HC Deb 29 March 1971 vol 814 cc1309-18

11.30 p.m.

The Minister for Local Government and Development (Mr. Graham Page)

I beg to move, That the Docks and Harbours (Valuation) Order 1971, dated 4th March 1971, a copy of which was laid before this House on 4th March, be approved. The purpose of the Order is to provide for all statutory dock and harbour undertakings, subject to a few exceptions which I will mention, to be assessed for rates by a formula related to the gross receipts of the undertaking. As I said on the previous Order, the rateable value of a property is based on the rent at which it might be expected to let. Normally an assessment can be made on the evidence of rents actually passing on similar property. Sometimes properties, including those with which we are dealing in the Order, are never let, and in these cases the valuer has to estimate the rental value on the basis of some other evidence.

In the past statutory docks have been assessed on the profits basis—that is, by reference to the profits which they make. This method has for some time been producing rather unsatisfactory results for many undertakings. In particular, it tends to produce very low, or even nil, assessments in the case of the older undertakings, whereas with the newer undertakings there may be very high assessments because of recent heavy capital investment. That gives the two ends of the scale.

There are three ways in which the profits basis for rating is not satisfactory. First, in the case where the gross receipts are low it is necessary nevertheless to make a notional reduction in the calculation leading to a value for renewals. That notional provision in a number of cases produces a nil assessment. Second, in a case where fresh capital expenditure is incurred, whether on a new dock or on an existing one, the full loan charges involved, in so far as they are covered by receipts, will normally fall to be included in the gross receipts for profit purposes, but no deduction can be made in respect of these charges because they are expenses that would be incurred by the hypothetical landlord and not the hypothetical tenant. The effect is, first, that if a dock or part of it is replaced and a new debt incurred the rate burden rises greatly, even if the new hereditaments are practically the same, and, second, that enlargements of a dock will impose a disproportionately large increase of the rate burden.

The third unsatisfactory result of the profits basis is that where a port authority does not own the bed of the river or harbour, its income by way of tolls in gross and river dues is not included in the calculation of the assessments for profits basis, but where it owns the bed of the river or harbour its income is included in the calculation. So ports which have a substantial income from tolls in gross and river dues have unduly low assessments compared with others which are otherwise quite similar.

Consultations about the change of the formula from the profits basis to some other more satisfactory basis have been proceeding with statutory docks and harbours and with the local authorities for some time, under the Governments of both parties. I think I can say that as long ago as 1969 a wide measure of agreement in principle was reached on a formula whereby the undertaking's rateable value for any year would be a percentage of its gross receipts and not merely based on profits. So we are proceeding by means of this Order to apply a new formula based on the percentage of gross receipts.

There was, as it were, a pilot Order to this only last year. A year ago the House approved the Docks and Harbours (Valuation) Order, 1970, which applied a formula of this sort on the gross receipts basis to a limited class of dock undertakings. When I say "a class" it applied only to one—Port Talbot. In that case it was based on 7½ per cent. of the gross receipts.

This Order provides for the rateable value of the docks and harbours covered by the Order to be 4 per cent. of the gross receipts. That is excluding receipts in relation to cargo handling. Four per cent. is what we estimate will produce roughly the same total rateable value as at present for the ports which now have a positive assessment.

It may well be that further rates will be brought in by ports which now have a nil assessment and will in future be assessed to rates. But the main effect of the formula will be to distribute roughly the present total of rateable values.

As the new basis for rating is quite different from the old, it is not surprising that some of the changes will be quite large, and in both ways—quite a substantial loss in some cases to the local authorities and quite a gain in other cases.

In order to ease the transition, because there are these fairly substantial changes, for the port authorities faced with large increases in their assessments and any local authorities facing large losses of rateable value, Paragraph 8 of the Order provides for these large changes to be phased over a period of five years. We are aware that in 1973 there will be a revaluation, and I can say here and now that I shall review the formula percentage in time for the rating year 1973–74. If rateable values based on the normal rental value of properties increase very much, it will put our present formula for the docks entirely out of phase. So it will be necessary to review that percentage for the year 1973–74, but that does not mean that we shall alter the general basis of the formula embodied in the Order.

I have mentioned that the formula will not apply to all statutory dock or harbour undertakings. Two classes are excepted. The first class are the very small port, those which have receipts less than £1,500 per year. Most of those, incidentally, have nil assessments at present, and it is not worth the trouble of assessing them and obliging them to pay rates. The figures would be small, I think that it is a matter of de minimis, and the administration would not be worth while. The second class excepted are the undertakers dealing wholly or mainly in goods belonging to themselves or to their associated companies. Any assessments on these two classes will continue to be settled on the present basis.

The right hon. Gentleman the Member for Deptford (Mr. John Silkin) may wish to raise one or two other points, and, if I have the leave of the House to reply, I shall deal with them. There are, for instance, the reasons why we have included rents as part of the receipts, and why we have included investment income as part of the receipts. I shall not go into those matters in detail now. We shall be reviewing the formula as we go along. One can never expect to get any of these formulae right first time, though I think that only minor teething difficulties may arise. If any arise in respect of rents and investment income, we shall look at them carefully to see how matters work out.

11.42 p.m.

Mr. John Silkin (Deptford)

No one can fairly complain that the Minister leaves us short of informataion. As regards the method of dealing with docks and harbour valuation, we on this side are now, rather dazedly, with him and we accept totally what he says.

I am glad, Mr. Speaker, that you were not present when I spoke on the previous Order, for you might otherwise have considered that I was about to give voice to some otiose repetition. My otiose repetition in this case is simply to say that I wish that the Minister would leave some small elements of rating changes to be dealt with in the local government finance Green Paper.

11.43 p.m.

Mr. Nicholas Edwards (Pembroke)

The Order is a compromise, and I suppose it is inevitable that a formula intended to find a common position for all ports should be riddled with anomalies. The most obvious anomaly arises from the exclusion of cargo handling charges from the total revenue on which the value is calculated. Although this avoids the difficulty that a number of port authorities are responsible for handling cargo and others are not, it produces the inevitable and thoroughly undesirable result that some of the biggest ports with vast hereditaments get away with a great deal less than they should. But that is not the matter which concerns me most, and it is not the reason why I find it necessary to express my objection to the Order.

I raise objection to the Order because I believe that it imposes an unfair and disproportionate burden on the board responsible for managing the greatest oil port in the country, the port of Milford Haven. I consider that the formula which has been produced is quite unsuited to the situation in Milford. I believe that there was inadequate consultation by the Docks and Harbours Association, which was largely responsible for this formula, with the Milford Haven Conservancy Board.

The arguments I advance represent no threat to the revenue of the local authorities in Pembrokeshire. Industry dependent on the Haven produces about 50 per cent. of the rates in the county, and that will continue whatever formula is applied to the premises of the Conservancy Board. The oil company jetties are excluded from the new formula. Their assessment is calculated on capital value, and produces a figure amounting to several hundreds of thousands of pounds. I believe that the rates arising from those jetties are greater than those of the whole of the Port of London.

What we are to have is a system under which the port is to be subjected to the highest possible assessment of two alternative system, and the oil companies are to pay twice, first for their jetties and second through the dues they pay to the Board.

But even if my criticism of the Order involves some small reduction in the rate revenue of Pembrokeshire, it is a case that should be put, because what the Government now propose is wrong in equity and imposes a fresh burden on an organisation the success of which is crucial to the future economic development and prosperity of the whole area. The Conservancy Board occupies only one small office, somewhat smaller in total volume than this Chamber, and has a boat harbour designed for the operation of its patrol and pilot launches. The total capital value of this property is about £200,000 and the present rateable value is £4,500, a fair figure in relation to the extent of the property and the burden the Board's activities impose on local authorities.

If the Order is approved, the rateable value after the end of the transitional period will be calculated at 4 per cent. of the gross receipts, which can be forecast for some years ahead, within a margin of error of about 10 per cent. This year they will be about £600,000. By 1974–75 they will be just over £1,000,000. The Board is not a profit-making organisation. Its charges are related solely to the service it provides, which include the considerable dredging operations which have opened Milford Haven to tankers of up to 275,000 tons.

On the basis of the income figures that I have quoted, taking account of the transitional relief and assuming no increase in the percentage figure of 4 per cent.—although my hon. Friend has told us that there may well be an increase in 1973—the Conservancy Board will see its assessment rise from £4,500 last year to £20,625 this year and about £40,000 by 1974–75. The transitional relief is negligible. Ports like Milford, with a rapidly rising income, do notably less well in this respect than ports with a static income. It must be recognised that other ports will suffer substantial increases. Swansea and Cardiff will go up from nil to £55,000 and £54,000 respectively, and Dover, previously assessed at £3,600, will face an increase of, I believe, over 1,600 per cent. But in the case of these ports, with their extensive premises and cargo-handling facilities, the increases must be related to existing assessments that are clearly ludicrous.

Under the new system Milford, with its one office and its tiny jetty, is to be assessed at or near the same rate as some of Britain's greatest cargo-handling ports. Any action the Board takes to extend or improve its present services will inevitably increase the burden of rates it will have to bear. If, for example, the Board should take over the tugs in the harbour, its assessment will go up, or, worse and more likely, if another major dredging scheme is undertaken, even if it is in the open sea outside territorial waters, the Board will face a heavy increase in rates.

The cost of any future dredging scheme is likely to run into many millions of £s, and the effect could, therefore, be penal, though no new hereditaments would be created. The dredging is actually improving the sea bed, which is Crown property, and for this improvement the Board receives Government grants and loans. Now the Government are, in effect, imposing a 4 per cent. tax on the interest payable on those loans and on the repayment of capital, although the expenditure is not in respect of a rateable hereditament.

The basic inequity of the whole scheme in this case is shown by the fact that if the Board decided to spend, say, £40 million to dredge for the 500,000-ton tankers which are now under construction, it would face a huge increase in rates. If, on the other hand, it were to build a £40 million container berth and seek to recover the whole finance by means of cargo handling charges, this immense structure, occupying a great area of land and making large demands on public services, would have no rating assessment whatever.

The Order seems not only inequitable but, in the circumstances, quite absurd, and I am not prepared to support anything that is either inequitable or absurd. I therefore urge the Minister to recognise the unique position of the Milford Haven Conservancy Board. It is the only Board left in this country which is concerned solely with navigational conservancy.

I hope the Minister will find it possible to produce, if necessary, a unique exemption. He has already indicated that two general categories receive exemption. I hope that he will do the same for this Board.

11.53 p.m.

Mr. John Sutcliffe (Middlesbrough, West)

I intervene briefly because the Minister will be aware of the concern that has been expressed by the Tees and Hartlepools Port Authority about the effect of these proposals, particularly in relation to the rents formula.

I am grateful to my hon. Friend for the trouble he has taken in this matter and for enabling the chairman and managing director of the authority to make representations to him. I would be obliged if, having taken this trouble, he would state more clearly how he proposes to deal with the difficulties which he recognises the Tees and Hartlepools Port Authority faces. The major cause of the anxiety being expressed by this authority lies in the fact that in 1973–74 there will be a huge increase in rates as a result of the rents accruing from development which are taking place in Tees-mouth.

Would the Minister explain in more detail how, if it is not possible for some port authorities to distinguish between true rents and service charges, along with other things that pass as rents, it will be possible to get over this problem by 1973? My authority will be in trouble unless there is some revision, though the Minister has said that he does not propose to review the formula. If that is the case, will he review the percentage? I hope he can give some reassurance on this point.

11.55 p.m.

Mr. Graham Page

I speak again by leave of the House. My hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) mentioned the Tees and Hartle-pools Port Authority. The difficulty is that the authority receives a substantial amount in rents for various kinds of services, including, for example, dredging. It has been difficult to devise any formula to distinguish between what might be called true rent and payment for services. As I have previously informed my hon. Friend, we are still searching for a formula, and if we can devise some way in which to distinguish what might be called true rent, I shall be only too happy to consider an Amendment to the order. But at the moment what we are dealing with, and on the whole fairly, are gross receipts of port authorities, and we are taking a very small proportion of that, 4 per cent., as the basis of the assessments.

I do not think that my hon. Friend the Member for Pembroke (Mr. Nicholas Edwards) goes back far enough in the history of the matter. The Milford Haven Conservancy is at present assessed to a figure of only £4,500, but that is because its receipts for profit basis purposes, the guide figure, do not include tolls in gross, and any system using gross receipts must bring in tolls in gross. The assessment will go up from £4,500 to £12,500, but this will be spread over the three transitional years, and again this is merely dealing with gross receipts.

Mr. Nicholas Edwards

Is it not true that under the tolls in gross system, if the profit had no relation to the hereditament it could not be brought in?

Mr. Page

That is what I was saying. Tolls in gross were not brought in previously and so Milford Haven Conservancy was "getting away with it", if I may put it like that, with a cheap job. It is only because we are now basing on gross receipts and trying to make it common throughout all the ports that some have had to bring in tolls in gross. It depended on whether the bed of the river was owned. This is an anomaly which we have tried to smooth out. I will look into the points which my hon. Friends have raised and see whether I can give any assistance.

Question put and agreed to.

Resolved, That the Docks and Harbours (Valuation) Order 1971, dated 4th March 1971, a copy of which was laid before this House on 4th March, be approved.

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