Rate Support Grant

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

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Photo of Mr John Tomlinson Mr John Tomlinson , Meriden 12:00, 12 December 1974

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.