Local Government Finance

Prayers – in the House of Commons at 12:00 am on 5th July 1974.

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11.8 a.m.

Photo of Mr Caerwyn Roderick Mr Caerwyn Roderick , Brecon and Radnor

I beg to move, That this House notes the difficulties facing many ratepayers, anomalies in the present rating system, and anomalies in the operation of the Water Act 1973 and the savage increases caused by it; welcomes the setting up of the Committee of Inquiry into Local Government Finance; suggests some reforms it might consider; but also urges upon the Secretary of State for the Environment the need to introduce some interim changes before the Committee reports. It gives me great pleasure to move the motion, and I realise my good fortune in getting a place in the Ballot. I do not wish to detain the House for too long and take unfair advantage of my position, because many of my hon. Friends wish to contribute to the debate.

There have been many debates and discussions on our rating system over the years, but never have we seen such widespread discussion as in the last few months. A dramatic rise in rate bills has inevitably provoked much activity. It is difficult to understand why rates have always caused so much concern and so much more heartburn than income tax, for example. Can it be that the payment of rates requires a positive action in that people must put their hands in their pockets and deliver the goods, whereas with income tax the PAYE system renders the operation painless in that no money is seen to change hands. Certainly, rates give rise to far more discussion than income tax ever did.

A great deal of the discussion which we shall have today will have been preempted by earlier debates—for example, the debate on 27th June provided a forum for many hon. Members to present their arguments and ideas—but I felt it important to bring the subject up once again in order to give hon. Members who have not previously contributed an opportunity to put their ideas forward. Admittedly, it will be difficult to find new ideas on this subject, but we should, nevertheless, get together and collect all the available evidence and suggestions so as to see how progress can be made.

Some of the causes of the present situation are plainly apparent. The public services and local authorities cannot escape general inflation and the increased costs going with it. In my view, the reorganisation of local government in the form in which we have it now has been a major contributing factor. Many of us are on record as opposing the creation of local authorities as they stand today. Not only are they difficult to see as local, because of their size, but inevitably they are more expensive to run because the distances are greater and the new staff structures have led to enormous increases in the salary bill. No doubt, hon. Members will refer to other contributing factors.

I need not rehearse the statistics of rate demand increases. Suffice it to say that commercial ratepayers in my constituency have seen their rate bills doubled in one step. There are small hoteliers and shopkeepers threatened with going out of business because the rise has been too sudden and too large for them to absorb.

Domestic ratepayers also are hard hit. In my area they suffer more because wages are so low. In Mid-Wales wages are about £5 a week less than the national average, and as a consequence our domestic ratepayers are suffering more than most.

But the hardest thing to swallow in Wales is the water charges. Not only are there huge increases in the charges but there are wide discrepancies. For example, there is the utter injustice of having to pay 20p in the pound in Mid-Wales, in Radnorshire, compared with a charge of 2·5p in the pound in Birmingham. Hon. Members may wonder why I refer specifically to Birmingham. Lest there are those whose geography is faulty, I remind the House that Birmingham draws its water from Radnorshire, from the Elan Valley. Thus, the people living at the source of supply pay 20p in the pound, the water is carried 80 miles away, and there it is sold at 2·5p in the pound to the ratepayers in that area.

There are those who clamour for better prices for our water, demanding that we should charge more for it, but I do not join that campaign. I do not believe that there is such a thing as Welsh water, which we hear so much about nowadays. There is only water. What we seek is justice. It is utterly nonsensical for people who live next door to the source of supply to have to pay eight times as much for their water as people pay 80 miles away. Sometthing must be done to remedy this anomaly.

We recognise that there are reasons for the discrepancy. In a large conurbation where many people live close together, it is obviously easier and cheaper to supply them with water. The capital costs are often virtually the same as for supplying small villages, but in a large conurbation the costs are shared and hence the charge per ratepayer comes down. I shall refer to this matter later when putting certain suggestions to the House.

When we pass legislation, as we did in the Water Act 1973, intended to rationalise and improve the organisation of water supply and sewerage services, if we create in the end a nonsensical situation such as we have today, is it any wonder that the general public get a bit annoyed with us and fail to understand what we are up to in this place?

We have the further nonsense that people are being charged for sewerage provision when their properties are not even connected to the main system. This has given rise to a great deal of anger throughout the country. Admittedly, this charge was made previously, but it was hidden within the rate demand. When the day came on which it appeared as a separate item, however, we ought to have said that those who did not have the service would not have to foot the bill. Now that it is itemised separately, we should correct that anomaly, too. Ministers at the Welsh Office and at the Depart ment of the Environment have admitted the folly of this latter matter.

Here is another folly. Fancy paying water rate and sewerage rate on a garage! Yet that is what is demanded. We now see these items separately on the rate demand. The amount that a ratepayer pays depends upon the total rateable value of his property, including a garage if he has one, so that the absurdity of the situation is there for everyone to see.

What is more, the charges for sewerage and for water do not qualify for rate rebate. Rate rebate is allowable on the main part of the rate demand, not on those charges. This ought not to be tolerated.

All in all, I find the rating system as we have it now quite offensive. It is offensive in its regressive nature, and, although more people today qualify for rate rebate, there are still those who are too proud to claim it.

During the past two months or Conservative Members have been campaigning vociferously for a change. What a pity they were not so active two years ago when we had an opportunity to follow up the Green Paper. I understand from today's Western Mail that some hon. Members are asking for a debate on this subject in the Welsh Grand Committee. I am sure that we shall be glad to have such a debate if it can be fitted in, because we want to lay the bogy that is being put about that the present Government are responsible for what has happened.

It is necessary to go back a little and remember that the rate demands were being issued not long after the General Election. Indeed, they were being prepared at the time of the election, and all the figures were available then. Therefore, what has happened since cannot be laid at the door of this Government. We on this side, on the other hand, want our Government to ensure that there is no repeat performance next year. We want the matter put right.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

The hon. Gentleman must admit that throughout the country many ratepayers in rural areas are suffering as a direct consequence of the early action of his Government in redistributing the rate support grant.

Photo of Mr Caerwyn Roderick Mr Caerwyn Roderick , Brecon and Radnor

Some have benefited, some have lost. But the clamour seems to be coming from business people who are totally unaffected by that action. They are the ones who are causing the biggest furore. I agree that they are suffering, but they must not blame the present Government for what has happened. It was simply a redistribution in respect of the domestic element in the rate support grant which came after the election. Admittedly, there are those who suffered by that change, but it was done in order to attend to the inner city areas. I shall make some suggestions for what ought to be done about that.

When the Conservative Government produced their Green Paper on "the Future Shape of Local Government Finance" in July 1971, we expected an announcement at any time of a White Paper indicating some changes. What happened? We had to wait until 12th November 1973, and the Local Government Bill then produced was just a hotchpotch of a Bill with little to show for all the labour supposedly put into it. Very little change was made.

In my view, we have these problems today very largely because an opportunity was then missed, and I can only say again that I wish that hon. Members opposite had been vociferous at that time in demanding changes.

On 27th June my right hon. Friend the Secretary of State for the Environment announced the setting up of a committee of inquiry. I am delighted that he intends it to be a wide-ranging unrestricted investigation. By that I understand that he will intend it to look at both the method of collecting local revenue and the contribution that the central Government will make.

I should therefore like to repeat suggestions of some avenues that the committee of inquiry should study closely. The present rating system is based on rateable value. The assessment of rateable value is an entirely subjective judgment. District valuers are expert in the matter, but it is still a subjective judgment that they make. An assessment of this kind is thoroughly unpopular, and when people improve their property only to find that they are penalised by the rates, they grow to loathe the whole system.

In any case it is an archaic seventeenth century system. It is interesting to note that only three countries employ such a system. We are one and South Africa is one of the others. That almost speaks for itself.

Paragraph 3.5 of the Green Paper talks about the disadvantages of the rating system. It says: But rates also have disadvantages. For the domestic ratepayer at the lower income levels rates tend to be regressive—that is to say, the lower the householder's income the greater the proportion that will be taken by his rates—although at average income levels and above rates are no more regressive than the other main taxes on expenditure. Moreover, rates are the largest tax which is demanded in substantial amounts from those of average means or less. In the commercial and industrial sectors, rates fall relatively heavily on those whose operations depend upon substantial investment in fixed property and plant—and anomalies in the rating of plant and machinery aggravate this effect. Periodic revaluations are needed to ensure that rateable values maintain their relationship with current rental values, and, between revaluations, poundage increases are necessary simply to offset the effects of inflation. In addition, valuation of dwellings has become increasingly difficult because there is at present a growing scarcity of evidence of open market rentals, on which rateable values are based, in large parts of the domestic sector. So the first thing we need is a tax that is based on ability to pay.

The clamour is now becoming so loud that I believe that it is impossible not to go for a scheme of local income tax of some kind or another. I know that it is fraught with difficulties, but they must be overcome. In this computerised age, it surely must be possible to use the information stored by the Inland Revenue for this purpose.

Fears have been expressed about knowledge of a person's private income and means being made available to local authorities. The Green Paper of 1971 in paragraph 2.16 said that a local tax on incomes and profits could take one of two forms, a tax assessed and collected locally on information supplied by the Inland Revenue, or a system under which only the tax rate is fixed by the local authority, with assessment left in the hands of the Inland Revenue. It said: Both systems would require personal information to be transmitted by the Inland Revenue to local authorities involving a substantial change in the present strict rules of confidentiality, to which most people attach great importance. That is an interesting remark to find in the Green Paper. What about the 3 million people who at present qualify for rate rebates? What about their dignity and confidentiality? They have to declare all this information to the local authority. Is there to be one law for the rich and one for the poor? Why this concern about confidentiality when it includes people such as ourselves? We do not care so much for the 3 million collecting rate rebates when they have to do the declaring.

Many obstacles are put in the way of such a tax in the Green Paper, but they are there to be overcome as I said earlier. It is pointed out that difficulties exist for companies that operate nationally. Surely it is not beyond the wit of man to devise a formula to share the contributions among the various areas of operations.

Naturally, the same total sum would have to be collected, but collection would be distributed differently. Let no one be deceived into thinking that by this measure he will be better off. By this means there would be some correction in the present intolerable injustice. Areas that are poor in terms of rateable value would probably be low on income, too. My constituency is one such. As I have said, wages there are £5 below the national average and so adjustments would be needed, and that brings in the central Government's support.

Whatever system is adopted, the central Government will largely have to support local revenue. Many people advocate that certain services such as education, the fire service, the police and so on should be paid for entirely by the central Government. Others fear the loss of local autonomy. I am not so worried by the latter, because I am one of the advocates of an elected assembly for Wales with executive powers. Such an assembly would draw its funds from central Government sources, yet we feel confident that such an assembly would still retain a fair degree of autonomy.

I think that the fears that local authorities would lose autonomy are not well founded. Even if we do not aim for 100 per cent. support by specific grants, certainly increased support must be found. Some people believe that by this means they will avoid paying, but that is because they will be paying out of one pocket rather than another. They cannot escape their responsibilities, of course, and we should give the lie to that belief immediately. What we should do, however, is to adopt the good Socialist ideal of "from each according to his means" rather than charging rates according to where someone happens to be living and according to the kind of house that he has.

Commercial premises should be judged similarly. Either profits or turnover should be the criterion. Regardless of the size of the premises, many businesses would then survive in areas such as mine, because their rates would be based on something certain, something that they could measure against profits.

On 27th June my right hon. Friend said: The new direct water charge is no longer a part of the local rate. My present view, therefore, is not to include it in the terms of reference of the committee of inquiry into local government finance, although I still have an open mind.…I have told the chairmen of the National Water Council and the regional water authorities that, while I propose to let the new system run for two years or so, I then propose to review its progress with an entirely open mind. While the demand for water charges comes on the rates form and the charge is based on rateable values, my right hon. Friend the Secretary of State will find it difficult to sustain the argument that it is separate.

I hope that hon. Members and my hon. Friend the Under-Secretary will be able to persuade my right hon. Friend to take a different view and to include water charges within the terms of reference of the committee of inquiry. The committee should consider whether water should be entirely free of charge and paid for out of Exchequer funds.

The snag about the committee of inquiry was shown by my right hon. Friend's remarks on 27th June when he said: I shall ask the committee to make its recommendations as soon as possible, and in any event before the end of 1975. That means legislation by the year after that and possibly action after another year. So we shall be running into four years before we get any action as a result of this committee.

The people whom I represent cannot wait that long and so we must consider the immediate future. My right hon. Friend went on: I have made it clear that the committee of inquiry will be concerned not with the interim problems raised by this part of the motion but with the long-term issues and the whole nature of the system. But I hope I have also made it quite clear and, if not, I underline it again that I am extremely conscious of the shorter-term problem and of the real hardship which many ratepayers are facing this year. I shall certainly consider with great care any points and ideas put forward in this debate which bear on the immediate situation. But there are, as the House well knows, acutely difficult questions of priorities in the field of public expenditure. I am willing to look at all the possibilities, but I cannot give any commitment today."—[OFFICIAL REPORT, 27th June 1974; Vol. 875, c. 1771–5.] I hope that this debate will give him some ideas for proceeding immediately.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

The hon. Member will, of course, recall that it was at the end of that debate from which he has quoted that Parliament expressed its will, which was that the Secretary of State should take some immediate action. I trust that what he says this morning will reinforce what we decided in the House last week and that we shall have action next week.

Photo of Mr Caerwyn Roderick Mr Caerwyn Roderick , Brecon and Radnor

I was not suggesting next week. We know that this Parliament has been taking some most peculiar decisions recently. These have not necessarily reflected what is possible. It is strange that Conservative Members should be seeing that all manner of things are possible these days whereas a few months ago they were producing obstacles to progress.

What I am anxious about is that we should have action during the course of the year to ensure that the Government do not produce the monstrosities which the last Government produced. One thing the Secretary of State must do is to step up the rate support grant. Here I am thinking of immediate action. This could provide relief for all without a great deal of complicated procedure. Incidentally, the domestic element now being provided for second homes should surely be abolished and that money used to increase the domestic element for those people in their first homes. It was surely never intended that we should be supplying rate support for this purpose.

Since the Water Act has shown up the most crazy situation we must have a short amending Bill this year. The Act provides for equalisation of charges within the regional authorities by 1981. This is not good enough. It should be done this year and the amendment to the Act should provide for equalisation throughout the United Kingdom. Why should water be subject to different charges when such basic commodities as electricity and gas have a standard charge throughout the country? The boundaries of the water authorities have been almost arbitrarily drawn so that in Radnorshire a person can pay 20p in the pound while in Montgomery, a mile or two down the road, it is 4·5p in the pound. This is total, arbitrary nonsense and should be put right. Water and sewerage charges should immediately be considered for rate relief. At 20p in the pound a large part of the rates of many householders are disqualified from rate rebate.

I pray in aid the remarks made by the Under-Secretary of State for the Environment in an Adjournment debate on 15th May. He said: We must remember that the charges"— that is the water charges— are not subject to rate rebate, and they ought to be. This comes from a Government Minister. I hope that we will get action during the course of this year.

I come now to the nonsense of sewerage charges paid by those consumers not connected to main sewers. Various Ministers have told me that it is a question of local authorities identifying such ratepayers, but that that may not be possible for some time. I return to the words of my hon. Friend the Under-Secretary of State for the Environment during the Adjournment debate on 15th May when he said: This matter has arisen in my constituency, and it is an almost intolerable position that people are being charged for a service which they do not receive…I cannot announce details tonight—it will be realised that I have not sufficient information before me to be able to do so—we are trying to devise a way not only to stop it for next year but to do something about the effect of these charges this year. I am not promising that we can do it, but we are trying to devise a way."—[OFFICIAL REPORT, 15th May 1974; Vol. 873, c. 1430.] If something can be done about this it will do a great deal to calm the situation while we await the report of the committee of inquiry.

I have touched briefly on some of the matters involved in this subject. There are many more. I am sure that hon. Members will cover them. I hope that they will supply information which will be useful to the Department. I thank the Under Secretary of State for Wales for attending today's debate. I know how difficult it can be, because our Ministers in the Welsh Office have a great deal to do involving a large amount of travelling. I hope that he will take the message of this debate to his right hon. and learned Friend.

Several Hon. Members:

rose

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. It is obvious that a considerable number of right hon. and hon. Members want to take part in the debate. I hope that their speeches will be reasonably short.

11.35 a.m

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

I welcome this opporunity to speak on local government finance once more. I congratulate the hon. Member for Brecon and Radnor (Mr. Roderick) on his speech and on having introduced this subject. I thought that there was a little bit of "sugar loaf" in his speech. I would have liked to hear a little more of an attack on the Government, aimed at securing immediate relief for taxpayers. I represent a constituency like the hon. Member's, where the wage rates are below the national average. I know only too well the despair of ratepayers.

I notice that the Liberals are absent from the House today. They have so often claimed that they wish to do something for the hard-pressed ratepayers. I introduced my first Private Member's motion dealing with local government finance in 1962. On that occasion I discussed ways and means of helping the hard-pressed ratepayers and got the Allen Committee set up. That was the first committee to introduce rate rebates for ratepayers. Then Richard Crossman extended the scheme, and this has been of great benefit to ratepayers as a whole.

I hope that the Government will act quickly over the rebate for water and sewerage charges because this is affecting ratepayers just as much as they were being affected by rates in 1962. I urge the Government to introduce this relief. I voted against my own party, when it was in Government, during the Local Government Bill because I realised that that was one of the things that should have been dealt with by the Bill. In 1967 I introduced another motion on local government finance to discuss the broader question rather than ways and means of getting more finance. I introduced another motion in 1972.

There is a common thread running through local government finance, and that is the high cost of education. That cost should be transferred to the taxpayer. Over these 10 to 15 years that I have been raising this subject what has disturbed me very much has been the fact that, although we have been prepared to have a Royal Commission and accept the need for a reform of the system, all that we have got has been the reorganisation of local government. I sometimes think that there is an establishment preventing any reform of local government finance. As Members we have to break that Establishment and urge early action on the Government. Otherwise our reforms will not be taken up.

Is it any wonder that ratepayers should be in despair and that they should be considering refusing to pay their rates? It is not surprising that there is this talk of revolt among ratepayers. It is a most dangerous situation caused by our own activity.

Photo of Mr Cyril Townsend Mr Cyril Townsend , Bexley Bexleyheath

Is it not a fact that it is the Chancellor of any Government who, upon being told that a new system of local government finance has been decided upon will say, "Not on your Nellie. I am responsible for monetary policy in this country and I will have the final say"? Is it not the Chancellor at whom we ought to be directing our efforts?

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

My hon. Friend speaks with much wisdom, because the Treasury is really the nigger in the woodpile. I know this because I have sought to exert pressure on many Chancellors of the Exchequer. We have this situation in local government today because of our failure to control local government expenditure and because the Treasury people sit back in their oasis of high finance and refuse to come down to the grass roots. They do not appreciate the kind of expenditure that is taking place locally which should and must be controlled if we are to bring relief to the ratepayer. For this reason, I have tabled a motion, supported by 73 of my hon. Friends, about taking education off the rates.

I wish that members of the Liberal Party would sign it. The Leader of the Liberal Party, the right hon. Member for Devon, North (Mr. Thorpe), has said that he wishes to take teachers' salaries off the rates. What a pity it is that members of the Liberal Party are not in the House to support this motion.

I believe that local government should, as far as possible, raise money only for services which are local and not national. There is a mood of despair among the hard-pressed ratepayers. We have almost pushed them into the position into which Charles I pushed the hard-pressed taxpayers at the time of the revolution in England. Let the Government realise the mood that ratepayers are in. Let us use strong words to make the Government realise the need for early action.

Photo of Mr Antony Buck Mr Antony Buck , Colchester

I agree with what my hon. Friend has said about the long-term situation and the need to take education off the rates. Does he agree that urgent action is needed, on an interim basis, to help, as was done by the Conservative Government, people whose rates have been increased by, say, more than 50 per cent.?

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

I agree with my hon. Friend that there is a necessity for interim relief. I wish help to be given in two respects—relief on the water and sewerage rates, and interim relief before the inquiry's report through the rate support grant.

Ratepayers also face difficulties stemming from the cost of repairing and painting their houses. Retired people living in large houses cannot move from them because of the position in the property market.

The time has come to stop subsidising education through the rate support grant and to make it a national charge. The education subsidy is the cause of much of the extravagance in local government spending. When I spoke during the debate on a Private Member's motion in March 1972 I pointed out that the cost of education in 1954 was about £450 million. In 1967 it was £1,500 million. In 1972 it was £3,000 million. It is this charge which the intellectuals who write about this problem hide away and will not talk about, but we must focus our attention on it. Is it right that the salaries of the future vast army of 514,000 teachers should be paid for by the ratepayers and not through the national Exchequer? We would never think of putting a defence bill of £3,000 million on the rates, yet that is what we do with education.

I am convinced that early action must be taken in this matter. In 1966 the Labour Government promised a major reform of local government finance. We have had a succession of Royal Commissions. We know the facts and the options. Successive Governments have failed to act. Action needs to be taken now. I underline the despair of ratepayers and the need for early action. Let us have a broad general reform. Let us tackle once and for all the problem of the heavy burden of education and other national charges which domestic ratepayers are asked to face.

I trust that the Government will recognise the despair of ratepayers and of people of the sort about whom the hon. Member for Brecon and Radnor spoke. My reason for speaking today was to bring to the Government's attention the feeling of despair among ratepayers in my constituency and in many others, and to demand action this day and not in 1975 or 1976.

11.45 a.m.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

We are all indebted to my hon. Friend the Member for Brecon and Radnor (Mr. Roderick) for giving us a further opportunity to debate the question of local government finance. He made a thoughtful speech which I am sure my right hon. Friend the Secretary of State for the Environment will study with care. I know from personal experience how assiduous my hon. Friend has been in bringing the problems of his constituents to the notice of the House and of the Government.

We are debating a difficult and controversial issue. Hon. Members on both sides are genuinely concerned about the sharp escalation in rates and are anxious to find ways and means of alleviating the burden and, if possible, of reforming the system. There is, I think, general agreement on that. It is unfortunate, as the hon. Member for Harwich (Mr. Ridsdale) pointed out, that there is no representative of the Liberal Party present. [HON. MEMBERS: "Where are they?"] I am asked to speculate on the whereabouts of members of the Liberal Party. I should think that they are out in the council housing estates repairing the window sashes and replacing the cracked paving stones.

It is a temptation to make party political capital out of the recent rate increases. The right hon. Lady the Member for Finchley (Mrs. Thatcher) did not hesitate to yield to it when she spoke in the debate on 27th June. Some hon. Members have said that the entire blame must rest on the shoulders of the present Government. The right hon. Lady criticised the last Labour Government for not including the question of local government finance in the terms of reference of the Redcliffe-Maud Commission. Those of us who have followed the recent history of local government reform know that it was the intention to follow the report with an inquiry into local government financing, but the Conservative Government. of which the right hon. Lady was a prominent member, took no action apart from publishing the 1971 Green Paper. That Green Paper was a damp squib it had no effect whatsoever.

The present Government came into office three months ago. The level of Government financial support for local authorities had already been fixed. March was the last month of the financial year, and the level could not be changed.

The Government altered the distribution of £200 million in rate support grant, which amounted to 7 per cent. of the total of £3,000 million given by the Government to help local authorities to run their essential services. This has been criticised again today. A small minority of authorities suffered as a result of it. One can understand that hon. Member who represent such authorities must point to the anomaly. My right hon. Friend the Secretary of State for the Environment said in the debate last Thursday that he recognised that he was administering "rough justice"—the greatest good to the greatest number. I accept that it was unfortunate but, from my experience of local government over 30 years, I submit that it was about the only thing he could do in the time available between coming into office and 1st April. If hon. Members have a better solution for the problem they left us in no doubt they will explain it when they come to make their speeches.

Our duty is to seek to analyse the position, to look for the causes of escalation and to consider whether there are other and fairer ways of raising money. We know that past and present inflation is "the villain of the piece". It accounts for about 30 per cent. of the general average increase. Then there is the reorganisation of water and sewerage which accounts for 6 per cent., the permitted growth of local authority spending which accounts for 3 per cent. and the reorganisation of local government which has added further to the burden, although, I understand that it is not possible to calculate the percentage increase there. Perhaps my hon. Friend the Under-Secretary of State for Wales will comment on that.

The previous Government were responsible for bringing about the reorganisation of local government, water and the health services on the same day, and this at a time of savage inflation. We pointed out the difficulties when the relevant Bills were passing through the House, but our pleas fell on deaf ears. If reform in the three sectors had been phased over, say, three years, and if some of our warnings, especially in relation to the Water Bill, had been heeded, we should not be in such acute difficulties today.

Against the background of mounting costs and big new authorities grappling with enormous problems, often in inadequate premises, and also of bewildered and resentful ratepayers, we must welcome the setting up of a full-scale inquiry into the problems of local government which was announced by my right hon. Friend last Thursday.

The hon. Member for Harwich referred to the difficulties which had apparently been created by obscure but powerful forces to prevent a full inquiry into this subject in past years. Obviously, these forces, wherever they exist, have now been frustrated. I was sorry that the hon. Gentleman did not feel able to give a much warmer welcome to my right hon. Friend's announcement. Here, for the first time for many years, a Minister of the Crown responsible for this subject has taken action.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

I do not wish to engage in an argument across the Floor of the House. I merely point out that the 1966 Labour Government promised a major reform of local government finance.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

The late Richard Cross-man made that promise, and I referred to it earlier.

It was decided that the first requirement was to examine the reform of local government, and the Conservative Opposition at that time did not dissent from that decision. A firm promise was made that the Redcliffe-Maud Report would be followed immediately by an inquiry into local government finance. Unhappily, in the June 1970 General Election the Conservatives came to power, and they had the opportunity when the report was published to follow it at once with an inquiry into local government finance, but they did not do so. The years have slipped by. Had they acted then, we might today have been debating the report of a committee on local government finance. The hon. Member for Harwich must be fairer in his speeches. He does not elevate the debate when he makes party political points of that kind.

I am glad that when the committee conies to undertake this task no aspect of the subject will be excluded. I hope it will get down to its work speedily and decisively. A great deal of preliminary work has been done on the subject over the years. We can, for example, dispense with a long historical dissertation starting with the Elizabethan Poor Law.

My right hon. Friend the Secretary of State for the Environment was right when he said that dissatisfaction with the present rating system is now both more violent and more universal than any of us have probably known it to be in our lifetimes".—[OFFICIAL REPORT, 27th June 1974; Vol. 875, c. 1771.] My right hon. Friend mentioned the end of 1975 as the time when the committee might complete its work. I hope that the committee will be able to work more speedily than that, and I suggest that it might aim to finish its task in 12 months' time.

The present rating mechanism has advantages, as we noted in the 1971 Green Paper. It is well understood and it provides a stable and reliable source of revenue. Rates are flexible because it is easy to alter the level of poundage. It is very economical to collect rates, and the rating system gives local authorities a degree of independence from the central Government. Rates have been described as a "bulwark of autonomy".

There are, of course, objections to the rating system. For example, it has no satisfactory tax base. We know that the quinquennial valuations are postponed so that rateable values do not keep pace with the fall in the purchasing power of money, and as a result poundages are forced up almost every year, causing the discontent with which we as Members of Parliament are familiar. The main objection to rates, however, is that they fall unevenly on different classes of the community. In this day and age house occupation is an unsatisfactory guide to wealth and ability to pay, and that was clearly discussed and established in Professor Allen's committee in 1965.

I know that the committee of inquiry will direct its attention to these matters and to alternative possibilities for collecting money locally. A local income tax has been referred to. That has attractions and it also has sizeable disadvantages. If a local income tax were adopted, we should avoid the creation of an additional large local bureaucracy to collect it. I suggest that collection could be arranged through the agency of local Inland Revenue offices, and the committee will want to consider that.

Then there is the well ventilated proposal of the rating of site values. That system also has some merit, but I do not think that it is the easy solution which some members of the Liberal Party suggest. Further, there is the proposal for a sales tax. That is attractive but its disadvantage is that it would operate unfairly against sparsely-populated rural areas and very much to the advantage of large shopping centres such as London, Liverpool, Cardiff and Swansea. But the proposal certainly bears looking at.

I wish to turn briefly to some local problems which I have raised in the House on several occasions and which my hon. Friend the Member for Brecon and Radnor (Mr. Roderick) mentioned. The first is the wholly unreasonable water rate that is being levied in many parts of Wales as the result of the 1973 Act. I explained the position in Anglesey in an Adjournment debate which I initiated on 6th May. I shall not, therefore, dilate on it today. On average, domestic users in Anglesey are paying three times as much for water, and the cost of metered supplies has gone up fourfold since last April. This is intolerable, and urgent action must be taken to correct the anomaly. It is causing great hardship to householders, farmers, shopkeepers and industrialists in the area. Some firms have said that it will affect their prospects, and this is in a development area with chronically high unemployment.

I have received a number of letters on this subject and I should like to read briefly from one or two of them. I wish to quote from a letter from a constituent to the divisional finance officer of the Anglesey Water Authority in which he said: I have recently received your account for water totalling £37·78 for the coming year. I need hardly tell you that I was horrified as my rate for last year was £7·34"— in other words, a 500 per cent. increase. This account is so much beyond all reason that I am sure there must be a mistake and I therefore enclose a remittance totalling £4·03 in respect of the first half year. This is made up from last year's account, plus a reasonable increase of 10 per cent. I shall not comment on the last passage in the letter save to say that I believe the law must be obeyed, however objectionable and offensive it may be. It is our duty in this House to see that a bad law is speedily changed.

I refer next to a letter from a firm in my constituency the manager director of which says: It should be pointed out that water at 50p a thousand gallons for a dyeworks is completely and utterly ridiculous and un-commercial and guaranteed to bring down the closure of any dyeworks, especially if it is the only dyeworks in the country having to pay in excess of three to five times more than its competitors". He then makes the point that if such treatment had been even suspected there would have been no possibility of the dye-works or company being established in Anglesey. He continues: It should also be pointed out that water in Kuwait and Saudi Arabia is cheaper than the water in Anglesey". We lose out on the oil and the water!

The Anglesey Borough Council has also passed resolutions calling for a reform of the Act and for immediate action within the existing law. There is also a motion on the Notice Paper in my name and the names of a number of my hon. Frends. I should like to read it since it summarises the prevailing attitude in Wales. That this House, noting the effects of the Water Act 1973, which has resulted in substantially increased water charges throughout Wales with serious consequences for domestic, industrial and agricultural consumers and noting also the imposition of a new sewerage rate which is not eligible for rebate and which is payable by householders whose properties are not connected to main drainage, calls upon Her Majesty's Government to review the Water Act 1973, with a view to amendment so that water and sewerage can be treated as basic public services and grant aided accordingly, and, in the meantime, to require the Welsh Water Authority to introduce the principle of equalisation of water charges so that the burden, which now falls most heavily on the sparsely populated areas with the least resources, may be more equitably distributed. I believe that to be a moderate and reasonable motion and I hope that the Minister in his reply will state the Government's attitude to it.

I appreciate that an urgent inquiry into water rates is proceeding but I must warn the Government that we cannot wait too long. This increase is too great a burden to be borne. Equalisation is possible within Wales under the 1973 Act, and possibly throughout England and Wales within the same legislation. I believe that this may be the solution to the problem and that it should be put in hand soon.

We have many great reservoirs in Wales, although my hon. Friend the Member for Brecon and Radnor said that there was no such thing as Welsh water. I hope he will agree that there is such a thing as Welsh rain which provides the water. I invite any hon. Member or any Minister to go to a householder living in the shadow of a dam in Wales and explain to him why he should not enjoy piped water or why, if he has it, he should pay several times more for his water than does the householder who lives at the end of the pipeline in Birmingham or Liverpool. There is no time to be wasted on this matter and we shall expect a statement very soon stating how the problem is to be put right.

Another matter which I hope the committee of inquiry and the Government will consider with care relates to rural areas, such as the new county of Gwynedd. A heavy burden is placed on the public services in these areas by the sparsity of population and the seasonal influx of holiday population. It should not be forgotten that the cost of maintaining these services is greater in these areas than in urban areas. This applies especially to education and highways which between them account for about two-thirds of local authority expenditure. The so-called sparsity grant is not adequate compensation for the extra expenditure which has to be incurred in Gwynedd on highways alone. The principal roads of the Snowdonia National Park have over 10 times the traffic in July and August that they carry in the rest of the year. The whole grants distribution system needs urgent review, and I hope that the Minister will comment in some detail on this issue in his reply.

Again, as a result of the Water Act 1973 the sewerage charges are not assisted by rebate—and, what is worse, households which are not connected to main drainage are subject to the charge. I welcome my right hon. Friend the Secretary of State for the Environment's assurance last Thursday that urgent steps are being taken to identify all these properties so that they can be given relief as soon as possible. We cannot wait for a year or two or three years. Action can be taken now within the existing law. Such action would not be costly.

We all appreciate that the Government—indeed, any Government—face economic difficulties. The Conservative Government imposed severe cuts on public expenditure, and we recognise the urgent problem faced by the Chancellor of the Exchequer, but the cost of alleviating the situation would not involve great sums. It would indeed be an investment in these areas, because we shall not attract new industry or see the expansion of existing industries—indeed, we might experience contraction—unless the Government take action urgently. These charges affect the day-to-day lives of people in an area which has known hardship, depopulation and unemployment for over a century. I have confidence that the Government will give sympathetic and early attention to their solution.

In the longer—but not too long—term I wish the committee of inquiry well. It has a difficult task to perform and the problems before it are great. I hope that in due course it will provide the answers to the questions which hon. Members are posing in this debate.

12.10 p.m.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

It seems to me that the rising concern in the country about the increases in rates stems from two factors. First there has been the prices and incomes policy which has held down wage increases to between 7½ and 10 per cent. at a time when rates are increasing, and obviously it is difficult for anyone with a 7½ to 10 per cent. wage increase to pay out of his income a rates increase of anything from 40 per cent. to 50 per cent.

The second cause has been the big local government reorganisation. Of course, it happened before I became a Member of this honourable House, but it is something about which I was always sceptical. It does not seem to be local at all and appears merely to encourage the growth of large administrative bodies with staffing ratios of between 8 per cent. and 10 per cent. more than those of their predecessors, quite apart from the larger salaries that they command.

Just as we have from time to time to change policies on other matters, I believe that at some point in the future we shall have to return to local government units which are answerable to people within a measureable distance. As on other issues, I believe that there will be great respect in the country for any Government who change their mind and admit that circumstances are different or that local government reorganisation was wrong.

One of the reasons for much of the cynicism of the public towards politicians is that people feel that no one in politics is prepared to admit that he has made a mistake. In local government we have lived through the change. We have seen the change come about in London, just as we have in areas outside the capital. I have in mind especially the results of the change in both London and Lancashire where I have served many years as a councillor.

The debate has concentrated so far on how we can levy charges in respect of local government expenditure and not on whether the expenditure is necessary in any event. We have heard already about excessive local government expenditure. I do not think we can solve the problems of local government expenditure by passing it on to national taxation. If we tried to do that, the result might be a tax revolt similar to that which has been happening in certain parts of the country over rates. We have to reassess the basic principles on which local government should be run and decide whether some of the services that it provides are really necessary for any public body to perform.

Local rates go back to the system of the Elizabethan Poor Law of 1601 or 1603. I hope that Government supporters will not be offended if I suggest that in many ways our system of local government expenditure goes back to Fabian Conservatism towards the end of the nineteenth century and has been accepted ever since. In my view, the test of government is that if it does anything which the majority of people could do for themselves it is bad government. It is a mockery in an age of participation to talk of taking away further powers of individual choice.

The hon. Member for Brecon and Radnor (Mr. Roderick) suggested that the means of people to pay rates could be assessed and that the charging of local government expenditure on house property was quite out of touch with the incomes going into some of that property. Similarly, since the end of the nineteenth century and the build-up of our present local government system there have been developments in the assessment of income tax, and now we see the introduction of computers, from which we have all suffered from time to time, especially when they are applied to our bank accounts. But if they are used in an objective manner there are ways of assessing which local government services are essential and of providing means for those who cannot afford the services transferred over to personal responsibility by additional money, reverse income tax or vouchers to take advantage of those services.

There are a number of local government services which will have to be reassessed. One element is the huge expenditure of £3,000 million on education. The rising cost of education looks like going on rising until it reaches bursting point not only in terms of local expenditure but also in terms of national expenditure.

In the report of the Plowden Commission there was a minority report signed by eight of its members, not all of them associated with the Conservative Party. They suggested that if we introduced nursery education it should be on a means-tested basis, with a payment from those who could afford it of 25p a week—the equivalent of 50p or 75p today.

It is ridiculous to increase education services when we cannot even afford to pay our teachers well and to keep them in the compulsory service for children aged between 5 and 16. I sometimes wonder whether we would not have a better education service if we cut expenditure by one-third. I am convinced that the best infants' schools today are those without facilities where there is a teacher and a classroom and where English and mathematics are taught. Today we install television sets, video tape, Jungle Jims and very often learner pools, and the teacher has to justify the expenditure by spending time on them, with the result that there is no time to teach English and mathematics.

The best school of which I was ever the head—it was not my last one—was in Lancashire. It had the minimum of facilities. The teachers taught from nine in the morning until four in the afternoon, and the children left well versed in the three Rs.

Photo of Mr Caerwyn Roderick Mr Caerwyn Roderick , Brecon and Radnor

Is the hon. Gentleman implying that television is a barrier to education? Does he have a television set in his home, or does he consider it an obstacle to his cultural development?

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I have a television set at home. But my home is not a school. There are certain things which I have at home, like beds, which I should not expect to find in a school. I do not believe that television is as useful in schools as some people pretend, and I think that most teachers agree with me. Children are used in their homes to see their television sets as rolling wallpaper. There is not enough concentration. It is quite wrong to suggest that television is better than a teacher. Children are best taught by a teacher with chalk and talk.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

Is the hon. Gentleman suggesting that a teacher turns on the television set and then goes out of the classroom? Surely teachers use these visual aids as a supplement to and not as a replacement for teaching.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I take the hon. Gentleman's point. However, I still believe that the best teaching in a classroom is done by a teacher who knows his class in depth. It is not done with the aid of a television set, irrespective of the level of attainment in the class. I referred just now to an infants' school. Their horizons can be enlarged, but I still think that if children are not taught the basic three Rs they leave school much more deprived than if they are denied the use of visual aids in the classroom.

I also believe that there are more ways of educating children than in school. At the moment there are more women teachers outside our schools than in them. Many children could be taught at home as well as in school if we laid down standards which were to be achieved at certain ages. We might see the blossoming of a fourth television channel devoted purely to education in the home for those who preferred home tuition to that available in schools.

I use those examples to illustrate that, just as local government reorganisation has led to different and more expensive forms of administration, so developments in education produce all kinds of technical difficulties which do not arise in basic teaching.

I make one last comment on education. Practically every country uses some form of loan system. Most countries are richer than us and some, like Sweden, have had Left-wing Governments for a long time. But we give universal grants—I agree on a means-test basis—in a way that other countries have decided they cannot afford.

Housing, on 1972 figures, now costs about £872 million a year. The council bulldozer has done more harm knocking down terraced houses in city centres where local shops and "pubs" were social centres and the back yard gave an identity to people than anything else since the war. There is a great demand by people for the opportunity to own their their own houses, and we slant our legislation in that direction.

The figures that I have for hidden and open subsidies show that for each council house we build there is a subsidy of £900 per annum, allowing for the subsidy from older council houses built in the 1930s, compared with the average mortgage subsidy of about £280. If we could encourage people to identify themselves with their own houses instead of building more council houses we could achieve a substantial cut in subsidies.

In Brent, houses are being bought by the council for £28,500 each. That happened this year. Those houses incur subsidies of £2,500 of national and local money every year. If that is the way to solve local government housing problems, I do not agree with it. It is no wonder that rates in Brent have increased by between 35 per cent. and 40 per cent. It is no wonder that people with average earnings and paying rates feel great indignation and are refusing rate demands.

My third and fourth points relate to refuse collection and so on. If refuse collection is to be run for the benefit of the householder and the commercial organisation, I think we should consider putting it out to tender to see whether it could be done cheaper than by council dustmen. Labour Members who visited Montreal know that refuse collection there was put out to tender seven years ago and a cut of 20 per cent. in the cost was achieved. The local people were also satisfied with the arrangement.

It may be that large urban areas could have alternative sources of refuse collection. There are alternative sources of milk delivery, newspapers and so on. Although refuse collection is carried out by local authorities, that does not mean that until Gabriel blows his trumpet council trucks will have to keep rolling down the streets of our towns and cities.

I turn now to the police rate which has increased quite substantially. I am not saying this with any feeling of animosity, but the police rate in London has gone up. We have moved to a situation where it is now possible to hire policemen for certain jobs. Wembley stadium is in my constituency. I am aware that police have been hired and are needed on certain occasions at the stadium. I suggest that factories and commercial premises which do not have a minimum standard of security should pay extra to the police rate because of the additional protection they require. It is not for the rest of the community to subsidise factories and business premises which are not properly safeguarded.

I agree with Sir Alan Herbert's Bill which was directed to the question of economic libraries. Since 80 per cent. of books in libraries are fiction, not all of a tremendously high standard, I agree that there should be charges for books. However, I should have opposed my party on the great battle regarding museum charges. I do not think that there should be charges for entry to museums, but charges for library books is a matter worthy of consideration.

We are all agreed that the rise in rates is oppressive upon the ratepayer. We are moving them towards a revolt which will not help our social fabric. Temporary help is necessary. We could give temporary help by moving more of the burden on to the Exchequer. This might, however, cause a disturbance in income tax, because in the last resort it comes from the purses of the people, but that also would not be preferable to a rates revolt.

I welcome the setting up of the committee to look into the rates problem. I think that it should also look at local government services and consider whether they are essential.

An individual should have the maximum choice of how to dispose of his income to his own satisfaction, just as in the nineteenth century the happiness of people was improved by the ending of the Truck Acts, which meant that employers could no longer pay their workers in the material that the employers wished to give. I suggest that we should look at ways of giving people more choice in the disposal of their money rather than say "You are having this whether you like it or not"—the modern local government truck.

12.25 p.m.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Stockport North

Having listened to the hon. Member for Brent, North (Dr. Boyson) I am concerned about some of his remarks, particularly the suggestion that it might be time to change local government again. I believe that some of the extra cost has come from the reorganisa tion of local government, but when the new authorities have settled down they will be efficient and reasonably economic.

The television set may or may not be useful in school, but it is not the major part of education cost. The buildings and teachers' salaries take up most of the money.

It is easy for individuals to get rid of refuse, but often at the expense and inconvenience of others. What dismays me about my area is the number of people who dump old beds and mattresses on street corners or waste areas instead of taking them to the refuse tip where they can be got rid of freely or making arrangements for them to be collected by the council. Refuse collection is one of the last of our services that we should hand over to private enterprise.

Rates always cause a shock when demand notes are put through letter boxes. The rate demand may not appear so great to a tenant who pays weekly, but it is still a shock when he receives the bill. People always miss money that they have had in their pockets and have to pay out rather than money they never receive—for example tax, which is deducted at source. Rates have always been an unfair burden, but the problem is that the sums involved have become steadily larger. That is what causes so much upset.

Rates have not suddenly become a hysterical issue in my constituency, since it has received slightly more generous treatment from the present Government than it would have received from the previous Government.

The unfairness about rating is that it takes no account of the ability of people to pay. There are many examples in my constituency of people living in identical houses with differing abilities to pay. On the one hand there are pensioners and large families with low incomes, and on the other hand there are families who may have four wage earners in one house bringing in considerable amounts of money.

The rate rebate helps those who face the greatest hardship, but it has done nothing to equalise or bring about social justice between people with different abilities to pay who live in identical houses.

One area of resentment is where rates are increased because of home improvements. The increase is usually small, but it is resented particularly by people who may have installed central heating or added a porch or other extension to their houses.

The redress that can be obtained for damage to one's environment by the building of a motorway or large factory nearby is extremely small compared with the feeling that the whole environment has been greatly changed.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

The hon. Gentleman and his hon. Friends may be aware that there is a Bill down for Second Reading today which seeks the removal from rates of internal improvements to property. I trust that he and his hon. Friends will give it maximum support.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Stockport North

I thank the hon. Gentleman for his comment. I think that there will be much sympathy for that Bill. There is little point in that, however, if the whole basis of the rating system is whether someone has a four-bedroomed or a three-bedroomed house or whether central heating has been installed.

One matter over which great injustice arises in my constituency is boundaries. Before the local government reorganisation there was a fairly continuous campaign by areas to the south of Stockport to ensure that they stayed outside Stockport because they were afraid of high rating. They succeeded in their campaign, much to the regret of many people.

Having seen some of their new rates, many of those same people are now busily campaigning to get back into Stockport to enjoy the benefits that are available in that authority. Stockport and the Greater Manchester area provide parks, libraries, and other facilities which people outside the rating area enjoy. No one suggests that people outside the rating area should be charged for using those facilities, but it seems reasonable that those who enjoy the amenities of an area should contribute something towards their cost.

I am unhappy about the holding of an inquiry. There have been endless inquiries, and there is an enormous amount of information to show that the rating system is unfair. There is also a lot of information about possible alternatives. If the inquiry were to produce a new, fair way of raising local taxation, that would be marvellous, but I doubt very much whether it will do so. The inquiry will consider all the alternatives and in the end will probably say that a local sales tax, local income tax, site valuation and so on are equally unfair and would be far more distorting than the local rating system.

We ought to do something about the problem now, and I suggest that one can retain the rating system provided that the rates are required to provide only a small proportion of local government finance. The argument that local councillors should have control over the raising of a large proportion of their finance was valid as long as they had some choice over the spending of a large proportion of their finance, but that choice is no longer available to them. More than 90 per cent. of local government expenditure is virtually compulsory, if not mandatory.

Many people have suggested that the cost of education should be taken out of the realm of local government finance. I think that about 90 per cent. of the cost should be met nationally, with local authorities being given the discretion, if they want to provide better services, to raise extra money from the rates for that purpose. The same comment applies to welfare services, refuse collection and all the other local government services.

The simplest remedy for dealing with the rating problem is to increase the percentage of Government grant paid from income tax and company taxation. We cannot get away without paying for local services, but the system to which I have just referred would be fairer and would leave the rates to pay only a small proportion of local expenditure. The local council should have discretion whether to provide the extra money from the rates. Rates would still be unfair, but the size of the injustice would be greatly reduced.

Such a scheme would press local authorities to squeeze the last ounce of efficiency out of those involved in spending the money given by way of grant and ensure that any extra income from the rates was justified to an electorate expecting low rates. Local government is much more efficient than most people give it credit for, and it is worth noting that private industry is not as efficient or as accountable to public opinion.

It is regrettable that in the reorganisation of local government the question of how councillors were to be reimbursed for their expenses was considered at the end rather than at the beginning. It would be far more logical to have a small number of local councillors paid to do the job efficiently rather than pay attendance allowances which produce all sorts of local comments and which are not particularly efficient.

Do we really require people to be paid the same amount of money for attending a 10-minute meeting dealing with parks or recreational facilities and for spending the same amount of time discussing local establishments? Having been on the establishments committee of a local council for many years, and having spent many hours before meetings poring over documents. I am of the view that there is unfairness in the system. It would be fairer to pay councillors for doing a job and to expect them to do it efficiently than to have the present system of attendance allowances.

There is need for a national agency to provide services for local authorities. One of the major problems in the Stockport area is that of a shortage of housing. The problem must be solved, and what is needed is a system under which houses can be allocated fairly as between people with tremendous needs.

Faced with such a problem a local authority tends to use a computer and a points system, but this is expensive bearing in mind that the local authority has to buy a computer programme. A programme ought to be available nationally so that all authorities can buy it off the shelf and possibly tailor it slightly to meet their needs if they have special requirements. There are other areas in which local authorities can use the services of a national agency.

Far too many local government services are not taken up to the extent that they should be because they are means tested. It would be better to remove many of these means tests and ensure that the majority of people have sufficient money to pay their rent or to pay for school meals for their children than to use means tests which involve local councils in considerable expense and baffle many of the people who ought to benefit from the services that are available.

I welcome the motion, but I hope that we can make some progress towards reforming the rating system quickly and not get bogged down in yet another inquiry.

12.36 p.m.

Photo of Mr Cyril Townsend Mr Cyril Townsend , Bexley Bexleyheath

I rise to make a brief contribution, suspecting that by the time I sit down I shall have lost many friends, but hoping that I may have influenced one or two people, because my views in some respects are at odds with those of my party and of most hon. Gentlemen on the Government Benches.

It is right that we should have this additional bite at the cherry today. Many hon. Members who failed to get in on the previous debate welcome this opportunity. It is right that the new committee of inquiry should have a copy of today's proceedings before it when it gets down to work.

It is right, too, that some interim help should be provided for hard-pressed ratepayers. Government Members have asked us to say where the money will come from. Let us do away with food subsidies and use some of that money to make an interim award to ratepayers.

I was told on Wednesday when I had a session with my borough treasurer that the rating system has been about to break down, to his knowledge, for the last 25 years. Nevertheless, there are grounds for thinking that the crunch point has come this time. The fact is that rates are not sufficiently buoyant. They have not kept in line with the fantastic increases in the costs that face local authorities. Revaluations must be carried out regularly, but that was shirked in 1968. Hon. Gentlemen on the Government benches like to forget that, but it had a most damaging result, and part of the row this year is as a result of that shirking by the then Government.

I should like to see a change to a system of rates based on capital values and not on supposed rental values. I do not believe that the average householder has a clue to the rental value of his property, but he does have some indication of the capital value of it, and such a system might make more sense to the average person.

The hon. Member for Stockport, North (Mr. Bennett) raised the vexed issue of the installation of central heating. I shall no doubt make myself unpopular, but if someone improves his house, such as by installing central heating—it is a costly thing to do—or adding on two garages, that is an indication of his ability to pay and he should to some extent suffer accordingly. He should not, however, be hit immediately. The change should be made at the revaluation at the end of the period. The previous Conservative Government moved in that direction in helping people who installed central heating, but I do not think that anything has been done with regard to garages and similar improvements.

When I spoke to my borough treasurer I asked about rebates. There are about 75,000 domestic ratepayers in the London borough of Bexley. Of the 15,000 applications for rebates, 9,000 sent the form back, and about 10 per cent. are in receipt of rebate. I asked to see the form. It is far too complicated—these forms always are. Hon. Members who have to deal with constituency problems know that forms such as these are not designed for an elderly lady who does not read regularly and whose eyesight is bad. She does not understand Civil Service jargon, and she is lost when it comes to filling in these forms. They must be made really simple and printed in large letters.

There is scope for voluntary organisations to visit the areas most affected asking people whether they have applied for rebates and whether they understand the system. Many authorities are good at advertising, but one reaches a point—certainly the GLC, under the previous Conservative administration, reached it—when advertising becomes too costly for the end product.

Whatever additional sources of local revenue we have, it is clear that rates are here to stay. The yield is largely exceeded only by tax on incomes; rates can be varied between areas; and rates are cheap to administer and collect. Many of the other schemes that I have heard proposed, from both sides of the House, have not struck me as being either cheap or easy to administer. Many would require a large number of additional staff. An interesting point was raised about the rate support grant and second homes. I agree with the principle that lies behind that point, but it would be hopelessly impractical to try to deduct the grant in the cases concerned.

In the London borough of Bexley, under a Socialist council we had the dubious distinction of having the highest rates in the whole of Greater London. In addition, we had to pay for a fantastic 46 per cent. GLC rate increase last year. I use the figure of 46 per cent. politely. If one makes allowances for those services which the GLC has lost, it was equivalent to an 85 per cent. rate increase. At a time of high rates of inflation, local authorities which introduce rate increases of that nature are doing a great disservice to the community they are supposed to represent. The combination of high local rates in Bexley and the high GLC rate has led to serious hardship for many people. We are not a rich community. Many people there live on fixed incomes. Once again, it is the middle classes who are getting squeezed by these powerful forces. I hope that the new council—hon. Members will not be surprised to learn that it is now a Conservative council—will make its top priority the control of future rate increases.

The council has big problems with inflation at an expected rate of about 20 per cent. and with the new London weighting—which basically I approve—giving an extra £200 to certain people. It will have great problems in containing rate increases to 20 per cent.— [Interruption.] One of my hon. Friends has said that it will be lucky. I agree. The council is working very hard. A row is taking place at present over efforts to impose realistic charges for services. That is surely right. A few years ago I withdrew from one of the City of Westminster public libraries some Gilbert and Sullivan records. I cannot remember whether I had to pay about a shilling, but it was an entirely nominal sum. It is absurd that long-playing gramophone records should be available on that basis.

There is a very big problem facing the new council in Bexley, which shares a computer with a number of other London boroughs, including Greenwich, in that for several weeks the computer staff have been on strike. The new council, therefore, which is trying to cut rates, is also faced with very large charges because it has reached the stage when it must borrow money—we all know how high interest rates are—to make up for lack of funds caused by the strike of the computer operators. It is yet another example of a sectional interest being put first and community interest last. It is just another paving stone on Britain's path to becoming a third-rate island.

The demands on Greater London's local government resources in the years ahead will exceed the resources available at present. Some supplementary source of money must be found if London's residents, workers and ratepayers are to be properly served and if in the very centre of the metropolis the basic structure of civilised society is not to collapse like a wet tent.

Some hon. Members will have seen the housing conditions in North Kensington and Tower Hamlets and will know the problems faced by those who commute daily from outer London constituencies, particularly from the South-East, where underground services are virtually nonexistent. They will know how thin is the ice between organisation and chaos in central London and how vital the need is.

During the period of the previous Conservative Government I was working in County Hall as political secretary to the Leader of the GLC. The Conservative GLC tried very hard indeed to persuade the Conservative Government to come up with some imaginative ideas for the reform of local government finance. We did not get very far. The GLC was then very keen to have a lottery. Indeed, both sides at County Hall welcomed the idea. I was a keen supporter of the Bill of my right hon. Friend the Member for Crosby (Mr. Page) on this subject. I should like to see a lottery supplying money for artistic and sporting projects. It would siphon off some of the money at present going to illegal lotteries run from abroad. I regret that the Home Office was so cool towards my right hon. Friend's proposals.

A poll tax is practical, based on the number of people in each household and the number of workers in each place of work. That could be added to the rates. It would bring in the element of numbers. Of course, it would be yet another burden for industry but it is simple and practical.

The GLC has pressed hard for years for a tourist tax—and made itself very unpopular with certain administrations for doing so. I am not entirely convinced about that proposal, but a percentage levy on hotel takings, as a planning aid, by differential taxation, as well as a producer of income is a possibility. In London we are all conscious of the number of rich tourists who visit us and use all our services but contribute in only a very small way to making a better London.

We must educate our schoolchildren about rates. I am appalled, as are many hon. Members, at the total ignorance of the rating system on the part of young people. They do not understand the boroughs' responsibilities and the new authorities, such as the GLC, and the part that they play. We shall not get very far in improving our rating system until every child is made aware of what rates are composed of, their advantages and their disadvantages.

There has been much talk today about teachers and about their pay being made a burden that falls entirely upon the Exchequer. I do not welcome that. It is right that local authorities which employ teachers should have some responsibilities for paying them.

The previous Conservative Government were a great reforming Government. It is possibly a criticism of them that they tried to do too much too quickly.

Photo of Mr Cyril Townsend Mr Cyril Townsend , Bexley Bexleyheath

On reflection I for one regret that the biggest reform of local government for a century was not matched by the biggest reform of local taxation for a century.

12.48 p.m.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

I ought to declare an interest as a member of a local authority and chairman of its finance committee.

I start by congratulating my hon. Friend the Member for Brecon and Radnor (Mr. Roderick) on giving us an opportunity to discuss this important subject. My hon. Friend has apologised for his absence now, and has a very good reason for it. I also congratulate him on the very effective way in which he moved the motion.

I support my hon. Friend in the plea that the Minister should allow the committee of inquiry to look into matters relating to water authorities. In my area, the South-East Water Authority has made an outrageous increase of 100 per cent. in its charges. It is not without significance that the four authorities with the largest increases accepted the recommendation of the Woodham Report on methods of capital depreciation and accounting. This may have some bearing on these very large increases. I hope that the Minister will allow the committee to look into this aspect of their affairs and into the question of rebates of water rates, and, indeed, of some relief for those whose premises are not connected to main drainage.

I hope that the hon. Member for Bexleyheath (Mr. Townsend) will forgive me for not following up his remarks and dealing with some of the criticisms which he made of his local authority. I am sure that some of its members will be only too happy to deal with them in due course.

In the last few years there have been numerous attempts to reform local government finance. There have been suggestions for a local income tax, a surcharge on the other members of households, and various local taxes, including a petrol tax, sales tax and a payroll tax. It was a great mistake not to make some fundamental changes before the reorganisation of local government. Instead, the new authorities, of one of which I am a member, must start the work of planning for the future inhibited by an out-of-date and inadequate system of financing local government.

It is possible to argue that in some respects rates are no different from other kinds of taxes. There are, after all, plenty of taxes which are regressive and are regarded as inequitable, especially by those people who have to pay them, because they fall on limited sectors of the community—taxes such as those on cigarettes and beer. But no tax can be pushed beyond a certain point without injustice and resistance, and I believe that we have long since passed that point in respects of rates.

Local government is already seriously under-financed, and the work which it has to do cannot be further financed on such a narrowly-based, unfair and inequitable system as that of rates. I have said that local government is under-financed, and the results are evident in many towns. Many of our staffs have to work in appalling conditions which no private employer would regard as reasonable. But there are other kinds of neglect also. Until 31st March I was chairman of one of the biggest hospital management groups in the country. Among the eight hospitals for which we were responsible there was a very large hospital for the mentally handicapped containing 1,500 patients. Last year a regional advisory team reported that half of these patients could live in the community if proper hostel accommodation was provided. This provision is the responsibility of the Social Service departments of local government. In the area from which I come, if the rate of progress continues as it is at present many of these people will not need accommodation by the time such accommodation is available.

Not only is there neglect of this kind. Looking to the future, the aspirations of local people are for increasing amenities such as libraries, swimming pools and civic buildings in order to provide a proper community system and community spirit. At present my own authority is contemplating such a civic centre, but the cost will be £8 million to £10 million. By no stretch of the imagination can the present rating system accommodate that kind of expenditure. Therefore, unless other steps are taken, we shall be inhibited in this kind of development for a long time to come.

An inquiry has been set up by the Secretary of State, but I want to warn hon. Members that it is an illusion to believe that one can suddenly find a new tax, even a local income tax, which will be acceptable to many people in the locality. Theoreticians can work out on paper many kinds of local taxation which will raise the money, but there are objections to most of them. A local tax or a surcharge on residents other than householders would be administratively complicated and expensive to collect, even with the help of the Inland Revenue. Who can believe that the young people who would largely have to pay this kind of tax would regard it with any enthusiasm? Any sales tax or vehicle tax or petrol tax or anything of that kind would be as unfair as the present rating system. It would be a kind of poll tax affecting very often the lower paid. In some cases it would fall on a limited section of the community, like a car tax and a petrol tax, and would accentuate differences which it has been public policy for 40 years to iron out between rich and poor areas.

I hope the committee will not rule out one of the simplest solutions of all—that of transferring directly certain items of expenditure to the Exchequer. Teachers' salaries and educational expenditure is the classic case. This could be done very quickly. It would spread the burden of expenditure fairly throughout the community and would remedy the situation, which I think is wholly unhealthy, in which county councils and others as local education authorities have to consider their expenditure bearing in mind that educational expenditure takes up more than half their total budget. This means that it is very difficult for education to get its due, and it is also difficult for other items of expenditure to be properly considered. It creates an imbalance which is prejudicial to the proper consideration of local government finance, and the transfer of these items of expenditure to the Exchequer would remove this imbalance.

Objections have been raised that somehow local councillors would lose independence. One must recognise that local government expenditure represents about one-third of the total of public expenditure. Of this, about three-fifths is already paid by the Exchequer. Often where there has been a reduction in local independence it has been for reasons other than that of finance. Therefore, I do not believe that this is a tenable argument against this kind of change. On the question of teachers' salaries, which local authority is really conscious of having control over the Burnham Committee? Many of them do not have a representative on the committee, anyway. Indeed, it is automatic to accept Burnham unless the whole of the local education authorities seek to make representations against whatever has been decided by the Burnham Committee. I hope, therefore, that the committee which has been set up by the Secretary of State will not get the impression that everyone in local government is in favour of a whole series of elaborate new taxes. We want more money but for it to be borne fairly between one person and another, and I suggest that consideration should be given to transferring some of the costs from local government to central Government.

Photo of Mr Cyril Townsend Mr Cyril Townsend , Bexley Bexleyheath

The hon. Gentleman mentioned the matter of the swimming pool which would be too costly. How can we persuade our local authorities to cut down on expenditure if such things are going to be increasingly paid for by the central authority? He has illustrated the point marvellously, if I may say so.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

I said that I was chairman of a finance committee. I would not want to make too much of that fact, but the hon. Gentleman may know, because he comes from north-west Kent, that my authority had one of the lowest increases in rates. At the same time, we have just spent £1 million on a new swimming pool, work on which was started only six weeks ago. This can be done. I do not believe the two matters are linked. We as local councillors have a responsibility for acting efficiently and economically, and I do not believe that the fact that three-fifths of the expenditure comes from the Exchequer makes any difference to my responsibility for getting value for money. If that amount of three-fifths were increased to four-fifths, my responsibility and application to duty would be no less. Therefore, I do not think that that point is relevant to the argument.

I believe that there are other services which are right for this kind of treatment. I have shown where the biggest and first candidate is, and I am sure that the committee will be able to find others. I hope that the committee's report will not be long delayed. The matter is urgent. The sense of injustice is very great, and the work will be stultified if some change in the financing of local government is not forthcoming very soon.

1.0 p.m.

Photo of Mr Nicholas Edwards Mr Nicholas Edwards , Pembroke

The whole House will be grateful to the hon. Member for Brecon and Radnor (Mr. Roderick) for introducing the debate and giving us another chance to discuss this important subject. Like my hon. Friend the Member for Harwich (Mr. Ridsdale), I note the absence of the Liberal Party from the discussions. We had looked forward to hearing the views of Liberal Members in this debate but no doubt they are engaged elsewhere in the country in disputes with their party workers.

There are a number of strands in a debate on the rating crisis, and several of them have emerged today. In a debate initiated by a Welsh Member I hope that I shall be permitted to refer to a few of the matters that cause particular concern in my constituency. First, there is the whole method of rating valuation and the anomalies that it throws up. This is something about which I have already written to the Chancellor of the Exchequer. I have been given facts which disclose a disturbing and apparently indefensible situation. I take just one example, but there are many others. Saundersfoot is a holiday village with a population of about 1,200. Tenby is a holiday town with a population of between 4,000 and 5,000. The ironmonger's shop in Saundersfoot has a sales area of 516 square feet and now has a rateable value of £1,500. A similar shop in Tenby with 1,800 square feet, more than three times as big, has almost exactly the same rateable value—£1,555. Another shop with twice the area has a lower rateable value of £1,263, and that includes a house.

That shop is typical of others in Saundersfoot where the rateable values appear to be between twice and three times those in the neighbouring towns, including the shopping and tourist centre of Tenby. That is the case even though Saundersfoot, unlike Tenby, has to rely almost entirely for its trade on its very short holiday season. Rateable values in neighbouring villages and neighbouring streets in my constituency in some cases vary by two or three times as much. The position is made worse by the fact that hardly any appeals have yet been considered, and that applies throughout the country. Certainly, the appeal I have put in on my house in London has yet to be heard. There is widespread concern and a sense of injustice, and I must press the Government for a full and impartial investigation and explanation of these anomalies.

The second matter for concern, which was referred to by the hon. Member for Brecon and Radnor, is that commercial rates have risen by as much as 100 per cent. in a single year, and that is in addition to rateable value increases last year of as much as eight times. It has been the policy of successive Governments—I am not seeking to make a party point—to cushion the impact on the domestic ratepayer by domestic relief. The amount set aside this year is tantamount to an average 25 per cent. derating of domestic properties. In other words we have super-rating of industry and commerce in all but name. Of course, commercial rates are fully allowable as a deductible expense against tax. Also the Price Code does not prevent price increases that would enable a commercial ratepayer to recover his increased outgoings. Unlike the domestic ratepayer, he is not at the end of the line and he can pass the burden on. That has influenced Governments of both parties.

However, we should recognise a number of difficulties. The first problem concerns the small shopkeeper who is competing with the supermarket but cannot immediately put up his prices. The second problem affects establishments with coin-operated machines, such as launderettes, for which an increase in prices involves a considerable capital outlay. The third problem concerns the hotel and boarding house which fixed its charges the previous year and cannot increase them. The fourth problem is that if prices are increased the cost is recovered only over a period, and in the meantime small businesses have increased borrowings at a time when they are already stretched and paying very high interest rates.

Many small businesses are in real difficulty as a result of these factors and the general rise in costs with which they are having to cope. Here I agree with the hon. Member for Brecon and Radnor. The Government will have to consider the problem more urgently, and some of the general principles about which I shall speak in a moment apply as much to small businesses as to domestic ratepayers.

Domestic relief has been calculated in Wales to cushion ratepayers from water charges. The water authority in Wales has already stated its intention to iron out next year the distortion between different areas, and the statement is welcome, but the scale of the increases by many water authorities throughout the country has come as a surprise and a shock, and something will have to be done before next year to provide relief and cushion the distortion. I agree with previous speakers on the question of sewerage charges. Here again, action will have to be taken.

We are to have an inquiry, but that in no way removes responsibility from the Government for dealing in the short term with the situation which now exists. There is a tendency for this administration to believe that blaming the last Government or setting up committees is a substitution for government. It is not, and the responsibility for action now clearly lies with them.

Secondly, people would do well not to create too great an expectation about the results of the inquiry. I share the views of the hon. Member for Stockport, North (Mr. Bennett) on that point. The faults inherent in the rating system are as obvious as the advantages, and some of them were clearly spelt out by the right hon. Member for Anglesey (Mr. Hughes).

Over the years many of us have been tempted by one or other of the alternatives to the present system. A local income or sales tax is perhaps the most attractive. However, the difficulties are very great. As the right hon. Member for Dartford (Mr. Irving) pointed out, difficulties arise in terms of practical administration. I do not believe that a genuine local income tax is possible in the very short term if for no other reason than that the organisation has to be created, and there is no accurate record at present of where people live. National income tax is based on the place of work. not on the place of residence. I forecast that even if the committee reports with dispatch no major new local tax will be introduced before the 1980s.

It is at least a possibility—I will say no more than that—that the committee will conclude that we should have an additional income or sales tax raised nationally to replace the rating system and then distributed to local authorities in a block form for their allocation and use.

There is a need for the committee to consider not only methods of raising finance but the whole complex question of its allocation. Part of the present difficulties stem from the decision, approved on both sides of the House, to allocate greater resources to city centres, but we must not overlook the additional burdens that fall on authorities that have to provide a full range of services in scattered rural areas or— this is a matter which I hope will be dealt with in a later debate today—have to provide for substantial tourist populations. If by any misfortune I do not get called for that debate, I stress now that those problems are as real in my constituency as they are in the constituency of the hon. Member for Caenarvon (Mr. Wigley). I welcome the Secretary of State's assurance that the scope of the inquiry will be wide. It needs to be.

We must never overlook the fact that the problem is not just one of distribution or method. The main underlying cause of the whole miserable situation is the vast increase in local government expenditure over many years. My hon. Friend the Member for Brent, North (Dr. Boyson) had some shrewd observations to make on that subject. The proportion of gross national product accounted for by local authorities has grown from 5·1 per cent. in 1900 to 8·5 per cent. in 1950 and to 18 per cent. in 1972. While national income calculated at constant prices increased just over two-and-a-half times between 1960 and 1973, local authority spending increased over the same period by four-and-a-half times. If ever there was a case of spending before the money was earned, that appears to be it, and it seems to me to be a major cause of the inflation which we are suffering.

It is remarkable also that in 1971–72, the latest year for which figures are available, while total local government capital expenditure was £2,055 million and repayments to lenders and transfers to sinking funds amounted to £177 million, debt charges came to a staggering £1,273 million. We live in a petty odd world when capital expenditure is just over £2,000 million and debt charges are nearly £1,300 million.

There are many good reasons for rising levels of expenditure. There is the pressure from the central Government and from the public for higher standards. But there is also a widespread public feeling, which we in this House would do well to take into account, that control is inadequate, that waste is common, and that empire building is too prevalent. Unfortunately, one of the consequences of local government reform, apart from the staff and administrative cost implications, is that if several authorities are merged one seldom does away with an existing service but almost invariably that service is extended to the areas which did not previously have it, whatever its inherent merit.

To take one example—I do not argue whether it is a sensible policy or not—if one authority subsidises bus fares for old-age pensioners and two merging authorities do not, because in the past they have thought that they could use the resources better, it is highly probable that the authority resulting from the merger will go ahead with such a scheme rather than incur the opprobrium of cancelling the existing arrangements. There is a general gearing up of expenditure.

However desirable projects may be, local authorities, like individuals, will have to realise that in the economic difficulties confronting the nation demands for ever-improving services simply cannot be met, and for a period, indeed, we face the prospect of an actual fall in standards rather than an improvement.

Let us be realistic. At the current level of inflation and with all the additional burdens imposed by the Labour Government in their Budget, next year's increases are likely to be quite horrific. I warn my hon. Friend the Member for Bexleyheath (Mr. Townsend) that if his local authority keeps its increase to 20 per cent. it will have performed miracles in the situation which it will face next year.

It is important to recognise—this arises directly from our consideration of the total level of public expenditure—that there is no magic way of reducing the total burden. The only way is by economy. The argument is about who should bear that burden and how it should be distributed.

Any change made in the future will be, as all changes in the past have been, helpful to some and harmful to others. Our debate today is not just about techniques for raising money and the consequences of inflation or extravagance. It is about how we effect change and how far Governments should cushion people from its consequences. Ironing out inequities in the present distribution system inevitably makes the Government unpopular in the areas which have been benefiting and will now face substantial rate increases.

There is a fundamental principle, I suggest, which should guide governments. If they wish to move the load, if they wish to take the yoke from one back and put it on another, they ought not to do it in a way that breaks that back. Citizens are entitled to plan their affairs in the reasonable expectation that obligations imposed by Governments will not fluctuate too violently. If the citizen has for some years come to expect a bill of £100, he may fear that it will rise to £110—and in these troubled times, if he is prudent, he will probably plan on the assumption that it will rise to at least £120. But what is wrong is that it should become £200 as a result of Government action, and without warning. If the Government do make changes of that sort of scale, they have an obligation to soften the impact so that the citizen may adjust his affairs.

That has been a guiding principle in the past. For example, it led my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) in March 1973 to protect the hardest hit by rating revaluation, which had been disgracefully and quite unnecessarily delayed by the previous Labour Government for political reasons. The Conservative Government met half the cost above 10 per cent. of any increase in domestic rate bills arising from revaluation. It was the reason, too, which led to the introduction of differential rating, which has been of considerable benefit in protecting ratepayers in part of an area from the disadvantages of a union with an area which formerly had much higher rates. The move to the new level is spread over a number of years.

The introduction of the domestic element in 1967–68 and the subsequent extension of that system was another defensive measure taken by the Government to protect the domestic ratepayer from the violence of change. The same desire to cushion the impact of change led the last Conservative Government to introduce variable domestic rate relief in this financial year to protect domestic ratepayers from exceptional increases in rates.

The present Government have chosen largely to abandon that principle by redistributing part of the domestic element so that in many areas a quite intolerable burden will fall on ratepayers. Let us be clear about it. It is fully within the power of the Government to act to protect both those excessively hard hit and those in areas such as Trafford where there were miscalculations and the burden proved higher than expected. But it is no good the Government saying, as the right hon. Member for Anglesey did today, that this is something which they inherited and they had no time to do anything about it. It is the cry of a party so addicted to opposition that when it is in power it is unable to assume responsibility. It carries on with its shrill cries of criticism, forgetting that only it is in a position to act and that it has a duty to act.

It is no good the Government saying that they could not make changes. They have made them, very substantial changes, in variable relief. They did it not on a basis of need but to obtain electoral advantage in some areas. Having made that change, they could have made others, and it is perfectly possible to make further adjustments before the second half-year rate demands are sent out.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

It was the present Leader of the Opposition who decided that the General Election should be held on 28th February. That left the Government with one month, no more—between 2nd March and 31st March—to introduce new measures. My right hon. Friend dispensed what he called rough justice, and it was justice for the majority. In view of his criticism, will the hon. Gentleman say what my right hon. Friend should have done in those short four weeks?

Photo of Mr Nicholas Edwards Mr Nicholas Edwards , Pembroke

I entirely deny that it was justice. The right hon. Gentleman tore up a scheme that had been designed to cushion the impact on those worst hit, and he left many areas in desperate straits. The very fact that he made the changes shows that he could have made others. There is absolutely nothing to prevent his making further changes before the second half-year rate demands are sent out.

As a Government, we would have protected those worst hit. We would have put right the mistakes and the anomalies, and we demand that the present Government do so. Last week the House voted for measures of interim relief. As the hon. Member for Brecon and Radnor reminded us, the Secretary of State promised that he would consider with great care the points and views put forward in that debate. He has had time to do so. The House and the country want to know the results of that consideration.

If the Secretary of State fails to act within a reasonable period, not only will he have shown contempt for the House but the blame for the present situation will lie with this minority Labour Government who have the power to act now to protect the ratepayers but who refuse the clearly expressed demand of the House of Commons that they should do so.

1.22 p.m.

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

It may be for the convenience of the House if I intervene in the debate at this stage. I hope that the constituents of my hon. Friend the Member for Brecon and Radnor (Mr. Roderick) have followed his terrier-like persistence and determined efforts on their behalf on various matters over the past three months. I should like to thank him for initiating the debate with courtesy and moderation. I think that he is too modest. He is calling attention only to some anomalies. I would go further and call attention to the many anomalies inherent in the rating system.

Some anomalies have existed for a long time, but they were studiously ignored by right hon. and hon. Gentlemen opposite when they were in office. Perhaps I do them an injustice: not only did they ignore them, but they introduced further and better injustices in their iniquitous Water Act. I would be the first to say that problems do not go away if one closes one's eyes: they simply get bigger and bigger. That is why, last Thursday, my right hon. Friend the Secretary of State for the Environment announced that an inquiry would be set up to get to the bottom of the problems that my hon. Friend has mentioned. I am glad that my hon. Friend welcomes that and I hope that all hon. Members do, because the inquiry is long overdue.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

Will the hon. Gentleman remind the House how many inquiries we have had already and what has been their result?

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

That intervention speaks for itself.

My hon. Friend and others have suggested several reforms such as the removal of education, fire and police costs from the rates and transferring the cost to central Government, as well as other alternatives such as local income tax. Unlike most of my hon. Friend's ideas, that type of suggestion is not new or original. It has been produced every time rates have been increased. The previous administration even stirred itself sufficiently to rake up an odd paragraph in its Green Paper on "The Future Shape of Local Government Finance". It concluded: …any substantial move in this direction would conflict with the Government's objective of devolving power from central to local Government…Any arrangement which separated administrative from financial responsibility to any marked degree would be open to strong objections both of principle and practice. It looked at various ways in which finance and management could be split but found objections to all of them. It also found objections to a local income tax and to a sales tax. I do not know whether it was right or wrong, but it seems clear that local authorities have a large measure of discretion in these matters which it would be wrong to take away.

I have a more fundamental objection to what my hon. Friend proposes. It is that it is not a reform at all but purely a palliative. Transferring these services would help ratepayers at the expense of taxpayers generally, but that does not mean that it is the best way to help them or that it has no undesirable side effects. It is the Cheshire Cat syndrome: the rating system would disappear bit by bit by the transferring of services until all that was left was the grin and in the case of the Liberals today we do not have even the grin.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

Will the hon. Gentleman give way? I wish to make an important point.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

The hon. Gentleman is in the process of making a reasonably categorical statement. Is he saying that, although an inquiry is to be set up and although it is to be given a general com- mission to look into these matters, the Government have already decided that there should be no such transfer of resources?

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

I have a fairly comprehensive set of remarks to make and I am sure that as I go through my argument the hon. Gentleman will be able to deduce the answer to his preliminary inquiry.

I was saying that the rating system would disappear bit by bit but that there would still be a rating system and nothing would have been done to improve it or to replace it, and nothing much would have happened to deal with the fundamental questions of local government finance.

That is why we are setting up the committee of inquiry. Its terms of reference will be wide. No ideas, old or new, will be excluded. That is why I said earlier that I did not know whether the previous administration were right or wrong about the possible problems of transferring these services. It is not for me to give off-the-cuff views on a Friday afternoon. It is for the committee to examine the proposals that my hon. Friend has put forward and to consider them further. I hope my hon. Friend will accept that the committee will do a proper job and that he will therefore not press his proposal today. He ought to know—I am sure that he does—that the committee will have complete independence.

My hon. Friend called on the Government to make interim changes to the system of local government finance pending the report of the committee of inquiry. It was certainly not our intention in setting up this inquiry to fossilise the situation completely in the meantime. I want to make it clear that the announcement of the inquiry will in no way affect what my right hon. Friend the Secretary of State for the Environment is undertaking in the grant distribution arrangement for next year. That is proceeding apace.

My colleagues at the Department of the Environment had a first discussion with the local authority associations in May and there will be further discussions leading to the formal consultations, which will take place in the late autumn. Meanwhile officials are exploring the technical issues.

A further innovation this year is a series of ministerial visits to individual authorities to discuss with them the prospect for the rate support grant next year. My hon. Friend the Under-Secretary of State for the Environment, the Member for Widnes (Mr. Oakes), will be seeing a selected sample of authorities in England and my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) at the Welsh Office will be seeing a few in Wales. These discussions are in no way a substitute for formal negotiations with the associations.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Merioneth

Can the hon. Gentleman give us an assurance that the Under-Secretary of State for Wales will visit Gwynedd to ascertain why the rate demand expenditure per head is £20 more than the average for England and Wales as a whole and ensure as a result of that visit that the position is rectified?

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

I am not able to give an assurance such as that on behalf of my hon. Friend. However, I will bring what the hon. Member has said very clearly to the notice of my hon. Friend. These discussions are in no way substitutes for formal negotiations with the associations but they will give us a valuable insight into the range of problems faced by particular authorities.

We shall be considering the criticisms that have been made of this year's settlement and in particular such things as the mysterious high-cost factor for the outer West Midlands and the failure to take account either of income levels or of the incidence of reorganisation costs. We hope to finish up with a formula that will be generally recognised as the fairest possible.

I would be misleading the House if I were to promise that all will be well for the year 1975–76. All the signs are that we shall once again have to ask local government to exercise the utmost restraint in its expenditure next year.

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

It follows that my right hon. Friend the Chancellor will need a great deal of persuading—this may help the hon. Member—if he is to give a grant total significantly greater in real terms next year. My right hon. and learned Friend the Secretary of State for Wales and my right hon. Friend the Secretary of State for the Environment are, as the House knows, very persuasive people, but they know not to press our claims beyond what the national economy can afford.

As soon as we are in a position to give more specific guidance to authorities on the outlook for next year, we shall do so. The last thing we want is a repetition of last year's shambles, where local government had to be told to cut spending savagely with only three months to go before the new financial year. No one will be more delighted than I if my pessimism proves unjustified, but I repeat that the prospects for the moment are very gloomy.

The conclusion I would draw is this. With inflation running at levels which few local authorities will have provided for in full this year, further rate increases next year are inevitable. What I would hope is that their incidence will be less severe and, particularly, less uneven than last year, when the previous administration in their wisdom inflicted on local government and the water services a quite overwhelming combination of chances. But some further change is both inevitable and desirable, and if it is to benefit the areas which need it most others must suffer.

I take up the highly contentious issue of water charges. My hon. Friend the Member for Brecon and Radnor has referred to the sharply increased water service charges in his constituency. I can tell him that this is an equally burning issue in other parts of Wales. I have received representations from literally hundreds of people in Flintshire and in particular in my own constituency of Flint, East who are very concerned about increases of 100 per cent. It is no surprise to me that my right hon. Friend the Member for Anglesey (Mr. Hughes) is so incensed about water rates in his constituency, which are over 400 per cent. greater than last year. My right hon. Friend has carried out a massive and sustained campaign on behalf of his constituents.

Mr. Gladstone had his Midlothian campaign and it would seem that my right hon. Friend is having his water campaign. He has, during every Question Time dealing with Welsh affairs, in our Welsh Day debate, in Adjournment debates and in the two-day debate fired salvo after salvo.

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

My right hon. Friend may mount that on the walls of Beaumaris, the finest of the North Wales castles, Water charges have gone up nearly everywhere but the most massive increases have occurred in Wales. These have imposed heavy additional burdens on all classes of consumers.

We have been able to provide help to domestic consumers through the domestic relief element of the rate support grant. But the extent and magnitude of the increases in water charges in Wales and their apparently capricious variation between one area and another has led to sustained criticism, which in turn has led my right hon. Friend the Member for Anglesey and my hon. Friend the Member for Brecon and Radnor to air the views of their constituents. There is no other single issue since we came into office which has caused such widespread concern and indignation in Wales. Hon. Members who represent constituencies in Wales will agree with that.

I come now to our predictions about the effect of the Water Act which we made when we were in Opposition. The fact that during the Committee stage of the Water Bill we warned the Government that such increases would inevitably follow the implementation of the financial provisions of the Act gives us no cause for pleasure now. The Opposition have at last recognised the truth of what we said all along about the effects of that Act.

If newspaper reports are to be believed, the Leader of the Opposition said recently, at a meeting in Llandrindod Wells, that his party would be prepared to consider any amendments to the Water Act which could give help to rural areas. If his Government had been prepared to consider our amendments to the Water Bill, we should not be facing such a difficult problem now.

In looking to solutions to this question we must go back to first principles and to what we said when in Opposition. We believed that water should not be treated as an ordinary market commodity and subject to what the Opposition like to call "normal market forces". Consumers in rural areas should not have to pay several times more for their water just because they happen to live in the country rather than in town. In saying this I am not ignoring the fact that the cost of providing services in rural areas will always be more than providing the same services in densely-populated areas, but rather that the extent of the variations in charges to reflect this fact simply cannot be justified in social terms.

I know that the Welsh National Water Development Authority is considering ways in which its present charging policy could be adapted towards eventual equalisation of water charges in Wales. Again, I should make it quite clear that under the provisions of the Water Act these matters, including the raising of the level of charges, are the responsibility of the Welsh Authority and are not for me to take. However, I am sure that the authority, which my right hon. and learned Friend will be meeting at Brecon on 26th July, will always be prepared to consider any advice he might give on this and related matters when deciding its policies.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarvon

May I put two points to the Minister with that meeting in mind? The first concerns the question of charging for water collected in Wales and used in cities such as Birmingham. In a Parliamentary Answer the Secretary of State has said that it is possible to do that under the current Act. Two weeks ago in Caernarvon Lord Brecon, the Chairman of the Welsh National Water Development Authority, indicated otherwise. Perhaps the Minister could take this matter up. On the same lines, may I ask whether the Government are willing to consider writing off some of the capital that has been sunk into waterworks in Wales in the past and which is leading to heavy interest charges? Lord Brecon is willing to consider this. Will the Government do so?

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

I will certainly draw the attention of my right hon. and learned Friend to what the hon. Gentleman has said. I can reply now at least in part to some of the points he has raised. I should emphasise that equalisation means not only reductions in water charges in some parts of Wales but matching and substantial increases in other parts. I have no doubt that if pressures ceased from some of my hon. Friends they would be replaced by representations from other hon. Members, because their constituents are facing substantial increases. But one would face that when it came.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

Will my hon. Friend bear in mind that the increases would not be matching increases because they would take place in heavily populated and far wealthier areas? I am grateful to him for saying that I have fired a number of salvoes on this matter. I am concerned that they reach their mark. Will my hon. Friend bear in mind that under the Act the Secretary of State has power to direct that equalisation should take place?

Photo of Mr Barry Jones Mr Barry Jones Parliamentary Under-Secretary (Welsh Office)

I now understand what my right hon. Friend's target is and, as I hear the shells whistling overhead, I shall concede that his wisdom is greater than mine. I take his point about matching charges.

Since I am dealing essentially with the principles which should underlie our policies for water and sewerage services, I must say a few words about one aspect of the sewerage charges which, as my hon. Friend has pointed out, has caused deep concern—that is, the charge for people whose premises are not connected to main sewers. With regard to households which cannot be connected to main sewers but which are still required to pay the full sewerage charge, we have already said that liability for charges for sewerage should be limited to the extent that people benefit from that service.

That remains our position, and we are examining the ways in which the charges can be limited. A working party of the National Water Council is examining this problem and local authorities have already been asked to identify the relevant properties. When this has been completed, it will be necessary to devise an equitable way to distribute the consequential additional financial burden which will fall on households connected to main sewers.

I turn to the question of the export surcharge for water and the matter of the cost of water which is impounded in Wales and passes by pipeline or by direct abstraction from border rivers to the Birmingham and Merseyside conurbations. Not unnaturally, over many years voices have been raised in Wales claiming that this water should be treated as a natural resource and charged for at a rate, I suppose, as high as the market could bear. Those voices choose to overlook the fact that the development of Welsh sources was made in pursuance of powers granted by Parliament to English undertakings which bore the cost of the extensive works involved. Without this, the water would run to waste to the sea.

With all its imperfections, the Water Act achieved something. It put control of any future reservoir development in Wales firmly in the hands of the Welsh people and their elected representatives. It also transferred to the Welsh National Water Development Authority the ownership of all the undertakings in the Dee and Wye catchments, including those in parts of England which need to be dealt with as a whole for water management purposes. In the long run, however, it is not a good idea to propose that reorganisation justifies treating water impounded or regulated in Wales and used to supply consumers in England on any different principles from water which reaches consumers in Wales or is transferred from a source in one part of England to consumers elsewhere in England.

There may be a case for considering whether the cost of water collected in Wales and which goes directly to consumers in England needs to be adjusted to reflect the different component of costs incurred by the water authorities in the two countries. This is something which the Government are following up, but it is a matter for friendly discussion and consideration and not for making demands which cannot be sustained on either legal or moral grounds.

Hon. Members have understandably drawn comparisons between the high charges for water in Wales and the relatively low charges in English cities which obtain their water from Welsh reservoirs. We should not delude ourselves into thinking that this situation is necessarily a reflection of the price paid for water from Wales. As I said earlier, water is invariably cheaper in large cities than it is elsewhere. For example, the current water rate of the Metropolitan Water Board is 2·9p in the pound whereas the rate in North Devon is 11·2p in the pound. As my right hon. Friend the Secretary of State for the Environment informed the House last week, a general study of the economic and financial objectives of water authorities is now being undertaken by a group of officials representing the relevant Government Departments and water authorities. No doubt they will be looking at the case for equalisation of charges over larger areas.

As other right hon. and hon. Members wish to participate in the debate, and in view of the proceedings which you, Mr. Speaker, have in mind for the rest of the day, I suspect that I have taken sufficient time. I therefore conclude by again thanking my hon. Friend the Member for Brecon and Radnor for raising this important subject and for allowing us again to make known our views on it.

1.46 p.m.

Photo of Mr Richard Body Mr Richard Body , Holland with Boston

The Under-Secretary of State has taken us on a tour of all the hazards to be encountered in rate reform, but I fear that he has not allowed us a proper glimpse of the gravest hazard of all; namely, what may well happen in 12 months unless major changes take place. I liked the hon. Gentleman's reference to the Cheshire Cat. I share with other hon. Members the view that, like the Cheshire Cat, the rating system will disappear so that there will then be only two countries left which retain such an archaic system.

I congratulate the hon. Member for Brecon and Radnor (Mr. Roderick) on giving us this opportunity of highlighting the grave problem facing many of our constituents. I do not know the antonym for "congratulate", but, whatever the word is, it could be justly applied to those who should be sitting immediately behind me on the Liberal benches. No group of people in this country has done more to create mischief about the rating system in recent months than the Liberal Party. We have read reports of its reckless statements and irresponsible proposals.

The absence of members of the Liberal Party today means two things. First, none of those of us who have been looking forward to the opportunity of cross-questioning them about their reckless statements has been able to do so. Secondly, their absence shows that they have failed to recognise that if we are to achieve any reform on this subject the House must represent to the Government the strength of feeling in the country, and by their absence they have failed to take part in any such representations.

In the Parts of Holland thousands of ratepayers have postponed payment of their rates this year. None of them has done it with any intention of withholding rates, still less of breaking the law. But for them, as in many other parts of England and Wales, rates have risen by 70, 80 and 90 per cent., and in some cases even more, at a time when their incomes have increased by only a fraction of those amounts. It has, therefore, been well-nigh impossible for them to pay those rates promptly.

My hon. Friend the Member for Bexley-heath (Mr. Townsend) spoke of a rate increase of 20 per cent. I was delighted when my hon. Friend the Member for Pembroke (Mr. Edwards) said that it would be miraculous if the increase were to be only 20 per cent. The forecast I made to the ratepayers in my constituency a few weeks ago was 20 per cent., and I regret that I have had to revise it. I share my hon. Friend's fears about the future. I am not sure whether he used the adjective "horrific" or "horrendous" but, whichever it was, I echo the words he used to describe what will happen this time next year. There will be not thousands but tens of thousands who are unable to meet their rate demands this time next year and the postponement will be measured not in weeks but in months. When that happens we shall see the breakdown of the rating system.

In Lincolnshire we have to pay not only water rates but drainage rates. I put forward to the Under-Secretary of State an idea to which I hope he will give careful consideration. The drainage rates are sometimes comparatively small—£5, £10 or £15 a time—but I hazard the guess that an accurate calculation would show that the cost of collecting represents a large proportion of the revenue derived. A better system might be the levy of a precept upon all local authorities. Instead of the drainage board having all the difficulty of bringing in these numerous payments, one or two lump sums could be obtained directly from the local authorities. Such an economy might be the equivalent of one year's inflationary increase in rates.

Much has been said in the debate about education. One easy remedy would be to make education a national rather than a local charge, but there are certain disadvantages to that. First, it would do nothing to lessen the total burden upon the British people. Secondly, it would mean more national rather than local control over education, and we on the Opposition benches feel strongly about that.

Perhaps we should go back to some of our first principles. In politics one has to make up one's mind whether or not one is a paternalist. It is the essential divide. Does one wish the State and its numerous agents and subordinates to make decisions for the individual? Lenin is frequently misquoted, but if he really did say that the real question in politics is who did what to whom, I think he spoke the truth. The paternalist, whether avencular or otherwise, would have the State take over a great many decisions which we who are anti-paternalist believe should rest with the individual.

No anti-paternalist has spoken more strongly in the debate than has my hon. Friend the Member for Brent, North (Dr. Boyson). He has long been an advocate of the voucher system in education. The adoption of this method would bring enormous benefit to local government and to the ratepayer. The essence of the scheme is that the Government should not, either locally nor nationally, pay directly for the building and running of our schools, but that to every parent should be given a voucher for each child to be educated, the value of the voucher being approximately the present cost of educating a child. The parent hands over that voucher to the school of his choice, and thus choice is maximised. With freedom of choice goes responsibility. That is the case that we anti-paternalists put. That system would give the erstwhile ratepaying parent the opportunity to make sure that the education system was conducted efficiently.

Hon. Gentlemen on the Government benches may regard this as a middle-class bonus, but it is almost the opposite. It does not represent a privilege that only some would have. Almost all parents would be treated equally in having this freedom of choice for their children's education. At present that freedom is limited to a minority. Under the voucher system, good schools in the private sector would be in a position to accept children of ability, no matter from what home they came. There is an ugly-sounding word, "democratisation", which could justly be applied to the voucher system. Democracy is about choice. A denial of political choice is a negation of democracy.

The same principle applies to economic choice. Thousands of parents have a free choice in education for economic reasons. That same freedom of choice could be given to millions of parents by the voucher system. They would demand and get the full value for the money they pay for education. It would provide what we do not have at the moment, an effective discipline upon the financial management of schools. The economies that would flow would run into millions and millions of pounds. That is one of the root and branch changes we must look forward to, and, when it comes, it will lift an enormous burden from the backs of the ratepayers.

1.58 p.m.

Photo of Mr Gwynoro Jones Mr Gwynoro Jones , Carmarthen

The hon. Member for Holland with Boston (Mr. Body) made an interesting proposal on education. He concluded by saying that the system he advocated would result in economies of millions and millions of pounds. I am sure he will accept from me that the economies that the ratepayer expects—although, if services are to be improved, it will be impossible to attain the economies which he would like to see—total hundreds of millions of pounds.

The debate is an important one and continues our recent debate on the problem of increasing rates and the concern of people right across the country. We are all aware of the growing anxiety felt by people as a result of the impact of various forms of reorganisation. This has happened in health, local government and water reorganisation. There has been growing bewilderment and frustration at the situation, and it must be said that this reorganisation was carried out in the period 1971–73 when the situation was transformed by the Conservative Government. However, I do not seek to apportion blame. The problem is too great for us to worry about who is at fault. I am merely pointing out that the Local Government Act was passed in 1972, the legislation affecting the health service in the same period and the Water Act in 1973, and such massive reorganisation ought to have been phased out over a longer period.

When Labour came to power earlier this year we had virtually three and a half weeks in which to try to deal with some of the problems. This involved an enormous task for my right hon. Friend the Secretary of State for the Environment and my right hon. and learned Friend the Secretary of State for Wales.

When I met the local authorities in my constituency recently my hon. Friend the Under-Secretary of State for Wales wrote to me saying that discussions were about to commence on the 1975–76 rate support grant. Therefore, the three-and-a-half-week period which Labour had to make decisions on these important matters was clearly not sufficient to transform the system fundamentally. But something was done decisions were not left on one side. The Minister said that £15 million more was to be given to Welsh ratepayers after 1st March than was originally intended by the Conservative Government. It is not just a question of taking money from rural areas and giving it to the town-dwellers, for in Wales rural areas such as Caernarvonshire and Merionethshire benefited whilst parts of Dyfed were rather worse off. In other words, certain rural areas have gained whereas others have lost following the decision made by the Secretary of State for Wales.

We must not give the impression that there is any easy solution to this problem. If the burden is taken away from the rates and borne nationally, it will still have to be paid eventually by taxpayers. Therefore, if we seek to improve services—services which people expect to be given either in local government or through Government agencies—at the end of the day somebody must foot the bill. If education is borne on the national budget, the consequence inevitably will be that the taxpayer's burden will increase considerably. Within a few years he will have to meet a mammoth bill amounting to £3,000 million-plus. There is no easy solution.

I should like now to deal with rates. Local rates have declined in their importance, as is shown by the fact that in 1913–14 some 68 per cent. of the local authority budget came from rates whereas by 1961–62 the figure had declined to 38 per cent. There has been a continuing decline in the last 10 years. The contribution of the central Exchequer to local authorities has increased to a figure of well over £3,000 million. I believe that the present system is regressive. In being based on property values it penalises people who want to modernise their property. This applies whether a householder installs central heating, adds another room to his accommodation, or whatever it may be. The rate system which has developed over many years clearly is at fault.

What are the alternatives? Reference has been made to local income tax, and clearly if that were to be introduced the system would at the end of the day be fairer. But in areas such as North-West and South-West Wales, where the average income per head is lower than in South Wales and in South-East England, there will need to be a major readjustment in the manner in which the central Government allocates money to local government. We should not be able to continue some form of central Government support to the local authorities under the present system if we had a local income tax system. The wealthier areas of Britain would have to receive less support from the central Government and areas such as parts of Wales with a lower average income would have to be given more support from the central Government. This matter must be closely examined.

I have no basic objection to education being dealt with as part of the national budget, but this would destroy one of the central tenets of local government. I refer mainly to the question of local choice, on which the Conservatives have always been self-appointed champions of the individual. To have education dealt with as part of the national budget would detract from the power of local authorities to put proposals to the Minister and to discuss these matters. If local authorities were not to be responsible for the allocation of money, their power undoubtedly would be less.

The inquiry into the rating system announced by my right hon. Friend the Secretary of State for the Environment has been widely welcomed. The only plea I make in that respect is that this long-overdue inquiry sets about its work quickly and comes to equally quick conclusions. There have been discussions for many years about how we should readjust the rating system. On balance I am sure that the officials in the Department of the Environment know all the problems and appreciate what is possible in the short term. I trust that the inquiry will not be used by the Labour Government or any future Government for a further postponement of the fundamental reappraisal and adjustment that is necessary.

Water rates are a problem which affect industry, agriculture and domestic consumers in Wales. A totally unfair system has been created. I received a letter from the Carmarthenshire Joint Water Committee, which is now extinct but which at one time was fighting the consequences of the 1973 Water Act. I quote from that letter: Due to the fact that many authorities levied a low water rate and recovered the deficiency from general rate, the transfer of all water expenditure to the water rate will cause considerable hardship to this class of ratepayer. There is the point of view that domestic water supply should be a service and not a public utility on the grounds that a wholesome water supply is as vital to health as, say, refuse collection. Hardship is now being felt in many areas of Wales and there are disparities between various areas—for example Anglesey, Pembrokeshire and Carmarthenshire. Indeed, there are major disparities between England and Wales in general. The plea for equalisation is sensible. I refer to equalisation in terms not only of Wales but of both England and Wales. It has been applied in many other services.

I have in mind, for instance, the Milk Marketing Board and the system of transport costs for milk. The national cost system employed results in the farmer in West Wales paying the same for the transport of his milk to the London market as the farmer in South-East England pays. It is a national transport cost system, and it illustrates my basic objection to the concept of selling water. If we adopt the principle that water should be sold from Wales to England, other arrangements which now exist will have similarly to be adjusted.

Hon. Members will recall the Padfield case, which went to the House of Lords. The farmers of Kent argued that they should not be obliged to pay the same transport costs as the farmers of Carmarthenshire to send their milk to market. My right hon. Friend the Member for Anglesey (Mr. Hughes) turned down that demand. Therefore, the cry of "Welsh water" must be treated very carefully, though I implore my hon. Friend the Under-Secretary to convey the message that the question of equalisation in England and Wales is fundamental.

The Secretary of State has promised a review. I trust that it will result in action for the next financial year, 1975–76. I impress upon my hon. Friend the Under-Secretary the need to bring to the attention of the Secretary of State for Wales and the Secretary of State for the Environment that the inquiry is fine but that action will have to be taken soon, and that, in terms of water, we trust that by the end of the year the principle of equalisation will be accepted, and many unfair practices, such as paying for sewerage where none exists, will be removed from the Act.

2.12 p.m.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

I wish to emulate the hon. Member for Carmarthen (Mr. Jones) in making a generally non-controversial speech following the general agreement which has been expressed on all sides of the House today. This is a subject which arouses considerable feeling among right hon. and hon. Members who are concerned about the problems of the financing of local government.

Before I pursue that theme a little further, I must add my own voice to those who have commented on the absence of Liberal Members today. In doing so, it is only fair to declare an interest. When we last had a debate on a Private Member's motion on the reform of the rating system, again the Liberals were not present. I see my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) in his place. In some of these matters I sit at his feet because, on that last occasion, I took my seat immediately in front of my hon. Friend in order to signify that I was speaking on behalf of the Liberal Party as well as my own. This will be within the memory of many hon. Members. It is only right to tell the House that subsequently I received a letter from a leading member of the Liberal Party in my constituency who said that my action had been a shameful and cheap attack and that it was because the Liberals were so few in number in this House that they had to work much harder than other hon. Members.

In matters of this importance it seems to me that the only way that we can judge whether any party in this House is interested and serious in its intentions is by the appearance of its supporters when the House is debating a subject such as that raised in the motion of the hon. Member for Brecon and Radnor (Mr. Roderick).

The main point that I wish to make about this consensus, this feeling of concern, is that it is precisely in this type of situation, with a minority Government, that we as back benchers have an excellent opportunity to bring about certain major and immediate changes. I have been heartened today to find that this is a view which is widely shared.

I want to touch briefly on some of the changes which I should like to see brought about, and I shall return in a moment to my hon. Friend the Member for Staffordshire, South-West, because I believe that he has an important part to play in these proposals.

Looking to the long-term inquiry, I am among those who support proposals to transfer the burden of education to the national Exchequer. That would be a start. It would move the whole shift in the right direction. However, the shift which has occurred in the rate support grant between urban and rural areas needs very careful examination. Clearly it was an emergency approach to the subject, and it is one which we do not wish to see repeated.

Looking to the immediate reliefs which could be provided, I was disappointed that the Under-Secretary of State for Wales was unable to give the House much more assurance about rebates for water and sewerage and about relief for those householders who are not currently enjoying main drainage facilities. I recognise that work is in hand, but I understand from a number of local authorities that this problem could be tackled. If necessary, the change could be brought about in respect of those authorities which are in a position to identify the householders concerned. It need not necessarily be made right across the country. If local authorities have problems in identifying these householders, once it is clear that legislation is to be brought in to give relief I am confident that the householders concerned will beat a path to their local authorities to make it clear who they are.

I turn now to matters raised in the Bill introduced by my hon. Friend the Member for Staffordshire, South-West. I hope, Mr. Speaker, that he will succeed in catching your eye later in the debate. Therefore, I shall not attempt to argue his case for him. As one who supported my hon. Friend's Bill, which last week, because of technical little local difficulties, sadly we did not have an opportunity to discuss, I support my hon. Friend's proposal for a head count and for giving relief to those who make internal alterations to their homes. These are immediate measures which we could all support and implement at an early date.

We have at the moment a minority Government, and we see difficulty in moving forward into various new areas of legislation. But there is no doubt in my mind that if the will of this House is expressed sufficiently strongly, as it is about local rates, we as back benchers have an opportunity to carry forward legislation such as I hope to hear explained more fully today by my hon. Friend the Member for Staffordshire, South-West.

2.17 p.m.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Is the hon. Member for Caernarvon (Mr. Wigley) seeking to speak to this motion?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

It may prejudice the hon. Gentleman's chances with his own motion later in the day. Mr. Wigley.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarvon

It appears unlikely that we shall get to my own motion. Therefore, I am grateful for an opportunity to speak to the motion of the hon. Member for Brecon and Radnor (Mr. Roderick). The subject which I had in mind to discuss is very closely associated with local government finance, and I hope to bring in many, if not all, of the points which I intended to make if I had an opportunity to speak to my own motion.

The right hon. Member for Anglesey (Mr. Hughes) has referred already to some of these aspects. He has spoken of the effect of tourism and of the influx of tourists on local government finance. I wish to take up what he said and to expand on his argument.

My main contention is that tourism affects the cost of local government in some areas and that it also reduces the level of service given by local government, bearing in mind the current level of costs incurred.

I refer deliberately to tourist areas, as opposed to holiday resorts or centres. I do so because, naturally, I speak against the background of the tourist industry in Wales, especially in North-West Wales. Here, the tourist industry is spread over a large geographical area—an area in total which shows a strong characteristic of sparsity of resident population. To that extent, I contrasted the tourist industry of Gwynedd with the holiday centres of Blackpool and Brighton. The problems of these two categories are different, and I am talking specifically about the former. This distinction is important, and I hope that the Government will keep it in mind in considering what I say.

I am well aware that the problems of the sort to which I shall refer are not peculiar to Wales. I am certain that they are applicable equally to parts of Scotland, to the Lake District and to Cornwall. The areas affected are certainly a greater proportion of the land area of Wales, taking in the new counties of Gwynedd and Dyfed. To a lesser extent they are also applicable to Powys and Clwyd. In these counties the effect of tourism on local government finance is significant. These counties represent 80 per cent. of the land area of Wales. I should add that the tourist industry makes a greater relative contribution to the Welsh gross domestic product at £180 million and 7 per cent. than to the United Kingdom in total.

Tourism in Gwynedd is a two-edged phenomenon. I do not want to see its demise. On the contrary, I want to see the growth of a balanced, healthy tourist industry which will maximise the benefit to the local community. This has a direct impact on local government finance.

The debate is taking place at an appropriate time. This is the season when the farmers of Llyn and Eifionnydd move from their homes to live for two or three months in their farm outbuildings so that their homes can be let as furnished houses for wealthy tourists from distant cities.

The tourist industry contributes 15 per cent. of Gwynedd's direct income, compared with 18 per cent. from agriculture and 11 per cent. from manufacturing industry. It was worth £41 million in the period June to September 1973.

I said that tourism was a two-edged phenomenon. Against these economic advantages there are social and some economic disadvantages. These are particularly relevant in the context of local government finance. Despite the contribution of the tourist industry, the per capita average personal income level after tax in Caernarvonshire in 1972–73 was only £349 compared with £663 for England, and the figure for Merioneth was even lower at £330. Yet in the last financial year the rate-borne local government expenditure for Gwynedd was £34·40 per head compared with £28·80 per head in the English counties. The new county of Gwynedd is one of the poorest areas in the EEC.

My work in industry in an economic capacity has taught me that the correct utilisation of plant and equipment is of basic importance in economic terms. That is true on a general basis. Any economy, whether local or national, which runs for three-quarters of the year grossly under-utilised and for the remaining quarter stretched well beyond its normal capacity will inevitably suffer diseconomies. This is fundamental to the economic situation pertaining in Gwynedd today. The seasonality of the tourist industry is a contributory factor to the low levels of average per capita income and also to the level of service and the costs of local government services.

The extent of the seasonal imbalance can be seen in terms of population. Almost 3 million visitors came to Gwynedd between June and September 1973. The resident population is only a quarter of a million. On average, the total population of Gwynedd in the summer months is increased to three-quarters of a million—an increase of 300 per cent.

Let me be more specific and outline the effect on the patterns of everyday life, particularly on local government services.

The most obvious local government service to suffer is the road network. The right hon. Member for Anglesey referred to a ten-fold increase in some areas. That is true of Caernarvonshire and of my constituency. This means that either the expenditure on roads must be greater than that needed to meet local demand or there are constant traffic jams in the summer to which visitors are subjected for a couple of weeks and to which the local inhabitants are subjected all the time.

Wales has 10 per cent. of the roads mileage of Britain and about 7 per cent. of the roads expenditure throughout Britain. Such a line of argument has been rejected in the past by successive Governments, who usually quote the per capita road expenditure, but in doing this latter calculation no account is taken of the influx of tourist population.

Many local government services suffer a similar strain. In terms of district council functions, the provision of car parks is obvious. Villages like Llanberis, Aberdaron and Nefyn need car parks vastly out of proportion to their resident population—car parks which will be vastly out of proportion to their resident population.

Again, with refuse collection and disposal, the service has to be geared to the peak capacity requirements. Road cleaning is another service where the seasonal effect is noticeable.

The need for recreational facilities adds to the burden. The maintenance of footpaths—there are over 1,200 miles of f3otpaths in Caernarvonshire alone—facilities for the foreshores and beaches—in the Dwyfor district alone there are 20 beaches with full-time and part-time manning—swimming pools and even public conveniences—all these matters in tourist areas place a greater demand on resources than is warranted by the resident population. There is also extra pressure on both outside labour crews and on office work on account of these seasonal patterns. It all means extra cost to the ratepayers.

Housing is another area that is affected by the influx of population. I think that the House is aware of my feelings on the second home problem. I will not go into that in detail now, other than to point out that there are 1,800 families on the waiting list for council houses in the Arfon district—9 per cent. in equivalent terms of the available housing stock.

We now see property developers moving in to buy up land and houses to serve the holiday sector to the detriment of the local population. I can think of houses in the village of Trefor today which have been standing empty for many months for this reason while young married couples cannot find homes.

New Society of 18th May 1972 states: Given that the second home boom is inevitable, it must be incorporated into the local scene on terms acceptable to the best interests of the country dwellers. If matters are left as they are—to the interplay of market forces—rural areas will have a settlement imposed upon them dictated solely by wealthy urban interests. This housing pressure has an effect on local government finance.

Turning to county council services, there should be added to roads the allied effect on the police force in terms of traffic control as well as general duties. The same impact is felt by the fire services, and it is severe in terms of accommodation, vehicles, equipment and manpower.

Again associated with tourism is the national park consideration. Although 75 per cent. of the costs are met by the Treasury, 95 per cent. of the users come from outside the area. Indeed, 55 per cent. of Gwynedd lies within the Snowdonia National Park.

I should like to refer briefly to the Sandford Report as it has a potential effect on both the financial burdens of my area and the pattern of life. The report states that it felt there was no justification for compensating the developers generally, including farmers, in national parks in respect of extra costs incurred in complying with planning conditions. So in these areas there is a cost effect directly on local government and individually on the citizen because of the tourist industry and the national parks.

I have detailed the effect of the inflow of temporary population on the cost elements in local government. This argument has been put before. The Edwards Committee report in 1953, Cmnd. 9270, considered the extra expense of coastal areas and rejected a "weighting" for such a factor in the then equalisation grant structure.

Again, in 1962 a number of authorities made representations to the Government working party on rate deficiency grants seeking a weighting allowance for summer visitors, but the committee rejected the proposal. Similarly, in 1966, during the passage of the Local Government Bill, the matter was raised.

I should now like to stress that areas such as Gwynedd are quite incomparable to resorts like Blackpool, Brighton or even London where there is an inflow of tourists.

In Gwynedd there is not only an influx of tourists but lack of a large basic resident population which can provide a high rate-generating capacity. Gwynedd has a sparse local resident population. This combination of sparsity and influx causes many of the problems, and I feel that previous investigations to which I have referred have missed this point.

It will no doubt be argued that Gwynedd gets a sparsity weighting in the needs element of Government grants, which in 1972–73 generated £3 million in aid. But this amounted to only £13 per head of the population. The average expenditure in Gwynedd, to achieve something approaching a standard level of local services, in 1972–73 was £113 per capita. For all the counties of England and Wales it was only £92. The difference made by this sparsity weighting did not cover the difference in the costs incurred. The services that were provided were under strain throughout that time. So I contend that there is a need for a greater allocation of resources for such areas, and a formula for this must be devised to achieve it.

The problems to which I have referred in the sphere of local government are equally true of many other spheres. We have heard about water supply. I could go on about the effect on health, telephones, and many other services, but this is not the right place or time.

I should like to deal briefly with the subject of water, as it has been discussed today. We have heard a lot about the cost of water, but in my area people are paying without even getting a supply. Villages in Gwynedd are without water, but this is nothing new. It happens every summer. It is yet another dimension of the problem of tourism. In Llanbedrog, for instance, the resident village is on the hillside, and there is a caravan park at sea level. Under present conditions, the caravans get water but the villagers do not.

The Welsh National Water Development Authority readily accepts that the problems from which it suffers in my area are on account of the tourist industry. The authority quotes an increase of 40 per cent. in the summer demand compared with the demand in winter, but against this background the staggering price increase which people have suffered in many areas is nothing to suffering a price increase for a service which they do not get.

I could go on quoting instances of this type in nearly every line of service, but I should like to deal briefly with the effect of tourism on the general economy. From the point of view of local government, I have mentioned congested roads, and this factor, too, has an effect on things such as industrialisation. The lack of industrialisation reduces the rate base for the area, and the effect of tourist traffic in the area is a feature that has Hindered several industrial developments in Gwynedd. This is an important matter when we are considering the effect of tourism on rates, and particularly on the possibility of a local income tax.

In relation to South-West England the Financial Times of 20th January 1970 said: A large proportion of those who come are 'self-cookers ', the caravan holiday-makers who spend little locally, having stocked up with food before leaving. It has been estimated that some councils spend more in accommodation these people through such things as car and caravan parks than they receive in holiday money generated. In Gwynedd, even some of the caravan parks are owned from outside and the rents paid leave the local economy. The means of raising local revenue to meet this on-cost must be considered in any investigation into local rates.

I make a plea to the Government to ensure that in tourist areas there is fair treatment in two ways. The first is by the contribution which the central Exchequer makes towards services in the area. I welcome the inquiry into local government finance announced by the Secretary of State for the Environment on 27th June, and I appeal that serious consideration should be given to including a weighting factor for tourist population in assessing needs grants. Incidentally, there can be no conceptual difficulty in doing this, as it is already done for the purposes of calculating the salaries of chief officers in local government.

—Secondly, I urge that in other public sectors, and especially in the health and welfare services, the level of service provision should be raised to meet the requirements of the peak population.

In conclusion, I quote from George Young's excellent book "Tourism; Blessing or Blight". He says: Over the next decade, conflicts of interest between tourist regions and national government are likely to be more frequent and more serious. For this reason, urgent attention should be paid to the development of machinery to avoid these conflicts, and to formulate a national tourist policy which contributes towards the achievement of regional objectives instead of threatening to destroy them. In the realm of local government finance, that comment is most pertinent.

2.34 p.m.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

This has been an interesting debate about the vexed problem of rates. Over the last few years many attempts have been made and many discussion papers have been issued to try to do something about rate reform, but nothing has been done. The last occasion was the previous Conservative Government's Green Paper, and I remember the indifference with which that document was met even by members of the governing party of the local council of which I was a member, because it contained little that was of pertinent positive guidance and use to local authorities.

For many years there has been a great deal of dissatisfaction over rates. It is a property tax, it is not based on income, and the recent vast increases in rates have brought home to many people injustices which before were of something of an academic nature.

Many suggestions have been made today for reducing rate expenditure. The hon. Member for Brent, North (Dr. Boyson) had some extraordinary and bizarre suggestions to make, allied to his devotion to private enterprise. He suggested that some local authorities might hive off some activities to their private enterprise friends so that they could make a few bob out of what were local government services.

The hon. Gentleman has left the Chamber, but had he been here I could have told him of a council which did just that. Because of a doctrinaire adherence to Right-Wing philosophies, the council closed a direct works department and put out the repair and maintenance of about 4,000 local authority dwellings to two private enterprise companies. The repair and maintenance of council houses at Keighley has been at an appallingly low level ever since, and one of the contractors has since gone into liquidation.

The council originally saved a bit of brass, but what is the position now? The new Bradford Metropolitan District Council, which is Conservative-controlled, has to spend more money on the maintenance and repair of council houses at Keighley than any other local authority that it has taken over. A Conservative-controlled metropolitan district council, far from praising the merits of hiving-off public services to private enterprise, has re-started a direct works department.

Even the hon. Gentleman's friends do not accept that private enterprise is a solution for saving money. Any fool can save money in local government services if he does not maintain things, but the reckoning must come at the end, and the reckoning has come in my constituency because the houses have to be maintained. If the hon. Gentleman does not believe me, I invite him to visit my constituency and see the houses there and ask people what they think of private enterprise. It is an unqualified tale of disaster after disaster. So much for the bizarre notion of handling local authority services over to private enterprise.

Some of the hon. Gentleman's other concepts, such as a means test for nursery education, are quite appalling. His views are in direct contravention of his Government's Green Paper on local government finance, which suggested that there was an important element of confidentiality—

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

I welcome the hon. Gentleman's defence of the Conservative Government. If he were faced with the problem that he could introduce nursery education only if there were a means test, otherwise it could not be provided at all, what would he have at the crunch, instead of rhetoric?

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

It is all right for the hon. Gentleman to take that view, but what happens when we talk about defence? He and his hon. Friends let out blood-curdling yells of support for any suggestion that defence should not be cut. This is the priority of Conservative Members. Provided that something is expensive and is connected with martialistic purposes, they support it, but if it is nursery education there has to be a question mark over it. Anything that is provided to meet the needs of people—housing, education, nursery schools—is subject to scrutiny, and Conservative Members are even questioning the Government's defence review.

Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North

The purpose of defence is to help people.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. Interruptions from a sedentary position are not welcome.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

When it comes to priorities, some Conservative Members make odd assessments. Perhaps I may read a letter from an old-age pensioner on the subject of rates, because I do not want to be diverted on the issue of defence—it is an interesting path to follow, but this is hardly the occasion.

The old-age pensioner writes: I trust you will continue to press for a new rating system. My general rate has increased from £38 to £51 and the water rate from £7 to £23·22. I live alone and many houses around have up to five occupants. Surely there ought to be some adjustment. Also, I know many people in your constituency would be grateful if the rates rebate could be speeded up. Two quarters have been paid, and no rebates forthcoming. Under the old system half the rebate had been deducted before we received the rate bill. What are we getting for the rate increase? Even the 'Leisure in Retirement' evening classes have been cut. There, in a nutshell, is the expression of the opinion of many people, that they are paying more rates yet are not getting the same sort of service.

In my constituency—I am sure that it is not alone in this matter—one of the difficulties was that local government re- organisation was accompanied, in a parallel situation, by the increase in the rate levy. The period of difficulty in the reorganisation, which often meant—and still means in some areas—dislocation of services, was a grave affront to many who were faced with an increase in the rate burden, yet who found that their old, familiar council offices had been either closed or reorganised for some other purpose. In my constituency people with increased rate bills had to queue for up to two hours to pay the money, which they did not want to pay anyway, whereas under the old local government system they could go straight into the office because the staff was adequate and could be supplemented from other staff of the local authority. Because local authorities are much larger now, staff have to be moved out specially from a central head office, and the old flexibility has, to that degree, disappeared.

One must recognise that the hon. Member for Brent, North had some useful contributions to make to the debate—between the dross, as it were. He said that in local government reorganisation we shall probably go on to provide some sort of decentralisation. I imagine that in 10 years' time or so it will be a fad for people to say that one of the ways of improving democracy in local government is to decentralise—the reverse of which we have just done.

The whole system of rates is farcical. I know that I reflect the views of millions of people in this country. The rating system is a disincentive to the improvement of houses because when people erect a garage or a porch or put in a dormer they find that, for their pains, pride and attention, they have not simply got the benefit of their efforts but are taxed in an increasing way. I have had to explain to people—as have other hon. Members, no doubt—why on improving their homes they find that they face an increase in rateable value. It is because of the absurd notion that a tax should be placed on the rent which a house might yield, which bears no relation to reality.

Rates are a very cheap tax to collect. I suspect that is why they have been with us for so long. Local authorities are not involved in the assessment of the tax because it is done by the Inland Revenue valuation officer. Therefore, to that degree, local authorities do not have to do some of the processing and evaluation which is necessary for the rating system. The apparent cheapness of rating as a local government tax is, therefore, somewhat illusory.

Several factors have led to the pressure for reform. First, local government reorganisation has unquestionably produced enormous strains, in the manner that I have described. Unquestionably it has produced an increase in costs. For one thing, many local authorities simply frittered away their balances in order that the people five miles down the road, who came from Mars, should not get hold of the money that they had collected over the years. Therefore, the newly-formed local government units had to charge a sufficient rate levy to be able to build up some balances and take account of possible extra expenditure during the following year, which is always a possibility. Local government reorganisation is certainly a factor.

The particular bone of contention is unquestionably the increase in water and sewerage charges. Frankly, the explanation for these increases has not yet been adequately made. That is particularly so in an area such as Bradford, for example, which has a higher charge compared with Leeds, although they both come under the same water authority. One of the things which struck me about the rate charges was that when Bradford sent out its rate bills—it collected the rate charges on behalf of the Yorkshire Water Authority, the rate-levying authority—the people had nowhere to go to find out why the charge was so high because they had no elected authorities. Indeed, Bradford, which is a Conservative-controlled local authority—although I sympathise entirely with it—does not have a representative on the Yorkshire Water Authority. It is an absurd anomaly about which I have written to the Minister. The Minister, unsatisfactorily, told me that he will review the matter in two years' time. That is not good enough. The Government should review the water authorities and the composition of the boards now. There is no reason why that should not be done.

To make sure that all local authorities are represented on all the water board would not be a very difficult exercise. It would make sure that local authorities had some degree of responsibility for the charges which they are levying. At present they have no responsibility, yet they take the can. Bradford is taking the can. It is partly responsible for the charge, but partly not responsible Whether it is a Conservative-controlled or a Labour-controlled local authority, both are in exactly the same position of taking responsibility and facing searching criticisms about charges over which they have no control.

I suggest that the Government go a step further and consider extending the democratic system that we have. I have said previously that it is not all that democratic. A vote every five years or so at a General Election or a vote every two or three years for a local government election is not very much. We ought to have a system whereby we have directly elected representatives on water boards throughout the United Kingdom. There is no reason why that should not be implemented. Why should we be so tied to this system of local government representation, which is unsatisfactory? If a local authority places a representative on a water authority, it is one stage removed. The representative, therefore, can be shielded from his responsibility by the general bevy of councillors and officials around him. If a person is directly elected, there would be long periods when no one would particularly care whether or not he was there, but on occasions when there was a water charge increase they would care very much and he would have to account to those who elected him. That would help to ensure that the charges were reasonable and adequately explained. Neither of those criteria applies at present.

One of the grosser injustices which occurred over this rates charge has been mentioned by a number of hon. Members. People whose houses were not connected to the sewerage system had the imposition of a sewerage charge. The houses of some people in my constituency were not connected to the mains water system but they had a water charge levied on them. I investigated this matter. The local authority discovered that this was an error, but it hardly soothed those whose premises were neither mains water connected nor mains sewerage connected to find that they were having a few pounds taken off their bills.

I hope that the Government will see fit to arrange for some sort of interim payment for those whose premises are not connected to a sewerage system but have their own septic tank and have to pay to have it cleaned out, often very expensively, and are subject to this charge.

I know that the Government inherited this situation, and I know that it was an anomaly created by the previous Conservative administration. I know that the Labour Government have been in office for only four months and that people want us to change society completely overnight. This we cannot do. For one thing, we have an irresponsible Opposition. I feel that in this respect the Labour Government should review the position with a view to doing something about it and not merely producing anodynes to which they frequently resort in answer to Questions. I know that they are going to do something about it next year, but the injustice is so great that it is no consolation to say to people "You will be unjustly treated this year but not next year". An injustice is the same this year as next year.

One of the sadder factors is that because of the splintering off of the water and sewerage authorities the rate rebate system does not apply to those authorities purely because of an administrative or legalistic sleight of hand. One of the anomalies has been brought to my attention by my local newspaper, the Telgraph and Argus, pointing out that when pensions are increased on 22nd July by the Labour Government, carrying out another election pledge, if application is made for a rate rebate after 22nd July the increase in pension will be taken into account so that the applicant will get a corresponding reduction in the rate rebate, whereas those who apply before 22nd July will have the rate rebate based on their present pension and the increased pension afterwards. That seems a silly anachronistic and bureaucratic decision, and I hope that the message goes out clearly to all persons receiving a pension that they must get their application in before 22nd July. Otherwise I can envisage many people being sadly disappointed and Members of Parliament will have to press the Government to waive the rule. We can certainly do without that extra work.

In Keighley the net effect of all these injustices was an enormous number of meetings; at one 450 people attended. There was an open air meeting in the town square; there was a parade, a demonstration was held and there was also a dinner attended by very respectable people. One can, therefore, give credit to the citizens of Keighley for taking action and helping to bring about this Government inquiry. Within the Bradford Metropolitan District Council area 40,000 signatures were collected and taken to the Prime Minister. One likes to think that it is by this sort of democratic action that one can push the Government into taking appropriate steps, and that this inquiry, although six weeks ago it was not certain whether it would be set up, has been instituted as a result of outside pressure. Certainly it is greatly welcome.

What can be done to reform the rating system? We could, of course, increase income tax. This was mentioned in the Green Paper produced by the previous administration, allied with the question of confidentiality. What we like to think is absolutely private would be maintained; there would be no disclosure of information. But there then arises the problem of local autonomy and decentralisation. An hon. Member said that the Conservative Party was the champion of local autonomy and of the ability of local authorities to make their own decisions. That is what the Conservatives said in their 1970 election manifesto. Alas, another U-turn was made by them when they passed the Housing Finance Act in 1972. I only wish that they were consistent. In that Act they took away the right of local authorities to make their own decisions over local authority council house rents. We all know the great division that that caused in the nation.

Nevertheless the problem is that of local autonomy. We want to encourage people to go on to local authorities. We also want to give them an area of decision-making. If we have a central grant system, in spite of the fact that central Government grants total 60 per cent. of local government expenditure compared with 40 per cent. of rate income, in spite of the fact that the Government have the whip hand, we still believe that local government needs the same area of decision-making. Almost certainly it means that it has got to be associated with the raising of money in order that it can have some degree of control over expenditure.

We must also bear in mind that local authorities cannot be permitted to levy whatever rate they want. If the Government are producing some sort of social contract, it can be quite easily blown sky high by a local authority levying a 100 per cent. increased rate, perhaps more than twice the amount which the threshold agreement has made available. Therefore, the Government must have some degree of control as well.

This brings me to the suggestion of a local tax, which is the most useful suggestion which the inquiry may recommend as a solution. It means a local income tax with the necessity of collecting information, although that could perhaps be done in conjunction with the national tax assessments. It means a profits tax on local industry. It means also that local authorities will be able to experiment to a greater degree with things like single fare transport systems or even free transport systems, and a wide range of other social benefits which a Labour-controlled local authority might well consider.

It has been mooted in this House in connection with the Local Revenue Bill, which allows lotteries, that there should be a bed tax in tourist areas. The hon. Member for Caernarvon (Mr. Wigley) has referred to tourist areas, so perhaps I may be permitted to mention one or two points about tourism. This gives rise to great concern in terms of local government expenditure. In my constituency there is the second literary shrine in the country, at Haworth where the Brontës lived and wrote, and where Brontëana is preserved to a greater or less degree. Thousands of people flock every year to the village on the hill with the cobbled streets and yellow "No parking" signs as an indication that local government has preserved every aspect of that period. About 150,000–200,000 people go to Haworth to take in the Bronte atmosphere.

Perhaps I may declare my own financial interest as a shareholder. I have five £10 shares in the Keighley and Light Valley Railway, which runs from Keighley to Oxenhope through the Brontë shrine at Haworth. This former British Railways branch line is run according to democratic Socialist ideas and has never paid a dividend, and would do so only over my dead body. It is a cooperative venture and should not be confused with capitalist enterprises which the Opposition might think worth while.

We, too, have faced the problem because we have brought into the same area perhaps another 100,000 people who have to be catered for. This is not a museum, it is an area in which ordinary workaday people live and want to relax at the weekend. They object when they cannot use their cars because the street is blocked by the cars of visitors to the area; they very much object to the bus service being delayed half an hour because car parking has produced such an enormous amount of congestion.

There is, therefore, the obverse side to tourism. It brings money into an area, but it costs a fair amount, too. Car parks have to be provided, and the police must be present to guide the traffic. Toilets have to be provided at great expense, and they must be cleaned up afterwards. There is also the problem of litter. We are the least litter-conscious nation in the world. Wherever a crowd gathers, there, too, will be a great mound of litter. That is a sad and disgraceful fact, but the cleaning up must be done by the local authority.

Perhaps it is possible to have some sort of tax on cars parking on main roads. Perhaps, also, visitors' cars could be banned from side streets so that local residents can get in and out. We could put up signs to stop motorists driving to certain parts unless they were residents. Tourist areas face tremendous expense, and that is a point that the inquiry must look into in great detail.

At one time I suggested a tax on dogs as a general supplement to revenue. I am not a dog lover, but many people are and one is on dangerous ground when dealing with the subject. We are a nation of dog lovers, and it is a guarantee of publicity to get involved with children and doggies. I do not like dogs because they are messy. There are far too many of them, they excrete all over the place, they are a nuisance and they are a danger on the roads. I would have thought that a tax on dogs—except those owned by pensioners, of course—would produce a useful source of local government revenue.

The people in my constituency, as in other areas no doubt, are very much concerned about the number of dogs that run loose on the streets. I am anxious that dogs should be well looked after, and I do not criticise people who look after their animals and gain great pleasure from them, but I criticise the people who acquire a dog and then turn it on to the street.

The local authorities could use motor tax to raise revenue. That would give them a degree of local autonomy and decentralisation. It would provide them with income and permit anomalies to be ironed out of the present rating system.

The inquiry should seriously consider for the short term whether all education expenditure should not be met by the national Exchequer. This item of expenditure has increased enormously, and therefore, if we are to lighten the rate burden without introducing a thorough alteration and replacement of the rating system by a local tax, this is one way in which expenditure could be taken away from local authorities and given to the central Government. But I welcome the Government's announcement of a committee of inquiry. There must always be some dependence on the central Government.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

I am interested in my hon. Friend's argument about putting all education expenditure on to central Government funds. A little earlier he advanced the case for direct elections to area health authorities and water authorities. If all education finance were put on central Government funds, how would my hon. Friend see the exercise of democratic control in local education committees?

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

Local education committees already have to recognise that the vast bulk of their expenditure is met from central Government funds. I imagine that they would function as they do at present. I served on an education committee, and I am sure that it would function in a very similar fashion if my suggestion were adopted. The area in which I served was an excepted district within the West Riding. A certain amount of local expenditure, minor works expenditure, was given to the local education commit- tee, but the vast bulk of expenditure was laid down by the West Riding County Council, and the excepted district worked within that ambit.

It seems reasonable that that manner of working could be followed in the national context. The Keighley education committee had certain powers. It certainly had power to make representations to the main body in the West Riding. The schools had certain powers of control, in consultation with heads about curricula, and so on. The boards of governors managed perfectly well. I believe that some such system is entirely possible, giving a measure of decision making locally, and it would not be incompatible with central expenditure because guidelines would be laid down. One hopes that the central Government would certainly encourage local authorities and would lay down guidelines for them to institute comprehensive education schemes, for instance. We must recognise that the central Government will always have the power at the end of the road.

I welcome the inquiry which the Government are instituting. I hope that the results will be forthcoming soon, and I look forward to our producing a more egalitarian system of local taxation so that the rating system is once and for all laid to rest.

3.7 p.m.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

Having sat through the debate from the outset, I am a little relieved that the hon. Member for Keighley (Mr. Cryer) has now temporarily been laid to rest. Although he made an interesting, diverting and perambulating speech, I could not help but think that the hon. Gentleman was appropriately named and that, if his speeches were taxed, there would be little need to reform the rates.

This has been a long and interesting debate, and we all owe a debt to the hon. Member for Brecon and Radnor (Mr. Roderick), who, I thought, made a splendid speech in initiating it. The only trouble with his speech was that it reminded one of the Sherlock Holmes story of the dog that barked—or did not bark—in the night, because amid all his recommendations and his dissertations on the rating system, with much of which all of us agree, there was a notable failure to mention last week's vote in the House of Commons when the expressed will of the House was that the Government should take action now to relieve from the iniquitous extra rate burden those who, like my constituents, are suffering so greatly at present.

It is a pity that, with the exception of one or two of my hon. Friends, notably my hon. Friend the Member for Pembroke (Mr. Edwards), who made a brilliant speech from the Dispatch Box, hon. Members have not emphasised that that was the will of the House of Commons. If the Secretary of State for the Environment does not take account of last Thursday's vote and does not heed the wish of the people as expressed through their elected representatives, he will, I suggest, be committing grave contempt of the House. To assert, as some of his hon. Friends did, that it is not possible to do something would be a totally inadequate excuse.

After all, the present Government—I do not criticise their integrity—found it perfectly possible to implement what I consider to be their fatuous proposals for food subsidies committing themselves to a total expenditure of some £700 million to enable the citizens of Keighley to munch Havarti outside the Brontës' birthplace and to leave their litter around afterwards. If they can do that sort of thing, if they can bring in the enormous bureaucratic panoply necessary to administer food subsidies, surely they can do something properly to relieve the burden upon ratepayers. In my constituency and in yours, Mr. Deputy Speaker, and in others all over the land, there are people who are suffering, and suffering very gravely.

This morning before we began our deliberations I had the privilege of presenting a petition. We all now know what is meant by the phrase "it is in the bag"; it is. But I hope that that petition temporarily resting in the bag behind your august Chair, Mr. Deputy-Speaker, will be studied very carefully by the Secretary of State, because it expresses the wishes of my constituents. It was signed in the space of a few short weeks by one-quarter of my ratepayers. It would have been signed by them all, I am confident, if we had had the sort of committee structure needed to collect the rest of the signatures. It calls upon the House in effect to do what the majority of hon. Members said last Thursday night should be done.

We have heard today of rate increases of the order of 20, 30 or 40 per cent. My constituents are facing an average increased rate burden of 68 per cent., and that is no laughing matter. I am sorry that the hon. Member for Erith and Cray-ford (Mr. Wellbeloved) finds it a trifle amusing. I can assure him that my constituents do not find it amusing. They find it an imposition added to other impositions placed upon them by the Chancellor of the Exchequer in his recent Budget such as to make them contemplate the most extreme action, from which I am trying to make them desist.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

The hon. Gentleman will be relieved to know that I was not laughing at him. I was discussing a minute point with an hon. Friend. However, as the hon. Gentleman has had the kindness to refer to me, let me say that I am somewhat amazed by his audacity. Having been in the House for a considerable number of years, at long last he has found it in his heart to show compassion for the ratepayers in his areas and other areas. It is a pity that he did not share the compassion of myself and many of my hon. Friends when we were pressing his Government during the passage of the Local Government Act 1974 to take positive action to deal with the scandal of rates and rate increases.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

If I shared the compassion of the hon. Gentleman, I should have been long ago turned to stone and should not now be addressing the House. He should listen with seriousness to a debate on an extremely serious subject.

The figure of 68 per cent.—I mention the figure again and underline it—is no laughing matter. My constituents who signed that petition and who have been calling meetings—attended by 200, 300 or even 700 people—have been expressing a cry from the heart. After all, the rate bill is the largest single bill that most people pay in the course of a year, and that deserves pondering.

My hon. Friend the Member for Pembroke said that a prudent person would expect an increase of 10 or 20 per cent. and would budget for it. Indeed he would, and my constituents, when for the first time I talked to the ratepayers' groups, told me that they had anticipated even more than that—30 per cent. or even 35 per cent., bearing in mind certain local circumstances. But 68 per cent.!

This means that young people struggling with mortgages and old people in the evening of their days and seeking to enjoy the homes they have built up over previous years will have an added worry, an added heartache. It would be cavalier in the extreme if the Secretary of State for the Environment did not take account of those feelings as translated into parliamentary action last Thursday and did not do something to give immediate relief.

The tale of woe does not end there. On Tuesday I received a letter from my county council. I am not making any party political point here. My county council, alas, is temporarily Socialist-controlled. The momentary aberration of the electorate which led to that peculiar circumstance will, I am sure, be rectified in the fullness of time. My Socialist-controlled county council has written to all Members of Parliament within Staffordshire and pointed out that unless some immediate relief is given to ratepayers through the county council one of two results will flow. Either there will be an increased precept this September, an addition to the 68 per cent. I have spoken of, or alternatively the council will be obliged to go "into the red" to an extravagant amount and next year the chickens will come home to roost. The bill will rise even more.

The Secretary of State must heed this totally non-party cry from the Staffordshire County Council and do something to ease the burden. I sincerely hope he will. I was to some degree comforted by the answer to a parliamentary Question I received yesterday which indicated that the representations had been received at the Department and were being studied. I hope that they will be studied most carefully and that there will be some tangible action as a result. If not, it will not be a question of a few of my constituents appearing at the House of Commons with a petition and my presenting it in this Chamber. It will be a question of their coming in their thousands to Whitehall. I shall be pleased to lead them to lobby the Minister in an attempt to get action.

Obviously we must pass on from the immediate situation to the long term. It was right and proper that in his admirable and comprehensive speech the hon. Member for Brecon and Radnor should have touched not only on the short-term dangers and difficulties and the need for immediate action, but on the long-term problems and the need for a proper solution to the rating difficulties facing us. He was right to say that every solution should be considered. That would not be an inexact précis of his general argument. Of course everything should be considered.

The hon. Member was right to welcome, as I did last week and as I do now, the action of the Secretary of State in instituting some form of inquiry. We all welcome that action. The hon. Member was even more correct when he said that the inquiry should not be drawn out. I suggest that almost all the facts needed are in the Government's possession. It is essential that some very early decisions decisions should be taken, followed by early action.

What is needed from the committee when it is appointed is a Sunningdale-type weekend when all its members are put together, with the Secretary of State, and try to reach a decision which can be presented to this House in the form of a White Paper. The Prime Minister once said that Royal Commissions took minutes to appoint and sat for years.

Although the inquiry is not a Royal Commission, the same thing could happen. It was the hon. Member for Brecon and Radnor who talked about the committee reporting at the end of 1975, consideration of its report taking a year, a year being needed for legislation and another year to implement it, making a total of four years. That is not good enough. We must have action long before then. An extremely useful aid to the deliberations of the committee is before the House at the moment. Within the next hour there will be an opportunity to give a Second Reading to the Rating Reform Bill, a modest proposal. [Interruption.] I have never claimed it to be coy-thing else. I am glad that the hon. Member for Erith and Crayford is pleased that it should be before the House. That redeems him for his momentary folly a few minutes ago.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

The hon. Gentleman says that I can wait until four o'clock. If he shouts "Object" to the Bill, people all over the country will know where his feelings lie and I shall have no hesitation in pointing it out, because it is plain from the speeches of Labour Members that there is a general welcome for the Bill.

Almost every hon. Member has spoken of the need to exempt from rating internal improvements to a person's property which at the moment result in a financial penalty to the householder. There has been a remarkable degree of cross-party accord on this issue. Any hon. Member who attempted to throw out Clause 1 of the Bill would be doing a grave disservice to people who might have had certain expectations aroused by it. We could easily amend the Bill and preserve in it the clause which would bring great benefit to many millions of people.

The other main provision of the Bill—it is a good basis for discussion and I hope that the hon. Member for Newcastle-under-Lyme (Mr. Golding), who is temporarily occupying the Government Front Bench and acting as messenger for the gods, will make sure that this is passed on—would oblige local authorities to take account of the number of adult wage earners in a household. It does not spell out in detail how that should be done, because that is beyond the capacity of a group of hon. Members.

My Bill has the support of some very distinguished colleagues, such as my hon. Friend the Member for Oswestry (Mr. Biffen), my right hon. Friend the Member for Stafford and Stone (Mr. Fraser)—[HON. MEMBERS: "Where is he?"]—he is seeing his ratepayers—and my hon. Friend the Member for Ludlow (Mr. More). I am sure that the House would wish me to pause to send our good wishes to my hon. Friend the Member for Ludlow who recently was badly injured in a car accident. I hope that I carry the House with me in doing that. We have joined together to present this modest proposal—

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

On a point of order, Mr. Deputy Speaker. I know that the hon. Member for Staffordshire, South-West (Mr. Cormack) is anxious about his Bill, but he is now making almost a Second Reading speech on it. Would it not be better if he were to wait until the appropriate time to make his speech on the Bill?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

We are discussing a wide motion dealing with rating, and there may be coincidence between what the hon. Member for Staffordshire, South-West (Mr. Cormack) says on the motion and what he has to say on his Bill.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

I am grateful for your protection, so eloquently delivered, Mr. Deputy Speaker. It is a comfort to know that the rights of back-bench Members are so zealously guarded by the occupant of the Chair. The suggestion of the hon. Member for Erith and Crayford was outrageous. The hon. Member for Brecon and Radnor has felicitously presented a wide-ranging motion for us to discuss, and for the hon. Member for Erith and Crayford to suggest that I should not be allowed on this motion to refer to my Bill dealing with rating reform is quite outrageous.

I shall not expand on the Bill. I merely suggest that it is worthy of the consideration of the House and I know that hon. Members will wish to consider it. I know that the hon. Member for Newcastle-under-Lyme, who is occupying the Front Bench for the Government, will convey these views and sentiments to the Secretary of State and that, as he is also a Staffordshire Member, he will do so with alacrity.

There are other matters which we must discuss. I take my cue from the hon. Member for Keighley. Knowing that those of my hon. Friends who wished to speak have had the opportunity of doing so, I feel that I am not detaining or delaying the House.

Education, the police and the fire service have been mentioned. The transfer of these major services should be considered carefully by the committee of inquiry which, has been appointed by the Secretary of State. There is one argument which has not so far been advanced in support of the transfer of these major services which should at least be reflected on by the House and by the committee. If the responsibility for raising revenue for education, the police force and the fire service were taken away from local authorities and placed upon the central Government it would be easier for local electors to scrutinise the expenditure of their local councils. They would feel that they had an opportunity to exercise greater control.

The list of services provided which appears on rate demand forms is difficult to comprehend. One sees from it the enormous expenditure on education, the sizeable expenditure on the police and the fire service, and expenditure on all the other services listed. If the three major items were removed and a more detailed list of specifically local items were included, a ratepayer could rely on his local geographical and social knowledge and decide in his wisdom whether the money he was paying as a ratepayer was being properly expended. That factor should be carefully considered by the committee when it deliberates.

I wish briefly to refer to a matter about which the hon. Member for Newcastle-under-Lyme must be as acutely conscious as I am. There has been criticism in Staffordshire recently of certain fringe expenditure by the county council which included expenditure on a chauffeur-driven limousine for the chairman of the county council where none had existed before, several thousand pounds upon crystal and cutlery for the entertainment of civic guests and some £20,000 on the chairman's expenses during the year. I have not said that that is absolutely wrong, because it would be rash of me to do so, nor have I suggested that by eliminating that expenditure the rate burden could be altered one iota for the ordinary ratepayer. But the ratepayer feels that an authority that does not look after the pence will not look after the pounds. That sort of apparent extravagance does not result in the local authority receiving a good Press.

Does the hon. Member for Newcastle-under-Lyme wish to comment?

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

We were not even listening. We were having an intelligent discussion.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

If the hon. Members for Newcastle-under-Lyme and Erith and Crayford are so unmindful of the ratepayers' difficulties that they carry on an altercation in the midst of an important debate, I pity them and their constituents.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

If those major items of expenditure to which I referred were removed from the rates, there would be greater opportunity for ratepayers to scrutinise the minor expenditures of their elected representatives which often cause such annoyance.

Without attempting to be dogmatic on what conclusions the committee should draw, I think it is right and proper for the message to go out from the House today that we expect the Secretary of State to announce the appointments to the committee within a matter of days rather than weeks, that we expect the committee to get down to work in weeks rather than months and that we expect it to report in a few months rather than in a year and a half, as was suggested last week.

I return to the point with which I began. It is essential that the expressed wish of the House of Commons by a convincing majority only eight days ago, expressed by a House of Commons which was fully representative of the people and fully attended by its Members, should be implemented by the Government of the day.

The situation demands a measure of immediate help in bringing relief to constituents. The hon. Member for Brecon and Radnor spoke of giving relief to his constituents and I know that my constituents are now suffering increases of 68 per cent.—plus. Following the decisive vote last week I hope that this afternoon we shall have an underlining of the message which we then sent to the Government and that we may expect action, if not this day at least next week.

3.30 p.m.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

I began to think earlier in the day that the debate was to be monopolised by Welsh Members, and apart from the fact that I have a Welsh Christian name I have no other grounds for joining that august company.

The hon. Member for Staffordshire, South-West (Mr. Cormack) said that the fact that the electorate of Staffordshire decided to have a Labour-controlled county council was in some way a temporary aberration. In the next breath he laid great stress on one decision reached a few days ago by the House of Commons. There seems to be a certain illogicality about those statements which I have not yet been able fully to work out.

The causes of the tremendous increase in rate demands have been well-rehearsed in the debate. We have heard it put down to reorganisation of local government, inflation, cuts in Government support for local authorities and so on. Reorganisation should have been expected to produce reasonable economies of scale, and indeed ratepayers looked to reorganisation to produce such economies. In fact, in many cases, certainly in Bedfordshire, there have been considerable increases in expenditure. The number of staff at county hall and indeed in the county as a whole employed by all authorities seems to have been increased. The salaries earned by people in the upper income levels employed by local authorities also seem to have increased considerably.

I believe that the reorganisation of local government and local services which we have seen in the last year or so was a very bad step. We reorganise local government only once every hundred years or so. It is almost a hundred years since the last major reorganisation of local government towards the end of the nineteenth century. I believe that the latest attempt at reorganisation of local government and its services has produced a most unsatisfactory result. What reason is there in the last quarter of the twentieth century to preserve the boundaries of the mediaeval county of Bedfordshire? I see no reason for it whatever.

Clearly the reorganisation of local government and the reform of local government finance are closely related. I believe that on the one hand we should have gone in for much larger units of local government—regional units which could have produced economies of scale—but on the other hand, as a number of lien. Members on both sides of the House have emphasised today, we want more genuinely local government. We also want smaller local government units. The two things are not necessarily incompatible.

Inflation, the reorganisation of local government and the cuts in Government expenditure have highlighted the unsatisfactory nature of rating as a system of local government taxation. There is a growing demand on both sides of the House and from all shades of opinion in the country for a better system of local taxation more closely related to the ability of people to pay. I agree with that. I believe that we should have a system of local taxation which is based on the prime criterion of ability to pay. Inevitably this points to some form of local income tax.

However, if that is true for local government, I cannot understand why it should not be true for central Government taxation as well. What is good for the local government goose surely is good for the national Government gander. Clearly the national Government must under any system provide much of the financial support for whatever local government system we have.

As I understand it, the Opposition are calling for a greater measure of central Government support for local authorities, at least in the short term. I leave aside for the moment the redistribution of the money which the present Government have undertaken. I must declare an interest here in that the ratepayers of my constituency benefited slightly from this redistribution. However, we are talking about the global sum. The Opposition are calling for an increase in the total sum of central Government support for local authorities, at least in the short run.

I do not argue against that, but it raises questions. From where is the money to come? Is it to come from increased taxation nationally? Is it to come from cutting out certain other forms of national expenditure and diverting the money to this object? Is it to come from the central Government going into even greater deficit than in the past few years, thus running the risk of adding more pressure to the inflationary spiral?

It also raises the question whether central Government taxation is raised more equitably than local government taxation. The rating system is very inequitable. But the way in which we raise taxes nationally is also inequitable. It might be interesting to do an exercise in the comparison of inequities between central and local government finance.

Another question which has been touched on by a number of hon. Members concerns the balance between central control and a certain degree of local autonomy. There is much to be said for transferring the education budget to the central Government, but it raises the question of the degree of local autonomy. Again there is a certain inconsistency in the attitude of some hon. Members who argue for the education budget to be transferred to the central Government while at the same time they champion local autonomy. Whether taxation be local or national, whatever kind of taxation it is, it should and must become more equitable.

I return to the point about decisions of this House. We also decided recently on a sparsely-attended Friday to pass a Bill allowing local authorities to raise money by lotteries. I am completely opposed to the idea on every possible ground, whether it be "practical" or moral, though why these two should be opposed to one another I have no idea. On that occasion the hon. Member for Kensington (Sir B. Rhys Williams), I think it was, shot the whole idea down in flames With a local lottery either we divert people from other forms of gambling or, which is more likely, we increase the total sum of gambling. I believe that there is already far too much gambling in this country.

As a Socialist, I believe that wealth should be distributed according to need, not luck. Therefore, I am totally opposed to a local lottery. Indeed, it diverts attention from the major problem of seeking and finding a better, fairer and more equitable system of local taxation.

I should like to add my support to those who ask that, as a short-term measure, the water rate should be eligible for rate relief. This seems an obvious, just and right move.

Clearly, the system of local government taxation needs reforming. The criterion for a future and better system should be the ability to pay.

I, like the hon. Member for Staffordshire, South-West and others, hope that the inquiry will not be too protracted. There are mountains of evidence and millions of words in print. The ground has been gone over many times. Therefore, the inquiry should be able to report within a reasonably short period. The inquiry could and should have been set up within days, or at least weeks, of this Government taking office. I offer the criticism that to wait four months before setting up the inquiry was a mistake.

Finally, I reiterate that, whether taxation is raised locally or nationally, whether we are talking about local government or central Government taxation, in both cases the forms of taxation must be made more equitable and be more closely related to the ability of people to pay. Let us, for goodness sake, have a degree of consistency.

3.44 p.m.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I am grateful for the opportunity of speaking in the debate. I spoke in the previous debate on rates and I have asked a number of Questions and taken a keen interest in the matter. I do not think that anyone can say that this House is not in touch with the electorate. Having had three debates, a motion on the Adjournment, a large number of Questions and now this debate today, I think that hon. Members on both sides are conscious of public concern about this matter.

The hon. Member for Luton, East (Mr. Clemitson) tended to blame the reorganisation of local government for a great deal of the trouble that we are experiencing. That is not entirely true. The hon. Gentleman said that he would prefer larger, rather than smaller, units of reorganisation. Yet he said that the reorganisation, by creating larger units, had increased the staff and put up costs. There is a difficult dichotomy there.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

I did not say that the reorganisation of local government was the only or the major factor in the increase in rates. I said that it was one of the factors along with inflation, the previous Government's cuts of last December and so on. I believe that as a result of the reorganisation of local government many parts of the country, and certainly Bedfordshire, have ended up with a kind of half-cocked situation in which there are units which are neither large enough to reap the real benefits of economies of scale nor small enough to provide really local government. I was pleading for large units for certain services and for much more truly local government. Those two things are not incompatible.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I do not necessarily agree with the hon. Gentleman, because he expresses all our difficulties in local government. We are always under local pressure, and people have different views. It is difficult to balance the two things for which the hon. Gentleman asked, but perhaps we may discuss that at greater length on some other occasion. Any reform of the rating system must be based on the ability to pay. This must be the underlying theme.

The hon. Gentleman said that as Conservative Members want to provide immediate relief for ratepayers they should say where the money must come from. If the Government had not given a subsidy of a penny on milk, there would have been a surplus of money which could have been used for the purpose.

I believe that the present situation concerning rates has been coming about for some time and is not such a new phenomenon as many people believe. It has come about through increasing demands by the electorate for more and more services—more swimming pools, more sports centres and more facilities for other activities. That is understandable but it has meant that local authorities have gone in for borrowing on a big scale. My borough of Reading is £51 million in debt. It has to pay back both the interest on that sum and some of the capital each year before it can spend any money on anything else. This debt has been accumulated over many years and is not a new phenomenon.

I think that I ought to defend the district councils. Our unfortunate district councils get most of the blame for the rates because they have to collect them, while our plush county councillors sit in their homes—and we have heard about motor cars and chandeliers. It is the district councillor, often living in bad conditions, who takes all the blame for the rate demand. The district percentage of the rate demand is very small, and perhaps we should consider splitting the rate demand so that the county coun cil collects its share while the district council collects its element of the rates. That might prove to be an interesting lesson.

I have spent some time examining various alternatives to the rating system. that might be put forward. It was right to set up an inquiry, because the solutions are not easy. They have all been considered, and we had the abortive Green Paper from the previous Government. Most of the time was spent on putting up ideas and knocking them down, but all the ideas are there and they ought to be examined carefully.

I was sorry that the hon. Member for Luton, East attacked my right hon. Friend the Member for Crosby (Mr. Page) and his little Bill which encourages lotteries. The idea of local lotteries has been a great success in Canada and has enabled many facilities to be provided. A town can get excited and interested in raising money for, say, a swimming pool by means of a lottery. Why should the football promoters have the money? Why not let the local community have it instead? I think that it is an excellent little Bill and that it will do something to help local finance.

There is no representative present from the Liberal Party, but I sound a note of warning to Liberal Members who have talked at length about abolishing the rates completely. That is a dangerous philosophy. It makes people think that they will not have to pay the rates. If we do not pay them locally they will have to be paid nationally, because the money must be found somehow. This is rather dangerous talk by certain people, perhaps for electoral purposes. It would be dangerous to take away rates altogether because we should kill local government practically stone dead. It is difficult enough now to get good councillors. If we killed their opportunity to raise revenue locally and to make decisions which are more local, we should have difficulty in getting people to serve on councils.

I want to make one comment, however, on the question of the rate uproar, as one calls it. I am nervous that this is more than just an explosion about rates. I have a feeling that it is an explosion from those in the middle-income groups who have had just about enough of being pushed about from above and below.

Photo of Mr Bob Cryer Mr Bob Cryer , Keighley

Does the hon. Gentleman accept that the sort of explosion about which he is talking is also reflected by members of NUPE who are waiting for Government action to rid National Health Service hospitals of private patients?

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I do not accept that at all. That was not the point I was making. I am talking about those in the middle-income range who have not been represented in our society in the last few years either by big business or by powerful trade unions. They have been left out, and they feel that it is almost the final straw when these rate demands come through the letter-box. They are shopkeepers, clerks, young executives, and supervisors—and school teachers, a category who have felt these increases particularly.

Something must be done quickly if we are to get anywhere. Delay would be fatal, because if we do not do something we shall have great difficulty in operating local government. We shall either have to cut it right back, in which case services will deteriorate, or find some other method. The fact that an inquiry has been set up is helpful, but it should move quickly. I am always nervous about committees and inquiries. I have spent a great part of my life on committees. They do not always come to very quick decisions, or if they do they come to woolly decisions. I hope that this inquiry will move quickly and that we shall get a quick answer.

We have had a lot of talk about rates during the last three months. I believe that the time has now come for a little less talk and a little more action.

3.53 p.m.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

In the few remaining minutes of the debate I want to make one or two comments as a modest contribution. I start by joining in the congratulations to my hon. Friend the Member for Brecon and Radnor (Mr. Roderick) on his good fortune in winning the Ballot and his good sense in putting down the motion.

There is no doubt that ratepayers are fed up with the continuation of the existing system, with all its anomalies and with the regressive nature of the rating tax. My only point of dispute with some hon. Members who have spoken in the debate, particularly the hon. Member for Staffordshire, South-West (Mr. Cormack), is that it is a bit much, on an occasion such as this, to attack the present Government without bearing in mind the realities of the situation and the lost opportunities. If there is one other thing of which ratepayers are sick and tired, it is the sort of hypocrisy we have had from hon. Members who today are advocating things which a few months ago they did not take the opportunity of putting into practice.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

I will give way shortly. I have not yet finished with the hon. Gentleman.

Due to your wise ruling, Mr. Deputy Speaker, that a Private Member's Bill which has not yet received its Second Reading may be referred to broadly in a debate of this nature, I am delighted to have this opportunity of referring broadly to the hon. Gentleman's Bill, about which he spoke so skilfully in his speech. The hon. Gentleman typifies the sort of humbug and hypocrisy which I am talking about.

Photo of Patrick Cormack Patrick Cormack , Staffordshire South West

On a point of order, Mr. Deputy Speaker. Are the terms used by the hon. Gentleman parliamentary, bearing in mind that he drifted into this debate about an hour ago not having heard a word that was uttered earlier?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Is the hon. Gentleman objecting to the terms that were used?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

It has been ruled on more than one occasion that it is out of order to refer to another Member as a humbug. One many say that his argument is humbug, but one must not say that the hon. Gentleman is a humbug.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

As an experienced parliamentarian I concur with that view, Mr. Deputy Speaker. I should not dream of referring to the hon. Gentleman personally as a humbug or a hypocrite. I shall wait for another occasion when I can speak the truth, perhaps at the hustings. The sort of argument which he adduced to the House this afternoon is without doubt humbug and hypocrisy, and I shall explain to the House why I take that strong view. In many other areas where I meet the hon. Gentleman I have found him a delightful companion, but he has had the cheek to come here in the hope of presenting a Bill to the House, Clause 1 of which seeks to amend the Local Government Act 1974, which was passed before the last election.

That Act lays down the framework of raising finance for local government. It provides for the rate support grant system. It also confirms the continuation of the present rating system. For the hon. Gentleman to come here with his Bill so shortly after his Government confirmed that atrocious system of rating really is humbug and hypocrisy. That is why in a few moments' time I shall unashamedly call out "Object" to the hon. Gentleman's Bill, because it is no part of my duty in this House to stand idly by while hypocrisy is perpetrated.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

No, I will not give way. I want to discuss some of the views which have been expressed in this debate.

The crucial issue is that the Secretary of State for the Environment should make certain that the pledge which he gave to the House on 22nd June is fulfilled, namely, that the committee of inquiry set up by the Government to make positive recommendations to deal with the anomalies and injustices of the present rating system shall report to the House by the end of 1975. We can justifiably say to the ratepayers "Be patient. Wait just a little longer". What we cannot justify to the ratepayers is waiting until the end of 1975 and then finding that the report of the committee of inquiry is not before us.

Photo of Mr James Wellbeloved Mr James Wellbeloved , Bexley Erith and Crayford

One ought to go one stage further and make clear to the people that it will be a fundamental responsibility of the next Labour administration to implement the findings of that committee. That is the clear message that my hon. Friends would want to go forth from the House this afternoon. I hope that my hon. Friend the Member for Brecon and Radnor will receive unopposed approval for his motion. I wish him good luck, and I wish to assure him that I shall be here a minute or two after four o'clock to stop the humbug and hypocrisy of the hon. Member for Staffordshire, South-West.

Question put and agreed to.

Resolved,That this House notes the difficulties facing many ratepayers, anomalies in the present rating system, and anomalies in the operation of the Water Act 1973 and the savage increases caused by it; welcomes the setting up of the Committee of Inquiry into Local Govermnent Finance; suggests some reforms it might consider; but also urges upon the Secretary of State for the Environment the need to introduce some interim changes before the Committee reports.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I suspend the House until Four o'clock, which is in 30 seconds time.

Sitting suspended

4.0 p.m.

On resuming