Rating System

Part of the debate – in the House of Commons at 12:00 am on 12th February 1973.

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Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North 12:00 am, 12th February 1973

I beg to move, That this House regrets that the Government has failed to take adequate measures to relieve the increasing burden on domestic ratepayers consequent upon rating revaluation and the present unprecedented degree of inflation. The debate falls neatly between the meeting last Friday which the right hon. Gentleman the Prime Minister had with the leaders of the six largest local authorities and his confrontation tomorrow with the Association of Municipal Corporations. The shadow of the rating crisis which hangs over our larger and older cities looms over those talks. Even more threatening, looming over that rating crisis, is the inflation which has affected the country over the last few years.

Before I look at the effects of devaluation, it is necessary for the House to consider the present rate of inflation, what it has done and the extent to which It has affected not merely the living style, habits and patterns of expenditure but also the very expectations of every working man and woman. A Committee of this House is now considering the Counter-Inflation Bill. Our constituents are being told that their wages are to be pegged for a long time to come, yet simultaneously they see staggering increases in the very staples of life, and it is against the background of increases that we have to consider the present rating revaluation. We have seen increases, which the Government say they cannot check, in the price of basic food stuffs. The Grocer magazine's price index has risen by 6½ per cent. in the last three months—an annual rate of 28½ per cent., if it continues—yet the Government have imposed no freeze on essential foods as the Swedes, for example, have done.

House prices have risen by an average of 47 per cent. in the last year, as my right hon. Friend the Member for Grimsby (Mr. Crosland) reminded the House last Tuesday. Other hon. Members like myself have tried to make the Secretary of State take action on flagrant gazumping, notice of which has been given by our constituents, but to no avail.

House rents have also risen under the infamous Housing Finance Act 1972, the latest IMTA figure being 24 per cent. in the current financial year for unrebated rates. That was the figure put by my right hon. Friend the Member for Grimsby during the debate last Tuesday, and it was not challenged by the Government.

That is the background. It is one of rising prices of food, land, houses and rents facing the ordinary citizen at precisely the time when he is being asked to exercise restraint, to peg his wages and to acquiesce in the Government's policy of a compulsory freeze. It is at this moment that he is confronted, particularly if he lives in one of the larger cities which has suffered because of the imbalance of rating revaluation, with rate increases which will be as severe for him as rent and food increases in recent years.

All in all it adds up to disaster for the wage earner. The Government's tardy conversion to a Counter-Inflation Bill will not alleviate that disaster. In the Chinese calendar, last year was the year of the rat. I shall not say that that description necessarily applies to this Government. It was not the year of the rat, but the year of the sinking ship, and one cannot right a sinking ship by turning the tiller through 180 degrees. The Government's conversion to a prices and income policy will not convince the average wage earner if he is confronted right across the board with costs increases which he cannot contain. The Government are finding the hard way that all these factors interact and that inflation cannot be combated in one area unless it is combated in all.

That brings me to the effects of the current rating revaluation and the Government's stern exhortation to local authorities to limit rate increases to 5 per cent. in the coming financial year. That, and the vague phrases in the White Paper about monitoring rate increases in phase 2, have to be seen against the background of inflation facing the ordinary wage earner.

The revaluation itself has been influenced by staggering inflation in property values due to speculation and to the high levels of rent being demanded under the new Act. On 31st January my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) challenged the Minister when he was in full flight about the alleged fairness of the revaluation. My hon. Friend asked whether it was not a fact that the imbalance in the revaluation was due to domestic properties having been revalued in the light of the current inflation of house and property prices. The Minister said that he was coming to inflation, but he never did in that debate, and the Government never do. It is the local authorities who have had to come to inflation and attempt to deal with it and curtail expenditure in the face of an unprecedented level of inflation in peacetime.

The situation of the local authorities was well summed up by the Association of Municipal Corporations which said on 18th January: local authorities are faced with cost of inflation up to November 1972 in that year alone at the rate was £410 million of which local authorities would have to find 42 per cent., namely, £172 million. Thus even though assisted by the Government's raising of their proportion of the rate support grant to 60 per cent. instead of 58 per cent., there remains a heavy burden for local authorities. It went on to say that those figures were averages and that some authorities do not do as well as others proportionately in the grant.

The statement went on: It is to be recognised that some local authorities will have estimated for a degree of inflation when they made their rates early in 1972 but there is no reason to think that those who did so will have allowed for more than 5 per cent. (or a figure of that order) and it is clear that the balances in the hands costs in recent years, are extremely limited." of urban authorities, faced with these heavy That is a mild statement of the position.

The fact is that the burden for 1972–73 is heavy despite the increase in the grant. I accept that there was an increase in the allowance for the domestic ratepayer from something in excess of 10p on the rate burden to 15p for 1972–73, but local authorities faced an enormous wage interest bill. At this time of high interest rates and unprecedented inflation, that inflation can run away with estimates, and they would be in deep trouble even without revaluation. The services they provide are mostly statutory obligations. They are not local extravaganza which can be cut by a simple exhortation for financial stringency and economies by the Secretary of State.

All the talk in the world about increases in the proportion of the rate support grant to 60 per cent. for the next financial year overlooked the cutting of the rate increase from 1 per cent, to ½ per cent. for 1971–72 and 1972–73. We look as though on that basis we are back where we were, but in fact the money denied by the cutting of the rate of increase in those years will not be made up by allocating now, so great has been the rate of inflation.

Has the revaluation itself been fair? The Government have been at pains to say so, but for most of the larger cities and for many Midlands boroughs such as Derby, which my hon. Friend the Member for Derby, South (Mr. Walter Johnson) and I have the honour to represent, there has been a major shift of burden on to domestic property from other types of property. The domestic ratepayer will be hardest hit in precisely the areas where the local authority has the heaviest burden in paying for community services, and he will be hit by what is always the most inequitable and most regressive of the taxes that he has to pay.

I think it is accepted by both sides of the House that the burden of rates as it falls upon the domestic ratepayer is regressive and will continue to be until we look fundamentally at the very basis of the rating system. That regression, of its nature, increases the unfairness of what has happened under the present revaluation.