RATE SUPPORT GRANT
4.19p.m.
The Secretary of State for the Environment (Mr. Anthony Crosland)
I beg to move,
That the Rate Support Grant Order 1974, a copy of which was laid before this House on 14th March, be approved.
When I last spoke in a debate on a rate support grant order in 1970, Ministers were accused of attempting to send the House to sleep. That is a tactic not unknown to Ministers who find themselves on a sticky wicket. But if I induce any drowsiness in hon. Members this afternoon it will be an accidental by-product of the technical complexity of the subject, and not an attempt to bore the House into submission.
The right hon. and learned Member for Hexham (Mr. Rippon), who was responsible for these matters under the previous administration, more than once observed that the only hope of securing an appropriate grant distribution would be to sacrifice a goat before programming the Department of the Environment computer. His right hon. Friend the Member for Crosby (Mr. Page) went further and argued that the most expeditious way of distributing rate support grant would be for him to fly over the country in a helicopter, dropping bags with the appropriate amount of money on local authorities as he passed. I am distressed to see that the right hon. Gentleman has retreated far into the back benches. I am sure that the right hon. Member for Finchley (Mrs. Thatcher), whom I welcome to her new responsibilities on the Opposition benches, will produce equally delightful suggestions for improving the system, using all the ingenuity which she displayed, though not always, in our view, with the right intentions, at the Department of Education and Science.
I should perhaps begin by explaining briefly the underlying basis of the order, which is the first to be made under the Local Government Act 1974. The formulae used for distributing Exchequer grants to local authorities in support of rates are extremely complicated—according to The Times, it is a task for an Einstein. But the broad workings of the system are clear—well, relatively clear.
Each year a forecast is made of local authority “relevant expenditure” . That [column 50]term now covers virtually all net local authority expenditure out of revenue. It is estimated in consultation with the local authority associations. Regard is paid to the evidence of performance in past years, to the probable fluctuations in demand for the different services, and to the best projections which can be made of factors such as the numbers requiring education at various stages, the likely recruitment of police, and so on. That is the starting point, but the Secretary of State is also required by the Act to take into account the extent to which it is reasonable to develop local authority services in the light of general economic conditions.
For 1974–75 local government reorganisation has led to a change in the composition of relevant expenditure. Certain services and their costs—namely, local health, the greater part of the school health service, sewerage and water expenditure—will be transferred to other bodies. On the other hand, certain other services will now come into relevant expenditure for the first time.
When the forecast of relevant expenditure is settled, Exchequer grant is fixed as a percentage of it. My predecessor had proposed a percentage of 60.5. I have no intention to alter that. About 10 per cent. of the grant is then deducted for specific grants towards particular services. The remaining 90 per cent. of the grant is then divided between three elements—namely, needs, resources and domestic.
The needs element is distributed to local authorities on a formula designed to reflect variations in their spending needs. The revised formula produced by my predecessor represents a considerable improvement on the previous formulae or any previous formula, but it is still far from perfect and I shall want to look closely at how it works out. The Secretary of State is required by the Act to prescribe various factors and sums which need to be taken into account in the formula. Many of the factors prescribed in the order are obviously right. However, I am not at all happy about the South-East and outer West Midlands factors. It would be too difficult to change them for 1974–75, but I shall certainly revise or, rather, review them for the following year. The needs [column 51]element accounts for £1,907 million. That is about 60 per cent. of the total grant.
The resources element is intended to supplement the rate income of authorities whose rateable value per head is relatively low. It is paid when an authority's rateable value per head of population is less than a “national standard” prescribed for the year in the order. The Government, as it were, step in as a ratepayer to pay rates on the deficiency in rateable value. This year it will be paid to most rating authorities, and will take a larger share than usual of the total, increasing from £413 million to £723 million. That is about 25 per cent. of the total. This change, which was proposed by my predecessors and which I welcome, should go some way to removing part of the inequity of the previous system.
The domestic element is very different. Rating authorities are required to levy lower rates on domestic than on non-domestic properties. Every rating authority receives an amount of domestic element grant which matches as closely as possible the authority's loss of rate income from this domestic relief. Under this order it would be more than doubled to £446 million, about 15 per cent. of the total rate support grant. I shall return to the domestic element, which appears to be a subject of some slight controversy.
When on 5th March I arrived at No. 2 Marsham Street, that elegant adornment of London's environment—my right hon. Friend the Member for Deptford (Mr. Silkin) remarked that the one advantage of being in the building was that it was the only place in London from which one could not see it—the first decision I had to make was whether to confirm the package agreed by my predecessor and fully described in the White Paper, Cmnd. 5532. This proposed, to recapitulate, a total rate support grant for 1974–75 of £3,076 million at November 1973 prices, apportioned as to £1,907 million for the needs element, £723 million for the resources element and £446 million for the domestic element.
I decided that it would be wrong to reopen the question of the total amount of the grant. Certainly we in opposition had criticised. some of the cuts which [column 52]the previous Conservative Government had imposed on local authorities. But during the election I had resolutely refused to promise that we would at once rescind these, and I decided not to do so for two good reasons.
The first was a severely practical reason. The new grants become payable, at a rate of £60 million a week, in only six days from today. I was advised that today was the last possible day on which the order could be laid before the House if payment was to begin on time. If I had sought to reopen the whole question of the amount of grant—involving, as that would, lengthy discussions with the local authority associations, the Treasury and so on—we simply could not have been ready with the order today. The new authorities, already sufficiently confused by the previous Government's many changes of policy, would have found that utter financial chaos was superimposed on all the other stresses and strains which reorganisation has imposed. I regarded that as unacceptable.
Secondly, we must face the fact of the economic situation which we inherited. Here I must not anticipate tomorrow's Budget Statement.
As the House knows, I strongly believe that a Labour Government should give a high priority to an adequate rate of growth of desirable public expenditure when deciding how our national resources should be allocated. But, clearly, resources are at present limited. It is equally clear that the Government have to decide what are the priority claims on public expenditure. The current settlement still leaves room for a 2½ per cent. increase in local authority expenditure in real terms. I wish it could be more. During the last Labour Government it was about twice as great on average. In today's circumstances I thought it would be wrong for me to make any change in the total amount to be paid out.
For practical reasons I also ruled out any change in the distribution of the grant as between the needs, resources, and domestic elements, or in the formulae for the needs and resources elements. No such changes could have been made in the time available.
The one aspect of the package about which I had the gravest misgivings was also one that it was possible to change in [column 53]the time available without serious consequences for the rate-fixing process—namely, the proposed distribution of the £446 million domestic element in the grant.
The previous administration, after a bewildering succession of policy changes which left the local government world dazed, came up with the device of variable domestic rate relief. The charitable explanation of what they had in mind was that they had decided to temper justice with mercy. The new formulae for the needs and resources elements—I give the previous Government credit for this—introduced some sense into the distribution of total grant so that areas with special problems received more help than they had done previously. Of course, giving more to those who had done badly under the old system meant that there was less left for those who had done well under the previous system. It was at that stage that the Conservative Government took fright.
The previous Government decided that there should be no redistribution to domestic ratepayers as a result of the altered formulae. What they had given the worse-off areas with one hand—through the needs and resources element—they took away with the other through the domestic element. Their aim was to legislate for a uniform rate of increase in domestic rates this year, irrespective of the ability to pay of different areas.
In the hope of achieving this aim, the last Government introduced a variable domestic rate relief. In areas which were losing grant, or where water and sewerage charges were likely to rise particularly steeply, the amount in the pound of domestic rate relief would have been very high—as much as 40p in the pound in one well-known instance. But for an area gaining grant the amount in the pound would have been as low as 7p.
This would have taken benefit away from householders in those inner urban areas which were entitled, and, indeed, intended, to gain under the new distribution formulae. The policy of helping the inner cities was surely right and justifiable. But the last Government flinched from the consequences for some of the counties and introduced the variable domestic element. I believe that this was wrong. [column 54]
Quite apart from the principle involved, the proposed system of variable domestic relief was complicated, cumbersome and difficult to understand. It was, as The Times commented, a wildly uncertain exercise, based on speculative arithmetic which produced some peculiar results. Moreover, there was never the slightest chance that as a result of this policy, to quote my predecessor's words in the House on 22nd January,
“The average national increase” —
in rates—
“should accordingly be about 3 per cent.” — [Official Report, 22nd January 1974; Vol. 867, c. 1469.]
There was not the slightest chance of that, or that in the hardest-pressed areas rate increases for domestic ratepayers would be limited to the 9 per cent. which he claimed he had in mind. There was no chance at all of achieving that under the last Government's policy.
On the information so far available from the authorities which have fixed their rates, it is clear that under the last Government's proposals, which I am altering, domestic rate increases would have averaged at least 20 per cent. and in some cases might well have been as high as 60 per cent. So much for the 9 per cent. ceiling on rate increases.
Mrs. Elaine Kellett-Bowman (Lancaster)
rose——
Mr. Crosland
I am reluctant to give way because Mr. Speaker admonished us before we started to be as brief as possible. However, I will do so to the hon. Lady.
Mrs. Kellett-Bowman
Is the right hon. Gentleman aware of the serious effect on the domestic rate of the reduction in domestic relief in Lancaster and many other constituencies in the North-West?
Mr. Crosland
I am in the middle of trying to make the case to the House. If anyone thinks that I am not aware of the strong feelings in a large number of constituencies, I can assure them that they are wrong. I am fully aware of those feelings.
The Conservative proposals would have failed to achieve what was in any case the wrong objective. The variable domestic element was thus highly unsatisfactory in many ways. Given the shortage of time, there was only one practicable change [column 55]which I could make, and that was to replace the variable relief altogether by a uniform flat-rate relief. This was not an easy decision, but I concluded that on balance—and it was only on balance—it would be right to make the change, because it helps the hard-pressed inner cities where so many of our social problems come together, and it has long been Labour policy—and a policy to which I personally have been deeply committed—to give these inner city areas more assistance.
The Labour Party's election manifesto said:
“Our cities desperately need and must get better services which are properly manned, and the resources to make this possible.”
I myself wrote in a book published last week which I warmly commend to the whole House:
“The environmental crisis of the inner cities, affecting the poor much more than the rich, continues unabated.”
I see considerable merit in both parties and individuals acting when in Government on the principles they enunciated when in Opposition. So I decided to replace the variable domestic relief by a flat-rate domestic relief of 13p in England. In Wales, where there are special problems, to which my right hon. and learned Friend the Secretary of State for Wales will be referring later, we settled on a flat rate of 33½p.
The result of this decision, I fully concede, is very rough justice, with a strong element of the capricious about it. I could have wished to have a more carefully worked-out proposal. But no one should doubt that the results overall are socially equitable and just.
I will quote some figures as examples. The change gives an extra £2.7 million to Greater Manchester, £3.3 million to Merseyside, £2.6 million to Tyne and Wear, £400,000 to South Yorkshire, £80,000 to the West Midlands and about £25 million to London. Not all districts in these areas benefit, but without exception it is the inner areas of the conurbations which will have relief. As such, on an admittedly rough and ready approach, we have gone back to something nearer the objective approach which the Conservative Government so altered during their last months of office.
[column 56]Mrs. Sally Oppenheim (Gloucester)
rose——
Mr. Churchill (Stertford)
rose——
Mr. Crosland
I shall not give way any more, because if 40 right hon. and hon. Members want to speak in the debate one must be brief.
The decision I took was given a welcome, albeit a cautious one, in the Press. The Times—which does not agree with the actions of the Labour Party as much as it does with those of the Conservative Party—said that I had
“wisely decided not to make any far-reaching changes in the distribution formulae or in the total amount of Exchequer grant distributed. To have done so at this stage might have been the final undoing of local authorities struggling to get a grip on their new areas and functions.”
In relation to the variable domestic element, The Times said that the decision by the last Government
“had a general tendency to take away from householders in inner city areas the benefits which other changes in the formulae had been intended to bring them. Mr. Crosland is replacing the variable element by a straight increase in the flat rate element. It should broadly support the egalitarian purposes which he said would be entertained by the Department of the Environment so long as he is in charge.”
The Economist, I think understating the position, wrote:
“Mr. Crosland 's system is probably slightly fairer than the Tories' proposal.”
I remind the House, therefore, particularly some of my hon. Friends, that I am making a proposal described both as egalitarian and as fair.
Given the redistributive nature of the change, I find the attitude of the Liberal Party towards the order extremely curious. In their manifesto the Liberals called for
“a radical redistribution of income” .
They do not seem to realise that one does not redistribute income simply by writing about it. One has to do something about it, and, of course, if one does do something about it some people must lose, and I accept that some Liberal constituencies will lose as a result of the order.
I may add that my own constituency of Grimsby will lose also as a result of what I propose. That is an ironic result [column 57]of the change, especially as the constituency of the right hon. Member for Finchley gains substantially as part of Barnet. One penny in the pound is the loss which will be suffered by the areas represented by a large number of hon. Members, including one or two of my hon. Friends, who have written angry complaints to me.
Grimsby is, naturally, dear to my heart, and the first thing which my officials told me when I proposed to make this change was that Grimsby would be one of the sufferers. Whether they pointed this out to me in a spirit of tender compassion or in an attempt to dissuade me is not for me to decide. I greatly regret that Grimsby should suffer. I am prepared to face up to that in the interests of general fairness. Like many of my hon. Friends who are in trouble, I met my constituency Labour Party on Friday to explain and defend my position. It was not best pleased, of course, but it comprises good Socialists and loyal Labour Party members, and they accepted the broad justice of what I have done.
I fully recognise that the course I am recommending is far from perfect. There are some authorities which have been unfortunate over the distribution of the needs and resources elements, where householders will now face additional burdens as a result of my decision. I am very much aware of the concern of hon. Members, including some of my colleagues, who represent such areas, and I greatly sympathise with them. I am most grateful to them, and here I think particularly of my hon. Friends the Members for Norwich, South (Mr. Garrett), Keighley (Mr. Cryer), Meriden (Mr. Tomlinson), Sowerby (Mr. Madden), and Gloucestershire, West (Mr. Loughlin)—and others of all parties—who have rightly drawn attention to particular rate problems arising in their constituencies from this settlement. I regret that I cannot offer to meet their individual cases this year.
Looking ahead to next year, I intend over the coming months to make a thorough review of the whole grant distribution system and the way in which it is distributed between the three elements. We shall have the representations of all hon. Members and of local authorities very much in mind in seeing how we can [column 58]improve the fairness of the system for 1975–76. This is without prejudice to any wider changes we may make in the longer run to the rating system as a whole.
I must remind the House of two points which have been rather lost to view in the course of the recent outcry. First, and broadly speaking, those areas where the percentage rise in rates this year will be somewhat higher as a result of our proposal to abolish variable domestic relief are those areas which have in the past often enjoyed a low domestic rate burden. For example, in Cornwall the average rate payment for each domestic household in 1973–74 was £40 a year. In County Durham it was about £45, in Norfolk it was £47 and in many of the West Yorkshire areas, where increases will be substantial, the figure was similarly low.
By contrast, in the areas which will benefit from the changes I am making the rates have been very much higher. In Newcastle in 1973–74 they averaged £73 per domestic household, in Birmingham £77, in Manchester £94 and in the GLC area as a whole £91. All of this strongly reinforces my view that we should concentrate our help, as we are seeking to do, on areas where the burden of rates is already a particularly onerous one.
Mr. John Pardoe (Cornwall, North)
Will the right hon. Gentleman give way? He mentioned Cornwall.
Mr. Crosland
I imagine it is possible that the hon. Member will be called. I rather hope not, but it is possible.
Secondly, the total increase in rates in the country as a whole, although it would not be guessed from some of the representations made to me, is part of the legacy which Labour has inherited from the previous Tory Government. The national rate burden remains precisely the same under this order as it was under the proposals of the previous administration. What I have done is to redistribute £200 million of grant out of £3,000 million—7 per cent. of the total rate support grant—back to the areas which needed it. As a result some people in other areas will pay more but by and large, with notable exceptions, these are the areas which have less pressing claims for central Government help.
Mr. Churchill
rose——
Mr. Crosland
My reason for not giving way is quite simply that there are [column 59]40 hon. Members waiting to speak. I have vivid recollections of being a backbencher, unable to be called because there was not enough time.
Mr. Churchill
Can the right hon. Gentleman explain, since he has said that by abolishing the variable domestic element he will be helping inner city areas, why this move is benefiting areas such as Sussex and Westminster, while my constituents in part of the metropolitan district of Trafford within Greater Manchester will lose more than £8 million in grant this year, which represents an increase in the domestic rate in excess of 60 per cent.? They will be worse off.
Mr. Crosland
I have already dealt with this. I have explained that Greater Manchester as a whole gains a large sum from the change I am making. I said clearly that not all districts in the metropolitan counties would gain.
Of course, there are anomalies in what I have done, but there were grotesque anomalies in the system I have superseded. A large number of Labour Members were complaining bitterly about the system I have altered.
I am sure that the whole House will wish to join me in paying tribute to the work of local and central Government officials who have jointly collected the information and prepared the analyses which formed the basis for the discussions leading to this settlement. The past year has been exceptionally difficult—indeed, quite awful—for everyone concerned with local government. They have had to cope with the preparations for local government reorganisation, a new grant system and numerous other changes.
This year—a quite unprecedented event—there have been three statutory meetings between the Secretary of State and the associations to determine the settlement, two with my predecessor and one with me. The uncertainty has been greater than ever before, as have the agonies. There must have been many moments when local authorities wondered whether there would ever be a rate support grant at all. On behalf of both sides of the House I express our appreciation for the spirit in which this year's highly complicated consultations have been carried out. [column 60]
In presenting this order to the House I find myself in a unique position. Never before has a Minister responsible for the rate support grant settlement brought before the House a measure which represents in part the work of his predecessor and in part his own. Perhaps this may make the order more acceptable to the House. I hope so, for I must warn the House that if this order were not to be carried tonight local government would be plunged into utter chaos. Authorities would not get their money by 2nd April, and would then have to start borrowing £60 million a week in the short-term money market at interest rates of 15 per cent. or higher. This would be a wholly unjustified additional burden on the ratepayers, and we should be thought most irresponsible if by our action tonight we were to impose it.
Furthermore, no one should think that by rejecting this order more money will be available for local government from the Exchequer. Those who vote against the order are asking that money should be taken away from inner urban areas and paid elsewhere. All that they will ensure if they succeed in the vote is that no local authority receives any Exchequer assistance for some weeks until we have relaid the order and argued it all out again.
The changes I have made represent a definite move in the right direction towards the goal of greater fairness and equality to which the Government are committed. I commend the order to the House.
4.50 p.m.
Mrs. Margaret Thatcher (Finchley)
Anthony CroslandThe Secretary of State claims that his is an equitable solution. We claim that he has abandoned equity and substituted an arbitrary decision. He claims rough justice. We say that he has abandoned any semblance of justice in what he is doing in the Rate Support Grant Order. I must, however, congratulate him on one aspect. No other Minister in his Government has invoked so much opposition from his own back benchers within such a short time.
The right hon. Gentleman claims that he has partly inherited the order, and he hopes that that will make it the more acceptable. It may result in making it unacceptable to both sides of the House. [column 61]The right hon. Gentleman claims that there is variation of rate burden from one part of the country to another, from some rural areas to some centres of cities. Yes, there is. There is, too, a variation of services. Even if there is a variation of burden, one cannot go from a position of considerable variation to the position which he wants to get to without making many transitional steps to protect ratepayers from the considerable increases which he would thereby impose upon them.
I agree with the right hon. Gentleman that the debate on the Rate Support Grant Order tends to be a technical debate—although, because of his action, this will probably be the liveliest debate we have had for many years—but our constituents do not come to us with technical points. It is no good trying to explain to them an increase in rates by reference to the resources element, the domestic element, the needs element, the relevant expenditure, and so on. They say “I still have to bear a certain percentage of the increase in rates, and what are you going to do about that?” That is what many constituents and many hon. Members will be saying to the right hon. Gentleman today.
The letters received by hon. Members are pathetic. My hon. Friend the Member for Honiton (Mr. Emery) tried to intervene in the right hon. Gentleman's speech, and I have a letter in these terms from one of his constituents who moved to Honiton:
“Comfortably settled as I am in this small flat, I carefully worked out provision for my few remaining years only to find now the Labour Government proposing such an increase in the rates that thousands like me will not be able to survive.”
Hon. Members
“Rubbish.”
Mrs. Thatcher
I am interested to hear that Government supporters say that increases sometimes amounting to between 80 per cent. and 90 per cent. in the domestic rate are nonsense. They are saying that they are not prepared to do anything about it and are displaying callous indifference to the requirements and needs of the constituents concerned.
I agree with the right hon. Gentleman that we come to this year's rate support settlement against an unusual background. There can scarcely have been more [column 62]changes in local government structure and financing than we have to cope with this year. That is common ground. The inquiries about reorganisation were set in train not by the previous Government but by the Government before that. There is little point in either Government or Opposition blaming the previous Government wholly for the difficulties caused by the reorganisation of local government or for the fundamental difficulties in local government finance which we have had for many years and which are likely to continue for many years to come.
This year, the biggest local government reorganisation since the nineteenth century, with different boundaries, different powers, a change of formula for the grant, changes in the organisation for water and sewerage and a miscellany of other factors affecting individual ratepayers, it seemed likely at the outset that there would be a number of sharp increases across the country as a whole in the rate burden from the domestic rate-payer. This increase might not go in any particular geographical pattern but have a random distribution. Unless something was done, it seemed that some ratepayers would face considerable increases. The system adopted by the Conservative Government set out to mitigate those increases wherever they occurred, whether in urban areas like Wolverhampton, Barnsley or Sandwell, or in rural areas in the counties. The variable domestic relief was designed to mitigate certain large increases in rates to a tolerable level. We claim that to be an equitable way of doing it.
The Minister for Housing and Construction (Mr. Freeson)
Political.
Mrs. Thatcher
If it is political to reduce sharp rate increases wherever they occur, it was political, but it was equitable as well. But the right hon. Gentleman is doing nothing about the sharp increases in rates which his decisions have produced. He prefers a blanket derating for the domestic ratepayer.
There are other reasons for increases in rates in addition to those I have mentioned. There could be extravagance by local authorities. I have many complaints of extravagance in some cities—Leeds and Sheffield—and some examples where reorganisation occurred enormous increases in the number of staff and in [column 63]the salaries which they were being offered. That is a matter for the local government authority itself to cope with, and it is not one of the special factors to which I referred earlier. There is, of course, an inflation element, but there is normally a rate support grant (increase) order at the end of the year to take account of inflation. Our proposals were designed to mitigate the sharp increases in rates which came from the reorganisation, the change in formula and the change in organisation of the water and sewerage element in the local authority rates——
Mr. A. J. Beith (Berwick-on-Tweed)
Will the right hon. Lady confirm——
Mr. T. W. Urwin (Houghton-le-Spring)
Will the right hon. Lady——
Mrs. Thatcher
I give way to the hon. Member for Berwick-on-Tweed (Mr. Beith).
Mr. Urwin
rose——
Mr. Deputy Speaker (Mr. Oscar Murton)
Order. Perhaps the right hon. Lady might defer afterwards to the hon. Member for Houghton-le-Spring (Mr. Urwin).
Mrs. Thatcher
I will give way to the hon. Member for Houghton-le-Spring (Mr. Urwin) after hon. Member for Berwick-on-Tweed.
Mr. Beith
I thank the extraordinarily gracious right hon. Lady, and you, Mr. Deputy Speaker. Will the right hon. Lady confirm that among the sharp increases to which she referred were the special negotiations which took place between the Department of the Environment and those authorities that incurred expenditure under the Local Employment Acts, and that part of the domestic element was used to cushion large expenditure of that sort? I have a case in Berwick-on-Tweed which accounts for 5p in the domestic element. Does the right hon. Lady agree that specific negotiations took place in which figures were produced and incorporated in the domestic element because of expenditure on such things as sewerage schemes under the Local Employment Acts?
[column 64]Mrs. Thatcher
I cannot confirm it because it was not my responsibility at the time—I hope that one day it will be. Perhaps the hon. Gentleman will have a word with Geoffrey Ripponmy right hon. Friend. I give way to the hon. Member for Houghton-le-Spring.
Mr. Urwin
When the right hon. Lady was dealing with the generosity of the previous administration she tended completely to overlook that in Durham, which is one of the poorer counties and which is badly affected by unemployment, the problems of industrial dereliction and so on, the decision of her Government to reorganise local government cost £4 million in rateable value. Because of her Government's decision to redistribute domestic rate burdens, Durham loses a further £2 million. Durham is absolutely seething with anger against my right hon. Friend for taking away £840,000, but by far the greater responsibility for the massive increase in rates rests with the right hon. Lady's administration, not with my right hon. Friend.
Mrs. Thatcher
Of course, I disagree with the hon. Member. He knows full well that, whatever the problem with rates in Durham, it has been made infinitely worse by the actions of Anthony Crosland the right hon. Gentleman and his right hon. Friends.
I was talking about the variable domestic relief. I shall not go over the factors on which we are agreed—the separation of the relief into the needs, resources and domestic elements. The purpose of variable domestic relief was described in a circular from Geoffrey Ripponmy right hon. Friend's Department, as it was then, on 4th February 1974. The object of the variable component is to protect domestic ratepayers against the increases in rate burdens that might otherwise occur because of the effect of changes in rate support grant under the new RSG arrangements and because of the effects of local government boundary changes and water and sewerage reorganisation.
The right hon. Gentleman has wholly abandoned that formula and with it that approach and with it the essential equity of the approach. He claims that we did not benefit the cities, but in his statement to the House on 22nd January my right hon. Friend pointed out that the distribution of the needs element had been [column 65]designed to help—and did help—the cities. Indeed, he came up against criticism from hon. Members on both sides of the House because, by virtue of the needs and resources element, he had already paid too much attention to the cities and too little to the rural areas. It was not surprising after that that he should attempt to bring some equity to the rural areas, too, but not limit it to that. If some urban areas were badly hit by rate increases, they, too, got the benefit. It is not just a difference in figures; it is an essential difference in approach.
Mr. Robert Adley (Christchurch and Lymington)
Is not my right hon. Friend saying that on the whole the previous arrangements were designed to benefit low income areas, for instance, East Anglia and the far West, and that what is happening now is that those areas with lots of people on low incomes and a lot of people on small fixed incomes are being disadvantaged, so that we have the better off in the cities being subsidised by the worse off in the low income areas.
Mrs. Thatcher
I believe that the formula was designed to mitigate severe increases in the rate burden, wherever they occurred, and to reduce them to tolerable levels this year. [Interruption.] There was a formula to calculate the increases and the advice available to us in the arithmetic connected with that formula was the same as is now available to the right hon. Gentlemen and his hon. Friends.
Certainly there were some difficulties in calculating the relief due because first one had to take the amounts of rates payable this year and compare that figure with the amounts payable under all of the new factors next year. There are a number of problematical factors in getting from the existing position to next years position, and I believe that a number of borough treasurers now have different ideas about how it could have been done. In fact, for all areas the projections were made on an average rate of growth, and I think that we might have taken some variable factors into account. Undoubtedly we should have liked to wait until all of the budgets were made up, and then we could have seen exactly how to apply the relief. [column 66]
But the right hon. Gentleman now has the budgets made up, and if he really wishes to be equitable, he could apply the relief to the actual figures, not on the basis of the theory which we had to operate.
Like the right hon. Gentleman we know that the local authorities need all the available information to make up their rate demands, and some of them have already made them up and sent them out and are in great difficulty because of the right hon. Gentleman's instant action.
There were some problems in calculation of relief, but those problems would now have been smoothed out if the right hon. Gentleman wished to adopt that approach, because he has the actual figures.
Just to show that it was not an urban versus a rural battle, the Press notice of the Department of the Environment on 20th February gave the variable domestic relief calculated for each area under the system Geoffrey Rippon my right hon. and learned Friend used. It showed that the benefit went to areas as different as Barnsley, Sandwell, Calderdale, Havering, Mid-Bedfordshire, Buckinghamshire, Cambridgeshire, Oxfordshire, Cheshire, Cornwall, Cumbria, Derbyshire, including Bolsover, Devon, including Plymouth, Dorset, Durham, Gloucester, Portsmouth—I cannot mention them all—Hereford, Worcestershire, Boothferry, Hull, Rossendale, Norfolk and Leicester. If any city has problems, Leicester certainly has, as anyone in the education world knows. Northampton, Shropshire and the Wrekin benefited but are very badly hit under the right hon. Gentleman's edict. Newcastle-under-Lyme, Nuneaton and Rugby were to benefit, but all of those places will now lose. I understood from the Association of District Councils that of the 296 new district councils in the non-metropolitan counties 234 will lose relief. That relief had previously been notified to them and used to make up their rate demand. Other districts may gain.
This change was made without consultation. A statutory meeting was called and told. I quote from the CCA note on 14th March 1974:
“The Secretary of State informed representatives of the change … No prior notice of the Government's intention had been given to the Association.”
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Having made the point, I make no further observations. I know what these statutory meetings are like, but it appeared that there were no prior consultations. We know full well that in the time available Anthony Croslandthe right hon. Gentleman and his friends could give the subject only the most cursory examination. On the basis of that cursory examination they were prepared to put many ratepayers in many authorities in difficulties and lead to rate increases of up to 90 per cent. Some of the details I have received from some of the separate authorities make it quite clear that that is the order of increase that will bear upon the domestic ratepayers.
Mr. David Mudd (Falmouth and Camborne)
Would my right hon. Friend go along with me in underlining that one of the effects of this mandatory action will be homelessness and squalor in counties such as Cornwall? Cornwall has been mentioned particularly in the debate. In Cornwall rent is traditionally low. It is on a rent plus rates basis. Therefore, if rates go up, because of the rent freeze the landlord cannot recoup this money. He will be left with less money to carry out modernisation and important repairs to the house. He will be left with no alternative other than to begin an endless trek through the county court for repossession.
Mrs. Thatcher
If one lives in a house which the right hon. Gentleman calls of comparatively low rateable value and budgets to pay rates of about £50 a year this year and is then faced with a demand to pay £75 this year, that is an extremely large increase for many people compared with what they had budgeted for. Some retired people will not be able to meet it. They will have to rely upon the Tory rate rebate provision which is being very well advertised. However, that will not benefit everyone who suffers severe increases under this Act.
I have had details from a number of areas—Somerset in particular, which was the subject of a short debate in the House the other evening. Somerset has done everything asked of it. It has exercised the most stringent economies so that it has only 2 per cent. growth, although it has had a bigger increase than that in population. It has budgeted for less than [column 68]the 9 per cent. inflation, as my right hon. Friend asked. It has implemented all the December cuts. Having done all that, some of its ratepayers have an increase in domestic rates of up to 85 per cent.
The authority does not think much of a Government who say that its ratepayers must pay bigger increases than those paid in some of the cities which have a higher rate of service. In Norfolk, amounts of up to 70 per cent. on the domestic rate-payer are involved. In Portsmouth—an example of an urban area—only one in five will qualify for the rate rebate and four-fifths will have their rates increased by up to 37½ per cent.
A large part of this situation has been brought about by the Secretary of State's action. I have a note from Lincoln, which, referring to the right hon. Gentleman's decision, says:
“This one act of ‘instant government’ has worsened an unhappy position—because no local authority likes to increase the rates—into a devastating one. In one part of the county the increase is going to be of the order of 80 per cent.”
This is caused by the right hon. Gentleman's action.
Increases in rates are always unpopular, and rates are always a very sensitive issue in the House. The right hon. Gentleman has abandoned the object of protecting ratepayers against big increases. He has abandoned the flexible approach which would have enabled him to do it. He is relying wholly on our rate rebate scheme. He has worsened, in particular, the position of owner-occupiers, who are already having to bear other increases without protection. In addition to those other increases, they will have to bear the consequence of the rent freeze as it affects the rates. Even if one gets a rate support grant (increase) order—and the right hon. Gentleman has given no such undertaking—a proportion of the increase will fall upon the local ratepayers.
Mr. Crosland
With respect to the right hon. Lady, any deficit is met by the Government to the extent of 80 per cent. in any case, so we are simply talking about the remaining 20 per cent. If there is an increase order, it would cover the 20 per cent.
Mrs. Thatcher
In that case, will there be an increase order to cover this?
[column 69]Mr. Crosland
In what was a rather longer discussion than perhaps the right hon. Lady implied, I told the local authority associations that I would await proposals from them as to how we dealt with the remaining 20 per cent., whether by an increase order or in some other way.
Mrs. Thatcher
So the right hon. Gentleman has not undertaken to meet the increase. Why? If it is so simple to pay 100 per cent., why does he not give an undertaking that there will be a full rate support grant (increase) order?
The Conservative Government were faced with rate increases due to a similar situation; namely the situation occurring after rating revaluation at this time last year, something which we had to undertake because it had been left aside by the Labour Government and, therefore, there had been a period of 10 years without any revaluation. That, too, threw up unexpectedly severe rate increases on some domestic ratepayers. The difference between the present Government and the Conservative Government is that we did something about mitigating the increases.
We did something of a kind which is still open to the present Government. On 6th March last year, in the Budget Statement, my right hon. Friend A. Barber the then Chancellor of the Exchequer said:
“the Government therefore propose to phase the effects for those hardest hit by meeting half the cost above 10 per cent. of any increases in domestic rate bills in 1973–74 which are attributable solely to the effects of revaluation” .—[Official Report, 6th March 1973; Vol. 851, c. 268.]
In fact, we were prepared to meet half the cost of the increases.
Mr. Charles Loughlin (Gloucestershire, West)
It never worked.
Mrs. Thatcher
We were prepared to do that and allocated money for that purpose. That solution is still open to the Government tomorrow, but if it is likely to come about tomorrow there is little point in our debating the Rate Support Grant Order today. One would have thought that he could have announced some such system of mitigation today.
If the Government, knowing that rate increases of up to 90 per cent. will fall on some ratepayers partly because of the Secretary of State's hasty decisions, pro[column 70]pose to take no action to relieve the burden, many of my hon. and right hon. Friends will feel that the only way they can protest about the Minister's callous indifference is to vote against the order tonight.