§ 9.25 p.m.
§ The Under-Secretary of State for the Environment (Mr. Gordon Oakes)
I beg to move,That the Docks and Harbours (Rateable Values) Order 1976, a copy of which was laid before this House on 16th March, be approved.The Order before the House concerns the rating by formula of hereditaments occupied by statutory docks and harbours. The port industry is one of several public utilities which are rated by formulae and most of the formulae have been reviewed over the past two years. The Order before us now is the result of the review undertaken of the formula relating to the docks and harbour industry.
It might help hon. Members if I briefly explain how the rateable value of the industry is arrived at under the present system. First, I should say that only premises on operational land are rated by formula. Offices, for example, not on operational land are valued and rated in accordance with normal rating practice.
Under the present system the rateable value of a dock or harbour undertaking in any year is 6 per cent. of the relevant receipts in that year up to a level equal to 6 per cent. of its relevant receipts in 1973–74, and 4 per cent. of any excess receipts over this level. Relevant receipts 747 are the undertaking's total receipts less receipts from cargo handling, pilotage and from certain specified investments and rents.
When the current formula was reviewed, the industry pointed out that it effectively meant that it was paying twice over for inflation. Relevant receipts of the industry have increased each year through inflation, although the actual amount of trade has in some years decreased. As rateable value is directly linked to receipts, it, too, has increased. But, in addition, rate poundages have increased to meet increased local authority costs, also due to inflation.
Thus, the docks and harbour industry alone amongst the formula rated industries has been paying poundage on a rateable value, both of which have been increasing with inflation.
My right hon. Friend the Secretary of State accepted the industry's view that this was an unfair situation. In the Order we have taken steps to ensure that it will not recur by providing that in future relevant receipts will be deflated to constant prices by reference to the Retail Price Index. We have also reduced the percentage of relevant receipts to 4 per cent., and we believe that these two factors together will ensure that the industry's rate burden will, from 1976–77 onwards, be at a reasonable level.
I will now run briefly through the Order and explain its main provisions.
Article 3(2) provides that the Order shall not apply to very small undertakings or to certain specialist undertakings.
Article 4 provides that the rateable value in 1976–77 shall be 4¼ per cent. of relevant receipts in 1975–76, and in subsequent years that it shall be 4¼ per cent. of relevant receipts in the previous year deflated to 1975 prices by reference to the Retail Price Index. Under the present system the rateable value in any year is based on the relevant receipts for the same year. The Order provides that in future rateable value in one year shall be based on the receipts in the previous year. This is a minor change introduced to enable the rateable value to be fixed during the rating year in question instead of well after the end of the year as happens at present.
748 Article 5 outlines the machinery under which undertakings will have to notify their relevant receipts to the Inland Revenue and provides that undertakings may elect to declare receipts for the previous calendar year instead of for the previous rating year, if they so wish.
Article 8 provides that those undertakings which have already elected to do this may continue to do so without making a fresh election. I can assure the House that my right hon. Friend has consulted all those affected. As I have said, these changes have been effected because of representations made by the port industry. They have been agreed also with local authority associations.
§ 9.31 p.m.
§ Mr. Tony Durant (Reading, North)
We have no particular quarrel with this Order. It arises from our own Local Government Act of 1974 and the formula is clearly there enabling the Government to bring forward their own formula and to ask for an Order in the House.
I wish to raise only one or two questions. The Minister mentioned that he has taken the widest possible consultations. We are reassured by that, because it was an integral part of our Act that there should be widespread consultations.
Not being a lawyer I am slightly confused by paragraph (3) of Article 2 where there is some interesting wording which I will bore the House by reading:In this order, unless the context otherwise requires references to any enactment shall be construed as references to that enactment as amended, extended or applied by or under any other enactment or by this order.I believe that I understand what that means but perhaps when the Minister replies he will explain it because I am slightly confused.
The whole formula which the Government put forward in this Order is based on using the index, and there is no doubt that this is causing us some concern. I know that my right hon. Friend the Member for Crosby (Mr. Page) feels very strongly on this matter and if he catches the eye of the Chair he may wish to raise a point on the index in relation to the Committee on Statutory Instruments. I will leave it to his experience and wisdom as Chairman of that Committee to deal with that point.
749 The Government are putting forward an interesting formula based on ability to pay. We on this side of the House have been pressing for a long time for an amendment of the whole rating system. Many of us have said that ability to pay should be one of the principal reasons for rating, and that the whole formula of rating should be based on ability to pay. It is interesting that we have here perhaps a step in that direction. There is no doubt that the whole rating system is in a confused and muddled situation. This Order is a complicated piece of legislation, though it is useful.
I was slightly concerned to hear the Minister say that it was thought that this industry needed help with its rates. Why not other industries? I agree that docks and harbours have been hard hit by inflation, but there are plenty of others in the same position. It all points to the fact that we badly need the Report of the Layfield Committee as urgently as possible and we need the Government to act on that Report to get this whole confused situation of rates cleared up so that everybody understands them and they are sensible, rational and reasonable. That is a matter of urgency. People are constantly pressing for this, and we on this side of the House say that it is time for something to be brought forward about it. But we support the general principle of this Order, apart from that slightly legalistic angle which I will leave to my right hon. Friend the Member for Crosby.
§ 9.34 p.m.
§ Mr. Graham Page (Crosby)
I have no quarrel with the merits of the Order, because it has been agreed among all those concerned—the local authorities, the harbour authorities and the Department of the Environment. I notice that the Preamble says that it has been made only after consultation with all those authorities. Indeed, I am sure that the Minister will assure us that the matter has gone further than consultation, and that there is agreement among the parties that this is the right formula.
Under the 1974 Act the Secretary of State has the power to lay down a formula of this sort, but what he does not have power to do is to delegate the specifying of that formula to someone else. That is the point that I wish to 750 raise with regard to the index of retail prices for all items.
Article 4(2) begins:For the purposes of this Article and of Article 5(3) being appropriate percentage of the relevant receipts shall be".The appropriate percentage is an important item in calculating the rateable value and therefore the amount of rates payable by the docks and harbour authorities. For the year it is to be a set amount —4¼ per cent. of the relevant receipts in the year ending 31st March 1976. Paragraph (b) provides thatfor any subsequent year, 4¼ per cent. of the relevant receipts multiplied by 140.5/y where y is the Index for September of the year to which the relevant receipts relate.So one has to go back to something called "the Index" for the previous September. When one calculates it next year, the previous September will be September 1976, which is a date after the making of the Order.
When we look to see what is meant by "the Index", we see in the Interpretation Article, Article 2(2) that'the Index' means the figure for the index of Retail Prices for All Items published by the Secretary of State".That index is published, I understand, not by the Secretary of State for the Environment but by the Secretary of State for Employment—although I know that "Secretary of State" is a comprehensive term. It used to be known as the Ministry of Labour Index, and one finds it in the Department's monthly book. For September 1975 it was the figure that appears in Article 4–140.5. In this month's Department of Employment Statistics it is 147.9. There will probably have been an increase by next September.
I entirely agree with the principle of calculating these rates in relation to inflation. The Minister was right to say that with a fixed percentage year after year the docks and harbours would be paying for inflation twice over. This is a valid way of taking inflation into account.
It is a perfectly accepted principle in delegated legislation that the Secretary of State, who is given power to legislate by a parent statute, must not pass that power on to someone else. He is saying here that, by an administrative act—the publication of the index of retail prices month to month—the Executive can introduce new law into this Order.
751 It may be that, by way of normal practice, the index is always calculated on the same formula, but there is nothing statutory about it. The House cannot be certain that the index will be calculated on the same formula month after month. Indeed, a formula for a similar index has been altered only recently— the formula for the Statistics of Employment.
It is quite possible that in calculating the retail index for all items the Executive will decide at any moment to leave out potatoes and bring in cabbage. It can alter the formula of that index, and if it is altered to a substantial extent by executive action it will alter the fraction that has to apply under this Order, and it could therefore alter the rateable value of the docks and harbours by an executive act—not an Act of this House at all —and damage the whole basis of the agreement between the parties which have agreed to this—the local authorities, the docks and harbours and the Department of the Environment.
I do not know whether the Minister has any precedent for the use of the Index of Retail Prices for All Items, as it is used in this Order, but there are certainly precedents for saying that a Statutory Instrument should not refer to some document outside that Instrument if that document can be altered after the date of making the Statutory Instrument. The House dealt with this on the occasion of a Statutory Instrument that related to the British Pharmacopoeia. The Statutory Instrument said that the statements in that publication should apply in future, and that mat publication could be altered, I think, every six months or annually. The House also considered this in the case of a Statutory Instrument relating to Building Regulations, where the Regulations referred to British Standards and to any amendments of those British Standards in future after the Instrument had been made.
I have in mind some other precedents of this sort, but those are the two which are almost classic precedents in this House—that a Minister should not, when he is given power to legislate by a parent statute, legislate by reference to a document outside that Instrument which can be altered by executive act or, indeed, by 752 the act of some authority outside the House.
What we are doing if we pass this Instrument is giving power to the Executive to legislate. The Secretary of State for the Environment is delegating his power to legislate to the Executive in future in publishing the retail index. I have searched for precedents for this in other Statutory Instruments. It may well be that the Minister can produce a precedent, and I shall be very happy if he can, but as matters stand at the moment it seems to me that, having agreed that in future inflation should be taken into account, it would have been very simple to make a further Order annually, taking into account exactly what he is doing in paragraph (b), which I have quoted. It would be so simple to say that this would come before the House each year; that it was agreed with the authorities concerned that inflation ought to be taken into account in this way. This is a convenient way to do it. But when the formula is changed by a change in the retail index the House ought to know, and it ought to be brought before the House by a further Order.
This is troublesome, I know, but once we agree to a precedent of this sort I am quite sure we shall see Secretaries of State legislating by reference to some document outside an Order which can be altered by the Secretary of State or by anybody else, and the House will be bound by it without any knowledge of what is happening. In this case there is knowledge, by the fact that the retail index is published monthly, but it is not approved by this House; it is purely and simply a set of statistics issued by the Department of Employment without any reference to this House or authority, by statute, from this House.
I do not wish to disturb the agreement that has been reached between all the parties. I think that the formula is good, but it should be brought before the House annually when the figures of that formula are changed.
§ 9.45 p.m.
§ Sir Michael Havers (Wimbledon)
It is clear that in principle the Order meets with the approval of both sides of the House. I want to do nothing that embarrasses the Government or the Minister, who is faced with a difficulty 753 of which he had even less notice than I had, though I gave him as much notice as I could. It is a matter which worries me.
The principles upon which references may be made to tables or guidelines outside the control of the House have always been frowned upon, to say the least. My right hon. Friend the Member for Crosby (Mr. Page) referred to cases concerning the British Pharmacopoeia, and there were a number of Customs regulations in the old days of purchase tax on which exactly the same issues arose. My right hon. Friend gave as an example what would happen if potatoes were taken out of the Retail Price Index and cabbages were substituted. Another change which would be even more dramatic and probably be much welcomed by ratepayers would occur if caviar were substituted for cabbages. There would then be a striking increase in the cost of living which when put as "y" in the formula would be very effective in reducing rates.
One cannot expect the Minister to be able to receive at such short notice the advice to which he is entitled on such a matter, where we may find not only criticism but practical difficulties in the courts. We do not want that to happen on such a matter, which is obviously sensible and should be able to go forward without criticism. There is a wealth of talent and great legal experience tucked away in the Strand and the Minister's Department. The Attorney-General has been present in the House tonight and the Parliamentary Secretary to the Law Officers' Department was here until a few minutes ago. The Solicitor-General has not been here, and we miss him. If none of those who can advise the Minister is happy about the matter, they can always instruct Counsel at the Bar to advise them.
If my anxieties and those of my right hon. Friend are found to be unnecessary, we shall be delighted, but if there is something in them, I hope that the Minister will have the matter put right, so that we may have a formula whch nobody can criticise. It is in nobody's interests to have a formula which will not stand up to examination.
§ 9.48 p.m.
§ Mr. Oakes
With the leave of the House, I should like to reply.
754 I thank the hon. and learned Member for Wimbledon (Sir M. Havers) for the notice he gave, albeit short. He himself had short notice of this rather technical point, which is more one of procedure than of any fundamental opposition to the way in which the Order has been drawn up, in what is perhaps a compromise. I see the difficulty which the right hon. Member for Crosby (Mr. Page) raised.
I wish to deal first with what the hon. Member for Reading, North (Mr. Durant) said. Awkward and difficult though the words of Article 2(3) may be, I understand that it is a routine provision. In effect, the words are intended simply to deal with amendments which might be made to enactments which are referred to in the Order or which are made by the Order.
The hon. Gentleman said that it was an interesting formula because it was based on ability to pay. The idea behind the Order is not strictly that. This is akin to Orders of the kind we have been dealing with in the Statutory Instrument Committee for the gas, electricity and other industries where it is almost impossible to provide an ordinary rating of hereditaments formula.
It would be too cumbersome a method to apply to the docks, just as it is too cumbersome to try to rate a pipeline or a gas terminal as a hereditament. In order that ports and these fuel industries pay a fair share of rates, the Order attempted, as did the previous Order, to find a suitable formula, which for the docks was based on receipts.
This formula was fairly easy to apply to the electricity and gas industries because, even though their rates increased as production increased, their revenue was increasing at the same time, so they were not hit by inflation in the same way as were the docks. We have all agreed that the docks industry was doubly hit by inflation, and that is the situation we have tried to cure. I should point out that the ports industry came to us and that full negotiations took place between my Department and the industry. This procedure was agreed by all parties as the best solution.
The Retail Price Index was not decided on in order to provide a devious way for the Executive to alter an Order 755 by its own act and not by legislation. It was agreed as the most appropriate formula for this purpose. The index has been in existence and fundamentally unchanged since 1962. There was a change when it was re-based to 100 in January 1974, but that was simply an arithmetical change which, if it happened again, would not have the effect to which reference has been made in the debate.
§ Mr. Graham Page
It would have that effect. We are using as a basic figure in this Order the September 1975 index level of 140.5. If there were another change to base it at 100 again and we were told to take into account the September 1976 figure, we would not be comparing like with like. It would make a great difference.
§ Mr. Oakes
An adjustment would be made to take into account the fact that the formula had been changed.
Reference was also made to the possibility of one item of food being deleted from the index and another being included, but this would not have a dramatic effect on the situation. I take on board what has been said about the situation which would arise if the whole basis of the formula were changed, in the way in which the compilation of unemployment statistics was changed.
I do not think that there should be an annual Order or that minor changes in the formula should be subject to the approval of the House. However, if a fundamental change in the constitution of the index—which has never been changed since 1962—took place, I agree that we should probably have to bring another Order before the House.
§ Sir M. Havers
I asked that there should be an undertaking on what would happen if the basis upon which the agreement between the parties was reached were changed. The minds of all those who came to the agreement were as one. The agreement was based on the present index figure of 140.5. If that should be changed by any Government decision, the House is entitled to an undertaking that the Order will also be changed to take account of it.
§ Mr. Oakes
I owe it to the House to give the undertaking if there is a fundamental change. I do not wish to commit 756 myself to saying that another Order would have to be brought to the House for a minor change in the formula. If the formula on which the Retail Price Index is drawn up is fundamentally changed, I give that undertaking to the House for which I was asked. The way in which the Retail Price Index is drawn up has not been changed for the past 14 years, and to my knowledge the Government have no intention of changing the formula.
§ Sir M. Havers
The word "fundamental" is capable of many variations. Would it be fairer to say "an alteration which any of the parties to the agreement could reasonably say was not the basis on which they made the agreement"?
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
Unlike the unemployment statistics, fundamental changes in the Retail Price Index are made as the result of a report to my right hon. Friend by an advisory committee. The recent change involved in the mortgage payments was made because the advisory committee was asked to look at that matter by the former Secretary of State for Employment, Lord Carr. If the change in the Retail Price Index comes as a result of a recommendation by the advisory committee, that would be a fundamental change.
§ Mr. Oakes
There is an advisory committee, and if there were a fundamental revision, the Order would have to come from the Secretary of State. I cannot go as far as the hon. and learned Member for Wimbledon (Sir M. Havers) wants me to go in saying that if any of the parties to the agreement considered that the basis had been changed——
§ Sir M. Havers
I did not say that. I said if any of the parties could reasonably say that it was not the basis upon which they made the agreement. The courts are always interpreting "reasonably", whereas "fundamental" is capable of great argument. Somewhere between the two would be sufficient.
§ Mr. Oakes
We are getting into a legalistic morass over a hypothetical situation. In plain language, if there is a fundamental change in the way in which the Retail Price Index is drawn up, it has to be made by the Secretary of State, and I give an undertaking that 757 we would bring back the Order, because, if there were a fundamental change, the basis on which the parties made the agreement would have been changed. If that happens, I undertake to come back to the House. This may be a novel way to deal with the situation. Let us see whether it works.
I think that it will work, and on the basis of the Retail Price Index, the formula of which has been unchanged over the last 14 years, we can at least try it out.
I commend the Order to the House.
§ Question put and agreed to.
That the Docks and Harbours (Rateable Values) Order 1976, a copy of which was laid before this House on 16th March, be approved.