HC Deb 26 July 1967 vol 751 cc914-28

11.23 p.m.

The Minister of State Scottish Office (Dr. J. Dickson Mabon)

I beg to move, That the Electricity Boards (Standard Amount) (Scotland) Order, 1967, dated 3rd July, 1967, a copy of which was laid before this House on 5th July, be approved. May I suggest that at the same time we might discuss, since they are all of parallel interest, the Orders relating to the Scottish Gas Board and the British Railways Board?

Mr. Deputy Speaker (Mr. Sydney Irving)

Yes, if that is for the convenience of the House.

Dr. Mabon

I am much obliged.

Under Part V of the Local Government Act, 1948, the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board are not subject to valuation and rating in the normal way. Instead, the Boards make annual contributions in lieu of rates which are paid to the Secretary of State and distributed by him among rating authorities in accordance with a statutory formula.

The Boards' contributions are calculated by applying each year to a "standard amount" adjustment factors, or multipliers, which take account of changes in the general level of rates and in the activities of the Boards, measured by reference to the amount of electricity supplied. The standard amounts for each Board are thus basic elements in the calculation of the Boards' annual contributions to local revenues and are, in a sense, analogous to rateable values.

Under Section 17 of the Local Government (Scotland) Act, 1966—of glorious memory—the standard amounts for the Scottish Electricity Boards have to be prescribed by the Secretary of State by Order. This Section of the 1966 Act also altered the statutory multiplier with the effect that for the year 1967–68 it stands at one, compared with about 2.7 in 1966–67. The last time that it was one was in 1946–47. A substantial increase in the earlier standard amount is accordingly called for since the Electricity Boards' contributions in lieu of rates would otherwise be greatly reduced. It is also necessary to take account of the general increase in rateable values following last year's revaluation in Scotland and of the fact that electricity showrooms are in 1967–68 being separately rated for the first time.

There is an element of urgency in making the Order since it is important that the local authorities should know soon what amounts they are likely to receive. We could not act sooner because it was only towards the end of June that we heard for the assessors what the showroom valuations were likely to come to. If the Order were delayed, contributions would have to be calculated on the basis of the existing standard amounts—£322,000 for the North Board and £1,227,000 for the South Board—and because of the effect of the 1966 Act in revising the statutory multipliers and reducing them to one for the current year, the Boards' contributions in lieu of rates this year would be only a little more than a third of last year's.

The method adopted for adjusting the standard amount is obviously of close interest not only to the Boards but also to the local authorities, and the question of the Boards' standard amounts was discussed at a meeting of the Local Government Finance (Scotland) Working Party in May. The representatives of the Boards pointed out that their rate contributions were considerably higher as a percentage of gross revenue than those of the Electricity Boards in England and Wales, and argued that the opportunity of the review should be taken to fix the standard amounts at a level which would produce payments more in line with the level south of the Border. They also pointed out that, following the 1963 revaluation in England and Wales, the English Electricity Boards' valuations were increased by less than the general increase in valuations, and that this had markedly reduced the level of their rate contributions for 1963–64 onwards.

As might have been expected, local authority representatives on the Working Party did not welcome the prospect that the rate liability of the electricity industry might be reduced. They were not convinced that the Scottish Boards should pay less by way of rates than they had in 1966–67, and considered that even a standstill in the current Order would be difficult to justify.

As suggested by the Boards, it is the case that their rate payments as a percentage of gross revenue have been higher than those of the English Boards since 1964–65. In 1966–67, the percentage for the South of Scotland Electricity Board was 3.3 per cent. and for the Hydro-Electric Board it was 3.5 per cent., but the average for all the English Boards was only 2.9 per cent. My right hon. Friend the Secretary of State fully appreciates that to adjust the standard amounts of the Scottish Electricity Boards in such a way as to give them a rating liability comparable with the English Boards must mean some loss of rate revenue to local authorities which would have to be found from other ratepayers. But, having carefully considered the comments of the local authorities, he cannot find any real justification for continuing to charge the Electricity Boards in Scotland sums significantly greater in proportion to their gross revenue than those paid by the electricity industry in England and Wales since the English revaluation of 1963.

The effect of the Order, therefore, is to bring the Scottish Boards' payments in lieu of rates for 1967–68 broadly into line with the level applying to the English Boards, and thus to restore the comparability which existed before 1963–64. As a result, when account is taken of the amounts payable separately by the Boards as rates on showrooms, which are now separately rated for the first time, the total amounts payable by them in 1967–68 are likely to be about £835,000 and £2,960,600 respectively, compared with £900,000 for the North Board and £3,187,000 for the South Board last year. The sums are distributed among local authorities on a formula based on rating resources, and the resultant loss of income to any particular local authority is unlikely to be material. The amount of the Boards' payments for subsequent years will, of course, vary according to changes in the level of rates and in the amount of electricity supplied. Having regard to the continued expansion of the electricity industry, they may be expected steadily to increase.

That is perhaps the most difficult of the Orders to be discussed tonight, because of the significance of the policy decision taken. In view of last night's debate, I think that we would have the support of both sides of the House in saying that it was the right decision.

The rating of the Scottish Gas Board is related to a basic rateable valuation which is adjusted annually, according to changes in the output of gas. The Board's rateable valuation was adjusted last year, by the Valuation (Scottish Gas Board) (Scotland) Order, 1966, to take account of the general increase in valuations following the 1966 revaluation in Scotland, but subsequently gas showrooms, in common with electricity showrooms, became separately rateable; from 1967–68 under Section 19 of the Local Government (Scotland) Act, 1966. The Gas Board was, at the same time, given an undertaking that if showroom valuations turned out to be substantial, a revision of the basic rateable valuation would be considered.

From information received from the local valuation assessors, the aggregate proposed rateable valuation of gas showrooms in Scotland as at 16th May last will amount to £57,679. The Secretary of State considers that this total is sufficiently large to warrant an adjustment of the Board's basic rateable valuation, and the Order before the House provides that, for 1967–68 and subsequent years, this will be the amount of the 1966 Order, less the valuation of showrooms; that is, £732,490. I am glad to say that the local authority associations, which have been consulted, have not dissented from the Secretary of State's conclusions.

Mr. Edward M. Taylor (Glasgow, Cathcart)

Can the hon. Gentleman say if the figure for showrooms includes administrative offices which, under Section 18 of the 1966 Act, are also being rated for the first time? If not, is a separate calculation made?

Dr. Mabon

They come under a separate calculation. These offices are individual subjects in this context. The hon. Gentleman put a Parliamentary Question to my right hon. Friend the Minister of Power about this and, in reply, was given an estimate. I would not like to speculate whether or not that estimate will prove correct. We will have to watch the out-turn. I assure the hon. Gentleman that the Scottish Office is watching the situation closely. We must see that the Scottish Gas Board is treated properly. We will know the answer when the out-turn of the figures is known at the end of the year. I am not saying that we are in disagreement with the Ministry of Power; just that we must watch the position, since nobody yet knows the aggregate sum of the individual offices, which, as I say, are taken as individual subjects.

Under Part V of the Local Government Act, 1948, the British Railways Board is not rated in the normal way but makes annual contributions in lieu of rates, which are paid to the Secretary of State and distributed by him among rating authorities in accordance with a statutory formula. These contributions are calculated by applying each year to a "standard amount", adjustment factors or multipliers, which take account of changes in the general level of rates and in the activities of the Board, measured by reference to numbers of passenger journeys and freight tons carried.

Because of the general revaluation in Scotland last year, it is necessary to review the Board's standard amount, since otherwise its rate liability, relative to ratepayers on the valuation roll, would automatically be reduced. When consulted on this question, the Railways Board pointed out that, following the 1963 revaluation in England and Wales, the Minister of Housing and Local Government had increased the standard amount for the Board in England and Wales by less than the general increase in valuations, with the result that the amount payable in lieu of rates for 1964–65 and subsequent years was reduced and that, in the past five years of continuing operating deficit, there had been a further measured contraction of the whole of British Railways, which in Scotland had halved the number of stations and marshalling yards and reduced by a quarter the number of route miles open for traffic. In the light of these considerations, the Board contended that it would be unreasonable to increase the standard amount. Instead, it considered that it would be realistic and equitable to reduce it.

The Board's payment in lieu of rates for any year is arrived at by applying multipliers to the standard amount for changes in average rates and in the activities of the Board. While the annual value of the average rate multiplier over the last five years has increased from 1.297 to 1.543, the value of the activity multiplier has declined only from 0.984 to 0.973. I find this remarkable, particularly bearing in mind what I said about the halving of the number of stations and marshalling yards and the reduction by a quarter of the number of route miles open for traffic That is quite remarkable. It has had a substantial effect on the multiplier. It is fair to say that the activity multiplier has had only a marginal effect, and the payments in lieu of rates by the Board increased in the period from £181,000 to £211,000.

Thus, taking into account that the railways were given a year's standstill in rates following the Scottish revaluation of 1961, the reduction in the Railways Board's liabilities which was made in England and Wales in 1964.65 and the very moderate effect which the activity factor is having, the Secretary of State is of opinion that it would be reasonable to give the Board a standstill in its rate payments in Scotland in 1967.68. This is the effect of the draft Order.

How the Board's payments in Scotland will move in subsequent years will depend on several factors, into which I do not wish to go now. I am glad to say that the local authority associations, which have been consulted by the Secretary of State, have not dissented from the Order.

I commend the three Orders to the House and shall be happy to answer any questions which are raised.

11.36 p.m.

Mr. Edward M. Taylor (Glasgow, Cathcart)

Perhaps we should apologise at the outset to you personally, Mr. Deputy Speaker, for detaining you at this hour to discuss problems associated with gas and electricity in Scotland when only this morning, from 4 o'clock to 6 o'clock, we were discussing certain other aspects of gas and electricity usage and supply in Scotland. There is this other difference, that we have the question of the railways also before us now. and we have the advantage of the presence of the Minister of State.

The Scottish rating system is difficult to understand, as it is in the rest of the country, and the basis of rate contribution by the nationalised industries is even less comprehensible. Though penetrating and courteous, as always, the Minister of State did not greatly assist us to unmesh the web of irrationality and confusion which surrounds the subject. He explained how the calculations were made, that for electricity the amounts vary according to the rate level in Scotland and the level of electricity produced, on the basis of a standard amount fixed by the Secretary of State under Section 17 of the Local Government (Scotland) Act 1966. For gas, we have a standard amount fixed under the Local Government (Scotland) Act, 1963, and there is power under Section 12(2) to vary the amount on which we work the principle of Schedule 4 to the Rating and Valuation (Scotland) Act, 1956.

For the railways we have Section 2(1) of the Local Government (Financial Provisions) (Scotland) Act, 1962, which gives power to fix the standard amount, and Section 66(3) of the Transport Act, 1962, which gives power to reduce that by an amount in respect of waterways. Again here, Section 11 of the Local Government (Scotland) Act, 1963, gives the Minister power to vary both amounts.

Plainly, there is need to tidy up this aspect of our legislation. I hope that these will be the last Orders to come before us in this form.

In arriving at the standard amounts, has the Minister taken proper account of the increased values in 1966 under the revaluation? The hon. Gentleman said that he had taken account of these in the calculations, but I wonder how the calculations square with what actually took place. In answer to a Question yesterday, the Secretary of State told me that in the 1966 revaluation commercial premises generally in Scotland rose in valuation by no less than 60.9 per cent. This was commercial valuations as a whole. We saw in the papers this morning a statement that for some retail premises revaluations had resulted in an increase of 100 per cent.

Mr. Deputy Speaker

Order. The hon. Gentleman is getting on to the principles of the enabling Acts that he has mentioned. It is not permissible in the discussion of the Orders. He can discuss only the proposed alterations to the standard amounts of the rating valuations.

Mr. Taylor

I fully appreciate, Mr. Deputy Speaker, that I cannot discuss rating, but under the Act relevant to the Order the Minister has power to fix the standard amount and in arriving at that he has to have regard to many circumstances, and he has assured us that one of these is the general increase in valuations. Many store owners, wholesale warehouses and others in our cities, particularly Glasgow, believe that there is a danger of their becoming deserts within our cities because of the high incidence of valuations. The Minister should look more carefully at the manner in which he is fixing the standard amount and the extent to which he has taken account of the impact of revaluation generally.

With regard to the railways Order, I asked a Question yesterday of the Minister of Transport about the contribution from railways and was told that whereas in 1965–66 the amount payable was £195,000 in Scotland, in 1967–68 it would be about £207,000, representing an increase of only 6 per cent. compared with the average increase in valuations of 60 per cent. For electricity we have an estimate of £3,700,000 in 1965–66, and in 1967-68 it will be £3,728,000, an increase of less than 1 per cent. The Minister explained that there were special factors operating in the special case of electricity, but 1 per cent. appears to be a relatively small amount in relation to commercial valuations. With gas the increase is more considerable but nothing like the figure that I mentioned.

First, has the Minister taken adequate account in his calculations of the standard amount in making the Orders and the substantial increase which has taken place in commercial valuations. The second question, more detailed, is on the matter of making allowance for inequalities in comparing the Scottish nationalised industries with the English ones. The Minister pointed out that a working party had recently told him, in a blinding flash of the obvious, that the electricity industry in Scotland was paying too much. [Interruption.] He said that the working party had drawn his attention to the fact that the electricity supply industry in Scotland was paying more than its share of rates compared with the English nationalised industry.

Dr. Mabon

The hon. Gentleman must get this right. The Local Government Working Party had a case put to it by the two electricity Boards in Scotland. I was very careful to say in relation to gas and the railways that the local authority associations did not dissent from the Secretary of State's decision. I did not say that about electricity, for obvious reasons. The Secretary of State's opinion is that the electricity Boards in Scotland are paying a fair rate. The local authorities may disagree with that or not. I suspect that they disagree. The hon. Gentleman must consider whether the Government are right in thinking that, or would he prefer that the electricity Boards should pay more?

Mr. Taylor

The point that I was making was that in consideration of this matter the Minister should have shown a little more urgency. On 9th November, 1966, on the Report stage of the Local Government (Scotland) Act the point was forcibly put to him in column 1321 of the OFFICIAL REPORT. We made an estimate that the South of Scotland Electricity Board was paying £750,000 more in rates than it would have done had it been assessed on the same basis as the English Boards. Has the hon. Gentleman made a similar investigation in respect of the gas industry? From conversations with people in the industry, I have reason to believe that many of them take the view that a similar position exists within it.

I appreciate the difficulty in that gas is generally the responsibility of the Minister of Power in Scotland while electricity is the responsibility of the Secretary of State. But I hope that this administrative demarcation will not prevent a thorough investigation into whether the gas industry should have similar adjustments in the payments it makes in lieu of rates as compared with the electricity industry. I appreciate that the hon. Gentleman cannot give a definite undertaking tonight but I hope that he will at least indicate that the problem will be examined thoroughly, perhaps in consulation with the Minister of Power.

What is the impact on the rates of the administrative offices which are being rated for the first time? The Secretary of State, on 9th November made it clear, in column 1320 of HANSARD, that rating liability of administrative offices was an additional factor. Is there any increase in the amounts?

The Minister of State explained that the activity factor of British Railways in Scotland had come down, and this may be the reason why there will not be a substantial increase in the amounts they will have to pay. But in 1961–62 the railways in Scotland paid £182,000 in rates. Next year, they will probably pay only about £200,000. This seems a remarkably small increase over a relatively long period, particularly as the amount of rates raised in Scotland rose by 6 per cent. in 1964, by 9 per cent. in 1965, and by 16 per cent. in 1966.

As appears to have been implicit in the speech of the noble Lord, Lord Hughes, when introducing the Order in another place, has there been any question of taking into account ability to pay? If so, this would be a new factor in valuation.

Finally, can we have an assurance that this will be one of the last of such Orders? There are obvious inequalities and injustices in the rating system but there seems need to tidy up the way in which we deal with rates paid by the nationalised industries. Is there any new thinking by the Government on that matter?

11.48 p.m.

Mr. Hugh D. Brown (Glasgow, Provan)

Mr. Deputy Speaker, you must be tired of hearing hon. Members apologising for keeping you up late, so I shall not even apologise for making a short contribution.

I have been living in the hope of seeing some change in the attitude of the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) as he has moved steadily from the back benches to the Opposition Front Bench. But I have been frequently disappointed because he still talks the same rubbish on the same irresponsible approach.

It is still, however, relevant to ask him what the Opposition's attitude is to these Orders. Are they for or against? Do the Opposition think there should have been some revision or change in the method of assessing the contribution of nationalised industries towards the rates? If they do, why did they not do it when they were in office for 13 years?

The hon. Member read his brief as well as my hon. Friend the Minister of State read his. He gave an interesting account of the historical background, but the majority of the Acts he referred to were passed during the Conservative period of office. I am at a loss to understand, in the light of many of the criticisms made about the higher costs of electricity, gas and transport in Scotland as compared with England, whether the hon. Gentleman is in favour of these Orders or not. There is a lot of merit in these Orders in the sense that they are trying to equalise.

The contribution of the fuel industry in Scotland—and I am concerned with the electricity Boards—should be equalised to some extent, in the sense of rating charges, with its counterpart in England and Wales.

Mr. Edward M. Taylor

I would make the point that if there are satisfactory answers to questions it is our intention not to oppose these Orders.

Mr. Brown

I appreciate that this is the Parliamentary procedure, but I must say that sometimes the party opposite might show a bit more enthusiasm than it has shown tonight.

The point I was making was that I welcome these Orders. They are long overdue in the sense that they expose some of the difficulties that nationalised industries are operating under in Scotland compared with England. I am not happy about the implications for the electricity Boards, but I think it is a welcome and logical step that showrooms and perhaps administrative offices should be rated on the same basis as any other commercial undertaking. There will be no disagreement on that footing.

I was wondering how the House of Fraser lobby would find an opportunity of saying something about the new valuations which were announced yesterday for Glasgow, and I noticed that the hon. Member for Cathcart dutifully represented that point of view.

Returning to the electricity Boards, I am worried about the effect of this, but not because the local authorities have not accepted it. If they have not accepted it, it is because there is to be a loss of revenue to the local authorities in Scotland. If my figures are right, it seems that the local authorities in Scotland stand to lose about £1 million next year from the electricity Boards alone. This is a serious matter. I have not been able to find out which local authorities got what and why in this calculation which has been made. I am not expecting the Minister to be able to say tonight how much loss this means to Glasgow, for example, but I should be interested to know. If it is not in his brief, perhaps he can advise me later about it.

However, I welcome these Orders, with the proviso that the Minister can give an assurance about this calculation, because this is an additional burden in the sense it is a loss of revenue to the local authorities in Scotland. While I agree that the nationalised industries should be treated on the same basis as their English counterparts, I hope that the Treasury is aware of the loss of revenue to the local authorities and that representations will be made accordingly, especially in the light of the fact that the local authorities are not accepting very happily the Electricity Boards Order. However, I think that the House should approve the Order. These proposals are long overdue. They bring a measure of logic into a very difficult and obtuse subject.

11.54 p.m.

Dr. Dickson Mabon

The latest estimates that we have for 1966–67 show that the average householder in Scotland paid slightly less by way of rates than his opposite number in England and Wales. Our present calculation is that it is £40 in Scotland as against £40 10s. in England and Wales, but I would exclude from both domestic water rates, and perhaps later we might be able to get a more precise estimate.

The present Order attempts, in relation to the electricity industry, to do no more for Scottish electricity than the Rating of Industry Order, 1965, achieved for the whole of Scottish industry generally by providing for continuance of derating—in other words, parity of rates burden with England and Wales, and this seems fair.

Since you, Mr. Deputy Speaker, allowed a comment on commercial valuation, I have this to say about the situation in Scotland. These are a reflection of the rentals which could be obtained for the properties in their present use and this is accepted as part of the rating and valuation system which we have inherited from the party opposite. I appreciate that the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) is not responsible for what his party did, but if he is to be his party's spokesman, he must realise that it was his party which introduced and sustained this system and he must endure the consequences. We shall consider the Report of the Royal Commission to see what should be done about the rating system generally, and we are keeping a close eye on the rating position in Scotland generally in all the different categories and certainly we shall take into account a number of changing factors as we go along and that certainly applies to the Scottish gas industry.

One of the most significant remarks in last night's debate on the cost of fuel in Scotland was made by the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) who argued a cogent case and who said that there was room to help with those other fuel industries for which the Government were responsible. That is a testimony of what we are trying to do in relation to electricity, gas and the railways. I therefore take it that the hon. Member for Cathcart, on behalf of his party, agrees that we are right to provide for parity in rating and valuation of electricity Boards in Scotland with those in England, and I am very glad to have the support of the Conservative Party in this respect.

The hon. Gentleman was right to say that this matter was raised on 9th November last year and my right hon. Friend the Secretary of State was able to acknow- ledge it only in general terms, because on 9th November the Local Government Act was a Bill and an Order cannot be passed unless there is an Act to give birth to it. The Bill received the Royal Assent just before Christmas and this Order is a natural consequence. I stressed the urgency of it. We have made a significant change in the policy which we inherited from the party opposite.

The curious thing about the Gas Board is that, despite the hon. Gentleman's conversations, we have not had any formal representation from the Gas Board about this matter. I am surprised about that. I had thought that the Gas Board would want to be treated on the same arguments as the electricity Boards in England and Wales. The Opposition left us with a situation in which the Gas Board's rates were 1.9 per cent of total income in their last two financial years compared with the figure of 1.1 per cent. in England. In other words, on average the rate burden imposed on the Gas Board in Scotland was twice that imposed on those in England and Wales, so that hon. Gentlemen opposite should be the last to complain that the present Government have dealt with the Gas Board in Scotland badly.

In my introductory remarks I deliberately went out of my way to say that we should like to consider the outturn of the estimates for the Gas Board. We would not disagree with the Ministry of Power at this stage, but the estimate given to us gives a tentative figure of £100,000 for the Gas Board's offices. I cannot give a figure for the electricity Boards yet, for we want to see the out-turn to see how we are doing. I take it that the hon. Member for Cathcart supports our decision about the Gas Board on behalf of his party and agrees that we should accept the Order as it stands.

I am sorry that the hon. Gentleman made those comments about the Railways Board, because in the scrupulous way in which I prepared my arguments I thought that I had allowed for that and that I had argued a good case for the Railways Board being marginally different and for the need to help with transport costs in Scotland. I would have thought that I would have had the hon. Gentleman's support for that, and that is why we are making what is virtually a standstill Order.

I take the point made by my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) that we cannot possibly deal with these industries fairly and at the same time not lose income in rating resources. But we cannot have it both ways. Even Jimmy Maxton could not ride two horses at the same time. If we help the nationalised industries in general to have some such protection, the local authorities lose, and if we insist that the local authorities are right, then, obviously, the nationalised industries in Scotland will pay more than the nationalised industries in England and Wales. As a good Scotsman, I prefer that we should treat the nationalised industries in both countries on the same basis, and accordingly I give the assurance that we shall look into the Gas Board case more thoroughly when all the facts become available. We are to review the whole position of the rating of nationalised industries in the light of the findings of the Royal Commission on Local Government. This is a very important matter as we have stressed several times and I gladly give that assurance.

Question put and agreed to.

Resolved, That the Electricity Boards (Standard Amount) (Scotland) Order 1967, dated 3rd July, 1967, a copy of which was laid before this House on 5th July, be approved.

Valuation (Scottish Gas Board) (Scotland) Order 1967, dated 3rd July, 1967, [copy laid before the House 5th July], approved.—[Dr. Dickson Mabon.]

British Railways Board (Amendment of Certified Amount) (Scotland) Order 1967 [draft laid before the House 5th July], approved.—[Dr. Dickson Mabon.]