HC Deb 10 May 1971 vol 817 cc128-51

8.23 p.m.

The Under-Secretary of State for Development, Scottish Office (Mr. George Younger)

I beg to move, That the Rating of Industry (Scotland) Order, 1971, a copy of which was laid before this House on 23rd April, be approved. The purpose of this Order is to continue industrial derating of 50 per cent, for another two years after the Rating of Industry (Scotland) Order, 1965. expires on 15th May this year.

The subject of industrial derating has a fairly long history, and I think it would be helpful to the House, in considering this continuation Order, if I begin by outlining the background.

Industrial properties in Scotland and England and Wales were 75 per cent, derated from 1929 until 1959, when derating was modified to 50 per cent. Derating was terminated in England and Wales in 1963, a revaluation year, but the Government of the day decided that full rating of industry in Scotland should be postponed until the 1966 revaluation.

Full rating from 1966–67 was provided for in Section 10 of the Local Government (Financial Provisions) (Scotland) Act, 1963 but, as a precaution, power was included in the Section enabling the Secretary of State to continue a measure of derating by order. It was in exercise of this power that the Rating of Industry (Scotland) Order, 1965, was made continuing 50 per cent, derating for the current valuation quinquennium which ends on 15th May next. If that Order had not been made industry's share of the rate burden in Scotland would have risen in 1966 from 12.5 per cent, to nearly 21 per cent., when the share borne by industry in England and Wales was still of the order of 14 per cent. We on this side of the House were, of course, in Opposition at the time, but the 1965 Order had our unqualified support.

No decision could be taken about the level of derating after the expiry of the 1965 Order until the assessors had submitted to my Department their estimates of the likely effects of the forthcoming revaluation on the various classes of property. These estimates have now been received and it is clear from them that if derating were to be allowed to terminate this year the rating position of industry in Scotland would be almost as seriously out of line with that of industry in England and Wales, as it would have been in 1966 if no derating order had been made by the previous Administration.

Full rating in 1971–72 would raise Scottish industry's share of the rate burden from about 12 per cent, to nearly 20 per cent., as against 14.7 per cent, for industry in England and Wales; and Scottish industry's rate bill would, on the 1970–71 figures, rise in that event from £24 million to £40 million. There is no doubt in my mind that an increase of this magnitude could prejudice the ability of Scottish industry to compete on equal terms with industry south of the Border. It could also affect adversely the efforts being made to bring new industry to Scotland and to secure the expansion of existing industry.

Mr. Tam Dalyell (West Lothian)

Has the Department done any sums on this issue of the way rating in Scotland was acting as a disincentive in the past? It would be interesting to have an indication.

Mr. Younger

That is a very interesting point which the hon. Gentleman has raised. There has been no specific study done by my Department into the matter, but it is a matter which has to be very carefully borne in mind. After the Green Paper on the future of local government finance is announced and discussed, this is a point we should take seriously.

Continuation of derating under the Order before the House should maintain Scottish industry's share of the rate burden at about the present level of 12 per cent. At that level the actual rate burden borne by industry on both sides of the Border should broadly correspond; and it is, of course, actual rate liability rather than the share of the burden which is of concern to industrialists.

Hon. Members may wonder what will be the effect of revaluation coupled with this Order on non-industrial property, that is commercial and domestic and so on. We do not know yet, of course, what the actual rate bills are going to be because authorities have until the autumn to fix their rates. I can say, however, that, as regards shares of the rate burden, the percentage burden for domestic property is likely to increase a little overall and the percentage borne by commerce to decrease slightly.

Members will no doubt have noted that while the 1965 Order applied for the whole of the valuation quinquennium which is just ending, the continuation Order I am now commending only applies for two years. This is so that the whole situation may be reviewed in the light of the likely effect of the 1973 revaluation on industrial rate burdens in England and Wales.

We are aware, of course, that to continue derating for industry alone means a heavier burden for other ratepayers, who also have to face increasing rate bills year by year. That is another reason why we want to look again at this order in two years' time. It is not a measure which should be in force permanently, but only so long as it can be clearly shown to be justified in relation to the rating burden carried by industry elsewhere. We believe that it is justified at present, but we accept the view of the Anderson Committee on Commercial Rating that the whole question of the incidence of rating in Scotland should be looked at comprehensively in relation to that in England and Wales at the earliest opportunity, and the revaluation in England and Wales in 1973—the first for 10 years—will provide that opportunity. We shall also be better placed then to assess the effect of any changes in the rating system that may be proposed in the forthcoming Green Paper.

The assessors, who I know have been hard pressed in recent months, were able to provide revaluation estimates only a few weeks ago. In view of the obvious need to make the Order as quickly as possible, I regret that there was no time for formal consultations with the local authority associations and industrial interests. Announcement of the Secretary of State's intention was, however, made in answer to a Parliamentary Question on 7th April, and I am glad to say that no objections have been received.

I commend the Order to the House as a necessary short-term measure to distribute the rating burden in Scotland as fairly as possible.

8.30 p.m.

Mr. Tam Dalyell (West Lothian)

Reverting to the point on which I interrupted the hon. Gentleman, I readily understand that, in the absence of any definite study having been done by the Department—not that I blame it—it is difficult to reach a conclusion. However, I offer as a fairly well-considered suspicion that the griping which some hon. Members have had from industrialists about the relationship between rating in Scotland and in England is largely justified. It would be interesting to have the figures. My suspicion is that they will reveal a situation where industry in Scotland is at a disadvantage compared with that in England.

The system of industrial rating should be considered afresh. It is an extremely unsatisfactory form of raising money. I am glad that the Financial Secretary to the Treasury is in his place, because I hope that, if we are to go in for an era of tax reform, the number of man hours involved in calculating industrial rates as opposed to other forms of raising money, be it through the Exchequer or through local authorities will be reconsidered. It is a matter which drives the internal accountants of large firms almost to distraction. Any basic thinking that is done in the light of the Green Paper and the changes in local government will be welcomed.

I do very little special pleading in this House. However, on this occasion, I want to make a special plea for the kind of situation in which West Lothian finds itself. We have the dubious distinction of being the second highest domestically rated area in Scotland. Our position in the league is almost like that of Celtic, Aberdeen, Leeds or Arsenal. We are far ahead of anyone else. It is a situation which arises in any industrial county which, to its credit, has done an enormous amount of development in recent years— and we are grateful enough for having Leylands and the many other firms which have come to us—but it puts a tremendous burden on the individuals who live in such a place and who may not necessarily work there or work in the incoming industries. Therefore, there is a dilemma.

I happen to know that the Under-Secretary was at the Hewlett-Packard factory at South Queensferry earlier today. Had it not been for the expected statement on Rolls-Royce, I would have been with the hon. Gentleman. However, I ask him to exercise his imagination. When such a company comes to a community like Queensferry, an enormous amount of expensive infrastructure has to be provided in the way of sewerage, drains and roads. With the advent of Leylands, Dynamco and Cameron Ironwork, this has been very expensive in the Livingston area and West Lothian. For that reason, in any basic rethinking of the philosophy of industrial rating in the future, I hope that account will be taken of the dilemma in which West Lothian finds itself.

Some kind of equalisation is required. If it is considered to be good that development areas with a great deal of new industry should be concentrated in comparatively few places, some thought must be given to how the general burden of the common weal can be more fairly spread.

In making that point, I hope that I have the sympathy of the Department. In the coming months, I look forward to hearing about its thinking and that of the Treasury.

8.35 p.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

I am sorry to have to disagree with my hon. Friend the Member for West Lothian (Mr. Dalyell) on a basic point. I believe wholeheartedly that industrial derating is a hidden subsidy to industry. I argue that if it is to be the policy of the Government—any Government—to supply inducements to attract industry to particular areas, that should not be the responsibility of local revenues but should be the direct responsibility of the Exchequer.

We have only to look at the imbalance in terms of the proportion of the rate burden between England and Wales and Scotland to see the true situation. The hon. Gentleman mentioned that the contribution from Scottish industry as a proportion of total rate revenue was in the region of 12 per cent., and indicated that in England and Wales it would be about 14.7 per cent. I do not want to make the differences larger than they need be, but let us say that, roughly speaking, there is a difference in percentage terms of 2½ to 3 per cent. In terms of total revenue, therefore, Scottish industry on the present basis makes a contribution of about £3 to £4 million less than it would be making if, in proportionate terms, it were making the same contribution as occurs in England and Wales. In some authorities this is a considerable sum.

I agree with my hon. Friend when he made his constituency point since my constituency of Clackmannanshire has the dubious distinction of being the highest rated authority in the United Kingdom. This authority suffers a severe disadvantage in terms of the anomalies that can occur in industrial derating. I am sure that the Under-Secretary of State for Development is fully conversant with the background of the cases involved in assessing a particular industry on storage facilities for industrial purposes rather than for commercial purposes. I will not go into all the details, but anomalies occur because of the type of provision which applies to derating.

The Minister has clearly indicated that the idea is to look at the Green Paper which will come along presently, but for which at the moment we have no date. One of the reasons for not making this a five-year Order is that the Government want to have an apportunity to assess the situation within the period of two years. This will produce considerable uncertainty. When I put down a Question on this matter on 28th October, the Secretary of State gave no indication that he would make any decision on industrial derating. However, in a television broadcast later in that week he announced that industrial derating would continue. There will be considerable uncertainty for this period of two years unless we seek a little further to find out what is in the Government's mind on the Scottish position as a whole.

Part of the anomaly of the Scottish system which leads to a maldistribution of burden among various sections of the community—and we are sorry to hear that the percentage for the domestic rate payable will go up—is involved in the transfer from rates to balance the housing revenue account. We are told in the Press, and from certain leaks which have taken place in the discussions, that the Government's intention is to remove any rate transfer on housing revenue account. That will mean that by that stroke—"at a stroke"—housing rents in Scotland will rise by at least 50 per cent.

If the Government are to use this to argue the case for an alteration of the rate, then it becomes very difficult for them to continue for any length of time. Having removed the rate subsidy from the housing revenue account—I am trying to read the Government's mind and it is become increasingly difficult to do that— it becomes increasingly difficult to sustain the 50 per cent, derating. My hon. Friend rightly probed the issue whether studies have been undertaken of the incidence of taxation and where the burden lies. We see great concern about the commercial ratepayer. This is particularly sorely felt in our cities. But the burden does not necessarily lie where it is put. It does not necessarily lie on the commercial ratepayer. It will be reflected in the prices charged to Scottish housewives for the goods and services they obtain from the commercial dealer, and might be reflected in changes in the structure of Scottish cities. The Government ought to study this matter. In view of the peculiarities of the Scottish system of local government finance, will the Green Paper contain a special section dealing with Scotland? I should not be satisfied by finding a general survey of the sources of local government revenue without a particular survey dealing with peculiarities of the Scottish situation.

If the Order is to terminate in 1972–73, on behalf of Scottish ratepayers and even Scottish industrialists I say that we need a clear indication long before that time of the Government's intentions on local revenue. In 1962, the then Secretary of State—now the Minister for Trade—in answer to a Question, said: In view of the outcome of the 1961 revaluation in Scotland the Government have decided not to proceed with the re-rating of industry in Scotland in 1963. The present intention is to include in early legislation provision for re-rating on the occasion of the next general Scottish revaluation, which is due to take place in 1966."—[OFFICIAL REPORT, 16th July, 1962; Vol. 663, c. 20.] We have had this before and there may be good regional economic planning reasons and regional locational reasons to have it. It may be a good thing. But that burden in regional reallocation should not be placed on Scottish local authorities. It should be placed directly on the United Kingdom Exchequer, which is responsible for correcting regional imbalances.

8.43 p.m.

Mr. James Dempsey (Coatbridge and Airdrie)

I shall not follow my hon. Friend the Member for East Stirlingshire (Mr. Douglas) other than to say that I recollect my days as Secretary of the Labour League of Youth, when we advocated full rating relief for industrialists to reduce chronic unemployment in the distressed areas. We did that because we were convinced that there was no hope of the Exchequer accepting any responsibility for the financial obligation involved.

I am convinced that for as long as the present Government are in power—with the greatest respect to the Under-Secretary of State for Development—there is little prospect of the Exchequer effectively contributing towards inducing industrialists to enter certain parts of Scotland where there is very high unemployment. I cannot believe that the Government will make the appropriate and successful effort to solve the problem. This is why, to some extent, the burden to contribute will be on the backs of local authorities in the competitive war for new factories.

It is unfortunate that industrial derating is to be pegged to 50 per cent. The Order will be approved, but I hope that the Minister will reconsider this matter. The mathematical ratio between Scotland and England in the matter of industrial derating is irrelevant. Scotland should relate its industrial rating to the efforts needed to attract industries to Scotland. To do that we need to be fully competitive. There is no prospect of growth-type industries which are situated near ports or near the main cities in the south moving to the north, because, if they were to do so, they would have to transport their raw materials up north and then move the finished product south. There would be an element of unviability in such a move.

We should consider what contribution we can make to encourage manufacturers to move to Scotland. I wish that the Minister had considered it in that way and said that, irrespective of the computation based on population and rates paid by industrialists, the additional cost borne by manufacturers in Scotland but not applicable to industries situated further south and nearer to the main centres of communication will be taken into account. That would be a much more sensible way of measuring the contribution to be made in establishing growth industries and factories in Scotland.

A great campaign is waging to establish a new steel complex in Scotland. To be competitive we must have a modern steel plant, but that is bound to result in the closure of older plants and in thousands of redundancies. Ideally the new modern steel plant must be accompanied by some growth industries and some ancillary industries to take up the redundant steel workers.

The ratepayers must make some contribution. As long as we must compete in a war for jobs, we must make every effort to ensure that we are the most successful competitors. There is nothing wrong in asking hoteliers, public houses, clubs and betting agencies to pay more rates so as to enable us to reduce industrial rates and to attract new industry to Scotland.

Another problem is that the buildings housing the old-established reputable industries which have provided employment for half of century are falling down. No grant is available under the Local Employment Act for the replacement of such buildings. Unless we make a contribution in the form of rating relief by industrial derating, in addition to the problem of attracting new industries there will be the problem of replacing old industries. Whenever I meet industrialists in my constituency they make the plea, "Can you do something to reduce our rates?" That is a serious problem for industries which have been operating for the past 75 years. That is why industrial derating is necessary.

I would like the Minister to consider a suggestion that, in addition to the 50 per cent., local authorities be given discretion in the application of additional industrial derating subject to the employment situation in their areas. Even within Scotland there are towns—for example, East Kilbride—where until recently we had only a handful of unemployed. Because it is a new town, it has all the attractions imaginable for new industry—

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. I hope that the hon. Member will confine his remarks to the scope of the Order.

Mr. Dempsey

I am just about to explain, Mr. Deputy Speaker, how the scope of the Order would be much more effective if local authorities had discretion in the granting of rating relief additional to the 50 per cent, outlined by the hon. Gentleman. I am trying to point out that new towns have special attractions that the older towns—

Mr. Deputy Speaker

Order. I do not wish to bring the hon. Member's remarks to a close unduly quickly, but I would like to point out that the scope of the Order is as it is written before us and not as any hon. Member might wish it to be.

Mr. Dempsey

I am trying to point out again, if you will permit me, Mr. Deputy Speaker, that the scope of the Order is not sufficiently generous. That is a valid statement and, in my view, perfectly in order.

Having said that, I repeat that towns like Coatbridge and Airdrie, the older parts of the country, could attract industry only if some additional contribution were made by the ratepayers. I should like the Minister to consider—

Mr. Douglas

May I interrupt my hon. Friend? I should like him to address himself to giving my constituency a little advice. How would he suggest that the ratepayers of Clackmannan and East Stirlingshire, whose rates last time were 41s. 6d. in the £, might be expected to give a little more contribution to the attraction of industry?

Mr. Dempsey

I could give them some good advice, but they would tell me to mind my own business and the Chair would rule me out of order. There are many ways of reducing rates other than cutting industrial derating. That is the last thing to think of cutting if my hon. Friend wants anything like full employment in his constituency.

Will the Minister consider, or will his Department study, the possibility of giving, say, a discretion to local authorities or giving them particularly generous facilities, legislation or provision, whatever it might be called, whereby they would be entitled, if they wished, to increase the amount of industrial derating beyond 50 per cent.? That is my plea because, coming from a constituency like Coatbridge and Airdrie, I cannot see any possibility of our breaking the back of the unemployment problem unless the financial inducements are much more generous than they are at present.

One of the effective ways of doing that would be for the Minister and his Department to study the practicality of local authorities, provided they are so minded, being given powers whereby they could be more generous than the 50 per cent, mentioned by the hon. Gentleman. He knows that local authorities have such powers concerning, for example, the relief of charities. Fifty per cent, is mandatory, but they have freedom to go beyond that figure.

I appeal to the Minister to consider extending that practice to industrial derating so that an additional contribution could be made, if a local authority regarded it as a wise policy to adopt, which would help to reduce the number of unemployed registered at our employment exchanges, especially at Coatbridge and Airdrie.

8.55 p.m.

Mr. George Lawson (Motherwell)

We must all marvel at the courage shown by my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), that he should advocate a change in the proportions of rates paid in different Scottish areas, as between householders, commercial and industrial subjects. I would not dare to do that in respect of my area. I am not sure that I can use the word "admire", but, as I have said, I marvel at my hon. Friend's courage. I know that he has been very concerned with bringing industry to his area, and I agree that few areas are more in need of industry than is the Coatbridge area.

I can suggest many ways in which local authorities can seek to attract firms to their areas and, having done so, can encourage them to expand. There are many services which local authorities can render, and I urge them to do so. I urge them to welcome firms to their areas and to be ready to meet the needs of those firms. They can do a great amount of good in that way. However, I hesitate to advocate shifting the burden of rates from industry to other ratepayers.

I want to touch on one point that very much concerns me, although even on that I hesitate to speak. When we talk about rates, the rate burden and the rating system, we usually preface our remarks by saying that it is very unfair system. We recognise that it is unfair, but we always have to admit that we have not yet been able to produce an easier way of raising as much money. No doubt on other occasions we can suggest ways in which present methods can be improved, but not on this occasion. I merely want to point out that in my constituency there is a heavy concentration of steel-making capacity.

Although the borough of Motherwell and Wishaw has a population of only about 76,000 people, it is an astonishing fact that two or three years ago the value of industrial subjects in that area was second only to that of Glasgow, an industrial city with approximately one million people. Edinburgh is not an industrial city but it has a substantial body of industry. Dundee is an industrial city, as is Aberdeen.

Until about three years ago the valuation placed upon industrial subjects in my constituency was greater than that placed upon the industrial subjects of Edinburgh, with its 500,000 people. In the past few years there has been a slight shift, and Edinburgh may have moved slightly ahead, so that the value placed upon industrial subjects in that city is now slightly higher than the value in Motherwell and Wishaw. But it is still true that the borough of Motherwell and Wishaw, with a population of about 76,000, has an industrial valuation as near as makes no difference to that of a city with 500,000 people.

It might be seen as a certain disadvantage to my area that the rating system, from an industrial subject point of view, is based not merely on the bricks and mortar that go to make up the factories but upon the fixed equipment. If the fixed equipment consists of very heavy and expensive steel-making or steel-rolling finishing equipment, costing perhaps hundreds of millions of pounds, one can see an enormous rating burden arising. This is the situation. I believe it is fair to say that one particular works at Ravenscraig in my constituency is rated nearly as much as all the industry in Dundee put together. I am guessing at this, and I may be challenged, but I do not think I am far out.

There is no Exchequer equalization grant, as it used to be called. Certain burghs which I could mention were getting as much by way of Exchequer equalisation grant as Motherwell and Wishaw were getting out of this particular payment. I wonder whether, in view of the expensive fixed equipment which certain industries must carry, it is a sensible system to charge on the value of that equipment, which is the prevailing practice. This must have a very powerful deterrent effect on industries going to certain areas. We are pressing for this £1,000 million "green field" development. There is even a difference in the proportion of rates raised in Scotland as compared with Wales or parts of England, and this can be a very large factor in deciding where a particular industry will be located. It is bound to be a big factor in giving rise to second thoughts about still further developing—

Mr. Deputy Speaker

Order: I appreciate the temptations which are before the hon. Gentleman, but I hope he will return to the subject of the Order, and within the scope of the Order, which he has left for some considerable time.

Mr. Lawson

I am sorry, Mr. Deputy Speaker. I cannot quite see where I am out of order. The Order relates to the derating of industrial subjects. I am describing industrial subjects. If a steel mill is not an industrial subject, I do not know what it is.

With a system of charging 50 per cent, based upon the value of the fixed properties, a very slight modification could make a substantial difference. If it were 40 per cent, in Scotland it could be a heavy disadvantage, whereas if it were 60 per cent, it could be a substantial advantage. It is the relative position that matters. Taking the point mentioned by my hon. Friend the Member for East Stirlingshire (Mr. Douglas), the charging of 100 per cent, could have an immense effect on whether a steel works developed or did not develop in that area.

There are other matters that we should keep in mind. I should like a close look taken at this question of how we charge and estimate industrial rates, so that we could perhaps find some way of compensating in areas where a new method is operating. Under a system whereby there was a smaller proportionate industrial charge in respect of an industry structured in that way, I should expect there to be a compensating payment from some other source, the, resources rate as distinct from what used to be called the Exchequer equalisation grant.

I hope that the Under-Secretary will think about it. There is bound to be a heavy discouragement against industrial development if one goes much beyond the bricks and mortar and charges rates on enormously expensive capital equipment. This is a factor which ought to have far closer and more sympathetic attention than it has had up to now.

It may be said that, in arguing in this way, I am in a sense arguing against my own area, but I am sure that my area would be happy if the industry within it —here I come to a certain point of sympathy with my hon. Friend the Member for Coatbridge and Airdrie—were made more secure than it might be under the heavy and growing charges put upon it as a result of the present system.


Mr. Peter Doig (Dundee, West)

It always sounds acceptable when someone is told, as is done under the present Order, that he can have something or get away with something. It is always popular to tell someone that he need pay only half his full rates, but it is popular only until people stop to realise that it does not reduce by a penny the amount of money which has to be raised for local government. If one group are told that they will pay only half their proper share of rates other groups will have to pay much more than their proper share.

How long are we to prolong this system? We employ expert valuation and rating officers to assess valuations, sharing out the burden of the money which has to be raised. Then the Government, whichever Government it may be, muck the arrangement about, saying to one group "You will not pay any rates", and to another group, "You will pay only half rates". The groups which are left, of course, have to pay very much more, so they begin to go out of business.

In streets such as Sauchiehall Street in Glasgow, one of the finest shopping-streets in Scotland, there are large shop premises empty, no one can afford to take them, and those who might take them are in the group who have to pay full rates. Then what happens? At the next revaluation, the expert looks at the properties again and says, "I must have been charging this commercial section too much, because people are going out of business. I shall have to reduce their share". In the end, nobody pays full rates. It becomes a farce.

When will the Government end this farce? When shall we have a reasonable system for the financing of local authority services? The anomalies of the present system become obvious when we consider Orders of this kind. In Bearsden, for example, there is practically no industry at all, in the constituency of my hon. Friend the Member for Motherwell (Mr. Lawson) it is nearly all industry, and there are wide variations in between which are bound to create unfairness. In agricultural areas, an enormous amount of property goes virtually free of rates. Someone is paying far more than his proper share. Why do we bother to employ experts, highly-paid scarce assessors? Why do the Government bother to pay them, when at the end of the day everybody, including the Government, will muck up everything they have decided? Once they have parcelled it out fairly, the Government chop and change everything.

The whole system is out of date. Whilst I do not object to this Order at this time, how long shall we carry on the farce of the present system, which everyone knows is wrong? I could give a practical alternative now, but I presume that I should be out of order if I did so.

We keep chopping and changing the system because it is faulty. A wrong impression is given to people. If an industrialist is making up his mind whether to build a steel strip mill in Motherwell, Wales, London, or elsewhere, at the back of his mind is the niggling thought, "If I go to Motherwell I shall be derated 50 per cent., but how long will it last?". He thinks that when the system is eventually changed he will have to pay twice as much in rates. That is not so, because if industry in a highly industrialised place like Motherwell were to pay full rates on its premises, it would not pay anything like double what it is paying now with 50 per cent, derating.

We must sort the muddle out one day. I hope that Governments will not bring Orders like this before us ad infinitum, but will one day get down to devising a proper system for local authority finance. Why on earth they excluded the matter from the Wheatley Commission's terms of reference, I do not know.

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. The hon. Gentleman, who was not present at the beginning of the debate, has gone far beyond the scope of the Order. I do not think that the hon. Gentleman can have heard the Minister's speech.

Mr. Doig

I will end by repeating that the system gives a wrong impression to industrialists and could frighten them away, because they do not understand what the abolition of 50 per cent, derating would mean. It would not mean doubling their present rates, and it is time someone made that clear. I think that at the back of their minds is the fear that if they come to places in Scotland, like Motherwell, Glasgow, Edinburgh or Dundee, they may be faced at some time with a doubling of the amount they must pay in rates, but that is not the case.

9.13 p.m.

Mr. Norman Buchan (Renfrew, West)

I had not intended to speak tonight, but the debate has ranged fairly widely, within the bounds of order, and it might be useful if I say a word or two. Some of the disquiet expressed is based on two old factors in the rating system. First, there is the general feeling that it is a highly regressive form of taxation. No one has yet come up with the alternative, although plenty have been advanced. I am disappointed that there is no suggestion that this is the last of the rating Orders, and that something more progressive has not been introduced. Second, there is disquiet that as an indictment the provision is not particularly effective— the comparison between the 12 per cent, in Scotland and the 14.7 per cent in England is a very small inducement—and in any case is remains an anomaly.

We have a kind of Samuel Smiles situation, a self-help situation, and in the areas we are asked to help, which require the right kind of industrial investment, with incentives given to industrialists, there is a double Samuel Smiles situation. Not only within the depressed areas as a whole, but in those parts of them where we require industry because people are out of work, those very people will have to bear the burden of extra rates because of the 50 per cent, reduction.

We are, therefore, in the peculiar position of seeing all sorts of theoretical and practical flaws in the system but saying that, because we have not produced the right kind of generating regional policy, we need to keep it, regressive as it is. However, if we got the right kind of dynamic regional policy, this system could appropriately be examined and perhaps, at some future date, rejected. My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) recalled that, a few years ago, the Labour League of Youth advocated 100 per cent, reductions. That was pushing the Samuel Smiles principle to the uttermost because nothing else was coming forward. We should clearly be moving beyond that stage now.

With reform of local government in the offing, I am disappointed that we were not told that this will be the last such Order. We have urged industrial rating incentives and some of us have detected anomalies. As Under-Secretary of State, I brought in 50 per cent, derating of agriculture in relation to intensive farming, pointing out that if it was not agriculture at least it was industry and therefore deserved 50 per cent, derating. But, of course, this created anomalies in the rest of Britain. We are, in effect, calling upon the rate bearing communities to carry what should be an Exchequer form of direction of planning, because, by this system, we are removing planning from local government. That is an important aspect to Scotland because of the unemployment there, which is now over 123,000.

Scotland, therefore, is crying out for the right kind of development incentives. This is not a party political point. A large part of the Tory Party in Scotland is calling for a return to investment grants and for getting rid of the nonsense in the Chancellor's Budget. If that were done, the Order would no longer be so important. I hope that the Under-Secretary of State will tell us that, while we must have this rather regressive situation because of the failure to develop proper regional policies, the Order will run for only two years and at the end of that time the Government will give proper regional incentives so that we can get rid of the desperate unemployment in Scotland.

The demand for investment grants is being powerfully voiced by a large section of the Scottish Tory Party. I hope that, when its conference comes in a week or two, the Government will see the error of their ways and accept that point of view. In that case, the Order will no longer be quite so necessary. It is the incentive and unemployment situation that we require to pay attention to.

9.18 p.m.

Mr. Younger

By leave of the House, Mr. Deputy Speaker, I will reply to this interesting debate. It sounded, at times, more like a trailer for the debate on the Green Paper which we expect to publish later this year on local government finance.

I will not stray into discussing the wide and interesting points raised by several hon. Members as to what might replace the present rating system or what major improvements one might make in it but will confine myself to saying that I noted the points with great interest and look forward to hearing more about them in the debate on the Green Paper, which will be the time for these ideas to be properly deployed. I hope then that we shall have an opportunity of taking a major look at the whole system of rating and how other possible systems of financing local government might work.

The debate is essentially—and the hon. Member for Motherwell (Mr. Lawson) put this concisely—about the balance of rating expenditure carried by each individual category of rated subject. If one reduces the percentage carried by one category, one inevitably increases the percentage carried by one or more of the others. We are dealing tonight with a global total which remains constant, and we are discussing the splitting of its subsections and the various parts of the burden. Therefore, those who may advocate, quite properly, that we should have industrial derating are advocating as a result that there should be an increase in the rate burden on commercial, or domestic, or other subjects.

Mr. Douglas

That does not necessarily follow. As I indicated in my remarks, the major element of disequilibrium in Scotland relates to the transfer in the housing revenue account. The Minister intends to remove that. If he does, he will alter an important percentage in the total.

Mr. Deputy Speaker

Order. I hope that the Member for East Stirlingshire (Mr. Douglas) will not lead the debate out of order yet again.

Mr. Younger

Perhaps I was too generous in giving way to the hon. Gentleman, because he strayed a little out of order and into another aspect of the problem which I was about to explain. We have, first, the balance between the categories I have described and, secondly, although it does not strictly come within this Order, to consider the actual amount of rates paid in these various categories, and they are not the same thing.

It is no use saying that the rateable value of a subject is so much and that that is bad or good, without relating it to the actual amount of rates which have to be paid at the end of the day. This is where the comparison between Scotland and England becomes so difficult. One has to take into account not merely the inevitable differences in practices of the assessors in the two countries, although they are supposed to be the same, but the different rating burdens of Scottish and English and Welsh local authorities, which are affected by substantial differences in policy and so on.

I give one further figure which adds to the rather crude figure I gave earlier comparing Scottish and English effects. One may calculate a figure of rates paid on every £1,000 worth of sales in a commercial undertaking. This measures in a certain rough and ready way the actual amount of pain caused to ratepayers. The estimated figures for rates per £1,000 sales in manufacturing in Scotland show that, with derating at 50 per cent., Scottish industry already bears a slightly higher rate burden than industry South of the Border. The figures are £6.87 per £1,000 sales in Scotland compared with £6.21 per £1,000 of sales in England and Wales. It may not be a substantial difference, but it is not negligible.

We have several different things to consider: first, the balance between the various categories of subject; secondly, the difference between the rateable value practices between the two countries; thirdly, the difference in the actual rates paid at the end of the day, which is affected by the matters which I have outlined.

Mr. Buchan

Surely this myth of concealed assistance to industry in Scotland as opposed to the rest of the United Kingdom is exploded and this makes it more necessary to bring forward the right kind of investment grants?

Mr. Younger

I do not want to stray out of order. Perhaps I can now refer to the point raised by the hon. Member for East Stirlingshire. The figures I gave earlier of different percentages for the rate burden carried by industry in England and Scotland, which have to be modified by this other figure—which is only a sample figure—show that in that case the figure was in favour of one side of the equation and in this case, if we take the per £1,000 sales rates paid, it appears that Scotland is on the worse side. Generally speaking, we have come to the conclusion that on balance, taking into account all the difficulties of the system and the differences between the two countries, it is not far out.

Mr. Lawson

Could the hon. Gentleman carry that interesting example of the £1,000 sale rate further and tell us how this might work out between different industries, for example the steel industry and other industries?

Mr. Younger

I am grateful to the hon. Gentleman for raising that point but I am afraid that I cannot give such a complicated calculation without notice. No doubt it is something that we could pursue with great profit at a later stage.

The hon. Member for Motherwell also raised a point with which I have much sympathy—the question of how we can make more readily understandable the methods by which such things as industrial plant are valued. I must be careful not to trespass beyond the bounds of this Order or into what is essentially the task of the assessors. One thing we cannot do is to start taking on the job of amateur assessors. The C.B.I, has made representations, fairly similar to those of the hon. Gentleman. We are considering this carefully and we will also consider what the hon. Gentleman said. [Interruption.] If the right hon. Member for Kilmarnock (Mr. Ross) wishes to intervene I shall be glad to give way but he might have found it of profit to have been here at the beginning of the evening to hear what I said.

Mr. William Ross (Kilmarnock)

The hon. Gentleman should know exactly where I was. If he reads his local paper he will know. It was not a very pleasant job. He said he would consider this and I ask him, having considered it, what does he propose to do about it?

Mr. Younger

I think that I will continue with the debate that we were having before the right hon. Gentleman came in. I want to reply to some of the points raised by his hon. Friends.

The hon. Member for West Lothian (Mr. Dalyell) raised the question of comparisons with England and the heavy burden on his own local authority of West Lothian. I can well appreciate the anxieties which this causes. As for the help for bringing in services, etc., for new factories he will know that there is some element of help for local authorities in the rate support grant, so that it is not a total burden on the local authority. I accept that a local authority which follows a progressive policy in trying to make itself attractive to industry faces this problem in spite of the available grants. This is one of the things we shall be looking at in the reassessment of the whole rating system which will come when the Green Paper is published and discussed.

The hon. Member for East Stirlingshire said that he thought the renewing of this Order for only two years would produce uncertainty in industry. I see the point but I do not feel that industry need have any feeling of uncertainty. I want to make it clear that the reason for the two years is not to make some shattering change but merely to leave the way open for any reconsideration which may appear necessary in the light of the Green Paper and consideration of it. There is nothing more sinister than that in the figure of two years.

The hon. Gentleman mentioned discussion which he and my right hon. Friend the Secretary of State had some months ago. I do not see any difference in what my right hon. Friend said then and what we are doing now. The hon. Gentleman asked him whether he was proposing to cancel industrial derating and my right hon. Friend answered, "No, we have no plans for that". He had no plans for it then and it appears that, having gone through all the processes, he has come to the decision not to cancel industrial derating. There does not seem to be any conflict here.

Mr. Douglas

I asked the Secretary of State what was his policy regarding the continuation of 50 per cent, derating of Scottish industry and the right hon. Gentleman said that he had no announcement to make. What I objected to was the fact that he made an announcement on television two or three days later.

Mr. Younger

I do not think one could count an answer to a simple question on television as an announcement when the question was, "Are you going to do something?" and the answer was, "I have no plans for that". Nobody could seriously call that an announcement. If that were the case, some very peculiar announcements have been made by many people on many occasions. Therefore, I do not think the hon. Gentleman's point was valid.

The hon. Member for Coatbridge and Airdrie (Mr. Dempsey) raised some interesting new ideas which I hope he will deploy at greater length in the debate on the Green Paper. His suggestion that local authorities should be given the opportunity to give more than 50 per cent, derating out of their own pockets when they thought that industry needed it was new. However, I do not think that many local authorities would fall over themselves to have a power of that sort. It would be an expensive power for their general ratepayers. I will look carefully at what the hon. Gentleman said, but my first reaction is that it is possibly something which might not prove to be very practicable.

The hon. Member for Motherwell raised the question of valuations on some subjects in his constituency about which we all know as being exceptionally large producers of revenue. He said that the industrial valuation of his constituency approximated to that of as large a city as Edinburgh, which is an interesting and surprising fact. I cannot give the hon. Gentleman any magic solution off the cuff, because it all comes back to the question of leaving the valuation to the assessors and their technical and professional expertise. We must leave the matter there for the moment, but we shall consider it in the debate on the Green Paper. That is the time when it should be considered in the widest possible way with the most critical eye.

The hon. Member for Dundee, West (Mr. Doig), who said that it was the balance between the categories which was important, made some interesting points. I am sure that he could make them with profit in a speech on the Green Paper.

We have had a wide-ranging debate. My hon. Friend the Financial Secretary has been able to listen to it. Anything to do with a review of local government finance is naturally of great interest to him. For a considerable number of years he was responsible for the rating problems of a large industrial concern which, he tells me, had factories in Scotland, England and Wales. He says that there is no doubt that more headaches were caused by rating in Scotland than were caused in the other two countries.

I commend the Order and hope that the House will pass it.

Question put and agreed to.

Resolved, That the Rating of Industry (Scotland) Order, 1971, a copy of which was laid before this House on 23rd April, be approved.