Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

Mr. Speaker

Before I call the first hon. Member to speak I have something to say about the length of speeches. We have already lost nearly three quarters of an hour. Yesterday in four hours 23 hon. Members from the back benches spoke. The mathematics of that are easy to work out. I hope that hon. Members will try to follow that example. I remind the House that the more the Front Bench speakers are interrupted and give way the fewer are the chances for back benchers to speak.

4.13 p.m.

Mr. Paul Channon (Southend, West)

I shall certainly bear your words in mind, Mr. Speaker, and I am sure the House will be relieved to know that.

Before we get on to the main subject of the debate may I say, since this is the first time I have spoken on topics affecting the environment for two Parliaments, how much pleasure it gives me to return to the topic, and how fortunate I think the Secretary of State and his hon. Friends are in having the Department of Environment to serve them? I have the very highest regard for so many of the advisers who I am sure are serving him as well as they served me and my right hon. and hon. Friends in the past.

I shall attempt to be as courteous to the right hon. Gentleman personally as he was to me and my colleagues on that previous occasion, although I dare say we shall disagree on questions of policy from time to time, possibly beginning even today.

The Opposition take the view that the topic of rates is so important that we have chosen to devote our first Supply Day to it in this Parliament. We believe that urgent action is now necessary both in the short term and in the long term. I shall try to say a few words about that subsequently.

I am sure it will be said more than once from the Government benches during the course of the day, and I accept it, that neither side of the House can pretend to be blameless over the national rates situation. Both sides have a responsibility for the anomalies and history of the rating set-up and the pressures which have now built up to what I believe to be an intolerable point.

The reason the burden of the rates has become so intolerable is that local taxation, is now being paid on far too narrow a base. Far more people are deriving benefit from local services than are actually paying for them. I believe urgent reform is required, and one of the points I wish to put to the Secretary of State is that the timetable for reform is far too slow. Perhaps he will say how he foresees the work of the Layfield Committee and what the timetable will be. Coupled with that, the Secretary of State's flat-rate domestic relief which he introduced this year has made the rate situation much worse than it was before.

I concede that it is extraordinarily difficult to work out a system which would be fair to everyone. It would be virtually impossible to do that, but I believe that the right hon. Gentleman's system has thrown up so many anomalies and so many examples of extortionate rises in rates that he ought not to be surprised at the degree of passionate feeling about rates across the country. It is not surprising in view of what has happened. There has been an overall increase in domestic rates of approximately 35 per cent., but that disguises the astonishing variations within that average. I have no wish to do down the Welsh, but in Wales the domestic rate has gone down 5.1 per cent. this year whereas the metropolitan districts have been asked to bear an extra domestic rate increase of 55 per cent. How can anyone justify that state of affairs when it includes so many obvious unfairnesses and anomalies?

When the Secretary of State produced the rate support grant order he said that there was in it an element of rough justice and that it was almost capricious—I think that was the word he actually used. How right he was. It is certainly rough justice and it is highly capricious.

However, that is past history, and what now worries people is what is going to happen next year. I hope that is what the Government will be telling us very soon. That is what we must concentrate on. Many hon. and right hon. Members will have seen horrifying reports by local authorities which have been trying to estimate next year's rates. I will not read them all out—I have before me a whole sheaf of reports of local authorities—but I will give a few examples. Essex estimates that the domestic rate will go up 40 per cent., Suffolk 40 per cent., Norfolk 35 per cent., Greenwich 70 per cent., Kent nearly 60 per cent., Bedfordshire 60 per cent., Cornwall 45 per cent., and Hereford and Worcester over 50 per cent. —and that last figure is in addition to a rise this year already of 47 per cent.

These are just some of the examples. I have seen reports of London authorities estimating increases of as much as 100 per cent. Croydon anticipates an Increase of 70 per cent., Merton 75 per cent., Bromley 100 per cent., Haringey 60 per cent., and the ILEA precept looks like going up 50 per cent. These are terifying figures in view of what has already happened this year.

The House will have seen today the forecasts and the views expressed in the Daily Express about other examples of what is happening to rates throughout the country. If that is the order of the increase we shall see in the domestic rating system next year, on top of the increases this year, there is the gravest danger that the whole system will break down. There is a danger that people will refuse to pay these enormous increases in rates. I shall not encourage them in that course. As a democratic Conservative, I should oppose people refusing to pay rate increases, just as I know that the Secretary of State, as a democratic Socialist, is against those who do not pay increased rents. That is what he says, and I believe him. Neither I nor any of my hon. Friends will encourage non-payment of increased rates, but it is the responsibility of the Government, who have been in office for 10 months in two Parliaments, to avoid such a situation occurring.

On top of all the increases I have outlined, and the possible increases in rates this year, a large increase will almost certainly result from the Houghton Report on teachers' salaries. I understand from what the Secretary of State for Education and Science said in the House yesterday and last week that we shall have the report, or at least an interim portion of it, as early as December. Substantial increases for teachers will no doubt result. I hope that they do, but they will have to be paid for, and the House will have to make up its mind who should pay. Is it right that the ratepayer should go on paying as much as 39½ per cent. of the burden of teachers' salaries, or should more be transferred to the Exchequer? Over the past year or so the rating system has become so widely disliked, so unfair in its operation and extortionate in its demands, that there is the strongest case for transferring more of the expenditure from local authorities to the Government.

Mrs. Elaine Kellet-Bowman (Lancaster)

Is my hon. Friend aware that the Chief Education Officer for Lancasire said on Friday that, unless there is more money for councils under the rate support grant, when the Houghton Report is implemented there will be the biggest cut-back in education in our county since the war, and probably since the beginning of the century?

Mr. Channon

That highlights the extremely serious situation. I am sure that my hon. Friend and other hon. Members will wish to catch the eye of the Chair to expound on it further. My hon. Friend emphasises my point.

In July the Chancellor of the Exchequer announced a system of interim rate relief that was very much welcomed from the Opposition benches. The House had asked the right hon. Gentleman to introduce such a system, and, unlike some of his colleagues, he had listened to the House. We are grateful for the measures he introduced, although we do not think them adequate.

But we shall have to vote tonight unless we are assured that necessary reforms in the rating system will come about in both the short term and the long term. We are rather suspicious of the Secretary of State. He is keen on public expenditure and on the rating system. I have a sheaf of quotations from speeches by the right hon. Gentleman extolling the virtues of the rating system and of high public expenditure. Therefore, I am not sanguine about what he will tell us. I am surprised that someone with such a logical mind finds this seventeenth-century property tax still to be the ideal solution.

Mr. Kenneth Marks (Manchester, Gorton)

Less than 12 months ago the hon. Gentleman's own Government had an opportunity to change the rating system, and speeches were made in support of the system by Ministers.

Mr. Channon

I said at the beginning of my speech that both sides of the House had a record on the rating situation that could be fairly criticised. I very much regret that a fundamental reform of the rating system was not undertaken many years ago. But the responsibility now rests upon the Government, and the House will be interested to learn what they propose to do about it.

In fact, the rating system is now seen not as a tax on property but as a payment for local authority services. There are no fewer than 9 million net earning householders who pay no rates. That is seen to be unfair. I understand that the social contract is the cornerstone of the Government's policy, and I presume that it is the cornerstone of the Department of the Environment's policy just as much as it is of the policy of other sections of the Government.

Is it not right that there should be an element of social justice for ratepayers as well—not only domestic ratepayers but small shopkeepers, many of whom have had to bear a heavy burden this year and will do so again next year? If it is correct that there should be a rent freeze for council tenants, what about other ratepayers? If it is all right for the tenants, why should not other people get help with their rates? [Interruption.] The hon. Gentleman's party introduced a rent freeze.

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

Commercial rents.

Mr. Channon

We introduced that, not the Labour Government.

There should also be an element of social justice for young couples trying to buy their own house on a mortgage, small shopkeepers, retired couples on small fixed incomes—all those who find the rate burden very heavy. Presumably, they, too, come under the social contract. They are useful people. Why should they not be helped?

I understand that the Layfield Committee is not to report until the end of next year. Its timetable is too slow. Although I was not present, I understand that in the debate in the Committee considering the General Rate Bill yesterday the Minister speaking on behalf of the Government said that the Layfield Committee was meeting only once a fortnight. I acknowledge that those serving on the committee are busy and responsible men, with wide interests, but the matter is so urgent that I believe that many hon. Members on both sides of the House will ask the Secretary of State to expedite the committee's sittings.

What will happen when the committee has produced its report? When shall we have legislation? I am told that we are not likely to have it until about 1977–78, and perhaps even 1979. What is the timetable for reform of the rating system?

The right hon. Gentleman and his Department have decided to postpone domestic rating revaluation from 1978. It is rather curious that they do not like the idea of having revaluation then. Perhaps all sorts of things will happen in 1978, and that is why we are not to have revaluation. I understand that the Under-Secretary, speaking for the Government, said yesterday that he was prepared to have revaluation a year earlier than had been announced. The House should know the exact timetable. If the present system is to continue, it will become even more unfair if there is no revaluation.

The Chancellor of the Exchequer told us in his Budget Statement a short time ago that local government expenditure had been increasing in recent years by 7 per cent. or 8 per cent. in real terms. That is a figure that I do not think can continue, and I believe that he thinks that it cannot continue.

Is it the fact that the Government's policy is that local government spending should not rise in real terms by more than the 2.75 per cent. figure the Chancellor gave the public spending as a whole? What will be the proportion of central Government and local government expenditure? If the percentage of real increase that I have mentioned is correct, will the Secretary of State make that clear to us today, and tell us the implications of such an increase on average for ratepayers, and how he proposes to secure that such a target is adhered to by local councils?

My right hon. Friend the Member for Carshalton (Mr. Carr) has already expressed doubts whether public expenditure as a whole should rise at all in real terms in our present economic circumstances. That goes for that part of public expenditure accounted for by local government, which the Chancellor told us in his Budget speech is now 30 per cent. of total public spending.

Some better means of bringing local authority spending under more effective control is essential both for the protection of ratepayers and for the effective fighting of inflation. The Government will shortly be introducing a rate support grant order. For the current year the Exchequer rate support grant was intended to meet 60.5 per cent. of the agreed local government spending on the relevant services, leaving aside extra relief eventually provided by the Government which relieved domestic ratepayers of 60 per cent. of any increase in their rates over and above a 20 per cent. increase. What proportion of agreed local government spending is it intended that the rate support grant should account for in 1975–76?

It is essential that we have a debate this week before final decisions are made so that the views of the House can be made known to the Government before they come forward with the rate support grant order. I ask the right hon. Gentleman: by how much in real terms do the Government expect local government spending to rise next year? What are the means by which the Government will ensure that local government spending does not increase above the target they have set for it?

What proportion of agreed local government spending in 1975–76 will be met by Exchequer rate support grant and what is to be the domestic rate element for 1975–76? This determines how much special help will go to householders. Is the right hon. Gentleman to continue with his flat-rate system of 13p in the pound for England and 33.5p for Wales or are the Government prepared to accept that my right hon. Friends are right in their proposals for a variable domestic element to take account of differing circumstances in different parts of the country?

Can the right hon. Gentleman assure us that help will be given to local authorities through an increase order so that no local authority will have to start off with a deficit next year, which will compound the already difficult problems facing them in the rate burden for next year? The aim surely must be to ensure, by domestic rate relief, that no householder faces excessive rate increases, whether he lives in town or country, whether in a Labour-controlled or Conservative-controlled area. No householder should be made to face an excessive rate burden.

What action do the Government intend to take to prevent excessive rate increases next year? During the last election we put forward positive proposals on the rating system. [Laughter.] If hon. Members think it is a laughing matter they are in for a nasty shock when they get their constituents' reactions.

Mrs. Renée Short (Wolverhampton, North-East)

Tell us what you would have done.

Mr. Channon

That is what I hope to do. It is very nice to have the hon. Lady here. I hope that she will not walk out during my speech at any rate.

Mrs. Short

No. I shall stay.

Mr. Channon

I do not propose to set out in this debate our arguments for the complete abolition of household rates, although it is the Conservative Party's view that in the end that must be done. My purpose today is to urge the Government to take immediate action as from April next. As we suggested to the country, and I suggest again to the House, the first step is to transfer from the rates to the Exchequer the costs of teachers' salaries and more of the costs of the police and fire services. Last year the total cost of teachers' salaries was £1,400 million. Local authorities had to find 40 per cent. If action were taken along the lines I suggest there would be a worthwhile saving to all ratepayers, whether householders or commercial, small traders, shopkeepers or industrialists. It is absolutely essential that the Government do this if we are to avoid the breakdown of the whole domestic rating system.

Mrs. Lena Jeger (Holborn and St. Pancras, South)

If this transfer of responsibility for teachers' salaries takes place, does the hon. Gentleman envisage that local authorities would still retain control over the number of teachers they employ and the distribution and allocation of those teachers?

Mr. Channon

Yes. The Exchequer should take over the responsibility of paying teachers' salaries up to an agreed quota. If local authorities want to employ more teachers, that is a matter for them. Certainly local authorities should, in the last resort, keep their freedom. The local education authority should run its own affairs. It is unlikely that there should be any real increase in public expenditure of any kind at present. There are many desirable things in Government and local government we should like to see which cannot be afforded at the moment.

Before estimating the increase in real expenditure the Government have to tell us what is the rate of inflation. Is it 8.4 per cent. still, or 8.73 per cent., as it was a couple of days ago, or, irritatingly enough, has it now leapt to 26 per cent. with the publication of this month's retail price index? What is the rate of inflation on which the Government are making their estimate before deciding upon the real increase in public expenditure? What will be the increase in expenditure on gas, electricity, rail fares, coal, and all the other things which will rise in price in a short time?

During the General Election campaign Labour Ministers seemed to regard as inflationary the suggestion that we should transfer teachers' salaries to Government expenditure. The fact is that it would not add one penny piece to public spending as a whole. What it would do is share out the burden more fairly among the taxpayers as a whole, instead of it being placed only on those taxpayers who are ratepayers.

I recognise that if this were to be done means would have to be found of ensuring that local authorities passed on the benefit to ratepayers. We must find the mechanism for ensuring that local government spending is geared to people's ability to pay. It is true that local authority spending has increased a great deal faster than public spending as a whole. That is perhaps because it is so much more labour-intensive. But is that not where the social contract comes in?

As we understand it, and if our understandings are wrong the Government will no doubt enlighten us, the social contract means that, except for special cases, wage increases should not go beyond price increases. All of us agree that teachers are a special case following the Houghton Report. Local government spending can surely be taken care of if the Government accept the proposal to transfer the cost of teachers' salaries. If that were to be done and the social contract adhered to, it would be possible to agree that local authority spending in 1975–76 should not exceed in real terms the level of the previous year, or at any rate, if it does exceed it, should do so by only a small margin.

Of course, an important part of this would be the requirement that the major trade unions would have to set an example in wage demands, making sure that they kept those demands within the social contract, because if one section of workers received an excessive increase in wages, it would be difficult to persuade local government employees to keep down their wage and salary demands to reasonable proportions. That is surely what the social contract is about.

Is it not right to consider that the correct approach is to gear local government spending, until we get over our present economic crisis, to increases in the retail price index? More effective control of this spending is important for domestic ratepayers, shopkeepers and small traders. The Budget has done little, if anything, for them, yet the small businessmen have seen taxes being put up and rates rising. He will soon have to pay much higher contributions if he is self-employed and there will be a further increase in national insurance contributions for employers.

Those are heavy burdens, and the Government know that the rate of bankruptcies among small businesses is, unfortunately, running at a high level. It will run at an even higher level next year unless something is done to help with rates. I know that businessmen are allowed to set their rates off against taxation but this by no means gets over the problem facing the small trader. On 12th November the Chancellor gave some relief to companies over the question of stocks. He said that he could not deal with the whole range of companies and his immediate relief would be confined to those who had a closing stock of at least £25,000. That means that some small businesses will receive no relief from the stock allowance which the right hon. Gentleman is proposing, at any rate for this year, although they may next year. That makes it all the more necessary that there should be some element of rating relief for the small shopkeeper facing these burdens.

Both parties when in Government are guilty of calling for the utmost economy while at the same time sending out circulars to local authorities telling them to take quick action on something and spend a great deal more money on something else. We must all accept, until we get over our present economic difficulties, that a number of desirable improvements cannot take place. There is no difference between the two sides of the House, or at least between responsible Members, on this issue. That makes it all the more important for us to get our priorities right.

That is why, at a time when rate burdens are so high and Government expenditure needs careful watching, it is utterly intolerable that the Government should press ahead with ludicrous, unnecessary and expensive schemes such as the whole of their land municipalisation proposal. [HON. MEMBERS: "The Channel Tunnel."] Hon Gentlemen opposite can fight their own battles about that.

Local authorities have not got the skilled staff necessary to carry it out. The cost of the scheme has been estimated by some observers to be as high as £500 million a year. Even if that is a massive over-estimate and it is as low as £50 million a year, that is still too much. It is no good the Government saying that in seven to eight years the money will be coming in to local councils from such a scheme. The money is needed now, not in seven to eight years. That is one of the many reasons why it is ridiculous.

It is also ridiculous that local authorities should waste hundreds of millions of pounds of the taxpayers' and ratepayers' money on the municipalisation of rented property to serve the party political dogmas of right hon. and hon. Gentlemen opposite.

Then we come to the Housing, Rents and Subsidies Bill, about which the right hon. Gentleman and I will have happy memories—or memories, at any rate. Is it right to revert to a system which allowed those living in council houses to pay lower rents and to have those rents subsidised frequently by people worse off than themselves living in other accommodation? I should have thought that that system was out of date. I am sure that everyone would like to see generous rebates for poor families who cannot afford rents, but it is ridiculous that ratepayers should subsidise those who do not need help.

It is a wrong use of public money to press ahead with turning all State secondary schools into comprehensive schools at massive cost. It is also a waste of money for the Government to press ahead now with the abolition of private beds in National Health Service hospitals at the expense of £30 million a year.

These are economies which can be made by either central Government or local government. Other economies could also be made. We have all heard stories—no doubt sometimes exaggerated—of local authorities with swollen staffs and all the other things which are alleged. What happened to the inquiries which were set in hand by my right hon. Friend the Member for Crosby (Mr. Page) regarding staffing in local authorities? What investigation is the Department carrying out at present?

I know that the right hon. Gentleman will seek to argue that the reorganisation of local government is to blame. The truth is that all parties were agreed on the need to reform local government. [Interruption.] If the present Government's reform had taken place instead of ours, there would still have been the same temptation on the newly created local authorities to indulge in a measure of empire building in this way. The problem —it would have remained whichever reform went through—is to ensure that this tendency is resisted. I hope that the Government are keeping a careful watch on this matter. This is more a matter of feeling. This is not what is causing the high rise in rates, but it is the kind of thing that irritates people, although I accept that it is the detail rather than the major factors which is causing increases in rates.

The last action taken by the right hon. Gentleman only a week or two ago has, in my view, although quantitatively not crucial, qualitatively made the situation worse. It is scandalous that ratepayers may be asked to pay extra money to bail out councillors who refuse to carry out their legal duties under the Housing Finance Act not through error, as the Secretary of State said—because they would not be surcharged if they had made an error—but because they deliberately chose to take the course of action that they took, did not use reasonable grounds for delay, were encouraged to do so by some hon. Gentlemen, and thereby broke the law. [HON. MEMBERS: "Right hon. Gentlemen."] No, certainly not this right hon. Gentleman.

Mrs. Kellett-Bowman

The Leader of the House.

Mr. Channon

That is a different matter.

Ratepayers will deeply resent having to pay for the mistakes of councillors who deliberately break the law knowing the consequences if they do so. I suggest that that is a matter that the House should reject when the time comes.

The Social contract covers the big battalions. We are told by hon. Gentlemen opposite that it covers many people —no doubt all the hospital workers and the railwaymen. We shall see whether it covers the miners. If it is to mean anything, I hope it will be a contract also with the ratepayer, the self-employed, and everyone who has to face the terrible burden of inflation.

In the short term immediate action is required to take away some of the rate burden. We suggest that it should be done through the removal of teachers' salaries from the rates to the Government. That is the short-term action that is pressing this year, this autumn, and should be carried out without delay.

In the long term we believe that the only solution is the complete abolition of domestic rating and its replacement by a much fairer system of taxation based on people's ability to pay. That is what we shall be asking for, however long this Parliament lasts, and when we are returned to office that is what we shall implement.

4.45 p.m.

The Secretary of State for the Environment (Mr. Anthony Crosland)

I congratulate the hon. Member for Southend, West (Mr. Channon) on his return to the House after what I understand has been a particularly painful and unpleasant bout of illness. I am glad to see him fully recovered.

I also congratulate the hon. Gentleman on what I take, and hope, to be promotion to a new Front Bench position. Certainly he has sloughed off both the memories and the responsibilities of Government quickly enough, because a large part of his speech had nothing to do with the coming rate support grant negotiations. I hope that the hon. Gentleman stays there for a little time, if only because we have become irredeemably confused by the restless instability of Opposition Front Bench spokesmen.

In recent weeks the hon. Members for Hornsey (Mr. Rossi), Chelsea (Mr. Scott), Shipley (Mr. Fox), Honiton (Mr. Emery) and Bury St. Edmunds (Mr. Griffiths) have popped up and down, now on the Front Bench, now on the back bench. They move from back to Front and Front to back and Front to Front. There must be some system of weekly promotion and demotion in the new democratic Conservative Party. We used to hear a great deal about the Tory magic circle. It seems that we now have the Tory magic roundabout. Please may we have some stability of deployment in the interests of national sanity before we all become totally giddy and cross-eyed?

Today, much as we like to see the hon. Member for Southend, West, we had looked forward expectantly to hearing from the right hon. Member for Finchley (Mrs. Thatcher). After all, it was she who, just before the election, made the ex cathedra announcement on the aboli- tion of the rating system. It was the right hon. Lady, not the hon. Gentleman, who was in the Tory Cabinet which bequeathed to us the present frightful rating crisis. Indeed, as Secretary of State for Education and Science, the right hon. Lady was exceptionally closely involved in rate suport grant matters, and her views would have commanded instant and respectful attention in the Cabinet. Therefore, we would have liked to ask her one or two gentle, courteous questions this afternoon.

For example, does the right hon. Lady suffer from chronic amnesia about what happened in the Cabinet of which she was so elegant an adornment? Was she in fact pressing, day in, day out, with persistent doggedness for the abolition of rates, only to be overruled by our old friends, those two stolid opponents of change, the right hon. Member for Worcester (Mr. Walker) and the right hon. and learned Member for Hexham (Mr. Rippon)? If the latter was the case, she has turned the tables on them now because she appears to be in the leadership race and they are not.

The trouble is that we shall never know the truth. The right hon. Lady has flown away and upwards, leaving as a souvenir to her meteoric passage only a characteristically charming photograph on the front page of the Local Government Chronicle which the ungallant editor chose to caption, The Unacceptable Face of the Conservative Party. That is very unchivalrous.

This debate could hardly be more topical. It takes place right in the middle of the crucial final stages of the negotiations with the local authority associations over the size and distribution of next year's rate support grant. Discussions have already continued for some months. The Government's formal proposals have now been put to the associations, and there was a first discussion of them at official level only yesterday. I shall have my final meeting with the association members—the so-called statutory meeting —next Tuesday, 26th November.

The right hon. Gentleman the Member for Crosby (Mr. Page) has sometimes referred to the day of the statutory meeting as the local authority Budget Day. That is an apt description. Thousands of millions of pounds of public money are at stake. The outcome, like the outcome of a Budget proper, will affect the lives of almost all our citizens. For different reasons, preparations for the local government budget have also to be carried out in conditions of strict confidentiality. This is not because great fortunes will be made, or national security threatened, if details of the settlement leak out in advance. The reasons are less spectacular than that.

There is, first, the obvious and general point that no party to any negotiation—be he employer, trade unionist or anyone else—can ever announce his final position in advance. The progress of negotiation could be seriously hampered if one side or the other were to take up a position in public at the outset. The parties would soon become entrenched in their positions, and it would then require a huge amount of time and effort for them to extricate themselves.

Secondly, apart from this general point, the rate support grant negotiations present particular difficulties. All local authorities are affected by their outcome. But each authority has its own special problems and needs and is not slow to suggest that they deserve priority over all other authorities' special problems and needs. Authorities are represented in the negotiations by their national associations. The association have to strike a balance between the often conflicting interests of their individual members. That requires some immensely difficult judgments which are bound to leave some proportion of their membership dissatisfied. The pressures operating on the associations are enormous. They would become intolerable if the final stages of the negotiations were to be carried out in a blaze of publicity.

If Conservative hon. Members press the case of the peculiarly deserving local authorities that all of us have in our own constituencies I shall not be able to satisfy them today even if the proposals which I have put to the associations happen to be beneficial to the authorities in question. Likewise—and I am sure the hon. Member for Southend, West will not be surprised to hear this—I shall not be able to tell the House today how much grant I am proposing to give for next year or what increase I am ready to make in this year's grant total.

Ex-Environment Ministers like the hon. Member for Southend, West will not be surprised to hear that never before—at least, not since rate support grant was introduced—have we had a major rates debate in the middle of the statutory negotiations. I do not complain of this in the slightest. Nor would I dream of impugning, as some cynical observers have done, the motives of the Opposition in initiating this debate. As honourable men and women, are they not bound by the pledge of the right hon. Lady the Member for Finchley to abolish the rating system? That was a pledge which shone out, in the otherwise murky light of a hard-fought election campaign, as a shining example of non-party-political moral purity along with the even purer 9½ per cent.

Of course, I accept that it is solely the Opposition's genuine concern with the plight of ratepayers which has prompted them to initiate this debate now. Nothing, I am absolutely certain, could be further from their minds than any desire to make political capital out of the rating situation. After all, the next election is some time away. I am only astonished that they should not have tabled a specific motion. Given the previous record of the Conservative Party in these matters, I suppose that the Shadow Cabinet found it impossible to draft a form of words that would not have been torn to shreds by my right hon. and hon. Friends.

Let me make it clear beyond any shadow of doubt that I and my right hon and hon. Friends are as deeply concerned as anyone on the Opposition benches at the magnitude of the crisis—crisis is not too strong a word—affecting local authorities' finances and the appalling consequences it would have for next year's rates if nothing were done to help. Both as a Minister and as an MP whose constituents faced a 40 per cent rate increase this year—less, I know, than in many other areas—I have been profoundly conscious of the problems arising from the situation which I inherited in March.

Lest we forget, I must remind the House of the factors which contributed to this situation. First, whatever the hon. Member for Southend, West may say, local authorities were subjected to a form of local government reorganisation which we in Opposition predicted would be expensive and extravagant, and which has proved so. It is no good saying that the kind of reorganisation we wanted on a unitary basis would have been as expensive. Secondly, they were required to include in their rate an element over which they had no control whatsoever—namely, the water charges set by that equally extravagant creation, the new regional water organisation.

Next, the new local authorities were told by the right hon. and learned Gentleman the Member for Hexham to keep their eyes tightly shut against the realities of the oil crisis and world-wide inflation, and to rate for only a 9 per cent. increase in pay and prices over the year. The last straw was the promise which the right hon. and learned Gentleman made to the House on their behalf that … the national average increase …"— that is the increase in domestic rates— should accordingly be about 3 per cent."—[OFFICIAL REPORT, 22nd January 1974; Vol. 867, c. 1469.] Even taken singly, none of these demands was realistic. In combination, they added up to a nightmarish fantasy.

Something had to give. Domestic rates did not go up by 3 per cent.; they went up by an average of 30 per cent.—or they would have done had it not been for the special relief scheme which we introduced in July.

Mr. Michael Latham (Melton)

As the right hon. Gentleman is explaining why the rates are going up, will he say something about the order that he introduced in March which discriminated against rural areas? Does he accept that the July measures were specifically necessary to undo that discrimination?

Mr. Crosland

I am talking, I hope reasonably clearly, about the national total increase in the rate bill. The March order had no effect on the national rate bill. It affected only the distribution. Tragically, many local authority treasurers heeded the then Government's call to rate for only 9 per cent. inflation. That is one of the deepest reasons for our trouble today.

The new authorities—many of which, to add to their problems, inherited little or nothing in the way of balances from their predecessors—have been faced with a yawning chasm between their income and expenditure and, as we all know from our own areas, have been forced into emergency bridging work by way of massive short-term borrowing. As with all emergency measures, a temporary respite has been gained. But the fundamental problem is untouched. This year's debts have to be repaid, with interest, out of next year's income. That is what lies behind the grim warnings which we are hearing from Treasurers every day.

I turn to the wider question on which the hon. Member for Southend, West spent much of his time, and reasonably so—namely, the future of the rating system. The hon. Gentleman said that our timetable for the consideration of this matter was too slow. I shall have something to say about timetables.

In recent years there has been a growing revolt amongst ratepayers against the entire rating system. It is now widely regarded as inequitable between individuals, unjust between households and harsh—even oppressive—for ratepayers in general. The Conservative Government of 1970–74 responded to this discontent with all the sense of urgency of an ageing snail. It was not that they never considered the matter. They considered it and considered it and considered it and considered it.

First, they published their July 1971 Green Paper on the future of local government finance. It was an impressive intellectual exercise. One by one, every conceivable major change in the rating system was subjected to an elegant analysis. One by one every suggestion of possible lifelines for the unfortunate ratepayer was dismissed and pooh-poohed. The right hon. Lady the member for Finchley was a member of the Cabinet at the time.

Then they settled down to consider the Green Paper—

Mr. Graham Page (Crosby)

All that the Green Paper did was to set out the pros and cons of each item which could raise money for rates. It did not dismiss any item but gave a lead to important consultation and discussion.

Mr. Crosland

Very well. Let us consider what happened after the Green Paper was published.

The Government—I pay them tribute for this—settled down to consider the Green Paper. They considered it and considered it and considered it and considered it. So deep was their meditation on their own writings that it took two solid years to complete. Meanwhile the loval government world chafed with impatience. Then the Conservative Government, of which the right hon. Member for Finchley and the right hon. Member for Crosby were both eminent Members, produced their consultation paper on local government finance. It was supposed to "finalise this matter". It represented the full flowering of two years of Conservative Government thinking on rates. On reading the consultation paper we discovered what finalisation meant. The paper was so devoid of positive thought that, in retrospect, it made even the Green Paper seem like a masterpiece of decisive and daring innovation.

We in opposition tried during this period to express and articulate the ratepayers' discontent. We did not commit ourselves to abolishing the rating system at a stroke, but we continuously urged a more positive attitude on the Government. My hon. Friend the Member for Birmingham, Small Heath (Mr. Howell) and others of my colleagues asked "Why should we not at least examine the idea of a local income tax?" The Government of which the right hon. Lady the Member for Finchley was a member said "No". We asked "Why should we not at least consider a local sales tax?" The Government of which the right hon. Lady the Member for Finchley was a member said "No". We asked about a tourist tax, about lotteries, and about petrol duty, and the Government of which the right hon. Lady the Member for Finchley was a member said "No", "No", and "No" again.

Mr. Graham Page

The Government of which the right hon. Gentleman is a member have said "No" to lotteries.

Mr. Crosland

I shall mention the question of the Lotteries Bill in a moment.

"No reform", said the right hon. and learned Member for Hexham. In the Second Reading debate on the Local Government Bll on 12th November last year, he said of our amendment, which criticised the Government for not providing additional sources of local finance: I reject that criticism completely, in so far as the Government do not think that this is the right time to introduce new local taxes. He went on to say: The system of rates, the local authorities' own tax, is well tried, well known and easy and cheap to administer. These are major advantages …".—[OFFICIAL REPORT, 12th November 1973; Vol. 863, c. 36.] The right hon. Member for Crosby went a good deal further. "Not even a Royal Commission or an inquiry", he said. I quote his words: it would be both disastrous and defeatist"— this is typical of the strong language he often uses in the House— to put the whole matter back into the melting pot". So I wish him well with his Lotteries Bill.

The right hon. Gentleman went still further. He said that there would be no transfer of expenditure, such as teachers' salaries, to the Exchequer. I quote him: We should hesitate"— the right hon. Gentleman is a good hesitater, or at least he was when he was a Minister— before removing such functions from local government or removing the expense of those functions and, therefore, the discretion operated by local government in the expenditure of money."—[OFFICIAL REPORT, 12th November 1973; Vol. 863, c. 148–50.] So the Tory Government were rigidly, adamantly and insistently opposed to any suggestion for relieving the poor ratepayer. It required the General Election to put the Conservatives on the road to Damascus, and the prospect of a second election—when they were in deep political trouble—to complete their conversion. Overnight—on 28th October, to be precise—the "No, no, no, no's" of the Conservatives' years in office were replaced by the right hon. Lady's "Yes, yes, yes's" of despairing opposition.

We have more respect for principle and constituency. In opposition we showed, unlike the right hon. Member for Crosby, that we understood the strong and natural feelings of the ratepayer, the feelings dismissed so contemptuously by Environment Ministers in the Conservative Government. We also showed that we were aware of the difficulties, and that is why in government we have set up the Layfield inquiry—independent, high-powered and representative of all shades of opinion and experience. If Layfield comes up with a viable alternative to rates, no one will be more delighted than I shall be. The hon. Member for Southend, West asked about the timetable. The inquiry is hard at work. As anyone familiar with committees will know, it is meeting once a fortnight because it is taking written evidence before it takes oral evidence.

But we are not prepared to be stampeded into instant solutions or to stand on our heads in an opportunist attempt to buy popularity. Just as we refused to compete in an electoral Dutch auction over 9½ per cent. mortgages, so also have we refused to promise the abolition of the rates unless and until we have a proven alternative. We cannot and will not suddenly announce a botched and hurried solution to this problem which, as hon. Members opposite know perfectly well—I suspect they have a certain amount of sympathy with what I am saying—has baffled successive Governments for so many years.

In passing, may I say that I wish that the hon. Member for Southend, West had clarified the Opposition's current attitude to the Layfield inquiry. In June the right hon. Lady the Member for Finchley welcomed the fact that we were setting up an inquiry, but only a few weeks later—and the hon. Member for Southend, West repeated this today—she made her electioneering announcement which was designed to pre-empt altogether the central question before such an inquiry. The hon. Gentleman has pre-empted it again today. I remind the House, incidentally, that the inquiry has on it two very respected and well known Conservative local government figures in Dame Kathleen Ollerenshaw and Lord Ridley.

I hope that now that the pressure of electioneering is off the hon. Member who winds up for the Opposition will withdraw on behalf of his party all the conflicting pledges made by his predecessors so that Layfield can have a clear and unprejudiced run over the ground.

I return to the immediate crisis facing us. Any measure to restrict an intolerable rate increase next year can succeed, as the hon. Member for Southend, West clearly said, only if local government plays its part. That means, as my right hon. Friend the Chancellor of the Exchequer told the House in his Budget Statement, that we must ask local authorities to keep the growth in their services to the minimum compatible with inescapable commitments. This is no sudden slamming on of the brakes of the sort which Mr. Anthony Barber attempted so crudely last December. I have for months past taken every opportunity to stress to local government how grim were the prospects for next year's growth in spending. Decisions will have to be taken of a sort which none of us will welcome. But we shall give local authorities ample guidance in good time on what is required.

I repeat that I greatly welcome the attention which the House is now giving to the question of local government finance. Up to about two years ago our debates on local government finance and the rate support grant were attended by about five Members on average on each side of the House. I am delighted to see the change. I have explained—and the hon. Member for Southend, West understands this perfectly well, as does his right hon. Friend—why the singular timing of this debate prevents us from being as forthcoming on detail as we would like. But it will not prevent us from paying the closest attention to all that is said today.

I cannot promise either local authorities or ratepayers an easy time next year. I have no doubt that I shall be a highly unpopular man next spring. I can make only one pledge—that I approach these problems with a far greater sense of urgency than the Conservative Party showed in government and a far greater sense of responsibility than it has shown in opposition.

5.10 p.m.

Mr. David Madel (Bedfordshire, South)

The Secretary of State told us at the start of his speech that it was a rather unusual time of year to hold a debate on rates because he was right in the middle of intricate negotiations for next year's rate support grant system. He also said that there were enormous pressures on local authorities, and that it would be wrong for those discussions to be published at this time.

The right hon. Gentleman will naturally expect me and those of my hon. Friends who catch Mr. Speaker's eye to say something about the special problems of our own particular counties.

The Secretary of State also spoke about reform of the rating system and went through some of the suggestions in the July 1971 Green Paper. I assume that he will leave answers to questions on these matters to his right hon. Friend to deal with in the concluding speech for the Government. I have no doubt that during the debate many questions will arise on the rate support grant, and on interim changes to the system which would help ratepayers from next April.

The Secretary of State pointed out that he came into office on 1st March at a very difficult time so far as negotiations on the rate support grant were concerned. The General Election campaign of three and a half weeks in February meant that a number of meetings between the then Secretary of State for the Environment, my right hon. and learned Friend the Member for Hexham (Mr. Rippon), and county treasurers had to be postponed. Many people wondered where my right hon. and learned Friend had left off and the present Secretary of State had taken over, because no actual rates had been fixed in the middle of the election campaign, and, therefore, the Secretary of State had to move very quickly in fixing the domestic rate support element. He described his 13p in the pound as an element of rough justice which benefited some authorities and sharply discriminated against others. But since then the Government have got a fuller picture of the system. They have gone deeper into how the rating system is affecting people and they have been fully cognizant about the huge rate increases this year and about what people have had to pay over and above what they paid last year.

The Secretary of State referred to our debates on the reform of the rating system. He should have been a little fairer on this. In the debate in February 1973, initiated by the hon. Member for Derby, North (Mr. Whitehead), both sides of the House strongly pressed my right hon. Friend the Member for Crosby (Mr. Page) to change the rating system.

One should say that there is a limit to the amount of party political juice that can be squeezed out of the question of reform of the rating system. We must differentiate and remember that there are a number of councillors who are independents in local elections but change into other political animals for General Elections. It would be wrong to say that the argument for reform of the rating system has been confined to one particular party. It has been an across-the-board movement in this country.

We have only to look at the composition of the rate protest action groups that come into play from March or April. These groups are composed of people from all political parties. It is therefore wrong to assume that one political party has a monopoly in pressing for a change in the rating system. We have merely to read the debates in the last Parliament to see that there was pressure on this matter from back benchers on both sides of the House.

The Secretary of State said that there was hostility and suspicion over the number of staffs local authorities were employing, and the Chancellor of the Exchequer mentioned this in his Budget speech. We ought to remember that had the Redcliffe-Maud report been adopted larger units would have come into play, and there is no certainty that even more staff would not have been employed.

Another important matter to consider is the protest over the change made by the Conservative Government in local government in 1972. Much of the protest was contained in phrases such as "You are taking away local democracy. We are going to feel more remote from the place where the decisions are made." Yet the Redcliffe-Maud proposals would have made people feel even more remote than they are.

This is not the time to talk about that, but we in the House must grasp the nettle of whether local councillors should be full time and whether, in view of the great difficulties in administering local councils, we ought or ought not to pay councillors for their work. As I say, this is not the time to talk about this in detail, but anxiety and suspicion over local government is very much tied up with the size of the new authorities that came into being in 1972. Even bigger authorities would have come into being had the Redcliffe-Maude proposals been adopted completely.

The Secretary of State mentioned the Green Paper. That is all we have to go on when we talk in our speeches about how we might change the rating system. Paragraph 11 on page 2 of the Green Paper goes to the heart of the matter. Referring to rates it states: But they have defects too. Their effect on individual ratepayers in some cases bears little relationship to ability to pay. The yield does not have the buoyancy required to keep pace with the growth of services. Paragraph 17 on page 3 of the Green Paper states: there are three—and only three—possible ways of filling the gap referred to in paragraph 14: either property occupiers must pay more, or the national taxpayer must bear an increasing proportion of local expenditure; or new and buoyant sources of local revenue must be found. It is little wonder that the overwhelming majority of people accept that probably the national taxpayer will have to bear an increasing proportion of local expenditure, because on the whole national taxes tend to be based on a person's ability to pay. I do not say that that is totally the case, but on the whole it tends to be so. Therefore, we are moving towards closer consideration of some form of local income tax. For example, as the Secretary of State said, the 1971 Green Paper carefully examined some of the arguments and possibilities for changing the rating system and then proceeded to turn them down. Two of the possibilities that have gone down the drain were a motor fuel duty and a motor vehicle duty. Those revenue raisers would now clash with a centrally directed energy policy.

A local sales tax was also mentioned in the Green Paper. The argument in 1971 and 1972 was that the buoyancy of the tax would help. I should have thought that in view of the possible low growth in expenditure the buoyancy argument has been knocked on the head.

There is also the possibility of local value added tax to consider. But on that I suggest that, first, we do not yet have enough experience of national VAT, and, secondly, the extra work for retailers would be unacceptable. Thirdly, it looks as if the Chancellor of the Exchequer is moving towards a three-tier VAT system. We have already moved towards a two-tier system, with the VAT rate on petrol. I should have thought that the local sales tax idea had also gone down the drain.

The Green Paper mentions on page 21 local employment tax, but knocks it down—now the argument is even more effective—when it states that a local employment tax could well conflict with the Government's regional policy, which is clearly more vital now in view of a possible rise in unemployment.

Thus, the Layfield Committee could save itself a lot of work and heart-searching, because basically the argument is coming down to some form of local income tax. Page 15 of the Green Paper, referring to a local income tax, shows that a number of countries comparable with ours, so far as industrialisation is concerned—the United States, Canada. Germany and Italy—have a form of local income tax. Such a tax would be imperfect to begin with and would take time to develop, but I am convinced that it would be a fairer system of raising money locally. This is probably what we are moving towards.

I always feel that when a Government publish a Green Paper those who have done the research work are on the whole pretty well prepared to implement all or some of the suggestions that have been put into the Green Paper after consultation with Ministers. I do not think that the argument that more time is needed to consider a new type of tax system holds much water. We have already looked into the matter. There must have been an enormous amount of research carried out by the Government Department concerned. I hope that the Layfield Committee will take this up and that we shall start moving towards a fairer system.

I turn now to the question of sewerage charges. The Minister of State, Department of the Environment wrote to me on 7th June stating: It is intended that these interim arrangements should come to an end quickly although I regret that no change and no retrospective adjustment will be practicable this year. I understand that the water authorities are already setting in hand arrangements with the local authorities in their respective areas to identify as soon as possible those properties which are not served by main sewers. I hope that in the concluding speech for the Government something will be said about this and about whether those interim measures, which were mightily unpopular, are coming to an end.

It is inevitable that hon. Members should spend a few moments on their own county's position. Bedfordshire's rate bill this year is £53.28 million. The estimate for next year is that rates and rate support grant will be £76.80 million. The policy and resource committee of Bedfordshire County Council had this to say: The estimate is tentative and necessarily based upon a number of assumptions. The full extent of inflation, even in 1974–75, is not yet known; nor is the outcome of pay negotiations including that for teachers. I endorse what my hon. Friend the Member for Southend, West (Mr. Channon) said about transferring teachers' salaries to the Exchequer. The time has come to change the London allowance into a South-East allowance. If counties like Bedfordshire are to have extensive London overspill they must pay teachers the rates that are paid in London. But that cannot be done with the present rating system. That is another reason which may come out of the Houghton Committee for transferring teachers' salaries from local authorities to the Exchequer from next April. That would provide an element of relief.

I will say a few words about the needs element, which has been gone into carefully in the rate support grant negotiations. On page 40 in paragraph 4.17 of the Green Paper there is a list of needs which includes total population, numbers of children under five years of age and persons over 65. Missing from that list is "rapid rise in population". The needs element seems to preclude that being taken into account, and counties such as Bedfordshire which have a rapidly rising population are not benefiting properly from the rate support system as it operates at present.

I realise that the Secretary of State cannot go into full detail at this stage, but I hope that in the negotiations proper account is being taken of the counties which are doing a great deal to help London with its housing problems, employment and industrial expansion. I hope that from next April the Government will come forward with some form of interim relief. If they do not do that they will be heading for a big storm from the ratepayers.

The Secretary of State said that he would listen carefully to everything that was said in this debate. I hope that at least on teachers' salaries and on the sewerage rate row he will be able to give ratepayers some relief from next April. It is vitally needed.

5.22 p.m.

Mr. Michael Stewart (Fulham)

Local government finance was a vexed question before the country ran into its present economic difficulties, and it will be a vexed question after those difficulties have been overcome. What I have to say is related not to our immediate crisis but to the longer-term problems of local government finance. I hope and believe that within a few years' time the country will have got out of its present difficulties and that we shall then be in a position, as industrial States usually are, to expect the total wealth of the country to increase steadily, though not spectacularly, year after year.

A community that is getting richer has both the power and the duty to increase those services such as education, housing, welfare and amenity which characterise a civilised society. A poor, primitive community can make only the most minimal provision for the old, the unfortunate and the sick. As society gets richer it should be prepared to spend not only more absolutely but a bigger proportion of its total wealth on those services. That is what being civilised means.

Our problem has been that the services which characterise a civilised society are services which we have required local authorities to play a great part and we have equipped them with a system of raising the money for those services which is inadequate and unfair. As many of those services involve the purchase of land, local authorities have been particularly vulnerable to the effects of land profiteering, that land profiteering which the Conservative Party has continually championed and kept alive and which, to judge from the Opposition Front Bench speech today, it proposes still to keep alive. That makes nonsense of a great deal of the Conservative Party's attempt to pose as the ratepayers' friend.

If we do not make radical changes we shall get into the position where the country as whole can afford improved services but the local authorities which are required to improve them cannot afford to do so without imposing an intolerable burden on some of their poorer ratepayers. To get out of that tangle I suggest three principles.

The first principle is that the proportion of total local government expenditure which is borne by the Exchequer must be increased. That can be done either by transferring wholly to the Exchequer some services that are now shared between the Exchequer and the rates, or by increasing the proportion which the rate support grant bears to total local government expenditure. Which of those ways is chosen—in the end we shall probably choose a mixture of the two—is no great matter. It is a comparatively simple administrative decision to make. What matters is that a bigger proportion of total local government expenditure should come from the Exchequer.

My second principle is a corrective of the first. One does not want so to extend Exchequer help that there is no revenue-raising problem for the local councillors. It is the local councillors' job to decide to what extent they will develop the services that I have described within the limits set by the minimum which the law requires and the maximum which the law will allow. It is for the local councillors to decide within those limits how far and how fast to go. It is for them to determine the form and organisation of the services. It is for them to determine, each in his own locality according to its needs, the priorities between those services.

There should, therefore, be a sizeable chunk of local expenditure left to be met by local levies, and it is the duty and responsibility of local councillors to tell the citizens how much they will charge them and why. If local councillors are not left with that measure of duty and power, the independence of local authorities will be reduced to zero and it will not be worth anyone's while to be a local councillor.

My third principle is concerned with how to make the local levy—the money raised locally by decision of local councils for local services—proportionate to ability to pay. It is notorious that the rating system has got more and more out of gear with ability to pay. I venture to give two examples which put that beyond doubt.

A household which consists solely of husband and wife does not need as large a house as does a household in which there are children. Usually, although not always, such a small household lives in a smaller house and pays lower rates. A household with children may well be in greater need and not so capable of contributing to local services as is the smaller household where there are no children.

Then, let us take two households each consisting of four persons, living in comparable dwellings and paying the same rates. In one household two out of the four may be very young children and the care of them makes it impossible for the wife to go out and earn an income. There is only one income coming into that household. In the other household there may be young people who are earning and there may be three or even four incomes coming into the household. Yet both households will be paying the same rates.

These are but two of many anomalies that one could quote. I believe that the only remedy is the one spelt out by the hon. Member for Bedfordshire, South (Mr. Madel), namely, local income tax. The right hon. Member for Southend, West (Mr. Channon) pointed out some of these anomalies, but could not quite get the words "local income tax" out of his mouth. It was left to his hon. Friend the Member for Bedfordshire, South to spell out the matter plainly.

So far as local income tax would affect domestic ratepayers, let me outline what it would involve. When a taxpayer pays income tax the size of his income is made known to the tax collector. After the requisite allowances and deductions have been made, the taxpayer is told that he must pay the Exchequer so many pence in the pound of taxable income. I suggest that he should also be required to pay so many pence in the pound to his local council. The number of extra pence would be determined by local councillors, and for that they would be responsible to the electorate. The taxpayer would not pay the extra number of pence in addition to the rates he now pays, but would pay them instead of that sum. The result would be that some households would pay more, but they would be households which could reasonably afford to pay more. Other households would pay less than they are paying now, but those would be the ones which are hit by the anomalies in the present rating system.

Mr. John Tomlinson (Meriden)

Does my right hon. Friend agree that what he suggests would be grossly discriminatory against rural areas, such as my own, where the per capita cost of services inevitably is much higher? We should still have a major problem about distribution of resources from central Government to local government.

Mr. Stewart

The point made by my hon. Friend about rural areas will be more properly dealt with when we consider the amount of Government contribution. I am saying that the help from the Government should be greater, and I accept that its distribution needs close consideration. Nevertheless, there should be some element of local levy, otherwise there would be no local independence at all. I suggest that a local levy, whatever it is, would be better raised in the form of a local income tax than by a levy based on the size and appearance of the house in which one lives.

We have been told time and again that a local income tax is administratively impossible. That might have been true years ago, but with modern methods of calculation, recording and correlation of the facts we should be able to get away from the axiom that a local income tax is impossible. I put forward these three principles as a part contribution towards finding a system of local government finance which will be fair as between one citizen and another and, equally important, will enable us to provide services worthy of a civilised society.

5.33 p.m.

Mr. Stephen Ross (Isle of Wight)

I am grateful to you, Mr. Speaker, for having called me so early in the debate. I think I caught Mr. Deputy's Speaker's eye a little too early on a recent occasion, although I was grateful for having been called.

In making a contribution to this debate on the subject of rates, which is certain to be free-ranging, I shall try to be constructive. However, I feel that I must refer—I exclude the right hon. Member for Southend, West (Mr. Channon), who in his speech tried to be constructive—to some comments made by the former Conservative Government. In the run-up to the last General Election, and indeed during the campaign, there was a great deal of manoeuvring by the Conservative Party for its own political advantage.

On the question of rating reform there were 5,000 posters in my constituency calling on people to vote for my Conservative opponent because he aimed at reforming the rating system. A spontaneous uprising by angry ratepayers in many parts of the country occurred in the early part of this summer and, in my view, it was perfectly justified. That was seized upon by the Opposition, desperately trying to placate many of their traditional supporters by making some extravagant claims and promises during the election.

I should like to correct the Secretary of State for the Environment on one point. I understand that the official line taken by the right hon. Member for Finchley (Mrs. Thatcher) was to phase out domestic rating over a five-year period. However, many Conservative candidates, including my opponent, told electors that the Conservative Opposition sought to abolish the entire system. I am unaware of the proposals which the Opposition intend to put in place of the present system. I do not know whether they envisage a form of local income tax. That suggestion has been made by two hon. Members so far in the debate.

It is quite proper for a political party to change its mind, but it would have come with better grace from Conservative Front Bench spokesmen—although at least the spokesman on this occasion, the right hon. Member for Southend, West, admitted faults in the past—to have admitted with proper humility that they had got things wrong in the past and to apologise for not having taken action when they were in office.

The Conservatives published a Green Paper in July 1971 in which many alternative ideas were ventilated and the arguments for and against were clearly stated. It is interesting to comment that the transferring of the full cost of teachers' salaries to the Exchequer, which the Liberal Party has been suggesting for five years, was dismissed on the ground that it would sharply divorce financial from managerial responsibility at local level. It might be argued "will that not still be the case?" It might be said that perhaps 10 per cent. of that charge should remain a local charge. I do not think the Liberal Party would disagree with that view, and indeed I doubt whether any other hon. Member would disagree with it.

The outcome of the situation, however, was a consultation paper issued by the Department of the Environment in June 1973. It contained some interesting conclusions in paragraph 15: … no substitute offering major advantages of a similar kind emerged from the earlier consultations and comments on the Green Paper. For these reasons the Government"— the then Conservative Government— propose that rates should remain the principal source of local revenue. The document stated in paragraph 2: The Government believe that the public would not welcome, at the present time of price and pay restrictions, the introduction of additional new taxes locally … which would … involve complex administration and collection. The Layfield Committee in its deliberations has great problems to consider. One of the difficulties is that life has become so complex that the introduction of a new tax and a new method of collection is bound to be unpopular with the public, even though they may be calling for abolition of the present rating system.

All these considerations were examined 18 months ago. Since then the Local Government Act was passed in February 1974. Therefore, it ill behoves the Conservative Party now to make criticisms to which we were subjected almost continuously since the Conservatives woke up at the end of last May.

Everybody is aware of the parlous situation in local government finance. No doubt this is principally due to inflation, but reorganisation has been costly—much greater than the figure of £54 million quoted in today's Daily Express. The advantages of local government reorganization—and there have been advantages—have been lost on the general public. I should like to express a word of sympathy to the officers and councillors who serve on local authorities and have to bear the brunt of a great deal of criticism, much of it ill-informed. Too often I have been obliged to sit in this Chamber listening to Conservative spokesmen unfairly passing the buck for what, after all, is largely their own creation, and it has been passed on to the backs of these unfortunate people. No wonder they are disillusioned—and there is disillusionment in local government service and amongst local councillors. New officers were appointed with high hopes and new councillors were elected with good intentions. They are becoming increasingly frustrated by the chronic lack of finance and the increasing cynicism of ratepayers.

In the months prior to taking over the reins of office they toiled long hours—they could not claim expenses in those days—implementing the Bains Report and the favoured system of corporate management. Appointments were made and salaries were fixed according to a preordained scale from a joint negotiating body. We had a scale fulcrum fixed according to population figures, and we appointed officers above or below the scale of the fulcrum. Now they are being told by the very people who helped to set out these guidelines that in most cases they are over-staffed and over-paid. If we are to regain their loyalty and restore their enthusiasm, I suggest that we must be more circumspect, in the criticisms that we level against them.

Governments are far too prone to introduce legislation which places more and more liabilities on these bodies without providing the finance necessary for them to carry out their duties adequately. Planning control has passed to the districts, but they have not the qualified staff necessary to do the job adequately. Heaven knows how they will cope if the Government's intentions with regard to building land are passed in their present form. Area health authorities suddenly find themselves having to finance a free chiropody service to old-age pensioners without any thought having been given to where they are expected to find the money. We know that countryside officers have to be appointed by local authorities. There are numerous other examples.

Responsibility for the present-day acute problems of local authorities lies here in this House, and we should admit that that is so. How are they supposed to implement the recommendations of the Houghton Committee on teachers' pay, due soon, if the system remains as it is? The Government must make some announcement about this matter now, and I hope to hear some crumbs of comfort by the Minister later tonight. Failure to act on this will completely sink the finances of our luckless education authorities.

We are told that the Layfield Committee is now sitting, albeit only once a fortnight, and that it will report by the end of 1975 or earlier if possible. In the meantime, the present rating system is to remain. I do not think that that is an unreasonable attitude for the Government to take. But if we are to get through the next 12 months without a complete breakdown in local government and a ratepayers' revolt—and there will be one—there are a number of steps that the Government must take, and their intentions should be made clear as soon as possible.

I accept that there is a very important discussion going on at the moment. I believe that there is to be a meeting with county treasurers and other officials at the end of this month. I accept that the Government are not in a position to announce their full intentions today.

Mr. Percy Grieve (Solihull)

I accept what the hon. Gentleman says about the grave danger facing us of a breakdown in local government finance next year and of a wholesale revolt by ratepayers. In that frivolous speech by the Secretary of State, did the hon. Gentleman hear one word of the action which the Government intend to take to obviate such a situation?

Mr. Ross

I am prepared to give the Government the benefit of the doubt, and I hope that my party does the same. I cannot believe that they are not conscious of the feeling among ratepayers. I cannot believe that they will allow the situation to remain as it is. I understand that the Secretary of State saw some 50 deputations during the last Session of Parliament and said that that was enough. He must be aware of the situation.

I wish to make one or two suggestions about what I believe should happen. First, the Government should state their intentions about rate support grant as soon as possible. This must be as generous as can be devised and as equitable as can be contrived. All hon. Members will talk of their own constituencies, so I must have my own word. In my authority the distribution of the needs element last year gave us a very poor deal. The Minister came to see us at the beginning of August. I hope that we got the message over to him. We have a rising school population and a rising old-age population. As the hon. Member for Bedfordshire. South (Mr. Madel) pointed out, such a situation works very much against an authority in the needs element computation. By a mathematical accident, we came off worst of all the counties. By comparison, Berkshire received a 28 per cent. higher grant towards expenditure than that of the Isle of Wight. I hope that the Secretary of State will at least put that one right.

To give an example of the way that inflation has hit us, although we are a small authority, we left £1 million in our balances which we thought would be more than adequate. Instead, by the end of the financial year our deficit is likely to exceed £500,000. So we have gone right from one side to the other.

Second, local authorities should be assured that they will receive a fair increase order to cover inflation in the current financial year, and this should be made known without delay. There is a suspicion that this may not be coming. Seven or eight years ago it was suddenly withdrawn. We hope that an increase order on the present rate support grant will be made, and made known soon.

Third, the Chancellor of the Exchequer should announce his intention of continuing his July concessions to domestic ratepayers into the next financial year and of extending his measures to cover the smaller commercial premises. I agree very much with the hon. Member for Southend, West. Small shopkeepers have suffered badly. Surely it is possible to devise a gross value below which small commercial premises could be included in the rate relief which the Chancellor of the Exchequer gave last Session.

Fourth, the Government should give their blessing and a speedy passage to the Local Revenue Bill, which I trust that the right hon. Member for Crosby (Mr. Graham Page), having won second place in the ballot, will now reintroduce—

Mr. Graham Page

indicated assent.

Mr. Ross

I am glad to see that the right hon. Gentleman agrees with me. I could not understand the opposition to it in the last Session, though I believe that it was their Lordships who finally pulled the string on it. I trust that it will be given a speedy passage. In times of stringency, surely we can still be allowed to improve our cultural and leisure activities. It would give local authorities a source of finance which they could control themselves.

Fifth, guidance should be given to authorities about those areas in which they should work closer together. Just because further reform is unthinkable so soon after the last upheaval, there is no reason why staff and premises should not be shared and proposed new buildings shelved. I still think that there is a great deal to be said for the old all-purpose authority. The first moves towards such amalgamations, where they make sense, could be made now. There are one or two places where it makes sense, and my own constituency is one.

Having heard the figures for Hereford and Worcester, which apparently went up to 45 per cent. last year and 50 per cent. is threatened this year, I am fairly certain that Hereford would rather like to get its identity back again. One way might be the all-purpose authority. We hear about schemes for all-purpose buildings. There is a new county building being erected near Worcester. It so happens that I know that part of the country rather well. Surely these things should be looked at again and the Government's ideas made known on whether they would allow all-purpose authorities in England and Wales, such as the old county boroughs used to be. After all, this sort of thing has been allowed in Scotland. It surely makes sense, where the public would welcome it and the rate would be financed, so to do.

Sixth, I want the Government to give local authorities greater freedom to raise finance from simple forms of local tax. A very simple one on the Isle of Wight would be a landing charge. If people came over and paid their way, we should be delighted.

Of course there will have to be cuts in present local authority services, although it is difficult to know where. Speaking as a former chairman of a policy and resources committee, I know that the last time that we fixed our rates we made substantial cuts. Now, apparently, local authorities will have to do more and the exercise will be even more difficult.

But there should not be cuts in housing expenditure. I welcomed the Secretary of State's conversion in his speech at Brighton the other day to the idea of low-cost housing designs and mobile homes. This is an area in which money could be better spent. The need is certainly immediate. One could consider imposing a double rate on second homes. This has been suggested elsewhere, and it could he introduced now purely as a temporary measure.

Nor, I hope, will there be cuts in social services or further education, particularly evening classes, which have gone to the wall in past times of stringency. Highways and lighting seem obvious targets. I cannot understand why there have not been cuts in lighting already, as there have been in Belgium and France. When one leaves this House at one o'clock in the morning, one sees lights blazing everywhere. Also, some of our ideas on work study seem to have gone badly wrong. There seem to be more people with stopwatches than men at the grass roots doing the job.

I make the final plea that at this late hour the Government should reconsider their proposals on development land. Why not impose a variable tax based on the capital value of land already passed for development—not land which does not already have planning consent or has not been scheduled for building? In any case, the tax should not initially be at the penal rate of 80 per cent. With that kind of rate, no one will do anything. Such a tax might start at 30 per cent.,

rising to 70 per cent. after a year if work had not started and finally to 100 per cent., which I believe the Government have in mind. If such a tax were levied and collected by the planning authority, it would not only bring in much-needed additional finance locally but restore a free market in building land and get some houses built into the bargain.

5.53 p.m.

Mr. James Boyden (Bishop Auckland)

The hon. Member for the Isle of Wight (Mr. Ross) has analysed for me the reasons for the political opportunism of the Conservative Party. I need not elaborate, except to say that I do not think that in the election the Conservative Party quite realised the damage it was doing to local g