reads: The Government have discussed these matters, in the light of the local authority estimates, the price changes, and the development of services with the local authority associations and the Greater London Council. The paragraph continues: They have concluded … The use of the word "They" gives the impression, though I am sure that the right hon. Gentleman did not mean to give it, that the organisations mentioned had all agreed. As he told us, they did not agree with the figures.

In the past, under the general grant system, the estimates of local authorities were exceedingly accurate. An example of this is the fact that over the eight years of general grant preceding this present method of rate support, actual expenditure varied from estimated expenditure by as little as £7 million. The actual expenditure was £8,258 million and the estimated expenditure was £8,265 million. There is a great tradition among local authorities of very accurate estimates. In the view of local authorities, the Government's accepted figure for 1967–68 was about £41 million wrong compared with the actual figure and, as far as they can estimate for this year, the Government's figure is £71 million wrong. If the local authorities are right in their estimates and the Minister is wrong one sees the situation that arises.

If we take the base figure of £2,793, used by the Minister for his 3 per cent. increase, and add the £71 million which the local authorities consider should be added, we get £2,864 million. If we then regulate that for the adjustment of prices and add another £50 million, we get £2,914 million. The view of the local authorities is that the figure on last year's services which should have been subject to grant is £2,914 and £2,927 is what the Government offer for next year. So, if the local authorities are right, the Government are offering virtually no increase at all. As a result, there will be very considerable added burdens on the rates.

Hon. Members may have read the letter which appeared in the Daily Telegraph last week from the Chairman of the G.L.C. Finance Committee, in which he said: When the G.L.C.'s budget is introduced in February it will carry at least £5½ million extra expenditure imposed from Whitehall in higher Jenkins taxes, usurious rates of interest and artificially low Greenwood rents. That means nearly a nine per cent. increase on our previous budget before we even start to consider the cost of services some of which are growing fast in response to public demand.Whitehall now tells us we must keep within three per cent. This comes pretty hard from a Government whose chief trouble is that its net income is never sufficient to pay for its gross habits. Those figures from the G.L.C. can be reflected in many parts of the country.

Local authorities have been inundated these last two or three years with Departmental circulars asking local government to do things. I am pleased the Minister of State, Department of Education and Science, is here because she will know just how many circulars her Department has sent out—all of which demand considerable increases in costs. The hon. Member for Orpington (Mr. Lubbock) has already mentioned one circular on the whole comprehensive system which will mean very considerable increases in cost. There have been White Papers, and new duties have been placed on local authorities—administration on the Rent Acts, rent rebates, administration of the S.E.T., and all the mandatory extra costs as, for example, university grants, to which the Minister will doubtless refer later.

In this light, it is very wrong of the Minister to put in page 6 of his White Paper a series of paragraphs which give the impression that no real harm will take place. Let me refer, first, to education. Any person referring to paragraph 15 would gain the impression that all the basic things would remain untouched but that perhaps a few minor things might go out. But already some pretty fundamental things have gone wrong as compared with the Order of two years ago.

It is interesting to note that when the former Order was made my right hon. Friend made a point about the raising of the school-leaving age and was given a categorical assurance by the Minister, who said: 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. The Government have shifted from that in education priorities and that promise has not been kept.

The Minister, replying to that debate on the Rate Support Grant Order, actually argued point by point that the Government were keeping completely to the National Plan in expenditure on education. He said: 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."—[OFFICIAL REPORT, 20th December, 1966; Vol. 738, c. 1325–6.] I hope that in replying tonight the Minister of State will tell us how far the Government are to keep to the target set by the National Plan.

I quote from a recently published education pamphlet, with a foreword by Sir William Alexander and written by Stuart Maclure, who is no supporter of the Conservative Party but writes as one genuinely interested in education. He ended this very important booklet by saying: Anyone must be anxious to avoid crying 'wolf. But Mr. Short has already shown his hand by hinting that, not only is there no crisis, but that any talk of a crisis is just making political capital. This line is made no easier to maintain when one of the first education committees threatens to sack all its 73 part-time teachers in order to cut its costs is Labour-controlled South Shields. This is not a party political issue at all. The facts are plain and untinged by party strife: 1969 and 1970 threaten to be worst years for education since 1931. All concerned with education, various chairmen of education committees I have spoken to at the weekend, are alarmed at the proposals in this Order.

On health and the welfare services the Government have published a report which gives an indication of the problems involved. They have passed a Bill which puts a statutory obligation on local authorities to provide proper health services. A report by the Office of Health Economics, entitled "Old Age", esti- mated that of old people living in private households 348,000 feel the need for a home help but are not getting one, 361,000 would like a hot meal from mobile services but are not getting one, 703,000 would like chiropody services but are not getting them, 220,000 have severe hearing difficulties and about 342,000 have sight difficulties which have not received attention.

The whole theme of the report is that if local authorities were able to provide proper services in this sphere there would be a considerable saving in the National Health Service. About 35 per cent. of the expenditure on the Health Service is for people over 65 years of age. Every local authority knows that unless it is substantially to increase its rates these services will be adversely affected.

I turn now to highways, a matter I have been concerned with in recent years in another capacity. Anyone with knowledge of road construction and road building realises that it is ridiculous to consider it a saving to cut down on maintenance of roads. It is a very short-lived saving and the costs are more later. In addition to costs caused through congestion there are those concerned with road safety. No section of the community is more hard hit than the motoring public, who have been paying taxes which have been doubled in the lifetime of this Government. Yet here severe cuts are taking place.

I put to the Minister a number of particular problems which I think he has failed to recognise by the manner in which he introduced the Order. First, there is the problem of an authority involved in a major city redevelopment. Such an authority is left with empty buildings from which it cannot draw rates and it has a high borrowing rate for money with which to pay both capital and interest charges. I heard only today from Newcastle of the great difficulties which that authority will be in as a result of the Government's proposals.

Many localities are involved in town expansion as part of the Minister's housing policy. I know in detail of some of the problems for these localities because there is one in my constituency. Droit-wich is taking Birmingham's overspill at a considerable rate year by year. Under present arrangements it has to meet the cost of providing a sewerage scheme.

Although there are grants from the Government and the county, such an authority has to start repaying immediately both capital and interest before the houses are built. There is a heavy burden on the rates in such localities.

Droitwich had to increase its individual rate by 1s. 3d. for this purpose alone last year. I think that there will be a further increase of about the same amount next year and probably the year after. This is an absurdity flowing from the Minister's housing policy. How can we encourage industry to go to such an area if the rates are to be much higher than elsewhere because of the unwillingness to capitalise on a large number of services and defer payment until the houses are built?

I urge the Government to answer a basic question. They know that by cutting down the rate of increase in the grant to this extent, by not having provided a proper increase Order last year, by the fact that local authorities have already spent £110 million more than was provided for in previous grants, they are putting an enormous burden on local authorities. I urge them to be honest with the country and to tell the people that there will be a need for an increase in rates or a cutting down of services. Let the Minister of State make clear which of the two she would prefer.

If local authorities in the interest of the economy are to keep the rates level and to cut back services, to comply with these financial requirements, let the right hon. Lady boldly say so, and let her say which services should be cut. If, on the other hand, the Government would prefer the rates to go up, perhaps to take money out of consumer purchasing, and the services to be maintained, let her make that clear to local authorities. In the whole tone of this White Paper the Government have shown that they have failed to have the courage to tell the country that, due to their failure to run the economy properly, local authorities throughout the country will have the worst year in 1969 that they have had for many a decade.