§ 10.10 p.m.
§ The Minister of Local Government and Development (Mr. Graham Page)
I beg to move:That the Gas Board (Rateable Values) Order 1972, a draft of which was laid before this House on 19th October, in the last session of Parliament, be approved.If it be your wish, Mr. Speaker, and that of the House, it would be convenient if we might deal at the same time with the following Order, the Electricity Boards (Rateable Values) Order, 1972.
§ Mr. Page
Since the mid-1950s the gas and electricity undertakings have been assessed for rates on a formula which has been updated each year. It is a formula which is based on the basic rateable value as laid down by Statute, which each year is adjusted by reference to the units and the therms respectively supplied by the electricity and gas undertakings.
The basic rateable value, although it is laid down by Statute, can be changed by Order. That is what we are seeking to do. When the country is revalued, gas and electricity undertakings and their properties are left out of the valuation list by Statute. When it is known what the general increase or decrease in rateable values throughout the land may be, that figure is applied to the basic rateable values of the gas and electricity undertakings.
A revaluation comes into operation next spring. The new valuation list will be published during December. I have to tell the House that rateable values will be, on average, about 2½, times that of the present rateable values. That is taking an average over all kinds of commercial, domestic, industrial and other properties.
The basic rateable value fixed in 1963 for electricity and its undertakings was £47,212,610. Taking the multiplier I have mentioned of the average increase over the whole of the rateable values of the country—two-and-a-half times or, for greater accuracy, 151.3732102 per cent.—that makes the electricity figure 960 £118,679,853. This, in round figures, is an increase from £47 million to £118 million. I am speaking of rateable values and not the amounts of money collected in rates from the rate poundage. The basic rateable value fixed in 1963 for gas, in round figures, was £9.6 million, which now becomes £24 million.
If these Orders were not made the gas and electricity undertakings would be receiving a magnificent rate rebate. When local authorities early next year decide the amount of revenue they need for the year 1973–74, and when they set that against the new rateable values in the valuation list to be published next month and set their revenue needed against the rateable values in order to ascertain the rate poundage needed, they should be able to reduce their rate poundage to two-fifths of that which applies this year—that is, of course, subject to the general increase which we see in the expenditure of local authorities each year. The two-fifths, of course, applies to the new rateable values. If it applied to the old rateable values existing at present it would be a gift to gas and a handout to electricity.
That might be fine if they reduced their charges to the public as a result, but it would be unfair to the rest of the ratepayers. So the purpose of the Orders is to bring the valuation of the undertakings up by the same proportion as the general increases in rating which we shall see in the valuation list. These Orders are to remedy what would otherwise be an unfairness. They have their precedent in similar Orders in 1963, when a multiplier was used in order to bring the rateable values of the gas and electricity undertakings up by the same proportionate change as that brought about by revaluation.
§ Mr. Arthur Palmer (Bristol, Central)
I hope the right hon. Gentleman does not overook the fact that the gas and electricity undertakings have been artificially restricted by Government policy in terms of the prices that they can charge. That point is relevant to what he is saying.
§ Mr. Page
Indeed, but if there is a revaluation throughout the country, and by Statute certain properties are left out 961 of that revaluation because a formula applies to them, it is only fair that we should apply that formula and bring them up equally with the other revaluation. It is another form of valuation of property. It is based on a formula which I readily admit is unsatisfactory to both sides—the public utilities themselves and the local authorities.
In the Green Paper issued some time ago, entitled "The Future Shape of Local Government Finance", we said that we were reviewing the formula, and we pointed out that the rate liability of some public utilities, notably gas, water, electricity and the National Coal Board, was assessed by formula. Then we referred to the docks and harbours, which come under a similar formula, and we said that we were also looking at that formula. Finally we said that the Government… will be examining the other formulae in consultation with the local authority associations and appropriate bodies representing the operational interests to see whether changes are justified in the light of other changes in the rating system.I think it is right at this stage that we should look again at those formulae to see whether they are applicable now and whether they are acting fairly. However, this could not be done in an Order of this sort. It must be studied in conjunction with the public utility undertakings, the local authorities and the Government, in a working party, to see whether they are satisfactory.
Revaluation does not affect what might be termed "the pound in your pocket". It does not affect the amount of money that local authorities have to raise by way of rates. Therefore, increases in rateable values will be accompanied by a reduction in the rates in the pound levied by local authorities.
Of the money which local authorities have to raise the Government bear more than half the cost of local services through the rate support grant. In the recent White Paper entitled "A Programme for Controlling Inflation: the First Stage", it was said in paragraph 20 that the Government would consult the local authorities in the forthcoming rate support grant discussions with a view to moderating the rate of growth of local rates, I assure the House that in the 962 forthcoming negotiations on the level of grant for 1973–74 the Government intend to be reasonably generous. That will be the most significant factor influencing the level of the rates next year.
The simple purpose of these Orders is to ensure that the gas and electricity industries continue to bear the same share of the total rates.
§ 10.23 p.m.
§ Mr. Joel Barnett (Heywood and Royton)
I listened with great interest to the Minister's recommendation for the House to accept these two Orders, and I noted that the general rateable values are to be increased approximately 2½ times. The Minister went on to say that this should mean that there would be a reduction of two-fifths in the rate poundages. However, the general public is a little sceptical about these matters. People assume, with some justification, that these increases in rateable values give local authorities an opportunity to increase rates rather faster than might otherwise have been the case.
§ Mr. Page
In 1962–63 rates went up by 11 per cent. on average, which was not more than one would have expected. They had risen by about 12 per cent. in other years. I agree that some local authorities went far beyond that. Others were very much lower. Not every local authority, right across the board, takes that advantage.
§ Mr. Barnett
Of course, it has come at a very interesting time. In 1973 the old local authorities will be trying hard to keep down rates by using every halfpenny of reserves. But come 1974, I fear that the new local authorities will be starting off on a somewhat unpopular base, with a higher rateable value, no reserves and a likely considerable increase in rates.
I was surprised that the Minister did not refer to the statement, in the package on inflation, that the Government were to try to keep down the rates in the coming year. We heard nothing about that from the right hon. Gentleman. I wonder whether the Prime Minister did not tell him, or whether the Government are not to do anything but leave it to the local authorities to try to keep down the rates. We know what that means.
963 Reverting to the Orders, I noted what the Minister said about the formulæ still being unsatisfactory. He said that this was not a suitable time to look into the formulæ but that he would do so at some time, and it was referred to in the Green Paper on Local Government Finance. The Government should know whether they are to change the rateable values. If it was clear that the formulæ were not entirely appropriate, surely now is the time to look at them before changing the rateable values.
I accept that the proportionate increase is the same as for other rateable values. Therefore, in that sense there is no increased cost to the Gas Board and Electricity Council. Is there any change in the ratio of the new valuations to be announced next month between the domestic and industrial rateable value? If so, it could affect the board and the council.
This is not the occasion to do so, but at some time we shall want to look into the costs of nationalised industries generally, bearing in mind that at some future date they will no doubt be blamed for losing money. Before the election we were constantly told that a Conservative Government would leave the nationalised industries to make their decisions on a purely commercial basis. We know that not only has that not been the case until now, but that given present circumstances it will become even worse. In the not too distant future we shall have to consider whether the nationalised industries should be constantly financed by the Exchequer or allowed to run on a commercial basis, which was the original intention. This is probably a matter for another occasion. For the moment, I certainly do not object to the Orders going through.
§ 10.28 p.m.
§ Mr. Page
With the leave of the House, I should like to answer some of the points raised by the hon. Member for Heywood and Royton (Mr. Joel Barnett). The hon. Gentleman was a little unfair in saying that I had not referred to the Prime Minister's speeches about the reduction and how it would affect rates. I referred to the White Paper and in my final remarks said that it was the Government's 964 intention to be generous in the negotiations over the rate support grant, which would have the effect of keeping rates down.
Concerning the changes in the ratio between domestic, industrial and commercial rateable values, the list will come out in this quinquennial, although it is the first for 10 years, with the domestic about the average, the commercial a little higher than average, and the industrial a little lower than the average. We took the factor of 2½ over the whole lot, and it does not greatly change the proportions.
§ Mr. Page
I am not prepared to say that on this Order, as it does not relate to houses and flats. At the appropriate time on the debate on the rate support grant I shall be happy to debate the point with the hon. Gentleman. I can give only the round and average figures now and say that these orders are merely trying to establish a fair proportion for the rates for the electricity and gas undertakings. We shall be dealing with other public utilities to bring them up by the same sort of increase as we see across the board in the new list.
§ Question put and agreed to.
That the Gas Boards (Rateable Values) Order 1972, a draft of which was laid before this House on 19th October, in the last session of Parliament, be approved.
That the Electricity Boards (Rateable Values) Order 1972, a draft of which was laid before this House on 19th October, in the last session of Parliament, be approved. —[Mr. Julian Page.]
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kenneth Clarke.]