RATES

§ Sir Geoffrey de Freitas (Kettering)

Like the hon. and learned Member for Runcorn (Mr. Carlisle), I have received a large number of letters from constituents. Most of them on this topic have gone right to the root of the matter in criticising the rating system. I am particularly pleased at what my right hon. Friend the Secretary of State said this afternoon.

I was elected to a local authority nearly 35 years ago. At that time I thought the rating system was ridiculous. Nothing has passed since then to revise my opinion. In many ways it is far worse.

The hon. and learned Member for Runcorn spoke for a constituency and a particular county. I speak as a Northamptonshire Member. Northamptonshire has a formidable problem. Over the last five years we have had the fastest growth of any county in Britain. My friends from West Sussex, Bedfordshire and Berkshire complain that their counties have experienced a rapid growth rate too. But not one of them has had an increase of even as much as 10 per cent. in population over the last five years, whereas in Northamptonshire that growth rate has been 12 per cent.

If we look at the increase in the number of children it is obvious why the county's expenses are soaring. The number of children increases by 5 per cent. each year. That may not sound much, but the national average is only 1½ per cent. We have experienced a 5 per 1792 cent. increase in the birth rate as opposed to 1½ per cent. nationally.

It is not as if we have brought this on ourselves. The people in Northamptonshire are not exceptionally fertile. The increase is due to the people who come from London and Birmingham. The increase in the population is directly due to people coming from those places because both Labour and Conservative Governments' policies over the years have been that we should receive tens of thousands of people from those cities.

Since both Governments have done us down, the five Northamptonshire Members of Parliament—two from the Government side and three from the Opposition—have preserved a united front. I see that one of my constituents, the hon. Member for Wellingborough (Mr. Fry), is present.

On 21st May we visited No. 10 Downing Street bearing a letter signed by my hon. Friend the Member for Northampton, North (Mrs. Colquhoun), by me and the hon. Members for Daventry (Mr. Jones). Wellingborough (Mr. Fry) and Northampton, South (Mr. Morris), by the leader of the county council, by the leader of the opposition on the county council and by the chief executive officer. This was a united all-party protest. The last paragraph of our letter read: We urge Her Majesty's Government to recognise the unique position of Northamptonshire as the fastest growing county in this country and to provide additional financial relief. On the same day during an Adjournment debate my hon. Friend the Under-Secretary for the Environment who is on the Government Front Bench, in replying to a speech by the hon. Member for Daventry, made several points. I shall refer to two of them. He accepted that Northamptonshire is the fastest growing county in Britain. Indeed, he agreed that in Western Europe it has the fastest growing population of any local authority. Secondly, he agreed that we should look at the rating problems from an all-party point of view because it is a problem which has been caused by both parties.

On 12th June the Prime Minister wrote to me. The first paragraph of his letter reads: On 21 May you led a deputation from Northamptonshire to 10 Downing Street to 1793 hand in a petition and a letter setting out the case for additional financial support to the county to meet the problems associated with its rapid growth of population. The last sentence reads: your constituents"— that is, all the Northamptonshire constituents— "may be assured that the Government knows about"— the wording is important— the particular problems the county and the districts have to face in coping with the rapid growth of population. The people of Northamptonshire have suffered from both Governments. They expect particular consideration in this particular problem. They are entitled to it.

§ Mr. Peter Fry (Wellingborough)

It is very rare that one can rise to speak after hearing one's Member of Parliament put one's own case. As a ratepayer living in the constituency of the right hon. Member for Kettering (Sir G. de Freitas), I find that unusual. I endorse what he said, because we in Northamptonshire constitute an extra special case.

Unlike the people in many counties, we have discovered that our rates have risen not only because of inflation, not simply because of the cut in domestic rate relief, but because of the enormous expansion programme that has been imposed on us. My constituency has experienced rate increases of not less than 50 per cent. and of up to 100 per cent.

It would be wrong to use this debate to make party political capital. The country and the ratepayers in my constituency do not want me to make a series of party political points.

When the Under-Secretary graciously received the three Opposition Members from Northamptonshire, together with the protest representatives, he said that he would take up the question of the four expanding towns and the extra help we would require. I am disappointed that he has not felt himself able to persuade the Secretary of State that extra help should be offered this year. I hope that the representations made this afternoon will mean that he thinks again on this point as to why our ratepayers are more aggrieved than those in other parts of the country. It is because the county 1794 treasurer has already announced that next year we are likely to face a further increase of 60 per cent. in our rate burden, without allowing for inflation.

It would not be so bad if the people at present living in the county were to benefit. Someone living in one of the rural areas of my constituency, who will probably have a bucket lavatory and will be waiting for a bypass to be built goodness knows when, is paying to house the people from outside the area and supply the new schools, roads and other local government services. That is why there is the gravest discontent. What good is it to a shopkeeper in Rushden High Street to be told that Northampton will be developed and that more trade will go there to the benefit of the whole county?

Therefore, the existing population are emphatically saying to the Government that unless there is more Government aid the expansion should stop. In the short term, if there is no help, I believe that there will be a cry from all the political parties and from the district and county councils to cut back existing expansion programmes. This can be done because the premise of the South-East Study is now false. London's declining population means that more people could be absorbed in the empty dockland areas, people who will be needed anyway if London Transport is not to collapse through lack of staff.

If I am told that one reason why this cannot be done is that the reduction in population is not matched by a fall in the number of households, it is about time the Government considered why the latter is not falling. My personal observation—I make no moral judgment here—leads me to conclude that the permissive society has aggravated our problems. A growing number of broken families means that husbands and wives need separate homes. Although I do not object to early marriages, young people who marry and have children at an earlier and earlier age show some irresponsibility which they turn to local government to put right.

Although I have said that we can take short-term action by cutting expansion, I should not restrict myself entirely to parochial affairs. There are three myths associated with the rates and local government. The first, which one almost always hears at rates protest meetings or when a district official or councillor makes a 1795 speech, is that we cannot cut services. Why not? For years the education and health services have been administered centrally. Would anyone put his hand on his heart and say that services in those two areas have not been reduced recently, in some cases drastically? The electorate has a perfect right to demand cuts in services rather than enormous rate increases. No council, no official, has any right to say that services are sacrosanct no matter what they cost. That is the way to ruination and it is one reason why the country is in its present dire economic state.

The second myth is that the sates are the easiest way of collecting local government finance. That is now an illusion. The strength of feeling nationally is such that the unfairness that now exists by far exceeds any merits which that argument might once have had. The public demand action. It is no good taking refuge in claims that the previous Government did nothing. The Labour Party are now the Government and it is their job to do something.

The third myth is that if too much money is paid from the centre, there will be little local independence. The real danger is the reverse. If 80 or 90 per cent. of the money spent by local government were allocated from the centre and local councils were told to settle their own priorities according to local needs within that budget, the problem would be not how to give them independence but what to do when they overspent or spent too quickly and came back for more, if they were denied the opportunity to raise money themselves.

We must therefore dispose of those myths before we investigate this knotty question. I have some suggestions for meeting the problem. It is not profitable to talk about removing this or that charge from one ratepayer. Rates are taxes, and sooner or later they have to be paid. If we were to say that someone without mains drainage should not pay for sewerage, what would we say to the childless couple about the education part of their rates? In the long run we should end up in a blind alley if we were not careful.

My main suggestion is that the bulk of local government finance should be provided from the centre. There is no one 1796 simple answer, but perhaps a mixture of direct and indirect taxation would be best. It would be wrong to transfer most of the burden simply to direct taxation. Then many small firms that are being crippled by the rates burden would pay the same amount in another way. We have to seek alternatives which would not cripple the small business.

I should like to commend the way in which continental countries finance their road building programmes. A system of road bonds guaranteed by the Government means that money is raised on the open market and the expense is taken off local authorities or the State. If it is argued that that is merely taking up resources that would otherwise be employed, I would answer that much of that money has gone into property or income bonds which do nothing to further the country's economic well-being. I commend my idea to the Government.

Local authorities must have some means of raising money themselves. That is why I welcomed the Local Revenue Bill introduced by my right hon. Friend the Member for Crosby (Mr. Page). Lotteries alone, however, are not the answer. After much thought on the subject I would defend a proportion—perhaps as low as 10 per cent.—of local finance being raised still by the existing system. I do so for two reasons. First, if local authorities can raise only 10 per cent. of their own income any large increase that they themselves have caused will be immediately obvious. A council which is profligate will soon be seen to be exceeding what others think it should spend. At the moment, if it is profligate that fact is lost in the mass of the rates. If there were still a small local element the electors could see whether councillors were doing a good job financially.

Second, in an age when the planners so largely decide our fate—decide to put a motorway within 400 yards of our house, for example, or to allow a factory to be built at the bottom of our garden—the only way that the ordinary citizen can gain redress is to have his rates reduced by appealing against the valuation. If we do away with the rates altogether, how will we recompense somebody whose property has genuinely lost value due to circumstances beyond his control? That is why, despite the major fundamental reform which must take 1797 place, some local money-raising must continue. Perhaps it should be based on the rates system.

I shall vote for the motion and against the amendment because I believe that the Government have failed. They have failed to introduce any similar measure to that of the former Chancellor which gave help to areas with extra large increases. We accept that help for any increase over 10 per cent. is perhaps too much to ask, but why not help those paying more than the national average of 30 per cent.? Why have not the Government acceded to that simple request? I shall go into the Lobby because the Government have neglected the areas with particular problems, because they have done nothing.

If the present Government and any future Government do not radically reform the rates, they will discover to their horror that they have done great harm to the cause of democracy in Britain.

§ Mr. James Lamond (Oldham, East)

Like my right hon. Friend the Secretary of State I welcome the remarkable conversion of the Opposition as illustrated in the motion, in which they stress the need for a fundamental reform of the rating system. Those of us who served on the Committee stage of the Bill which dealt with local government reform will remember how often the point was made to the then Government Minister that reform of local government finance was much more necessary and urgent than reorganisation of local government. Unfortunately that plea fell on deaf ears.

Why, therefore, has there been this conversion so soon after the Tory Party lost office? It is obvious from speeches in the debate that pressure put upon Opposition Members by their constituents has forced them to abandon the stubborn stance they have taken over the years and to realise at long last that radical reform is necessary.

Unlike some hon. Members who have spoken, I cannot say that I have had a lot of letters from my constituents about this matter, because my constituency was one of those which benefited from the change made by the Labour Government. I make no bones about that. But I also make the point that I am convinced of the need for a radical change, without 1798 having to have the pressure of my constituents applied upon me. I have believed in this need for many years. During the whole of the time that I served on a local authority, including my years as chairman of its finance committee, I considered that the present system was unfair and must be changed. There has been resistance to this proposal for a long time.

We have heard today one of the defences of the present system—almost the only defence—that it is simple to operate and that it is easy to collect the rates. But the mounting cost of local government has forced us all to try to ensure that a radical change must be made. We need not take a blind jump into a new system which is completely untried. This matter has attracted the attention of many local authority bodies, including the International Union of Local Authorities, for many years, and on a number of occasions reports have been prepared comparing different rating methods used throughout the world.

I attended a conference in Vienna in 1969. I admit that that now seems to be a little out of date, but at that conference we were presented with an extensive report of the rating methods used in no fewer than 33 countries. Those methods varied widely, as one would expect. The method used in this country was not very popular. Only three other countries used our system in the main—South Africa, Canada and to a great extent the United States.

The difficulty of our system is that because it is based on the taxation of owners or occupiers of property it is not at all buoyant. It does not expand with a buoyant economy. That is the difficulty from which all the complaints about it stem.

At the conference to which I have referred, the system which was most popular, and which was demonstrated to be the most efficient was that operated in Sweden and Finland. That was a local income tax system which gave the local authority the greatest flexibility, allowing it to select the tax, within certain limits, which it wished to apply. There were limits to the amount which could be applied to any individual's income tax, and those limits were recognised as necessary by all the local authority representatives who took part in the conference. It 1799 was recognised that while local authorities would wish to be able to fix their own rate of tax and the amount to be collected, they must operate within a total national taxation policy of the central government and that restrictions must therefore be imposed. There are rating methods much superior to that used in this country.

My right hon. Friend the Secretary of State today indicated that he is to instigate an inquiry and that he will try to do this as quickly as possible. He said that he would not have a Royal Commission because of the time it would take before it reported. I suggest that members of the inquiry should be given details of rating methods used throughout the world to enable them to make comparisons and to look at systems which are not untried but which have been used for many years. The members of the inquiry would be able to compare the efficiency or otherwise of other systems as against our own.

We should recognise that local government plays an important part in the affairs of our constituents and that it should be given the utmost freedom to carry out the voters' wish. In giving local government freedom, we must relinquish some of the control we have over it.

I am sure that everyone interested in focal government will give a warm welcome to my right hon. Friend's announcement of an inquiry. That decision is many years late—perhaps both sides of the House should take blame for that—but it is nevertheless a welcome move.

§ Mr. Percy Grieve (Solihull)

I am deeply disappointed that the Secretary of State has not today promised us a measure of interim relief immediately for those adversely affected by the actions taken by the Government this year. My disappointment arises because my constituency is one of the worst affected, and the way that Solihull has been treated by the Secretary of State lends a great deal of substance to the charge which the hon. Member for Stoke-on-Trent, South (Mr. Ashley) referred to when he said that the Government were being accused of injustice and callous indifference.

In Solihull rates have gone up by 92 per cent., 36 per cent. of which was due to the direct arbitrary action of the Gov 1800 ernment in withdrawing £1,500,000 from Solihull's rate support grant. The arbitrary nature of the decision can be seen in a West Midlands context when we compare what happened to Solihull, a metropolitan district in the West Midlands metropolitan county, with what has happened in other metropolitan districts in the area. Only two, Birmingham and Walsall, have benefited from redistribution of the rate support grant. They have benefited to the extent of £4,376,000. The other five areas within the metropolitan county have lost £3,450,000, of which Solihull has lost £1,500,000.

It is absolutely crazy that parts of Birmingham—such as Sutton Coldfield, which is in a similar situation to Solihull and has a similar kind of residential district and similar problems of development—should have benefited by the Government's arbitrary measures while Solihull should have been disadvantaged in the way it has.

I said that Sutton Coldfield has similar problems to Solihull, but that was an exaggeration and indeed perhaps a misstatement in favour of Sutton Coldfield and other parts of Birmingham, because Solihull is a rapidly developing area with considerable problems of its own in trying to deal with a growing population. In this context, if I may take the words from the right hon. Member for Kettering (Sir G. de Freitas), I believe that the people of Solihull are themselves responsible for the growth of their population. The school figures for 1972–73 were 39,145, for this year they are 41,494 and for next year it is expected that there will be another 5,600 pupils.

In addition, the newly created enlarged district of Solihull has an enormous financial burden resulting from a large overspill population at Chelmsley Wood of people from Birmingham desperately needing schools, social services, libraries and all the other things with which local government should and ought to provide them.

I speak passionately in the cause of Solihull, but everyone here has problems of a like kind. In the circumstances, it is extraordinary that there should have been no recognition by the Government of the damage they have done by the redistribution of the rate support grant 1801 this year and by their refusal to give a measure of interim relief from it. There was a time when it was possible to obtain transitional grants in matters of this kind. No transitional grant is offered this year. Why not? It surely is not beyond the bounds or means of the Department to tide over local authorities in this position with transitional grants.

I echo the words of my hon. and learned Friend the Member for Runcorn (Mr. Carlisle) in saying that the Secretary of State has been singularly reluctant to receive a deputation from Solihull to put to him its problems and the way in which it has suffered. Not surprisingly, the people of my constituency are angry and bitter at the way they have been treated. Like many of my hon. Friends, I have heard threats to withhold rates, and I have stood out against such threats. But the Government have only themselves to thank for such threats when they supported the illegal activities of the councillors at Clay Cross and the Leader of the House himself came out in their support.

These matters have been raised not by me but my constituents with me in threatening action of this kind. I hope very much that the inquiry which we are promised into the rating system will be speedy and urgent. I hope that we shall have interim relief before long.

§ Mr. Kenneth Marks (Manchester, Gorton)

The interesting thing about the debate so far is that while Tory Members have talked about their constituency problems not one has mentioned the rates actually paid in their constituencies. Part of my constituency had a rise of only 1p in the rates this year, and the rates are now 58.8p in the pound. The greater part of the constituency paid 35p last year and this year it will pay 52.3p, a considerable increase of 17.3p.

I served on the Standing Committee which dealt with the Local Government Act 1973 and I have attended all the rate support grant debates since I first came to the House. I can only describe the Conservative position as one of ineptitude and delay in government and hypocrisy in opposition. It is one of ineptitude and delay because the Act under which the new grants were to be made was pro 1802 duced a year later than it should have been. The Green Paper was produced in 1971. In the Gracious Speech of November 1972 we were promised a Bill. It did not appear until November 1973, and then we were told that it would have to be rushed through, because if we did not get on with it the local authorities would not know what their grants would be, and so on.

The Conservative Government mixed up all kinds of things in that measure, including an ombudsman for local government. It was described by the Minister responsible as five Bills in one. We co-operated in getting it through the House even though we put down important amendments designed to provide an alternative to the system and to assist the ratepayers. Before the Bill became an Act the Conservative Government informed the local authorities of the proposed rate support grant.

At the end of December 1973 the right hon. Member for Altrincham and Sale (Mr. Barber) brought in new cuts and there had to be a new rate support grant. On 22nd January 1974 the Conservative Government announced a new figure, and the present Government have kept to it. The total of the grant which the councils receive themselves as opposed to individual ratepayers on the individual domestic rate is exactly what the Conservative Government proposed.

Only one change was made by the new Labour Government. In the determination of the 7 per cent. applying to domestic rate relief, the Government thought it unfair to subsidise some domestic ratepayers—some of them well off, some even with two homes—as much as six or seven times as the city dweller. Rightly, therefore, the Government gave the citizens of Liverpool, Manchester, Birmingham and elsewhere a 13p domestic rate relief. That was social justice. But, of course, it meant some increases elsewhere. Yet not one Tory Member has said exactly how much. All Opposition Members who have spoken have merely quoted percentages.

§ Mr. Maxwell-Hyslop

The hon. Gentleman says that none of us has stated how much. In my constituency we are having to pay 15½p in the pound more, entirely as a result of the change made by the Government and for no other reason.

§ Mr. Marks

The hon. Gentleman had not yet spoken when I made that point, and he still has not given the figures for the rates paid last year and those which will be paid this year. I have accused the Opposition of hypocrisy. It emerges very early in the motion in the call for a fundamental reform of the system, for interim relief this year and for water and sewerage to rank for rate rebate. The Opposition could have done every one of those things before 28th February. But they did not. Instead, Conservative Members went into the Lobbies time and time again in support of their Government probably not even knowing what they were voting about. They opposed our amendments to the Local Government Bill and to the Water Bill.

On 25th March last the rate support grant was put up for approval or rejection by the House. The present Leader of the Opposition voted against it. So did the Liberals—perhaps all of them. But 70 Conservative Members were missing. Where were they? Why did they not oppose the grant, as their leader did? This is hypocrisy. It is "phoney" war.

There was dishonesty too during the General Election. On 20th February the right hon. and learned Member for Hexham (Mr. Rippon), then Secretary of State for the Environment, issued a Press release. In it he said that there would be no rise in rates of over 9 per cent. That statement was completely untrue. It was not even what he had earlier said in the House.

I want now to deal with the problems of Greater Manchester. Most of my constituency is in the new metropolitan borough of Tameside, which has particular problems because it is a new borough with no former county borough basis; it is like Trafford and Knowsley in the Merseyside area. In the part of the borough in which I live, the rates have gone up from 35p to 52.3p. The prospective Conservative parliamentary candidate has sent telegrams to the local newspapers from London, where he lives, saying that this is because of the wastefulness and extravagance of the Labour-controlled council.

On the other side of Manchester there is the metropolitan district of Trafford, and there the rate has gone up from 35.7p to 55p, an even bigger increase. Whose fault is it there? According to 1804 the hon. Member for Stretford (Mr. Churchill), it is all the fault of the Labour Government. They cannot both be right. The fact is that they are both wrong. I shall give way to the hon. Gentleman, though I assure him I have not yet finished with him. Without that level of rate, neither Trafford nor Tame-side council could have done the job which the Conservative Government placed on them. The hon. Member for Stretford spoke in the House on 25th March. Let me deal with his speech and the so-called information he has given to his constituents and the Press. Either he has an immense lack of knowledge about the rating system or he has an intention to mislead the House.

I suggest that the very numerous claims made by the hon. Member of cuts that would be forced on the Trafford council because of the Labour Government's decision were entirely misleading. He read from a statement by the chief executive officer but he did not tell us the date of that statement, which complained that There would be redundancies of staff; including professional staff; replacement and maintenance provision would have to be reduced to levels which would result in forced deterioration of property … there would be no grants to voluntary bodies. One of the two teaching centres would have to be closed … In the public health service, reductions would involve significant staff vacancies, including five public health inspectors …—[OFFICIAL REPORT, 25th March 1974; Vol. 871. c. 127.] All those were cuts that were insisted upon by the hon. Gentleman's colleague in the Trafford borough, his right hon. Friend the Member for Altrincham and Sale (Mr. Barber). These were the cuts he was proposing on 17th December, cuts which the hon. Member for Stretford went into the Division Lobby to support.

§ Mr. Churchill

The hon. Gentleman has not stated the facts as they were. As he will see if he reads the relevant part of the OFFICIAL REPORT, the letter from the chief executive of Trafford district from which I quoted at the time of the last rates debate was based on cuts that would have been required had the council sought to remain within the 9 per cent. increase within which the previous Government had indicated in their letter to me it was their firm intention to remain. This is why the hon. Gentleman is misleading the House. As 1805 regards his earlier point, he suggests that there was a similarity between the Tameside situation and the Trafford situation. This is not so. In the case of the Conservative-controlled Trafford authority the expenditure from local government reorganisation resulted in a saving of £1½ million.

§ Mr. Marks

The hon. Gentleman is saying that those cuts should have been restored. He voted for them. He is saying that it was quite impossible for the Trafford borough to carry out its task with a rates increase of only 9 per cent., given the grants which the Conservative Government had sanctioned and which we maintained. So far as Trafford was concerned the domestic rate relief was different by only 1½p. I asked the right hon. Lady the Member for Finchley (Mrs. Thatcher) if there would have been any extra money coming from the Conservative Government had that party won the election. The answer is there would not be any extra money, because the Conservative Government were, perhaps in their view rightly, insisting on cuts in public expenditure and not more expenditure. But I suggest that those cuts were published in a Press release by the Department of the Environment on 4th February 1974.

The hon. Gentleman has said the Conservative Government were determined to ensure that rate increases for householders in Trafford were limited to 9 per cent. compared with last year. But he has not brought any evidence, and neither has the right hon. Lady, that that would have been the case. Whatever my right hon. Friend might have done, it would have been quite impossible for Trafford, Tameside or a vast number of authorities to have restrained the growth in rates to 9 per cent. In any case it would have been in the neighbourhood of 50 per cent. for both Trafford and Tameside.

I want to thank my right hon. Friend for accepting the proposal that there should be an immediate review. I believe that for next year he should examine whether water should not only be separated from local government expenditure but should be precepted directly to the Government from the water authorities. I also welcome his statement that local authorities with particular problems resulting from local government reorganisation—Trafford and Tameside 1806 are similar here—will have special recognition. I hope, however, that the Inland Revenue will not altogether be taken out of the reckoning when this is being examined and that someone from the Inland Revenue will serve on the inquiry, because in the end we want to see a change from an unfair system of rates to a fairer system of taxation on income.

The figures are remarkable. If we did away altogether with domestic rating and transferred it to income tax, the increase in the tax rate would be only from 33 to 37½ per cent., so that anyone now paying £10 tax a week would pay only £70 a year more and not a domestic rate. This is the main thing we should examine.

§ Mr. Anthony Steen (Liverpool, Wavertree)

I am proud to succeed a man so respected in this House, so loved in his constituency and with such a reputation for public service in this country and overseas. Sir John Tilney was Member of Parliament for Wavertree for 24 years. He had the special distinction of speaking not only in this House but immediately outside it in Parliament Square at the unveiling ceremony of the statue of Sir Winston Churchill, having played a great part in seeing that it was built there. He set a high standard and established a great reputation in Wavertree with his wife, Guinevere. I hope my wife, Carolyn and I will be able to live up to this standard in forthcoming years.

I have delayed intervening in this House for some time, as some hon. Members may have noticed, awaiting an appropriate opportunity to bring to the notice of the House a serious and grave issue, one which has a direct bearing on this debate, which faces my constituency, the city of Liverpool, and the major part of this country. Since John Tilney's day the size of local authority districts has greatly changed. In his day people identified with a small unit which was accessible and comprehensible to them. These small units have now been superseded by giant authorities where fundamental decisions on strategic policy affecting the lives of ordinary people are taken by what seems to them a remote authority no longer representing them.

It is this lack of identity and sense of distance from those who make decisions 1807 that is creating an alienation foreign in this country and endangering the democratic process. Post-Beveridge and more recently post-Seebohm we have seen new and increasing pressures placed on local authorities by this Chamber which in turn have given rise to new levels of expenditure. In 1963 the rate per head, including central Government grant, was £48. By 1972 this figure had risen to £128. The location of power and the ratio between central Government and local government expenditure have also changed in that today more than 65 per cent. of all public expenditure is incurred directly by central Government. This in turn results in over-dominance of central Government on the local authority and of the local authority on the community.

Does this increase in dependence on central Government matter? I believe that it does. It takes away local authority control in determining the destiny of the people whom it was elected to represent. This undermines the democratic process which is at the cornerstone of our local government system and is admired by countries throughout the world.

But perhaps more important—a view which I imagine is shared by hon. Members on both sides of the House—it takes away the self-reliance, motivation and willingness of the individual to take action for himself and for his neighbours. It also reduces his incentive to take action for the benefit of the community.

If the increased power of central Government had removed injustices at local level there might have been some justification for the Government's financial dominance, but that is not borne out by the facts. More than 4½ million people live in more than 1¼ million homes which are unfit for human habitation. One in six homes lacks one or more of the basic amenities. In Liverpool, 5 per cent. of the population live in overcrowded conditions, according to the 1971 census. It has been estimated that about 30 per cent. of the disabled still do not get help. About 43.6 per cent. of all children leave school without educational attainment, and 2 million adults are estimated to be illiterate. Tens of thousands of old people remain isolated and neglected, and an increasing number die alone. During 1972 at least 7 million supple- 1808 mentary benefit claims were made. The social conditions in which our people are living are a terrible indictment of our times, and the situation is getting worse.

Surely the time has come for a radical reappraisal of how we spend public money at local level and what level of services can be expected to meet the demands of a primarily urban society. It is apparent that public services are not tackling the fundamental human and urban problems, but are designed, albeit unintentionally, to reinforce the dependency syndrome to which I have already referred.

I want to suggest an entirely new style, new process, new social philosophy—not a new political party—to tackle this kind and scale of problem. I can claim firsthand experience of what I am advocating as a youth and community worker and founder of Task Force.

Task Force has recruited about 100,000 young volunteers in London alone to care for neighbours and to befriend the old, the lonely and the handicapped. It has reinforced the importance of involving young people in understanding and caring for the needs of the individual and shows what can be done.

I think that you, Mr. Speaker, know the importance of this work, having been actively involved in helping to found Task Force. The Prime Minister—if he were here—would recollect, as would my own Leader—if he were here—the all-party programme that was launched from 10 Downing Street six years ago—YVFF—the Young Volunteer Force Foundation. Lord Houghton of Sowerby, formerly of this House, the right hon. Member for Orkney and Shetland (Mr. Grimond) and you, Mr. Speaker, played a major part in building YVFF into the largest major community work foundation in Britain today sending small teams of community workers into areas of severe urban stress where the ordinary channels of communication have broken down. There they tackle social anomalies through a variety of action projects and have helped to reduce risks to the community. It was my privilege to be involved as director of that foundation since its inception. I retire from that post tomorrow.

It is this spirit of social responsibility, kindled by YVFF, Task Force and many other similar community organisations, 1809 which may provide some guidelines on how to handle the problems of alienation and resentment which are now so prevalent and increasing rapidly.

The changes that I am advocating at the local authority level would see a new style of approach adopted which would engage every person in the decision-making processes and evoke hope within them that they have power over their own destinies. This spirit of hope opens new political possibilities. Instead of public philanthropy, which some of the major Government community programmes of recent years have offered, resources could be used by communities, especially for residents in high stress areas, in a way which would bring dignity instead of despair.

I have been trying to persuade the Liverpool City Council to encourage the tenants of a new council estate known as the Belle Vale Estate—rather inappropriately named—to tackle their own problems: for example, vandalism in car parks, lack of play facilities, refuse bins on fire, no grass and no trees, unmade-up roads, and broken pavements.

I have asked the Liverpool City Council not about administrative reorganisation but about adopting a completely new way of thinking. Instead of waiting for officialdom to take action—now almost too late—the new approach could have had an immediate impact.

It is not only housing estates that produce some of the worst urban problems, but new constructions like the Rocket Flyover in my constituency at the end of the M62. The Department went ahead with that without utilising the knowledge or experience which has been accumulated over past years. It did not properly consult the residents, and this has directly affected the attitude of local people. The residents have still not had a rate reduction, their homes are still not sound-insulated, they do not know when they are to get compensation, telephone kiosks have been removed overnight, trees have been dug up without authority, and the site office, which is there to establish good relations with the community, is just failing in its public relations.

Public participation is still regarded by many as a hindrance and delay rather than as an enrichment of the democratic process. This short-sightedness and lack 1810 of vision directly results in huge social and financial costs. This can be illustrated in the acceleration of rate expenditure. Officials are being paid to handle a deluge of dissatisfied and unhappy ratepayers who, understandably, are complaining about the blunders of officialdom which could have been avoided if genuine participation had taken place. The community and the ratepayers pay twice: first for the blunders and, secondly, for the face-saving operations which follow.

Public participation and community involvement would make public services less expensive. I speak from experience of 14 years of community work at the rock face, the grass roots—call it what one will. More community involvement could result in a saving of expenditure which we all so much desire today.

The cold hand of bureaucratic indifference has stifled the latent British talent of finding solutions to urban problems. I recognise that it is possible to justify the increased size and scale of local authorities, but that does not absolve them for failing to recognise the attendant problems that result.

By mobilising local people to do things for themselves, it is possible to envisage neighbourhood development groups which would have delegated powers from these huge councils and be responsible for the day-to-day running of council estates. The make-up would be heavily biased towards the people in the local community and the leaders of the community groups. By all means let us have professional guidance from the social work area team leaders, the local councillors and someone from the treasurer's department to see that the books are in order. But they must have power and money to deal with the blocked gutter and the broken paving-stone, to plant trees. finance play schemes and run community centres. They would have their own labour force. They would be there for and of the people. This would introduce an important new element into local government with which people would be able to identify and feel once more that the neighbourhood was truly part of their lives.

Unless we introduce this kind of innovation the nerveless hand of bureaucratic inertia will demand more money from us for a poorer quality service and at 1811 ever-increasing cost. The decision facing the House today is whether it will send a message of hope to all those people who have come to despair of politicians and Government.

§ Mr. Joseph Dean (Leeds, West)

May I first apologise for the wording I used in an interjection during the speech of the right hon. Member for Finchley (Mrs. Thatcher). My wording was perhaps not correct. If any offence was taken at my use of non-parliamentary language, I offer an apology.

Looking at the signatories of the motion, I am rather surprised to see the name of the Leader of the Opposition. I have had some experience of dealing with rate support grant negotiations over the last two years as a representative of an association of local authorities. I should not have thought that the Leader of the Opposition was the best person to become involved in predictions of rates and at what figure they ought to be levied.

The Leader of the Opposition made a speech on 13th December, 1972 at a luncheon to celebrate the centenary of the Association of Municipal Corporations. Quite a number of Cabinet Ministers were also there in support of the right hon. Gentleman, who was then Prime Minister. At that time the worry about rates was the effect of the revaluations. An average revaluation of two-and-a-half times the original rateable value was being done nationally. The then Prime Minister said in his speech that he saw no reason why, because of revaluation, rates would increase at all.

It was just after that time that the imbalance in the rate support grant formula showed itself so drastically biased against some areas that a deputation from the large conurbations went to see the right hon. Gentleman, who agreed that the formula showed that instead of receiving 58 per cent. of their expenditure in rate support grant some authorities were receiving a proportion as low as 39 per cent. The then Prime Minister conceded that this was a very grave injustice which ought to be put right.

But what did the right hon. Gentleman do? That was in January 1973, three 1812 or four months before the rates were to be levied by the local authorities. He said that the time factor would not allow for any such alteration but that it would be put right by the Government in the 1974–75 rate support grant negotiations. Those negotiations started to emerge last autumn. They were based almost identically on the grants that have been levied, or a portion of them, by the Secretary of State. But what happened? The money had been apportioned and it was obvious that if the large conurbations which were then to receive domestic relief of 7p were to be given a further 6p or an across-the-board 13p levy, it could be done only at the expense of some authorities that were receiving a tremendous amount of domestic rate relief. Some authorities which are now receiving 13p, like others, over the last two years have suffered rate increases of tremendous dimensions.

Conservative Members have spoken of the action of the previous Chancellor in helping certain areas in distress. But he did not help any of the large conurbations which sent representatives to see him. The equalisation that has been brought about is entirely just. In the financing of local government there will have to be a great increase in the amount of money that is found to enable local government to operate. That is why the motion is almost meaningless. A large number of hon. Members were absent from the House when the subject was debated some time ago. It is clearly very difficult for a Conservative Member who represents a city constituency which has now received rate relief at a level that it ought to have had years to go into the Lobby in denial of that and then to have to tell his constituents in, for example, Leeds, Liverpool or Birmingham that they must find another £3 million or £4 million because they will not get the same domestic rate relief as, for instance, Yeovil, Cornwall and similar areas.

I am not crowing about the fact that the rates of some people have risen dramatically. I understand their chagrin and dismay. In the major conurbations, however, one still finds that the person living in an ordinary three-bedroom house is still paying more in rates than someone living on the periphery in one of the metropolitan districts who is occupying the same type of house.

1813 I could not understand the point made by the hon. and learned Member for Runcorn (Mr. Carlisle) when he said that one of the grumbles in his area was that people had no facilities in return for their rates. If that is so, why do they need this massive injection of rate relief? What is it for if they have no facilities?

I welcome the Secretary of States' announcement that he is to set up an inquiry. I hope that it will report very quickly indeed. In view of the rate of inflation there is a sense of urgency, and this matter cannot wait for 12 or 18 months. There has now been enough examination of the alternative forms of financing local government for us to come up with something better than the present rating system.

However, overnight the Secretary of State has put right a grave injustice. It is unfortunate that some authorities were made to suffer. But it is still only a measure of justice. People in inner London boroughs are still paying higher rates, as a proportion of outgoings from the family budget, than those living in outer London boroughs. A person living in the centre of Birmingham will be paying out more in rates than people in the constituency of the hon. and learned Member for Solihull (Mr. Grieve) and those in many other constituencies. This is part of the imbalance that has always existed. Part of it has been put right.

When I began my speech I was not sure that I was following a maiden speaker. I have been informed that I have done so. I should like to compliment the hon. Member for Liverpool, Wavertree (Mr. Steen) on a very good maiden speech. Clearly, as a social worker and in view of all the work he has been doing, he has tremendous knowledge of the subject and an appreciation of people's rights to run their own affairs. I compliment him on the content of his speech. We shall look forward to hearing him again.

§ Mr. W. Benyon (Buckingham)

I start by adding my congratulations to my hon. Friend the Member for Liverpool, Waver-tree (Mr. Steen) on his maiden speech. His predecessor as Member for Wavertree was held in great affection by the House. From what my hon. Friend has said this evening, it is clear that we shall be look 1814 ing forward to hearing him many times in the future.

Criticism of the rating system is not new. It has been rising steadily over the years. It has concentrated on two main aspects—first, that not everyone pays rates; second, that rates are not a buoyant tax but a regressive tax. When rates were low these criticisms were muted. It is only since the imposition has increased that we have the situation in which this tax imposes quite unacceptable burdens on certain citizens just because they are householders.

Like many other hon. Members, I have had a number of letters and petitions on this subject—more than I have had on any other issue since I became a Member of the House in 1970. Although local authorities realise the situation, they are relatively powerless to do anything about it. I have been working in local government for 10 years. That experience has taught me that most councillors are more concerned with keeping up the standard of services than with effecting economies in expenditure.

I was most interested when the hon. Member for Stoke-on-Trent, South (Mr. Ashley) raised the problem of the threshold agreements, because these are adding, and will continue to add, an enormous extra burden on local authorities. Yet all the alternatives to the rating system have significant disadvantages. Although I believe that some form of locally-based income tax or sales tax will eventually come, while retaining some form of property tax, these changes cannot come quickly, as my right hon. Friend the Member for Finchley (Mrs. Thatcher) explained. Therefore, these are no easy solutions to our present problem.

I was pleased to hear the Secretary of State refer to the inquiry he is to set up, but apparently it cannot report until 1975 and cannot, therefore, help us in our immediate difficulties. I believe that the last Government were right to introduce a variable rate of domestic support. It was an attempt, albeit an imperfect attempt—and we all realise that—to iron out some of the special problems of individual authorities. In my county, Buckinghamshire, it took into account the loss from that county into a neighbouring county of a high rated 1815 area. It also took into account the point made by two Northamptonshire Members that we are establishing a new city which requires very heavy initial expenditure, and, therefore, imposes a heavy burden in these early stages of development. Even with this variable relief the domestic rate increase would have been substantial, and industry and commerce, of course, would have been subject to the full amount. That point has not been raised today and is sometimes overlooked. Then, for reasons best known to themselves, the Government swept it all away, and in my constituency that meant an extra imposition on the domestic ratepayers under my two local authorities of 8.5p and 7.5p respectively.

My right hon. Friend was correct to say that there could be no return to the original levels of domestic support. That would be impossible. The only answer that makes sense, therefore, is for additional relief to be made available during the second half of the current financial year so that at least the worst inequalities can be removed.

There is one other aspect I wish to raise which the House should consider carefully. Nothing typifies more the general character of this country or the way we run our affairs than the way the taxes and rates are paid by the population. That is now at risk. I have been approached over the last few weeks by responsible people asking for my support for some form of rate strike, and citing instances where this has been done elsewhere. I have strenuously refused to have anything to do with this because the law is completely indivisible. We cannot obey some parts and disobey others, in spite of the examples I have referred to. If, on top of the strains imposed by inflation, the ratepayers of this country are to be subjected to this additional unjust imposition we are courting disaster. On behalf of my constituents I must tell the Government that it does not matter what they do, but they must do something, and they must do it quickly.

§ Dr. Edmund Marshall (Goole)

I wish to address a number of remarks to my right hon. Friend the Secretary of State over the broad canvas of the need for a 1816 complete reform of the rating system as it affects the domestic householder. There is no doubt that the recent anger we have seen throughout the country—and this has been particularly acute in my constituency—is directed to the fact that the whole system is anachronistic, unjust and quite inadequate for providing the necessary finance for modern local government.

It is a system which goes back to the Statute of Artificers of 1601 in the reign of Good Queen Bess. It is a system of regressive taxation, taking no account of people's ability to pay and bearing particularly hard on retired people with fixed incomes which are declining in real value.

As my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) said, the system takes no account of the number of people who are resident in a property or the number of income earners there. It is a system based wholly on hypothetical criteria like the fictitious rent of a property, and people find it ludicrous that they should have to contribute more to the running of local authority services simply because they have more windows or because they install central heating or make other adjustments to their house. Coupled with these factors is the fact that the rating system is not generally understood. Hon. Members will gather from the correspondence they have received on the subject that people are almost completely unaware of how the system operates, and I have found an increasing number of people who do not know how to go about getting a reduction in the rateable value of their property.

Because of this unpopularity the system puts a severe brake on a lot of initiative that should be shown by local authorities. Local authorities see the need for better roads and better schools, or water authorities see the need for new enterprise in particular areas—the introduction of new sewerage schemes, for example. Yet all this is damped down because of the effect that the authorities feel it will have on the local rates. Because the rating system is unpopular there is less inclination on the part of people to press local government for necessary improvements in their areas. Their way out of the dilemma is always to call for increased financial help from the central Government, so that when some new initiative 1817 is required to expand local authority services the initiative is always left to the Government.

This leads to arguments over the rate support grant and dispute with the central Government over who should pay what. In any alternative system which is designed to replace the present rating system, finance must as far as possible be given a local base. I believe strongly in the principle, which is perhaps a constitutional one, that he who pays the piper should call the tune, and therefore the person who tries to call the tune in local government should essentially be the one who pays the piper.

The difficulties caused by the rate support grant in certain areas stem from the fact that the money is coming from the central Government to pay for a lot of schemes which are determined locally. There difficulties are reflected in some of the sections of the Kilbrandon Report on the Constitution where it discusses the possibilities of financing the new regional authorities, and all these difficulties apply with equal force to the system of financing local government.

I think, therefore, that those who cry out for a transfer of the cost of main local authority services to national funds are dodging the issue and that if there were to be a transfer of the cost of, say, education we should seriously consider whether it would be right for education to be maintained under the control of local government.

If we are to maintain local government in its present form, with its present functions, we must have a financing of local government based on locally-raised revenue for those specifically local purposes. I agree with the right hon. Member for Finchley (Mrs. Thatcher) that the Chancellor of the Exchequer must have overall control of public expenditure because of the need to operate demand management in the economy as a whole, but I think that with that one proviso we must have the greatest possible local flexibility in the financing of local government.

My right hon. Friend the Secretary of State announced this afternoon the setting up of a committee of inquiry with the broadest terms of reference into the whole of local government financing. I welcome 1818 the decision to set up the inquiry but I am a little worried about the breadth of its terms of reference. As one of my hon. Friends said, most of the information is already available. The matter has been talked over for many years. Even though the Green Paper was a very green document in metaphorical terms, at least the information is there.

I hope that the committee may be given more specific terms of reference, and told to direct its attention to particular means of raising local government revenue and the practicalities entailed so that when the report becomes available an alternative system can be put into practice rapidly.

As I consider all the various alternative ways of raising local government finance, I have no doubt that the only equitable solution to the problem is a local income tax. I find that that solution has the widest agreement among the people of my constituency. It would be a buoyant means of taxation. I agree with my hon. Friend the Member for Oldham, East (Mr. Lamond) that we should examine particularly how local income tax is applied in Sweden and Finland. I hope that details of the system there will be scrutinised by the committee of inquiry so that it can make detailed recommendations on how it might be applied here.

§ Mr. Daniel Awdry (Chippenham)

I agree with the hon. Gentleman—I think that some form of local taxation is the answer—but does he think that it would be centrally or locally organised and administered?

§ Dr. Marshall

I was just coming to those points. I think not only that local income tax would be widely acceptable but that in general it would be far more easily understood, certainly much more easily understood than the present system. Therefore, it would be a system that people would be prepared to operate.

There are difficulties in the application of such a tax. We should have to look into the details of how it would be raised. Would it be operated through the Inland Revenue? Would the collection of local income tax be carried out at the same time as the collection of national income tax, with a return from the Inland Revenue to treasurers of local authorities? All those practical difficulties must 1819 be ironed out within the terms of reference of the committee. There would be much more work for employers who operated PAYE systems as their personnel departments would have to take into consideration all kinds of factors, such as the local authority areas within which employees lived.

In addition there would be the need to retain a means of Government support to equalise the local income tax revenue to different local authorities. It would be wrong for some local authorities to be penalised because people in their areas had much lower incomes than people elsewhere. That problem could be dealt with through the machinery of the resources and needs elements of the present rate support grant. I would retain the rate support grant in that form, but I should like to see as far as possible the rest of local government expenditure depending on locally-raised revenue by means of a local income tax.

I hope that the committee will do its work not only rapidly but in great practical detail and that it will go particularly thoroughly into the means of raising local income tax, which I see as the only remedy to the desperate situation in which we are placed.

§ Mr. James Allason (Hemel Hemstead)

In Hertfordshire there is unprecedented dismay over rating. Domestic ratepayers in my constituency face increases of up to 40 per cent., a figure which represents personal hardship for many people. Those increases, combined with earlier rate increases, of which Hertfordshire has had more than its fair share, have meant that Hertfordshire has recently suffered desperately in the matter of rates.

The result is that, instead of paying 4 per cent. of their income in rates, most people find themselves paying 6 per cent., which is equivalent to an extra week's pay being taken from them each year. That is intolerable.

§ Mr. Allason

I will not give way. I promised Mr. Speaker that I would take four minutes, and I intend to keep my promise, as so many other hon. Members have tried to do.

1820 What is the Government's feeling about capital expenditure? The previous Government called on local authorities to reduce their capital expenditure by 20 per cent. What do the Government say to a local authority which instead raises additional rate poundage to spend on capital projects? Is that legitimate, or is there a justifiable complaint against an authority which does that, and does it in a substantial way?

Some parts of my constituency are in the area of the Anglia Water Authority, which charges a 6.8p water rate, whereas other parts—happily, most—are in the area of the Thames Water Authority, which charges a 3.8p water rate. One can understand the immense discontent felt by people over that difference, which depends on the watershed on which they are situated.

What is the position over consumer consultation for the water authorities? I know that they report at the end of the year, but is there not a case for a consultative body, such as exists in other industries, so that there can be some protection for the consumer against possible extravagance by authorities?

I cannot now deal with what will happen next year. However, there is still time to put matters right this year. The Secretary of State has made a £200 million switch from the rural areas to the urban areas, and he could not take it back again even if he wished to. But he can introduce a rate support grant increase order to restore to the rural areas what has been taken from them. If he does that in time for the autumn rate demand he can remedy the situation. I ask him to do that, and my constituents demand that he does it.

§ Mr. John Ovenden (Gravesend)

We have heard today some tremendous examples of humbug. We are faced with a motion which is a supreme example of political opportunism. We on the Labour benches have not spent the past few months bemoaning the inheritance willed to us by the former Government, because that inheritance was probably no worse than that which we should have expected.

It is not fair that my right hon. and hon. Friends should be asked to carry the can for decisions of the Conservative 1821 Government when we have had no opportunity to make any effective changes. This Government came into office only four weeks before the new local authority financial year was due to start. In such a position, the Government could not make changes to the needs and resources element of the rate support grant. What Conservative Members are saying is that the special needs of their areas are not being properly looked after by the rate support grant system. They say there are inaccuracies and mistakes in the allocation of the needs and resources element. These decisions were made by the former Government. Hon. Members can hardly ask for a special grant to compensate them for something to which they originally agreed.

My right hon. Friend has made only one change, and that is in the allocation of the domestic rate support grant. It may be that Conservative Members representing specific areas may object to that action. Can they really blame my right hon. Friend for taking back a bit of the money which was allocated by them in the reverse direction? Can they blame us for taking from Paul some of the money robbed from Peter in the first place? There is no justification whatever, if the calculations of the resources and needs element are correct, for a variable domestic grant.

I have not heard one hon. Member try to justify this. What they are saying is that some of their areas are now being forced to take a higher share of the rate burden, and in some way they should be compensated for this. If another of my right hon. Friends decides to introduce a progressive form of redistributive taxation, which we hope he will, will it be said that those from whom money has been taken should be compensated for perhaps the first or second year? I hope not.

In many areas the effect of what was done by the Secretary of State pales into insignificance when compared with the other factors which have forced rates up—local government reorganisation and inflation. There are many of us who believed, when the previous Government forced local government reorganisation upon reluctant local authorities—I accept that some local authorities are always reluctant about reorganisation but a large number were right to be reluctant about the half-baked and half-hearted 1822 system forced upon them on this occasion—that the Government should have been prepared to carry a bigger share of the burden of the costs of reorganisation. This is what hon. Members opposite should have campaigned for during the period of the last Government.

There is also the inflation factor. It looks to me as though the calculations which municipal treasurers made and the views which they took about inflation will prove to be far more correct than decisions taken by the last administration. We have to look at local government finance as a whole.

I am disappointed that there has been little discussion on what I thought was the major item in the motion. Instead we have had a repeat of the debate on the rate support grant at the end of which the Government had a comfortable majority. I would have thought that it could have been concluded from that majority that they had the confidence of the House.

Today we have had a discussion about local government finance generally. Some people are falling into the trap of thinking that there is a magic wand in local government which can produce a system acceptable to everyone and which will relieve people of the burden of paying for local services. There is a reluctance on the part of many people to face up to the harsh and unpalatable facts of life in local government.

§ Mrs. Kellett-Bowman

If the Secretary of State could freeze rents on the ground that incomes were restricted should he not also compensate local authorities such as my own which have to pay another £20,000 because of the rent freeze? Should he not reduce rates because incomes are restricted?

§ Mr. Ovenden

I understand that the hon. Lady supported her party when in Government. This is another example of the political humbug of which I spoke earlier. She did not oppose the actions taken by her party.

However, I was about to move away from this rather sterile debate about the rating position this year and look at local government finance generally. The harsh, unpalatable fact of local government finance which we must face up to, if we are not to delude ourselves, is that 1823 the cost of local government services must rise over the years, and at a faster rate than the average rise in prices. This is because if the general level of wages in this country rises at a higher rate than that of prices, and presumably hon. Members hope that they will, then, since 75 per cent. of local authority expenditure goes on labour costs, it follows that the rise in wages must be higher there than the rise in prices in manufacturing industry, where the labour content is far less.

There are only three other solutions. Those are that local authority wages should be depressed below the level of general wages, that the services which they provide should be cut back or that central Government should bear a larger share of the expenditure. There is a serious conflict, which we have not faced up to, when we talk about shifting a bigger burden of expenditure to central Government and at the same time believe that local independence can be maintained. Those who believe that any Government, of whatever political complexion, will foot a bigger share of the Bill and yet allow decisions on these services to remain in local hands are living in cloud-cuckoo-land.

§ The Minister of State, Department of the Environment (Mr. Denis Howell)

It is interesting to note that the right hon. Member for Finchley (Mrs. Thatcher) relied heavily in her speech on the fact that the previous Government gave help to the National Health Service by moving it from local government to the central Exchequer, which makes my hon. Friend's point. When that is done local democratic control is also removed.

§ Mr. Ovenden

I am sure that there are many other instances of such action. Those who believe that they can send the bill to central Government and maintain control could not be further from the truth. If we are to provide the services needed in local government—and we all know that, although we get letters protesting about the rates we get an almost equal number demanding improvements in services—then we will have to provide a larger share of our resources for local authority services. We are under tremendous pressure to make more money available for the disabled. Every local 1824 authority is under pressure to improve or make available sport and leisure facilities. Local authorities have to find the money for this from somewhere. Under our present system every local election becomes a dutch auction on the level of rates. Parties vie with each other about who can depress the services most to keep the level of rates constant.

We must look for a new system of financing local government. We want a dynamic system which can provide revenue and which keeps pace with the general level of wages, or possibly does better than that if we are to improve the services. Our present system is agreed by everyone to be archaic and nonsensical.

I read the report of the Second Reading debate on the Rating and Valuation Bill which took place 11 years ago. After reading it, I was no wiser about what was meant by "gross values" than were the hon. Members who took part in the debate. It is a meaningless term which can be defined by no one.

The Liberal Party suggested site value rating. I fail to see how a change of that type will achieve a more equitable system. All it will achieve is a system which is as unjust in its operation as is the present system, added to which we we shall have the cost of introducing site value rating. That suggestion holds no benefit; it holds only extra expense for us.

Besides being dynamic, the new system must also be fair. It must be based on the ability of individuals to pay. I have received letters from old-age pensioners who complain that they have to pay the same rates as do households further up the road in which there are two or three wage-earners. That is a valid point. It is equally valid to take into account not only the number of individuals but the income within a household. I can point to some households in which there is only one wage-earner but the income is as great as it is in households which have two or three wage-earners.

§ Mr. Jim Lester (Beeston)

The comparison is constantly being drawn between a single-person household and a household which consists of several wage-earners. It must be remembered that 60 per cent. of the rate is supported by central Government taxes, and if four 1825 people are living in a house they pay substantially more in taxes than does the single person living in a house. It may be rough justice, but inadvertently a balance is achieved. It is wrong to say that the people who pay rates are the only ones to make a contribution, because taxes also play a part and four people living in one household contribute very much more through taxation.

§ Mr. Ovenden

That is the supreme example of illogicality. Those individuals bear their own fair share of national income tax but pay only a quarter of the rates, which is totally unfair. The system which I want to see adopted would be based on income.

There is no panacea which will solve the problems of local government finance overnight. Many questions on local income tax remain to be answered. For example, should it be a flat-rate system or a sliding-scale rate as it is within the national Exchequer? I favour the sliding scale rather than the flat-rate taxation system. There is also the problem raised by my hon. Friend the Member for Goole (Dr. Marshall) of how to offset the differences which arise between wealthy and poorer areas. Nothing will discredit a system of local income tax more than large variations between areas. If people working side by side take home at the end of the week vastly different earnings because of the local income tax they have to pay, that will undermine the system faster than anything.

In the context of a system of local taxation no one has mentioned what is to be done about the contribution which comes from industry in the form of rates. No one would suggest that we should relieve industry of its contribution so that the whole burden is put on local income tax. We must find an equitable way of getting industry to pay its share of the burden. That will be a problem for the inquiry which has been set up.

It will be a long, difficult job to reform a system which we have been trying to reform for decades. We must not hold out to people the hope of a quick and easy solution. We must not hold out to them that the problems of local government finance will go away if we change the system. All we can honestly say to people is that if we are to achieve expanding services in local government they will 1826 be asked to pay a higher proportion of their incomes towards the maintenance of local authority services. That may be harsh and unpalatable, but it is a fact of life. We cannot hide our heads in the sand and avoid it.

§ Mr. Peter Temple-Morris (Leominster)

This is an important subject upon which I made my maiden speech in March. I congratulate the hon. Member for Gravesend (Mr. Ovenden) on his contribution. He began in a partisan way and I thought that I might have to be partisan in replying to him, but about one-third of the way through his speech took on a constructive form. He said that the cost of the services will rise. In speaking from the Opposition benches my task tonight is to make a small contribution towards ensuring that there is a fair system of taxation to meet those costs.

As the hon. Member for Gravesend said, what is to be done with industry is a matter for the inquiry. Once more we may get into the position where the towns which possess industry have much higher taxation, just as now they have a higher rateable value. Rural areas have no industry. The local taxation system will therefore have to be framed so that money can be taken from the richer areas and given to the rural areas. That problem will exist whatever system is adopted.

I am against the rating system. In addressing the House, I hope constructively, I want to accept responsibility for the actions of the previous Government, not having been here at the time, and I shall invite hon. Members on the Government benches to accept their responsibility. I use the word "responsibility", not "blame", because that must be the keynote. The previous Government were responsible for the removal of 10p in the pound from the grant for country areas such as Hereford and Worcester. We are responsible for taking that away. We shall serve no constructive purpose if we argue about money going from the towns to the country and vice versa.

We are also responsible for the rate of inflation until 28th February. I shall not go beyond that date. I shall try to approach this in a reasonable and sensible way. We are, therefore, responsible for the official allowance to local authorities for inflation at that time, 1827 which amounts to 9p to 10p in respect of my own authority.

I sound a warning note on the urgency of the problem. Hereford and Worcester already, on the present rate of inflation, are between £5 million and £6 million "in the red ", which does not augur well for next year unless we get a fairer system into operation quickly. My right hon. Friend the Member for Hereford (Mr. Gibson-Watt) well knows this too.

I accept responsibility for water reorganisation. There was too little control of last-minute expenditure. Water mains were being put in, the bill for which had to go to the new authority. Hardly a council in the country was ready properly to audit those precepts. The net result in my area is that the water rate has soared. I have accepted my share of the responsibility, and I invite Labour Members to accept their share of responsibility for the cut in domestic rate relief in the rural areas.

The hon. Member for Gravesend asked for the figures to be given. I can tell him that in Hereford and Worcester there is a variable rate relief for the domestic element ranging from 19½p to 29p. Some people have suffered a cut to 13p, making a maximum loss of 16p. Translated in terms of the rateable value on a council house or small private house in Leominster with, say, a rateable value of £202 this means an extra sum of 58p per week. On a house with a £240 rateable value, 70p extra will be paid. In the rural areas we have our poor as well as our rich. Indeed, we happen to be one of the lowest wage-earning areas in the West Midlands.

§ Mr. Ovenden

I should like the hon. Gentleman to tell the House the rate in his area last year and what it is this year so that we can compare that figure with the burden placed on some of the cities and towns.

§ Mr. Temple-Morris

I have a file of figures in front of me, and I can tell the hon. Gentleman that many of my constituents are suffering increases ranging from 80 per cent. up to 115 per cent. The average figure in the 600 square miles of my constituency comes out at something like 90 per cent. That is causing a serious problem in Herefordshire, and particularly in the Leominster district. We have heard a lot already 1828 of figures like 40 per cent. or 60 per cent., I count myself modest in not having mentioned mine sooner.

There is a feeling in the usually non-complaining country areas, which normally take these things in their stride, that the towns are beginning to get on top of them. This applies not only to rates but right across the argicultural spectrum. We saw this plainly during the last debate on this subject when a number of my hon. Friends abstained. It must be said that we have many town Members, and indeed there are more town Members than country Members. As this feeling gains momentum and people's rates increase by an average of almost 100 per cent., there is bound to be protest. I protested rather peacefully when on Monday of this week the Under-Secretary of State for the Environment was kind enough to visit my constituency. That protest was an orderly one, but the point I wish to emphasise is that the situation in the local authorities will not hold out for very much longer. That is why our motion asks for immediate relief to be given now.

The country is in a state of almost rebellion. I know that there is a letter waiting for me, which I have not yet read but about which I have heard, saying that from October in Herefordshire a rates strike is threatened. That is the position in my constituency and I know that hon. Members in all parts of the House are aware of similar protests.

§ Mr. Nicholas Winterton (Macclesfield)

My hon. Friend makes the strong point that there is an urgent need for action on rates and that this matter cannot wait until next year. Does he not concede that the present Government—and I am sure that Conservatives would accept responsibility during their term of office—have a responsibility for the rate of inflation now being encountered by local councils? Inflationary budgets have triggered off a threshold which has put many councils, particularly those in Cheshire, in tremendous financial difficulties. Does not my hon. Friend agree that the Government should now bring in an interim supplementary rate support grant?

§ Mr. Temple-Morris

I am grateful to my hon. Friend for that intervention. I agree with him that the greater the rate 1829 of inflation, the greater is the urgency for action to be taken.

I wish to mention the problems of the Welsh National Water Development Authority. I am sorry that the Secretary of State for Wales is not present. I raised this matter with him in an earlier debate, and to be fair, he did not then have much of chance to say anything when he wound up the debate. However my constituents would like to have a reply in regard to the Welsh National Water Development Authority.

Perhaps I may briefly explain the position. Our water rates have risen from a figure of 4.6p to 13.8p. We are just over the hill from a development area, and that area has a domestic rate relief of 33½p compared with our 13p. What makes the situation worse is that in Montgomeryshire, which happens to be in the Severn-Trent Water Authority area and which pays a water rate of 3.6p, the authority there still receives 33½p in domestic rate relief. That does not go down very well in my area.

§ Mr. Ted Leadbitter (Hartlepool)

Will the hon. Gentleman tell the House whether he is aware of any rate increase announced at the end of the financial year on 31st March which has been changed since that date arising from any action of the Labour Government? If not, will he confirm that the rate increases arose as a result of the actions of the Conservative Government?

§ Mr. Temple-Morris

I was hoping for a slightly more worthy intervention than that. This problem was dealt with a little earlier in my speech. One of the major points touched upon in this debate concerns the variable clement. I was asking Labour Members, including the hon. Member for Hartlepool (Mr. Leadbitter), to accept part of the responsibility for that.

I was about to make a point about the Welsh Water Authority. I have been speaking for too long, and I shall soon complete my remarks. With regard to the sewerage rate, I seek to provide that people are not double charged or that local authorities and district councils should introduce a septic tank-emptying service. I believe that the Government should ensure that either one course or the other should be adopted.

1830 We are facing a crucial time in the country areas. I repeat that we face the possibility of a rates strike. We face widespread inflation. We also face the fact that many towns, which until recently have been quiescent on these matters, dislike a system in which rates are constantly rising. If inflation continues at its present rate, action must be taken and changes will have to be made in the system. Unless something is done to cope with the situation, and done soon, there will be a gradual loss of national party control in all local government, from whichever side it comes. We shall see a further fragmentation of democracy. This is very much our responsibility in this debate today.

§ Mr. John Garrett (Norwich, South)

I wish to be brief, but first I must observe that any discussion of the future of the rating system should be set in the context of the future of local government itself. There is what I believe to be an alarming and continuing loss of local democratic control over locally-administered services. Local government is becoming progressively less local. Its recent history is the steady erosion of local authority powers. Unless the House takes some decision to the contrary, the process of bureaucratic centralisation, which was actively encouraged by the previous Government, will continue to gain in strength. The two-tier system of local government will inevitably encourage the shift of power away from the district to the county and we now have regional government in prospect. What is needed is a shift of power from the county to the district and from the district to the neighbourhood.

Local autonomy has been diminished as much as anything else because the revenue from rates is less and less adequate to support the tasks laid upon local government by central Government. That makes the need for a supplementary form of revenue most pressing. It seems to me that the most satisfactory form would be a local income tax similar to that which has been proposed by other hon. Members and which is successfully operated in other countries.

The Opposition's motion is the most remarkable piece of political bandwagoning since last week's debate on night storage heating charges. My right hon. Friend the Secretary of State has 1831 described its basic hypocrisy. However, there is no profit to the ratepayer in bandying charge and counter-charge across the Floor of the House. What we must do is consider rating reform in the short term and in the long term. In considering the arrangements for next year I should like the Government to increase the total rate support grant as a high priority for public expenditure planning. Second, I ask that special arrangements be made to relate the grant to income levels. I am glad to know that my right hon. Friend has something like that in mind. Third, it is essential to base the needs element on more sensitive measures of need.

My right hon. Friend asked us to be specific in our recommendations, and I shall be. I believe that the resources element, which favours the authorities with a below-average rateable value, should be complemented by an income equalisation grant for areas with particularly low wage levels. First, there should be within the grant an allowance for each percentage point which a district falls below average national earning levels. That would ensure that the regressive nature of the rate burden which is so heavily felt in low wage areas, such as my constituency, would not continue. The reforms required in the needs element would be somewhat reduced in total as a result of the institution of an income-equalisation grant. That grant should provide that all the basic data on which the rate support grant is based, such as the total population, children and the over 65s, should be up-dated to the year of account. The 1974–75 grant was based on 1972 figures and failed to take account of the dynamic of population growth. The latest available figures should be up-dated by the average annual rate of increase in population in recent years. The very fast-growing county of Norfolk was penalised by the present arrangement of using historic figures which fail to take account of the lag between growth of population and growth of rateable values.

Second, the allowance for sparcity of of population is inadequate and fails to allow for the costs of servicing a scattered population, for developing new services in rural areas or for staffing small rural schools. Third, there is inadequate justification for the sizeable weighting in 1832