§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Howie.]
§ 4.10 p.m.
§ Mr. Frederic Harris (Croydon, North-West)
On raising this specific matter—namely, the loss of rates to Croydon in respect of office occupation by nationalised industries—I must, as chairman and managing director of a public company, with its headquarters in Croydon, on which substantial rates are paid, declare my interest.
During my public life I have battled rather hard against the sheer unfairness of the incidence of rates, with all their anomalies and injustices, upon my fellow citizens in all walks of life. As the Minister knows, I was particularly opposed to the creation of the Greater London Council. I fought strenuously against Croydon becoming a Greater London borough within that Authority.
One of my main reasons was that this in itself was bound to substantially increase Croydon's rates. On Monday next the Croydon rate will be known, but my guess is that there will be, once again, a considerable increase, possibly about 15 per cent., of which at least half—and this is a most important point—will solely be due to the net cost of transferring some of the Croydon services to the Greater London Authority.
These services will, in effect, cost Croydon about double what they have been costing in the last few years. So it has become a very expensive political manoeuvre. Parliament, in its lack of wisdom at the time, created this unfortunate situation. Each time I consider the implications on Croydon, particularly on the Croydon ratepayers, I become more and more disturbed. No one can say that I at least did not warn everyone about it at that time.
Both main political parties are wedded to doing something about alleviating the general rating burden, for the present formula is surely agreed by all to be completely out of date. The real point is, when? There was published only yesterday the Report of the Allen Committee. I have ploughed through some of it—there are 400 pages of it—and about much of it I have knowledge, but a lot 887 of new facts are disclosed in it. We are reminded that its terms of reference did not require the Committee to pass judgment on the rating system or to make recommendations. Thus, much of the value which one hoped might stem from its Report is lost because of its limited terms of reference.
All that is really open to me as a back bencher is to draw the attention of the Government to the specific anomalies, particularly where alleviation will help Croydon's ratepayers. I understand that I was the only Conservative hon. Member—I emphasise "only"—who strove for the abolition of the outdated and out-moded industrial derating. Although I was constantly assured by my Ministers that nothing could be done about it, eventually, by stages, it was abolished. Abolition subsequently brought some benefit to house occupiers, but that is something of the past. What I wish to raise today is, in a way, a similar anomaly; but in this case it concerns the nationalised industries.
In May, 1961, during the Recommittal and Report stages of the Rating and Valuation Bill, I endeavoured to introduce three new Clauses which, if accepted, would have ensured that certain nationalised industries—such as the railways, gas and electricity boards—would have paid their rates for their office accommodation on exactly the same basis as other commercial occupiers, which I considered was blatantly fair. Rating experts consider that where the railways or other nationalised industries occupy property detached from their main hereditaments they should be separately rated in the usual commercial way. So why should there be an exception for the nationalised industries?
In 1961, I was told by the then Minister, my right hon. Friend the Member for Hampstead (Mr. Brooke), that, although he agreed in the main with the point I was making, the most appropriate time to pursue it would be when the 1963 valuations came into force. Regrettably, in 1963 still nothing was done about it. Therefore, in giving the Minister the following facts I make a special plea that the present anomaly should be put in one form or another as urgently as possible. It could be done in many ways.
888 I am pleased to say that Croydon Council is a very progressive council. I know that the Minister himself has visited it lately. Over the past seven years the council has carried out an extensive redevelopment programme of the town centre. Again, I believe that the Minister has seen this. To me and to many others it is a most exciting development. It was not unreasonable to assume that the new office buildings would produce substantial rates to help to offset the cost of the public improvements. All of this would have been to the ultimate benefit of Croydon ratepayers.
What happened? Because British Railways do not pay rates like other rateable occupiers in Croydon, as with many other local authorities Croydon itself comes off very badly indeed under the present system. I understand that the local authority representatives are even now trying to persuade the Accountant-General of the Ministry of Housing and Local Government to review the whole rating of nationalised industries. So we are all apparently talking as one.
What is the present system? The British Transport Commission makes a global payment to the Ministry of Housing and Local Government, which, in turn, makes a general distribution to such rating authorities as have railway property within their boundaries. No account whatsoever is taken of how much or how little railway property there is in the area concerned. The amounts which are passed on to each authority just do not vary. For instance, Croydon has 14 railway stations, many goods and marshalling yards, extensive engine sheds and other workshops. In the main, all those existed when the original rating formula was devised.
In 1961, the railways took over some valuable offices in Croydon, to an area of about 40,000 sq. ft., which they rented from a private development company. These offices, if normally rated, would have produced for Croydon an additional £12,000 in cash rates per year. Recently, the Southern Region of British Railways decided to move into further new offices in Croydon, and has now taken over, or are in the process of taking over, a new office building of about 200,000 sq. ft. Under the normal rating formula, this block of offices would provide a further £63,000 a year.
889 I am given to understand that the lease is for 21 years; so, unless there is a change, this could continue for 21 years. Each year on this British Railways occupation alone Croydon is losing £75,000, equal to about 1¼d. in the £. All that Croydon receives at the moment, because of the British Railways occupation, is £16,072. Even this is a decrease on the previous year, when it was £22,453. The situation as it is at the moment is obviously most unfair.
I will make a quick reference to the Gas Board. Croydon, because of its fine commercial centre, is obviously attractive to other nationalised industries, but, unfortunately, similar rating anomalies then follow. In Croydon, the Gas Board rents private office building of about 21,000 sq. ft. and the loss of rates to the town is about £6,000 a year. Now the Gas Board has just taken a lease on a further 68,000 sq. ft. with an additional loss to Croydon of a further £20,000 a year. The Gas Board already occupies extensive offices over its main showrooms which, if rated in the ordinary way, would produce a further £10,000 a year. So, here again, the Gas Board short-pays to the town of Croydon in rates £36,000 a year.
Time is limited, otherwise I could point to a similar case relating to the electricity undertakings, but I must say in fairness that that would be a smaller case than that of the railways or the Gas Board. Croydon is, naturally, only too glad that the nationalised industries recognise what a fine progressive town Croydon is, but it is most unfair that because of the present rating system the occupation by them of their office accommodation means such a loss to the town, which at the moment is at a minimum of £111,000 a year, about 2d. in the £ for every ratepayer.
The Daily Telegraph referred to my considerable interest in this matter on 3rd February, and I have also had many communications from all over the country. Perhaps there are people who feel that there is a case for subsidising British Railways, but why at the expense of the Croydon ratepayers? Why not spread the burden throughout the country, throughout all taxpayers? Why, for instance, cannot the Exchequer make good the shortfall?
Croydon went ahead with its original development, at the earnest behest of 890 the then Government, that a new commercial centre should be provided as an alternative for the city. This has been done most successfully, but it is very unfair that by having done this the nationalised industries should in effect fill those offices on the cheap. It is fair to say that, understandably, Croydon is astonished and angry at the present situation. While I am the first to recognise that the new Minister and the new Government inherited this situation, I can certainly claim that at least I asked my own Government to put the matter right. Now I ask the Socialist Government to put the matter right.
§ 4.23 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish)
I think all will agree that the hon. Member for Croydon, North-West (Mr. Frederic Harris) has put his case in a courteous and excellent way on behalf of his constituency. To begin with, I should like to deal with the point concerning the reorganisation of the Greater London Government. The hon. Member will know that the views he expressed are shared by myself; and many of us on this side of the House regret that because of the time factor, because so many staffs were already appointed, and bearing in mind that they had to be done by 1st April, we found no time to make any dramatic changes in the London Government Act.
Whilst I share the hon. Gentleman's views on the matter, and I recognise that many of the costs which will fall upon Croydon ratepayers may be attributable to this reorganisation, there is nothing more that I can say about it at the moment, except that I hope this is not the end of the story, and some of us will be watching carefully to see what ought to be done in consultation with the authorities concerned.
I listened to the hon. Member for Croydon, North-West with interest but without surprise, for I have read what he said on the subject on 3rd May, 1961, when the House was considering a rating and valuation Bill, which it seems to do quite often. That was almost four years ago. The grievance which Croydon feels has not altered in principle but it has been given added weight, for two reasons. The first is that I understand that British Railways have increased their office space 891 in Croydon; and the second is that as the total rate levy increases, rateable value becomes more and more important. It is understandable that a rating authority should resent giving space to buildings which seem to produce no rate income. The hon. Gentleman will understand that I have sympathy with his point of view.
The background to all this is that public utilities used to be assessed for rates according to their profits. This method had to be abandoned when the nation acquired the industries, and service rather than profit became the order of the day. The Local Government Act, 1948, took the railways and electricity out of rating and provided for global payments in lieu of rates to be shared out among rating authorities. These payments, as the hon. Member said, were calculated by formula. In 1955 a formula was added for gas, and minor modifications have since been made to the original arrangements.
We now have a system by which gas and electricity boards are subject to rates levied at the local rate poundage on values found by formula, and by which the transport boards make an annual payment to my right hon. Friend in respect of their rail and canal property which he distributes among all rating authorities in England and Wales in lieu of rates. All these payments are based originally on the rates paid by the industry before nationalisation, with adjustments for changes in activity, general revaluations and changes in rate poundages. The formulae governing these rates, or payments in lieu of rates, do two things. They fix the overall value or liability of each board, and they provide for the board's contribution or rateable value to be shared among the rating authorities.
I think it fair to say that it is the second element which is the bone of contention in Croydon. The borough does not consider that it is getting a large enough slice of the cake. It wants a bigger slice or, better still, it wants a separate cake for Croydon. I am sure that the hon. Member will agree that he would not be alone in that point of view, particularly where there are boroughs with numbers of problems similar to his own and with a spate of these industries' offices and so on.
892 We have to recognise that any formula must contain a certain amount of rough justice. I have no doubt that Parliament tried to steer a middle course between the need for simplicity on the one hand and the need to give fair shares all round. The railways formula is the oldest. Under it the total payments by the British Railways Board, the London Transport Board and the British Waterways Board are simply shared among all rating authorities in proportion to the total rateable value of each area. Under the later gas formula the share is based on gas supplied to consumers in each rating area, with a special weighting for manufacture. The formula for electricity combines these two approaches. The value of generating activities goes to the rating areas containing power stations, and the value of distribution activities is shared out in proportion to the rateable value of each rating area.
Underlying all the formulae is the conception of a "notional hereditament". I apologise to the hon. Member for the use of that word. In his excellent Report, Professor Allen refers to the "unit of assessment for rating", which is very much better. The valuation list for the area does not contain a list of individual items of land and bricks occupied by a gas, electricity or railways board. It shows a single entry representing the rateable value of all the property occupied by the gas or electricity board in the rating area. The railways are not in the valuation list at all, but the principle is the same.
It is part and parcel of this approach that the value of the rates or the contribution to the individual rating area cannot be measured in terms of the space occupied by the industry or the normal rateable value of its buildings. This is the price one pays for simplicity—and I am bound to say that it is hard to see how one could depart very far from this line without plunging into the ad hoc valuation of all sorts of bits and pieces of property.
I said just now that the single entry covered all property occupied in the rating area. There is one exception—showrooms of the gas and electricity boards to which the hon. Member has referred. These were taken out of the formulae by the Local Government Act, 1958. It is asked why offices cannot 893 be treated in the same way. There were at the time reasons for leaving offices in the global arrangements, but I do not think that I need to go into them now because it is not my purpose today to defend the present formulae to the last letter.
The hon. Member referred to the promise given to him by the then Minister in the debate on his Amendment in May, 1961—the promise of a full inquiry into the formulae when the 1963 revaluation had taken place.
We are at this moment re-examining the rating arrangements for gas, electricity and transport. The tripartite working party on rating and valuation set up some years ago was reconvened in the autumn of 1963 for this very purpose. It has not yet reached the stage of discussing the basis of apportioning rateable value, but I am sure that it will regard the issue raised by the hon. Gentleman as an important one, and I am prepared to promise that the position of offices in the formulae, and the question whether they should be individually valued, will be looked at.
In the meantime, it is open to the Croydon Borough Council to raise the matter with the Association of Municipal Corporations, which is represented on the working party along with the other local authority associations. I regret that I cannot give the hon. Gentleman any idea when the working party will conclude its discussions or of the timing and scope of any legislation which may flow from its work. If I may interpose here, although the working party was re-convened in 1963, I am given to understand that the local authority associations themselves took about ten months in considering the whole question of rates, and it was not until that rather later stage that they submitted their paper to the working party. The hon. Gentleman will see that the delay has been due to more than one factor.
We are aware that there are several aspects of the formulae which worry the various authorities or the industries themselves, and we shall press on as quickly as we can. But there are some quite complex issues involved and we must ensure that any changes really are 894 improvements. The formulae may well be deficient. I am not saying that there is no room for improvement, but, equally, I am not forecasting a change in this particular respect. Until the formulae are changed I fear that the rating authorities will have to take the rough with the smooth, whichever is uppermost in any one area, and there can be no hope of a special subvention.
It has been suggested that Croydon will lose about £70,000 a year—that was one figure which the hon. Gentleman gave—but, as I have explained, it is not reliable to base such an assertion on the rateable values, ascertained or estimated, of the offices because Croydon is receiving some apportionnment of each board's total value, for offices as for other property. But, even omitting that, what is at stake? Let us be fair about it. The hon. Gentleman spoke of a 2d. rate, and I am not suggesting that that is beneath notice. Local authorities have been anxious, more anxious, perhaps, than ever before, about the rise in rate poundages, and 1d. or 2d. in the £ is extremely important to them.
I can understand the feeling of any rating authority as it looks at a new building centrally situated in the town and ostensibly escaping rates, and this is why I promise that the working party will look with special care at this aspect of the matter. But I must ask the hon. Gentleman to persuade the local authority and his constituents, the ratepayers, to be patient. We shall look at their grievance in context. Only by so doing can we ensure fair play among all rating authorities. I know that the hon. Gentleman will concede to me that, as we have been in office for only four months, we have to await the working party's report, but I repeat the assurance which I gave him earlier that the points which he has raised will certainly be brought to the attention of the working party.
§ Mr. Frederic Harris
I thank the Minister very much for a helpful reply. I sincerely hope that the matter will be brought to a successful conclusion.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-seven minutes to Five o'clock.