Mrs. Margaret Thatcher (Finchley)
It is my pleasant privilege to congratulate the hon. Member for Erith and Crayford (Mr. Wellbeloved) on his excellent maiden speech. I do so with special pleasure because his seat was the first one that I fought, and therefore I did my best to prevent his coming to the House. I fought his predecessor in 1950 and 1951, and the hon. Gentleman will be glad to know that I had the same respect and liking for his predecessor (Norman Dodds)as he showed. [column 146]
Another reason for my special pleasure in congratulating him is that my husband has a factory in Erith, and therefore I am very glad that the hon. Gentleman has chosen a debate on rates for his maiden speech. It might be said in one sense that I am wedded to the problems of Erith, and in that capacity I would tell him that the rates on industrial hereditaments are very high. I hope that we will hear often from the hon. Gentleman. Perhaps I should inform him that his predecessor made fairly brief speeches, and I noticed that he followed that example.
I come to the Bill. Always in the House when we have a debate on the rating system or on any Measure affecting it, we find that the word “iniquities” is rather over-used. We have had a special lot of iniquities mentioned today and I would, therefore, like to begin by quoting from the Allen Report, extracts which have been conspicuous by their absence in debate today. Paragraph 346, Chapter 15, stated in the summary and findings:
“Looking at rates as a form of taxation … we find that domestic rates are less now than before the last war, as a proportion of all local authority expenditure, or of all personal incomes, or of total taxes.”
Listening to the debate today, one would expect that the reverse was the case.
I regret that the hon. Lady did not see fit to quote the whole of that paragraph from the Allen Report, for it goes on to say that while rates are a lower proportion than was the case prewar:
“The proportion, however, has been rising in recent years. We received evidence that this recent trend, and the prospect that it would continue, is of concern to many ratepayers today.”
Is that not precisely what we have been discussing?
I entirely agree. I did not quote the whole of the paragraph because I wished to save the time of the House. In any case, the hon. Gentleman has quoted the remainder of it and he will see that although it has been rising, in particular since 1957 when we had a tremendous education drive, it still has not reached the same proportion of taxed income and personal expenditure as it did in pre-war days. That is significant. [column 147]It looks as though it is going to, and perhaps this year and next year it will—although we cannot be blamed for that.
Among other statistics, one can see that more than half of local expenditure is already borne by the taxpayer while the other half is only part borne by the ratepayer, for about 50 per cent. of that half is borne by industrial and commercial properties. Thus, of local authority expenditure, only about a quarter, taking the country as a whole, is met by the domestic ratepayer. I have begun by giving these statistics to try to put the problem in perspective because at times I thought that we have been getting the matter a little out of perspective.
I will make a few general observations on the kind of characteristics which one would require for a scheme of domestic rate relief. I suggest that such a scheme should have three characteristics. It should be completely comprehensible to the potential beneficiaries, it should be easy to operate and be administratively inexpensive and local authorities should not be penalised because they happen to have a disproportionately high number of elderly or retired people in their areas who might be expected to benefit under a rate relief scheme. By these tests the Bill does not come out very well. We approve very much the principle of a rate rebate scheme, but, as I say, by these three tests this Measure does not at the moment come out with flying colours.
A number of hon. Members have referred to the question of hardship in connection with National Assistance. I agree with Richard Crossmanthe Minister that in Committee we shall have to insert words which are clearer than the present provisions and which will enable local authorities either to refuse rebates to those who are at present receiving National Assistance or enable them to inquire the source of income, whether it comes from National Assistance, when a person makes application. Otherwise, I can imagine a person going to a local authority and saying, “I have an income of £7 10s. a week. I want a rebate.” The local authority will not be able to ask if the income comes from National Assistance and unless we cover this point there will be considerable difficulty about the [column 148]interaction between the two. We shall have to take great care also in operating the scheme, remembering that the dislike of this form of National Assistance started not with the National Assistance Scheme but when it had a local element. It started as dislike of a public assistance scheme, and the thing in public assistance that people disliked——
Mr. Julius Silverman
And Poor Law before that.
Yes, and before that the Poor Law—was going to local people whom they knew in order to ask their help. They did not like local people knowing their circumstances, and I put the latter factor rather more highly than I do the first.
In this Bill, therefore, we must be extremely careful that people do not shy away even more from going to a local authority than they would from going to a national authority, which means that it is particularly important that the rules of confidentiality should be adhered to very strictly. I understand that in rent rebate schemes these people have been dealt with by code numbers by the officials of the local authority. This is an excellent method, and one that gives people confidence that their anonymity will be strictly preserved, and that no one will know by name who has applied for the relief.
We have heard a number of hard words about the Rating (Interim Relief) Act, but I notice that this Bill does not repeal that Act. As far as I can make out, there are probably two reasons for that, one of which would have been advanced by my hon. Friend the Member for Worthing (Mr. Higgins) had he been fortunate enough to catch your eye, Mr. Deputy Speaker. By Section 1 of that Act, very considerable grants—up to £6 million in all—are given to local authorities which have a higher-than-average proportion of old people. If the Act were repealed that £6 million would go, and those local authorities—and the large number of old people who benefit—would have to find their income from the rates instead of from grants.
The relief to which the Minister referred, which was 50 per cent. and 50 per cent. in the first instance, and 66⅔ per cent. and 33⅓ per cent. in certain [column 149]exceptions, came under Section 2, but one found that what happened was that the local authority was given a very considerable grant under Section 1, and if it also spent extra money it was given a part-grant under Section 2. As things turned out, the grants under Section 2 were very small, but no one could tell how things would turn out when we debated the Measure. Indeed, going through the debate, I noticed that M. Stewartthe present Foreign Secretary thought that as high a proportion as 80 per cent. of the ratepayers in certain areas might have been eligible for relief. As it turned out, they were not, so only about £100,000 was dispersed under Section 2. Nevertheless, that Act was, and is, extremely valuable. There is a definite reason for its not being abolished, and for the Minister to say that it does not matter when some £6 million is involved would, I think, strike fear into the hearts of local authorities.
I turn from that point to the financing of the scheme. I leave Scotland for the time being—William Rossthe Secretary of State for Scotland is mumbling on the Front Bench——
The Secretary of State for Scotland (Mr. William Ross)
I was merely saying to my hon. Friend the Member for Paisley (Mr. John Robertson) that the benefit the hon. Lady mentions does not apply to Scotland.
I am glad we still keep some money in England. Nevertheless, the right hon. Gentleman reminds me that an extra £ million for Scotland was mentioned earlier under a separate scheme. However, I leave the Secretary of State to fight that out with my right hon. Friend.
The financing of the provisions of the Bill has already been referred to, and I will not dwell on it for too long. Undoubtedly the defect and I use the word “defect” advisedly—of the scheme is that in order to give relief to some it will impose penalties on others. This, I am afraid, will come particularly harshly on those who just escape relief. It is not that they will not get the relief but that they will have to pay more in rates because of the relief which has been afforded to others.
I entirely agree with the sentiments which most hon. Members have expressed to the effect that the [column 150]Exchequer should pay for the financing of the scheme. This is quite different from the interim rating relief scheme because in that a considerable discretion was given to local authorities. As it happened, they did not use it, but the local authority's stake in the provisions of that Act was reflected by the discretion given to local authorities to operate the scheme. Here no discretion is given to local authorities. Therefore, one would expect that the whole amount should be met by the Exchequer.
We should not underestimate the problem of finding not only the number of extra staff to operate the rebate scheme but finding the quality of staff which will be required. A large number of people will probably apply for rebate and not all will be entitled to rebate. The method of deciding whether they are entitled or not is very important indeed. For National Assistance every applicant has a personal interview. That is carried out by highly skilled people. It is carried out very sympathetically indeed. It will not be possible to interview every person for a rate rebate scheme. This will mean that the first form will have to be drafted very carefully in order to get the maximum information about income.
After that has been filled up a certain number of people will have to be interviewed. The Bill is mainly to benefit older people. They often have a fear of form-filling. As soon as a form comes through the door they find they are almost incapable of filling it up because they are mesmerised by fear. Their first reaction is, “What do they want to know now?” A great deal of interviewing will have to be done and it will not be easy for local authorities to find the staff to deal with these people in the right way. I do not make too much of this point because it is one which we would have to face in any event if we agree in principle to a rate rebate scheme and also to an instalment system.
Clause 5 of the Bill deals with reckonable income. Income on which entitlement to relief is assessed relates to a period which ends three months before that for which relief is given. One may secure title to a rebate during a period in which one's income happens to be low. That rebate might be granted during a period in which one's income has recovered. This seems very strange indeed. One would [column 151]have expected that there would be a Clause providing that if there is any material change in income between the base period for assessment of income and the period for which the rebate is granted the applicant should have to notify the authority and the authority could cancel the relief. Otherwise we shall find that when the income is low one will get relief which might operate during a period when one's income is high. It might operate in the opposite way as well.
This would not seem the wisest use of public money nor the best possible system. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) referred to this anomaly in relation to seasonal workers. Many hon. Members from Scottish constituencies will know of difficulties about seasonal workers. It is obvious that if the rate rebate period is divided into two and income is calculated not by reference to a year but to a six-monthly period, those in seasonal work will be able so to arrange affairs that they can claim a rate rebate in alternate periods of six months. It may be that one would have to have a provision for averaging out the income in such cases.
A second point which arises in connection with reckonable income is, what is income? As the Minister said, it is not defined anywhere in the Bill. I take it from what he said that it is not equivalent to taxable income. Would he indicate whether that is so?
It is more than taxable income.
In such cases war pensions would rank as income. They do not rank as taxable income. Sickness benefit and injury benefit are not taxable income, but presumably they rank as income for this purpose. What about income on National Savings Certificates? I do not think that the right hon. Gentleman knows exactly what income is for this purpose.
We had better leave the details, but interest on capital, as I made clear, would count as income—but not the capital. The interest on National Savings Certificates will count but not the National Savings Certificates. The hon. Lady is making it rather difficult, but, in fact, it is simple.[column 152]
I assure the right hon. Gentleman that it is a considerable departure from usual policy if interest on National Savings Certificates is to be counted as income. The right hon. Gentleman said that income in this case meant more than taxable income. Perhaps we can get this sorted out later. I have used it as an example because I should have thought that details such as this would have been worked out beforehand.
So much for reckonable income. I come to reckonable rates—that is, the amount of rates which a person may well be liable to pay and which is calculated by reference to a different period from reckonable income. I refer to Clause 4(4) from which it appears that if a person has another adult living in the house, that affects the reckonable rate. The reckonable rate is calculated not by reference to a period ending several months before the period in which the rate rebate is due. It is calculated by reference to the date of the application for the rebate. Reckonable income is therefore calculated by reference to a different period from reckonable rate.
We come, then, to a third different period, because instalments are calculated by reference to a third period—not a six-month period but an annual period. One may well get difficulties where the rate rebate applies for a six-month period but the instalments have to be calculated over a twelve-month period. Presumably one does not assume, without a Clause in the Bill enabling one to assume, that the rate rebate will continue after the six-month period. If, therefore, a person applies for a rebate and also applies for the residual rate to be paid by instalments, we must calculate the instalments by reference to a rebated period of rates followed by a full period of rates. We shall therefore find that someone is paying more in instalments in the first six months than he needs to pay. [Hon. Members: “Oh.” ] I do not think that hon. Members opposite have thought this Bill out at all. Let me give an example. This example, and a number of other points, were provided to me by the Institute of Municipal Treasurers whose members, one would have thought, knew what they were talking about.
The Institute says:
“The instalments provisions are to be calculated by reference to the annual rate period [column 153]whilst the provisions in regard to rebate are calculated by reference to a period of six months. This could have the result of requiring instalment payments during the first half of the year of such amounts as could make it necessary to effect a repayment during the second half of year, and this is illustrated by the following example.”
It then goes on to give an example which I think is too long to quote but which I will send to the right hon. Gentleman. It makes the point which I have just made.
It seems to me, therefore, that there are several periods in the Bill. There is the reckonable income for one period, the reckonable rate for another. The rate rebate period is yet a third period, and the fourth period is the instalment period. This is quite a system and it certainly is not one that could be understood by the potential beneficiaries.
When we were discussing the Rating (Interim Relief) Act M. Stewartthe present Foreign Secretary suggested that the provisions in it might be replaced by algebraic symbols. I should have thought that as there were so many variables in the present Bill they might have been just as well expressed by the integral and differential calculus because one has to make up the sum of so many different things if one wants to find the result.
I turn now to what Richard Crossmanthe Minister said at the beginning of his speech. The key to it was the viewpoint expressed by my hon. Friend the Member for Oxford (Mr. Woodhouse) who spoke while the Minister was not present. My hon. Friend said that ever since he had been a pupil of the right hon. Gentleman he had had the one very considerable difficulty that he could never tell whether the right hon. Gentleman meant what he said. We have also experienced the same difficulty because the right hon. Gentleman says different things on different days about the same matter. On 5th May, for example, when we had a debate on rates he said:
“It is … unlikely that any Government can rapidly switch from rates to a local tax. We have got to face that as something which cannot be done.” —[Official Report, 5th May, 1965; Vol. 711, c. 1492.]
On 2nd December the right hon. Gentleman was reported as saying that the Government
“want to get rid of the rates system altogether and replace it with a system of local taxation.”
I should have thought that to some extent those were mutually contradictory. [Hon. [column 154]Members: “No.” ] But there is a better one. [An Hon. Member: “From the Central Office?” ] I did not have any material at all from the Central Office. I did not ask for it. I had most of the material from the Institute of Municipal Treasurers.
The right hon. Gentleman was speaking about the rate deficiency grant, which we were told in this Bill would be increased to take into account the extra administrative expenses for those areas which are entitled to rate deficiency grant. The right hon. Gentleman made some reference to this in his opening remarks today but also on 5th May he said, talking about the rate deficiency grant,
“I think that we shall scrap it. It is another of the things which will go, because it is no good.” —[Official Report, 5th May, 1965; Vol. 711, c. 1496.]
The right hon. Gentleman was then going to scrap it. He is now going to increase it for the administrative costs of this Bill. The right hon. Gentleman is very anxious to abolish——
I am always patiently willing to help the hon. Lady as far as I can. I said that as from today the old rate deficiency grant, which is there now, will assist with the burden of administrative costs as long as it is there. As I told her, we are also preparing a second Bill in which we shall revise the grant system and she will find there that the rate deficiency grant is modified in certain particulars to take account of the criticisms I made at that time.
I see. It is not going to be scrapped now, it is going to be modified.
As for my third quotation—I know that the right hon. Gentleman does not quite like quotations from The Times—he is concentrating now on saying that he will abolish something before we are certain what he is to put in its place. It is really inexcusable for a Minister to say that he intends to abolish a particular system before we can judge the relative merit of the system which he will put in its place.
The Financial Times summed up the position very well in a leading article on Saturday, 27th November, headed “Mr. Crossman 's Cherry” ,
“Assuming that Mr. Crossman is granted time to finish the meal, and that he manages [column 155]it—he has so far shown a brilliant ability to ask the right questions, but we have yet to judge the quality of his answers …”My advice to the right hon. Gentleman, if it is not trying to teach an old dog new tricks, which, of course would be quite impossible, is that until he has something to put in its place it is as well to keep the rating system in order to work extremely well. It is most significant that he is abandoning a revaluation, which is fundamental to keeping the rating system up to date and in order. One of the reasons why he is abandoning it is in order to collect a much smaller tax. Let us keep the system which collects some £1,000 million a year up to date and in order.
The right hon. Gentleman's hon. Friend the Dr. J. Dickson MabonUnder-Secretary of State for Scotland will have the Floor in a moment.
The right hon. Gentleman called this Bill rough and ready justice. We like the bits which are justice. We do not like the bits which are rough and ready.