§ 1.16 p.m.
§ Sir John Gilmour (Fife, East)In a reply to a supplementary question which I put on 12th March to the Under-Secretary of State for Scotland who answers for agricultural matters, I was told that rates paid on farm buildings are taken into account in Price Review discussions. He had said in his original Answer to me that about 2 per cent. of farms in Scotland had some rated buildings on them. The Minister also said in reply to a supplementary question by my hon. Friend the Member for Edinburgh, West (Mr. Stodart) that Scotland had a higher proportion of rated farm buildings than did the rest of the country.
This is borne out by two further Parliamentary Answers to my hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith), in which the Secretary of State for Scotland gave the figure for rates paid on agricultural building in Scotland as £133,000, compared with £250,000 in England.
That is a difference of only £100,000, whereas one would have expected the English figure to be eight to 10 times larger, in view of the difference in the size of Scotland and England. It means that if rates are being paid in respect of only about 2 per cent. of holdings in Scotland the proportion of people paying rates in England must be very much less.
I know from many of my hon. Friends that there is extreme disquiet not only in Scotland but in England about the rating of agricultural buildings. The 687 whole agricultural community is worried about paying rates on agricultural buildings, but it is obvious that a very unfair rate burden is falling on Scottish farmers. There is every indication that the situation will get worse, not better.
In many ways, I may be doing a disservice to a certain extent by raising this matter in debate, but as more assessors get round to their revaluations and look at the changes taking place in the structure of agricultural buildings, the likelihood is that the number of buildings in respect of which rates are paid will increase. With changes in agricultural circumstances, the use of intensive livestock housing is increasing. The squeeze on their profits reinforces the farmers' need to get the maximum number of animals congregated so that they can be looked after by the smallest number of people. That must be so if a living is to be made and if we are to compete efficiently. As it is, these charges are bound to aggravate an already quite serious situation.
The Under-Secretary of State for Scotland may know that in the Lothians one intensive livestock unit for the housing of cattle has already had to go out of production because it was felt not possible to make a profit when this high burden of rates was being put on buildings.
The effect of rates on the cost of production can be quite considerable, and a pig farmer living not very far from me has sent me an example. He writes that he recently appealed to the Tribunal against a gross annual value of £4,000 put on his pig enterprise. He has lost the appeal. In the calendar year 1968, this farm produced 2,881 bacon pigs at an average live weight of 200 lbs.; 1,517 porkers at an average weight of 120 lb., and 4,346 weaners at an average live weight of 45 lb. That is a total production of 953,810 lb. of pig.
A sum of £4,000, the gross annual value, is 96,000 pennies. For all intents and purposes, therefore, the rate per lb. of live weight sale is 1d. Related to the effect on the production of the pigs, it means that the rate value against the bacon pig is 16s. 8d.; against the porker, 10s., and against the weaner 3s. 9d. I admit that these figures are gross annual value and that on net annual value the 688 figures might be rather lower, but there cannot be very much in it.
The Minister of Agriculture has recently provided an incentive to increase the pig herd, but it seems obvious that the increased price given to the pig producer will be more than swallowed up in rates. The Minister has said that this fact is taken into account in the Price Review, but it is obvious that the benefit cannot be distributed fairly over the country as a whole. The proportion of rates paid in England is very much lower. It is the progressive and efficient farmer, who is spending money, who will bear the burden of the rates, and that is particularly unfair.
Test cases have shown that, with very few minor exceptions, all holdings in Scotland which have intensive livestock units are likely to be charged with rates. We are at present operating under a rating Act passed in 1956, but because of developments in agriculture since then, the approach intended when that Act was passed cannot now be applied. If we are to get that expansion in agriculture which all parties believe necessary in order to save imports, one of the chief ways of getting it is to increase the amount of pig meat, particularly bacon, that we ourselves produce.
In that connection, the N.E.D.C. report on pig expansion over the next five years suggests that we should have about 270,000 additional breeding sows. Scotland would probably get about 30,000 of them. The Pig Industry Development Association has estimated that the total cost of providing the necessary housing for those extra sows is £33½ million, plus £27 million for the housing of the pigs that are taken on to fatten for bacon.
A total of £60½ million, therefore, has to be envisaged for the pig industry alone if we are to achieve the import saving which the N.E.D.C. believes is right. I estimate that Scotland's share would be about £10 million. If the industry, with all its difficulties—the present high rates of interest, and so on—is to be asked to find such an amount and has to pay rates in addition, will that expansion ever take place? I do not think that it will.
The additional food required for that extra pig production over those five years is estimated at about 2 million tons. About 1½ million tons would consist of 689 home-grown cereals, and Scotland would have its share. It is in terms like that that the Minister of Agriculture has spoken on incentives for the expansion of cereal growing. It therefore seems certain that the development which we need in the pig industry, and which is likely to take place in other spheres of agriculture, will not take place while we have the present rating law in Scotland.
There are very many developments in the housing of livestock. Only today I read an article in the Financial Times on developments in the housing of sheep. It pointed out that in the Continent of Europe a great many flocks of sheep are housed, but what incentive is there to use these latest livestock housing techniques if those adopting them are to be penalised by having to pay rates on their buildings? This rating charge will always be a brake on the extension of the farming industry. It will stop people from using the most efficient methods of developing the livestock industries in a competitive world in a way which will give the farmers a profit.
One of the greatest drawbacks about the present rating situation is the unfair way in which it reacts on different farmers——
§ Mr. Deputy Speaker (Mr. Harry Gourlay)Order. The hon. Gentleman must not, in an Adjournment debate, suggest any alteration in the present legislation.
§ Sir J. GilmourIf the present legislation was crystal clear, all might be well. As it is, members of the farming community are having to take many cases to court in order to find out what the law really is. One of the troubles is that the law was based on the Sorn Report, which did not envisage any special change in the law of rating in Scotland.
Somehow or other, since that time, the interpretation of the law by the courts has led to a change in the type and the way in which rates are levied on buildings in Scotland. While I do not suggest that the only way in which this can be remedied is by a change in the law, it is fair to point out that the law appears to be in doubt. I want to draw this to the Minister's attention, because it is only in this way that the difficulties of the agricultural industry can be resolved.
690 It cannot be fair to have one set of people paying rates, and another set not doing so. It cannot be fair to have a universal price system for the industry in the United Kingdom, so that the price for barley, fat cattle, pigs and poultry is the same in an Annual Price Review, while the cost factors that make this up are different in different parts of the country. I hope that the Minister fully realises the seriousness of this situation for the agricultural community, and that the consultations which I know have been going on will very soon come to a swift conclusion, so that there is absolutely no doubt, and people can go ahead with plans for agricultural expansion without the fear of an unfair burden of rates being levied upon them.
§ 1.32 p.m.
§ Mr. Ian MacArthur (Perth and East Perthshire)The House will be grateful to my hon. Friend the Member for Fife, East (Sir J. Gilmour) for raising a matter which has been, and is, a source of extreme disquiet among farmers, particularly in Scotland. My hon. Friend referred to the scale of this disquiet and I should like to confirm what he said from my own experience. Every group of farmers I meet inevitably raises this question and expresses its uncertainty about the future course of rating. Farmers emphasise to me the need for a clear Government decision about what should now happen.
My hon. Friend reminded the House that a very high proportion of this growing rate burden falls on Scotland. We were assured that these costs would be taken into account in the Annual Price Review. I hope that the Minister will tell us how these increased costs were taken into account at the last Review and what adjustments were made, in Scottish terms, to take note of the growing burden which has fallen on Scottish farmers.
We are told, from time to time, that this development or that which has increased farming costs—and goodness me, we have had a stream of governmental decisions over the last few years which have had added heavily to the financial burden on farmers—will be taken into account at the forthcoming Price Review. I doubt whether farmers are any longer impressed by these alleged assurances. Any credibility that the Government 691 might have retained was finally completely shattered by the last Price Review statement, particularly when the terms of that statement were compared with the assurances given to the House and the industry last November by the Minister of Agriculture.
The development of intensive methods in farming reflects the constant search for greater efficiency. Yet the position today is that, as these intensive methods are developed, so they attract a growing rate burden which is a disincentive to further development and to the growing efficiency for which we are looking. My hon. Friend explained the problem clearly. What he and the industry are looking for is a clear declaration today of the Government's intentions. In correspondence which I have had with the Under-Secretary of State, I have learned that the Government are considering the problem. They have been considering the problem for years, and the industry expects not a declaration about further consideration but a declaration about a definite decision. It is not a declaration we want so much as a clear decision about the way in which this growing problem can be resolved. The industry is awaiting this decision with rising impatience. I hope that the hon. Gentleman will be able to make a clear and definitive statement this afternoon.
§ 1.37 p.m.
§ The Under-Secretary of State for Scotland (Mr. Bruce Millan)May I preface my remarks by apologising for the fact that my hon. Friend the Joint Under-Secretary of State, the Member for Renfrew, West (Mr. Buchan) who normally deals with agricultural matters is unavoidably absent today. I am answering in his stead.
§ Mr. MacArthurMay I thank the hon. Gentleman for his courtesy, and may I also express the apologies of my hon. Friend the Member for Edinburgh, West (Mr. Stodart), who would normally deal with such matters but who is unable to be present.
§ Mr. MillanI think that both of us are acting in rather unaccustomed capacities today.
I listened with considerable interest to what was said about this by the hon. 692 Member for Perth and East Perthshire (Mr. MacArthur), because I take his point that it is a matter causing the farming community in Scotland, particularly those directly concerned, considerable concern. That is also true South of the Border. On 30th January this year there was a meeting at which both farmers unions were represented, with the agricultural Ministers of Scotland and England. The hon. Member for Fife, East (Sir J. Gilmour) has made a very fair statement of the position and I accept a number of things that he said. I know that Scottish agriculture is proportionately carrying a higher rate burden in this respect than that carried by farmers in England and Wales.
I also take the point—although I shall have something to say about the total burden later—that in particular cases the rate burden can be a very substantial expense upon an individual business. I accept that those who are engaged in intensive methods and who have now attracted a rating burden feel that they are being penalised unfairly in comparison with agricultural producers using non-intensive methods and paying no rates.
I would not accept as completely proved the proposition that the producers in the intensive areas should necessarily be placed on all fours with the producers using non-intensive methods. That is one of the basic issues involved in this controversy. Obviously a sense of unfairness must persist among those using intensive methods. A considerable amount of attention has been given to this issue, and my right hon. Friend is very well aware of the considerations which the hon. Gentleman brought to our attention.
§ Sir J. GilmourAs I understand it, under the present law, one may have a building used for intensive purposes, which is rated, and one may have other buildings used for part of the year for the intensive rearing of livestock and then used as a farm store for another part of the year, and these do not appear to attract rates. This seems to be a further anomaly.
§ Mr. MillanThe hon. Gentleman is only illustrating the extreme complexity of this subject. Perhaps I might return to that later.
693 One of the difficulties facing everyone is that the exact state of the law is becoming clarified only because of a number of decisions in individual cases. This has been a difficulty facing the Government as well as the farmers. My right hon. Friend appreciates the issues involved. We have had consultations with the National Farmers' Union and recently with the Scottish Landowners' Federation. Although it is fair to say that the hon. Gentleman has restated the position rather than introduced any new material, we shall take account of what he said.
When dealing with rating matters it is necessary to have some regard to the rating system as a whole and the fact that it is a very complex structure. It is not for me today to deal with the rating system as a whole, but I should make the point that many interests other than agricultural interests feel that they should have an additional measure of relief from rates. Private occupiers and commercial interests, perhaps especially in Scotland, feel that their burden is severe. Industrial interests have views about the incidence of rates. The interests of local authorities as a whole must be taken into account.
I do not suggest that we must necessarily have regard to the whole field of rating or that we must take everybody's interest into consideration before making any adjustment affecting one particular interest, but the background is complex and it is perhaps made rather more complex by the fact that a Royal Commission on Local Government is sitting and we have committed ourselves to considering the question of local authority finance as a whole when it has reported. However, I am not saying that nothing can or must be done about this problem until we have sorted out all the other issues. I merely say that we are dealing with a particularly complex matter.
I accept that for the individual producer the impact of rates may be serious, but we should try to get the costs involved in perspective. The figure is approaching £200,000. That is slightly higher than the figure quoted by the hon. Member for Fife, East. The figure is probably not more than about one-tenth of 1 per cent. of the total expenses of Scottish farms. We are, therefore, dealing with a problem which, in that relationship, is comparatively minor, 694 although I do not underestimate the problems which it may pose for individuals. The number of holdings concerned in Scotland is about 750, or less than 2 per cent. of the total number of agricultural holdings. Therefore, the problem is confined to a comparatively narrow area.
However, there is an uneven incidence in rates, and more and more holdings are being brought into the rating field. In Scotland the picture is by no means even. Nevertheless, in our experience over the last two or three years, there is no foundation for some of the fears which the hon. Member for Fife, East expressed. He specifically mentioned the problem of pig producers. In the last two years, the rate of expansion in Scotland in this respect has been greater than in the United Kingdom as a whole. Since 1966, when the figures were admittedly low, there has been a very considerable expansion. In 1966, the total number of pigs was 491,000. In 1968, it was 592,000. Most of the increase would be largely in the intensive sector. Therefore, considerable development has been taking place, despite the fears which the hon. Gentleman mentioned.
The total burden of rates on the industry is taken into account in the Annual Price Review. The hon. Member for Perth and East Perthshire asked for an assurance on this point. The item for rents and interest in Appendix III of the White Paper which has just been published includes the rates burden. I assure the hon. Gentleman that the additional costs for the year covered by the latest Review, which amounted to about £40,000 in Scotland, were included under the heading in Appendix III. The figures were based on returns of rateable values supplied by the assessors.
Perhaps rather more than half of the rateable buildings are used for broiler production and hatcheries. They are not covered in the Review since they are not Review commodities. On the other hand, the returns which are attributable to Review commodities—for example, pigs and eggs—are taken into account in calculating the costs of the industry for the purpose of the Review. Therefore, the industry as a whole derives some benefit. If the hon. Gentleman looks at the Appendix which I have mentioned and compares the total cost increases for 695 all products with the amount taken into account for the Review products, he will see that the sum in respect of the Review products proportionately is not ungenerous. I accept that the Review system is not able to even out differences between one producer and another. Nevertheless, I can give the assurance that the total amount of costs is taken into account in the Review.
§ Sir J. GilmourDoes not that mean that, as the proportion of people who pay rates in Scotland is higher, that acts to the benefit of all English farmers?
§ Mr. MillanProbably it is true, with regard to a number of cost items which are taken into account in the Review, that one is not able to get an absolute equivalence of benefit between England and Scotland. This is intrinsic to the Review procedure. The total costs are certainly taken into account in the Review.
I wish to make a point about the delay in reaching a decision. I recognise that there is a certain amount of validity in this argument. Nevertheless, it would be unfair to the Government to suggest that there has been a considerable delay when one considers the inherent complexity of the issue and the fact that the law has been defined gradually by a series of cases over the years. The Valuation and Rating (Scotland) Act, 1956, provides for the de-rating of agricultural land, including agricultural buildings used solely in connection with agricultural operations. The first case which raised difficulties was in 1963, but there was need then, as much from the farming interests' point of view as from the Government's point of view, to wait for a pattern to be established by court decisions. This has meant that in many cases we have had to await the results of appeals. That has been true in England as well as Scotland. However, the N.F.U. has now presented its case which is being actively considered.
I hope that hon. Members will not be too disappointed if I conclude by saying that I am not able to announce a decision or even an indication of the decision that the Government are likely to reach. Nor am I able to say precisely when an announcement will be made. We appreciate the uncertainty in the industry over the present position. The Government 696 are committed to reaching a decision on this very tricky matter as soon as they possibly can. I think that the debate will go a little way towards enabling us to reach that decision.
§ Sir J. GilmourI should like the Minister to bear in mind one other point. Rating does and will have a big effect on the co-operative movement between farmers. There is a real need to encourage co-operation. Whilst it is difficult to keep within the rules of order in stressing this point, I should like to be certain that, when making up their minds about it, the Government will bear in mind that there is a need to look after the furthering of the co-operative movement between farmers.
§ Mr. MillanThat point also will be borne in mind. I will certainly draw it to my right hon. Friend's attention.