§ Order for Second Reading read.
§ 10.13 p.m.
§ The Under-Secretary of State for the Environment (Mr. Guy Barnett)
I beg to move, That the Bill be now read a Second time.
No one likes taxes, not even Members of Parliament who authorise them, but there can be no public services without revenues. The services of local government, which are of inestimable value to us but which we take so much for granted, could not exist without the combination of local taxation and support from national revenues. Any tax system must be kept under scrutiny and kept up to date. This Bill is designed to make a number of modest improvements to the system of rating and Exchequer aid to local authorities.
In the opening months of this Administration, Tony Crosland, then Secretary of State for the Environment, appointed the Layfield committee on local government finance. Its terms of reference wereto review the whole system of local government finance in England, Scotland and Wales, and to make recommendations ".The committee reported, after two years of intense work, in May 1976, and its report is one that will be actively referred to for many years. Out of this work and from parallel initiatives have come several important developments in local government finance.
After receiving the Layfield report, and following full consideration of its recommendations in the consultative council on local government finance and elsewhere, the Government published the Green Paper on local government finance. This proposed important developments in rating, central Government grants, local authority capital expenditure and audit arrangements.
The Bill is concerned mainly with the rating proposals contained in the Green Paper. It also contains some minor proposals for changes and improvements in the grant system and for relaxation of central controls over the level of various fees and charges levied by local authorities.
176 The Government recognise that rates are not a popular tax, and alternatives were examined extensively by Layfield and then in the Green Paper. Many people hoped that rates—or at least domestic rates—could be swept away. They hoped that Layfield could find the philosopher's stone—the tax that no one would mind paying—but it could not be found and the committee of inquiry advised that the rating system should continue, with some modifications.
It is interesting and instructive to compare the exhaustive analysis and recommendations of the Layfield committee with the Conservative Party's occasional forays into rating. At the time of the October 1974 election the Opposition wanted simply to abolish domestic rating. Subsequently, however, this vision seems to have receded somewhat from their pronouncements.
I was particularly interested to see reports of the speech last October by the hon. Member for Barkston Ash (Mr. Alison) when he spoke of abolishing the burden of domestic rates rather than the rates themselves, though I was somewhat puzzled to see that he proposed to achieve this by abolishing domestic rate relief, thus increasing the absolute level of rates, and then setting them off against income tax. I shall be waiting with absorbed interest to see what panacea he has to offer us tonight.
Returning, however, from those visionary realms, I suggest that any serious examination of the rating system must now start from the rigorous analysis of the Layfield report. The Layfield committee found that rates have many advantages as a local tax. The tax structure is reasonably simple. The yield is predictable. Rates are easy to adminster locally, cheap to collect and difficult to evade. Because rates are levied on immovable property, they are ideally suited as a local tax; and their very perceptibility heightens the accountability of local government. We see this every year as authorities make their rates in the full glare of local publicity and debate. No other potential source of local revenue has such a combination of advantages.
On the other hand, the rating system was acknowledged to have defects. What tax system, I may ask, does not? It is the 177 duty of responsible Government to build upon the good features of rating, to identify the weak points and to work to improve the system. This Government propose to do just that. I would state our underlying objective as to make the rating system more intelligible and more fair.
I draw attention now to six main ways in which we can work to improve the rating system, and in which this Bill will help significantly. These are: first, improving the rate rebate system so as to moderate the apparent regressivity of the rating system; second, improving the instalment system, so that all ratepayers can plan for regular payments of reasonable instalments of rates instead of substantial lump sums; third, improving the valuation system so as to ensure that the basis of assessment for rates is as fair and equitable as between one ratepayer and another as we can make it; fourth, improving the accountability of the system so that all ratepayers know what their rates are being raised for and how they are being spent; fifth, improving the administration of the system so that local authorities are able to operate it as fairly and efficiently as possible; and, finally, improving the grant system, with its general objective of taking a substantial part of the burden of local services off the ratepayer's shoulders and equalising the burden of different needs and different resources in different parts of the country.
I do not propose to go through the Bill clause by clause, but I should like to say a little about how it will improve matters under each of the six main heads I have just outlined.
One of the most common criticisms of the rating system is that rates bear little relationship to the ability to pay—that they are a regressive tax. One of the chief routes by which we can help, therefore, is by the development of the rate rebate system. Some 4 million households are eligible for rate rebates in England and Wales. With this scale of provision, rebates are not just a benefit for those who are poor: in essence, rebates form a system of tax allowances.
Take-up is not complete—around three-quarters of those eligible. Among pensioners it is around 90 per cent., but 178 I am particularly anxious to improve take-up among tenants in the private rented sector, by whom evidence suggests take-up is well down. I hope to launch special publicity this year to attract applications from private tenants.
The Bill contains an important provision to extend the range of rate rebates. At present, when a wife has separated from her husband and lives alone in the matrimonial home she cannot obtain a rate rebate, even though she is paying the rates. Clause 18 will extend eligibility to separated wives in these circumstances. Incidentally, the clause is not discriminatory. It will also work the other way, so that the husband would be eligible if he were the one left living in the matrimonial home.
The second route for improving the system is by easing the payment arrangements. The rate demand is made at the beginning of the year but instalments can spread payments over 10 months or so. Domestic ratepayers already have a legal right to pay by instalments—and I recommend people who may not have been aware of this right to consider exercising it.
It is unreasonable that businesses and other non-domestic ratepayers should not have that opportunity also, and clause 4 of the Bill will therefore establish this right for all ratepayers in England and Wales. The right has already been established in Scotland. Here is a notable provision that should be of very considerable benefit especially to small businesses.
§ Mr. Max Madden (Sowerby)
Is my hon. Friend aware of the arrangement made by the Tory-controlled Calderdale district council in my district whereby it has introduced a system which separates rent payments from rate payments made by council tenants? This scheme seems extremely expensive, as it is costing all ratepayers—council and private tenants—an additional sum of about £50,000 a year to administer. Will the Bill safeguard this undesirable trend, which may well be adopted by other Tory-controlled authorities?
§ Mr. Barnett
The Bill will not deal with the particular point raised by my hon. Friend the Member for Sowerby (Mr. Madden). He will understand if I do not make any comment on it. Whatever a Tory council may do in any part 179 of the country, I prefer to leave it to the judgment of the electors of the authority concerned rather than attempt to pass judgment on it myself.
Incidentally, I was interested to see that in his Bournemouth speech the hon. Member for Barkston Ash put forward the idea of instalments for small businesses and other non-domestic ratepayers as an important Conservative proposal, apparently oblivious of the fact that it had already been recommended by Layfield and included in the Government's Green Paper.
I turn now to valuation. We can do much to make rating fairer and more intelligible by keeping the valuation of premises up to date and realistic. Regular general revaluations are the key to this. The revaluation due in 1978 was postponed to give time to the Layfield committee to conduct its inquiry and for its recommendations to be studied. A general revaluation is now firmly pro grammed for 1982, and the valuation office of the Inland Revenue is already advanced with its preliminary work.
What we need for the future is a system that will enable us to have regular revaluations at five-yearly intervals. There are many reasons why this has proved impossible in the past, but one of the most important has been the burden of the sheer volume of appeals against valuation assessments that come in all the time and which have often made it impossible for the valuation office to prepare for the next revaluation as quickly as it and everyone else would have wished.
No one, of course, wants to prevent ratepayers from having their right to challenge the rateable value assessment that is put on their property at a revaluation or to propose changes when any significant or material changes take place in the property or its environment.
§ Mr. Arthur Jones (Daventry)
It has been a political decision on the part of Socialist Administrations that revaluations should not be made. In fact, we have not had a revaluation at any time since the war under a Socialist Administration. It was the late Richard Crossman who disclosed that it was a political decision which he took which persuaded the Government not to have a revaluation for rating purposes when he was Secretary of State.
§ Mr. Barnett
The hon. Gentleman will know that some years ago legislation was passed through this House, during the lifetime of the present Administration, to delay the revaluation quite deliberately in order to make it possible, as I have just said, for the Layfield committee to report. That was done with the agreement of the House, and that was the reason why it was done on that occasion. I can make no comment on what the hon. Gentleman said. Naturally, I accept that it is unfortunate that revaluation has been delayed for so long, but I think that there was a very good reason why it was done on that occasion and why the revaluation was delayed until 1982.
The Layfield committee thought, and the Government agree, that it would be reasonable to try to reduce the number of appeals coming forward for essentially irrelevant reasons, such as rises in rate poundages, which have nothing to do with valuation but which clog up the system and themselves make it harder to achieve the five-yearly revaluations which everyone wants.
After carefully considering this problem, the Layfield committee said—and I should like to quote its exact words:We consider that it would be justifiable to limit the ratepayer's right to make a proposal beyond the first year following revaluation to cases where there had been a material change of circumstances affecting value, or a change of occupier. This procedure, which obtains in Scotland, should discourage appeals stimulated by rate poundages increases without depriving anyone of a legitimate opportunity to test the validity of his assessment ".That quotation comes from page 176 of the report. The Government have accepted this advice, and clauses 7 and 8 of the Bill broadly adopt the Layfield position.
We said in our Green Paper that we believe thatthese changes strike a fair balance between the rights of the individual and the need to ensure the efficient operation of the rating system ",and we had very little adverse reaction. Two related clauses—Nos. 6 and 9—also follow through on Layfield recommendations to modify the appeals system in the interests of the majority.
Naturally, the House will want to consider the implications of these proposals very carefully, but I would say that this. As a ratepayer myself, I do not feel 181 that my rights will be dimnished by these four provisions. After each revaluation I shall have a full year to consider whether the new value of my property seems fair, and to appeal against it if not. After that, I shall be time-barred. However, if any significant change happens to my property or my environment which might affect its value, I shall still be entitled to appeal. Further, I shall know that in any case, as a result of the restriction imposed on me along with every other ratepayer, it will be possible to have another revaluation in five years' time, when the whole question can be reopened.
§ Mr. Stephen Ross (Isle of Wight)
It has not been unknown for valuation officers to make mistakes in measurements of area or in pricing. If that occurs and it is shown to have occurred after the year has expired, will there be grounds for an appeal against mistaken quantum or area of propertly that brings a value that is too high or, in some cases, too low? Will there be provision for such a challenge, or will it be up to the valuation officer or local authority to make the alteration?
§ Mr. Barnett
The probability is"Yes ". That is a matter that we may examine in Committee to ensure that the hon. Gentleman's point, which seems perfectly fair, is covered.
§ Mr. Nicholas Winterton (Macclesfield)
Is the new valuation likely to be based on the old valuation, bearing in mind that inflation is likely to continue, or is the job to be as massive as I expect it could be and to involve many areas being totally revalued? There is no doubt that valuations in some areas are far too high rather than far too low. Is there to be a balance between rates increasing as a result of revaluation and perhaps rates decreasing in other areas?
§ Mr. Barnett
I do not think that it would be right for me even to try to make a judgment on decisions that will be reached following the revaluation exercise. Unfortunately, the system that we shall have to use is that which was used on the previous revaluation, much as we would like to go ahead with capital valuation. However, that is another matter.
§ Mr. Andrew F. Bennett (Stockport, North)
What will be the position if, for example, six people living in a road appeal against a valuation and the appeal takes some time to be heard, and after 12 months have elapsed the appeal is upheld? What will happen if some of their neighbours think"We, too, are entitled to a reduction "? If that happened, would the neighbours be entitled to appeal? That type of chain reaction took place on many occasions following the previous revaluation. Will the chain reaction be possible, or will everybody have to start at the beginning?
§ Mr. Barnett
If they are out of time, they are out of time. If they have not appealed within the year if the Bill is enacted, it will not be possible to appeal. That, again, is a matter that we shall wish to examine in Committee to ensure that my hon. Friend's point is considered. I am grateful to him for mentioning it, as it could be an important issue that we shall want to consider.
Three other clauses are intended to improve the system of valuation. Clauses 1 and 2 are about methods of valuation and will be welcome to the profession. Clause 10, on minor structural alterations, will remove an anomaly that has been resented by many householders. There are one or two other technical matters of valuation that the Government might wish to introduce in Committee.
We believe it necessary to introduce valuation on the basis of capital values rather than on the basis of historic, not to say antiquated, rental assessment, which is becoming increasingly difficult to work upon. The Government have been prevented from making this sensible reform, but it is our desire to make it.
I turn to the issue of accountability. There are two other routes of improvement in the system which I shall cover quickly. One is to strengthen the accountability of local government to its electorate. Clause 15, in a minor way, will help to make councils' rate-making more explicit by requiring them to identify and declare separately the rate needed for the county and for the district.
Secondly, we can help local authorities to administer the system more fairly and more efficiently. The Bill contains several minor provisions that have originated in consultation with local authorities for 183 improving and streamlining the rating system.
I turn now to the grant system, which itself does such a lot to redress the uneven burdens to which the rating system by itself would give rise. I draw attention, first, to the sheer size of the grant—£8½ billion in 1979–80, or 61 per cent. of total relevant expenditure, which is borne by the taxpayer rather than the ratepayer.
Secondly, I draw attention to the grant's important equalising effect in channelling Exchequer aid to areas that are poorer and where there is a greater need for local services. Thirdly, I draw attention to the important part of the grant represented by the domestic element, which goes to reduce the rates of every domestic ratepayer. Nearly £700 million next year will be used to reduce domestic rate poundages.
The Bill will extend this domestic rate relief in two ways. Clause 3 will bring domestic garages, parking spaces and storage space fully into the net. At present, if these are separate from the main hereditament, the rates paid on them will not attract domestic rate relief. Therefore, the Bill will bring a marginal benefit to some people, such as flat-dwellers with garages in a separate block, and so remove an unfairness.
More significant, however, is the extension of domestic rate relief to many mixed business and domestic premises which at present do not qualify. Domestic relief is available currently only where the domestic portion accounts for at least half the rateable value. Layfield identifies this anomaly, and clause 3 provides that where the proportion of total rateable value attributable to the private dwelling is not greater than one-half but more than one-quarter of the total rateable value, one-quarter of domestic rate relief will be given. And where the proportion is not greater than one-quarter but more than one-eighth, one-eighth of relief should be allowed. I expect this measure to be a great benefit to large numbers of small businesses, typically the shop with a flat over it, but also to some sub-post offices, private dairies, small workshops and some small businesses with an office in the home, and many others.
184 The remaining clauses largely concern grants to local authorities. They are non-contentious, technical provisions that have the full support of the local authority associations. I have no doubt that we shall want to look at these carefully in Committee.
In conclusion I should like to say a word about the general level of rates and local authority expenditure.
§ Mr. Stan Crowther (Rotherham)
Before we leave the question of grants, will my hon. Friend assure us that the provisions set out in clause 19 on the resources element of the rate support grant, and the right of the Secretary of State to vary it, will not in any circumstances result in any local authority being told in mid-year that the resources element that it expected at the beginning of the year will be reduced? This is not clear at present.
§ Mr. Barnett
It might be a good idea if I were to ask my hon. Friend who will reply to this debate to confirm what I am about to say. My understanding of the situation is that clauses 19 and 20 will have the effect of improving the situation, rather than the other way. They will enable a local authority to be more certain than it is at present of precisely what resources element it will be entitled to in a financial year. I hope that that gives some reassurance to my hon. Friend.
I was referring to the general level of rates and local authority expenditure. In spite of the regular attacks that are made on the level of rates and the burden of the rating system, the House should note that over the years they have remained at a very steady percentage of the personal disposable income of individuals. Since the early 1960s, the percentage has remained very steady with just over 2 per cent. of personal disposable income going on rates. Local authority expenditure did, of course, grow substantially as a percentage of gross national expenditure in the 'sixties and early 'seventies, but in the past five years it has stabilised around a fairly steady 11 per cent. of GNP. We need to bear these fairly steady figures and trends very much in mind in considering the burden of rates and local authority expenditure.
I shall not be surprised if we hear something this evening about the supposed 185 scandal of enormous rate rises currently coming through for the current year and attacks on local authority expenditure run wild. Let us keep a sense of proportion about this. The Chartered Institute of Public Finance and Accountancy is reported today as predicting average domestic rate rises of about 17.5 per cent. this year. We do not know yet whether the final figures will confirm that, but I think it may well be of that order.
That is certainly higher than the single-figure increase which we had hoped for when my right hon. Friend made the rate support grant settlement last November. It no doubt reflects the cautious view which many local authority treasurers are taking about the likely level of inflation in view of recent pay increases.
There is no evidence, however, that on a national scale there is likely to be any upsurge in the total volume of local authority expenditure this year. We certainly should not allow one or two well-publicised examples of large rate increases this year to rush us into thinking that much more radical measures are needed to transform the rating system or to subject local authority expenditure to tighter central control. Such ideas may sound attractive as off-the-cuff responses to the reports of large rate increases, but they could easily do immense harm to the freedom and autonomy of local government. The longer-term perspective which I have given shows that such measures are unnecessary and would be quite unjustified in terms of overall public expenditure control.
In conclusion, I say that this measure offers a realistic approach to rating and local government finance. The Government prefer not to waste their efforts looking for the elusive tax that no one will mind paying. They prefer not to mislead the public into thinking that this is possible but, instead, to build upon the basis that we have—that is, the well-tried and practicable system of rating. It must be significant that almost every nation in the developed world has found it sensible to include a property tax among its variety of taxes. Our aim must be steadily to improve the system and make it more intelligible and more fair. I believe that the Bill will help in that process.
§ 10.43 p.m.
§ Mr. Michael Alison (Barkston Ash)
The Minister, in presenting and elucidating the Bill, has not sought to persuade the House that we are here dealing exactly with an epoch-making piece of legislation and reform. He said that it contains modest improvements in the rating system, and it certainly is a mouse rather than a mountain. But it contains some controversial proposals nevertheless, as well as some features that we positively welcome.
The first comment to which the Bill gives rise is a general one. It relates to what the Minister said about the Green Paper published in May 1977. That it has taken the Government nearly two years to produce this measure, containing so little of the expectations raised by the Green Paper, is an indication of the essential hesitancy and uncertainty of the Government in their general field of policy concerned with local government.
What has happened to the brave new world of changes and innovations outlined in the Green Paper—capital values for the purposes of rateable valuation; a unitary system of grant to replace rate support grant; greater freedom for local authorities in the matter of capital expenditure; a new audit system to advise local authorities, and the fruits of a general review of charging policy? All these are in the Green Paper. Why is there nothing about them in the Bill? Why has the Minister not even referred to these fundamentally innovating proposals that were discussed and considered in the Green Paper?
As for capital valuation, perhaps the Government have recognised that the volatility and changeability of house prices would inject greater uncertainty and controversy into rating valuations than under the present system. Or perhaps the absence of these proposals from the Bill before us is evidence of a certain lack of political enthusiasm on the part of the Minister's colleagues in the Parliamentary Labour Party for capital valuations. At any rate, perhaps the Under-Secretary of State will say in reply whether this omission betokens the long-term abandonment of the Government's support for capital values—we really need to know about this—or whether this omission is occasioned simply by the 187 difficulty of getting a majority for a change of this kind at present. It is of general public interest to know whether the Government have reneged on their support for capital valuations in the Green Paper.
§ Mr. Nicholas Winterton
Does my hon. Friend agree that when answering an intervention of mine, the Minister appeared to imply that the Government were in favour of capital valuation, almost strongly in favour of it, but felt that they could not get it through the House? Will my hon. Friend comment on the fact that this sort of rating taxation would probably be terribly damaging to the countryside and would further depopulate many areas where the Government wish to see an increase in growth rather than a decrease?
§ Mr. Alison
I am filled with a great many misgivings about the idea of capital valuations as the basis for valuing property, particularly domestic property, and I appreciate a great many of the points my hon. Friend makes about the impact that they are likely to have, but we are not responsible for legislating on this subject at present. It is of general public interest to know what the Government propose to do and whether they are simply dodging the issue because there is no majority for it, or whether it remains their long-term policy. After all, this is meant to be a Bill to implement the Green Paper. The Minister made some claim to merit in that direction.
There is something in the Bill concerning the rate support grant, but I was unable to find any reference to a unitary grant. Once again, will the Minister tell us whether he and his colleagues now believe that it is unworkable, or is it the case that such an innovation would again be unpalatable to some of the local government barons belonging to the Labour Party?
The Opposition very much regret that the Minister and his colleagues have been unable to include more in the Bill to increase the freedom of local authorities by relaxing detailed control on capital expenditure and by freeing local authorities from more of the irksome limitations imposed over the regulation of charges. The Under-Secretary, like his ministerial colleagues, must know of the definitive list of 1,250 separate ministerial controls 188 over local government which my right hon. Friend the Member for Worcester (Mr. Walker), when Secretary of State, caused to be prepared in the Department before he left. Why is there nothing in the Bill to start sweeping away this jungle of irrelevant controls if the Minister really believes in strengthening local government?
We also regret that it has not been possible to work towards establishing an audit system which would assist local authorities in the improvement of efficiency. With the very necessary review of output and manning levels in local government, which we understand from the Prime Minister is to form part of the study of pay comparisons by the Clegg Commission, this efficiency audit—if the Government had done something about it in the Bill—would have been welcomed not only on the Opposition Benches but in local authorities generally, especially where Conservative-controlled councils in particular are anxious to reduce waste. But, again, there is nothing about it in the Bill, although the Green Paper featured it.
In a defensive way, the Minister anticipated some reference to the burden of rate increases, which, in spite of the help which parts of the Bill might give to some ratepayers in some circumstances in the future, is bound to fall heavily on all categories of ratepayers in 1979–80. Therefore, I rise to the bait dangled in front of me. I simply ask the Minister to answer specifically this simple question. When will DOE circular No. 6/79—the definitive 1979–80 rate support grant circular sent to all local authorities in a typescript version, dated 5 January 1979—be withdrawn and replaced by another one?
The current circular, No. 6/79, states, amongst other things, that the Government's policy in relation to this year's settlementis compatible with the national average domestic rate increase remaining in single figures.… It is assumed that settlements in this round will be in accordance with the Government's pay policy as set out in Cmnd. 7293.That Command Paper is the 5 per cent. pay policy Command Paper.
That is the current official guidance given to local government. When will the Government withdraw that circular and replace it by another? The proposition that rates will be left in single 189 figures and that rate settlements will be in accordance with the 5 per cent. pay policy have been left as high and dry as Noah's Ark on Mount Ararat and just as out of date. When will Ministers face the facts on likely rate increases and give advice and guidance accordingly? This is what we want to know. It is the advice and guidance which local authorities need.
The Minister, in presenting the Bill, said that expenditure was not likely to go up except in a few highly publicised, specific and special individual cases. Let me remind the Under-Secretary, who, I hope, will comment on this matter, what the Secretary of State for the Environment said in the House on 14 December. Referring to the current settlement, he said:The settlement provides for local authority expenditure to grow…Certainly the period of national manpower cuts in local government is over."—[Official Report, 14 December 1978; Vol. 960, c. 1053.]That was not referring to a few individual local authorities.
The Secretary of State said that local authority expenditure would grow and that he expected manpower cuts to be reversed. Can this still represent official thinking? The Association of District Councils estimates—I am happy to go along with what the Minister said—that rate increases in 1979–80 will range from 7 per cent. to as high as 35 per cent., averaging out at about 18 per cent. That is double the highest figure envisaged by Ministers and, therefore, double the figure envisaged in the current circular guiding local authorities on their policy for the future. That circular must be withdrawn and a new one issued. I hope that the Minister will say when that is to happen. This is the guidance on which local authorities are making their rates. It contains a figure for cash limits on an entirely unrealistic basis. If local authorities are to make realistic rates this year, they must have realistic guidance from the Government.
I want to look briefly—the Minister himself was commendably brief—at one or two provisions of the Bill. I do not intend to refer to every clause. Much of the Bill is to be welcomed, but some clauses give us cause for great concern. I understand that it is the Government's intention in clause 1 to alter the basis of valuation of non-domestic property from gross to net annual value. It is not clear 190 what the effect will be on the relative incidence of the rate burdens as between domestic and non-domestic property. Can the Under-Secretary give the House some indication of the effect on household rates of this new basis of valuation? Will he also explain why the change is being made only for non-domestic property, leaving domestic rates based on gross value, subject to statutory deductions? Would it not be simpler and more equitable to base all rateable values on net rental values?
Clause 3 will be generally welcomed, not least on this side of the House, particularly by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). We have been committed for a long time to the extension of domestic rate relief to a larger number of people living in mixed hereditaments, such as shopkeepers and others living at their places of business. The 1975 Bill of my hon. Friend the Member for Norfolk, South even anticipated Layfield, let alone the Green Paper. He tried in that Bill to achieve exactly that.
§ Mr. Madden
The hon. Gentleman has heaped a torrent of questions on Ministers about the Bill and the continuation of the rating system. He has so far neatly avoided the questions my hon. Friend put to him in opening the debate concerning the Opposition's view of the rating system. Will he now say whether the Conservative Party has abandoned its apparent commitment at the last general election to the abolition of the rating system?
§ Mr. Alison
If the hon. Gentleman really wants me, at five minutes to 11, to enter into a disquisition on the Tory Party's proposals for rating reform. I shall seriously consider it, but I do not think that my hon. Friends would be particularly pleased. There will be an election before long, and we shall be happy to put our proposals before the electors. That might be more satisfactory, so that they can evaluate what they think is worth while. This, however, is a Government Bill.
Can the Minister say whether the extensions proposed in clause 3 will cover virtually all those living in mixed hereditaments and how many people will still not benefit? Will he also deal with an alleged administrative difficulty, which is 191 that local authorities will now have to handle five, rather than three, different poundages? I take it from the explanatory and financial memorandum that the implications for local government staffing will be neutral, because there will not be any extra staffing.
We also welcome clause 4, which extends to all ratepayers the right to pay rates by instalments. This again has been Conservative policy since 1975 and featured in the Private Member's Bill of my hon. Friend the Member for Norfolk, South. Labour Members will no doubt recall why those proposals failed to make progress and recognise why we have had to wait until 1979 for the Government to do anything about them. The Government are catching up slowly, and it is probably only because an election is coming that they have bothered to do anything.
Clause 6 gives the Secretary of State power to alter by order the amount of a rate increase due to a new valuation which may be withheld by the ratepayer. At present, the ratepayer can withhold half the increase pending the result of an appeal. The proposed change is open to criticism because revaluations are infrequent, particularly under Labour Governments—my hon. Friend the Member for Daventry (Mr. Jones) made this dramatically clear in his reference to the total absence of revaluations under Labour Governments—and cause shifts in rateable values and rates payable which can be dramatic. Without the protection of withholding half the increase, some ratepayers could be seriously embarrassed. We shall want to put the Minister through his paces on this in Committee.
I have received representations from the Rating and Valuation Association and others that clause 7 will substantially reduce the rights of ratepayers. It effectively restricts the right of appeal against rating assessments to appeals made within 12 months of the introduction of a new valuation list. This provision would, for example, deny a new tenant or purchaser of a building the right to appeal against the rating assessment of a building that he takes over where the previous occupier may not have been aware or concerned that the rating assessment was incorrect.
192 Why do the Government think that ratepayers' rights should be summarily eroded in this way? Mutuality does not apply. For example, the authorites will be able to make proposals under the relevant section—section 69, I think—of the Local Government Act 1967, long after the 12 months have expired. Only the ratepayer will lose rights here. We shall want to do something about that in Committee.
Unamended, the clause could lead to a considerable increase in the number of appeals arising in the first 12 months. Far from reducing the administrative burden of appeals, it could aggravate them by concentrating appeals in a limited period. This could lead to delays in dealing with appeals and to a backlog of cases. Indeed, we are still dealing with some of the appeals under the 1973 revaluation, even without a cut-off period. How can the Government argue that this measure will ease the work load of valuation departments if everything is crammed into 12 months?
Clause 8 is related to clause 7 in that, where an appeal is made against an assessment, the ratepayer may be required to substantiate the grounds of appeal before the case is heard by the local valuation court. That is unnecessary. Local valuation courts have power to dismiss appeals. That provision is merely an additional obstacle to the ratepayer. At first sight it appears to be yet another erosion of the position of the ratepayer, and we shall want to study that carefully in Committee.
We are also concerned about clause 9, which likewise seems to erode the rights of ratepayers. It provides for the abolition of an unrestricted right of appeal from a local valuation court to the Lands Tribunal. That is not likely to encourage ratepayers in the belief that justice at least is being seen to be done. A small degree of administrative convenience is being gained at the expense of the rights of individual ratepayers. The saving is minimal. As the Layfield committee showed, between April 1973 and August 1975 there were only 373 appeals to the Lands Tribunal, compared with over 1 million ratepapers' appeals to local valuation courts and over 20 million rating assessments. The Lands Tribunal case load is trivial, and there is nothing 193 wrong in keeping it going. Again, we shall want to look at that carefully in Committee.
We are worried by clause 10, which removes the exemption, which was granted in the Conservative Government's Local Government Act 1974, from interim increases in valuations where the ratepayer has made some improvements to his home, such as installing central heating. That provision will not reduce the work load of valuation offices and will be seen by ratepayers as a petty and spiteful attempt to penalise them for home improvements.
Clause 11 places a duty on rating authorities to recover rates from the owner rather than the tenant of a property in certain circumstance. The AMA has argued that that should be a power available to authorities rather than a duty. Perhaps the Minister can tell us why that should be mandatory on councils.
Clause 17 extends the end of the period during which a precepting authority, principally a county council, can make a supplementary precept on the rating authorities from September to December. The professionals believe that that could cause administrative difficulties for district councils. The ADC wishes to see the clause deleted from the Bill. Perhaps the Minister will explain why that clause is essential. We shall certainly want to look at that in Committee.
Clauses 19 to 21 make new provisions for the adjustment of the resources element in the rate support grant. Clause 19 empowers the Secretary of State to vary the amount prescribed each year as the national standard rateable value per head, in order to adjust the distribution of resources element of RSG as an alternative to clawing back a set percentage of resources element from all authorities where there has been overpayment. The Centre for Environmental Studies has carried out a detailed study into the problem of the resources element of RSG. It argues that the position could be improved without recourse to legislation. Will the Minister explain why he requires additional powers and what administrative options might have been open to him as an alternative?
Clause 22 deals with the reimbursement to local authorities of rebates granted under the Rating (Disabled Persons) Act 194 1978. The Bill proposes that 90 per cent. of rebates granted should be reimbursed by central Government. The AMA argues that the Government should meet 100 per cent. of these rebates. Will the Minister perhaps reconsider the 90 per cent. instead of the full 100 per cent., having created the precedent for gipsy camp sites? Why should rebates granted for the disabled not qualify for the 100 per cent. grant?
In addition, the ADC has pointed out that rating authorities which give charitable relief are reimbursed indirectly through the resources element of rate support grant. It argues that grant-aid for charitable relief should be paid on the same basis as that for the disabled, and it cites the example of Cambridge, which is a district with a large number of charities. It receives no resources element. The ADC argues that clause 22 should therefore be extended to give grants in respect of rating relief to charities. That is a fair argument, and I hope that the Minister will at least consider the possibility, if not now, in Committee.
We imagine that clause 25 will be deleted. Will the Minister confirm that?
Clause 26 removes the restriction on certain fees chargeable by local authorities. The issue is whether the clause goes far enough and whether, and to what extent, the Government propose to undertake the general review of charges as proposed by Layfield and accepted in the Green Paper on local government finance. The Government have so far taken only a tiny step.
The failure to relax more of the controls on charges is only one of a number of omissions from the Bill. The apparent abandonment of capital values leaves rates virtually unchanged. The Bill also lacks any comprehensive attempt to reform the grants, to relax control over capital expenditure or to prepare for an efficency audit. Although the Bill contains much that is welcome, it leaves a great deal undone, and the major reform of local government finance, presaged by Layfield and promised in the Government's Green Paper, remains largely unfulfilled.
We are seriously concerned about the proposals that erode the rights of ratepayers, and, while we do not propose to divide the House on this issue, we 195 shall certainly want to propose amendments to them in Committee.
§ 11.7 p.m.
§ Mr. Stan Crowther (Rotherham)
I agree with the hon. Member for Barkston Ash (Mr. Alison) and with my hon. Friend the Minister. This is an extremely modest Bill. Its proposals ought to be welcomed, but it could have gone a lot further. I greatly regret that the opportunity has not been taken to deal with the basic unfairness of the way in which the rating system operates.
My hon. Friend was understating the case when he said that rates are not a popular tax. They are probably the most unpopular tax of all, even more unpopular than income tax. While a great deal of this is due to the artificial heat generated by ratepayers' associations and many newspapers, that does not hide the general resentment at the fact that rates do not reflect either the consumption of services, which would be almost impossible to achieve anyway, or the ability to pay.
I appreciate that there is a means-tested rebate system, but even that, in a sense, exacerbates the injustice by concentrating it within the band of those who do not get the rebates. It is some time since the Layfield report was published. It is even longer since the previous Conservative Government produced their Green Paper on local government finance, which came out in about 1971 or 1972. Unless my memory is at fault, both of them concluded that while there was no feasible alternative to the rating system, it nevertheless needed to be greatly refined.
I welcome the Bill in that it seeks to eliminate a number of fairly minor anomalies, but it does not refine the system as many think it should be refined. I am not suggesting that there should be a local income tax to replace the rating system, but surely it is not impossible to devise a system under which a household containing only one wage-earning adult does not pay as much in rates as a household living in similar premises but with three, four or even five wage-earning adults. That factor causes the greatest resentment against the rating system. I do not know whether we shall ever tackle this problem. We have been discussing 196 it for years. Every hon. Member knows that this is one of the most common complaints we get. Neither this Government nor the previous one—and no Government before that—have been prepared to tackle this basic problem.
§ Mr. Nicholas Winterton
The hon. Gentleman has just said that he would like to see a form of rating which would reflect the use of local facilities and the number of earners in a household. In the breath before that statement, however, he said that he turned down the proposal for a local income tax. Is not a local income tax system the only system which would reflect the sort of proposals that he has put to the House?
§ Mr. Crowther
I did not say that I would wish to see a system which reflected the use of services, because I do not think that that is feasible. I am not in favour of a local income tax because it would not reflect the need of local authorities for resources. It would result in the authorities with the highest levels of income in their areas receiving the highest level of resources. That, in an area such as I represent in South Yorkshire, which is a low-wage area, would not solve any problems.
I am worried about the resentment among many ratepayers at the fact that a family with four or five wage-earning adults pays the same rates as the family in the house next door where there is one adult earner. That is a basic cause of resentment about the system.
I am disappointed also at another omission from the Bill. I am sorry that the opportunity has not been taken to abolish, or to modify, the principle of ultra vires, which makes it impossible for local authorities to engage in most forms of commercial activity. I have never understood why profit-making should be regarded as inappropriate for the ratepayers. I think that it would be very sensible if the rate fund were to gain from commercial enterprise. Long ago, the old Association of Municipal Corporations, when it was making its representations to the Redcliffe-Maud Commission, recommended the abolition of ultra vires.
Nothing was done about it, unfortunately, and it seems particularly illogical nowadays that local authorities can make profits from gambling, while they 197 are not allowed to engage in responsible commercial operations such as retail trading, the provision of architectural services, building contract work or property repairing. There are many ways in which local authorities could reduce the rate burden if they were allowed to enter into commercial activities. It seems a great pity that the opportunity has not been taken in the Bill—as it was not taken in all previous local government finance Bills—to allow local authorities to do this kind of work.
Having described two ommissions from the Bill which have caused me disappointment, I think that the things which are in the Bill are sensible. The Bill ties up loose ends and does away with a lot of anomalies, and, despite what the hon. Member for Barkston Ash said, I hope that it will get an easy passage through the House.
§ 11.14 p.m.
§ Mr. Arthur Jones (Daventry)
I have recognised the general purposes of the Bill, which are to tidy up a variety of questions of rating, to bring about the more effective collection of rates, to aid the recovery of rate arrears and to assist ratepayers in need. I warmly welcome these adjustments, which will, perhaps, make the rating system more effective.
I address myself to those clauses in the Bill under the heading of"Alterations of valuation lists "—that is, clauses 6 to 10. Clause 7, I regret, denies to a ratepayer the centuries-old right of appeal against an assessment. That places as unfair limitation on the rights of a ratepayer. The Minister says that the purpose is to streamline rating and to do away with the large number of appeals, but this may not be the outcome.
I understand that under clause 7(7) any appeal against the value ascribed in the valuation list must be made within 12 months. Some of the defects of that provision have been described effectively by the hon. Member for the Isle of Wight (Mr. Ross).
The Association of District Councils states:The Association is not happy with the proposal to restrict the rights of ratepayers to appeal against the values in the new list. While one year may be a reasonable time 198 for the large commercial or industrial ratepayer, who usually has professional advice, there may be circumstances which prevent the small shopkeeper or private occupier from appealing. Unrestricted rights of appeal are not necessarily the answer, but we think a reasonable compromise would be a two-year period.I am not sure that I subscribe to the latter part of that statement. I do not see any severe disadvantages in leaving the system as it is. There is to be no right of appeal similar to those which the public have enjoyed throughout the courts or the Lands Tribunal. That is unfortunate.
Press notice No. 51 from the Department of the Environment issued on 6 February stated:A provision of this kind…was recommended by the Layfield Committee on Local Government Finance (Cmnd. 6453, page 176) as necessary, to discourage the volume of appeals based on invalid grounds, to enable regular five-yearly revaluation to be carried out by the Valuation Office of Inland Revenue.But those revaluations have not taken place. The Minister is paying lip service to the fact that we must make administrative economies to allow the Inland Revenue to carry out the revaluation. The Minister recognises past errors. Let us hope that lessons have been learnt.
§ Mr. Jones
I agree with my hon. Friend. The late Richard Crossman said in his memoirs that a political decision led to his deciding to recommend to his colleagues in the Cabinet that we should not have a particular valuation. But no revaluation has taken place under a Socialist Administration in the post-war years. The Conservative Party has been in trouble about revaluation. Ministers nod about that, but if one argues that the rating system needs a revaluation it is up to the Government of the day to institute it. It is wrong for Ministers to make the plea that they have made.
I am told that there has been as long a gap as 10 years between one valuation and the next. Is it reasonable for someone not to lodge an appeal when perhaps he has to wait so long before a mistake or a misjudgment can be corrected? I am reliably informed that no less than 1 million appeals have been lodged as a result of the revaluation list. It is a fantastic 199 figure. Many were settled between valuers, but about 1,000 have gone to the Lands Tribunal, which bears only about 120 cases each year, 40 per cent. of which have been successful.
That really is not a tremendous burden for the Lands Tribunal to carry. I cannot see the validity of this recommendation. As I understand it, it is to save administrative and staff problems, perhaps, in the department. But it will deny the general public and the individual a right that they have had for very many years. I consider that to be the wrong approach. The fact that there has to be this 12-month limit will mean that more or less everyone who is in any doubt about his rateable valuation will put in protection proposals against the revaluation figure. He will say"I will put in a protection, then I can think about it or get a valuer to look into it for me later on." A significant number of protection proposals will be made when revaluation is done.
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
Am I right in assuming that, by and large, big business automatically objects to the rates? A good percentage of the 1 million appeals are lodged not by the domestic ratepayer but by big business. In Birmingham a few years ago, it was discovered that millions of pounds were owed to the city simply because certain firms had decided to appeal. It was said that it was done as a matter of company policy. Have I got it wrong?
§ Mr. Jones
No. I think that the hon. Gentleman has got in right. This situation is a reflection on the whole method by which rating assessments are calculated.
In my experience—I am interested in rating and valuation professionally—almost invariably, if one challenges a rating valuation, whether it be a large property or, say, a shop, one can get something off it. It is a question of judging whether it is worth going to the expense of instructing a valuer to try to get a few pounds, or a few hundreds, or, in the case of a large assessment, such as that for a factory, a larger figure, especially when one realises that that concession will last until the next revaluation. It can come to a very significant sum of money. It is a judgment which individuals make as to whether it is worth lodging an appeal, having 200 the valuation done and having one's own private valuer to put his view against the Inland Revenue assessment.
We shall see these lodgments against assessments by anybody who has an assessment of any significant size, but we shall still have the situation in which the domestic ratepayer probably will not lodge an appeal. It is the domestic ratepayer with a grievance who will lose out. The big people will not lose out, because they will put in their appeals as a matter of form. That will not save work in the Inland Revenue. It is the small man with the domestic hereditament who is being penalised by the withdrawal of the right of appeal to the courts and the Lands Tribunal. That is really the burden of my complaint, and I am grateful to the hon. Gentleman for giving me the opportunity to elaborate my ideas. The penalty will lie against the individual domestic hereditament—the individual rather than the business, commercial and industrial ratepayer.
I recognise the difficulties in long-term planning of rating in view of the declared policy of the Conservative Party with regard to domestic rating. I had hoped that we would hear from my hon. Friend the Member for Barkston Ash (Mr. Alison) what the Opposition's proposals were in this respect. We should all very much like to hear what is proposed. But not today, apparently.
§ Mr. Nicholas Winterton
My hon. Friend is in very expansive mood. Will he give those of us on the Opposition Back Benches, and perhaps those on the Government side, too, his ideas on how he would like to see the rating system modified? Perhaps he would take up the points made by the hon. Member for Rotherham (Mr. Crowther) about a local income tax which would ensure that all earning people within a particular house made a contribution to the funding of local facilities.
§ Mr. Jones
I am tempted to do that. I have given a great deal of thought to the whole problem, but, as is generally known, my influence in this place is on the wane. [HON. MEMBERS:"Shame."] I shall not be here to make an effective contribution to those discussions, so I shall resist the temptation.
201 Ways and means should be found of making economies other than a denial of fair and reasonable appeal procedures. It would be interesting to hear what may be proposed as possible in this regard, particularly in the use of computer aids. I should have thought that this was a matter in which computerised aids could be effectively used for rate collection and the monitoring of rating valuations. I have no idea whether that has been considered or examined—indeed, as far as I know, it may be operative—but I should have thought that the Goverment would be addressing themselves to administrative economies there rather than to what amounts to penalising the ratepayer, and particularly the domestic ratepayer, by these four clauses in the Bill.
My submission is that the rights of the individual must not, in the circumstances to which I have referred, be sacrificed to administrative convenience.
§ 11.28 p.m.
§ Mr. Stephen Ross (Isle of Wight)
I am sorry for the hon. Member for Birmingham, Perry Barr (Mr. Rooker) who is waiting for his Adjournment debate, but I wish to detain the House for about 10 minutes, and I hope that he will forgive me.
I shall state at the outset what I think the Government should have done after Layfield. They should have accepted one of the Layfield recommendations—that is, to institute a local income tax. They should not have been put off by the red herring that is always trailed across these matters by the Inland Revenue, that it would would take another 12,000 civil servants to implement it. What would happen to the various valuation departments of the Inland Revenue if the present rating system were to be taken from them? Surely, they could be transferred to implementing a local income tax. We had just the same thing over the 12,000-plus to administer the Community Land Act, which, thank goodness, has never taken up to anything like that number. I think that that was probably the paramount consideration in the Government's mind in deciding not to take up the suggestion.
I put on record straight away that my party goes along with the suggestion for a local income tax. I accept that it would probably not be sufficient to raise 202 enough revenue, and Layfield recommended also that there should be a rate based on capital values. I put it to the Goverment, as I put it to the Secretary of State when he asked me, that capital value rating is not a very good system. Although at one time when I used to practise in valuation courts I supported the idea, I changed my mind in the 1970s due to the enormous ups and downs—the yo-yo fluctuations—in capital values.
One has only to look at the rise between 1971 and 1972, and again between last year and now, when some properties rose perhaps to figures of £100,000 or so and then dropped to £40,000 or £50,000. How on earth would the Government be able to bring in a Bill of this sort, which gives one year to make an objection, and say"Because your value has dropped by £40,000 or £50,000, you cannot make any objection for another four years "? That would be ludicrous. I do not think that could happen. I accept that Layfield said that it should be done between bands and that there should be a divisor. Nevertheless, rents rise more evenly. Agricultural rents are a typical example of continuity.
I know that at present there is very little evidence with regard to unfurnished property. If only the Government had the guts to bring in a review of the Rent Acts, we might get some evidence on which to base our judgment. That would be a much more sensible basis on which to work. If the Government are not prepared to introduce a local income tax, a system based on rental values is the next best thing.
I believe that the Government should direct their attention towards some form of site value rating. I am not entirely sold on this idea, as are many members of my party, and I accept that Layfield refused to look at this because it considered this matter in the context of the Community Land Act and felt that any form of profit out of land values in the future would disappear. It was, after all, intended that development values would be taken away over a 10-year period. But that will not happen, and land transactions will still take place. A site value tax could, therefore, be introduced.
In the first instance, I would restrict this to development land. I have made this point time and time again. I do not 203 know why we need a DLT and the Community Land Act when we could put a site value tax on land which carries planning permission immediately it gets that consent, provided that it has all the facilities to go with it. That money would go straight into local government and would be a good, added source of revenue. It would also fulfil the idea of"positive planning"which was favoured by the now Minister of Agriculture, Fisheries and Food when he was Minister for Planning and Local Government. Of course, on the Isle of Wight we would also have a landing tax, which would just about do us.
I commend the hon. Member for Daventry (Mr. Jones) on the speech that he made. About 400 of my constituents, including the former Conservative mayor of Newport, crowded into a room last Monday, wanting to know what we would do about changing the rating system. They want nothing more to do with the present system. We have had no answer from the Conservative Front Bench this evening. The hon. Member for Daventry also had the courage to make that point and said that he would be interested to know.
The public are entitled to know what the Conservative Opposition would put in place of the present system, particularly if during the next election—as happened during the last one—they issue posters stating that they will reform the rating system and do away with domestic rating. We are entitled to have some honesty on this subject.
§ Mr. Alison
—but he cannot accuse us of dishonesty if he is complaining that we have said nothing at all. I hope that he will withdraw the imputation of dishonesty. It may be that we shall be prepared to make a statement before very long, and he ought to wait and see—a good Liberal principle.
§ Mr. Ross
I concede that we shall be delighted to wait and see. I hope that it happens before the next election, because it is fair to say that the October 1974 election campaign was pretty unfair—I withdraw the word"dishonest "—because it gave the impression that the Conservative 204 Party would do away with the domestic rating system.
Another point that is constantly put to me is that Southern Ireland has done away with its rating system. There is a much more centralised administration in Southern Ireland, but it is noticeable that about 50,000 Southern Irish citizens recently marched through Dublin in favour of changing the taxation system. Therefore, we can move from one corner into another. We must be fair and honest with our constituents and point out that all systems have a measure of unfairness, and it is up to us to try to get it as right as we possibly can.
I welcome clause 3 of the Bill, which makes a minor increase in the relief available to small commercial premises with limited accommodation. Incidentally, it will help me because I have a garage which is separately assessed. However, I fear that this does not go far enough. It is my view that due to the present very high rates of interest on overdrafts and mortgages, coupled with the disastrous effects of the recent strikes, in particular the transport strike, many small shopkeepers and light industrial units are facing bankruptcy. Indeed, one small company in my constituency lost about £38,000 due to that strike. One went bankrupt only at the end of last week in the town where I live. I must declare an interest as a small shopkeeper. I own a china shop.
Therefore, some measure of derating—or, at the very least, an entirely separate rate rebate, be it of only limited duration, perhaps for two or three years—is urgently necessary. It could be linked to the amount of the gross or net annual value and, for argument's sake, be applied to property of, let us say, less than £1,500 net annual value—perhaps a little higher in London. With many small shopkeepers and light industrialists facing rent increases of the order of 30 per cent.—in my constituency people are facing rent increases of over 25 per cent.—more urgent help is called for.
I ask the Government to give serious attention to this point. If it is the Government's intention to assist the smaller concern—I think both sides of the House are agreed on that—on which so much of the nation's future well-being depends for the creation of wealth and for employment, in industry and in the services, this is surely one way in which we can be 205 of positive help. I should therefore like to see clause 3 substantially widened in its application.
Clause 10 is a niggle and is unacceptable to me. Why should anyone who improves his property by installing central heating or a bathroom immediately be penalised in this way? The hon. Member for Rotherham (Mr. Crowther) will agree that this is another bone of contention for everybody concerned. If quinquennial revisions were not continually postponed, there would be no need for this provision. I would welcome a legally binding directive from the Government that the Inland Revenue should carry out the quinquennial review, if we must carry on with the present system. As the Association of Local Councils rightly points out in its brief to hon. Members, this is one of those provisions which cause greater resentment to the prudent occupier.
Clause 17, which deals with the supplementary precepts, strikes me as highly inflammable, particularly at a time when there is a growing rate revolt in many parts of the country. It is a matter which the House will have to face. It will be 1974 all over again. Indeed, I think that it will be a good deal worse. Even to talk of a possible further precept in the coming financial year is dynamite, and the Government would be wise to drop it. There is no way—I repeat"no way "—in which local authorities should be obliged to make a further demand of their ratepayers.
If the Secretary of State, who has played a leading role in the recent wage awards, intends to pass even some of the increase on to local councils, and in turn to ratepayers, it will lead to a very serious situation in the country. Most authorities have absolutely nothing left in their balances and will therefore be forced to make a further precept. The Isle of Wight county council has warned that, if any of the wage award is passed on, it will have to come back next August and make a further precept.
I ask that a statement be made as quickly as possible to allay the fears of authorities and ratepayers. Central Government, and indirectly the taxpayer, will have to pick up the bill. The necessary economies will have to be made, preferably among staffing levels in the upper 206 tiers of management. The issue will have to be faced by the House and by one Government or another.
Clauses 19 to 21 appear to be helpful and, therefore, they are to be welcomed. Clause 23 seems to avoid what is required. I have pleaded before for a national disaster fund. Many authorities will not spend up to the product of a penny rate when there is a local disaster, while others have to spend sums vastly in excess of such a rate. I hope that in Committee questions will be asked about EEC funds for this purpose. Why is it that we can never get any of that for local authorities when disasters occur such as those at Torcross and Portland, to name but two of recent memory?
I regret the omission from the Bill of two important matters that have been highlighted in the brief from the Association of Local Councils. The brief states that the Billmakes no attempt to deal at all with those two financial issues which concern all 8,000 parish, town and community councils…and which were the principal subjects of the Association's written and oral evidence to the Lay-field Inquiry into Local Government Finance and of the Association's discussions with…the Under-Secretary of State, during the consultations on the Layfield Report.These issues were (a) the payment over to local councils of that portion of the rate support grant which is received by districts councils because of the precepts issued to the districts by the local council; (b) the need to ensure that when a district council is carrying out in part of its area a function which elsewhere in the area is discharged by any local council, the cost should be specially charged by the district council on the area for which the function is being discharged and should not be charged equally throughout the districtI am referring to cemeteries, for example.
My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) and I have supported the association's contention. In a note to me, my hon. Friend says:What this means in practice can be seen in my constituency. One district pays over the rate support grant amount to the parishes, but the other does not.He takes the example of Wooler in his constituency. He states:If we levy a 2p rate, they raise £3,000 and should in theory get rate support grant ".He observes that that would be an addition of about £1,800. He says that in fact the district councilpockets the lot207 anduses it to maintain the same facilities—eg., cemeteries and public halls—in the town of Berwick, which does not have a parish council and in which no local precept is raised! In fact, the district council would prefer all the parish councils to pack up and go home and leave them to run the district undisturbed.I am firmly in agreement with my hon. Friend when he writes:I am strongly opposed to this attitude, as are many people in the villages, but the present RSG arrangements offer a financial inducement to the parishes to hand over all their duties to the district!A similar situation applies in the parish of Bembridge in my constituency, and no doubt it applies elsewhere. I made representations to the Under-Secretary of State only a month ago. I regret that the opportunity has not been taken to put the matter beyond doubt. The present permissiveness is unsatisfactory and should be dealt with by the Bill.
If we really mean to give power to those at local level—I hope that we do, and, by God, we should—we should give them the chance, for example, to decide where to place their double yellow lines in the smaller towns and to make decisions on many other purely local matters. I hope that the Government will think again. If some suitable amendments are tabled in Committee to correct the injustice, I hope that the Government will consider them favourably.
Finally, could not the Bill be used to change the law that applies to vacant listed buildings, which for some reason are specifically exempted from discretion under the 1967 Act? That provision may have been well meant when it was drafted, but in my view it is wrongly conceived and allows the owners of such buildings to avoid paying rates and to leave the properties until they are on the point of falling down. I should love to take the Minister to a property in my constituency that has been empty for 25 years. These listed buildings are part of our priceless heritage. Let us rate them and get them repaired before it is too late.
§ 11.44 p.m.
§ Mr. R. B. Cant (Stoke-on-Trent, Central)
I apologise to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) for delaying his Adjournment debate. There are one or two aspects of 208 the Bill on which I should comment. I do not know to what extent I am qualified to do so. This is my twenty-sixth year as a member of a local authority, but I have always taken the precaution of being on spending committees and not on the finance committee. Therefore, that is somewhat of a closed book to me.
I should like to take up the point made by the hon. Member for Daventry (Mr. Jones) concerning valuation, especially in relation to valuation courts and the possible threat to democracy. In my early local government days I was a member of a valuation panel. I came to view this as the grass roots of the local government democratic system. There were four or five councillors or others on the panel. People would come to the panel. If we were in any doubt about whether a cottage or other property was overvalued or undervalued, we would go into the country and have a look at it. It used to take a lot of time, but we felt that we were performing a democratic service. That opportunity may be lost if the clause in question is passed. I do not think that drawing parallels between these valuation panels and the Lands Tribunal is valuable. We shall have to see what happens.
Contributions have been made by hon. Members on both sides about the rating system. I am an absolutely unrepentant supporter of the rating system. I know, as the Minister said when eloquently introducing the Bill, that many people have tried to follow the will-o'-the-wisp of an alternative and painless system of local government finance. I do not want to develop that theme. One of the great virtues of the rating system is that it makes local government local in the sense that it keeps councillors on their toes. If we were to take refuge in income tax or any other system in which revenue was lost in the general maw of public finance, I am sure that the local councillors would look to future elections and consider councils' expenditure in perhaps a slightly more light-hearted fashion. There is nothing in local government which so concentrates the minds of local councillors as fixing the rates. This democratic system should remain. As a practical man, I have always believed that it would be difficult to find an alternative tax that would raise the large sums involved.
209 Although this is a Second Reading debate, I do not wish to make a Second Reading contribution by discussing the matter in terms of general principle. I support the rate support grant. The Government's contribution to the reform of local government has been limited. However, they might have tried to do a little more than they are doing in the Bill.
It is wholly delightful that whenever the humblest member of a council nowadays talks about grants and the rate support grant, he refers to multiple analysis, clawback, the damping effect and other highly technical terms which he uses on public platforms and at the hustings. Most people will agree that the end product of this esoteric exercise is not wholly satisfactory.
I cannot help but feel that in the county council of which I am a member—Staffordshire—one cannot get a satisfactory basis for rate support grant distribution which does not take into account the number of schoolchildren. It is remarkable that where there is a shire county—they are very outmoded in these days and no one believes in them, apart from the reactionary people on the Opposition Benches—which has proportionately the second largest school population, it should do so badly when it comes to rate support grant. This is just one facet of the problem.
Another important matter which will have to be considered more seriously in the future is the way in which so many claims on local government funds at the disposal of the Department of the Environment are now being made that they are distorting the whole nature of the grant, both directly and indirectly. There is a new policy relating to the re-vitalisation of inner city centres, areas of deprivation and so on. However indirect the effect of the financing of this policy, the impact on local government grants and finance can be quite serious, especially if one lives in an area which, although it includes cities, which are in many cases deprived, finds that there is nothing doing for it in financial terms because it does not fit anywhere into the fancy terminology or nomenclature of partnerships and so on.
210 There is another quite serious problem of deprivation which is related, in a sense, to land reclamation. I refer to land which is made derelict because of industrial development, coupled with mining subsidence. Whereas one might be able to change part of the Shelton steelworks site, which is being closed down, into a very nice landscape with a 100 per cent. grant, it is quite impossible to persuade the Department of the Environment, because of all the other pressures, to give any special grant to help with the reclamation of the area for industrial purposes, because this does not come within the definition of dereliction. Life is becoming more complicated for the DOE, and I am not sure how far the rate support grant fits into this.
In times such as these, the rate support grant suffers very greatly from the problem of uncertainty. It is quite incredible, serving on a local council and watching those who have the job of fixing the rate—as distinct from the people who sit on the education committee or deal with planning and development—to see the difficulties with which they are faced in knowing exactly what sort of rate to levy. In normal times it is bad enough, but currently, with cash limits—which might or might not be exploded, depending on how one interprets the Chief Secretary's remarks at various dinners—one has to make some sort of judgment on these issues.
I am surprised to hear the hon. Member for the Isle of Wight (Mr. Ross) say that there is not one solution to this problem, in Tory terms. The solution is that one builds up what I would regard as quite irresponsible balances to meet every possible contingency, and one does this cynically two years prior to the next county council election. However, I shall not pursue that point.
It is very difficult to try to be realistic in fixing a rate and saying"We shall do what the Government ask us and allow 8 per cent. for inflation and 1 per cent. for growth ", knowing all the time that all these good intentions that are being eroded by the movements taking place in prices and, for some reason, increased staff and so on.
§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)
Does my hon. Friend agree that last year, 211 when inflation was at 8 per cent., a great many treasurers calculated beforehand that it would be a lot more than 8 per cent.?
§ Mr. Cant
Yes. There is no doubt that what one might be losing on the swings this year one gained on the roundabouts last year. To a very large extent, the source of the balances held now by councils finds its origin in those circumstances.
I support the Bill. Like many hon. Members, I have my complaints. I do not think that the Bill goes far enough. However, as a general philosophical principle, I support it, because I am getting tired of politicians who come to the Dispatch Box and want to change the world and turn it upside down. A few moderate changes and some improvements, such as those outlined in the Bill, are what people want. It is time that we got a bit more settled down and stopped talking about wholesale reform of one kind or another.
I was saying to a senior official only the other day that what we need is not the reform of local government, and not what is taking place in many authorities in the way of new management schemes and heaven knows what, but merely a simple capacity on the part of local government staff to be courteous and to answer letters in less than two months.
§ 11.58 p.m.
§ Mr. Nicholas Winterton (Macclesfield)
It is a great pleasure to speak after the hon. Member for Stoke-on-Trent, Central (Mr. Cant), because on many occasions I find myself in considerable agreement with much of what he says. His understanding of economics is to be respected. I know how much his service to Stoke-on-Trent and to Staffordshire is respected in the West Midlands.
My constituency is not very far from that which the hon. Gentleman serves. In coming to London every week, I pass the Shelton iron and steelworks, which is off the new Potteries D road. I agree very much with the hon. Gentleman that it is extraordinary that the city of Stoke-on-Trent could get a huge grant from the Government to lay out the land for a recreation area now that the works has, sadly, come to the end of its useful life but that it can get little or no assistance 212 to provide alternative employment, which is what is required in the north of Staffordshire and the Potteries in particular.
The hon. Gentleman's contribution to the debate was valuable, perhaps particularly when he said that we want not dynamic or dramatic change but a touch on the tiller, perhaps, and a little moderate change here and there. I agree with him about that in most cases—but not quite so much tonight, because I believe that slightly more than a touch on the tiller is required for the rating system.
I go along with the hon. Member for the Isle of Wight (Mr. Ross) when he says that it should not be beyond the wit of politicians, of those who run local government and of those who run the Treasury to institute a system whereby all those who earn within a local authority area make some contribution to the funding of the facilities in the area. I do not know whether that means a combination of local income tax and the present rating system modified to suit a local income tax. I do not believe that it is beyond the wit of the Government to devise a system which is more fair than the present one. I am delighted that the hon. Member for Rotherham (Mr. Crowther) is nodding his head.
If the hon. Member for Stoke-on-Trent, Central had received, as I did in 1974, nearly 2,000 individual representations from constituents—my constituency, with 85,000 or 86,000 electors, is larger than his—he would know that the importance of rates to people was well established with me, not just as a ratepayer but as a Member of Parliament seeking to represent the best interests of those in the area I serve. I believe that within a month or two hon. Members will be receiving very hot and numerous representations from their constituents, as I did in 1974.
It is unfortunate that this important debate is taking place so late at night. It is a pity that the Bill we were debating prior to this one is not being debated now and that this Second Reading debate did not come on in the major part of the day when the majority of hon. Members could have been present.
I fully endorse the view expressed by the hon. Member for the Isle of Wight on behalf of the Association of Local 213 Councils. I happen to be a vice-president of that body. The representations which it has made are very sound. It is a pity that the position of parish, town and local councils has not been more carefully regularised and established in the Bill. I know the injustice that they feel, and particularly the injustice felt by parish councils which are raising money from their areas, whereas money is not being raised in other areas which do not have a council. As the hon. Member for the Isle of Wight stated, the parish areas which are represented often pay twice for a service. This is a grave injustice. It undermines the whole purpose of parish and local councils. I hope that the Government will make some comment on this matter.
We have talked about the system of rating. I hope that the Minister will deal constructively with this matter in his speech in reply. The Minister's opening speech was spoilt by his snide remarks aimed at my hon. Friend the Member for Barkston Ash (Mr. Alison). At this moment, we are not in Government. The Socialist Party is. This debate is about the content of the Bill. It does not deal with what we propose when we take office shortly. I shall press my party to introduce reform of the domestic rating system. I believe that it is long overdue.
The hon. Member for Stoke-on-Trent Central referred to the allocation of the rate support grant. He drew attention, rightly, to some of the problems that the area he represents so well is experiencing under the present allocation. He denigrated slightly the shire counties. For about six years I was a county councillor in a shire county, although it was not the county in which I now have the honour to represent a constituency. The hon. Gentleman was a little unfair.
The hon. Gentleman spoke particularly about education and numbers of children, and the consequent problems of organising the needs of an area. Cheshire is one of the few areas that is actually growing, yet, under the rate support grant allocation of this Socialist Government, we have lost many millions of pounds, although we have to provide more school places and all the infrastructure associated with a new town. Part of the latter is separately funded, but part also has to be found by the county council. Perhaps the Minister will consider how Cheshire has suffered.
214 I admit that we have suffered this year less than several areas in Inner London, for example, where rates are due to rise—this applies to the area in London where I rent accommodation—by up to 50 per cent. How the Government will explain such a rise I do not know.
§ Mr. Cant Why is it that Cheshire, which is one of the richest counties, nevertheless enjoys intermediate area status? Was there some political reason for that?
§ Mr. Winterton
The hon. Gentleman is right. The whole of Cheshire is an intermediate area, but that benefits the county only slightly.
§ Mr. Winterton The amount of grant available to business to set up in an intermediate area is limited—much less than is available for full development area status such as applies to Merseyside and elsewhere. I agree that parts of Cheshire have low levels of unemployment. My own area has perhaps the lowest unemployment in the whole North-West, but that is because it is very progressive and relies heavily on smaller business. I have told the Government many times that the encouragement of smaller business could go a long way solving our unemployment problems. We also have efficient Conservative councils which spend the ratepayers' money—that which they have-very well.
§ The hon. Member for Birmingham, Perry Barr (Mr. Rooker) asked whether we would do without intermediate area assistance. If regional policy were changed, and if other areas gave up such assistance as well, so that we encouraged efficient industry rather than seeking to prop up inefficient industry, I should be prepared to see the system change. I am much more keen on long-term employment prospects than on short-term measures to sustain industries which, because of changes in demand, should gradually wind down and be replaced by others.
§ I also fully agree with what has been said about the disincentive of the Bill and present rating legislation when it comes to improving one's home. It seems stupid to give grants for home improvements and then to raise the valuation and thus the rates. If one installs central 215 heating or modern sanitary facilities, the rates should not rise. The valuation of property should be altered to allow such things to be done without detriment. We want to save property and not provide a disincentive.
§ Mr. Stan Crowther
Does the hon. Member agree that all that is happening is the restoration of the position that existed until the 1974 Act? Is he suggesting that there was a tremendous disincentive to people to improve their homes until 1974 and that the incentive has existed for only the past five years?
§ Mr. Winterton
No, I am not making that point at all. There is a disincentive in this, and there has been a disincentive for people to improve their homes. When they improve them, the valuation goes up and inevitably their rates go up. It has been said that people pay taxes in sorrow and rates in anger.
As my hon. Friend the Member for Barkston Ash has said, there are good points in the legislation. However, bearing in mind the promise that has been made in many reviews of local government and local government finance, it is extraordinary that more positive measures have not been brought forward to change the major injustice. I am confident that parts of the legislation will be heftily amended in Committee or struck out altogether. The Committee stage will be interesting, and I hope that representations made to its members will be more numerous than those this evening. It is an important debate which has been badly attended. It has come at too late an hour, and I hope that in future the Government will improve the order of their business.
§ 12.11 a.m.
§ Mr. Tim Sainsbury (Hove)
If we accepted the Bill in the way that it was presented by the Under-Secretary, as domestic ratepayers we should all be rushing to declare interests, as the benefits would seem to be many and substantial. I am a director and shareholder of companies that will derive minor benefits, but the Bill does not seem to have found many friends since it was presented in such glowing terms. Clauses 3 and 4 have been well received, but many doubts have been expressed on others. It is perhaps the omissions from the Bill that have commanded the greatest attention. The 216 presentation is late for a Bill which is of great importance to every ratepayer. It would have commanded more attention earlier, and I hope that the remarks of my hon. Friend the Member for Macclesfield (Mr. Winterton) will be noted.
The hon. Members for Rotherham (Mr. Crowther) and for Stoke-on-Trent, Central (Mr. Cant) have commented on the omissions from the Bill. We seem to be promised an interesting Committee stage, and if new clauses are moved to cover all the points of omission it will also be lengthy.
It would be helpful if we could have the notes on clauses that the Department of the Environment normally produces in good time instead of at the last moment. Indeed, it would have been helpful if the notes on clauses had been available in the Library before Second Reading. I go further. The Bill inevitably refers to amendments to existing legislation. It could well have been more sensible and helpful to have had an amended text. That might have expedited our proceedings at this stage.
Clauses 7 and 8 place a restriction on the right to make a proposal to alter a valuation. They have found no friends and have been severely criticised from both sides of the House. They represent the contra-argument to the advantages of the rating system which were described by the Minister. If we have a tax which, as he says, is so easy to collect because it goes with the property, it follows that the only way to object to such a tax is to object to the assessment on the property. That means that any new owner must feel that he has the right to make such an objection. He does not know the circumstances which led the previous owner not to make such an objection, when it might seem to him an obvious one to make.
To take away that right seems totally unjustified. Every ratepayer expects to have it and would bitterly resent not being able to exercise it merely because he bought the property more than a year after a new assessment came into force. In any case, the proposal is fairly weak. It is said that it would still be possible to make an objection if there were significant changes in the environment of the hereditament. How is one to determine, other than by an appeal to a valuation court, whether there has been a significant 217 change in the environment? One might well find in practice that the proposal did not create a saving in the work of the valuation court and of the district valuers, as the Government seem to expect.
To remove this right of appeal without providing a cast-iron guarantee that there would be a revaluation every five years seems to be totally unreasonable. My hon. Friend the Member for Daventry (Mr. Jones) has pointed out the unhappy circumstance that there has never been a revaluation when a Socialist Government have been in power. One might say that that is another good reason for not having Socialist Governments. Perhaps there is the slight risk of one being returned again before the century is out. We therefore run the risk as ratepayers of once more, for political reasons, having a revaluation deferred.
§ Mr. Stan Crowther
If the owner of a property fails within the 12 months allowed to apply for revaluation and he sells it, is he not asking for trouble? Is he not devaluing the property by permitting the rateable value to remain at a higher level than that which should obtain? The purchaser knows what the rateable value is when he decides whether to buy the property.
§ Mr. Sainsbury
The hon. Gentleman has a reasonable point, but he entirely overlooks the individual circumstances of the ratepayers. In my constituency there are many elderly ratepayers. Many of them, because they will want to avoid the trouble and expense of getting professional advice, or because they may not be in a position to get it, will not challenge their assessment. In those circumstances, it would be totally unreasonable if an elderly or dying ratepayer, by his own omission at the end of ownership, devalued the property which he was passing on to his successors or which was to be sold.
What happens if there is a successful challenge to an assessment which results in a significant reduction in the valuation of a hereditament and the neighbours living in substantially the same sort of property, with almost exactly the same valuation find that because they have not put in an appeal they are not able to change their valuation? There will be a row of identical properties, one with one valuation and the others with another. 218 that will give rise to a great deal of resentment and bitterness.
Enough time has been spent on clauses 7 and 8 about which we shall have much to say in Committee. Clause 10 concerns the variations of rating assessment as a result of minor alterations and improvements. I find this clause worrying. My hon. Friend the Member for Macclesfield, in his commendably blunt way, said that it was stupid. The more moderate view of the hon. Member for Isle of Wight (Mr. Ross) was that it was a niggle which would be resented by many householders.
The Government have presented clauses 7 and 8, which take away from ratepayers the right of appeal, because of the need to save manpower and because we must allow district valuers and the valuation courts to get on with the business of five-yearly revaluations. Socialist Governments in the past have been reluctant to bring this about. It is surprising that they should promptly put into clause 10 a lot of extra work for the district valuer who has to make minor adjustments to assessments as a result of modest improvements by ratepayers.
It is even more surprising when we look at the Local Government Act 1974, which the Bill proposes to alter, and see that on Report the right hon. Member for Birmingham, Small Heath (Mr. Howell), who is now the Minister of State, Department of the Environment, far from disagreeing with this proposal, wanted to take it further. He said:The Government have accepted that argument—I am with them; I do not quarrel with them about it ".—[Official Report, 22 January 1974; Vol. 867, c. 1602.]He went on to move a new clause which would have taken the exemption further.
Perhaps the Under-Secretary will say whether his Minister of State is with him about clause 10 or whether he has had a remarkable change of heart. Perhaps he will be on the Committee, and perhaps we could hear what evidence the Department has which has not been revealed to us which has made him change his mind.
We welcome clause 18, and I welcome the campaign to encourage the take-up of rent rebates in the private rented sector. This would be valuable, particularly in areas such as the one that I represent, where there are large numbers of tenants in the private rented sector, 219 many of whom, for a variety of reasons, fail to take advantage of the rebate scheme. The Under-Secretary referred to it as a tax allowance. If it is a tax allowance, why does the cost of giving it fall upon the local authorities? Why does any part of the cost of administering it fall upon local authorities instead of being borne by the central Government, as with any tax allowance given in response to the circumstances of an individual taxpayer? That seems to be self-evident.
Clause 22, which appears to be helpful to local authorities, is directly contrary to an undertaking given to me by the Under-Secretary in last year's debate. He said that this was a non-contentious, technical clause which had the full support of the local authority assocations. I fear that in Committee he may find that it is not non-contentious and that it does not command as much support as he suggests.
I hope that the Under-Secretary of State will recall that he gave me an unqualified assurance about the Rating (Disabled Persons) Bill. He said:On the general issue, however, I give the House again the absolute assurance that the Bill does not involve a significant Exchequer contribution and, further, that local authorities such as Hove, about which the hon. Gentleman is concerned, have no reason to fear that there will be an increased burden on other ratepayers as a consequence of the relief in so far as it is mandatory."—[Official Report, 12 May 1978; Vol. 949, c. 1640.]That was an unqualified assurance that mandatory rate relief which has to be given by local authorities to premises being used by disabled persons would not be an additional burden upon local authorities.
We had a long debate on that matter on Report. The argument was—and it must be accepted—that most of the areas that have concentrations of premises which qualify for the rate relief also have concentrations of ratepayers who are least able to bear the additional burden. Therefore, it is illogical to require them to carry an extra burden because Parliament has decreed that certain premises qualify for mandatory rate relief.
Why do the Government have to change their mind? The Under-Secretary of State has used the Layfield report as a justification for many items in the Bill. 220 The report was unequivocal. On page 168 it stated:In respect of mandatory relief over which local authorities have no influence, we consider that local authorities should be compensated through the grant arrangements.But they are not so compensated. Local authorities—such as Cambridge—which have a substantial volume of mandatory rate relief do not receive any resources element and, therefore, receive no relief. The situation is unsatisfactory. It highlights the unsatisfactory nature of the resources element of the rate support grant. This is stated each time that we debate the matter in the House. The Government have still done nothing about it.
A resources element which is based on the deficit from the rateable resources per head, times the rate poundage, is a formula which encourages extravagance. The more a local authority spends, the more resources grant it receives. That is unsatisfactory. It is one of the reasons why this is an unhappy timing for the Second Reading of a Bill which deals with rates. It comes just before most ratepayers will have a nasty shock. Hon. Members will receive many letters about this.
We recognise that the Bill does some good in other ways, but it raises some problems in so far as it diminishes the rights of ratepayers and places some of the burden of providing statutory rate relief on local authorities rather than on the central Government. The Bill deserves a Second Reading, but a lot of work must be done on it in Committee. I hope we shall be able to improve it there, and also that we shall now get some answers to the many questions that we have raised in this debate.
§ 12.30 a.m.
§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)
This has been an interesting and useful debate. I am sure that if I attempted to answer now all the questions that have been put to me I should be here until after 10.30 tomorrow morning, and the hon. Member for Barkston Ash (Mr. Alison) and I are needed then for a debate in the Standing Committee on the Countryside Bill. I was thinking of that when the hon. Member for Isle of Wight (Mr. Ross) said that 221 he had a china shop. Tomorrow morning we shall be debating in Standing Committee the question of bulls on footpaths, among many other things.
The debate has ranged widely over the issue of rating and local government finance. Perhaps sometimes it has been concerned less with the subject matter of the Bill than with its context. But we acknowledge that such debates will be somewhat peripheral. However, the debate has been important in giving hon. Members the opportunity to air their concern, and giving parliamentary time to review some of the fundamental principles of local government finance, even though it has taken place at a late hour.
My hon. Friend said that the Bill was a key part of the Government's response to the work of the Layfield committee. The hon. Member for Isle of Wight thought that we should have gone beyond Lay-field and gone for local income tax. I was one of those Members who suggested just that to the Layfield committee, but it did not accept the case and gave many arguments as to why it could not be done.
My hon. Friend also said that some of the provisions arose from discussions in the consultative council on local government finance. The Bill is presented to the House in the belief that it will help to make rating more intelligible and fairer, and after this debate I think that many of us agree that it will do just that, although no doubt it will be debated at great length in Committee.
Rates are an unpopular tax. The hon. Member for Macclesfield (Mr. Winter-bottom) quoted the saying that taxes are paid in sorrow and rates in anger. Let us ask ourselves why. Is it the amount of rates? Or is it that on our doormats in early April there arrives the total figure of what we shall have to pay for all local government services during the next 12 months? Sometimes I wonder whether, if everybody got a bill at the beginning of the year saying how much tax he would have to pay on the cigarettes he smoked or the alcohol he consumed during the year, or what we were all to pay towards defence, some of those taxes would not be even more unpopular than they are now.
The hon. Member for Barkston Ash did not take the opportunity to talk about whether domestic rates should be 222 abolished or fundamentally changed. We had a glimpse of the Conservative Party wriggling on the hook that its leader made for it at the last general election. It was not in the manifesto; it was not one of those things that go into pamphlets issued long before. It was something that the right hon. Lady said in the heat of the campaign. It was designed to switch votes to the Conservative Party, and I wonder how many other similar promises will be made during the few days before polling day next time.
The Government's position is straightforward. Our policy is based on an acceptance by Layfield of rates as a workable tax well suited to local needs, and our approach is to build on what we have, as the Bill does. It is worth repeating that income taxpayers and other contributors to national taxes already meet about two-thirds of local government revenues through the rate support grant and that rate rebates are available to about 4 million domestic ratepayers, in addition to the domestic rate relief that is automatically given. Instalment arrangements can ease the problems of payment, and the Bill provides opportunities to expand the facilities for instalment paying beyond the domestic rate. As the hon. Member for Hove (Mr. Sainsbury) said, some of the firms in which he is interested may well benefit.
Those are sensible ways of relieving the burden of rates, and the Bill extends all three of them. Therefore, because of the Opposition's failure to propose the abolition of domestic rates, which their leader once promised us, I look forward to the amendments which they will put forward in Committee.
The hon. Member for Barkston Ash asked what had happened about various matters discussed in the Green Paper. As regards capital valuation for rating, the Government remain committed to this change for domestic property, but, as the hon. Gentleman surmised, there is no majority for it and, as a Government working in a minority position, we have to accept that the official Opposition and the Liberal Party, as the hon. Member for Isle of Wight said, would not support us. We should not get support for that in a Bill, and there is not much point in bringing in a Bill if one does not think one can get it through. I may say that 223 there would have been a water Bill making some fairly radical changes from the 1973 Act which is now so frowned on by the Opposition if we had had some incentive to that end from some of the minority parties.
§ Mr. Stephen Ross
I understood the hon. Gentleman to say that Layfield did not recommend a local income tax. That is not quite correct. I accept that Lay-field did not recommend a local income tax as the sole source of revenue, but it certainly recomended it as one source of revenue. I refer the hon. Gentleman to the Layfield report.
§ Mr. Marks
I stand corrected. Layfield reported to that effect, but it pointed to the considerable expense of collecting what would have been a minor part of the present rate revenue if that suggestion had been adopted.
The hon. Member for Barkston Ash spoke about value for money. My right hon. Friend the Secretary of State said that he would be setting up a new advisory committee on local government audit to receive reports from the chief inspector of audit and to set up value for money studies. I feel that we should say frankly to the country that what local government spends is an extremely important part of spending. We are too often afraid to admit that what the community spends through local government is a vital part of our whole life.
I turn next to central controls. Clause 26 and schedule 1 will relax some of the controls in a useful way. Some of them have already gone in earlier legislation, but the Government are very ready to consider going further, and, as my right hon. Friend the Secretary of State said last week, we shall be co-operating with the local authority associations in further studies to identify whether there is scope for relaxing some of the controls listed in the report recently published by the combined associations.
Perhaps I have said enough to show that all the Green Paper proposals are alive and well and that the hon. Gentleman should look beyond the Bill to see how they are being advanced.
I come now to the question of rate rises, though, to be fair, it was not referred to much by the Opposition except in the opening part of the debate. This 224 year's rises, of course, have no direct bearing on the Bill, though the issue is topical. It is important to look at the movement of rate levels in a broad context and not be misled by some of the alarmist newspaper reporting that we had a couple of weeks ago. It is clear that in this year, as in all years, there will be a wide variation in rates, from large increases to rate freezes or cuts in some cases. But the long-term relationship between rate payments and disposable domestic incomes, as my hon. Friend said, has remained remarkably stable over many years, and total local authority expenditure has been stabilised in real terms for the same time.
There was some alarm because some of the county authorities gave notice of big increases in their precepts at a time when some of the needs element of the rate support grant was being transferred to the district councils. Before going on about the fact that we shall not get rate increases below 10 per cent. this year, the Opposition should have thought of that before they defeated us in the debate on private income and wages. If they seriously thought that local government employees would stand by and see a free-for-all in private industry, encouraged by the Opposition, they were quite wrong. The Opposition's action is probably one of the causes, if not the main cause, of the escalation of rate increases to more than 10 per cent. this year.
§ Mr. Sainsbury
The Minister, like other hon. Members, referred to the fact that rates as a proportion of disposable income have remained remarkably constant. Will he admit that this year at least there can be no doubt that rates will form an additional burden because they are going up very much faster than disposable income?
§ Mr. Marks
We do not know how disposable income will increase this year. Had the Opposition had their way, it would have been much more than the 9 per cent. which is going to local government employees.
Several hon. Members talked about the restriction on the rights of appeal. I understand their concern. As a ratepayer who once appealed, I can appreciate it. It is important that a Second Reading 225 debate should raise questions of principle, as has happened tonight. I hope that the clauses will be looked at very carefully in detail in Committee, but there are a few important points to remember at this stage. First, what is the justification for this restriction? It is not for a frivolous reason. The intention is to reduce the work load of appeals on professional staff of the valuation office so that the work of conducting a general revaluation can proceed.
Secondly, the restriction is only partial. For a year after each general revaluation there will be an unrestricted right, followed by a right after that, to challenge the assessment if there has been a change in the circumstances of the property. There are other safeguards.
The Department has received many leters from constituents of hon. Members on both sides of the House complaining about the present system—complaining that the man who had his central heating installed in 1973 had his rates put up whereas the man who had it installed in 1974 had not. This will at least achieve some reasonable agreement between neighbours.
My hon. Friend the Member for Stockport, North (Mr. Bennett) referred to a time limit on appeals. Although the ratepayer will not be able to make an appeal after the first year, the valuation officer will still be able to make a proposal, and will expect to make proposals to deal with any mistakes which come to light as a result of appeals. He will also expect to make proposals to deal with the chain reaction, so as not to allow unfair advantage over their neighbours to those who successfully appeal. In my view, the valuation officer will have a duty to examine such matters.
I remind the House that in paragraph 88 of its report the Layfield committee said:We consider that it would be justifiable to limit the ratepayer's right to make a proposal beyond the first year following revaluation to cases where there had been a material change in circumstancs affecting value, or a change of occupier. This procedure, which obtains in Scotland, should discourage appeals stimulated by rate poundage increases "—which is why many appeals are lodged, not on the basis of the valuation being wrong but because the rates have gone up— 226without depriving anyone of a legitimate opportunity to test the validity of his assessment ".The Government have accepted the recommendation of the Layfield committee and clauses 7 and 8 seek to implement that recommendation.
My hon. Friend the Member for Rotherham (Mr. Crowther) made the type of speech that I often made as a Back Bencher about the need for radical change. He asked why households with more than one adult wage cannot be assessed to more rates than households which have just one wage. This is a difficult question which is posed weekly to all hon. Members. The Layfield committee discovered that there are some good counter arguments. The main objection is the extreme difficulty of devising a system which could be workable, other than by going over to local income tax, and which would not be open to widespread evasion. Another objection is the fact that wage earners contribute substantially to local government through the rate support grant, 60 per cent. of which represents taxation.
It is a fact that in many cases those in multi-occupation of a house enjoy a lower standard than someone occupying a house on his own. Only at the weekend a pensioner complained to me that just down the road there were three pensioners sharing a house whilst he lived in a house on his own and had to bear the full burden of the rates. He is at liberty to invite two other pensioners to join him.
The hon. Member for Daventry (Mr. Jones) welcomed many features of the Bill, though he did not make enough of the considerable value of the Bill to small businesses. There is the extension of domestic relief to those who literally live over the shop. I do not have the figures, but I should not think that there are many cases where the proportion of the premises used for domestic purposes is less than one-eighth of the total hereditaments. Virtually all those in that position will enjoy this benefit. I hope that this will be of considerable value to shops in rural areas. I hope that village shops, which have been closing down at a rather rapid rate, will gain some benefit from this provision.
The provision for non-domestic ratepayers to pay by instalments will be of 227 considerable advantage to small businesses.
On the question of home improvements, concern has been expressed about the repeal of section 21 of the Local Government Act 1974, which prohibited between general revaluations any change in the rateable value of a house arising from the installation of central heating or from minor improvements. Some ratepayers will lose a concession which might have brought them a temporary gain. However, this provision will not take effect until after the next revaluation, when all hereditaments will have been revalued, anyway. It will apply only to new installations after that.
Many ratepayers have felt a keen sense of grievance at the fact that they have had to pay increased rates following the installation of central heating, while the man next door was getting away with it. If there is to be a tax, which is what rates are, based on the value of property, whether it is the rentable value or the capital value, an improvement of that kind creates an increase in value—whether rentable or capital. An extension on the kitchen or the installation of central heating increases the value of the property.
I suppose one advantage of capital value would be that people would recognise that their rateable value reflected the value of their house if they sold it. It would be a useful guide to the price people would expect to get for their house.
§ Mr. Marks
To be frank, I cannot say. I shall look into that. Changes of mind are useful. Much information has been received bearing on the Layfield report, and no doubt that will come to light.
The hon. Member for Isle of Wight said that the majority of local authorities have hardly any balances. It will be interesting to witness the balances that appear at the end of the year. It is my impression that many local authorities expected that during the current financial year inflation would be running at a much higher level.
The hon. Gentleman referred to emergency and disaster funds. The Con- 228 servative Government gave local authorities powers to spend money it there were an emergency or disaster in their areas, but it has been left to the Government to allocate a figure and to say that when there is an emergency the Government will make a substantial contribution. The Government have been paying already. The Bill gives legislative powers to the payment that we have been making. It will be 75 per cent. on everything over a penny rate. We suggest that if spending reaches more than five times a penny rate there shall be an additional grant.
The grant to parish councils was referred to by the hon. Member for Macclesfield. The Government's view remains that the present powers of local authorities to pass on the benefit of the resources element are adequate. Local circumstances may vary greatly. It would be wrong for central Government to try to impose a central view, as apparently some Opposition Members wish, on the diverse circumstances of parishes. Many of the parishes are in better-off areas of the districts, and perhaps district councils would like to take into consideration some of their poor authorities.
§ Mr. A. J. Beith (Berwick-upon-Tweed)
How can the hon. Gentleman possibly defend an arrangement under which expenditure earned by the decision of ratepayers in a parish to pay an additional rate should incur grant-aid on a general basis to the district council that does not need to be passed on to the parish? Does he recognise that a few district councils—fortunately, only a few—are actively opposed to the concept of parish councils and would much prefer parish councils to entrust all their functions to them and enable them, the district councils, to control all the grant-aid and for the parish councils to disappear? Will he recognise that the parish council is in a weak position in the argument and that it should receive more support from the Government than the hon. Gentleman implies?
§ Mr. Marks
I am sure that the hon. Gentleman wants us to dictate more to district councils about what they should and should not do. I shall consider his argument. He says that the district councils receive more resources grant because local councils are spending money. Resources grant is based on the penny rate 229 rather than on what is spent by local councils.
§ Mr. Beith
In many districts a parish may decide, for example, to raise, a 3p rate at the expense of the inhabitants of that parish alone, and that incurs 3p worth of rate support grant for the district council. Within the same district there may be another area—perhaps an old borough that was taken into the district—in which no additional rate is imposed. That area will have its cemeteries, public halls and public conveniences financed from the very revenue that has been created by the inhabitants of the village that decided to go for the full 3p rate.
§ Mr. Marks
I shall examine the hon. Gentleman's argument. My hon. Friend the Under-Secretary of State, who will be taking the Bill through Committee, has agreed to examine his argument.
My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) referred to derelict land. Under this Government there has been a considerable increase in the reclamation of areas, including land in his constituency, for the purpose of the industrial grant.
Some years ago, under Mr. Crosland, the then Secretary of State for Local Government and Regional Planning, the whole Civic Trust programme was launched in Stoke. Since then there has been considerable support by the Government to the tune of about £18 million a year. I shall examine the argument that, having cleared the land for industrial purposes, those involved will need help, presumably from the Department of Industry, to set the scheme on its feet. Stoke has had substantial help from my Department. I have visited and opened some of the sites.
The problem of the rural areas needs to be examined carefully. I do not know whether the answer is merely to give more rate support grant to the shire counties. What is needed is an examination, as we have carried out in the inner cities, in partnership with the county councils, to see what is needed, where the deprivation is and where the needs are. We shall then perhaps consider some specific grants such as those given to our inner cities. I am considering the possibilities rather than making any statement of Government policy.
230 When I was chairman of the local finance committee some years ago, the ratepayers' and residents' associations were concerned only with keeping the rates down. Nowadays I do not get that. I hear from them about the services that are being provided and whether they are good enough. There is a demand for better services, whether roads, education or housing, or the many environmental aspects of life. A great many more people are now concerned with the proper spending of the rates and the proper raising of the right amount. I am sure that there is an improvement generally in what is being done.
This Bill concentrates on information about rates, payment by instalments, rebates and the other factors. It will be a considerable help in making rates a less unpopular tax. The Government can say that this is a measure to make improvements in the system of rating and local government finance. In the long term, improvements of this kind will do most to give local government a secure and acceptable means of raising revenue. My hon. Friends and I will look carefully at the reservations which have been expressed about the Bill. I hope that the House will recognise that there are some strong attractions in the Bill, especially for the poorer ratepayers, small businesses, and those who have separated and have financial problems as a result.
I ask the House to agree that the Bill should be read a Second time.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).