I will, with permission, Mr. Speaker, make a statement about the rate support grants to local authorities in England and Wales for 1974–75. Details are set out in the White Paper, Cmnd 5532, copies of which are available at the Vote Office.
I discussed the settlement with local authorities last week. It assumes that they will make the reductions in expenditure announced by the Chancellor of the Exchequer in May and in December. Details will be given in a circular. I should emphasise that local authority relevant expenditure in 1974–75 will still grow in real terms by 2½ per cent.
The present formula for distributing the needs element no longer reflects the true variations in local authorities' spending needs particularly bearing in mind reorganisation. The effect of our new proposals is broadly to give a greater share of the total of the needs and resources elements of grant to the declining city centres. I also consider that there is a real need to correct the balance between the burdens on the domestic and non-domestic ratepayer which was distorted by the last revaluation.
So I propose to increase the total amount to be devoted to domestic relief to £446 million in all—more than double last year's amount. Much of this will go to help those domestic ratepayers who would otherwise suffer as a result of changes in the grant system, reorganisation and the effect of the new water and sewerage charges. In the light of further consultations and subsequent changes in the settlement I have decided on a fixed minimum domestic element of 7p rather than the 10p I previously announced, but the majority of ratepayers will be getting more than 7p and many will be getting more than 10p. Indeed the 7p will apply only in areas gaining under the new grant distribution.
I have decided to propose, subject to the approval of the House, a grant percentage of 60·5 per cent. This compares with 60 per cent. in 1973–74. It would mean a total grant of £3,431 million.
As a result of this redistribution of the domestic element and of the high rate of grant I believe that the percentage rise in domestic rate burdens can be kept to a maximum of about 9 per cent. subject to any exceptional local circumstances. In a number of cases, particularly in the cities, there should actually be a decrease in the domestic rate burden. The average national increase should accordingly be about 3 per cent. But this is on the understanding that local authorities play their part in keeping down expenditure.
Even with these provisions rates can bear hardly on some domestic ratepayers. I have done two further things. I have altered the statutory deductions to lessen the burden on domestic ratepayers in dwellings with a lower rateable value. And in addition over 2 million domestic ratepayers should be helped for the first time through the new rate rebate scheme at a cost approaching some £100 million, the cost of which will be borne as to 90 per cent. by the Exchequer.
Will not the rate rise for most domestic ratepayers in this country, on the basis of the right hon. and learned Gentleman's statement, the White Paper and the grant order, be a minimum of 9 per cent. or thereabouts? Does not the White Paper use the phrase—I have never heard it previously except in a sporting connection—
We hope to keep the rate rise down to single figures"?
Is the Secretary of State saying that the Government accept a 9 per cent. increase?
Why has the Secretary of State said nothing about the rate rise to other ratepayers, to industry and commerce, for example? Is it true—as I am advised by local authorities—that the Government accept that the rate rise for local authorities will be about 20 per cent.?
Regarding the Government's hopes of maintaining a national average increase of 3 per cent., would the Minister be surprised at the comment of one of the country's leading local government finance experts who, when I asked him about it a few moments ago, said that that hope was "totally ludicrous"? I believe that to describe the hope as "totally ludicrous" is a masterly understatement. The rate increase cannot be kept down to 9 per cent., and the Secretary of State knows it. Furthermore, neither can the rate of growth of local authorities' expenditure be kept down to 2½ per cent., which the Minister is suggesting, because of the commitments which have already been taken on board by local authorities for the reorganisation of schools which have been built, for staffing old people's homes, and so on.
My second main question is this. As the Government's phase 3 policy, which the House has just been considering for the best part of an hour, is based upon a 7 per cent. increase in basic wages, will not the order accepting an increase of 9 per cent. for domestic ratepayers amount to a blatant breakage of the Government's economic policy? How on earth can that be justified?
This is a very serious matter. It is a special case.
There is another point of tremendous importance. Will not this 9 per cent. increase for domestic ratepayers help to push up the retail price index, which will then help to trigger off the threshold agreement allowed for in phase 3, and, therefore, to that extent, is not this adding to the inflationary pressure in the country as a whole?
Finally, the Secretary of State has now announced a 7p support for the domestic element. But did not the Secretary of State, on Second Reading of the Local Government Bill, announced that the help to the domestic ratepayer would be 10p, and did not the Chancellor, in his Budget Statement just before Christmas, say that there should be no increase in rates? Why have the Government ducked and dived in this manner? Why did the Minister for Local Government and Development tour the country recently consulting every local authority on the basis of an obligation that they would get a 10p assistance for the domestic element when the Government have now reneged upon that promise?
I am afraid that almost everything that the hon. Gentleman said is totally wrong. First, I mean a maximum of 9 per cent. as being proper in ordinary circumstances subject to special local conditions, and local ratepayers will have to monitor their local authorities in that regard. As I explained, in many cases there should be a reduction in the rate bill of domestic ratepayers, for example in Liverpool, Manchester and Newcastle, where they will receive a substantial additional percentage grant.
The reason why I announced this afternoon that I had decided upon a 7p minimum domestic element arose from my consultations with local authorities who favoured a variable domestic element. As a result of this, the 7p will apply only in those areas which are already receiving a substantial additional proportion of the grant. In other areas which have a loss of grant, considerably more than the 10p will be given as relief to the domestic ratepayer. That is why I am able to say that the average domestic increase over the country as a whole should be about 3 per cent. The maximum of 9 per cent. is to be, as far as one can achieve it, a maximum, but the variations below the 9 per cent. will be very considerable and should result in a reduction in the domestic rate in many areas.
It is perfectly fair to say that non-domestic rates in many areas will rise by between 20 per cent. and 30 per cent., or possibly more. On the other hand, in the cities to which I have referred there should be a reduction not only in domestic rate but also in non-domestic rate. There should, therefore, be considerable benefit to the cities.
The hon. Gentleman will remember that the criticisms which were made last year centred on two matters. First, it was said that we had not taken sufficient account of the problems in big cities resulting from the declining population and the heavy social expenditure, so we paid great regard to that. It was also pointed out that in many areas revaluation had the effect of transferring a higher proportion of the rate burden from the domestic to the non-domestic ratepayer and that we should also put that right. That is the purpose of the settlement which we have negotiated.
Is my right hon. and learned Friend satisfied that this method of distributing central Government funds, with the infinite variety of local circumstances that face him, is the best method that is available? It means a tremendous complication in the distribution of the domestic element because of the recognition of the problems there, and a wide variance between the domestic rate and the rate which will be payable by other hereditaments. Does not my right hon. and learned Friend think a much simpler method would be to introduce differential rating for commercial and industrial hereditaments?
That could certainly be borne in mind for the future. We have made the best settlement we can in present conditions, bearing in mind the difficulties that arise from dealing with so many new authorities as the result of reorganisation. We have said that we regard the implementation of the formula as something to be looked at in the future in a much more flexible light.
If the House considers what was said last year about the problems of inner cities it will realise that it is not unreasonable to redistribute the grant this time so as to give greater benefit to them to meet their needs. We are also pursuing the same policy in relation to housing.
Stripped of its verbiage, does not the Minister's announcement mean that, with the increase in the water and sewerage rate, these new arrangements will mean an increase in the cost of living of almost everybody? Is the Minister aware that in certain rural areas such as Mid-Wales, which surfer from depopulation and have very low average earnings, there will be a substantial increase in the rates? Exactly what did the Minister mean by "special local conditions" when he referred to the maximum of 9 per cent.? In the present economic climate do the Government regard this as a wise policy to pursue?
What I mean by "special local conditions" is that, although we can make a national settlement which lays down broad guidelines, we must accept that it is ultimately for each local authority to make its own decision on the rates. There may be various local matters such as the size of balances, and so on, which the local authority may have to consider. All we are providing is a structure within which we can say that if the local authorities make the cuts in expenditure for which the Chancellor of the Exchequer has asked and play their part in containing inflation, this should be the result, and local ratepayers can monitor any increase above 9 per cent. with that factor in mind.
To keep to the 9 per cent. in some areas it is necessary to give a larger domestic element than the 10p, and that factor has been brought into account. It will not mean a rise in the cost of living of the sort to which the hon. and learned Gentleman referred for many ratepayers. Many ratepayers, particularly in cities, will be paying lower rates in spite of the increase in wages they may receive. We also took into account as far as we could the problems of sparsity as well as the problems of the big cities.
Does not my right hon. and learned Friend feel that this is a time for special generosity, when extreme difficulties will arise from ratepayers coming under new authorities? Although I am sure we all greatly welcome my right hon. and learned Friend's announcement of the doubling of the sum available in the domestic element, is he satisfied that he is being sufficiently generous to counties which have suffered harshly in Wales and the home counties—particularly Hertfordshire—where domestic rates have risen considerably in the past few years?
I agree with my hon. Friend. That is why we have tried to bring about a generous settlement, which, while recognising the particular problems of the cities, at the same time imposes a limitation on the burdens in the counties and elsewhere.
We have also agreed on a 60·5 per cent. Government contribution which is an improvement on last year's 60 per cent. We shall altogether be contributing £3,431 million out of a total relevant expenditure of £5,671 million. It is against those figures that the Chancellor of the Exchequer's reduction in public expenditure must be set.
We have to bear in mind that if—as we believe we should—we are to help the cities with their special problems both with general expenditure and housing, the counties must accept that that will to some extent throw a greater burden upon them, given the same total expenditure. On the other hand, in so far as we can solve more readily the various problems of the cities with their declining population by giving them more for housing and other matters, areas such as Hertfordshire will not have to have so much overspill or such extensions of new towns as they might not desire.
Is the right hon. and learned Gentleman aware that the local authorities challenge his figures and his suggestion that the rate increase can be kept to a maximum of 9 per cent. unless a drastic and shocking cut is made in essential services, especially in education? Equally, the local authorities do not accept his figure of expenditure growth which they believe cannot be obtained in real terms.
In so far as there are reductions of expenditure and services as a result of the Chancellor of the Exchequer's cuts, the benefits of the reduction in expenditure should go to the ratepayers. They do not get it both ways. As I said, we reckon that there will be real growth in local government expenditure of about 2½ per cent. but in many areas there will be cuts in the level of services provided. The total of £200 million cuts in public expenditure—£81 million in May and £121 million in December—are not unreasonable against a total relevant expenditure of £5,671 million.
May I press my right hon. and learned Friend a little on what he is saying about cities? He mentioned Manchester. Is he referring to the Manchester Metropolitan District or the Greater Manchester County Council? There is a strong feeling in Bolton, which is part of the metropolitan county, that the new county council is being extremely profligate in planned expenditure, particularly on new offices, and there is concern about the precept that would be made on the Bolton Metropolitan District. Will my right hon. and learned Friend explain how this will work?
This is one of the problems of settlement this year since we are dealing with new local authorities in many areas outside London. In the case of the new Manchester District Council, we expect that they should receive about £6 million more in grant.
Is the Secretary of State for the Environment aware that hon. Members from Wales regret that the Secretary of State for Wales has not made a separate statement on the situation as it affects the Principality? Can the Secretary of State for the Environment say whether the Secretary of State for Wales will make a statement in future so that we may cross-examine him on the effect of these proposals in Wales? In the meantime, could he clarify the position? Is it not the case that following the statement and the new policy, officials in the new Welsh county councils, apart from South Glamorgan, will be worse off than they were before—and this at a time when they are to suffer the cutbacks which have been announced by the Chancellor of the Exchequer? Is he aware that the effect on regional policy will be disastrous and most discouraging to the new county councils in Wales, and also to the district councils?
I welcome an increase in the domestic element, but does my right hon. and learned Friend agree that it would be better and fairer if the education charge had been made a national charge? This would avoid subsidies and make it easier for those who cannot afford to spend large sums of money. For this reason is it not possible, in the case of those who are unable to meet these burdens, for the water rate to be rebateable?
I appreciate that my hon. Friend has been making these points for many years and I have debated the subjects with him before. It has been arguable as to where the burden of education expenditure should lie. This is all public expenditure and has to be met, whether by ratepayers or taxpayers. I should have pointed out that as a result of the transfer of functions the local authorities this year are relieved of £350 million of relevant expenditure. This has occurred because of the transfer of local health and other services and 90 per cent. of the cost of student grants.
I think that it will be necessary to look at the position county by county, but we have borne in mind the difficulties which arise when entirely new authorities are created. Some will receive an additional percentage of the total grant available.
In view of the spiralling costs and the grave economic situation of the country, is the Secretary of State not being completely irresponsible in pretending that local authority services can be maintained if the increase in rates is to be confined to 9 per cent? I was disturbed to hear the right hon. and learned Gentleman mention the cities in every reply he made to questions on his statement. Is he aware that in the non-metropolitan counties, such as Durham, the effect of the built-in bias which he has proudly announced this afternoon will cause consternation in local authorities? Those authorities are faced with the cruel dilemma of whether to cut services, or to put up rates much higher than the Secretary of State would allow them to do.
It is a 9 per cent. increase in domestic rates. Non-domestic rates generally will, as the hon. Gentleman said, tend to rise, except in those cities that receive so much additional grant that they should be able to reduce both domestic and non-domestic rates. Given that the size of the cake does not change very much, we have increased the total grant. Everybody on both sides of the House last year agreed that we would do something to redress the balance between the domestic and the non-domestic ratepayer and also that we would assist the inner cities with special problems. This can be done only at the expense of other parts of the country. By giving a grant of 60·5 per cent. and by doubling the amount of money available for the domestic element, we have limited the burden that will fall on domestic ratepayers in the country as a whole.
Although I am certain that the Secretary of State has produced a scheme which he thinks is fair and just—and I am sure that he has done his best—I am a little worried about his constant references to cities. I am delighted to know that Newcastle will receive so much benefit because that in turn will benefit the region to which both my right hon. and learned Friend and I belong. But will he define a "city"? I should like to know what will happen to Gateshead, Sunderland, Durham and Tynemouth. Gateshead and Sunderland probably require even more help than do some other areas, and certainly some of these areas would also be defined as "cities".
I do not want the Secretary of State to go away with the idea that everybody in the north of England will be entirely pleased—although Newcastle will be pleased—with the way in which these problems in other areas—areas that ought to be regarded as cities—have been dealt with. Will he kindly tell me how he defines a city, because Newcastle's problems from the point of view of employment and similar matters are not as difficult as those in Sunderland?
The difficulty last year was that in grant terms many cities appeared to suffer too great a detriment compared with the rest of the country. We have tried to put that right. I do not know that I can give figures for every part of the country, but I can say that Sunderland should get about £4 million more grant.
So far as metropolitan counties are concerned, the percentage increase in grant for Greater Manchester should be 7·9 per cent., in Merseyside 6·4, in South Yorkshire 1·3, in Tyne and Wear 5·7, in the West Midlands 1·4 and in West Yorkshire 4·2 per cent. Greater London gets an increase of 3·4 per cent. and there is a figure of 3 per cent. weighting to be taken into account, but in Greater London we must have regard to the equalisation scheme which London works out for itself. There will be considerable variations over the country. The cities benefit, the counties on the whole have to pay, but the domestic ratepayer is shielded by the additional provision made for domestic rate element and the additional percentage grant which the Government are making applies to the country as a whole.
Is the Secretary of State aware that his announcement today of an increase in rates from 1st April of around 9 per cent., 10 per cent., or perhaps more, despite all his talk today—and let us remember that we still have the Budget to come—must be coupled with the fact that on that same day 70 per cent. of the 5 million council tenants who are not included in the October arrangements will be hammered again by the Government for another 50p increase in their rent? That takes account of the 30 per cent. rent rebate which, according to the Government, will not be affected. Is this not a savage indictment of the Government's policy, in a year when they are talking about no special cases for wage claims?
The hon. Member for Bolsover (Mr. Skinner) is wrong. As I tried to explain, I talked about a maximum increase. The hon. Gentleman might at least recognise that the Government have done their best to meet so many criticisms that arose last year about rates in cities. A large number of ratepayers, although they may have had additional wages in phase 3, will be paying less rates. Moreover, there are over 2 million ratepayers who for the first time will benefit from our rate rebate proposals. The hon. Gentleman should think about the way in which some of his colleagues in some parts of the country are keeping many people's rents up when they could go down.
Does the Secretary of State appreciate that the matters which we are discussing today constitute one of the gravest blows struck at Wales in modern times? Does he appreciate, further, that the proposals will bring about the ruination of Welsh local government? Will he be honest with the House and admit that Wales will be receiving a sum probably in excess of £10 million less than she receives in the current year, accounting for the average rise in prices, and that it means either a diminution of services already at a low level or a vast increase in rates well above the 9 per cent. which he mentioned?
Will the right hon. and learned Gentleman assure us that Wales will not be further discriminated against when it comes to imposing the cuts announced by the Chancellor of the Exchequer last month, and that the poorer areas which are being used to subsidise the cities in this scheme will be made an exception from the Chancellor's cuts?
On a point of order, Mr. Deputy Speaker. Before the Secretary of State addresses himself to the Welsh question posed by my hon. Friend the Member for Cardigan (Mr. Elystan Morgan), may I seek your guidance on this point? It is impossible for hon. Members representing Welsh constituencies to probe the position in Wales when the Minister replying to questions is primarily responsible for the English situation. Can you assist me in ensuring that the Secretary of State for Wales, who has ministerial responsibility for this matter in Wales, himself makes a statement and answers questions on Welsh matters?
Further to that point of order, Mr. Deputy Speaker. I can help the right hon. Member for Caernarvon (Mr. Goronwy Roberts). I am responsible because the Labour Government refused to transfer the function to the Secretary of State for Wales. I am wholly responsible. As I have said already, my right hon. and learned Friend the Secretary of State for Wales will produce a circular in due course dealing with Wales and the effect on Wales.
As for the question asked by the hon. Member for Cardigan (Mr. Elystan Morgan), he has wildly exaggerated the position in Wales. I can assure him that there will be no discrimination against Wales in the cuts which will be imposed which would affect the 9 per cent. mentioned for the domestic ratepayer.
On that same point of order, Mr. Deputy Speaker. Although I have every sympathy with my Welsh colleagues, my English colleagues also are seriously perturbed. Is it not the case that the Rate Support Grant Order, about which the Secretary of State has made his statement, is presented to Parliament by the Secretary of State for the Environment and the Secretary of State for Wales? That being the case, is not it reasonable for hon. Members representing Welsh constituencies to expect, when they ask questions which are perfectly in order, that at least the Secretary of State for Wales might try to answer them?
I realise the interest that there is in this matter, and I have permitted a great deal of latitude on what was not a point of order at all. In any event, it is not for me to tell Ministers who is to answer hon Members' questions.
Further to that point of order, Mr. Deputy Speaker. This matter is of great importance to the House and to local authorities. The reason why the details of the rate support grant have been published in the form of a White Paper is that the Rate Support Grant Order canot be made until the Local Government Bill which we are to consider later today has been enacted. Quite apart from getting through this House, that Bill has still to go to another place. Therefore there will be a tremendous delay.
As my hon. Friend the Member for Manchester, Gorton (Mr. Marks) pointed out, treasurers normally get this information in November so that they may make their calculations about rates. In view of that, may I at least ask the Secretary of State to say what is the Government's timetable? When will the order be laid before Parliament, and when shall we be able to debate it so that we may give sensible guidance to local authorities?
On a point of order, Mr. Deputy Speaker. I have been listening to the exchanges which have occurred. May I remind you respectfully that it is your duty as Mr. Speaker's deputy to protect the rights of backbenchers? Can the Secretary of State for Wales be persuaded to say when he will discuss these matters in the House?
On a new point of order, Mr. Deputy Speaker. Just now in answer to a question from my hon. Friend the Member for Bolsover (Mr. Skinner), the Secretary of State for the Environment made an oblique reference to Clay Cross. It is the only authority which he could have referred to in his reply to my hon. Friend. Clay Cross happens to be in my constituency, and on numerous occasions I have tried to raise matters in this House pertaining to Clay Cross. Each time I have been ruled out of order because the case is sub judice. Tomorrow, Thursday and Friday the Clay Cross case will be heard by Lord Denning, the Master of the Rolls. My point of order is to ask whether it is in order for the Secretary of State to make references, either directly or obliquely, to Clay Cross and to the housing commissioner without taking into consideration the sub judice rule?