HC Deb 24 April 1928 vol 216 cc843-54

5.0 p.m.

If I were only dealing this afternoon with the financial requirements of His Majesty's Government and the means of satisfying them, I should bring my tale to a speedy conclusion; I should sit down almost immediately and escape thus easily from the Budget of 1928. As it is, I must warn the Committee that our joint ordeal is not yet half completed, and that by far the most important and controversial part of our task must now begin. Here I shall invite the Committee, at the outset, to open new ground. During the last three years, the decline in the cost of living has reached a total of 10 points. That is of immense benefit to the people. According to the calculations I have had made, the advantage gained by the wage-earning mass of the nation from a decline of 10 points in the cost of living may, after making full allowance for any wage reductions which have occurred, be com- puted at not less than £100,000,000 a year—not a fact to deplore. A far less satisfactory picture is presented by the heavy basic industries, which have the greatest responsibilities in the employment of the people, which are most directly in contact with labour unrest, which are most unsheltered from foreign competition, which are most markedly charged with our elaborate social services, and which are principally affected by the high costs of our sheltered transport trades.

The general strike and the coal troubles account for a great deal of the immediate evil, and their effect will slowly pass both from industry and finance. We have, however, to face the fact that unemployment remains obstinately chronic around the dismal figure of 1,000,000, and that all those basic industries which used to he the glory of this island, which must always constitute an essential element in the life of every nation, and which are vital to our export trade—all those industries are at the present time in serious eclipse. Various remedies have been suggested. Some say they should be nationalised, others say they should be protected, others again advise the rationalisation of industry and are strenuously endeavouring to promote co-operation and good will. On every side and among men of every type there is a conviction, and, I trust, a resolve, that a new effort should be made to impart a vigorous impulse to the efficiency and volume of British production. The removal of invidious burdens constitutes no favour. If the burdens are found to be invidious, their removal is an act only of policy and justice.

Our system of local rating; dating from the 16th century, is wholly inapplicable to modern industrial production. The practice of levying local taxes on the tools and plants of production is, in its nature and essence, economically unsound and even vicious. The rates enter directly into the cost of production and affect our competing power at home and abroad. They vary in weight with every district and with the local politics of every district. They fall with progressive severity upon an industry in proportion as it uses bulky tools and extensive premises, and consequently in rough proportion to the number of wage-earners for whom it provides a livelihood. They fall the heaviest upon industry when it is most depressed and making little or no profit, or even running at a loss, and when only a small portion of the plant, upon the whole of which it has paid rates, is in fact in profitable use. According to the latest ascertainments, every one of our colliery districts shows a net loss on working, and yet the industry is being required to pay several millions a year in rates. In other depressed industries a quarter or even a third of the wage-earners are employed at this moment by firms that are either working at a loss or making profits less than the rates they are paying. Many hundreds and thousands of wage-earners—certainly much more than a million—after making painful sacrifices of hours and wages, are at this moment working for businesses which are very near the verge of closing down, and which in this precarious state are forced to pay heavy rates out of dwindling capital. How long is that likely to be able to go on?

These evils manifest themselves in another direction. Under our present arrangements, when the industries of a district flag, unemployment, distress and pauperism increase, and to meet them the rates arc raised. These higher rates aggravate the trouble of the failing industries; more unemployment results, and what with the ever-growing burden of the rates and the atmosphere of discontent caused by distress—always the cause of discontent—industry flies from these districts or else dies within them. Who would start a new factory in such a district? On the contrary, we frequently see industries shifting outside the heavily-rated areas and starting afresh, with a needless capital outlay, in grass meadows without population or communications. They then demand motor roads to bring, at uneconomic expense, workmen to the scene and to deliver their products to the market; they demand new houses, subsidised by the State, for a new community. Frequently we see a factory—and the practice is growing every day—erected just outside the boundaries of some poor district in order to escape being made a milch cow. The whole impulse is for industry to quit these melancholy areas and leave behind them political agitation, State assist- ance, and a forlorn mass of derelict humanity.

Yet, after all, many of these necessitous areas, but for the rates, the pauperism, and the political consequences of distress, would be quite good places for old-established businesses to thrive in and even for new ones to be founded in. Here it is that the working population have their homes, their institutions, their schools, their churches, their chapels, their recreations, their shops, their gas and water connections. How much better to bring industry back to the necessitous areas than to disperse their population, at enormous expense and waste, as if you were removing people from a plague stricken or malarious region! The evil is progressive. Take, for instance, one district whose case we have examined in detail. I will not name it, because there is no point in entering upon a local argument. It is a district which had nearly 40 collieries. Four years ago, after 15 of them had already closed down, the remainder were still paying over 20 per cent. of the rates of the district—the total rates. Since then six more have been compelled to shut down, and, owing to the consequent distress and loss of rates from those collieries, the burden falling on the other collieries and on the other ratepayers in the district has increased by no less than 6s. in the £. You can tell a similar story about any Lancashire town where spindles are being steadily reduced. Whenever one factory falls out of the ranks, the pressure on those remaining progressively increases. There follows a gradual but increasing exodus of enterprise and of industry from the places where the working people live and where they have their institutions. There follows that movement, already clearly discernible, from the industrial North to the politically more settled and less highly rated South. There follow all those acute problems of distress connected with what are called the necessitous areas, which, under the existing system of local government, can only be palliated by loans and doles.

The burden of rates on industry is cumulative. Coal (rated) is converted into coke (rated again), and used with iron ore (rated) and limestone (rated) to make pig iron (rated again), and this, with more coal (rated) and other rated products, is used to make steel (rated again). I am told that the average burden on steel from the rates is over 4s. a ton. That is the average burden, but in many cases, where in the districts the rates are very high, in districts where there is distress, the burden is far greater. Upon this darkening scene another set of evils arrive. All these commodities that I have mentioned need to be transported, usually by rail or water, and at each stage more rate burden is added. The railways pay over £7,000,000 in rates. They are sheltered from foreign competition, but inside this island the railways are confronted with the strong competition of motor vehicles. This limits their powers to pass on the burden so far as the passenger or light goods traffic is concerned, but the heavy traffic of the basic industries, which have no alternative means of transport, remains inevitably at their disposal. I am not blaming the railways; I am stating the facts. The Balfour Committee reports typical cases in which the total rail charges entering into the cost of pig iron in 1925 amounted to 23s. 5d. a ton, or 29 per cent. of the total market price.

Thus, at every stage in the progress of basic products till they finally reach the ship for export, or reach the home consumer, the rates add to the price, and they add to the price irregularly, unequally, and injuriously. I am not, of course, suggesting that the present difficulties of British industry or the distresses of the wage-earning population in certain areas will be cured completely by any relief that can be afforded upon the rates. On the contrary, the opportunity of any rate relief which may be given ought to be used by every depressed industry to set its house in order and to make a new effort at a favourable moment. Coal, cotton, iron, steel—in every one of these industries, very great efforts, quite apart from any outside assistance which the State may give, are needed at the present time. Capital and Labour should take occasion by the hand, and endeavour to turn a substantial aid to permanent effect. We boast no panacea, but we are sure that the relief of the rates upon production is the first, the most obvious and the most urgent remedy which Parliament can apply. This, if I may judge by the de- clarations of leading men in industry and politics, is common ground between all parties. We may differ about the remedies, but we are largely agreed upon the diagnosis. A clear distinction can be drawn between productive industry and the distributing trades. Productive industry is exposed, in the main, to worldwide competition. It cannot recoup itself from the consumer. Productive industry employs three-fourths of the weekly wage-earners and accounts for not far short of nine-tenths of the 1,000,000 unemployed. The distributing trades, according to every test which the Inland Revenue can apply, have not suffered, but, on the whole, have prospered in the last 10 years and the revenue raised upon their profits has not diminished. On the contrary, it has increased and is still, I am glad to say, increasing.

Accordingly—taking this view and having profited by what I have heard in the Debates in this House during this Parliament, and having laid to heart every counsel that was offered in sincerity—at Whitsuntide last year 1 proposed to the Prime Minister that, as the concluding financial effort of this Parliament I should try—the Committee will excuse a military metaphor—to form a mass of manœuvre of £20,000,000 to £30,000,000 a year for a great operation upon the rates; and, secondly, that this effort should not be frittered away over the whole front but should be concentrated upon the relief of the sector occupied by the producers in town and in country. Ever since then all the Departments of State concerned have been at work. Our plans are now complete and we believe them to be practicable. The time for consideration has passed; the time for action has come and we shall begin this afternoon. I may say, parenthetically, that in what is beginning to be a rather long and certainly a very varied experience of administration, I have never known a policy more searchingly examined and prepared, but I must also say that in a business of this immense complexity, touching at, so many points so many interests, and producing reactions of all kinds in every direction, it is quite certain that the Government will require the help and the guidance of Parliament at every stage. No doubt suggestive and constructive criticism will reveal in the next few months a great many things Which could never be foreseen while our discussions were confined to the secret circle of the Government, their officials, and their confidential advisers. Therefore we shall welcome the help of suggestive and constructive ideas from any quarter, if it is offered in a sincere desire to arrive at the best result for the country as a whole.

The policy will proceed in three main stages. First, the gathering of the money necessary for the relief of the rates upon the producers; secondly, the defining of the scope and direction in which that relief should be applied; and, thirdly, the reimbursement of the local authorities for their loss in rateable value. These are the three stages and with each of these I will now proceed to deal. But the Committee will follow the account much more easily if, at this point, I inform them of the time-table which the Prime Minister has prescribed and which indeed the physical necessities, the temporal necessities, of Parliament require. The first stage is the provision of the money arid that is what we are going to do now. The second stage, the direction of the relief, will require a Bill which will be called the Valuation (Ascertainment) Bill. This will be introduced by my right hon. Friend the Minister of Health as soon as possible after the Budget resolutions arc disposed of. Twelve months will be required after that Bill is passed, to enable the new valuation to be made for the purposes of de-rating. While this is going on, and when we meet in November, the third stage of the policy will begin. The Minister of Health will then produce the main Local Government Bill dealing with the reimbursement of the local authorities. Advantage will be taken of this unique opportunity to carry out those reforms in the local government system which are long overdue and upon the principle of which the Government have already reached definite conclusions. The interval will be occupied in consultation with the local authorities with a view to securing their active co-operation and dealing fairly with them, having regard to all the circumstances of the present time, social, financial and economic, and to other circumstances as well. This main Local Government Bill of the winter must, inevitably, become the most important Measure of its kind since 1888 or perhaps since 1834.

The opportunity afforded by the relief of productive property from rates will be used to establish a system of block grants subject to quinquennial revision. These block grants will include not only compensation to the local authorities for their loss of rates but will also include the existing percentage grants for health services. They will also include the grants under the Agricultural Rates Acts and the money provided by the Assigned Revenue System, except only such part as is allocated for Education and Police purposes. The percentage grants for Education and Police will also remain untouched, outside the ambit of the scheme at the present time, and so far as the present Parliament is concerned.

As to roads, the grants from the Road Fund for road improvement in all areas, and for the maintenance of Class 1 and Class 2 roads in administrative counties, all continue unchanged. On the other hand, all State assistance towards the maintenance of roads in London and in county boroughs and of non-classified roads in administrative counties will in future be given through the channel and in the form of the new block grant. For this purpose a suitable share of the existing grants and of the growing revenue of the Road Fund will be assigned. Lastly, in order to inaugurate the new system and to mitigate the hard cases and anomalies, inseparable from a great change of this character, there will be an additional grant of new money from the Exchequer over and above what the local authorities are receiving now, and for this purpose I am prepared to find £3,000,000 a year, though, I trust, it will not all be required. This potent fund of money, comprised in the block grants, will be used, not only for reimbursing local authorities, but also for the purpose of securing a gradual but continuous adjustment of the resources of individual local authorities to the needs and the character of the population for whom they are responsible.

The creation of wider areas for certain purposes of local government has long been urgent. The development of transport, the movements of population and industry, the more elaborate standard of technical services now required, have rendered many existing district divisions unsuitable for the discharge of their functions in respect both of Poor Law and of highways. Unemployment, arising perhaps from world causes, falls with peculiar severity from time to time upon particular trades and areas; and the local resources are not only inadequate for the burdens they have to bear, but they actually diminish with every increase in the weight of these burdens. Obviously it is wrong that the people in any district should be left without the means of providing for the necessary services approved by Parliament, just because they are all poor together and have not got the money. It is equally wrong that any district, so situated, should draw a blank cheque against the Treasury, or that the burden of a poor district should be thrown only upon its immediate neighbours. A broader basis of adjustment is necessary on this account.

Even more obvious are the inequalities and injustices arising from the present system of maintaining the highways. The cities and the towns disgorge, in ever-growing quantities, the motor traffic—light and heavy, pleasure and commercial—for which the local roads were never designed, and to provide for which many existing rural authorities are not equipped with the powers, with the money, or with the technical knowledge. The foresight of some counties like Bedfordshire and Hertfordshire has already shown us in living example the remedying advantages which flow from the adoption of a county basis as the unit of highway administration and charge. In this sphere, as well as in that of unemployment, an advance towards a larger grouping should be made.

Both the Poor Law and the highways require a broader basis of adjustment. But here an interesting and helpful feature presents itself. Either of these questions, treated separately, involves disturbance and considerable disturbance of the resources and the burdens of particular areas. Widening the area of the Poor Law helps, on the whole, the towns at the expense of the countryside. Enlarging the boundaries of highway administration helps the countryside at the expense of the towns. Either of these problems taken separately probably presents insuperable difficulties; but taken together, lapped in one comprehensive scheme, these discrepancies are to a con- siderable extent cancelled out or neutralised; and with the additional subvention from the Exchequer, which the institution of wider areas of charge renders possible, there is no reason why the double reform should not be achieved, not only without any marked increase in the rates in any area, but with a substantial relief in many highly rated areas and with a large balance of reductions generally, from one end of Great Britain to the other. It will be seen that in what I have just said I am giving two very important indications of the Local Government Bill of the winter. One of them will probably cause certain heartburnings to the class of local authorities who, within their limited resources, have carried a heavy burden far, and the other will give and is intended to give a broad assurance of positive relief to the great masses of ratepayers throughout the island. There are the two indications—larger areas and lower rates; these are the two main features which will characterise the Bill to be presented in the autumn.

The policy which we intend to follow is, of course, directly opposed Go that advocated from several quarters, of transferring to the central government whole blocks of services now discharged locally, like the care of the able-bodied poor. Such a remedy would be at once improvident and reactionary. It would simultaneously sap the vitality of our local government system, and further overload the centralised departments at Whitehall. It would impair local responsibility, throw away valuable voluntary effort, and cut the administration off from local knowledge. At the same time, you would unduly expand the numbers and exalt the functions of State officials. The House of Commons, which more than ever requires time to weigh and debate the supreme issues of national and Imperial policy, would find itself increasingly encumbered with a mass of disconnected duties which ought to be discharged by the county councils, and which the county councils can be easily fitted to discharge. We believe that the devolution of powers and duties, and the building up of strong and well-equipped local unities to exercise them, has still the dominant part to play in our modern domestic progress. In providing these major authorities with new sources of revenue, which will periodically be brought into fuller harmony with local needs, we are introducing into local government a flexible factor which will provide for the changing conditions of our time, and thus secure for the institutions of local government a fuller measure and a longer lease of active life.

I return now to the time-table. We hope that the main local Government Bill will receive the Royal Assent by Christmas, or at any rate by Easter. On this basis, and provided that the new valuations under the Valuation (Ascertainment) Bill are completed about the same date, the first relief to rates on productive industry will begin in the rate payment of October, 1929. Finally, the fulfilment of the scheme of local government reform will be achieved during the course of 1930. Therefore, there is a long job before us, and it will be only misleading the Committee and the public to suggest that it can be accomplished more quickly. Unless Parliament is strong enough, patient enough and dignified enough to pursue over a long period of time a national object of this prime importance, it would be far better to do nothing and to admit that the capacity for designed and concerted action no longer resides among us. [An HON. MEMBER: "You have begun late!"] We have begun late. What could we have done when we were fighting the greatest industrial struggle in this country? [Interruption.] What is this we hear from Labour representatives? If these great objects are not worth pursuing because they take 18 months to bring into effect, what prospect is there of achieving any real advance in legislation? If I am to take, as I hope I am not to take, that intemperate and precipitate mood as an indication of the line which the Labour party is going to adopt towards this vast scheme of constructive social reform—a line of mockery, derision and scoffing—then I say that we will advance against you with the utmost vigour. [Interruption.]


You are threatening us!


I am only threatening the hon. Gentleman to use my constitutional rights against him, as he may use his against me. At any rate, I am quite sure that hon. Gentlemen will really do well to address their minds to this subject, and hear what is the position that they will have to meet. They will either have to support this policy or oppose it. They had better hear what it is, and then they will know what course it will be best for them to adopt. If I have been led by interruptions from the even tenor of my way into a more controversial vein, I will hasten to recover the highway.

Now I will turn to the first stage, that is to say, the provision of money. The prospective surplus of £5,502,000 is very welcome so far as it goes, but it affords no means of coping with the task before us. I propose, therefore, as a first step, to increase that surplus by carrying forward, by a Clause in the Finance Bill, the £4,239,000 surplus of last year, which by law, in the ordinary circumstances, would be devoted to the further reduction of debt. Such a step is justified, by the exceptional levels of the New Sinking Fund, both in the past year and in the present year, and by numerous respectable precedents to be found in ancient and in modern times. I have them all here, but I will not recite them now. [An HON. MEMBER: "Why not?"] I have a long way to travel, and I have to weigh very carefully every word and argument which I have to offer to the House, and I have already presumed on their patience a great deal. This addition raises the prospective surplus to £9,741,000. This is far too small for the problems which we have to face. I must, therefore, find substantial new revenues. I do not suppose anybody will have much doubt where we ought to turn for that.