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Scotland, and in the Financial Relations between

the Exchequer and Local Authorities.

1. With a view to the assistance of agriculture and productive industrial undertakings, the Government have framed proposals for an alteration of the basis of rating of agricultural and industrial subjects designed to lighten the burden of local rates which at present presses upon these interests. The nature of these proposals was outlined in the Budget statement of the Chancellor of the Exchequer, and, as was then indicated, they involve important alterations in the system of Exchequer. Grauts, and modifications of the existing system of Local Government in Scotland; The Finance Bill, and the Rating and Valuation (Apportionment) Bill; contain parts of the legislative programme necessary to give effect to the scheme, and it is the intention that the remainder of the programme should be embodied in Bills to be laid before Parliament in the Autumn. The purpose of this Memorandum is to explain in some detail, for the information of Local Authorities, the nature and scope of the legislative proposals in the confident anticipation that the Government in framing the legislation may have the advantage of the co-operation of the Local Authorities.

2. Under the Scheme, it is proposed that Agricultural subjects shall be rated on one-sixth of the gross annual value, and that Industrial subjects and Freight-transport subjects shall be rated on one-fourth of the rateable value, as ascertained under the provisions of the Rating (Scotland) Act, 1926. Properties in the occupation of the Crown will be dealt with on similar lines.

The definitions of Agricultural, Industrial and Freight-transport subjects are contained in the Rating and Valuation (Apportionment) Bill, which also makes provision for effecting the necessary entries in the Valuation Roll. The de-rating proposals will come into operation in England as from 1st October, 1929, and provision will be made for a proportionate de-rating in Scotland in the financial year 1929-30.

3. The magnitude of these rating changes must profoundly affect both the general structure of Local Government and Local Authorities individually. Until the preparation of the valuation roll to be made under the Rating and Valuation (Apportionment) Bill has been completed it will be impossible to state with precision the amount of rates at present being raised by Local Authorities on the part of the rateable value of their areas which under the Government's proposals will be the subject of rate relief. That amount throughout this Memorandum is referred to as "loss of rates." It is estimated that, had the derating proposals been in operation in the year 1927-28, the loss of rates, taking Scotland as a whole, would have amounted to in round figures £3,200,000 for the year. To meet this loss an alternative source of revenue must be provided and the Chancellor of the Exchequer has stated that he is prepared, as part of the general scheme, to find moneys for this purpose from the Exchequer.

4. The receipts of Local Authorities from Government grants in the year 1926-27 (which is the latest year for which complete figures are

available) were approximately £13,000,000, while the total of rates levied was £20,500,000. If, in that year, the relief now proposed had already been given to industrial and agricultural property, and the proportion of local expenditure to be found under the present scheme from the Exchequer had corresponded with the above estimate of £3.200,000, the relation between grants and rates would have been :-

Grants
Rates

£16,200,000 . £17,300,000

It has seened to the Government that so large an increase in the Exchequer grants in aid of rates necessitates some reconsideration of the grant system, and the more so because reforms in regard to certain parts of that system have long been accepted as necessary. In particular (and especially having in mind that the relief of industry is a primary reason for undertaking a scheme of this magnitude) it has seemed to the Government that no scheme of the kind would be complete unless consideration were given to the case of those districts which have been commonly called necessitous areas.

5. If the de-rating proposals are important as affecting Local Authorities as a whole, they are no less so in their influence on individual Local Authorities. It must first be remarked that no scheme for providing an alternative source of revenue for Local Authorities can take the form of a grant varying from year to year with the expenditure of individual. Authorities. Under such a scheme the Government would be committed to finding a material proportion of every Local Authority's general expenditure without any possibility of effective control, and the financial interest of Local Authorities in their administration would be seriously impaired.

6. The most important effect of the de-rating proposals on the position of the individual Local Authority is the narrowing of the basis of taxation available to that Authority, which necessarily involves a greater or less impairment of the capacity to meet the considerable fluctuations in expenditure inevitable from time to time. This is a matter of less significance in the case of larger Authorities, or of those whose resources are drawn from a wide area, but is of the greatest importance in the case of smaller and financially weaker Authorities who may be responsible for services involving considerable expenditure liable to periodic fluctuations between wide limits.

An examination of returns rendered by Local Authorities indicates that the loss of rates in rural parishes due to the de-rating proposals will vary from about 3 per cent. to 60 per cent. Thus, in the extreme case, the reduced rateable value on which would be charged any future increase in the cost of the local services would be not more than 40 per cent. of the present rateable value; in other words, where the Local Authority at present would require to meet an increase of expenditure by an additional levy of 1s. in the £, it would, in the future, in the absence of special action, have to levy a rate of 2s. 6d. in the £. In many parishes a rate of 1d. per £ of reduced valuation will yield less. than £10.

7. For the reasons stated in the preceding paragraphs the Government have come to the conclusion that the necessary accompaniments of the

derating scheme are (a) some modification of the basis and method of Government contribution to local services; (b) arrangements to meet the case of the necessitous areas; and (c) arrangements to obviate the difficulties of those Authorities whose finances are on too narrow a basis. If the case of necessitous areas is to be met, a new method of distribution of Government grants and reorganisation of administrative arrangements . are both requisite. Change in the areas or functions of certain authorities is the only way in which a remedy can properly be found for the difficulties of those authorities whose resources would be inadequate to enable them to meet their needs under the new conditions. Moreover, a fundamental part of the scheme is the introduction of a system of "block grants" based upon general characteristics and needs, and these must be ascertained for administrative areas sufficient in size to present average conditions.

8. The alterations required to meet the objects which the Government have in mind can only proceed on the basis of widening the area of charge. The services for which there is a clear case for modification of this kind are the poor law, public health and highway administration; and in these cases it appears to the Government that the duties should be entrusted to Local Authorities of the first importance, and that the area of the charge should be as wide as is compatible with effective local interest in the work to be undertaken; such a change is fully consistent with the principles on which local government is organised.

PROPOSED LOCAL GOVERNMENT REFORMS.

9. In Scotland there are a large number of Local Authorities which administer public services for very small areas, and the need for a reduction in the number of these authorities, and an enlargement of the units of administration has been generally realised in recent years, and has been given effect to in connection with certain services, e.g., the treatment of tuberculosis. It is an essential element of the Government scheme that the opportunity should be taken of effecting a widereaching reform in this sphere, which will make for an increase in simplicity and efficiency of administration. One important object to be kept in view is the unification of administrative and financial control of the major services under a single authority in each area. By this means it is hoped :

(1) to prevent overlapping of services such as now exists;

(2) to make better and fuller use of the numerous institutions belonging to local authorities;

(3) to secure more effective control over local expenditure by the authority of the area, not only with a view to economy, but also with a view to seeing that that expenditure is being applied to the best advantage according to the needs, financial ability and other circumstances of the area; and

(4) generally to promote efficiency in administration of the various services, thereby adding to the well-being of the persons for whom the services are administered.

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Accordingly, it is proposed to abolish Parish Councils, Education Authorities, District Committees and District Boards of Control, and to transfer from the smaller authorities to authorities operating for enlarged areas the administration of the major health services. These proposals are dealt with in greater detail in the paragraphs which follow.

10. It is proposed to transfer to County Councils as they will be constituted under the scheme-.

(a) The powers and duties of Parish Councils in landward areas and in burghs with a population of less than 20,000 ;

(b) the powers and duties of District Committees relating to Public Health, Roads and Highways, etc.;

(c) certain of the powers and duties relating to Public Health of Town Councils of burghs with a population of less than 20,000, which will include

(1) Housing and town planning;

(2) Hospital and other institutional services;

(3) Infectious diseases (including tuberculosis and venereal

diseases);

(4) Maternity and child welfare;

(5) Sale of Food and Drugs Acts and Milk and Dairies.

Acts;

(6) Water supply ;

(7) Drainage;

(8) Prevention of rivers pollution;

(d) the powers and duties relating to the management and maintenance of classified roads of burghs with a population of less

than 20,000;

(e) the powers and duties of burghs with a population of less than 20,000 relating to the valuation of lands and heritages; (f) the powers and duties of Education Authorities, except in the burghs of Edinburgh, Glasgow, Aberdeen and Dundee ; (g) the control and management of the police in burghs with a population of less than 50,000;

(h) the powers and duties of the Standing Joint Committee in rela

tion to the police.

11. The powers and duties of District Boards of Control, except in the case where the district board is now the parish council,* will be transferred to county councils and town councils of burghs with a population of 20,000 and over. The asylums for the several lunacy districts will be managed in each case by a Joint Committee of the constituent authorities within the district.

12. To meet the case of the smaller counties, it is proposed, to take power to combine counties for all administrative purposes, and also to take power to combine contiguous burghs. The Standing Joint Com

* As regards these see paragraph 13.

regulation of the performance of the extensive new duties of the county council, and wide powers will be given of delegation of functions to committees of the council and to town councils of burghs within the county. Provision will be made for the due representation on the council of burghs with a population of less than 20,000, and for a re-determination: of the numbers of county councillors and the number and boundaries of electoral divisions. The burghal representatives on the county council will be nominated by town councils from their own numbers, and the system of triennial election of county councils will continue. Provision will also be made for the representation on the county council, as education authority, of burghs (except the four largest burghs) with a population of 20,000 and over, and for the representation on the county council, as police authority, of burghs up to 50,000 population.

13. It is proposed to transfer to the Town Council of Glasgow the powers and duties of the District Boards of Control of Glasgow and Govan, and to the Town Councils of Edinburgh, Aberdeen, Dundee and Paisley the powers and duties of the District Boards of Control of these areas respectively; to transfer to the Town Councils of Edinburgh, Glasgow, Aberdeen and Dundee the powers and duties of the Education Authorities of these burghs respectively; and to transfer to the Town Councils of all burghs with a population of 20,000 or over the powers and duties of the Parish Councils in their areas. The opportunity will also be taken to carry out certain outstanding reforms of the Scottish poor law.

14. It is proposed that these alterations in the system of local government should take effect as from 16th May, 1930.

15. As regards the proposed transfer to county councils of the powers and duties of the town councils of the smaller burghs, relating to the management and maintenance of classified roads, it is contemplated that the town councils will retain the management of, and responsibility for, non-classified roads and streets, and that county councils may enter into arrangements with town councils to carry out the actual work on classified roads in burghs where such a course appears to be justified by considerations of efficiency and econony. Where such arrangements are made, the cost would be a charge on the county rate. The percentage grants in respect of classified roads for which county councils are responsible, including for this purpose the classified roads in the smaller burghs, will continue to be paid on a percentage basis as heretofore and will not be merged in the scheme of block grants outlined later in this Memorandum.

16. As regards classified roads in burghs with a population of 20,000 and over, the grants paid in respect of maintenance and ordinary improvement will be merged in the scheme of block grants. Works in the nature of major improvements of classified roads in such burghs will, however, continue to receive assistance through special grants from the Road Fund on a percentage basis as heretofore.

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