§ Mr. Teddy Taylor (Southend, East)
I beg to move amendment No. 41, in page 11, line 2 at end insert—.(2A) Schedule 3 to this Act shall have effect with respect to the rating of agricultural buildings.In applying rates to any agricultural buildings under this Schedule, rating authorities shall charge rates according to the following formula—
|Rateable year||Derating percentage|
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will be convenient to take amendment No. 40, new Schedule 3—Rating of Agricultural Buildings.
§ Mr. Taylor
Time is short because of the guillotine, but I propose briefly to explain the reasons for amendment No. 41 and I hope that, if he is able to catch your eye, Mr. Deputy Speaker, my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) will be able to explain some of the broader thinking behind it.
350 The amendments would end, over a five-year period, unjustified and illogical circumstances by which agriculture alone makes no contribution to local government expenditure for its buildings. It is an anomaly of which many people are unaware and it cannot be justified on any logical grounds. Various types of derating has existed since 1896 but it was in 1929 that legislation was introduced wholly to exempt agriculture for contributing in respect of land or buildings. At the time it was interpreted as a small concession to take account of agriculture's serious plight. It was rightly said that the Government had no power to do anything to protect agriculture against a serious world recession and that this was the only small available item. There was no broad system of agricultural support and agriculture faced serious problems.
Things have changed dramatically. Whereas rates on industry were low, they are now a substantial burden. We have heard from the Confederation of British Industry and firms in our constituencies how many of them are battling for survival because of the burden of rates. Agricultural buildings tended to be relatively unsophisticated in 1929, but their quality has improved and their quantity has increased. Moreover, since 1929 we have had, through case law, a major extension in the concession, and legislation of 1971 extended the exemption to offices of agricultural co-operatives. Every industry has to pay substantial rates irrespective of whether they can afford to do so, but agriculture does not have to pay a penny. I am not expressing a view held only by my hon. Friend the Member for Aldridge-Brownhills and I. My hon. Friend the Minister must be aware that every independent committee and study group that has examined the matter has said that the anomaly should be ended speedily. We had, for example, the Layfield Royal Commission on local government, which looked at the whole issue very carefully. It concluded that there were no grounds for exempting agricultural land or buildings from carrying a share of rates.
We are talking not about pennies but about a great deal of money. There have been various estimates of what agricultural rating might produce. An example given in a written question some four years ago showed that the rateable value of land and buildings was about £200 million. As most of these are in the shire counties that would mean about £300 million in cash. Layfield indicated that perhaps farm buildings would account for some £130 million. The Economist magazine said that the amount of rates was about £400 million. But all of those are just estimates because, as the buildings have not been rated, we can only make a rough guess.
However, I think that the Minister would accept that it could amount to perhaps £200 million to £250 million for local authorities, which is a lot of money. We have been discussing under the Bill the enormous problems of local authorities in making ends meet, and the Government are short of money. Not only would it ensure more revenue for local authorities but it would take some of the enormous burden off the rest of industry, because any exemption for one part of industry inevitably means that others pay more.
When this was raised once in the past a Minister said that it would not help local authorities because if their rateable values were increased their Government grants would be cut. I am sure that the Minister is well aware that if there was a substantial change in rateable values it would 351 be very difficult for any Government to argue that none of the benefit should go to the local authorities. Even if the Government were hard-nosed enough to say that, at least it would be a major benefit to the Exchequer.
It has been argued that, as this derating has existed since 1929, there is no reason to do anything about it now. One of the reasons for that was the rather dramatic speech made by the Secretary of State for the Environment at a party conference in Blackpool, in which he said—to the surprise, I think, of many people—that the reform of the rating system would not happen.
Many of us on the Conservative Benches have argued for the reform of the rating system. There was a time some elections ago when, in our party manifesto, we made the astonishing proposal that we should abolish rates for domestic properties only, which would have placed local authorities in the unusual situation of levying rates for industry, while the ordinary domestic owners would pay none. I would like all rates abolished, but now that the Government have concluded—and they are very wise and have access to information which I do not have—that we cannot change or abolish the rating system, it seems wrong for this anomaly to continue.
What are the arguments against removing this derating? One is that it would create a major change in the finances of agriculture. Obviously, if we are talking about £150 million to £200 million, that is a large sum. That is why, in this amendment, in an attempt to get the full support of the Government, as I hope we shall tonight, we have suggested that rating should be introduced over a five-year period—that there should be derating of 80 per cent. in the first year, going down to nil in 1990. So to that extent we deal with the question of its being phased in.
The second argument is that it would be unpopular. Understandably, such an important and efficient industry as agriculture carries a lot of clout. We are dealing not just with the agriculture industry, but, to some degree, with the whole City of London, because a number of institutions and pension funds have almost a vested interest in keeping agricultural land at an unreasonably high price. It would probably be an unpopular move with a lot of people. On the other hand, it would mean a reduction in the rating burden carried by others.
The third issue is to consider what we can afford. Rates for industry have never taken any account of what industry can afford. We know that many firms in our constituencies are having to pay in rates enormous sums that they cannot afford. Not only may they not be making profits, they may be making substantial losses, yet they still have to pay their rates. It is unreasonable to suggest that it should be said only of farmers that if they cannot afford to pay they should not do so. Indeed, there are some reasons for thinking that certainly in recent years agriculture has performed financially slightly better than the rest of industry because it has had the enormous, high support, the protection, of very substantial levies, which in some cases are over 100 per cent., as a form of tariff protection, compared with about 7 or 8 per cent. for the rest of industry. Also, with the exception of items such as sugar, they have had more or less a guarantee that anything produced would be purchased at a relatively high price.
This, of course, has created the rather unusual situation whereby, since the Government came to power — I found to my horror only yesterday — exports by the Common Market to the Soviet Union of cheap, subsidised food have increased 600 per cent. We are now selling 352 about 100,000 tonnes of food every week at knockdown prices to the Soviet Government to help boost its economy. Sadly, the Russian people do not get the food at cheap prices. It is taken by central purchasing and, of course, the Russian Government make the profit, which will no doubt help them to finance their defence spending.
It is an indication of what happens when we interfere with the natural disciplines of the market. The Government are now facing the appalling problem of what to do about the Common Market, which has huge mountains of surplus food that nobody wants and is exporting massive amounts to Soviet Russia at knockdown prices. It is an indication of what happens— whether the Government are Conservative or Labour— when we interfere with the natural disciplines of the economy and try to force unreasonable subsidies where they are not justified.
It is therefore also in the national interest that we decide that agriculture should be treated exactly the same as any other industry. What could be fairer?
I was quite encouraged to read in the papers only about two weeks ago that the Government were undertaking an inquiry into support for agriculture, including agricultural derating. It seemed to be some kind of official statement or comments because every newspaper carried it at the same time. These things usually come from guidance of some sort—not a leak, because leaks are very few and far between. I am told that guidance can be given, and the papers pick it up and all publish the same story. Then it seemed that there was a great deal of discussion, a lot of flapping, and lots of organisations were making telephone calls and seeing their Members of Parliament — and suddenly we found the Prime Minister, for whom I have the greatest admiration, saying in the House on 23 Februarythat contrary to reports we do not propose to re-open the question of rating agricultural land and buildings."—[Official Report, 23 February 1984; Vol. 54, c. 972.]That certainly came as a shock to me, because it seemed to be some kind of policy re-think.
In the very short time available we cannot have a full debate and I am not expecting the Government —although I hope that they will—to announce this major change of policy. But, if the Prime Minister says they are not going to do it now, could they give us some indication when this grotesque and absurd anomaly might be reviewed? Could they, for example, say that a committee might be appointed to look at it in 10 years, or 20 years, or 30 years, or something like that?
We have had this ludicrous anomaly, which is unfair to every other ratepayer in Britain, who is having to pay more rates because agriculture pays none. It is shocking, it is shameful and it is unfair. Firms are being forced to close on the margin. We know that some firms go bust, not because they are losing millions but because they cannot pay a bill of £200. Efficient firms employing good British workers and run by good British managers are being put out of business because of rates. And some of that on the margin is because of this ludicrous anomaly concerning agriculture.
I know that some of my hon. Friends argue that if this is hitting industry so hard there is no point in doing the same to agriculture. I should be very happy if the Government were to say that they were going to abolish rates, because they are a negative tax which has no relation to the ability to pay. But the Government told us only 10 353 days ago, to my shock and horror, that they will not reform rates, that rates will carry on for ever. So, if rates are going to carry on for ever, let us remove the anomalies from the system. Let us get rid of agricultural derating in a sensible way, over a five-year period, and end an injustice which is not only unfair and illogical but is also an unnecessary burden on every other domestic, commercial and industrial ratepayer.
I know that the Minister who will reply is an honourable man who cares about people, justice and principles. For that reason, I am confident that he will give us some hope that there will be reconsideration of a policy which is an outrage to any logical, just mind.
§ 8 pm
§ Mr. Richard Shepherd (Aldridge-Brownhills)
I support the amendments, because, as my hon. Friend the Member for Southend, East (Mr. Taylor) said, they involve a matter of equity. The great majority of our people are employed in industry, commerce and trade and they support all the services and facilities through the normal taxation system.
Why, then, do a Conservative Government, who profess to believe in equality of treatment in law and tax matters for all citizens, have a blind eye in respect of the taxation or rating of farm land? I should like us to be able to refute that suggestion, because I believe that the Conservative party represents the broad interests of all our people.
However, when we say, "We shall rate 99 per cent. of the places of employment of our population, but not rate one particular section," we are saying that there is a privileged part of the community which, whether in good times or in times of adversity, does not pay its contribution to the services provided in rural communities. I feel strongly about that. The historical reasons for the derating of agriculture were sufficient in their day, but they are no longer sufficient.
Reports on the financing of agriculture show that support and subsidies from the Exchequer and the CAP total about £20,000 a year per farmer or 12,000 per farm employee. My constituency is in the west midlands, which has suffered a severe recession. Our factories have been required to pay rates, whether or not they were making profits. Many small businesses and some large firms have had to cease operations and lay off people because of the rates burden. Yet farms and farmland are a privileged and protected part of the community which has not had to bear its share of general expenditure.
The amendment proposes a big structural change for agriculture. It would obviously have to be phased in, but there is no justifiable reason for supporting the existing anomaly. I urge the Government, as a matter of equity, to consider the proposal in the amendment. We would come out as a stronger party and a stronger Government by treating equally the work places of our citizens. I know that some sectors face difficulties, but we all have problems and we still pay our share.
The finances of the European Community are reaching the stage where they can no longer support our agriculture and its investment programmes. We are naturally anxious about the future and prosperity of agriculture. We accept that it is an important ingredient in the success of our 354 nation, but that is no reason to exempt agriculture from the general rules that apply to all our constituents in their places of employment or business.
§ Sir Peter Mills
I must declare my interest. Despite the honeyed words of my hon. Friend the Member for Southend, East (Mr. Taylor), I am worried about his proposals. Incidentally, I never regarded my hon. Friend as a man who was easily shocked.
The amendment would be the thin end of the wedge and I have no doubt that full agricultural rating would follow. That would be a costly burden to British agriculture, which already has burdens enough.
The question that I have to put to my hon. Friend and to the House is whether the consumer would pay for the proposal in the amendment. It would add millions of pounds to food costs and I cannot see the consumer being prepared to pay that extra money. The question is not whether the farmer can afford it, but whether the consumer can afford it.
Food is a sensitive issue and under this Government prices have been held steady compared with what happened under the Labour Government. Adding to the consumer's burden by greatly increasing the cost of food would be a serious matter. I am grateful to my right hon. Friend the Prime Minister for giving a firm pledge that there would be no rating of agricultural buildings.
Perhaps my hon. Friend the Member for Southend, East does not realise the role of the farmer in looking after the countryside. Some farmers have caused problems for the community by tearing down hedges and so on, but they are the exceptions. The vast majority of farmers guard the countryside.
§ Sir Peter Mills
I am glad that my hon. Friend agrees with me. That work done by the farmers is costly and it is in the interests of ratepayers and taxpayers that it should be done. Mark my words: if chunks of British farmland were not used, their maintenance would be costly for the nation.
Agriculture plays an important role. I am anxious about the burdens that it bears because of what is happening in Europe. It would be much more serious if we added the enormous burden of the rating of agricultural buildings. British agriculture would not be happy with the amendment.
§ Mr. Deputy Speaker
Order. I called the Minister—who was rising — as is the normal custom in these matters. Mr. Waldegrave.
§ Mr. Waldegrave
I also have to declare an interest, but, despite that, I have some sympathy with the argument of my hon. Friend the Member for Southend, East (Mr. Taylor) when looking at it solely from the point of view of the Department which has to deal with rating matters. However, there are many other matters to take into account.
355 I wish to make it absolutely clear and to reassure the farming community and others who may be concerned that we do not intend to re-rate agricultural land or buildings.
I also sympathise with my hon. Friend the Member for Southend, East because in arguing for the re-rating of agriculture he has to argue against the trend that we should like to be following. We have been relieving some industrial properties—empty factories and so on—of rates, and that is the way in which we should like to move. Few know better than my hon. Friend the workings of the market, but my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) was right when said that the amendment would have an effect on costs. We could not shift the burden of millions of pounds on to an industry without that having some effect. The wise market has, in the years since 1929, adjusted its cost structure. Changing it would have an effect on the industry and, ultimately, on employment or prices.
My hon. Friend the Member for Southend, East referred to the commitment given by our right hon. Friend the Prime Minister. Perhaps I should repeat it:I should make it clear, because there have been reports to the contrary, that, as was said in the White Paper, we do not propose to reopen the question of rating agricultural land and buildings".—[Official Report, 23 February 1984; Vol. 54, c. 972.]Not only the present Government take that view. It is instructive to examine the response of the previous Labour Government to the Layfield report. They said:The Government accept that in terms of rating principles there are extremely good grounds for treating agriculture just like other industries. But there are strong practical arguments against the Committee's recommendation for the re-rating of agricultural land and buildings.We accepted in Committee that that was written by the hon. Member for Blackburn (Mr. Straw).
§ Mr. Waldegrave
The Labour Government's response continued:First, the total income of local authorities would probably be unchanged because the increase in rateable value would be balanced by a reduction in grant from the Government. Second, valuation of agricultural properties would involve extra costs for the Inland Revenue and for local authorities. Finally, there would be significant adverse effects on the financial position of the farming industry, and so on home food production and food prices. The Government therefore do not propose to accept the Committee's recommendation.Against the very difficult position of change and stress that the agriculture industry is about to face, and as we come to grips with the common agricultural policy and its successors, this is not the right moment to argue for this change. It is not only in the short term that the Government remain committed to the derating of agricultural land and buildings. As my right hon. Friend the Prime Minister has made clear, we remain committed to it as a long-term policy.
§ Mr. Stanbrook
I am profoundly disappointed by the words of my hon. Friend the Minister in dealing with this important matter, and I warmly support the amendment, moved in his usual cogent fashion by my hon. Friend the Member for Southend, East (Mr. Taylor).
§ Mr. Straw
On a point of order, Mr. Deputy Speaker. I realise that you cannot control the speeches of hon. Members, but can you suggest to the hon. Member for Orpington (Mr. Stanbrook) that, as his hon. Friend has entirely agreed with him, and as there are more important 356 amendments to be taken in the next five minutes before the guillotine falls, perhaps he would like to bring his remarks to a close?
§ Mr. Stanbrook
The hon. Gentleman is misinformed. I do not agree with the Minister. I find that the Conservative party's general policy against restrictive practices and the existence of privileged groups is an attractive one. We have had the pursuit of restrictive practices among opticians and solicitors and it was suggested that farmers should be the next target. Lo and behold, unfortunately, my right hon. Friend the Prime Minister recently surrendered without a shot being fired.
This is a terrible shame. There should be a system of public financing that is as broadly based as possible, set at as low a level as possible, and with the minimum of exemptions and allowances. It is all very well for my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) to speak on behalf of those who would be affected by the amendment. There are many spokesmen for privileged groups, but he is speaking about a class of people who are sturdy, well off and would not be so troubled by the application of a general rule in the interests of justice. The Government now have a moral duty, having given up the cause of rate reform, to proceed along the lines suggested by my hon. Friend the Member for Southend, East. I warmly support his amendment.
§ Question put and negatived.