Central Control and the Employment of Exchequer Grants in British Local Government

254 Pages·014.374 MB·English

by  Hsio-Shih, Lee

CENTRAL CONTROL AND TEE EMPLOYMENT OP
EXCHEQUER GRANTS
IN
BRITISH LOCAL GOVERNMENT
Thesis presented for the Degree of
Doctor of Philosophy
By Lee Hsie-shih, B.A*,
at the
University of Glasgow.
ProQuest Number: 13870183
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P R E F A C E.
In July, 1946, the M inistry of Education of the
N ationalist Government in China held an open competitive
examination throughout the country in order to select post­
graduate scholars, who were to be sent to various leading
countries in the world to study subjects which the Government
deemed at that time to be of great importance fo r the re­
construction of the country. Under th is scheme, the author
was sent to Great B rita in to examine the system of Local
Government obtaining there.
The present study was begun in October, 1947, when
i t was the o rig in a l intention both of the M inistry of Education
and the author to spend at least three years upon the subject.
Meanwhile, however the p o litic a l situa tion in China deterior­
ated and the author was obliged to terminate his study in
May, 1949, drawing his work to a conclusion before returning
to his own country.
The importance of the subject is evident. In B ritain,
the local authorities have not merely been responsible fo r
most of the in te rn a l services which cater d ire c tly for the
welfare of the people, but, through th e ir independence of the
central government, have played a large part in developing
and sustaining the fabric of democracy there. The value of
tn is system of local government in the life of the nation,
however, has not been due simply to the e ffo rts of the local
authorities. Central direction and supervision have had a part
to play, and though they cle a rly carry th e ir own dangers,
th e ir influence, on the whole, has been beneficial. This has
been largely due to the methods by which the central govern­
ment has intervened and its re stra in t in th e ir use.
In this thesis, the author examines ghe most important
o f these methods. His main object is to see to what extent
the control of government departments has been, and in what
manner i t ought to be? exercised through the system of grants-
in -a id . The theme has been touched upon in several books on
local government; but i t is mostly accorded a passing and
casual treatment and there is s t i l l a need fo r a fu lle r exam­
ination. In this respect, he hopes that the present work
may be of some use in fillin g in the gap.
-iii-
As a student in the social sciences has not the fa c il­
ity of a laboratory in which to experiment, i t is impossib­
le fo r him to design any device and put i t into practice.
What he can do is to observe the existing system, compare
i t with others, and make some proposals for its improvement.
Hence, some parts of this work are descriptive and h is to ri­
cal, and others c ritic a l. former, e ffo rts have been
made, as fa r as possible, to bring the matter up to 1948.
Here, government papers, Parliamentary statutes, and books
w ritte n by authorities on the subject have been fre e ly
used. As fo r the c r itic a l parts, the author owes much to
the Reports and Minutes of Evidence issued by various
Royal Commissions and Departmental Committees on Local
Taxation and National or Local Expenditure, as w ell as
the opinions expressed by scholars and government o ffic ia ls .
He has also consulted personally several o ffice rs in the
M inistry of Health and the Corporation of the C ity of
Glasgow. Nevertheless, the fin a l evaluation is his own.
In the w ritin g of this thesis, the author has endea­
voured to use Scottish facts and incidents to a greater
extent than is usual. Books on English local government
are p le n tifu l. Scotland, however, is but scantily treated,
and an attempt has been made, as fa r as possible, to main­
tain a balance.
During the preparation of this thesis, many obligations
have been incurred which the author desires to take this
opportunity to acknowledge. His grateful thanks are due
to his supervisor, Mr. J. H. farrender, whose helpful c r it i­
cism and guidance have enabled him to accomplish this
work. He also wishes to record a debt of gratitude to
Mr. Bsslemont, C ity Chamberlain of the Corporation of the
C ity of Glasgow, who supplied him with inform ation about
the p ra ctica l fin a n cia l adm inistration of the Corporation,
and to the libra rian s of the M inistry of Health fo r the
fa c ilitie s thay accorded him during the summer vacation
of 1948.
Lee Hsio-shih.
May, 1949.
CONTENTS,
Page.
INTRODUCTION* 1.
Part I.'
CENTRAL CONTROL OVER LOCAL AUTHORITIES.
Chapter I. LOCAL GOVERNMENT IN TRANSITION. 5.
II. FORMS OF CENTRAL CONTROL. 17.
I I I . CENTRAL CONTROL OVER VARIOUS SERVICES. 41.
IV. RECENT TRENDS IN CENTRAL CONTROL. 81.
V. LOCAL AUTONOMY versus CENTRAL CONTROL. 93.
Part I I .
THE DEVELOPMENT OF THE SYSTEM OF EXCHEQUER GRANTS.
Chapter VI. EXCHEQUER GRANTS IN LOCAL GOVERN­
MENT FINANCE. 100.
V II. EARLY GRANTS-IN-AID TO LOCAL AUTH­
ORITIES. 106.
V III. MR. GOSCHEN* S SCHEME OF ASSIGNED
REVENUES. 120.
IX. EXCHEQUER GRANTS BETWEEN THE TWO
GREAT FINANCIAL REFORMS (1888-1929)129.
X. THE FINANCIAL REORGANIZATION OF 1929
AND THE BLOCK GRANT SYSTEM. 143.
XI. GRANTS SUBSEQUENT TO THE LOCAL
GOVERNMENT ACT OF 1929. 156.
X II. THE LOCAL GOVERNMENT ACT, 1948, AND
the equalization grant. 175.
Part I I I .
THE EMPLOYMENT OF EXCHEQUER GRANTS.
Chapter
X III. THE FUNCTIONS OF EXCHEQUER GRANTS. 180.
XIV. SERVICES SUITABLE FOR EXCHEQUER
GRANTS. 196.
- V -
Part IV.
EXCHEQUER GRANTS CONSIDERED. Page.
.
Chapter XV. DIFFERENT FORMS OF GRANT COMPARED. 201
CONCLUSION. THE DESIRABILITY OF CONTROL THROUGH
.
GRANTS. 221
Appendix.
# PROPOSED CONSTITUTIONAL REFORM FOR THE
WIDENING OF THE FIELD OF LOCAL ACTIVITIES. 233.
LIST OF REFERENCES. 237.
-1-
IHTROPUCTIOH
Tiie question of what relationship ought to exist be­
tween the central government and local authorities is an
interesting and important one in the field of political in­
stitutions* If we make a surrey of the more important coun­
tries in the world, we can classify them as regards the
character of this relationship into three main types* There
is, in the first place, what Lord Passfield termed the Bu­
reaucratic System represented by most of the Continental
countries, especially the Republic of Prance whose tradition
is 'the building-up of a consolidated and powerful state by
means of a great bureaucracy, directed from a single centre,
and pursuing a uniform policy'* (l) Here local administra­
tion is chiefly entrusted to salaried officials who are some­
times actually appointed, and whose work is closely super-
wised, by the central authorities* (2) The sole functions of
local institutions is, therefore, to fulfil the purposes, and
realise the will, of the 'Executive Government’. Locally
elected authorities have very imperfect control of internal
administration* Their estimates (budget) must be submitted
to a higher authority and often to the central government it­
self for confirmation before action may be taken upon them*
(3) The public services which are classified as 'central' in
this bureaucratic country are very wide in scope* They in­
clude such services as education, sanitary administration,
and police, which are administered either solely by central
departments or by their territorial delegations and agents
sent out to act within prescribed areas* Local authorities
have no control over them* What they can take part in are
merely those scanty and insignificant 'local* matters spe­
cially assigned the to them, and even here the mighty hand
(1) P. Ashley, Local and Central Government, 1906, p*5*
(2) In Prance there is a system of tutelle administrative by
means of which the central government retains wide powers
of controlling not only the decisions but even the compo­
sition of local authorities* See W.P. & W.O* Hart, An
Introduction to the Law of Local Government and Adminis­
tration, 1934, p*304*
(3) A higher authority in Prance enjoys a system of '1*ins­
cription d*office*, that is to say, it can include in the
budget of any local authority any item relating to an obli­
gatory function of that authority which, in its opinion,
has been improperly omitted and the local authority becomes
consequently obliged to raised money for such a purpose*
2-
of the central authorities is felt. It may he said that in
France the power of the central government is exercised to
such an extent that it has practically extinguished the op­
portunity of the people to join in the management of the pu­
blic affairs of their locality.
At the other extreme may he seen the organization of
local government of the United States where the cities and
townships are fully independent of the State or the Federal
Executive departments. Some of them under 'municipal home
rule' charters are not subject to the interference even of
the legislatures. Municipalities, whether of council-mayor
or of council-manager type* are autonomous corporations en­
joying a wide range of administrative freedom. Bach of them
has its own system of management in public affairs, and there
is 'nothing in the nature of an administrative hierarchy, and
nothing in the nature of a national system, whether in educa­
tion, sanitation, collective provision for the dependent
classes, or means of communication'. (1) The local bodies
have presented such a remarkable diversity of organisation
and complexity in the variety of services they provide that
no coordination and adjustment on a national scale is possi­
ble. There is an anarchy in municipal administration which,
being in need of a wholesome check and beneficial guidance
from the superior authorities, is often manipulated by sinis­
ter interests to the detriment of the public. Thus neither
the French nor the American type of central-local relation­
ship is free from gross disadvantages. To reduce local au­
thorities to the position of mere agencies of the central de­
partments is to kill the vitality of local democracy; while
complete autonomy tends to make the internal administration
of the country complicated and confused, and the poor and
backward authorities are, moreover, deprived of the assis­
tance, financial or otherwise, of superior authorities.
In Great Britain, however, we find a third type of
relationship between the central and local authority. Here
the paid officials are subordinate to the wishes of the coun­
cil and its committees. There is no prefect or Minister of
the central government with power to suspend or dissolve the
council. The local budget does not have to be approved by a
central department, nor is it subject to the revision of a
higher authority. The appointment and dismissal of the offi­
cers is with a few exceptions within the control of the local
council. But, on the other hand, local authorities are by no
means free to go as they please. So far as the services of
national importance are concerned, the central government is
(l) S. Webb, Grant-in-Aid, A Criticism and a Proposal, 1911,
pp.4-5.
-3-
alert both to restrain and to stimulate. The traditional
practice of local self-government is wonderfully mixed up
with* and invigorated by* the superior enlightenment of the
central departments derived from greater general knowledge*
wider experience and more highly-trained intellects. And
the result is that* on the one hand* a large measure of
independence is left to the local authorities, and on the
other hand* a certain standard of uniformity is maintained.
The spirit of compromise has smoothed out many of the sour­
ces of friction between central departments and local coun- .
cils; and their copperation has ensured great improvement in
the service as a whole.
The control of the central departments is limited to
such services as roads and bridges* police and housing*
health and education* which are regarded as predominantly
national in character and of general rather than local in­
terest and utility. On the whole, this control has been di­
rected towards securing a certain minimum standard which pu­
blic opinion demands* and not an arbitrary intermeddling
with local initiative and freedom to experiment. The super­
vision from the centre chiefly takes the form of instruction
and inspection. It consists of assistance rather than domi­
nation.
The British system* in combining fruitfully the ef­
forts of central and local authorities, owes its success in
large part to that invention of British political wisdom,
the grant-in-aid. A partial financial subordination of the
local to the central authority* a subordination in itself
highly repugnant to the tr^djjjional British ideas of local
autonomy* has* nevertheless** to be a valuable device of local
government. By it* the central departments have sevured* in
a tactful manner, rights of criticism* supervision and ins­
pection. The instinctive resentment of a subordinate self-
governing body at external interference has given way to an
eagerness to acquire advice from the government department*
when the improvement of the service is to be accompanied by
a handsome subvention. The central government, on the other
hand* having fully recognised the importance of the spirit
of local responsibility, seeks in turn to imspire satisfac­
tory local administration rather than to force it* although
in regard to many services the power is given to exercise
compulsion. m
Speaking generally* in the presence of central con­
trol exercised through Exchequer grants, local freedom and
administrative efficiency have attained an admirable balance.
The system gives weight to the directions of the central
(1) In particular the power to withhold the grant, a power
which* however* has only been exercised in one or two
isolated instances over a long period of years.
-4-
depnrtments and brings the local authorities into the afcbit
of national policy; and thus, apart from administrative ad­
vantages, enables Ministers to fulfil their general respon­
sibility to Parliament for the oversight of services entrus­
ted to their care, without creating financial irresponsibi­
lity in local authorities, or robbing them entirely of their
initiative.
In recent years following the expansion of public
services, some localities have felt to an increasing extent
that the duties imposed upon them by Parliament are far be­
yond their financial ability. Partly as a result of these
increased burdens and partly in pursuit of a more egalitarian
philosophy, there has developed a tendency to adapt the grant
in aid to take into account the means and needs of local areas.
A block grant, calculated upon a formula weighted for diffe­
rent needs and responsibilities has been devised in order that
the rate burdens of different localities might be equalised.
It is expected that with this more considerate and generous
support from the Exchequer, poor authorities will be able to
provide services comparable to those of their rich neighbours.
Central control has hitherto been mild and moderate.
There is as yet no deliberate development of national control
at the expense of local initiative. Nevertheless, with the
improvement of social services on grounds of efficiency, there
is a tendency towards an increase of central government regu­
lations in pursuit of uniform administration. The danger of
the extension of the power of bureaucracy has been recognised
and trumpeted from all parts of the country. Proposals have
been made for the widening of locally controlled resources
in place of the Exchequer grants. But as a thorough innova­
tion is at present neither practicable nor desirable, the
remedy still lies in the manner in which the grant-in-aid is
to be employed. Whatever changes are made, the collabora­
tion between central and local government staffs and the di­
vision of labour, characteristic of the British system of
public administration, should be preserved. The system is
preferable to the bureaucratic system of Prance or the Ame­
rican anarchy of local autonomy; and it has developed, in
the past at least, largely around the grant-in-aid.
In the following pages, we attempt, within the
wider context of departmental control, to give some account
of the development of the grant-in-aid system, of the dif­
ferent forms it has taken, and of the different uses to
which it has been put, and, finally, to evaluate the grant-
in-aid as a device of government.