Rate Support Grant

– in the House of Commons at 12:00 am on 12th December 1974.

Alert me about debates like this

Question again proposed.

6.39 p.m.

Photo of Mr Geoffrey Finsberg Mr Geoffrey Finsberg , Camden Hampstead

I should like to follow the hon. Member for Woolwich, East (Mr. Cartwright) and say how sorry I was that the Secretary of State for the Environment was not here when he started speaking, because the hon. Member was one of the few Londoners likely to congratulate the Secretary of State on what he has done for the London ratepayer this year.

I fear that the hon. Member for Woolwich, East has not fully grasped the fact that we are in the middle of a grave economic crisis and that no local authority service can be regarded as sacrosanct in the difficult months ahead. Whatever circular he may have disliked last year, I believe that he will find many more unpleasant circulars coming and the situation will have to be realised by those who run local government rather more than would appear from the speech we have just heard.

The hon. Gentleman went on to make a comment about Camden. He said that the reason for Camden's massive acquisition of properties was to solve the problem of the homeless. Let me assure him that the main reason for Camden's desire to make such acquisition is its sheer desire to acquire as much property as it can irrespective of cost or condition, which is why Camden ratepayers pay so much.

The debate started with a witty and urbane but somewhat uneasy speech from the Secretary of State. He never disappoints us. Everything he says is extremely clear. I have the feeling, however, that today he was less than his usual happy self. The content of what he said did not seem to match the way in which he was trying to express it.

For example, the Secretary of State was kind enough to confirm when I intervened that London certainly does extremely badly from the current set of rate support grant negotiations. I was sorry to hear him say and some of his hon. Friends repeat what is now repetition ad nauseam that it is reorganisation that is increasing the costs of local government. In London, reorganisation has been over for more than 10 years. It is not the Local Government Act and reorganisation itself which have cost an enormous amount of money and inflated staffs but the method by which reorganisation has been carried out—mainly, I fear, by authorities of the political persuasion of the Government.

In London in the rate year 1973–74 there was about £120 million of identifiable expenditure which was not included for grant purposes, and in the year 1974– 75 it is still not included. Why does London do so badly? I suppose it is because, as some have said, London streets are believed to be paved with gold—perhaps today "paved with Krugerrands" would be a fairer way to put it. But the average Londoner exists under appalling conditions.

As we heard earlier today, those who have to come in to London to work and enjoy our facilities constantly find that their trains do not run, that their tube trains are overcrowded and that there are not enough staff to run their buses. So there is no joy in living and working in London. But still the Government and the Civil Service—I fear that my right hon. Friends were as guilty as the present Government—believe that London can afford to pay more because it has so much rateable wealth. As the hon. Member for Woolwich, East demonstrated, that is not so, but it becomes increasingly difficult to persuade Ministers—and the Civil Service, I suppose—of this fact.

I too should like to quote from the GLC's brief on this subject, which discusses the fallacy of the argument about London's high rateable resources. If one takes the table of relative rateable values of Parker Morris houses and the level of a house in Dyfed as 100, Durham becomes 131, Kent becomes 150, Mersey-side 157 and Greater London 243. As a result of London's higher rateable values, our domestic ratepayer pays an average of 50 per cent. more in rates than the average ratepayer in the rest of the country, although average household incomes in London are nowhere near that much higher. Statistics for 1972 showed that they were about 20 per cent higher, and there is no sign of any recent improvement.

The hon. Member for Woolwich, East listed some of the factors which are building up the problems for London—the police, higher land and construction costs, bigger social service caseloads and higher education costs in deprived areas where so many children are immigrants. This will cost London about £200 million extra and the total extra cost will be about £300 million. These extra costs are not given adequate weight in the formula which discriminates yet again against London. The 12 per cent. factor for London's higher costs in 1974–75 will go down to 8 per cent. in 1975–76, yet there is little likelihood of those costs suddenly going away.

What are some of the facts about London's emerging problems? Leaks— they are fairly authoritative—suggest that the Inner London Education Authority precept will be up from 22p to 34p, an increase of over 50 per cent. The GLG precept will be up from 9½p to 20p, an increase of well over 100 per cent. I would have said, had he not been so courteous, "Where is the Secretary of State's average of 25 per cent.?" I would have gone on to say that the actual figure might have been nearer his humorous aside of a few weeks ago—100 per cent. But he was kind enough to confirm earlier that the London average would be much higher than 25 per cent. Any London borough which gets away with an increase of less than 50 per cent. will be able to count itself extremely fortunate.

Take, for example, the City of Westminster, which may have to raise its domestic rate by 65 per cent. That figure includes 2p for London equalisation. London has always set an example which could be followed in other parts of the country in which the authorities, mainly the inner London authorities, with a high resource of rateable value have contributed to those less fortunate. It would have been possible, by adopting the scheme that the Government and the Civil Service appeared to want at one stage, to have a fairer spread throughout London, but that would have meant that instead of an authority like Westminster having a 2p equalisation rate, it would have had to have a 5p rate to ensure that everyone got something out of the pool. But I am not sure that the domestic ratepayers, private and council tenants, for example in Paddington, Notting Hill or Kilburn, who may be just over the rate rebate level, would be willing to pay that much extra. Therefore, if Westminster is typical, as I believe it is, the domestic ratepayer in London will do very badly and is being shabbily treated.

Rates in outer London will probably rise by an average of between 50 and 60 per cent. The make-up of an outer London borough's rate bill is that about 65 per cent. goes on education, 10 per cent. on social services and between 5 and 10 per cent. on housing. From the documents accompanying the order, it is clear that the Secretary of State for Education and Science will allow a 4 per cent. growth in education, and we have been told that there will be no cut in council building. Yet it is clear from all that has been said that local authorities are meant to economise somewhere.

I see from the Press that a Minister in the Department of the Environment is considering writing a letter of admonition to the council of the London borough of Barnet for paying salaries to certain chief officers above a level that he thinks adequate. I hope he will take on board the need for an even-handed policy and will investigate the activities of the council of the London borough of Camden, which recently reduced the working week of its manual workers to 37½ hours in spite of requests not to do so from the appropriate Whitley Councils. That will cost the Camden ratepayer about £500,000.

If the Minister feels it necessary to write to Barnet because it is paying above the approved scales, I hope he will also tell Camden that he disapproves of its paying above the scales by reducing the working week in this way.

The hon. Member for Cornwall, North (Mr. Pardoe), who happens to be one of the many people who like to live in my constituency, reinforces the view I have already expressed—namely, that reorganisation is often blamed for the increase in costs. The hon. Gentleman instanced planning. I am still critical that no one expected the problems that emerged from the split in planning when we reorganised London in 1963–64. We allowed a split of powers to exist outside London in the new counties and districts. There is not the degree of co-operation which happily existed in London.

I am bound to say—this is no political argument—that there was a good degree of co-operation between the London boroughs and the GLC. Outside London there has been an almost impossible situation in which both the counties and the districts have been sending planning applications backwards and forwards in search of staff. I do not think that any of us in our wildest dreams or fears thought that that would be the result. That is one of the main causes of the massive increase.

If I am right that the bulk of expenditure in an outer London borough is taken up by education, social services and housing—we are told that for education there is to be a 4 per cent. growth and that there is to be no cut in expenditure on council housing—where will it be possible for local authorities to make some cuts? The document issued by the Department makes it clear that there will be no room this year for any improvement in the standards of management or maintenance of local authority dwellings. I am sure that the right hon. Gentleman's postbag is as full as mine with letters from council tenants who write, irrespective of the political control of the local council, to complain, for example, about the failure of the local authority to carry out repairs. Yet we are told there is no room for improvement in what are admittedly low standards.

We are told that there is to be a standstill in council housing, but if local authorities continue to acquire properties there may be not a standstill but a decline. Is that what is in the mind of the Minister? If he is encouraging local authorities to enlarge their housing stock, should he at the same time encourage them to allow the standards of maintenance to drop so that when the work eventually has to be done it will cost very much more as the property will have deteriorated? Would it not have been wiser for him to have chosen a different option instead of allowing a 4 per cent. growth in education? Perhaps he should have allowed a slightly lower figure and at least ensured that the standard of maintenance of publicly-owned buildings did not deteriorate still further.

Having sat in on rate support grant negotiations, I know that no Minister ever has an easy task. It is clear that this year the right hon. Gentleman has had an impossible task. None the less, I believe that he has made a wrong judgment. Only time will tell.

I believe that London is badly treated. I venture a guess as to why that is so. Perhaps London is being badly treated this year because there will be no local elections. If local elections had taken place in London this year, I wonder whether the Government would have allowed a 50 per cent. increase in the rates. The Secretary of State "tuts tuts". He appears to shy away from any idea that he is ever motivated by political considerations. I do not believe that the average Londoner will be taken in, however charmingly the right hon. Gentleman may put his case. There will be elections this year in other parts of the country, but in those areas the average rate increase will be 25 per cent.

We get many useful briefs for use in rate support grant debates from interested parties such as the GLC, the AMA and the London Boroughs Association. This year I found the LBA's document extremely good. Apart from dealing with the problems mentioned by the hon. Member for Woolwich, East, it made three specific suggestions about how London might have its affairs better ordered in future.

I shall briefly outline the LBA's proposals so that the House may know what the Minister might be able to do in time for 1976–77. First, it recommends that London's expenditure should be brought into the regression analysis on which the right hon. Gentleman's formula is based. Secondly, it is recommended that he should increase by a substantial amount the percentage addition in respect of London's higher costs Thirdly, it is recommended that he should reduce the proportion of rate support grant devoted to the resources element, thus leaving a larger total for distribution through the needs element. I believe that these are constructive suggestions. I hope that they will be taken on board by the right hon. Gentleman.

These orders will be a slight palliative but little comfort for the average Londoner. The Government must insist that the Layfield Committee reports more swiftly on this occasion than it did previously after considering another matter. I hope that the Government will take early action when the committee reports. I must remind the right hon. Gentleman. who has said on more than one occasion that he expects still to be in office in 1978, that there will be elections in London that year. The London Labour Party will not think him such a nice, happy chap if in that year Londoners are still being as badly treated as they are this year.

6.57 p.m.

Photo of Mr Peter Temple-Morris Mr Peter Temple-Morris , Leominster

To give a certain credibility to what I want to say in future—I have not yet heard this said straight by any of my hon. Friends—I must say that I do not believe that any Government in the present economic situation could have given more money by way of grant. I do not wish to take up the argument about the rating system itself and to go into all the matters which we debated so fully such a short time ago.

It is right, however, that I should briefly mention the rating system and my party's political policy, with which I so much agree. There is a problem in giving a generous award at present. The longer it takes to deal with the problem, the more generous will have to be the awards supplied by future Governments to keep the system alive. That is the predicament.

Any committee takes time to report. We all know that rating is a complicated subject. We all know that we cannot have a rapid decision, but I fear that by the time the Layfield Committee has reported the rating system will be so much shattered in its own ruins that we shall be urged to take a panic decision. The result will be that the whole process will start once again.

I urge the Secretary of State, with all the power I can muster and as reasonably as I hope my voice sounds, to speed on the Layfield Committee to a conclusion so that we can make a positive decision.

I shall make but three definite points on behalf of English country areas. We have had a plea on behalf of Welsh country areas and we have heard plenty about London. We have heard of the position of Cornwall in relation to Wales. I speak on behalf of the English country areas. I begin in a bipartisan manner because the previous Conservative Government began governmental progress towards the shift of money and the balance of resources from the country to the towns. I do not wish to discuss domestic rate support grant and whether it should be variable, but the shifting of money and resources was started by a Conservative Government. I say that as a Member representing a countrified constituency.

It should be recognised by country areas that on rates they have for some time had it fairly easy compared with the urban areas. I mention that only to give credibility to the point that if we are to have this change-over we must not do it at a time of intense inflation, just after local government reorganisation, the increased costs last year and all the other factors which have been mentioned today. One perhaps accepts that, over the years, the rural areas have fared better than the towns. However, we have heard certain percentages mentioned. For example, the rates for the new county of Herefordshire and Worcestershire last year rose by 72 per cent., and before the measures taken by the Secretary of State in July the increases in my constituency were to be between 80 per cent. and 115 per cent. The same problems arise again this coming year.

The total grant is split up into various elements. I ask the Secretary of State for the Environment and the Secretary of State for Wales to bear in mind all these factors when considering the situation of the rural areas, where there is a feeling that, compared with the towns and in struggling against the interests of the towns, the rural areas, whether in agriculture, in the problems of the self-employed or in the rating situation, are losing out all the time.

Party politics apart, pleased as I was that the Secretary of State for Wales should have taken on his distinguished office, he brought in, although not by his own administrative action, a month after taking office, the most expensive water emanating from Wales that Herefordshire had ever encountered. Most of my constituency has the benefit of the pure water of the right hon. and learned Gentleman's domain, but has to pay an extreme price for it. Last year's water rate went up from 3·8p to 13·4p.

The Secretary of State for the Environment has told us in answer to interventions by my hon. Friends the Member for St. Ives (Mr. Nott) and Cirencester and Tewkesbury (Mr. Ridley)—and we all know it to be so—that local government reorganisation and water reorganisation have been much greater in their effect on Wales than on the rest of the country. That is his explanation, and I have quoted his words, of the Welsh discrepancy. If that is so, my area has not only had its own reorganisation of local government but has Welsh water as well. In our domestic rate relief, we have 18½p as against 36½p in Wales, and this is felt deeply by the Herefordshire constituencies.

I know that the Secretary of State for Wales has a committee considering the water problem, but I fear that it will devote most of its time to the dire internal problems of Wales and its water supply and perhaps neglect those of us who are sitting on the border and do not get Wales's domestic element rate support. I appeal to both Secretaries of State to remedy the situation as they sit opposite me in their places.

The Secretary of State for the Environment is considering the district council's position. As the county councils get more and more remote, if the system is to succeed it will do so because of the district councils, which are at least in touch with the people. If they are to succeed, they have a good claim for consideration for some part of the rate support grant—I am talking of the needs element—going to them. While the Secretary of State for the Environment is not taking action on that matter this year, I understand that he is considering it for next year. It would be a great step towards the success of the system, for which he is responsible, although he did not introduce it.

The need to economise has been emphasised. As a result of local government reorganisation, Herefordshire—a reluctant bride—was married to Worcestershire. If the Labour Party had been in office at the time, we would still have been married but might have had a slightly different husband. Our matrimonial problems would have been the same, however. I did not represent my constituency at the time of reorganisation, but so great is the feeling locally that I have no hesitation in saying to this House that I would have gone against the three-line Whip and voted against local government reorganisation.

In considering the appeals for economy, there is a blazing issue across Herefordshire and Worcestershire—the project for new headquarters for the Herefordshire-Worcestershire County Council. If we and, more importantly, our constituents are to accept that the right hon. Gentleman means it when he talks about local authorities keeping their side of the bargain and sticking to inescapable expenditure only—his view has been echoed by the Chancellor of the Exchequer—surely a project for a brand new headquarters is not within that bargain.

The project, which has earned some very derogatory descriptions in the area, is to go up at a cost of a penny rate —a figure used in justification. An application for loan sanction for between £5 million and £6 million will soon go before the Department. When ratepayers are being asked to meet rises in their rates to the extent that they are this year, with the prospect of further increases next year, they resent having to stomach grandiose projects of this type, designed to cater for the standards and comforts of those who are partly responsible for the rates bill. If ratepayers are asked to stomach this sort of thing in the present situation, we as politicians, locally and nationally, will have no credibility at all.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

The hon. Gentleman has been kind enough to write to me about this matter, and I have a great deal of sympathy with his views. As I understand the position, however, the building comes within the locally-determined expenditure and so, in effect, the Government have no control over it.

Photo of Mr Peter Temple-Morris Mr Peter Temple-Morris , Leominster

I shudder to think that the Secretary of State has no control over something as important as this. It is not for me to tell him what his powers are. Although I will have to put down a Question after checking the detail, I suspect that in fact he does have some powers to stop something like this. They may be emergency powers; that, I think, is the appropriate expression. My suspicion is founded on a letter written on the right hon. Gentleman's behalf to a political opponent at the recent General Election when this issue was raised. I hope that the right hon. Gentleman has such powers, and I hope that he hopes so too. If he does not have them, he is in for far more difficulty nationally than perhaps I am in for locally.

Anyway, those are my points and I am very grateful to have been able to make them across the Floor to both the responsible Ministers, the Secretary of State for the Environment and the Secretary of State for Wales.

6.59 p.m.

Photo of Mr Michael Ward Mr Michael Ward , Peterborough

I hope that the hon. Member for Leo-minster (Mr. Temple-Morris) will forgive me for not following his case in detail. As one who has had 16 years of work in local government, and as the chairman of a finance committee responsible for budgets in the last three years of budget making, I assure the hon. Gentleman that the right given to local authorities to have a block allocation of funds for projects, to allocate as they saw fit under the arrangement for locally determined schemes, is a right which is part of the independence of local government and is very much treasured. That arrangement was welcomed by both sides of the House when it was made. I hope that the hon. Gentleman will not seek to pursue the point too hard to try to diminish in any way the freedom of manoeuvre which authorities have been allowed in that respect.

May I say how much I and the representatives of local authorities in Cambridgeshire and my constituency of Peterborough have welcomed the scale and the generosity of the award which is being made by my right hon. Friend in the order? What has struck them and me very much is that the chaos which we all had to endure last year has not been repeated. Last year, I well recall, we had two so-called statutory meetings between officers of the Department and the local authority associations, before the statute making them possible was in existence. We had a succession of hurriedly prepared, difficult and long meetings, carrying on right up till the 11th hour and the 59th minute of budget making. We appreciate very much the extensive consultation this year and the generous time which has been allowed to the associations and to the authorities for them to understand the contents of the proposed order.

Last year, we had some very misleading forecasts from the right hon. and learned Member for Hexham (Mr. Rippon) about the extent of likely rate increases coming this spring. He talked in November 1973 of an average 7 per cent. rate rise for householders in the current financial year. As my right hon. Friend the Secretary of State said, the right hon. and learned Gentleman also advised authorities to budget for a rate of inflation of about 9 per cent. As a consequence, the rate support grant order—based, presumably on that sort of forecast—and the activities of local authorities were subject to grievous underestimation. Indeed, the new county of Cambridgeshire, taking the advice of the right hon. and learned Member for Hexham, budgeted for inflation of about 10 per cent. in the period from December 1973 to March 1975. But instead of having to pay £5 million to- wards inflationary costs, it is having to find about £10·8 million, an increase of 22 per cent. This has created serious difficulties for that authority, to which I shall refer shortly.

The total increase in rates this year is, after all, a function of the settlement that was made and fixed by my right hon. Friend entirely on the basis of the figures worked out by right hon. and hon. Members now in opposition. The only change possible was in what was called the variable element. A great deal of noise was generated in the country, and in this Chamber, about the content of the variable element. However, it was, of course, but the small change of the rate support grant order, being only 7 per cent. of the rate support grant for the current year. I suppose that to some extent Parkinson's Law sometimes applies in these matters, as it does in others. Local authorities are frequently criticised for the way in which Parkinson's Law sometimes seems to operate in their proceedings.

However, having been able to attend the Press conferences held by both the Association of Metropolitan Authorities and the Association of County Councils, I was extremely gratified to hear from the chairmen of those great organisations warm words of welcome and appreciation for the size and generosity of this overall settlement by my right hon. Friend. Indeed, Sir Meredith Whitaker—who is not, I believe, a member of the party to which I am proud to belong—thought that it was an extremely good order. He said that his authorities, including the county of Cambridgeshire, would welcome particularly the special sum of £350 million provided in recognition of the special difficulties which counties and other authorities face this year. This wiping clean of the slate was greatly welcomed by him. One must say that the special difficulties to which the order refers are really the special difficulties created by the over-optimism and the underestimation of right hon. and hon. Members of the Opposition.

The order was equally welcomed by Sir Robert Thomas, the Chairman of the AMA, who said that it was the most generous settlement ever. Certainly, when my hon. Friend the Under-Secretary kindly saw leading members and officials of Cambridgeshire County Council a short while ago, they equally praised the level of settlement.

Cambridgeshire County Council, which has been more reorganised, perhaps, and has suffered the problems to which hon. Members have referred more than almost any other local authority in the country, was subject to amalgamations following the 1958 Act under the general Boundary Commission recommendations, and it was reorganised recently when the four former counties were brought together into one. This has created considerable problems for those responsible for ordering the administration of the county.

In July this year, the county council had to make some very painful decisions as a result of its financial situation. It had to decide whether to make cuts in present services or to try to go for a supplementary rate. It had no option but to take one of those courses. It chose to take £792,000 from its estimates for services in the current year. The effect of those cuts has already fallen heavily upon education. For example, Cambridgeshire has made no moves whatsoever yet in relation to nursery education, and does not see itself being able to do so in the coming year. This is a matter of grave concern in large parts of the county, particularly in the new town area of Peterborough.

The county of Cambridgeshire has also had to make substantial reductions in services in highways and in public protection. In the matter of public protection it was hoping to take the initiative which my right hon. Friend the Secretary of State for Prices and Consumer Protection was hoping it would take in developing consumer advice services. That project must go into cold storage, even before we come to the advice given by my right hon. Friend the Secretary of State for the Environment in the order that is before us, and before the series of economies which it will have to consider in the coming year.

In addition to that, we have to consider the immediate situation. I have listened with great patience to Opposition Members' comments about overstaffing and extravagance. This is a cry which has been heard not only from the Opposition but from one or two of my hon. Friends. There may be some among the new local authorities which have made, perhaps, injudicious decisions in the first year or so of reorganisation. I am particularly mindful of the observations made last month by my hon. Friend the Member for West Bromwich, East (Mr. Snape). He is not in the Chamber at present, although I advised him that I should be referring to what he said on 20th November. Speaking of the new authorities, he said: Not only have the new authorities proved completely incompetent to carry out the functions for which they were designed. Rather than admit their incompetence and rather than their chief officers and deputies admitting that they are vastly overpaid, they have taken to employing a completely new innovation, the PR man. The last refuge of the gin-sodden PR man is local government."—[OFFICIAL REPORT 20th November 1974; Vol. S81, c. 1418.] My hon. Friend went on to give a number of examples of posts being offered, including my own as Press officer with the Inner London Education Authority, until I was elected to this House. Perhaps on another occasion I shall say to my hon. Friend that he does a great disservice to local government to speak in such generally disparaging terms of local government.

I can say with certainty that the county of Cambridgeshire has pursued all its new responsibilities with great diligence and enthusiasm, and it has been extremely prudent on staffing. The number of administrative staff employed by the county council was 2,257 in October 1973, in all the constituent authorities. Making allowance for the transferred services, this figure has been reduced to 1,989 in post. That is the opposite to what many hon. Members have been suggesting about incompetence and extravagance in local government. No doubt there are local authorities which have a similar responsible story to tell.

Cambridgeshire has a problem which has not yet been adequately recognised in the formulae put forward in the Rate Support Grant Order. It has a rate of growth of population eight times the national average. It has considerable problems in the short to medium term, and I hope that when considering the review of the formulae in the next order my right hon. Friend will bear in mind the problems created by growth in rapidly expanding areas. I hope he can agree that some device should be built into the order which will allow this matter to be the subject of negotiation, and not for only one year at a time, and to include some forward thinking to reflect the immediate costs borne by these rapidly growing areas. I hope he will be able to make an arrangement which will enable an adjustment to be made by agreement with the associations in future years.

7.22 p.m.

Photo of Mr Charles Morrison Mr Charles Morrison , Devizes

I strongly agree with what the hon. Member for Peterborough (Mr. Ward) said in defence of local government. I served in local government for a number of years, although my service was not as recent as his, and he is, therefore, able to offer a defence of local government from immediate past experience.

There has been a tendency over the years for this House to use local government as a whipping boy, to blame it for all evils and for waste of one sort or another. It has been blamed for extravagance. No one in local government would deny that there is waste, but I suspect that it is no greater or less than the waste in Whitehall or even the waste in many large companies.

As my hon. Friend the Member for Southend, West (Mr. Channon) pointed out, debate on this matter has in the past been of a technical nature, and perhaps that is partly because there used to be no more than a small annual grumble about rates which lasted perhaps a week or not much longer. Times change, however, and that change has been reflected in many of the speeches today. For example, my hon. Friend the Member for Hampstead (Mr. Finsberg) pleaded for London to be treated more fairly. I would be delighted if that could be done, but I know that it would mean that other parts of the country, probably including my own, would be treated less fairly. The reality is that there is a shortage of resources. It has become almost a cliche to say that the rating system is at breaking point. None the less, it is true, and this rate support grant order makes it no less so.

That is no criticism of the amount or proportion of the grant for 1975–76. The hon. Member for Peterborough referred to the generosity of the Secretary of State and I accept that he has been generous in view of the state of the economy. Some may think he has been too generous, but the size of the grant, however generous, however small or however large, is no consolation to the hard-pressed ratepayer. Nor is it a consolation to the ratepayer to reflect on the variety or quality of the services which are provided by local government. It is a credit to both local and central Government that these services have increased and improved enormously over the years. What worries, irks and infuriates the ratepayer is his inability to pay the ever-increasing rate demand, and the knowledge that only a year or so ago the price demanded for local government services was not unreasonable. Now that price is becoming—and to many has already become—unacceptable.

The Government are coping in a dilatory manner with this situation. I do not think that the Secretary of State improved matters today by refusing to give an estimate of the rate of inflation for the forthcoming year. I think that he was implying that the Government have no control of inflation and, regrettably, that the social contract is not working. It is not enough for the Government to say they have set up the Layfield Committee and then just to leave it to get on with the job. What matters to the local ratepayer is the size of the demand, and in that respect the Government are offering no hope for next year.

In my county it seems likely that the rate support grant increase order should cope with the effects of inflation in the current year. The same should be true of all counties provided the method of distribution of the increase is arranged fairly. I hope that the Secretary of State for Wales will comment on that point when he sums up. For next year the Secretry of State for the Environment has asked for a limit in growth in real terms of 4 per cent., but in my county there is virtually no doubt that that would involve a cut in services. The Secretary of State should not think otherwise. Therefore, the basis for his belief that the average increase in rates will be 25 per cent. may be totally false.

That emphasises two points. If the rate increase equals more than 25 per cent. the Government must be extremely careful how they apportion the blame. I do not doubt that they will try to blame local authorities for higher rate increases, particularly if they are not Labour-controlled. I have no doubt that in some cases there will be strong justification, in view of the need to maintain services, for the rates being higher than the Secretary of State's estimate.

I hope, whether the increase is more or less, that the right hon. Gentleman will take careful note of what is happening in local authorities and will continue to give them guidance. There must be detailed consultation and understanding between the Government and local authoties about any reduction in services. In particular, there must be consultation about the content of the circular which is to be issued.

The Government's outward concern for the ratepayer would have seemed a little more real if at the same time as setting up the Layfield Committee the Government had indulged in a self-denying ordinance not to impose any more duties, tasks or responsibilities on local authorities, and, therefore, not to impose the potential for increasing the burden on the ratepayers. I think that the Secretary of State said that he would do his best to ensure that while he was trying to control local government expenditure his colleagues would not, in effect, be doing their best to increase it, but the Government have already added to the potential burden on the ratepayer.

There are, for example, the Housing Rents and Subsidies Bill, which will give local authorities the opportunity to increase the burden borne by the ratepayer; the encouragement given to local authorities to increase their housing stock, which is bound to mean increased loan charges and increased maintenance costs; and the Government's land proposals. If the land proposals do not add to the costs borne by ratepayers I do not know what will. They are bound to create a demand to increase the bureaucracy of local government, and to increase the demand for planners, although the planners probably do not exist. They are bound to require extra manpower to be employed by local authorities for the management of the land. Set against those matters, and others which will, no doubt, emerge in the months ahead, the Government's concern for the ratepayer does not seem real.

That is emphasised by my second point. I am worried not just about the rate demand for 1975–76 but about the rate demands for 1976–77 and 1977–78. We have been told that the Layfield Committee is not to report till the end of 1975. That is bound to be too late for a reform of the system of local government finance for 1976–77. That means that there is no hope of relief for the ratepayer till 1977–78 at the earliest, and even that may be optimistic.

What will happen if the Government, after all this time, disagree with the committee's recommendations? Shall we have yet another committee to consider the recommendations of the Layfield Committee, or will the Government make up their own mind? If they will do the latter, they might as well do it now and get it over and done with. In any case, the chances are that the only solution to the problem faced by the ratepayer will be close to the one suggested by the Conservative Party at the last election—a partial abolition of the rating system.

It would be much better if the Government began to face up to reality. What planning is the Department beginning to undertake in anticipation of the reform of local government finance? Unless the ratepayer is given some help the rating system will not just be at breaking point but will break down. What, then, of the local authority services, and the position of everyone employed in local government?

Everyone knows that the problem of local government finance is very difficult. Ever since I became a Member in 1964 it has been under discussion. Even before 1964 the late Richard Grossman was saying that the Labour Party would reform the rating system when it came into power. It did not do it then and it has not done it since. I admit that my own party has also failed to do it. It is high time this difficult matter was brought to a conclusion. I hope that the Government will approach it with greater expedition, realism and sympathy. If they do not, the future of local government will be at risk.

7.36 p.m.

Photo of Mr Anthony Durant Mr Anthony Durant , Reading North

I am grateful for the opportunity to enter this small debate on a most important subject, a subject which, perhaps, affects every man, woman and child in the country more than any others we discuss.

It has been a debate of special pleading. My hon. Friend the Member for Devizes (Mr. Morrison) made a special plea for his area. I agree with my hon. Friend that before the Secretary of State issues his circular there should be consultation. If the right hon. Gentleman is asking for cuts, there should be good consultation between his Department and the local authorities. We must recognise that the 4 per cent. growth in real terms will mean cuts. The situation is serious.

We have the Layfield Comittee report ahead of us, but we do not know when we shall legislate on it. We have been told that the report will come out at the end of 1975, but we do not know when there will be any change in the rating system.

We have heard special pleading from hon. Members representing London, Wales, Cornwall and the Borders, and from my hon. Friend the Member for Leominister (Mr. Temple-Morris) and the hon. Member for Peterborough (Mr. Ward), who talked about the difficulties of locally determined schemes.

I make a plea for the South-East, which has not yet been mentioned. I am sorry that the Secretary of State is not here, because I am sympathetic towards him. I believe that when he became Secretary of State he wanted to consider problems of the environment, and he had great ideas about making cities better places to live in and about many other aspects of our environment that we are all keen on. But this poor Minister had the rates problem dumped on him and it has been with him ever since. It has become his nightmare. I imagine that it is all he thinks about most of the time.

Every local authority faces tremendous problems, but I want to talk particularly about the capital debt problem. My local authority, the borough of Reading, has a debt of about £61 million. That is an enormous debt for an authority with a population of 150,000. It has to be paid off and interest charges have to be met before any services are paid for. The Government must closely examine the whole question of local government borrowing and lending. There has been a tendency for local government, in an effort to develop more schemes, to borrow at high interest rates, which have attracted money. This has created another debt and another problem.

I was pleased to hear that the Secretary of State is looking closely at the question of staffing. It is a pity that we have heard nothing about the inquiry into staffing by my right hon. Friend the Member for Crosby (Mr. Page) since the Labour Party came to power. The inquiry was in train, and its report would have been useful. It is sometimes said that we exaggerate the matter. Would not it be better to have a report so that we knew the facts? At present, there are different theories about whether we are wasting staff. Some people say that we are short of staff.

I make a special plea for both the South-East and the district councils. In my local government experience, I have always been involved at district council level. I have had a plea from the District Councils Association about the needs element. The association urges that it be passed down to the local authorities at district level. Those authorities are carrying out a considerable amount of Government policy and legislation.

The Secretary of State said that he did not think that there would be rate increases above 25 per cent. Then he mentioned another figure—and then he was not sure. He should cease making statements about what he thinks will happen, because every time we have a statement everybody gets worked up and then we find that what has been said in the statement does not stand up.

I make a plea also on behalf of the small shopkeeper. We have heard pleas on this subject in the House during the past eight or nine months, and the matter has been raised in debates and in Questions by hon. Members from both sides. Heed should be paid to the pleas for action to help the small shopkeeper. There is social implication here, and it has particular importance in my constituency where the town is large and scattered and in which there are a number of smaller surrounding areas with shopping precincts which old and young people like to use. We wonder whether in the future we shall be left with only a town centre shopping area, because the small shopkeepers in the surrounding areas are finding it practically impossible to keep going. There should be a special dispensation in the form of rating relief for small shopkeepers. I know that this could present difficulties, and it is not easy to decide what is a small business and what is a big business, but a system of special rating relief for small shopkeepers could be worked out.

There has been a special grant for subsidiary high costs, as they were called, in the South-East, but this special dispensation is now being cut out. This will be unfortunate for districts such as mine on the edge of London. The London weighting allowance ceases to apply a few miles down the road from my constituency which has many difficulties arising from high costs in housing and other features of a built-up community. The special aid which was previously built into the rate support grant to help meet the sort of difficulties I have described should be for instance, reinstituted. The South-East has particular problems in, for instance, attracting staff.

There has not been much reference in the debate to bus fares, but it is clear that what is being proposed by the Government will mean bus fare increases, which will hit the two sections of the community who cannot look after themselves—the old and the young. These two categories need buses, and it is a pity that the Government have not given special thought to that.

I appreciate that house building is probably slightly outside the terms of the debate, but there are costs which arise from house building schemes. I am thinking of infrastructure—provision of roads and drains for example—which can put a large burden on the rates. Therefore, whether the Government like it or not, their proposals will slow down the housing programme because of the infrastructure work involved.

The Secretary of State should speak to the water authorities. In my area the water authority is becoming the planning authority. The local council wants to go ahead with a development, but is told by the water authority that it is unable to provide an adequate water supply to the district involved for some time to come. This can lead to difficulties in, for instance, planning new council estates.

I make a special plea to the Government to consider the capital debt of district councils, and I urge that the needs element be siphoned down to local districts so that they have some help. Also, the Government should reconsider a special element in the rate support grant for the South-East, which has peculiar problems and high costs.

7.44 p.m.

Photo of Mr John Tomlinson Mr John Tomlinson , Meriden

I have listened to much of the debate, and I am particularly struck by the contrast between the hysterical nonsense, mostly from members of the Opposition, when we last debated the rate support grant in March and the relatively little interest being shown this time. This lack of interest is probably a tribute to the work done by my right hon. Friend the Chancellor of the Exchequer in the mini-Budget earlier this year, which took many of the problems out of this year's rate argument and foreshadowed the provision of much more substantial support in the increase order and the rate support grant order for 1975–76.

The hon. Member for Eastleigh (Mr. Price) made a plea earlier in the debate that we should not make partisan points, because the General Election is over. That was equally true in March when we last faced this issue. I can understand the hon. Gentleman's reluctance to make partisan points this time, because the matters about which he and his hon. Friends were complaining earlier in the year should now be the subject of the congratulations of the whole House on the action taken by my right hon. Friend the Secretary of State.

In the present serious circumstances, bearing in mind the continuing concern among ratepayers, we should not be doing anyone justice if we failed constantly to mention where the problem began. I am not surprised that the hon. Member for Southend, West (Mr. Channon) was a little coy about recalling figures given by the right hon. and learned Member for Hexham (Mr. Rippon) when he advised the House in January about the kind of expectation that ratepayers should have for what is now the current financial year. He said: I am able to say that the average domestic increase over the country as a whole should be about 3 per cent. The maximum of 9 per cent. is to be, as far as one can achieve it, a maximum, but the variations below 9 per cent. will be very considerable and should result in a reduction in the domestic rate in many areas."—[OFFICIAL REPORT, 22nd January 1974; Vol. 867, c. 1471–2.] No wonder that the hon. Member for Southend, West was coy about recalling the figures, even though, at the same time, he was pressing my right hon. Friend to give an estimate of inflation for next year. If the estimate of inflation for next year were as accurate as was the estimate of the rate increase given by the right hon. and learned Member for Hexham, it would not be worth the paper it was written on.

The irresponsible expectation created by the Conservative Government has been largely to blame for much of the outrage felt by ratepayers during the year. The expectation they were given that their rates would be kept to a 3 per cent. increase was irresponsible, in the light of all the circumstances then known. It was at that time that much of the irresponsibility which has led to rightful feelings of outrage among ratepayers began. The blame should be laid at the feet of the right hon. and learned Member for Hex-ham, who manages to avoid all our debates on these matters nowadays with remarkable regularity.

However, responsibility for the present rates problem can be found in other areas. We have heard today a number of examples of the appalling effects of reorganisation of local government. There was what I regard as criminal irresponsibility in that reorganisation, because no provision was made at the same time for reorganising the financial basis of local government. It is not good enough for the Opposition to say what they would have done. It is no good their talking about abolishing domestic rates by the end of the year, or at least taking substantial steps towards it, while at the same time introducing 9½ per cent. mortgages.

The hon. Member for Southend, West has said what he would have done had his party still been in office towards abolishing domestic rates, but we have had such promises from the Opposition year after year. We had promises in the Queen's Speech in 1972. What happened? —nothing. We had promises in the Queen's Speech in 1973, but again nothing happened.

There were promises made also in the consultation document on local government finance. It referred specifically to legislation being brought in by the end of 1974. But when my right hon. Friend began to look into the rating situation earlier this year, he found that no such legislation was available to operate from 1st April 1974. No work had been done towards resolving the problems of rates for the current year. My right hon. Friend encountered great difficulty when he took over, because he found that there had been no preparation towards solving the rates problem.

That vacillation has been responsible for the emergency measures which have had to be taken in the last 12 months. It was a vacillation reflected in the comments we had in the Tory consultation document, where it was said: … no substitute offering major advantages of a similar kind emerged from the consultation and comments on the Green Paper. For these reasons the Government propose that rates should remain the principal source of local revenue. Suddenly, from that position there was an overnight mass conversion to the idea of abolishing domestic rates almost immediately, although no adequate preparation had been made for such a move.

Coming to the real issues rather than the phoney issues that have been presented over the years, I am concerned about the growth in local government expenditure. Apart from the superficial arguments we have had when Conservative Members have tried to blame the Government, there are serious arguments which need to be presented on orders such as this. In present economic circumstances, local government cannot expect to be immune from the consequences of its own decisions. It cannot expect that continually expanding programmes of its own choice will automatically be underwritten by the Government. For that reason, I find it totally irresponsible for the hon. Members for Southend, West and for Eastleigh to suggest a fixed limit in future increases.

The hon. Member for Southend, West suggested that in no circumstances should we have rate increases in excess of 25 per cent. The hon. Member for Eastleigh went further and suggested that, despite inflation, there should be no increase in rates payable next year. In those circumstances what kind of financial control can there be in local government? When there is not that degree of local accountability, we shall have reached a situation when local government expenditure will have run completely out of check. Yet hon. Members opposite, having put forward the policy which led to that situation, complain about increases in the public borrowing requirement.

I welcome this year's increase in the rate support grant. It is of unparalleled magnitude in amount and in the proportion of local government expenditure being met by the Government. It was necessary to achieve some rectification of the situation created by incompetent financial management and incompetent arrangement of local government reorganisation by a Tory Government. By means of the increase order and the extra £350 million, the Government have wiped the slate clean and done their bit to restore a situation of rectitude in local government. The slate has been wiped clean of the consequence of estimates based on the expectations created by the right hon. and learned Member for Hex-ham. They will no longer be carried forward into next year's figures.

I welcome this not as a matter of gratification but as an act of economic realism. It had to be done despite the economic circumstances. I strongly welcome the view of my right hon. Friend that in present circumstances next year's rate support grant will need to reflect no growth other than the revenue consequences of committed capital expenditure.

In present circumstances, local government accounts for something in excess of 30 per cent. of public expenditure. While I have a great deal of sympathy with those of my hon. Friends who argue for the sanctity of local government programmes, I must point out that such programmes cannot be expected to be immune when other areas of public expenditure are under challenge. There has to be concern about the degree to which local government expenditure can continue to grow. While we are financing real increases in public expenditure by increasing the public borrowing requirement at a rate that many hon. Members would regard as dangerous, the growth in local government expenditure cannot continue unchecked or unchallenged.

In present economic circumstances, which we have largely inherited, desirable and even essential local government ex- penditure can proceed only at a rate made viable by our economy. Members of the Tory Opposition have spoken about constraints upon the degree to which rates can increase. That kind of argument represents precisely the kind of pressure which would encourage the more profligate use of resources by local government rather than the more efficient use of resources.

The overall situation this year is such that, despite the economic circumstances, the Government deserve much congratulation. The grant for 1975–76 of £5,434 million is a record in absolute and real terms. The proportion of local government expenditure being borne by the Exchequer—66·5 per cent.—is also a record. I welcome it.

There are certain specific items this year which are worthy of commendation. I particularly welcome the improved methodology in the needs element. It is an improvement because, particularly in respect of areas of growing population such as the Chelmsley Wood estate in my constituency, by using more up-to-date demographic statistics we are putting a dynamism into the needs element which was not previously there. I congratulate the Government on taking note of this point and doing something about it.

Like the hon. Member for Reading (Mr. Durant), I believe that there are one or two things to be regretted. Whereas the hon. Member regrets the action taken in relation to the South-East of England, I regret a similar decision—it is dealt with in the same provision—relating to the outer West Midlands. I refer to the decision to discontinue in 1975–76 the factor which was meant to take into account the higher cost of providing services in an area close to a major conurbation. I regret this, although in the circumstances I do not make too much of it because there are beneficial effects in other areas. In due course I should like to make representations to the Minister because the decision does not fully take into account some of the higher costs in areas such as the West Midlands which are close to the much more competitive labour market of conurbations such as Birmingham.

My overall impression is of a sincere and successful attempt to produce equity in the rate support grant, a feature which was notably absent from the situation we inherited in February 1974. It is all very well for the hon. Member for Southend, West to conclude his speech by referring as a joke to Early-Day Motion No. 88. I did not notice anyone on his side of the fence laughing any more than there was anyone on the Labour side laughing.

That motion, standing in my name and in the names of over 100 of my hon. Friends, sets out clearly what we think the Government have done in difficult circumstances. If the hon. Member regards it as a joke, I implore him to intervene before I finish my speech and tell us precisely which part of the motion is funny. I am not aware that any ratepayers have laughed at it. They can see in the rate support order and in the increase order a sincere attempt to deal with a difficult circumstance.

There is nothing in the motion from which anyone I know wishes to dissociate himself. I should expect anyone who did wish to dissociate himself from it and look upon it as a joke to take a more constructive view and not merely to make a speech of that kind about it. The logic of such a position would be to pursue the matter further and to let ratepayers see exactly where they stand.

These orders represent the kind of financial management of local government which the people expect from a Labour Government. They will be warmly welcomed. While rate increases will be high in certain areas, they will be much lower than they would have been had my right hon. Friend not taken the action which he has. Increases will certainly be much lower than they would have been if we had had the same kind of financial management from which the country suffered until February 1974.

8.0 p.m.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

The phrase which I particularly noted in the speech made by the hon. Member for Meriden (Mr. Tomlinson) was "the sanctity of local government expenditure". He used the phrase in the context that if there are to be economies in local and central Government expenditure local government cannot expect to escape those disciplines. I agree with him entirely in that respect. I am sorry that he had to be so politically partisan in much of what he said. Although there is a significant political content in one's attitude and the decisions one takes, to try to put the problems we face in an historical context, as he did, is not a very useful contribution to the debate.

Photo of Mr John Tomlinson Mr John Tomlinson , Meriden

Will the hon. Gentleman explain to the House how it made a useful contribution to the debate in March this year?

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I do nut want to go back to March this year. That would not help, either. I much prefer to address myself to the orders that are before the House. I hope that I shall carry the hon. Gentleman with me in some of my comments.

The financial crisis that faces local authorities is by no means relieved by the proposals before us. There is a tremendously high rate of inflation, and I was disappointed that the Secretary of State was not prepared to commit himself, albeit not specifically, but still in much more definite general terms, on what the rate of inflation is expected to be next year. Most of us have in mind a figure in the region of 30 per cent. That will present local government with a wide variety of problems.

Although the ratepayer will be helped significantly, he is given by the Secretary of State and those who speak for the Government a dose of soothing syrup in the reference to an average increase in rates of 25 per cent. We have heard from many who speak for their own constituencies that increases of 50 per cent. or more are expected. I noted with interest the remarks made by my hon. Friend the Member for Hampstead (Mr. Finsberg) who spoke for the London boroughs as a whole and suggested an expected increase in the region of 50 per cent. We have not heard of any local authorities which are expecting a balancing decrease in rates. How it is expected that the increase will be only 25 per cent. calls for some elaboration. I do not know whether the right hon. and learned Gentleman the Secretary of State for Wales will be able to help us.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

That might be explained by the fact that there are only two back benchers on the Opposition side and six or seven on the Government side of the House. It may be that those who believe that the increase will be less than 25 per cent. have gone home.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I do not wish to argue about why hon. Members are not in the House. I am sure that they will all be here for the right hon. and learned Gentleman's speech. We shall, perhaps, not be hanging on every word, but we shall be picking out the aspects of this complicated and far-reaching matter which we think are important. It will be a different story for the ratepayers when the rate demands are issued for next year. That will be the test. The Government are playing it soft in the meantime, but, inescapably, reality will have to be faced in due course.

I want to address myself to the contradictions which I see in the attitudes of the Chancellor of the Exchequer on the one hand and the Secretary of State for the Environment on the other. In the Budget Statement the Chancellor referred to a reassessment of public expenditure, and in that context he said one of the aims was to establish firm control over the demand on resources of the public sector as a whole so as to make sure that the programmes do not increase in demand terms by more than 2¾ per cent. a year on average over the next four years."—[OFFICIAL REPORT, 12th November 1974 ; Vol. 881, c. 270.] The Secretary of State for the Environment said today that local government expenditure is to increase by 4 per cent. in the next financial year. That cannot do other than undermine the objectives which the Chancellor set in his Budget. There is no reference to savings to be made to offset the balance of increased expenditure on local government services.

The Budget Statement went on to refer to a review embracing housing and other social and environmental services. To my knowledge nothing has been said in that respect, but in making that reference the Chancellor said: If this is to be achieved, it will require action from both central and local government … No matter how much he would like to see a further development of standards and services, a rate of increase which so far outstrips the growth in national resources cannot go on indefinitely."—[OFFICIAL REPORT, 12th November 1974 ; Vol. 881, c. 271.] I agree with that part of the speech of the hon. Member for Meriden. Referring to local authorities, the Chancellor went on to say: They must limit the rise in their expenditure to what is absolutely inescapable …— [OFFICIAL REPORT, 12th November 1974; Vol. 881. c. 271.] I see no reflection of that requirement in the rate support grant proposals for next year.

On 24th July, in Press Notice No. 560, the Secretary of State for the Environment referred to a levelling oft of the rate of growth in local government expenditure". I am not quite sure what "a levelling off" means. His proposals imply an increased expenditure of about 4 per cent. in real terms for 1975–76. That is where I see some evidence of disagreement. What lies behind the advice given to local authorities which in no way requires policies which recognise the serious financial situation with which the country is faced? We have had no statement by the Government that circumstances are so serious that there will have to be a reduction in local government services.

The country is not being faced with the seriousness of the situation in terms of the tremendous proportion of the gross national expenditure with which we are dealing. There is no evidence of a determination to ensure that local government expenditure keeps within the rate of growth of the gross national product which in the past few years it has exceeded by no less than a multiple of three. It is a reflection on the Government and on earlier administrations that we have allowed the escalation of local government expenditure. Surely, what we as a nation must do is to reduce the level of public expenditure in the local government sector. To follow policies that are directed merely towards the containment of rate increases in real terms and the maintenance of services beyond our financial resources is entirely misconceived.

There is a real crisis throughout local government whose policy of borrow, borrow, borrow at a time of rising interest rates is a denial of the nation's economic reality. I know this is only a near quote, but in one of his plays Shakespeare could have said: "Borrowing dulls the edge of good husbandry". As the Secretary of State says, we must look to a curtailment of borrowing.

Central Government will not give local authorities permission to go on borrowing as they have done in the past to meet the cost of their services. The total loan debt on local authority loans amounts to £23,381 million. Of this the long-term debt is £18,370 million and the temporary borrowing £3,656 million. It would be enlightening to know the average rate of interest on that short-term borrowing. It is undermining budgets throughout local government.

Incidentally, overseas borrowing in the last five years total £203 million, and it may be that to an increasing extent local government is maintaining services through borrowing abroad. In the circumstances of the oil crisis and the fluid situation of world currencies we may well be floating many of our local government services with the aid of Arab oil money.

Through his rate support grant proposals the right hon. Gentleman the Secretary of State for the Environment seeks to fund from central resources £3,100 million. In an award of this magnitude the real seriousness of the United Kingdom's financial situation is being substantially ignored. This immense sum will be added to the large figures to which I have referred. I was interested in the debate which took place on 4th November on local loans when the Minister of State at the Treasury said: The control of local government spending is decided in conjunction with the Chancellor of the Exchequer, and the capital expenditure is a separate agreement made between the Chancellor and the local authorities."— [OFFICIL REPORT, 4th November 1974; Vol. 880, c. 846.] Central Government have a clear responsibility in terms of capital expenditure by local authorities. If that statement by the Minister of State is correct, all control of local government expenditure lies in Whitehall and Westminster. As far as small peripheral matters are concerned, I think that the statement is correct. I hold the view that local government expenditure should be cut. It is the Government's responsibility to direct where cuts should be made. I welcome the clear indication given in paragraph 11 of the Rate Support Grant (No. 2) Order 1974: … many desirable projects will have to be deferred; and … many charges and fees will have to be increased above the amounts neces- sary merely to keep in step with price increases. That is a good firm statement which I welcome, but it goes only part of the way.

Paragraph 13 of the order reads: The Government intend to issue a circular, which the local authorities have indicated that they would welcome, giving specific guidance on the way in which economies in services might be made. I do not have any hope in that direction but I shall look to economies in services.

I believe that there should be a curtailment in local government services and that this is substantially a Government responsibility. It is something away from which successive Governments have shied in the past. Such a course would answer many of the pleas from those who play a prominent part in local government. I quote from an article in the Local Government Chronicle by Mr. Othick on 15th November 1974: If worthwhile economies are to be secured, then local authorities are entitled to ask in what direction The Government have now met that request, and, indeed, events have forced the Government's hand.

Local government is widely criticised on all sides, but with one or two exceptions it loyally carries out Government policies and has done so in recent years in the context of significant changes imposed by this House. I refer to local government reorganisation—which has been a sea change for officers and members throughout local government—and to the establishment of regional water authorities and the reorganisation of the health services. Local government takes on added commitments on demand and sheds others at indecently short notice. The standards which it achieves are equal to the best anywhere in the world.

Local authorities need protection against central Government and the departmental ambitions which have required increased expenditure regardless of the total consequences for their own budgets and for public expenditure as a whole. I welcome the indication by the Secretary of State this afternoon that he intends to ensure that the budget will not be bedevilled by the competition for expansion and increase of services by various central Government Departments. That is a significant step forward and I readily accept it. I congratulate the right hon. Gentleman on having made that statement. I hope he succeeds.

The parlous state of our economy demands that expenditure on local government services must be reduced. This means smaller staff establishments and cuts in services. Indeed, the Government recognise this need. If we are to protect many of the essential local government services we need to look for savings in less necessary services. We need to choose our objectives and to obtain a correct order of priorities. It is not good enough to say that we can go ahead and expand local government services as we have done in the past. There is little in these proposals that reflects an adequate recogntion of the problems which we face. In education it was a mistake to extend the school leaving age from 15 to 16.

I believe that in financial terms there could be substantial savings. We should make better use of buildings and available staff. Let us look at library services on which a total of £100 million a year is spent. I have always maintained that we need a good library service, but when people take out books of fiction why should not they pay for them? What is wrong with paying for the facility comprised in a good fiction library? Such payments would bring private resources into local government services. Surely, economies can be made in services which are inessential, and nobody can say that the fiction service of a library is essential, although it may be highly desirable. I do not include the education side of the library service, but why should not the ordinary borrower, in the main the fiction borrower, pay for the service that he is enjoying? After all, the ratepayers are footing the bill. The service, which is enjoyed by a substantial number of people in the community, is not essential. This is a question of priorities.

Surely our national dilemma lies, to some extent at least, in the fact that the British people have not as yet been brought face to face with the realities of our potentially disastrous financial plight. The Government's willingness to allow local government expenditure to continue at its present level and to be expanded by 4 per cent. is, in my judgment, contributing to our problems and is unwise and profligate.

8.21 p.m.

Photo of Mr George Rodgers Mr George Rodgers , Chorley

I listened with interest to the hon. Member for Daventry (Mr. Jones), particularly for news of the areas where the proposed cuts would be made. It was rather melancholy when I realised that the hon. Gentleman was talking about education and the library service. The library system dates back a long way and is such a triumph that it seems tragic to talk of making economies in that area.

Photo of Mr George Rodgers Mr George Rodgers , Chorley

There are certain items that we can afford less.

Photo of Mr George Rodgers Mr George Rodgers , Chorley

If we extend the range of the debate, I can point to areas where there is a great superfluity of wealth in which I should like to see economies made.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

Will the hon. Gentleman tell me which they are?

Photo of Mr George Rodgers Mr George Rodgers , Chorley

Yes. If the hon. Gentleman wishes to linger on the subject, I point to defence and to the character who stood against me at the election and simultaneously stood for 13 other seats on an anti-Labour platform, who lost his deposit at each of them and was able to afford to forfeit deposits on that scale. That is a demonstration of an area of surplus wealth.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

Yes, but it has nothing to do with local government.

Photo of Mr George Rodgers Mr George Rodgers , Chorley

It is an area of income. However, I shall press on with the main function of the debate.

There has been an unanticipated bonus from the massive increases which struck ratepayers as recently as March. We now have well-informed ratepayers' associations. People have suddenly become aware of the ramifications and tangled complications of local government finance. Members of Parliament who perhaps avoided the subject like the plague are now considerably more interested than previously—no doubt of necessity. Many ratepayers' associations have recently been formed and associations which already existed have had their numbers swollen.

The first and immediate reaction to the substantial increase in the rate levy was that, whatever the consequences.

increases in rates must cease immediately. Having survived the first shock, and because in the main they are intelligent, articulate people and able to present their case very well, ratepayers soon appreciated that, despite the extravagances and occasional absurdities of local government, they were sitting on a very good bargain that had gone unappreciated for many years. I accept that these absurdities and extravagances still exist, but we should recognise that they have a trivial impact on local government finance and on the spending of local authorities.

Not a few of those who originally took up the cudgels for rate reduction realised when they examined the position that they were having their children educated, refuse cleared, roads lit and kept in good order, parks tended, the fire brigade at hand and a dozen other services for a relatively tiny proportion of the average family income. That achievement has been taken for granted for many years. None the less, ratepayers quickly appreciated that the formula for collecting local revenue was not only complicated but unfair. We trust that the Layfield inquiry will lead to a lasting reform in that area.

It is interesting that many ratepayers' organisations have come to the conclusion that the basic answer lies in the old Socialist principle of direct taxation. This appears remarkable. Ratepayers' associations have long been associated with the philopsophy that their rates are borne by a few and that they should be borne by many. However, when they pursue that philosophy logically they appreciate that direct taxation is probaly the fairest form of levy. I go along with them on that.

I accept that in the coming years, not only the coming year, local authorities will have to exercise strict discipline. The extent of support provided by the central Government in current circumstances is astonishingly generous. Therefore, my right hon. Friend is entitled to seek restrictions on expenditure by local authorities. I regret that the additional support has not been linked to a greater degree of direction. I still fear that some local authorities will exercise the easy options when making cuts in the coming year.

How many council officials and councillors will be tempted to trim the functions of the social services? How many will have the courage to resist the temptation and the pressures to defer full implementation of the Chronically Sick and Disabled Persons Act and to press ahead with some prestige project? How many, looking towards the approaching council elections, will seek short-term popularity by imposing slashing cuts in sections where the need is greatest?

I believe that it is essential for local government to have the courage to place its priorities and predicament clearly before the electorate. There must be discussion on a grand scale. There must be consultation and, where necessary, adjustment in the light of considered opinion.

That there will be increases in the domestic rate is beyond doubt, despite the economies in the new level of rate support grant. I believe that people will tolerate these increases, not with rejoicing but with understanding, if they are convinced that the service is sound, that they are receiving value for money, and that the distressed and disabled are being adequately cared for.

I think we might be surprised at the response from the rate-paying public if local authorities recognise that those who pay the piper are at least entitled to be given some choice in the tune being played by their town hall musicians.

There are one or two areas interwoven with local government functions which require special and specific consideration. The first is public transport. The day must be hastened when there is direct control of public transport by local people. I refer not only to the efficiency of the service but to fare levels. We must appreciate that 50 per cent. of the public are entirely dependent on public transport. The prospect is that fares will increase and that the system will deteriorate. Therefore, we must hasten intervention by local authorities, because within the smaller districts the system is appalling and is often in chaos.

I should have preferred the Chancellor of the Exchequer to increase the tax on petrol for the private motorist even more than he has done and to pass on the extra revenue to reduce the cost of public transport. That would have had the dual effect of saving precious oil and of improving local transport.

Special provision should have been made for sewerage and water charges in the coming year. There is little evidence of democracy in the composition of the regional water boards. I realise that the new structure was part of the dismal inheritance from the previous Conservative administration, but we have accumulated too many bodies which are not accountable to the electorate and which are not in accord with our democratic society.

My reaction to the Rate Support Grant (Increase) Order 1974 is pleasure at its total, concern about the purposes for which it may be utilised and deep anxiety that in some sectors—notably social provision, public transport, water and sewerage charges—there will be neglect in provision despite the upsurge in rate charges. I hope that my right hon. Friend will give due consideration to my concern about these sensitive issues.

8.30 p.m.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

As we look in horror at the increasing crescendo of local government expenditure, I think we owe it to local government to stand back for a moment and recollect what are the additional burdens which Governments and Parliaments have placed on local government during the last few years. For instance, there is the whole panoply of consumer protection. Under the price control regulations it was the local authorities' weights and measures inspectorates who were the enforcement authorities and who had to be considerably expanded to do their job. Local authorities have to recruit more and more qualified people, at high rates of pay, for the inspection of slaughterhouses.

I remember when Parliament passed an Act making it compulsory for local authorities to inspect riding establishments. I dare say this was admirable, but it meant that another burden would fall on local authorities. When we took criminal processes against young persons out of what was previously the sphere of criminal law and put them within the sphere of the county social services and to a lesser extent the probation services, we added enormously to the burden which local authorities had to carry.

The legislation on the prevention of pollution is enforced largely by local authorities. The inspection of dumps and of poisonous waste disposal locations and the enforcement of the regulations lie with the local authorities, which cannot enforce this legislation without qualified personnel.

I can quote an example of this from my own constituency. The local authorities have had to recruit inspectors whom they did not need to employ before but whom, because of their statutory duties, they now need to enforce the legislation.

The legislation on the control of plant diseases, which requires people to fell elm trees and so on, is admirable, but it is yet another of the duties which the central Government have imposed on local government within the last few years. When we are critical of local government and talk about increased establishments and higher expenditure, quite apart from the change in the value of money, it is only fair to ask ourselves whether local government asked to have the burdens imposed on it or whether they were burdens which Governments of different political persuasions and Private Members' Bills imposed on local government.

Each legislative measure imposed burdens which were probably not onerous, but over the last decade they have meant not greatly increased establishment of unskilled labour but a greatly increased establishment of qualified specialists, all of whom have pension rights. The process yet continues.

I doubt whether there is an hon. Member who docs not have a constant stream of letters from constituents asking for yet more legislation for the inspection of dog-breeding establishments and cats' homes. There is almost no limit to the amount of legislation which some well-meaning people would have us thrust upon local authorities, and very often the same people will write to us complaining about the increase in the rates. This process results in an accumulation of legislation over the years which at times of inflation of personal incomes achieves a momentum of its own.

Therefore, when colleagues say that we must cut down on local government expenditure, it would be helpful to think in terms of repealing some of the legislation that this House has passed when it has seemed more important to deal with some peripheral issues of the kind I have mentioned than to get local authority expenditure under control. That is the first matter which I regard as being of considerable significance.

The second point is that, as we transfer expenditure between central Government and local government, from the point of view of the command upon our national resources and the inflation-generating propensities it is meaningless. It does not matter whether we transfer them from local government to central Government or from central Government to local government. The command on the resources is the same.

We must all know of cases where priorities have gone mad. Although trunk road expenditure theoretically is central Government-controlled, we all know that the county councils act as agents for the central Government. In my constituency, at Beare, just outside Broadclyst on the A38, within 200 yards of the immense expenditure on the M5 motorway a massively expensive programme is being conducted to straighten out kinks in the A38 which will become a local service road within a year, when that section of the M5 is opened. For years this has been the main trunk road to the West, and when it is about to be replaced by a motorway an expensive programme of improvements is under way. This is the sort of nonsense which we must bring under control if we are serious in talking about avoidable waste.

I am all in favour of capital expenditure on trunk road programmes. Whenever Select Committees of this House have asked business men who have brought new industries to peripheral areas what it was which had the most influence on them— whether it was shadow factories, cheap loans, regional employment premium or what—the most insistent positive answer has been good road communications, simply because they have a permanent effect on costs and do not go away when the Government changes. They are facilities on which reliance can be placed.

In the South-West we have a specific problem which is not general to the United Kingdom. Just as the electricity boards suffer severe rises in their costs in having to make the capital provision for peak demand which is unused for much of the time, so the South-West, being the principal holiday area of England outside London in terms of numbers, has to make quite extraordinary capital expenditure to provide for the water requirements of holidaymakers for only 10 or 12 weeks of the year, although the holidaymakers come there at times when water is shortest in supply.

It is not true to say that everyone in the area benefits from holidaymakers going there, so why should they pay for it? Quite a small percentage of people in the South-West benefit from holiday visitors. For many people tourism is their livelihood, but it is a quite small percentage of the people living there. For most people it means extreme nuisance and disruption of transport facilities by road and rail. Then to have to pay the whole capital cost, and the income costs to service that capital, of providing the water supply and to a lesser extent sewage disposal facilities for this peak demand results in a situation in which we should think again about whether the burden should not be more evenly shared throughout the country so that those for whom these expensive facilities are provided when they go to the South-West on holiday at least share in the cost of providing them.

More and more as hotel costs rise—and they will rise with inflation—more and more both as a percentage and quantitively, holidays will be taken in caravans. Caravans have the worst effect on any environment to which they come in holiday times. They constipate the road system and by the resultant road congestion they add desperately to the costs of local people earning a living. They bring very little income and generate little employment in the area to which they come. They put local authorities to great expense in the provision of car parks which have very low utilisation for 35 weeks of the year. Local authorities dare not make economic charges for their use in the holiday period lest those with caravans park on roadside verges instead ; and it is not practical to police against that.

This is another example of the tremendous burdens that fall upon an area which is attractive to the vast majority of people living outside it to come to as a holiday area. Other parts of the country have this problem as well but it is particularly acute in the South-West because, of the whole of England outside London, it is that area which attracts the greatest number of holiday visitors.

Public transport has been alluded to, but, good heavens, private transport is of crucial importance as well, as is the road system on which it runs. Maintenance expenditure has now fallen to such an extent on unclassified roads that many of them are physically deteriorating month after month. This can be seen as the edges are breaking up, and there is simply not the funding available even to preserve them in their existing condition. The Registrar-General's last return showed that in my constituency 42 per cent. of the people who were gainfully employed travelled to work by car or motor cycle, and there are many people in the large towns who walk to work. This shows how crucial is the road network.

Local authorities have many problems in trying to contain their own expenditure. I mentioned earlier some of the extra obligations which Government and Parliament have thrust upon them. In my view, the new organisation of the National Health Service is a great improvement on the previous one and it involves much greater participation by local government in the whole health structure. This is entirely desirable but it also imposes a greater load on local authorities which has to be paid for.

Pending the outcome of the Layfield inquiry on local government, I certainly favour the greatest possible transfer of the taxation load from the rates to central Government purely for the reason that at this time the central Government distributes its burdens more fairly than local government taxation, because local government taxation is entirely a property tax: it is entirely unrelated either to capacity to pay or to benefits received, and it misses out a good half of the population who in law are not occupiers of the property. It is therefore an extremely inequitable form of taxation.

At this stage I should like to make a plea to the many people and bodies who write to us criticising the present system of local government finance that they should make their recommendations to the commission of inquiry considering this subject in the Department of the Environment while that commission is still taking evidence instead of merely criticising its report afterwards. Now is the time for people to make their recommendations to the Layfield Committee, and that time will not last for ever. Perhaps the Minister can tell us its closing date for taking evidence. I do not happen to know off the cuff. This is something that the public should be told, so that those who have a constructive view to put are not overtaken by the arrival of the last date for putting it.

The burden of increasing rates has hit a large section of the community at a time and in circumstances when they have been able to make least provision to meet it. This applies particularly to the self-employed. As the cost of living increases faster than they have the means to increase their incomes, their rates are bounding on ahead, as are their national insurance contributions, electricity and gas charges and maintenance costs, and there is likely to be a cascade collapse of this indispensable sector of our economy.

When we think of domestic rating, we should remember how many dual-purpose premises there are in which, for instance, the plumber and the cobbler live but which are also the site of their business and for which they pay more than the normal domestic unit. When one thinks of the self-employed, one thinks mainly of those with shops. They are part of it, and of course their houses are more highly rated if they live over them than if they were merely domestic hereditaments.

These people are likely to be squeezed out over the next 18 months because they have no resources on which to draw and at present rates of interest they will rapidly become uncreditworthy. It is no help to borrow money from a bank if the use to which one puts the money does not generate the interest one has to pay on it.

We must therefore consider the devastating problem of increasing rates not just in isolation but in the context of the compression between other dramatically increasing costs and the whole spectrum of personal incomes—this is most acute with those on fixed incomes and those who have retired—which cannot accelerate even at a significant percentage of the rate at which these costs are accelerating.

Therefore, with the best will in the world, a large proportion of the ratepayers suddenly will not be able to pay their rate demands—not because they have not the will, but because they have not the means to do so. More and more they will have to ask the local authority to spread their rates over 10 months, and half way through that period they will receive the next rate demand for the second half of the year. On top of that come the increased fuel bills and insurance premiums on their homes.

Local authorities then have to borrow money because they are not getting the income to sustain the cash flow they need, apart from the annual sum that they have to raise. Then they have to raise further rates to pay the interest on the current account loans which they have had to borrow because their ratepayers have had to spread payment over many months. This is the cascade of problems which has arrived at the same moment.

I ask the Minister again to give particular thought to the burden of the capital expenditure on water in areas which have to provide such a high proportion of their capital expenditure not for their own residents but for the peak needs of holiday-makers, who do not effectively contribute to the rates but for whom those facilities are indispensable, because a water tap does not discriminate between local residents and holiday visitors. This is probably the greatest single problem in my area, but I know that there are other constituencies in which it is also particularly acute.

8.50 p.m.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

At times this House in its natural anxiety forgets about the nature of a problem which faces it. In this case we are talking about a service that is unique in the world. In local government I have met the most outstanding people of great professional integrity and dedication to the service of the public. It cannot be repeated too often that they work probably more than any other section of the community in providing services which, compared with what we pay, can only be regarded as cheap. On the other hand, we have people who are very much taxed, who have many personal and domestic problems and who are living under pressures and stresses which the media imposes upon them.

There is, therefore, a natural and understandable conflict. On the one hand we want certain things out of our community, and on the other hand it is difficult to see how we can pay for them. But I often feel that the House of Commons— which is also unique in the world, but because it is a human place—makes the mistake of looking at each subject in isolation.

For example, we recently discussed the police. We all agree that it is essential to maintain the excellence of the standards of the police service. But it has to be paid for. As I understand it, the amount of financial support that we are debating is to take account of a possible increase in the police strength of 1,000—a likely increase of 1 per cent, on the present strength of 100,000.

We spoke in that debate of the under-manning and of the stresses and strains on the Metropolitan Police. In the general context of Northern Ireland and the IRA, the police are under extreme pressure. Therefore, as a House of Commons, if we are to give guidance to anyone in the United Kingdom, it is that we have to pay for the police force that we need in order to provide the services that the country wants. Such argument can be applied also to education, for example, and the library service.

I was appalled to hear it suggested that those who take out fiction books from our libraries should pay. The corollary of that is that, as pedestrians, we might have to pay to cross the road. It is not a sensible argument if we are thinking in terms of developing the whole local government service.

We must face the dilemma as seen by the local government service. I would rather not talk in terms of economics unless we define clearly what is meant. Once we do so several matters arise. First, to re-expand services will obviously cost more money. Second, there is a danger of cutting the wrong services. In a democratic society there are powerful individuals in local government who jealously guard their services. If they happen to be the stronger element they will protect their services. Others might be unfortunate and be dealt with in an undesirable and excessive manner.

Instead of referring to economies, I would rather imprint value for money upon the minds of local and central government. That is the test. When we talk about value for money we begin to talk about efficiency. When we talk about efficiency we immediately begin to consider how to deal effectively with the problems now arising in local government.

I was a member of the Committee that considered the Local Government Bill. Heaven knows how many times I pleaded with the Conservative Party to take care. It did not do so, and we are now dealing with the problems resulting from that lack of care. It underestimated the costs of its proposals. That is why the increase order is now before us.

Since March of this year, the Labour Government have been outstanding in their presentation of remedies. We had to deal with the domestic element straight away. Further, we dealt with an improved rebate scheme. We eventually produced a handsome rebate which went a great way towards satisfying the ratepayers. Having done so, we still have to present this increase order which provides another £350 million.

That is to be set against what the Conservative Government did in underestimating the costliness of their proposals. That applies irrespective of what the hon. Member for Daventry (Mr. Jones) said when he objected to a reference to the Local Government Bill. It is the blatant truth.

In addition to the increase order my right hon. Friend has brought before the House the new rate support grant order. The Exchequer element of local government expenditure has been increased from 60·5 per cent, to 66·5 per cent. That is the fourth step this year towards improving the situation.

But to return to the instruments for dealing with the problems of local government, I remind the House that they are far more positively at hand. The time has come when, in addition to taking up the Layfield Committee's report, we should undertake immediate discussions with the local authorities to see how we can recreate the more pronounced efficiency levels we once enjoyed in local government, because they have been blurred by the reorganisation.

I give an example. Last year I could write to an official in my constituency and get an answer within a week. When I have to do that now, the official has to send his reply to the county, the county secretariat has to send it to the head of the department, he has to send it to his deputy director, and he has to send it to his assistant director. When he has signed the answer provided by the person to whom I first wrote, it comes back down the chain again and three weeks later I receive it. That is inefficiency.

We should look at the whole of local government reorganisation again and try to give the non-metropolitan counties especially some more work to do so that they can deal with problems affecting their people far more efficiently and readily.

I hope that the local authority officials and councillors will respond to the example set by the Government and see how best to keep within the general limits of public expenditure without damaging services. I hope that they will try not to work in separate committees but will form policy committees in which the chairmen of all other committees can get together and can say distinctly "We are charged here with a Government recommendation whereby we can improve our services, rather than sit round a table asking whether we can cut this or cut that". If we can achieve such a harmonised approach in the physical reorganisation of local government, with the co-operation of the present Government, I am certain that the despondency expressed by the Opposition will not be weighed heavily by the country or by our local town halls.

9.3 p.m.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Haringey Hornsey

It is clear that the Secretary of State very much took to heart the strictures I passed upon him in the last debate on rates when I suggested that he was too frivolous on a subject which was causing great anxiety to so many people throughout the country. So sensitive has he been on that score that he referred to my strictures on three public occasions. Today, he has dubbed me the Savonarola of the Conservative Party. If I recall my history correctly, what distinguished Savonarola was his strictures on the life style of the rulers of his State in the midst of poverty and on their frivolity in the midst of misery. So close to the mark did he get that he was sent to the stake. The rules were determined to destroy him. I must say that, during the last General Election campaign, I had the most flattering attention from the whole machine of the London Labour Party.

Savonarola was distinguished also by the number of converts that he brought round to his thinking. Therefore, I was very gratified that, in his analysis of the causes of the high rates of this and last year, the Secretary of State eschewed completely the false alibis he tried to give himself in the previous debate and adopted instead the analysis I proffered to the House, namely, inflation in a labour-intensive industry, under-budgeting in the face of that inflation, heavy borrowing commitments, and inescapable commitments already entered into.

The right hon. Gentleman repeated all those arguments in this debate, and I am grateful to him for picking them up and being converted to their thinking. He even ended with a peroration asking for reduced local government expenditure. Even more satisfying for a Savonarola than conversion is repentance.

It would be churlish of me therefore not to recognise that the Secretary of State has both repented and done penance for his "Not as much as 100 per cent, increase" joke and has come forward with a rate support grant order and an increase order which has pleasantly surprised the local authorities associations. As far as I have been able to detect, there is no criticism by any of the local authorities associations of the size of the grant. There are, however, considerable misgivings concerning the distribution.

The County Councils Association has commented that the distribution is unfair and points out that there are six areas, two of them in Wales—and my hon. Friend the Member for Conway (Mr. Roberts) drew attention to this—which are receiving a share of the grant which is more than 5 per cent, less than last year. That will cause considerable difficulties in those areas.

In addition, London is particularly badly hit as a result of the maldistribution, and I have an interest in this since I represent a London constituency. As my hon. Friend the Member for Hamp-stead (Mr. Finsberg) said, the average domestic, ratepayer in London pays 50 per cent, more in rates than any ratepayer outside the capital. On top of that the estimated average increase over the coming year in London will be 40 per cent, as against an average increase of 25 per cent, in the rest of the country.

The hon. Member for Woolwich, East (Mr. Cartwright) identified some of the problems in London which give rise to this situation. He spoke of the home-lessness, children in care and the illegitimacy rate, and his arguments can be taken one stage further. With its effect as a magnet our capital city, because of job opportunity and because of the anonymity of the people coming here, attracts a great many of these problems from all over the country.

It would therefore seem to be right that London ratepayers, having to bear the burdens of others, should receive a more generous distribution of the rate support grant than the Secretary of State proposes to give in these orders. If it is too late now for him to do anything about this, may I urge him to ask for some rethinking within his Department as to the peculiar and difficult position of London and the burden upon the London ratepayers?

Another matter upon which a number of my hon. Friends commented was the lack of guidance to local authorities over the savings they will be required to make in expenditure. The Secretary of State said that he expected them to make these savings. My hon. Friend the Member for Daventry (Mr. Jones) called out for cuts in expenditure. My hon. Friend the Member for Southend, West (Mr. Channon) referred to the economies in the White Paper on the rate support grant and suggested that these were extremely vague, in some respects contradicting Government policy in other matters. He referred specifically to the nationalisation of land, the burden this will throw on planning establishments and the fact that the White Paper referred to cutting back on planning establishments.

Thus a great deal more thought is needed on cuts in local authority spending and I would urge the Secretary of State to produce his promised circular as soon as possible because local authorities are in the midst of considering their new rates for next year and if the circular is to be of any value to them they should have it now. As my hon. Friend the Member for Reading, North (Mr. Durant) suggested, it would be more than helpful to the local authorities' associations if the Secretary of State would enter into consultations with them about the suggested cuts.

The hon. Members for South Shields (Mr. Blenkinsop), Cornwall, North (Mr. Pardoe) and Hartlepool (Mr. Leadbitter) spoke of the effects of reorganisation on local authorities and spoke about the large staffs. I do not propose to go over that ground, because we answered the point adequately in our last debate on the rating system. But I point out that when commercial firms amalgamate they rationalise their staffs and reduce the size of those staffs. That is the point of amalgamation of commercial concerns. Regrettably, that does not seem to have happened with local authorities. One establishment has been piled upon another.

It is for that very reason that my right hon. Friend the Member for Crosby (Mr. Page) when in office asked for an investigation into the way in which local authorities created their establishments and the salaries they started to pay. Where is the report? We asked for it in the last debate, and are still waiting for it. I hope that the Secretary of State will present at the earliest opportunity the results of the investigation ordered by my right hon. Friend.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

I am surprised at the hon. Gentleman. Is he not aware that the right hon. Member for Crosby (Mr. Page) was warned about the problem in Committee in 1972, and took no notice? He only asked for the report when it was too late.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Haringey Hornsey

The hon. Gentleman tempts me to go over the ground that we argued in the last debate. Need I point out to him again that it was his Administration that set up Redcliffe-Maud, with the fatal defect of not including the financial implications in the terms of reference? That is why we are in the difficulty today. How many times does one have to repeat it before it sinks into the minds of some Labour Members?

Other hon. Members have spoken about the wide variation from the 25 per cent. average increase. The Secretary of State has admitted this. Some hon. Members have asked that there be a safety net. If the Secretary of State finds that there are local authorities suffering an increase greatly in excess of the 25 per cent., will he make proposals to help the ratepayers concerned?

Perhaps the most curious part of the Secretary of State's speech was his reference to the rate of inflation and his refusal to give the House or local authorities any guidance. He called to task my right hon. and learned Friend the Member for Hexham (Mr. Rippon), because, on the best figures then available from the Treasury, my right hon. and learned Friend suggested last January that there would be a 9 per cent, inflationary increase in rates, taking into account the variable domestic rate relief that he proposed to give to the local authorities.

That 9 per cent, was part and parcel of the concept of the variable domestic relief, which was intended to be geared to bring down the increase. The Secretary of State abolished the variable domestic rate relief, which would have given him flexibility to assist areas where the increase will be beyond the norm of 25 per cent, that he posits now.

One finds it not surprising that, because he has removed from himself the opportunity to be flexible in that way, the right hon. Gentleman refuses to give any estimate of the probable inflationary increase next year, although I am sure that the Treasury must have those estimates and that they have been passed on to his Department. He is fully apprised of those estimates. But he was rather coy in giving them to the House in case he gets his leg pulled this time next year.

Perhaps that is understandable, but we must ask the right hon. Gentleman how can local authorities budget their rate if they cannot obtain any guidance whatsoever from the Government, who are the body best placed to give estimates of this kind. If local authorities receive no guidance at all and, as a result, seriously underestimate the inflationary figure for next year, would it not be right for them to come back this time next year and to say to the Secretary of State that he had said that the £350 million was a once-and-for-all payment, but he had put them in this position for the second time running and must now give them another £350 million, or whatever the equivalent would be, because he refused to give them the necessary guidance in their budgeting?

We shall remind the right hon. Gentleman about this debate next year when we see what position the local authorities are then in—

Photo of Mr John Tomlinson Mr John Tomlinson , Meriden

Do you not agree that my right hon. Friend is having to give £350 million extra this year precisely because of the guidance, given on the best Treasury information, that your right hon. and learned Friend had available to him on 22nd January this year?

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. The hon. Gentleman was bringing me into the debate.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Haringey Hornsey

I referred a moment ago to the effect of the right hon. Gentleman abolishing the variable domestic rate relief, and the fact that this exacerbated the situation so much that he was forced by this House—we defeated him—to give relief, simply because he had played around with the domestic rate relief. Minority Government, it seems, has some advantages for the minority.

The debate has emphasised that despite the help that the Secretary of State is able to give to local authorities this year, acute problems remain in the rating system. The distribution of the rate support grant is one of the problems that has been highlighted in the debate. The difficulty in cutting back public expenditure and the defects of the system will mean that, despite the aid we are discussing today, many people will suffer again next year because of the rating system. Therefore there must be reform, and it must be urgent reform.

My hon. Friends the Member for East-leigh (Mr. Price) made a thoughtful speech in which he analysed the figures in the White Papers now before us, which he accurately described as dull and difficult-to-understand technical documents. We are talking in terms of £8,000 million, a figure which it is difficult for the mind to take in. But it is not hard for the mind to take in the impact which the rate demand will have on the average ratepayer in the coming year.

A number of my hon. Friends, particularly my hon. Friend the Member for Eastleigh and my hon. Friend the Member for Reading, North, spoke about the small shopkeepers to whom no especial relief is being given, and thus many of them face bankruptcy.

In conclusion, I echo the request of my hon. Friend the Member for Leominster (Mr. Temple-Morris) that the Secretary of State should do all he can to hurry the Layfield Committee in its work so that as soon as possible, we can study its findings upon the defects in the rating system, which are obvious to us all. Then the House may set about the business, as quickly as possible, of replacing the present inequitable rating system with a system that will charge people according to their ability to pay.

9.20 p.m.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

I am sure that the House has enjoyed the speech of the hon. Member for Hornsey (Mr. Rossi), particularly the earlier part of it. There was more than a touch of levity in it. He complained about the joke-cracking ability of my right hon. Friend the Secretary of State, but I thought that at one point the hon. Member's speech was becoming positively hilarious, especially when he came to defend his party's record on the high cost of local government reorganisation.

As the House knows, and as the ratepayers know to their cost, the hon. Gentleman was attempting to defend the in-defensible. I was interested to hear him complain about a report which had been commissioned, as a sort of death-bed repentance, at the time when his right hon. Friend the Member for Crosby (Mr. Page) was in office. That report was no doubt commissioned when the right hon. Gentleman saw the results of local government reorganisation.

I shall be corrected if I am wrong, but I believe that the hon. Member was referring to the report produced by the Local Authorities Conditions of Service Advisory Board. This is the report which analysed what had been done and the increases in staff in various parts of the country. Happily, this report was placed in the Library earlier this year. It is available for the hon. Gentleman to peruse when he has the opportunity. I thought that from time to time he had his tongue in both cheeks when he was criticising my right hon. Friend—

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

For the sake of the Conservative Front Bench I had better make it clear that I do not think that was the report to which the hon. Member for Hornsey (Mr. Rossi) was referring. We have all read the report to which the right hon. Gentleman referred. I quoted from it extensively in my speech. The report to which I think the hon. Member was referring was one which the Pay Board had been intending to make. We do not know where it is because there is no Pay Board to report on this.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

I am glad that the hon. Member is taking over the mantle of defender of the Conservative Front Bench. I am sure he is able to do it very well.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

Perhaps I may finish my sentence. If the hon. Member wants to supplement the point a little, the House will be interested to listen.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Haringey Hornsey

I was watching with amusement as the right hon. land learned Gentleman dug himself a pit in speaking about the wrong report.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

I gave ample opportunity for the hon. Member to correct me if I was wrong. He did not seek to do so. This is the trouble with the hon. Member. He realises the great responsibility he and his party bear, but there is a touch of amusement about everything he wants to say.

There has been a quite different atmosphere about this debate compared with the debate we had in March. It would be fair to say that my right hon. Friend has been congratulated in varying degrees on the support he is providing next year for local authorities. There has been a little criticism about the way it has been divided, but the totality of the grant has been welcomed. I have not heard any statement to the effect that in all the circumstances the total grant should be increased. By increasing the percentage from 60·5 per cent, to 665 per cent, my right hon. Friend has brought record help to local authorities in a situation where help is badly needed. That is why it has been welcomed right across the board in local government.

I find very odd the various schemes suggested by the Opposition during the election campaign and since for the financing of local government. It is no use Opposition spokesmen complaining about the terms of reference of the Lay-field Committee. They had the opportunity to do something about local government finance. Almost on the eve of the General Election a whole series of quickly-thought-up and botched-up schemes was produced with the object of trying to distract the attention of the electorate. Of course, they carried no credibility.

Photo of Mr Charles Morrison Mr Charles Morrison , Devizes

Is the right hon. and learned Gentleman giving a categorical undertaking that the Labour Government if they remain in office, will not introduce something similar to the Conservative Party proposals in the last election manifesto?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

The hon. Gentleman will have heard of the Layfield Committee which is investigating, with wide terms of reference, the whole rating system. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) spoke of the evidence being given to the Layfield Committee. It is hoped that the evidence will be available in the course of the spring. The committee will not close its doors thereafter, but it expects that the bulk if not the whole of the evidence will be available by then. The committee wants to complete its inquiries and report by the end of the year. That is the speed with which the committee is tackling the problem.

The Government hope that the average domestic rate increase next year will be in the region of 25 per cent. Of course there will be variations, and I would be the first to concede that. It is an indication of the satisfaction of right hon. and hon. Members on both sides of the House that the temperature of today's debate is wholly different from that of our March debate and that so little criticism has been made of my right hon. Friend. Were it not for the measure of assistance given, coupled with the special addition in the increase order, the rate of increase next year would have been in the region of 70 per cent. The figures make allowance for the fact that our special relief scheme announced in July will reduce many householders' rate bills this year.

Only a couple of years ago a 25 per cent, rate rise would have been inconceivable. Since then there has been a sharp increase in all the costs borne by local authorities, for instance, for building materials, road materials, interest rates and, above all, manpower. Staff costs are considerable because local government is so labour intensive.

The hon. Member for Eastleigh (Mr. Price) wanted to know how our proposals were made up. Local government has to deal not just with pay and prices but with high interest rates. During the period of inflation, local authorities have had to do a great deal of short-term borrowing. Inflation hits local authorities hard because of its labour-intensive situation. I am advised that there has been a 100 per cent, increase in some road building materials. We have sought to make allowances for all these costs.

Photo of Sir David Price Sir David Price , Eastleigh

Do I gather that my figure of 20 per cent, which I used as being the year's inflation—I suggested that there might be a shortfall of over £1,000 million—is accounted for by the other increases that have been substantially more than the 20 per cent, which I took as being the general average of inflation?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

The hon. Member for Eastleigh, in a thoughtful speech, was generally correct. We have sought to meet extraordinary expenses which have been carried by local authorities and which generally are out of line with costs which other people have had to carry. We have given some examples, although they are not exhaustive. However, they give an indication of the high degree of additional expenditure undertaken by local authorities which we have tried to meet.

I was asked about the Houghton award and the manual workers' pay increase. The present settlement takes account of the burden on local authorities resulting from these pay increases. The central Government will bear their share of the burden in any increase orders that may be made.

The hon. Member for Daventry, with his substantial local government experience, raised the problem of economies and the need for advice. The hon. Member for Hornsey also mentioned those problems. We are conscious of the need to give local authorities helpful and detailed guidance on how the reduction in the rate of growth can be achieved. We shall be issuing a circular before Christmas setting out speci- fic and detailed guidance. Every Minister is conscious of the need not to impose fresh burdens on local authorities.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Haringey Hornsey

Will there also be full consultations with the local authorities?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

There have been consultations with local authorities. They are anxious to have guidance, and therefore we shall be carrying out their needs and meeting the hon. Gentleman's request. My right hon. Friend is always ready and available for consultations. However, at this point of time it is not consultations which are required but the views of the Government on how local authorities should act.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

Will the recommendations talk in capital terms or in current terms of expenditure?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

We are dealing with the rate support grant—in other words, with current expenditure. That is the basis of the guidance that will be issued.

I was asked about the starting point in terms of various authorities, which may vary as regarding existing staff, and the need for some flexibility. We feel that it is an essential feature of the rate support grant settlement for 1975–76 that local authorities should provide for no extension in present total staff numbers beyond small increases necessary to meet inescapable commitments. Central and local government will institute joint arrangements for keeping a watch on local authority staffing, but it will be for individual local authorities to decide how to allocate their staff resources in a period of restraint. So far as it goes, I hope that that will provide the necessary flexibility which has been urged upon us.

I was asked whether the Government estimate of a 25 per cent, average increase in rates took account of the July special rate relief scheme. I think that my right hon. Friend answered that point in the affirmative in his speech earlier in the debate. As to distribution, no scheme is perfect, and certainly no scheme would meet with a unanimity of welcome from all parts of the House. One hon. Member some years ago, in view of certain criticisms which had been levelled on that occasion on a rate support grant system, thought that there would be less criticism if the Secretary of State chartered an aircraft, loaded it with gold, took it over the various local authority areas and, according to his fancy and what he saw beneath him, handed out large amounts of gold.

Some of these schemes have been the object of criticism in the past. What we have done this time is certainly an improvement on what was done in the past. I think that speeches today have indicated that the differences and objections are very much less than they were previously.

First, it is right to point out that the basis of the formula is fairer. This time we have been looking at the new local authorities' expenditure estimates for 1974–75, not at what the old local authorities spent in the past year. These estimates are more up to date and avoid all the problems of apportioning figures to one area which originally related to a somewhat different area. Besides, in our calculations we have adjusted the figures to avoid penalising low-income areas.

Secondly, we are using better social indicators. The 1974–75 formula included something called a "personal social services unit" based on the numbers of social workers, home helps, and so on. That was not an indicator of social need at all. It measured what authorities were doing about their social needs. That is a completely different matter which depends as much as anything on what the authority can afford to spend. Therefore, this year we are using indicators of general social conditions: high population density and population decline, which are generally symptomatic of stress areas, and the numbers of elderly people living alone who not only place a substantial demand on the social services in themselves but tend to be concentrated in areas of poverty and deprivation.

Thirdly, next year we shall be getting rid of the so-called "high cost weightings" which the last Government added to the formula at a very late stage. These gave more money to the inner and outer South-East counties and the outer West Midlands, but not, be it noted, the West Midlands conurbation. We sought in vain at that time for some explanation why goods and services were supposed to be cheaper in Birmingham than in Bromsgrove.

Fourthly, we are giving more help to London. I realise that my hon. Friend the Member for Woolwich, East (Mr. Cartwright) and the hon. Member for Hampstead (Mr. Finsberg) would like substantially more. I think that everyone agrees that London has unique problems. Indeed, that could be said in varying degrees about other parts of the country. Rate bills in London are very high. The previous administration included a 3 per cent, weighting in the 1974–75 formula— less generous than their inner South-East weighting.

This year there has been a substantial increase in the London and fringe area location allowances—far more than the authorities concerned had budgeted for in setting their rates. In the increase order we are making a special addition to the London grant and, to demonstrate our complete impartiality, to the grant paid to the counties round London which also had this new burden thrust upon them. Next year, too, London will have an 8 per cent, weighting as against the original 3 per cent, for the current year.

Fifthly, we are increasing the resources element from 27½ per cent, to 32½ per cent, of the aggregate of the needs and resources elements. This will benefit areas, including Wales, which are relatively poor in rateable resources. These are all improvements. While they will help many deserving areas, of course authorities elsewhere will do less well.

Photo of Mr Wyn Roberts Mr Wyn Roberts , Conway

Is the right hon. and learned Gentleman quite satisfied with the effect of the new formula on particular counties in Wales and other counties which are to have a decrease of more than 5 per cent.?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

I am afraid that the hon. Member is living in a wholly different world. There is no decrease. Every authority in the country will receive a substantial increase, and the Welsh counties will receive a very substantial increase, amounting to about £90 million. I shall deal with the position as regards Wales in a moment. There is no decrease. The sooner the hon. Member washes that out of his mind the sooner he will begin to understand the position. We are talking of massive increases right across the country, which vary from one part to the other, as I am the first to concede.

Photo of Mr Wyn Roberts Mr Wyn Roberts , Conway

The fact of the matter is that the Welsh counties' share of the grant is less for the coming year than it is for the present year. That has been pointed out very clearly by the County Councils' Association, which has declared its dissatisfaction over the matter. Is the Secretary of State saying that he is satisfied with the position?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

The hon. Member should know that we are talking about the rate of increase, which varies from one part to another. Some of the Welsh counties and English counties are not receiving as much as some of the others. The amounts vary across the country, and hon. Members should take the whole picture into account.

I shall deal in a moment with the domestic rate relief, of which there has been some criticism by the Opposition, including the hon. Member for Cornwall, North (Mr. Pardoe) and the hon. Member Leominster (Mr. Temple-Morris).

If the hon. Member for Conway wants absolute parity, if Conservative Party policy calls for absolute parity on all these matters, he might say whether it is his view that there should be the same rate of domestic rate relief for his own constituency as, perhaps, for some of the English counties. Is that the hon. Member's view, or does he prefer a much franker and fairer way of looking at the whole picture and not of taking one tiny fraction of it?

Photo of Mr Wyn Roberts Mr Wyn Roberts , Conway

The Minister said that special attention would be paid to the low-income areas. Yet the Secretary of State knows that there are low-income areas within his own sphere of special responsibility, which is Wales, that are coming out of this rate support grant negotiation worse off in terms of their grant than they are at present.

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

I cannot convince the hon. Member, who believes that there is a diminution of the share. He is living in cloud-cuckoo-land. He has been present during only a small part of the debate and he obviously needs a great deal of education to inform him that we are talking about rates of increase. He has failed to respond to my challenge whether he would like parity. Perhaps he would like to consult the Opposition Front Bench about the matter. I understand why he refuses to rise to that bait.

In view of the intervention of the hon. Member for Conway, perhaps it would be convenient if I dealt with the Welsh problem in detail at this juncture. I note that the Opposition in their wisdom are not voting against our proposals tonight. I welcome their conversion compared with what they did in March when they voted against the proposals. In March I noticed that not one Conservative Member of Parliament from Wales voted against us. Indeed, nor did the nationalist Members, because they were very pleased with what had been done. We have sought to build upon that. There has been criticism from people on both sides of the Welsh border, some of whom say that we have done too much for Wales whereas others say we have done too little. It seems that our proposals are absolutely right. They are fair and equitable, and they meet the reality of the situation.

If I may try again to persuade the hon. Member for Conway that we are discussing increases, let me point out that Welsh householders next year will receive an increase of 2½p in domestic relief. Does the hon. Gentleman object to that? Does he regard that as unfair? Would he reject it on behalf of his constituents? I am sure that he would not. He will welcome it with open arms and resist the blandishments of the hon. Member for Cornwall, North when the latter wants to take it away from him. We have to look at the totality of the picture and not just at one little fraction where the hon. Gentleman feels hard done by and where he misunderstands the differences between decreases and growth.

I hope that the hon. Member for Caernarvon (Mr. Wigley) will take the message back to the fastnesses of Gwynedd that Wales will receive a higher amount of domestic relief than will England. The reason is simple. At the beginning of the debate in March of this year, I said, and I repeat today, that Wales has been given a high rate of domestic relief this year and again next year because of the overall total cost of local government and water reorganisation, which was higher on average in Wales than in England.

One can pick out one area just as one can pick out part of a settlement and suggest that one area is hard done by compared with another. But, taking the totality of the picture, our conclusion was that there was a need for this higher level of domestic relief. If it gives pleasure to some hon. Members not from Welsh constituencies, the gap has somewhat narrowed for next year. We believe that it is needed, that it is right and that it meets the situation in Wales.

I have heard quotations from the hon. Member for Merioneth (Mr. Thomas), who is not here today. He has been quoted by the Western Mail as saying that Gwynedd was likely to get £2 million less in rate support grant next year than this year. Obviously he has persuaded the hon. Member for Conway along similar lines. The hon. Member for Caernarvon has made a similar claim in this House. The hon. Member for Carmarthen (Mr. Evans) has been even more extravagant in referring to the position in Dyfed.

Precise figures for rate support grant will not be known for some time, but the Department of the Environment has now sent to all authorities sufficient data to enable them to work out their grant entitlements. However, provisional figures show that, because of the Government's very generous grant settlement, all authorities in Wales will get very substantial increases in grant next year more than making up for the inflation which has taken place since 1973.

Some critics have led themselves astray because they have concentrated attention on the ordinary sparsity and the super-sparsity factors in the needs element formula. It is true that these factors for 1975–76 are rather less generous than those for the current year. But at one time it looked as though there would be no super-sparsity factor for next year. The fact that one is to be included is of real advantage to Dyfed, Gwynedd and Powys.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarvon

Will the right hon. and learned Gentleman explain how it is that, given the sparsity element which in Gwynedd means about £300,000 or £400,000, and the super-sparsity element on top of that of £500,000, making a total of £900,000, he can say to his right hon. Friend the Member for Anglesey (Mr. Hughes), as he did yesterday in a Written Answer, that the sparsity element would be more than £3 million for Gwynedd next year?

Photo of Sir John Morris Sir John Morris Secretary of State for Wales

If the hon. Gentleman will be patient, I will give him the full figures. Those are the figures which I gave in the course of that answer which I thought would have been welcomed by the hon. Member and would have done away with the picture of gloom which has been paraded from one end of North-West Wales to the other.

It was a decision of Ministers to ensure the super-sparsity factor, but this did not emerge from the working party with local government. There is also provision in the needs formula for next year—and I would have thought the hon. Gentleman would have welcomed the way in which Ministers have ensured that this operates to the benefit of his constituency —to distribute part of the grant on the basis of this year's formula. This will give rural counties some continued advantage from this year's sparsity factor.

I am advised that the end result is that the rural counties will not suffer anything like as much as some people have feared from the changes in the sparsity factors. Indeed, it seems likely that Gwynedd and Dyfed will get a little more money from these factors. Let me illustrate the case of Gwynedd. In 1974–75 Gwynedd will get just under £3 million on account of sparsity of population. In 1976 Gwynedd will probably receive about £930,000 from the new formula plus 71·3 per cent, of their 1974–75 sparsity entitlement, giving them a further £2,100,000, a little over £3 million in all.

I emphasise that these are provisional figures, but it appears that the rural counties will not do so badly out of the sparsity factors next year, although I acknowledge that they will get rather less out of these factors than in 1974–75 if the increase order as well as the original settlement is taken into account. That is the answer to the criticisms that have been made.

Some critics have complained that there is no low income factor in the needs element formula. This complaint, too, is based on a misunderstanding. The Government Departments and local authorities' associations found in their work on RSG this year that authorities with a high proportion of low income households in their area tended to spend less, other things being equal, than those elsewhere, although their true need to spend clearly cannot be less. We have made a correction for this by adjusting the expenditure figures of those authorities upwards in the course of the statistical analysis on which the formula is based. This will stop the formula from working unfairly to the disadvantage of low income areas even though numbers of low income households do not specifically appear in the formula.

I hope that this will be an encouragement to the hon. Member. In any case, it is misleading to look at separate parts of the needs element formula. The RSG settlement must be looked at as a whole, and the total result will be as advantageous to Wales as it is to England. As far as the needs and resources elements are concerned, all Welsh areas will have bigger grants next year in real terms, not just in money terms—and I have given the picture as far as the domestic element is concerned.

In the present year, 70 per cent. of Welsh local government current expenditure is met from the Exchequer, and next year the percentage will be rather higher. I will give the figures: Dyfed this year, 70 per cent.; Gwynedd, 71 per cent. There is no complaint when one compares with the national average. For Powys it is 79 per cent.—I believe the highest figure in the country as a whole. It seems likely that the figures for next year will be rather higher.

Against that background, I cannot understand the complaints of hon. Members. It seems to me there are those who never can be satisfied when one compares this picture with the picture as a whole. If hon. Members want to argue, if they want to come back to national parity as regards the total domestic element, I shall be glad to hear from them, and their constituents will be even more pleased to hear their views. This is the picture. This is what we defend. I am sure from what local authorities generally have said that there has been a very general welcome from them right across the board for what we have done. I commend these orders to the House.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. The right hon. and learned Gentleman has sat down.

Question put and agreed to.

Resolved,That the Rate Support Grant (No. 2) Order 1974, a copy of which was laid before this House on 5th December, be approved.

Resolved,That the Rate Support Grant (Increase) Order 1974, a copy of which was laid before this House on 5th December, be approved.— [Mr. Crosland.]