§ Mr. DeedesI beg to move, in page 6, line 26, to leave out from "buildings" to "there" in line 29 and insert:
with or without any garden, yard, court, forecourt, outhouse or other appurtenance belonging thereto, but without other land.This is really only a drafting Amendment, which does three things. It adds the word "outhouse" in Clause 4 to the list of appurtenances, and removes a possible source of doubt. It then deletes as unnecessary the reference to landother than that on which any such house or building stands.Finally, it alters the order of the words. That is necessary in view of the first reason for this Amendment which I have mentioned; and, as redrafted, lines 26 to 29 in Clause 4 (2) will read:… houses or other non-industrial buildings, with or without any garden, yard, court, fore court, outhouse or other appurtenance belonging thereto, but without other land …There is no other significance to this Amendment.
§ Amendment agreed to.
§ Mr. LindgrenI beg to move, in page 6, line 30, after "amount," to insert:
being the larger of the two following amounts, that is to say,—(a) an amount.
The Deputy-ChairmanIt may be for the convenience of the Committee to take together this Amendment and the Amendment to the Second Schedule, in page 18, line 2, at the end, to insert:
UNDER PARAGRAPH (a) OF SUBSECTION (2) of SECTION FOUR OF THIS ACT.
§ Mr. LindgrenI accept that suggestion, Sir Rhys, and agree that it would be for the convenience of the Committee to do so.
It will be within the knowledge of hon. Members who sat through the Second Reading debates that I called attention, particularly in the debate on 6th April, to the effect of revaluation on smaller properties, and the difference between gross and net rateable value. I instanced a house with a gross rateable value of £20 and a net rateable value of £12, and said that if its gross rateable value was doubled, becoming £40, its net rateable value would become £30. I also spoke of a house with a gross rateable value of £50 and a net rateable value of £40 and said that if its gross rateable value went up to £100 its net rateable value would become £40, the gross and net rateable value going up in ratio.
8.30 p.m.
The fact here is, as I said on Second Reading, that while the gross rateable value is doubled, the actual net rateable value goes up two and a half times in the case of the house with a gross rateable value of £20. If we take as an example a council house, which is a reasonable one, in the outer London area at any rate, with a gross rateable value at the moment of £20 and a net rateable value of £12, its gross rateable value will probably go up to £30 and its net rateable value will become £22. These properties are out of ratio.
I am prepared to hear the Parliamentary Secretary or the Minister say that the wording of the Amendments does not meet the position which I want to rectify. I want to keep the ratio between gross and net rateable value a little more in line than will at present be the case under the Second Schedule, which, as I said on Second Reading, is a re-enactment. I appreciate the difficulties about attempting to amend the Schedule, for we should then have difficulties in respect of previous legislation, such as the Housing (Rent and Repairs) Act, in that factors arising from that Measure are tied to the same Schedule.
The point about what we are trying to do has been made, and I move the Amendment so that we may ascertain whether it is possible to come to some agreement about giving effect to a principle which, I think, has been admitted 130 on both sides of the Committee, that we should not get out of ratio between one type of property and another.
§ Mr. DeedesThe hon. Gentleman made this point on Second Reading, and I undertook that we would look into it. The difficulty which, I think, the hon. Gentleman has not appreciated about the Amendment, or any Amendment on these lines, is that there can be two reasons for a low rateable value. One might be the size of the house, the point stressed by the right hon. Gentleman the Member for South Shields (Mr. Ede) when we debated the matter earlier. The other might be that the house was under-assessed, as we know a great number of houses are.
We are, after all, dealing with changes in value—I think I ought to remind the hon. Gentleman of this, because he has given one or two very extreme examples of what might occur under the Schedule in the five-year period between 1934 and 1939. I take issue with the hon. Gentleman in that we cannot now fairly judge a comparison between the present lists and the new lists in this respect because we know that the old lists are full of anomalies. The effect of the proportionate arrangements which his Amendment seeks to make would be to continue those anomalies in the proportion in which they now exist. This would perpetuate anomalies which we know exist and which have to be rectified.
We are satisfied, and have good evidence, that the assessment of the cost of repairs in 1939 is fair and about right. In 1951 the Royal Institution of Chartered Surveyors carried out a considerable inquiry into the matter and was satisfied that the assessment of the cost of repairs was about right. It may well be the case, in fact it will be, that before the next revaluation this schedule will have to be reconsidered. Of that there is no doubt at all, and there may then possibly be a change in its basis. But there is not, for the reasons I have given, a sound case for doing that now, simply because—and this is the heart of the matter—there may be two reasons for an old rateable value, one being the size of the house and the other because it is under-assessed. I am sorry that we cannot accept the Amendment.
§ Mr. LindgrenWhile thanking the hon. Member for what he has so far said, 131 I want to press him a little farther. I would expect that small properties would vary in different parts of the country. I agree that there are properties in one area valued at £12 gross and another area at £20 gross. But that does not apply so much with large groups of properties with which local authorities are concerned.
I do not suggest that here has been no variation between one authority and another in their standard of valuations of council houses for rating purposes. But those variations have been much less than with older type properties where previous valuations have had something to do with the standard of the next valuation, and that we all know. Where we have perhaps one-third of the properties owned by the local authorities, as we have in a large number of towns, the incidence of the increase will be different between one ratepayer and another. That was not the intention of revaluation, because in all these cases one can see that the old valuation and the new valuation are still in line. Although we have a valuation of 1934 and another in 1939, one can see that the incidence of value differs very considerably between one area and another.
I know that it is a bad thing to quote cases, but one is naturally biased by one's experience. As the Committee knows, I have been associated with local government and the development of Welwyn Garden City. Rearmament and the fear of war and that sort of thing in the period from 1936 to 1939 made a considerable difference to rentable and purchase values in that town. That is a fact which will have to be taken into account by the valuers. Values in 1939 were considerably higher in such areas than in the whole of Hertfordshire, or any area which bordered on the London area, because they were safer than London and the outer London area.
§ In those circumstances, it is unfair that this type of property should bear an unfair proportion of an increase. I do not say this as a threat, because I would not do such a thing, but unless the hon. Gentleman can indicate that he is prepared to look at this again, I will ask my hon. Friends, in fairness to authorities in outer London, to divide.
§ Mr. PowellWhen I saw the Amendments of the hon. Member for Welling-borough (Mr. Lindgren) on the Order Paper, I was at first inclined to feel that they were justified. They certainly would be justified if the increase in valuations of dwelling-houses in the new list as compared with the old were due to a decline in the value of money, or to a general rise in the cost of building and repairs. But, as my hon. Friend has pointed out, apart from the local exceptions, to which the hon. Member referred in his second speech, such changes will be attributable to the placing of valuations on a uniform basis over the country at large.
Between 1934 and 1939 there was very little variation in the purchasing power of money in relation to the articles and services which are involved in the value of a house. There were, of course, wide variations in valuation as between one part of the country and another. But since the new valuation lists will only place all houses upon the 1939 standard of values and since we know that the proportion of the statutory deduction to the gross value at present prescribed in the Schedule is broadly correct for 1939, I feel that no unfairness arises, so far as the present list is concerned, through these proportions being maintained. It seems to me, therefore, that further consideration does tell against the Amendment and in favour of my hon. Friend's contention.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 196, Noes 246.
135| Division No. 6.] | AYES | [8.40 p.m. |
| Ainsley, J. W. | Benn, Hn. Wedgwood (Bristol, S.E.) | Brown, Thomas (Ince) |
| Albu, A. H. | Benson, 0. | Burke, W. A. |
| Allaun, F. (Salford, E.) | Blackburn, F. | Butler, Herbert (Hackney, C.) |
| Allen, Arthur (Bosworth) | Blenkinsop, A. | Butler, Mrs. Joyce (Wood Green) |
| Allen, Scholefield (Crewe) | Blyton, W. R. | Carmichael, J. |
| Anderson, Frank | Boardman, H. | Castle, Mrs. B. A. |
| Attlee, Rt. Hon. C. R. | Bottomley, Rt. Hon. A. G. | Champion, A. J. |
| Awbery, S, S. | Bowden, H. w. (Leicester, S.W.) | Chetwynd, G. R. |
| Bacon, Miss Alice | Boyd, T. C. | Clunie, J. |
| Balfour, A. | Brockway, A. F. | Coldrick, W. |
| Bartley, P. | Broughton, Dr. A. D. D. | Collick, P. H. (Birkenhead) |
| Bence, C. R. (Dumbartonshire, E.) | Brown, Rt. Hon. George (Belper) | Corbet, Mrs. Freda |
| Cove, W. G. | Irving, S. (Dartford) | Pursey, Cmdr. H. |
| Craddock, George (Bradford, S.) | Jeger, George (Goole) | Rankin, John |
| Cronin, J. D. | Jeger, Mrs. Lena(Holb &St.Pnce.S.) | Reid, William |
| Cullen, Mrs. A, | Jenkins, Roy (Stechford) | Rhodes, H. |
| Dairies, P. | Johnson, James (Rugby) | Robens, Rt. Hon. A. |
| Dalton, Rt. Hon. H. | Jones, David (The Hartlepools) | Roberts, Goronwy (Caernarvon) |
| Darling, George (Hillsborough) | Jones, Frederick Elwyn (W. Ham, S.) | Robinson, Kenneth (St. Panoras, N.) |
| Davies, Ernest (Enfield, E.) | Jones, Jack (Rotherham) | Rogers, George (Kensington, N.) |
| Deer, G. | Jones, James (Wrexham) | Ross, William |
| Dodds, N. N. | Jones, T. W. (Merioneth) | Shinwell, Rt. Hon. E. |
| Dugdale, Rt. Hn. John (W. Brmwch) | Kenyon, C. | Short, E. W. |
| Dye, S. | Key, Rt. Hon. C. W. | Silverman, Julius (Aston) |
| Ede, Rt. Hon. J. C. | King, Dr. H. M. | Simmons, C. J. (Brierley Hill) |
| Edelman, M. | Lawson, G. M. | Skeffington, A. M. |
| Edwards, Rt. Hon. John (Brighouse) | Lee, Frederick (Newton) | Slater, Mrs. H. (Stoke, N.) |
| Edwards, Rt. Hon. Ness (Caerphilly) | Lever, Leslie (Ardwick) | Slater, J. (Sedgefield) |
| Edwards, Robert (Bilston) | Lindgren, G. S. | Smith, Ellis (Stoke, S.) |
| Evans, Albert (Islington, S.W.) | Logan, D. G. | Sparks, J. A. |
| Evans, Edward (Lowestoft) | MoColl, J. E. | Steele, T. |
| Evans, Stanley (Wednesday) | Mclnnes, J. | Stewart, Michael (Fulham) |
| Fernyhough, E. | McKay, John (Wallsend) | Stones, W. (Consett) |
| Fienburgh, W. | McLeavy, F. | Stross,Dr.Barnett(Stoke-on-Trent,C.) |
| Finch, H. J. | Mahon, S. | Sylvester, G. 0. |
| Forman, J. C. | Mainwaring, W. H. | Taylor, Bernard (Mansfield) |
| Fraser, Thomas (Hamilton) | Mann, Mrs. Jean | Taylor, John (West Lothian) |
| Gibson, C. W. | Mason, Roy | Thomas, George (Cardiff) |
| Gooch, E. G. | Mellish, R. J. | Thomas, lorwerth (Rhondda, W.) |
| Grenfell, Rt. Hon. D. R. | Messer, Sir F. | Tomney, F. |
| Grey, C. F. | Mikardo, Ian | Turner-Samuels, M. |
| Griffihs, David (Rother Valley) | Mitohison, G. R. | Viant, S. P. |
| Griffiths, Rt. Hon. James (Llanelly) | Monslow, W. | Watkins, T. E. |
| Griffiths, William (Exchange) | Moody, A. S. | Weitzman, D. |
| Hate, Leslie | Morrison, Rt.Hn,Herber(Lewls'm,S.) | Weils, Percy (Faversham) |
| Hall, John T. (Gateshead, W.) | Mort, D. L. | Wells, William (Walsall, N.) |
| Hamilton, W. W. | Moss, R. | West, D. G. |
| Hannan, W. | Moyle, A. | Wheeldon, W. E. |
| Harrison, J. (Nottingham, N.) | Neal, Harold (Bolsover) | White, Henry (Derbyshire, N.E.) |
| Hastings, S. | Oliver, G. H. | Wilcook, Group Capt. C. A. B. |
| Hayman, F. H. | Oram, A. E. | Wilkins, W. A. |
| Healey, Denis | Orbach, M. | Willev, Frederick |
| Henderson, Rt. Hn. A. (Rwly Regis) | Oswald, T, | Williams, David (Neath) |
| Hewitson, Capt. M. | Owen, W. J. | Williams, Rev. Llywelyn (Ab'tillery) |
| Hobson, C. R. | Padley, W. E. | Williams, Ronald (Wigan) |
| Holman, P, | Paling, Rt. Hon. W. (Dearne Valley) | Williams, Rt. Hon. T. (Don Valley) |
| Howell, Charles (Perry Barr) | Panned, Charles (Leeds, W.) | Williams, W. R. (Openshaw) |
| Howell, Denis (All Saints) | Pargiter, G. A. | Williams, W. T. (Barons Court) |
| Hubbard, T. F. | Parker, J. | Willis, E. G. (Edinburgh, E.) |
| Hughes, Cledwyn (Anglesey) | Paton, J. | Winterbottom, Richard |
| Hughes, Emrys (S. Ayrshire) | Peart, T. F. | Woodburn, Rt. Hon. A. |
| Hughes, Hector (Aberdeen, N.) | Popplewell, E. | Yates, V, (Ladywood) |
| Hunter, A. E. | Price, J. T. (Westhoughton) | Younger, Rt. Hon. K. |
| Hynd, H. (Accrington) | Price, Philips (Gloucestershire, W.) | |
| Hynd, J. B. (Attercliffe) | Probert, A. R. | TELLERS FOR THE AYES: |
| Irvine, A. J. (Edge Hill) | Proctor, W. T. | Mr. Pearsoo and Mr. Holmes |
| NOES | ||
| Agnew, Cmdr. P. G. | Boyd-Carpenter, Rt. Hon. J. A. | Dance, J. C. G. |
| Aitken, W. T. | Boyle, Sir Edward | Davidson, Viscountess |
| Alport, C. J. M. | Braine, B. R. | D'Avlgdor-Goldsmid, Sir Henry |
| Arbuthnot, John | Braithwalte, Sir Albert (Harrow, W.) | Deedes, W. F. |
| Armstrong, C. W. | Brooke, Rt. Hon. Henry | Donaldson, Cmdr. C. E. McA. |
| Ashton, H. | Bryan, P. | Doughty, C. J. A. |
| Astor, Hon. J. J. | Buchan-Hepburn, Rt. Hon. P. G. T. | Drayson, G. B. |
| Atkins, H. E. | Burden, F. F. A. | Dugdale, Rt. Hn. Sir T. (Richmond) |
| Baldock, Lt.-Cmdr. J. M. | Butcher, Sir Herbert | Duncan, Capt. J. A. L. |
| Baldwin, A. E. | Campbell, Sir David | Duthle, W. S. |
| Balniel, Lord | Carr, Robert | Eden, J. B. (Bournemouth, West) |
| Barber, Anthony | Cary, Sir Robert | Elliot, Rt. Hon. W. E. |
| Barlow, Sir John | Chichester-Clark, R. | Emmet, Hon. Mrs. Evelyn |
| Barter, J. W. | Clarke, Brig. Terence (Portsmth, W.) | Errington, Sir Eric |
| Baxter, Sir Beverley | Cole, Norman | Farey-Jones, F. W. |
| Bell, Philip (Bolton, E.) | Conant, Maj. Sir Roger | Fell, A. |
| Bell, Ronald (Bucks, S.) | Cooper-Key, E. M. | Finlay, Graeme |
| Bevins, J. R. (Toxteth) | Cordeaux, Lt.-Col. J. K. | Fisher, Nigel |
| Bidgood, J. C. | Corfield, Capt. F. V. | Fleetwood-Hesketh, R. F. |
| Biggs-Davison, J. A. | Craddock, Beretford (Spelthorne) | Fletcher-Cooke, C. |
| Birch, Rt. Hon. Nigel | Crookshank, Capt. Rt. Hn. H. F. C. | Fraser, Sir Ian (M'cmbe & Lonsdale) |
| Bishop, F. P. | Crosthwalte-Eyre, Col. O. E. | Freeth, D. K. |
| Black, C. W. | Crouch, R. F, | Galbraith, Hon. T. G. D. |
| Body, R. F. | Crowder, Sir John (Finchley) | Garner-Evans, E. H. |
| Bossom, Sir A. C. | Cunningham, S. K. | Glover, D. |
| Bowen, E. R. (Cardigan) | Currie, G. B. H. | Gomme-Duncan, Col. A. |
| Cough, C. F. H. | Lindsay, Hon. James (Devon, N.) | Robertson, Sir David |
| Gower, H. R. | Linstead, Sir H. N. | Robinson, Sir Roland (Blackpool, S.) |
| Graham, Sir Fergus | Llewellyn, D. T. | Rodgers, John (Sevenoaks) |
| Grant, W. (Woodside) | Lloyd, Maj. Sir Guy (Renfrew, E.) | Roper, Sir Harold |
| Grant-Ferris, Wg Cdr.B. (Nantwich) | Lucas, P. B. (Brentford & Chiswick) | Russell, R. S. |
| Green, A. | Lucas-Tooth, Sir Hugh | Sandys, Rt. Hon. D. |
| Gresham Cooke, R. | Macdonald, Sir Peter | Schofield, Lt.-Col. W. |
| Grimond, J. | Mackie, J. H. (Galloway) | Scott-Miller, Cmdr. R. |
| Grimston, Hon. John (St. Abans) | McLaughlin, Mrs. P. | Sharpies, Maj. R. C. |
| Grimston, Sir Robert (Westbury) | Maclay, Rt. Hon. John | Shepherd, William |
| Hall, John (Wycombe) | McLean, Neil (Inverness) | Simon, J. E. S. (Middlesbrough, W.) |
| Harris, Frederic (Croydon, N.W.) | Macleod, Rt. Hn. Iain (Enfield, W.) | Scames, Capt. C. |
| Harrison, A. B. C. (Maldon) | Maddan, M. | Spearman, A. C. M. |
| Harrison, Col. J. H. (Eye) | Maitland, Cdr. J. F. W. (Horncastle) | Speir, R. M. |
| Harvey, Air Cdre. A. V. (Macclesfd) | Maitland, Hon. Patrick (Lanark) | Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) |
| Harvie-Watt, Sir George | Manningham-Buller, Rt. Hon. Sir R. | Stanley, Capt. Hon. Richard |
| Hay, John | Markham, Major Sir Frank | Stevens, Geoffrey |
| Heald, Rt. Hon. Sir Lionel | Marlowe, A. A. H. | Steward, Sir William (Woolwich,W.) |
| Heath, Edward | Marples, A. E. | Storey, S. |
| Henderson, John (Cathcart) | Marshall, Douglas | Summers, G. S. (Aylesbury) |
| Hicks-Beach, Maj. W. W. | Mathew, R. | Sumner, W. D. M. (Orpington) |
| Hill, Rt. Hon. Charles (Luton) | Maude, Angus | Taylor, William (Bradford, N.) |
| Hill, Mrs. E. (Wythenshawe) | Maudllng, Rt. Hon. R. | Teeling, W. |
| Hill, John (S. Norfolk) | Mawby, R. L. | Thomas, Rt. Hn. J. P. L. (Hereford) |
| Hirst, Geoffrey | Maydon, Lt.-Comdr. S. L. C. | Thomas, Leslie (Canterbury) |
| Holland-Martin, C, J. | Medlicott, Sir Frank | Thompson, Kenneth (Walton) |
| Holt, A. F. | Milligan, Rt. Hon. W. R. | Thompson, Lt.-Cdr.R.(Croydon, S.) |
| Homsby-Smith, Miss M. p. | Morrison, John (Salisbury | Thornton-Kemsley, C. N. |
| Horobin, Sir Ian | Nabarro, G. D. N. | Tiley, A. (Bradford, W.) |
| Horsbrugh, Rt. Hon. Florence | Nairn, D. L. S. | Tilney, John (Wavertree) |
| Howard, Hon. Creville (St. Ives) | Neave, Airey | Touche, Sir Gordon |
| Howard, John (Test) | Nicholson, Godfrey (Farnham) | Tweedsmuir, Lady |
| Hudson, Sir Austin (Lewisham, N.) | Nicolson, N. (B'n'mth.E. & Chr'ch) | vane, W. M. F. |
| Hughes Hallett, Vice-Admiral J, | Nield, Basil (Chester) | Vaughan-Morgan, J. K. |
| Hughes-Young, M. H. C. | Nugent, G. R. H. | Vickers, Miss J. H. |
| Hulbert, Wing Cmdr, Sir Norman | Oakshott, H. D. | Vosper, D. F. |
| Hurd, A. R. | O'Neill, Hn. Phelim (Co.Antrim, N.) | Wade, D. W. |
| Hylton-Foster, Sir H. B. H. | Ormsby-Gore, Hon. W. D. | Wakefield, Edward (Derbyshire, W.) |
| Iremonger, T. L. | Orr-Ewing, Charles Ian (Hendon, N.) | |
| Irvine, Godman (Rye) | Orr-Ewing, Sir Ian (Weston-S-Mare) | Wakefield, Sir Wavell (St. M'lebone) |
| Johnson, Or. Donald (Carlisle) | Page, R. G. | Walker-Smith, D. C. |
| Johnson, Eric (Blackley) | Pannell, N. A. (Kirkdale) | Wall, Major Patrick |
| Jones, A. (Hall Green) | Pickthorn, K. W. M. | Ward, Hon. George (Worcester) |
| Kaberry, D. | Pitman, I. J. | Ward, Miss I. (Tynemouth) |
| Keegan, D. | Pitt, Miss E. M. | Waterhouse, Capt. Rt. Hon. C. |
| Kerby, Capt. H. B. | Pott, H. P. | Watkinson, H. A. |
| Kershaw, J. A. | Powell, J. Enoch | Webbe, Sir H. |
| Kirk, P. M. | Price, David (Eastleigh) | Whitelaw, W.S.I.(Penrith & Border) |
| Lagden, G. w. | Prior-Palmer, Brig 0. L. | Williams, Rt. Hn. Charles (Torquay) |
| Lambert, Hon. G. | Raikes, Sir Victor | Williams, Gerald (Tonbridge) |
| Lambton, Viscount | Ramsden, J. E. | Williams, Paul (Sunderand, S.) |
| Lancaster, Col. C. G. | Rawlinson, p. A. C. | Wills, G. (Bridgwater) |
| Langford-Holt, J. A. | Redmayne, M. | Wood, Hon. R. |
| Leavey, J. A. | Rees-Davies, W. R. | Woollam, John Victor |
| Leburn, w. G. | Renton, D. L. M. | Yates, William (The Wrekin) |
| Legge-Bourke, Maj. E. A. H. | Ridsdale, J. E. | |
| Legh, Hon. Peter (Petersfield) | Rippon, A. G. F. | TELLERS FOR THE NOES: |
| Mr. Studholmc and Mr. Godber. |
Question put and agreed to.
§ Mr. DeedesI beg to move, in page 6, line 37, to leave out "and."
This is a paving Amendment to the next Amendment.
§ Amendment agreed to.
§ Mr. DeedesI beg to move, in page 6, line 39, to leave out from beginning to "premises" in line 40 and insert:
with the exception of factories, mills and other premises of a similar character used wholly or mainly for industrial purposes and of.This is a drafting Amendment, but perhaps I should say a word or two about it. It removes a certain ambiguity in Clause 4. As the Clause now stands, it could be read to mean that premises 136 valued as part of any of the undertakings previously mentioned are not within the exception. The words which are ambiguous are:except a mill, factory or other premises of a similar character …This Amendment, I think, removes any possible misunderstanding.
§ Amendment agreed to.
§ Mr. DeedesI beg to move, in page 6, line 45, at the end to insert:
and the expression 'appurtenance' in relation to a dwelling-house, or to a school, college or other educational establishment, shall be taken to include all land occupied therewith and used for the purposes thereof.This Amendment also is designed to clear up a possible ambiguity. It arises 137 out of the part of Clause 4 which, as redrafted by the previous drafting Amendment, now reads, in lines 26 to 29,houses or other non-industrial buildings, with or without any garden, yard, court, forecourt, outhouse or other appurtenances belonging thereto, but without other land.I am advised that there are two categories of property which might be affected by the words "without other land." One would be country houses with parkland and the other would be schools with playing fields which are within their boundary. Both those categories of property have hitherto been valued to gross value, that is to say, in accordance with the valuing of domestic hereditaments.The Inland Revenue authorities advise us that unless we alter it by means of this Amendment, the form of words would result in both country houses and schools being valued to net annual value. This, I may tell the Committee, has already arisen in one instance, which I will not specify, but which involved quite considerable sums of money. That is how we know that it may come about.
Because parkland and playing fields cannot be regarded as
garden, yard, court, forecourt or other appurtenances …that could easily be anomalous. We might have country houses with parks and country houses with huge gardens treated separately. Schools with playing fields inside their perimeter and schools with playing fields some distance away might easily be treated on a different footing. It is desirable that there should be no ambiguity, that the matter should be made plain, and that this category of property should be assessed to gross value. That is the object of the Amendment, which has no other significance.
§ Amendment agreed to.
§ Mr. MitchisonI beg to move, in page 8, line 14, to leave out subsection (8).
§ The Deputy-Chairman (Sir Rhys Hopkin Morris)I think that it would be to the convenience of the Committee if we discussed with this Amendment the next Amendment but one standing in the name of the Minister, that in page 8, line 24.
§ Mr. MitchisonAs you please, Sir Rhys.
Subsection (8) deals with, among other things, the rating of waterworks. It includes other matters, but a very serious question has arisen in connection with the rating of waterworks. If the Amendment in the name of the right hon. Gentleman is accepted, the effect of the subsection will be that the provision of a notional or actual sinking fund which has been common practice in rating these bodies for very many years past will no longer be allowed, and that in its place an estimate of the annual expenditure actually incurred by the authorities in renewing parts of their property will be allowed as a deduction.
That estimate is a somewhat artificial figure, for, according to the Government Amendment and the Schedule to which it refers, it will be either the actual expenditure over a period of three years; the average expenditure over a period of ten years—in both cases before the material date—or, alternatively, treble the average annual amount of expenditure in a prewar ten years, ending at the end of March, 1939. The sum is trebled, presumably, to allow for the additional cost of replacements and renewals now as compared to the pre-war figure.
At first sight that suggestion appears reasonable, but when one looks into the matter a little further one finds that in practice it involves waterworks bodies—many of which are local authorities—in some very grave difficulties and exceedingly unfair discrimination. I hope that I am being fair in taking as an illustration a point which arises in the case of an undertaking situated near my constituency. At the moment, the Mid-Northamptonshire Water Board is engaged in building a large reservoir and pumping station and in laying down mains, and so on—which involves a very large capital expenditure—for the purpose of supplying water to a number of areas to which local authority arrangements have not succeeded in bringing water before.
As a result of that expenditure the Board will no doubt borrow in some form or another. In the same way, if a new town embarks upon water arrangements of its own it incurs very considerable 139 capital expenditure, and borrows in some form or another for the purpose. Those bodies will not be allowed to make a deduction, from their year to year basis of assessment, either by way of a notional sinking fund in respect of the investment they have made in putting up the water works originally or in respect of the annual cost of borrowing. In consequence, by reason of their capital expenditure at this time, they will be faced with a large increase in their rate liability at soon as the Bill comes into force—if it is in its present form—and that increase will continue year after year.
Moreover, they will get into further difficulties, because this is to some extent a cumulative process. In order to avoid some wholly impossible rise in the rates which they are charging for water they will have to borrow again and, in consequence, to incur exactly the same difficulty. The long and short of it is that they are being driven to accept a replacement or renewal basis calculated upon an average estimated in one way or another, instead of following the ordinary and sound practice of any public or private business concern which is undertaking a capital expenditure of this kind.
That is by no means the whole story, because waterworks, like other undertakings of this character, do not incur a regular, year to year, more or less constant expenditure upon renewals and replacements. What happens is that for some considerable time they have quite small bills for repairs and replacements and, after a time, large ones.
9.0 p.m.
It has been sought to meet that position by allowing an average annual charge to them, but that does not meet the case in the least. It is obvious that the three years' average does not meet the difficulty when one considers the practical side of replacements and renewals of that kind in such an undertaking as a waterworks. It is obvious that a ten years' average is little if at all better. As for taking the pre-war average and trebling it, I say to the right hon. Gentleman that at best that is a chancy process when dealing with large sums of money.
What is the reason for putting in this provision at all? I will tell the Committee what the reason is, and right hon. and hon. Members will have seen it for 140 themselves. It is that most of these large water undertakings will not have been able to incur any large capital expenditure, whether originally or by way of replacement and renewal, during the years since the war. For that reason it has been necessary to go back and take the pre-war average as one alternative and provide it with a multiple of three to do some sort of rough justice; but there is another side to this matter.
What is the result of water undertakings having been unable in recent years to incur considerable expenditure? They have been unable to do so for a variety of reasons which I need not go into now but which are obvious to any right hon. or hon. Member. The result will be that in the coming years, apart from new undertakings such as the Mid-Northampton-shire Water Board, even an old established water undertaking is bound to incur considerable capital expenditure and, therefore, to suffer from the quite unfair penal effect of this change in rating law.
We have been told that there have been discussions between the Minister or his Friend and the water undertakers, but they appear to have led to no conclusion. Until the next Amendment comes forward there is in the Clause a short paragraph (b), which is almost unintelligibly vague. It speaks about "the average annual amount" without saying over how many years it is to be averaged. That paragraph, which I would refer to as a draftsman's stop-gap, is to be replaced by the Schedule to which I have referred.
I can assure right hon. and hon. Members opposite that those responsible for waterworks do not regard this as a matter between a short and ill-drafted proposal and a longer and better-drafted proposal but as one involving a change which will ruin their undertakings. When I say "ruin their undertakings," I am perhaps speaking metaphorically because we do not ruin an undertaking but ruin the people who pay for the water. In some instances it would go so far as to make the undertaking financially impossible. That is what could happen if this Clause were put into effect in its unamended form.
One can get a measure of comparison and perhaps some indication of what has been in the minds of the right hon. Gentleman and his hon. Friend in this 141 matter by remembering that this proposal appears to represent a very rough and ready attempt to bring water undertakings in some way or other into line with pool payments now made in respect of gas and electricity. That may or may not be the position, but it occurs to one as a possibility. But its operation is entirely different.
I have with me a calculation that has been made about the gas industry. The sum of it is that the gas industry pays about 1.8 per cent. of its total revenue by way of rates. The water industry would pay, at any rate under the Clause, between 13 and 14 per cent. of its revenue. Surely, any logical or apparently logical consistency that may be obtained in that way would result in grave injustice. It seems to us that this is a hasty proposal, that it has not been fully considered in all its implications, and that the possibility of agreement between the right hon. Gentleman and the water undertakings has been far from exhausted.
We know that a Bill is to be introduced in the comparatively near future to deal with gas and electricity—we have been told so. That being so, I have a suggestion to make to the right hon. Gentleman and to his hon. Friends opposite. I suggest that the legislation dealing with the valuation and rating of the water industry should be postponed until it can be dealt with in conjunction with, and perhaps in the same Bill as——
§ Mr. NabarroIt is no recollection of mine—I have followed all the proceedings right through this Bill and the previous Bill—that any undertaking has ever been given to bring in a Measure to deal with the electricity and gas undertakings, both of which are nationalised. On the contrary, all that my right hon. Friend has said is that at some future indeterminate date—he did not use the word "indeterminate" but I do—he would review the arrangements under the 1948 Act. Certainly, there has been no promise of legislation. I should be much happier if there were.
§ Mr. MitchisonI am glad to hear that I shall have the invaluable support of the hon. Member for Kidderminster (Mr. Nabarro) in pressing for legislation about the immediacy of which he appears to be in some doubt. But I understood that it was definitely proposed to reconsider, and 142 to legislate, if necessary, about, the gas and electricity industries. I will give the hon. Gentleman an opportunity of correcting me if I am wrong.
§ Mr. DeedesIt is important that we should get this matter straight. The assurance that I gave in the Second Reading debate on the Bill was that the pool arrangements which affected electricity and the Transport Commission, and which we would not preclude including the gas industry, notwithstanding what is in this present Bill, would be reviewed immediately this went into effect. I specifically stated that the year 1956—it was not an indeterminate date, if I may correct my hon. Friend the Member for Kidderminster (Mr. Nabarro)—would see that work beginning.
§ Mr. Nabarro rose——
§ Mr. MitchisonI am sorry to have interrupted this very interesting quarrel that appeared likely to brew on the benches opposite, but as between myself and the Parliamentary Secretary there seems to be very little difference. The fact is that the pool arrangements are to be reviewed next year. It does not matter whether there is or is not a specific promise of legislation. What I am asking is that the water arrangements and this particular subsection should be reviewed at the same time.
There is an obvious answer to that. If it is left at that, the local authorities will say, "Yes, but the effect of this Bill will be to make very considerable changes in the rates levied on water undertakings, and we want to be assured that we shall at least be able to preserve the same rate revenue as we are now getting from water undertakings for the comparatively short period before the review" to which the Parliamentary Secretary has just referred. I would say to the hon. Gentleman and to his hon. Friends that we on our side of the Committee have no objection whatever to that.
If the omission of this subsection is to be agreed to on a statement that the right hon. Gentleman will at a later stage move an Amendment to the Bill to preserve the present revenue of local authorities from water undertakings, we should have no objection; nor, I may say, would the water undertakings have any objection. What they are afraid of is that for lack of sufficient exploration 143 of the possibilities of this Clause, for lack of sufficient exploration of the possibilities of agreement between themselves and the Minister, there should be a Clause which as at first drafted showed every mark of inaccurate haste and as now drafted contains provisions which, though far more complicated and far more detailed, will not meet the real difficulty, and which will work for two purposes.
Those provisions will penalise the water undertakings that are incurring or are about to incur heavy capital expenditure now; therefore, they will hinder the development of the provision of water in the towns and in the country districts. They will, of course, put the water undertakings into such financial difficulties that there will be one of two consequences, either a large increase in the water rates chargeable in some areas, or a deliberate cutting down of expenditure which is long overdue and which ought to be carried out. Those are the risks that are being run by a provision in the Bill which, I suggest to the Committee, merits much further consideration.
§ Mr. Walker-SmithIn the debate on Second Reading of the similar Bill in the last Parliament on 6th April, I made some reference to the subsection the omission of which is now moved by the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison). He has confined his argument to the effect on water undertakings, but, as the Committee will appreciate, though water undertakings are, perhaps, the principal ones concerned, the effect of this provision is not confined to water undertakings but extends to all hereditaments which are valued on what is called the profits basis, and that includes not only water undertakings but, amongst other sorts of activities, horse races which interest hon. Members and their constituents sometimes.
I am going to follow the hon. and learned Gentleman in this way, in addressing my observations to the matter of water undertakings as being the ones mainly affected and as being the largest single type of undertaking which is still rated on the profits basis. Perhaps it is right that, before so doing, I should say again, this being a new Parliament, what I said in April, that I am, as it happens. 144 President of the Water Companies' Association. I have no interest to declare in the technical sense, because it is not an office of profit and I have no financial interest in the water industry. [HON. MEMBERS: "In beer?"] No financial interest in that sense. I do not receive any pecuniary emolument myself: though, like other hon. Members, I contribute to the revenues of water undertakings in two ways. No doubt, at the end of this exacting cerebral exercise on which the Committee is engaged a good stiff glass of water would be very welcome.
9.15 p.m.
I have referred to the water companies because the Committee should have in mind in connection with this matter that the water companies, which represent about one-fifth of the providers of water in the country, are on all fours with the local authority and other public undertakings which represent the major four-fifths. It is of course true, as I said in April and as the hon. and learned Member for Kettering said just now, that the effects of this provision in connection with the terms of the sinking fund in relation to water undertakings has occasioned great apprehension amongst them. But, of course, the Committee, though concerned for the good fortune of water undertakings, is even more concerned with the effect on consumers and with the rise in water rates which may occur if the cost of this provision has to be passed on to the consumer.
I fully recognise that the Minister and the Parliamentary Secretary have been engaged constructively in discussions with the water undertakings and their representatives in the last few weeks, but unfortunately, as I understand it, the position is not yet one which is agreeable to the water undertakings, nor one which frees them from the apprehensions which they feel. We must be clear on all sides of the Committee, that no outside interest, be it a water undertaking or any other, can insist to Parliament that a provision concerning it should be exactly as it desires. It is for Parliament to say and for the Minister to make up his mind as to what he can conscientiously recommend to Parliament in the interests of the public as a whole. That is clearly the constitutional principle upon which we proceed, but it is, of course, desirable that the Amendment which now 145 stands in the name of my right hon. Friend, and which is clearly an improvement on the provisions of the Bill as originally drafted, should be one under which water undertakings can reasonably and economically function.
The hon. and learned Member for Kettering has defined with his customary clarity the various methods which the proposed new paragraph will provide. I do not pretend in this short time to have been able to make a very precise evaluation for myself of what the effects of this would be, but there appear on the face of it to be certain disadvantages. Taking the first method—the three-year actual period—even in the last three years there has been difficulty in water undertakings, by reason of shortages of materials and labour, in doing the amount of work and thereby incurring the amount of expenditure which the undertakings might have wished to incur. If we take the second method—the period of 10 years, 1944.54—that argument is very considerably reinforced because of the licensing machinery which governed materials and so on during that time. Both alternatives have the additional disadvantage that the expenditure incurred in recent years is for the renewal and replacement of assets incorporated in the undertaking some 50 years ago. It would therefore appear to be clear that neither really takes into account the growth of undertakings over that period of 50 years.
That particular consideration is even more present in regard to the third method, which is to take a 10-year average from before the war. If that period is taken, the assets which are being renewed are even older and reflect a more out-of-date position in regard to the undertaking, and, of course, what the position was 26 years ago does not really necessarily bear very much relation to the position of the undertaking now. I repeat that these are complicated matters, and I shall certainly listen with great attention to what my hon. Friend—who is a participant in these discussions and has this matter very much in mind—has to say. It would appear that there are valid objections to each of the three means now put forward in substitution of the previous arrangement.
I should like to put two questions to my hon. Friend, because in this context I think that they are very important. The 146 first is this. What assessment has been made of the effect upon water undertakings in the making of capital extensions of the possibly deterrent effect of the proposals put forward in substitution of the old sinking fund procedure on the profits basis of rating? What assessment has been made of the deterrent effect on capital extensions at a time when, as the hon. and learned Gentleman observed, most water companies are seeking to make suitable capital extensions in the climate of the present day?
The second question I put separately because it is one which concerns me very closely as a Member for a partly rural constituency, and in this context concerns many of my hon. Friends and many hon. Gentlemen opposite. What is the estimated possible deterrent effect on the extension of the provision of water supplies in rural areas? We are now all very concerned to get this broad, sustained advance on the rural front towards the provision of water as part of the rural amenities which we are anxious should be provided. I should be grateful if my hon. Friend would have those considerations in mind, and if he could address himself specifically to the two points I have ventured to put to him.
§ Mr. Denis Howell (Birmingham, All Saints)I support the Amendment, because we in Birmingham certainly think it extremely important. The water industry in general believes itself to be overrated, and the figures I have certainly lend weight to that contention. The present estimated annual revenue of the water industry is some £60 million, of which £8¼ million is the estimated annual payment in rates. That is a percentage of 13.7. The comparable figures for the gas industry are a present annual revenue of £219 million and a rates payment of £4 million—1.8 per cent. It therefore seems most inequitable that in this and the following Clause we should have different systems of rating for water and for gas—and for electricity also—the effect being, as I have just described, one of great inequality.
I want, too, to protest against the monstrous way in which the Birmingham Corporation had been treated by the Department. We have just had a prolonged and costly case before the Lands Tribunal which we were invited to take by the Inland Revenue and by the 147 Department of the hon. Gentleman opposite. That case took ten days to hear. It started on 21st February and the hearing of evidence went on until 4th March. Then there followed three days of legal submissions between 19th and 21st April. The judgment will not be made known until Friday of this week. We were invited to take this case in order to test the law, but mid-way through it——
§ The Deputy-Chairman (Sir Rhys Hopkin Morris)I understand that the argument of the hon. Gentleman is about a case which is under considertion——
§ Mr. LindgrenOn a point of order, Sir Rhys. You will remember that during the Second Reading of this Bill I called attention to the fact that there was an attempt by the Inland Revenue to value the City of Birmingham Water Undertaking on this basis and that was contested by the Birmingham City Council. The council was invited to go to appeal. I would suggest that the changing of legislation while that appeal is under consideration—the findings of the tribunal are to be made known this Friday—is somewhat material while that appeal is still under consideration.
§ The Deputy-ChairmanI do not know about this case, but the argument is advanced while the case is before the courts——
§ Mr. LindgrenIt is finished.
§ The Deputy-Chairman—and the judgment has not yet been made known. So it is sub judice and that case cannot be discussed.
§ Mr. HowellWith respect, Sir Rhys, and further to that point, I was not discussing the case but the fact that the Government, having invited Birmingham to take a case, have themselves, before the judgment is announced, introduced entirely new legislation in the same field. I would have thought that was a pertinent point, but I have made the point and will leave it there.
It has for many years been the practice in the water industry, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has said, to have a notional sinking fund in which all the assets and the question of replacements 148 can be taken into consideration. There was not any discussion about this Bill with the British Waterworks Association until 11th May, although of course there were discussions with the Association of Municipal Corporations by the Government. One would have thought that in a matter of this seriousness, certainly as regards municipal water undertakings, the Government would have consulted them more than has been done and at a much earlier stage in the proceedings.
We have been told by my hon. and learned Friend and also by the hon. and learned Member for Hertfordshire, East (Mr. Walker-Smith) of the three systems which the Government now propose, and I do not want to go over them again, but I must mention that Birmingham pays out 25 per cent. of its income in rates to other local authorities. That is an extremely big proportion of what those local authorities receive. For example, 60 per cent. of the income of the Radnorshire county authority comes from Birmingham Corporation.
That is, of course, as it should be, but I hope to demonstrate that if this Clause is passed this might come to an unsavoury end at some time in the future if the assets of the Birmingham water undertaking—the dams and the terrific cost of replacing mains—were put on the basis suggested by the Government. For example, there are two projects in Birmingham which might come quickly to hand. One is the replacement of a complete reservoir and the other is the replacement of 500 miles of water mains. If those two things came together on the basis of what has been put before us, it would make chaos of the income of the County of Radnorshire. Therefore, apart from the effects of the Clause upon the consumers of water in Birmingham, there could be an extremely serious effect upon the county councils involved. I hope the Government will bear that in mind.
9.30 p.m.
With regard to the case to which I have referred, we were hoping that Birmingham would obtain a renewals allowance in the region of £300,000. We have examined the Government's three proposals very carefully, and the best from our point of view is the 1930–39 proposal trebled: but we do not accept the contention that it should be trebled because we believe that building costs have risen more than three 149 times since pre-war. This proposal would give us an allowance of £114,120. I ask the Committee to consider that figure in relation to the fact that we were given an allowance of £102,938 in 1934 at the time of the last valuation, which itself makes the new proposals of the Government quite absurd.
Apart from that, Birmingham's capital value has increased from £l1 million in 1934 to £18 million today. The effect of the Government's proposal would, we estimate, mean an increase for Birmingham from what we consider to be the proper figure as assessment, about £285,000. to £378,000, representing an increase of £93,000. If we take the average rating as 20s. in the £, which is reasonable, it is clear that the proposals will cost the water consumers of Birmingham, at a very conservative figure, £93,000 in any one year, and the figure may well be over £100,000.
It will be seen that this is a very serious matter for municipalities with water undertakings and also for county councils with water undertakings in their area, for they might at any time lose the value of rates because a water undertaking decides to do works on a very large scale. With my hon. and learned Friend the Member for Kettering, I plead, in the name of common sense and logic, and because the Clause in its present form is discriminatory, that the Government have another look at the Clause and re-introduce it in the Bill which we know to be forthcoming. I also complain most bitterly of the monstrous treatment of the Birmingham Corporation by the Government in that it was asked to undertake a test case and the Government acted before the legal decision could be given.
§ Sir I. HorobinI intervene to support the views which have been expressed that the case has not been made out for the change proposed by the Government in the method of rating water undertakings. It is rather remarkable to me that in his speech earlier the Minister went out of his way to point out to the Committee that further legislation for permanent arrangements for the rating of water undertakings would be necessary in the comparatively near future. In these circumstances, it seems to me rather difficult to justify putting into legislative form in this Bill a very recent attempt by the Inland 150 Revenue to alter the method by which for years water undertakings have been rated.
Many of the arguments have been deployed, but as this concerns my own county borough, which, I am glad to say has lots of very good water, I feel that I must add my voice to those of hon. Members who feel that water undertakings, whether municipal or private, are being hardly treated. I am not a lawyer, but I feel that the Government cannot in any case rest themselves upon a strict legal interpretation for the very reason, given by the hon. Member for All Saints (Mr. D. Howell), that the Government have stepped in and taken the very words out of the mouths of Her Majesty's judges who have been asked to determine a case on strict law. I do not base my case, therefore, on a strict legal interpretation, which, in any case I am not competent to give, but on the principles involved, which are comparatively simple, although their application in this special case presents certain admitted difficulties.
What we have to determine in this case is, in fact, as with our old friend the hypothetical tenant, the net worth of these properties. What the Government are saying, and what the Inland Revenue Department is attempting to have put in the law, is the extraordinary proposition that if, for reasons good or bad, the owner of a hereditament, in this case a water undertaking, has spent less than would be the normal, average amount necessary to keep the hereditament in the condition to command the rent, that is a reason for increasing, not for decreasing, the amount the hypothetical tenant may be expected to offer.
Put in that form the proposition is completely ludicrous. There may be good reasons why the owner of any hereditament has not spent as much as he should, taking one year with another, to keep the hereditament in good condition. Nobody trying to let a house with dry rot and telling the tenant to pay a bigger amount because the house has not been kept in good condition would get away with that argument, and I do not see why the Inland Revenue should get away with it.
Of recent years the Board of Inland Revenue has been endeavouring to carry into the valuation of these undertakings a completely new method of valuing. I do not know if the Board is basing itself 151 on a correct legal construction of the Statute. I am not competent to give an opinion on that. The Government apparently do not think that the judges are competent, because they want to give them an interpretation.
The principle involved, however, seems to be perfectly clear. It is that what has been done for over a century is, roughly speaking, correct: namely, that these things should be averaged out and that an amount should be put aside which, taking one year with another, will be sufficient for repairs and renewals, and that that amount should be taken as the deduction from the gross rent to arrive at the net annual value. That has always been done. It may be true that clever, legal gentlemen have discovered that that ought not to be done, but it has been done. For all we know they may be right. No doubt we shall hear in the next day or two, when it is too late, when judgment is delivered.
However, the general principle in our rating procedure seems to be quite clear, and it is a deduction from the gross value, taking one year with another, of what will be necessary for the purpose. If a particular water undertaking has spent only £3,000 when it ought to have spent £300,000, that is not a reason for giving it more value, but a reason for giving it less.
It is extremely unfortunate that private or local authority owners of water undertakings—the only public utility of this kind which has not wangled for itself any special provisions for rating; everybody else has—should find themselves in that unfortunate position, with all the consequences which have been pointed out. The inclusion of the owners of these water undertakings in the Bill until only next year, or until some proper system can be worked out, is a totally new and unexpected way of calculating their rating liability.
Unless the Minister can give a much more satisfactory explanation of why it is necessary to do this—this is not the sort of issue on which even in the early stages of a new Parliament one can feel justified in voting against the Government—I shall certainly, if I am forced into the Lobby, go there and continue the argument with the Parliamentary Secretary. I hope, however, that my hon. 152 Friend will find some better arguments than those we have heard so far.
§ Mr. John Hynd (Sheffield, Attercliffe)Sufficient has been said from both sides of the Committee to indicate to the Government that the wisest course they can pursue at this stage is to accept the Amendment and withdraw the subsection. Like my hon. and learned Friend the Member for Kettering (Mr. Mitchison), I was concerned when I read the Clause and found from subsection (8, a) that for the purposes of the Bill the expenses of a water undertaking and certain other concerns would not include the provision of a sinking fund, whether such a sinking fund was provided or not.
I need not go into the reasons why I was concerned, because the hon. Member for Oldham, East (Sir I. Horobin) has given the complete case why that practice which has existed for so long, should not be interfered with unless and until the Government had sound reasons to advance for some new formula which could take the place of this practice in the interests of all concerned. That the Government have completely failed to do.
I should not object to some new method which would give a greater equity in the rating of these concerns and which would enable subsection (8, a) to stand, but when I read subsection (8, b) I find there a completely impossible and impracticable alternative. My hon. and learned Friend has already explained the uselessness of this subsection which provides that "the average annual amount" of the expenditure incurred by the occupier should be included as the basic amount of the expenses without defining the period on which such "average" should be based.
When I saw that an Amendment was now proposed by the Government in Clause 4, page 8, line 24, containing a lot of new words, I thought that that might be some answer; but the Government, having realised that the original paragraph (b) was quite impracticable and inequitable—which, of course, is the reason for this mass of words on the Notice Paper—have not, in fact, proposed an acceptable alternative. This Amendment proposes that the expenses:
… shall be treated as including a sum … representing expenditure incurred in replacing or renewing hereditaments, or parts of hereditaments, occupied for the purposes of the undertaking.153 That might not be so bad, were it not for the fact that paragraph (a) still stands. That still provides that a sinking fund shall not be taken into consideration.I do not want to go over the arguments which have already been advanced, but I should like to draw attention to the point made by my hon. Friend the Member for Birmingham, All Saints (Mr. D. Howell) about the impact that this provision will have if it is included in the Bill in spite of the arguments advanced against it from both sides of the Committee. In Birmingham it will make a difference of about £100,000 to the rates, and in Sheffield it will involve the city in an additional £85,000 or thereabouts, much of which will go to local authorities outside the city.
That would not in itself be an argument if the Government had provided a substantial, reasonable and logical basis upon which the old practice could have been altered, but they have not done so. I submit that before we embark upon a Clause which imposes such tremendous burdens upon local authorities, we should consider whether or not there is a better alternative, and whether or not this is the right answer. I have a suspicion that the Minister is likely to try to get away with it by telling us that he is prepared to consider a further alteration to this formula in due course, either in the legislation which he proposes to introduce in the course of time governing other public utility concerns, or in some other way.
9.45 p.m.
If the right hon. Gentleman is going to tell us that Clause 4 (8) as he proposes to amend it, or as it already stands, is to be regarded only as a carry-over arrangement; that it is not the final answer; that it is not permanent—and if he uses such arguments, he will be admitting that it is not satisfactory, even in the view of the Government—then, in view of the tremendous dislocation which it will cause among these undertakings, and among local authorities which in many cases are responsible for the undertakings, I suggest to him that there is no justification for including Subsection (8) in the Bill at all.
So long as there is a lack of certainty that this is the answer; while there exists an opposition which cuts across parties; while there is a considerable dissatisfac- 154 tion among water undertakings and the local authorities concerned, and in view of the burden imposed on local authorities—and therefore upon the constituents of hon. Gentlemen on both sides of the Committee—the Bill will not suffer if subsection (8) is withdrawn altogether until the Government have considered what is the right answer, and how best to bring water undertakings and other similar hereditaments, or hereditament-owning bodies, within this new conception of rating and valuation. I hope, therefore, that the Minister will consider the arguments advanced from both sides of the Committee and that he will seriously consider accepting the Amendment moved by my hon. and learned Friend.
§ Mr. DeedesI do not think that we should allow my hon. Friend the Member for Oldham, East (Sir I. Horobin) to sleep upon the decision he announced a few moments ago. It may be convenient if I now attempt to meet some of the points made during the debate on this Amendment.
My right hon. Friend appreciates that there is considerable concern felt by hon. Members on both sides of the Committee about this matter and that this arises from the fact that, as was said by my hon. and learned Friend the Member for Hertfordshire, East (Mr. Walker-Smith), we are not here concerned only with water undertakings, although they bulked largely in the remarks which have been made. In fact, we are concerned with all industries falling into the category of being assessed on profits method. That covers a considerable field, including the categories mentioned by my hon. Friend and by others. Therefore, the concern which has been expressed is understood by my right hon. Friend who is, and has shown himself to be, anxious to attempt to meet it.
The hon. and learned Member for Kettering (Mr. Mitchison) and, if I may say so, everyone else who spoke on either of the two Amendments made light of the background of this problem and the reason we decided to take the action which is now proposed. No one touched on the problem confronting the Government when they came to making this provision. It is known that the idea of a notional sinking fund has, during recent years, led to what I can only describe as quite unrealistic results. I think that is a fair way of putting it.
155 It is quite clear from the figures in our possession that, as matters stood, there was, under the notional sinking fund arrangement, a likelihood that, at a time when it was known and accepted that the assessments of everyone else would be rising, the assessments of a large number of these undertakings would, in fact, fall. I do not think that is in dispute as a generality. I have particulars in my possession, but I do not think that I should give names. Here I have details of specific instances. In one case there would be a reduction from a pre-war assessment of £185,000 to £110,000. In another case the reduction would be from £341,000 to £227,000. Those are reductions envisaged under the arrangement which we have sought to meet.
I do not have to stress to the Committee the fact that reductions of this kind in the case of public utilities may be a serious matter for other ratepayers in the area. A certain amount has been said about the effect on payers of water rates, but the other ratepayers may be concerned at the considerable fall in the assessments of public utilities.
§ Dr. Horace King (Southampton, Itchen)The Minister has talked about some companies which would benefit by this. The only company which could benefit would be one which had not put enough into its sinking fund with which to meet the annual repairs which it had to undertake.
§ Mr. DeedesThe point I am making is that the notional sinking fund had reached a point when it was leading, and would lead on this occasion, to a reduction in the assessment; in other words, an assessment below the previous assessment. That is not a situation——
§ Mr. MitchisonWould not the hon. Gentleman agree that more people wash than pay rates?
§ Mr. DeedesI am not going to quarrel with the hon. and learned Gentleman on that point at this stage.
Both the hon. and learned Gentleman and my hon. and learned Friend the Member for Hertfordshire, East were critical about the provisions of the alternative Amendment we have offered.
§ Mr. D. HowellWould not the hon. Gentleman agree that the fact that the 156 water industry pays 14.7 per cent. of its income in rates as against 1.8 per cent. in the case of gas and electricity undertakings might tend to show that they have been overrated in the past?
§ Mr. DeedesIf the hon. Gentleman will wait, I am coming to that point.
As I was saying, both the hon. and learned Member for Kettering and my hon. and learned Friend the Member for Hertfordshire, East were a little critical of the provisions which we have made. May I clear up the point raised by the hon. and learned Gentleman on the question of the pool payments? I think I made it clear that any comparison with gas or electricity—I do not think that a comparison can be made with the British Transport Commission—is not really a reliable comparison for two reasons. The most important is that we accept the fact that there is a need for revision. The local authorities are pressing for it, and one will take place immediately on revaluation in about a year from now. Once that has taken place, I do not think that the comparison which the hon. Gentleman seeks to make with water will arise. We cannot do it any quicker, and that review will involve gas as well.
Both hon. and learned Gentlemen, as I say, were a little critical of the provisions which we made. Perhaps I might attempt to meet two or three of the points raised by my hon. and learned Friend. He spoke, first, of the point which we accept, that is to say, that the 10-year average can work unjustly in respect of businesses which were kept back during the unnaturally restricted years following the war.
The object of the second of the three provisions, the idea of the three-year average, is principally to meet the difficulty of the post-war, 10-year average. Whether it does so or not to the satisfaction of my hon. and learned Friend, is another matter, but that was the object of the provision. My hon. and learned Friend asked two specific questions. He asked what assessment, if any, had been made of the deterrent effect on capital extension. On that I can only say that such assessment as we have made does not lead us to adopt the apprehension felt by my hon. and learned Friend.
My hon. and learned Friend then asked what was the estimated deterrent effect on water supplies in rural areas. They 157 are in a rather different category because they get their supplies from wells and rivers and they are equipped with pumping plant which has been provided on short-lived capital.
§ Mr. LindgrenMany rural water supplies have long mains with no hereditaments on either side of them for many miles and their loans were for 60 years. Surely that was not short-lived capital?
§ Mr. DeedesThey have much shorter capital and are not on a par with that to which my hon. and learned Friend was referring.
§ Mr. MitchisonWill the hon. Gentleman deal with the case not only of the Mid-Northants Water Board, to which I referred, but of the other water boards in rural areas which are incurring considerable capital expenditure for purposes which I should have thought would commend themselves to the hon. Gentleman?
§ Mr. DeedesPerhaps the hon. and learned Gentleman will wait for a moment. I should like to say something about the Birmingham case, and also to reply to a point made by my hon. Friend the Member for Oldham, East. I hope it is not suggested that we have in any way attempted to prejudge the issue which was before the courts, or that any attempt has been made to take unfair advantage of the situation which has arisen.
There is a long history to the Birmingham case, which arose in 1952. The hon. Member for All Saints (Mr. D. Howell) is not right in saying that Birmingham was invited to bring a test case. In fact, the initiative was taken by the Corporation.
§ Mr. D. HowellI have here the extract from a speech of counsel to the Birmingham Corporation, in which he says:
I can only talk of my own client, the Birmingham Corporation, and I can say this categorically, that had we known at the time we were invited to take this case before you and find out what the law was"—and he made some very pertinent comment about the people who invited Birmingham to take the case. I stand by that statement.
§ Mr. DeedesAll I am saying is that the Corporation was not invited by the Inland 158 Revenue to undertake the case. I hope that my right hon. Friend will be acquitted of seeking to take any advantage, bearing in mind the fact that the judgment was in relation to past transactions, while the Bill is concerned only with what will happen in the future. It will not militate against a judgment given in favour of the Corporation.
My right hon. Friend is personally ready to examine, in conjunction with industry and local authority associations, the whole question of the assessment of water undertakings. The talks that we have had with the industry have not got us beyond the point which we have now reached. There is no reason why there should not be an examination, by the industry and local authority associations, into the future of the assessment of water undertakings. My right hon. Friend is prepared to review the position of all undertakings assessed by the profits method—upon the lines of the undertaking which he gave earlier on to the shopkeepers—when the full effect of the revaluation is known. When we know what the incidence will be my right hon. Friend is prepared to undertake a review of the method of assessing all undertakings on a profits basis.
§ Mr. MitchisonDoes the hon. Member seriously mean that this devastating and ruinous change will be introduced into the assessment of water undertakings, pending a review of the whole question?
§ Mr. DeedesWe do not accept the hon. learned Gentleman's Amendment, which would leave the position as it was when we found it, because it makes no contribution to the problem which has to be met. We put forward our own Amendment as a reasonable alternative, which I hope will go some way to meet the Committee's wishes.
§ Mr. LindgrenThe statement to which we have just listened is particularly unsatisfactory. Reference has been made to drawing up a comparison as between shopkeepers——
§ It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
§ Committee report Progress; to sit again Tomorrow.