RATING AND VALUATION (WATER UNDERTAKINGS) (Hansard, 12 April 1967)

§ The Minister of State, Scottish Office (Dr. J. Dickson Mabon)
I beg to move, That the Valuation (Water Undertakings) (Scotland) (No. 1) Order 1967, dated 13th March 1967, a copy of which was laid before this House on 16th March, be approved. Section 16 and Schedule 2 of the Local Government (Scotland) Act, 1966, provide for the introduction in 1967–68 of a new system of valuing water undertakings by reference to a "norm" or national average rateable value per unit of water to replace the present system which produces unduly high rateable values for undertakings with heavy capital expenditure.
The principle of the new system, which was fully debated during the passage of the Bill, is that the rateable value of an undertaking will in future be obtained by multiplying the norm by the average daily output of water. This will have the effect of equating the rateable value of all undertakings directly with output.
The Order establishes how the norm is to be calculated; and it is the key to the operation of the new system. The Order is required by 15th April to fit in with the statutory timetable of the 1116 Assessor of Public Undertakings who, under the Act, now has the responsibility of calculating all water valuations.
The norm is to be the aggregate rateable values of all water undertakings in 1964–65 divided by the aggregate potential output of water for that year, the resulting factor being increased by 31.6 per cent. to take account of the general increase in rateable values in Scotland as a result of the 1966 revaluation.
The explanation for using 1964–65 data is that this is the latest information available to the Working Party and to the Government.
As far as the effect of revaluation is concerned, it is a reasonable proposition that the norm should reflect this, otherwise the new system would achieve too substantial a reduction in values, which is not its main purpose, and this would be unfair to other ratepayers. On the basis of the method described, the norm is £5.568 per thousand gallons of water per day—that is, the figure derived from 1964–65 valuations and output, plus an increase of 31.6 per cent.
The local authority associations were fully consulted about the "norm" method of valuation as the best alternative to the present system. Indeed this method, as I mentioned in Committee and at other stages of the Bill, is very much the brain-child of a sub-committee of the Local Government Finance (Scotland) Working Party, which included representatives of the local authority associations, the British Waterworks Association and officers of my Department.
It was only after the fullest examination of a number of alternative systems that the norm method was selected as being the fairest. The local authority associations are also fully in agreement that the means of arriving at the norm should include a factor for revaluation.
The British Waterworks Association was the only dissentient to the principles of the norm. It felt that the reduction in values which the norm system would be likely to achieve were not radical enough. That was not, however, felt by the Government to be a fair point of view, bearing in mind the interests of other ratepayers who would have to make good the deficiencies in rates no longer being paid by water undertakings.
1117 The use of the norm will not give rise to any dramatic reduction in the over-all rateable value of water undertakings; indeed the levelling-off process involved will mean that some undertakings will have higher values than before. But it is estimated that the total rateable value of all water undertakings will, as a result, be reduced by about 20 per cent.
The real value of the Order lies in the fact that in future all water undertakings will be protected from the swingeing increases in rateable value arising solely on account of increased loan debt. This overcomes one unsatisfactory feature of the present system which we are replacing in the next financial year.
I commend the Order to the House.

§ Mr. Gordon Campbell (Moray and Nairn)
The Minister of State has described how the Order arises from the Act. As he said, the Order determines a method whereby a norm is established. He indicated that the British Waterworks Association did not agree to the idea of a factor. It seems that this has been a Government decision. It would seem also, from what the hon. Gentleman said, that it is the result of a recommendation by a working party.
The hon. Gentleman said that the water authorities were agreeable to the inclusion of a factor, but have they been consulted about the method prescribed in the Order? If so, did they agree with the figure and with the method? There is one further point. This seems to be a very good argument for having a decimal currency as soon as possible, because we are dealing with 5.568 of a £.

§ Mr. James Davidson (Aberdeenshire, West)
I welcome the Order. Would the Minister of State confirm that seasonal variations in the actual volume of water coming from these undertakings are taken into account in determining the norm?

§ Mr. Richard Buchanan (Glasgow, Springburn)
The cost per thousand gallons of water in England is estimated to be between 2s. 3d. and 2s. 6d. In Scotland the cost per thousand gallons is 1s. 3d. According to the British Waterworks Association under the Order the rateable content will be double that in 1118 England. The rate content in England and Wales will be 2d. per thousand gallons. In Scotland it will be 4d. Although water undertakings may be protected from the swingeing increase and although there will be normalcy in their rateable value, nevertheless 31.6 per cent. is being added to take account of the general increase in the rateable values of shops, offices and industrial premises. I believe that this should be put on the same basis as the nationalised industries and that there should be a pool. If the Minister can explain why it is different in Scotland I shall be grateful.

§ Dr.Mabon
I am very sorry that, because we are obliged to have the Order by 15th April, we have not had time to discuss further with the British Waterworks Association the matters referred to by my hon. Friend. There was a meeting with my noble Friend the Under-Secretary of State for Scotland, and I am glad to say that my noble Friend has written to the British Waterworks Association taking up various points made, some of which have been touched upon this morning by my hon. Friend.
I hope that the Association, when it reads the letter, particularly the final paragraph, will see that there is room to look at the impact of this on individual authorities. If my hon. Friend reads Schedule 2, paragraph 24, of the Act he will see that the transitional powers are such that the Secretary of State can look into all or some of the undertakings, as he prefers. The reason for this flexibility is so that the system shall get off to a good start.
The local authority associations are in agreement with the Government on this. They do not take the same view as the British Waterworks Association about the degree to which we should reduce these rateable values. I respect the arguments of the Association which are perfectly sound from its point of view. The Government have to take into account that this is a new system. We are advancing not only into a new system of local government finance, but into a new system of water reorganisation in Scotland. In addition, we have a revaluation year to take account of.
This is an awful lot to swallow at one go, and that is why I think it wise that we should take the base line as 1964–65 1119 which is the only year for which we have up-to-date and accurate figures. We should then proceed from that taking in the revaluation figure, and then the formula as devised by the working party.
The hon. Member for Moray and Nairn (Mr. G. Campbell) asked me how this was arrived at. I have the report of the sub-committee to the working party, which is not available publicly, and this shows that it was agreed as an essential point of switching over from the unsatisfactory position of raising rateable value on loan debt in respect of waterworks to output. The British Waterworks Association accepts that that is a fundamentally sound way of doing things, even though it may disagree with the degree to which we are doing it in this Order.
There will be every opportunity of looking at this, if anyone is dissatisfied, either generally or from an individual point of view. The Assessor will shortly be sending out to each undertaking the figures which he has been collecting and which he will be applying in respect of this formula, if the Order is agreed. I am certain that out of that will come comments which are bound to attract the attention of the Secretary of State. He may not want to do anything generally, or very few things individually. This remains to be seen. We have to start somewhere, and it is with the Order. We have left this very small margin of only a few days because we wanted the best possible advice from all bodies.
I am only sorry that the British Waterworks Association was not able to impress its arguments on us a little earlier, although I do not blame it for that because we have been working very hard on the subject of water in this Parliament, and the Waterworks Association has done very well on a number of matters.
In answer to the hon. Member for Aberdeenshire, West (Mr. James Davidson), the average output per day is averaged over the year, so that seasonal variations are taken into account. Nothing need worry him about the peculiarities of the Aberdeenshire area, which I hope will be overcome quite soon.
Water in Scotland is much cheaper than in England. For anyone thinking 1120 of coming to Scotland for the purpose of industrial expansion it must be an encouragement to know that the cost of water to industry is, roughly speaking, half the price of that in England. This is one more attraction. Not only have we cheap water but we have plenty of fine water. We hope that this Order will help us on our way to achieving industrial expansion in Scotland.