§ Mr. George Foulkes (Carrick, Cumnock and Doon Valley)
I welcome the opportunity to discuss the question of revaluation in Scotland. I am particularly grateful to you, Mr. Speaker, for allowing three hours for this debate.
The issue shows up the Government's greatest ineptitude in Scotland. You, Mr. Speaker, are not involved in the revaluation, since you represent and live in an English constituency.
According to newspaper reports, it appears that only when the Secretary of State received his own revaluation notice for Gargunnock—his estate in Stirling not in Ayr—did he understand what was happening. The chairman of the Scottish Tories, Sir James Gould, was so astonished by his 33 per cent. increase that he was photographed brandishing his rate demand in George square in Glasgow. He described the increase as "appalling." Sir James was not the only one who was appalled. Councillors were appalled. The Scotsman carried the headlineA Glasgow Tory attacks Younger".
The way events are moving, the headline could soon be "The Glasgow Tory attacks Younger."
According to The ScotsmanCouncillor William Aitken … suddenly stunned the Labour ranks by embarking on a surprising attack on Mr. George Younger … He said the revaluation was at least badly handled and at worst a disgraceful decision.That is from an increasingly lonely Scottish fellow in Glasgow. I hope that by quoting from The Scotsman I do not offend my good friends from the other Scottish newspapers.
The hon. and learned Member for Perth and Kinross (Mr. Fairbairn) is not here, but he is normally one of the Government's most ardent supporters. He has often come gallantly to the Prime Minister's defence. Another article in The Scotsman states:A Conservative MP last night accused the Government of 'betrayal' over rates rises and called on the Prime Minister to redeem the situation when she attends the Scottish Tory conference at Perth in May.We also read that the hon. Member for Dumfries (Sir H. Monro), chairman of the Scottish Tory group in the House of Commons, is to lead a deputation to the Prime Minister on the issue, understandably bypassing the Secretary of State for Scotland.
The hon. Member for Eastwood (Mr. Stewart), an Under-Secretary of State for Scotland, who is in the Chamber, had to appear before a "Star Chamber" in his constituency. A miraculous decision was made. He was cleared, but the Government were found guilty. I thought that the hon. Gentleman was party to all this as a member of the Government, but no, the honourable Burgher for Eastwood apparently thinks differently. The Parliamentary Under-Secretary of State, the hon. Member for Edinburgh, South (Mr. Ancram), who will have the pleasure of replying to the debate, no doubt knew a little more of what was happening in this revaluation. After all, he has one of the widest home ownerships in Scotland today.
On more sober reflection, after all the outrage from Conservative Members as well as councillors and ratepayers, given the reduction in rate poundage to offset the increased revaluation, is all this concern justified, is 320 this uproar justified? The answer is an unequivocal yes. The overall increase in Scotland's rate bill is estimated to be some 21 per cent. Individual domestic increases will be much more, some well over 40 per cent. I will give a prize—a very small one, of course—for the largest verified percentage increase. This 21 per cent. increase in Scotland compares with an overall estimated increase of 9 per cent. in domestic rates in England where no revaluation is taking place—indeed, it has not had a revaluation since 1973, while we are experiencing our second revaluation.
The Secretary of State and his cronies keep trying to pile the blame on allegedly profligate authorities. This is a deliberate attempt to mislead and to divert attention from the real source of the problem. It is mischievous and malevolent. To eliminate the variable of authorities which may be spending over the Secretary of State's arbitrary guidelines, such as the variable is, let us take areas where region and district are within the Secretary of State's guidelines. There are 36 out of 65, as we have heard from the Secretary of State, Perth and Kinross notable among them. We note that Mrs. Rosemary Ferrand of Perth and Kinross, whom the hon. Member for Tayside, North (Mr. Walker) knows well, said that her own council of Perth and Kinross… had always been careful of its housekeeping and had always tried to keep within Government guidelines but though it had pruned spending to the bone it faced a penalty of £260,000 in claw-back".The hon. Member for Tayside, North knows that this is one authority — and there are others in Dumfries, in Galloway and in Grampian—where region and district have kept within the Secretary of State's arbitrary guidelines. Thus we rule out the variable of the so-called profligate authorities.
In all these areas, there will be huge increases for the domestic ratepayer. There are two causes, both of which are the responsibility of the Secretary of State and the Government, including the hon. Member for Eastwood. The first is the reduction in rate support grant. Less Government money to local authorities inevitably means that more must come from the rates to maintain spending and services at the same level. The second is revaluation where the switch in burden from the non-domestic to the domestic ratepayer without adequate cushioning for the domestic ratepayer causes additional hardship and cost. With respect, the £38.6 million added under protest—the Secretary of State admitted in a written reply that he had received 3,800 letters earlier this month—is a mere fleabite. To add insult to injury, the £38.5 million came from harmful cuts in other areas of Scottish Office budget expenditure, robbing already poor Peter to pay a poorer Paul. The uproar is understandable. The Secretary of State is not with us today. No doubt he is elsewhere in the House drowning his sorrows following the salutary lesson last Thursday from the electors of north Kyle, who used to be well represented by my hon. Friend the Member for Cunninghame, South (Mr. Lambie).
§ Mr. Bill Walker (Tayside, North)
If the hon. Gentleman wishes to discuss by-election results, perhaps he will comment on the result in the Tayside region last week, when the Conservatives retained the seat with a substantial majority.
§ Mr. Foulkes
My hon. Friends have admitted that, on the basis of the present system in Scotland, the hon. Member for Tayside, North would be the only Tory in the 321 House representing Scotland. We give him credit for that. Nevertheless, in the north Hule by-election, regional councillor Tom Parish overturned a 1,500 Tory majority with an 11 per cent. swing from Conservative to Labour, and that in the Secretary of State's own constituency. If that swing were reflected throughout the constituency, it would be large enough to unseat the Secretary of State.
We appreciate that other factors were at work. For example, the Tory candidate was not the cleverest choice. Also, there was the teachers' dispute, and tonight we heard about the martyrs of Man college. We saw them on television, although schools other than Man were affected in the Secretary of State's constituency. Revaluation was the key issue, and the Secretary of State's standing in Ayr has never been lower than it is today.
§ The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)
I hope that the hon. Gentleman will continue with that argument, for if he looks at the average rate increase in Kyle and Carrick—and I suspect that this applies to some of his own constituents — he will find that the domestic rate increase is 5 per cent., level with inflation. How, on that basis, does he explain revaluation having such an effect?
§ Mr. Foulkes
That is not my information. Nor was that the information published in the Glasgow Herald. Nor will it be the information that the electors and ratepayers of north Kyle will get when they take their new valuation, multiply it by the rate poundage, work out what they are due to pay and compare it with what they paid last year. That is the test, that is what they did and that is why they voted Labour.
§ Mr. Foulkes
I will not give way again. The Minister has the right of reply, and many hon. Members wish to take part in the debate.
Hon. Members may rightly say that we should be looking for an alternative to the rating system. Regrettably, the panic and hysteria among Conservative Members has allowed some of the more sinister Right wing elements to preen and spread their feathers. The hon. Member for Stirling (Mr. Forsyth), opportunistic as ever, is no doubt away making an honest penny or two—
§ Mr. Jim Craigen (Glasgow, Maryhill)
The hon. Member for Stirling (Mr. Forsyth) is upstairs in Committee dealing with the Transport Bill. He is trying to privatise the buses.
§ Mr. Foulkes
I cannot think of anywhere where I would rather have the hon. Member for Stirling than upstairs on the Transport Bill. He put forward the proposal of a poll tax which, he said, could be levied in different ways—on every adult, on every elector or on every person with an income. We understand that that proposal is being taken seriously, not just by the Secretary of State but by the Prime Minister. To rush into such a tax would be to go out of the frying pan into the fire. If rates are regressive and unfair, a poll tax would be doubly so. It would be much more regressive, with no account taken of 322 ability to pay. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) has pointed us in the direction of a local income tax. That deserves careful study. The onus is on the Government. Reform of the rating system was a clear Tory election pledge in 1974 and 1979. Tory councillors and MPs—the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) was notable amongst them—have been pressing the case for further consideration of rates reform. Of course, the hon. Member for Strathkelvin and Bearsden is in a marginal constituency, so he would, would he not? They are rightly asking what has become of that Tory election pledge. Scottish Tory councillors consider that they are becoming an endangered species. As I said earlier, Scottish Tory MPs will be equally rare.
§ Mr. Barry Henderson (Fife, North-East)
The hon. Gentleman seems to have forgotten that at the last general election one in six of the Labour candidates lost their deposits. Would he like to take any odds that that is not likely to happen to at least as many next time?
§ Mr. Foulkes
I will see the hon. Gentleman afterwards and take a bet on that. The other one was a prize. I will double it for the hon. Member for predicting the result in Fife, North-East, and it will not be a Tory retention.
What of the immediate rather than the long term disaster or debacle that faces the Tory Government? The Secretary of State should have stopped the revaluation. Is it too late to do so even now? I hope the Under-Secretary of State will give us an indication that it could still be stopped. If it is too late, however, the Government must make new money available, though not by robbing other spending areas in the Scottish Office, to provide a full cushion for domestic ratepayers. Nothing less will do.
§ Mr. Bill Walker (Tayside, North)
It is always interesting to follow the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). He talked about opportunism, but he never misses an opportunity. He enlivens our proceedings as he enlivens the proceedings in Scotland. The House would be less fun if it were not for people like him. For him to suggest that a Conservative Member was an opportunist was rather like the kettle calling the pot black.
Revaluation is like blaming the wrong thing for the problems that we face. In Scotland for a long time those who have voted for expenditure have not been footing the bill. Many people who vote at local elections are not ratepayers. The information I have is that the hon. Member for Glasgow, Garscadden (Mr. Dewar) favours a form of local income tax. If that is so, he and I are in agreement.
§ Mr. Craigen
Am I not correct in thinking that the Chancellor of the Exchequer took great pride last week in the fact that he was able to take many people out of the payment of income tax? I trust they will not lose their votes as a result.
§ Mr. Walker
That intervention is fascinating. It is typical of Socialism. Socialists want to spend, but they never want to pay. There could be a local income tax that would be fair. It would have to be used as an income tax 323 and not as a flat levy. I have no objection to those who can afford to do so having to pay. All I am saying is that those who spend and promote expenditure should make their contribution. Under the present rating system, that does not happen. The revaluation has not changed that iniquity.
I hope that the hon. Member for Carrick, Cumnock and Doon Valley will not suggest that I have a marginal seat. For many years I have believed that the only fair way in which to make people pay for locally provided services is a form of income tax. Scotland is unique in having Centre 1. Other facilities could and should be used. Private sector large computers are under-utilised in down time. Once again I see the hon. Member for Glasgow, Cathcart (Mr. Maxton) shaking his head. He has no idea what I am talking about.
§ Mr. Maxton
The problem with local income tax—I agree that the Inland Revenue is beginning an experiment to solve the problem — is that large numbers of employees in Scotland do not pay their tax to centres in Scotland. An argument is consistently put forward in the assembly against using income tax. By the time there is a Labour Government after the next election, the Inland Revenue will have solved that problem.
§ Mr. Walker
We do not have to leave it to the hon. Gentleman to solve these problems. Of course I am aware that many people living and working in Scotland have employers from outside Scotland. Many of them are large companies operating cost and profit centres from computer bases south of the border. Every employer has to register every employee with the Department of Employment. Cross-fertilisation is not as difficult and horrendous today as it was five or 10 years ago. Some of the facilities are not in the public purse at the moment, but they are available and under-utilised. There are machines with the necessary capability and capacity; we only require the will.
I hope that people will not be put off because Centre 1 has a limited ability and because of the difficulties. I have already written to my right hon. Friend the Secretary of State putting concrete decisions. I have not simply grabbed these proposals out of the sky. The facilities are there. We need only management and co-ordination.
Of course, Government Members comment on the problems created because of the activities over long periods of profligate authorities. Governments, whatever their colour, always introduce cruel and arbitrary measures when faced with having to contain public expenditure. One cannot deal equally with the problems. Governments bring in across-the-board measures.
I have never argued with some of the actions of the Labour Government when faced with certain difficulties, because that was the correct approach at that time. I have never criticised the right hon. Member for Glasgow, Govan (Mr. Millan) for those actions, because they were right. The Labour Government introduced across-the-board measures with massive reductions in expenditure, so that authorities that began from low-spending bases—such as Perth and Kinross — and willingly acquiesced were disadvantaged compared with authorities that did not acquiesce in the way desired by the right hon. Member for 324 Govan. That meant that those authorities started from a higher spending base and retained that position as the years passed.
In 1979, when the Conservative party came to office, it introduced measures to curtail local government spending. Inevitably, the authorities that behaved were already in a weak position compared with the profligate authorities. No matter how much one tries, one cannot square that circle. The differential is too great. With the best of intentions, it will never be possible to make the present system fair to all authorities. Inevitably, the good authorities will be penalised more than the profligate ones.
I accept that the profligate authorities had grown accustomed to spending at a certain level, just as any spendthrift grows accustomed to living at a certain level. The adjustment for them had to be over a much longer period. The problem is that we do not have that length of time.
Revaluation is an attempt to spread the burden in a different and more acceptable way so that industry is not disadvantaged. We do not argue with that, because it is right that we look carefully at the way we tax jobs. This has done more than anything else in my judgment, to force employers to lay people off earlier than they should ever have done. Employers do not willingly lay off staff; they do so reluctantly, in my experience, and they do so because it is the one area in which they can act quickly. They can do little about their other expenditure but they can do quite a bit about the cost of staff, which is one of the largest cost elements, certainly for labour-intensive industries.
Consequently, it was inevitable that the rate support reductions and the transfer because of the present revaluation would produce ghastly problems and inequities. In my own constituency I have plenty of examples, but I am not going to bore the House with details because all of us can talk about ghastly examples in our own constituencies. All I will say is that the largest employer in north Tayside—one industry that has been showing more growth than others in recent years — is tourism, and that has been hard hit by the revaluation because it has hit the shopkeepers and hotels. In some instances, the increase in the rates to be paid is greater than the net profit realised in any one of the last five years. That can only mean more jobs lost, and no one can welcome that.
Therefore, I hope that Ministers are well aware of the mood in Scotland in favour of a real, positive change in the system. It is not promises we are looking for, but real plans, to be brought forward and implemented as soon as possible.
§ Mr. Bruce Millan (Glasgow, Govan)
I was rather surprised that the hon. Member for Tayside, North (Mr. Walker), who normally gives us a great deal of detail about his constituency, did not mention the increases which domestic ratepayers in the Tayside region will face in the forthcoming year. His own district has an increase of 24.6 per cent., Angus 23.8 per cent. and even the comparatively responsible authority of Dundee has an increase of 19.9 per cent. — rather lower, but a very considerable burden on the ratepayers none the less.
There has been a real sense of outrage in Scotland as these revaluation notices have come in. If ever a Minister was in a mess and thoroughly deserved to be, it is the 325 Secretary of State over revaluation. He was well warned about what was happening. It is not something that just came up and took him by surprise. If it did, he is even less informed about the realities of local government finance than some of us have considered him to be. He was well warned that there would be this kind of trouble in Scotland, but he took no effective action to deal with it.
Whatever the merits of revaluation, it cannot be sensible that there is a revaluation in Scotland this year when England has not had a revaluation since 1973. It simply does not make sense. It is impossible to explain this to the electors in Scotland. There is a considerable difference between 1978 and 1985. There had been only a five-year gap in 1978 between the revaluation in England and that in Scotland. There is now a 12-year gap. What is more, the revaluation in 1978, I am glad to say, reduced the burden on domestic ratepayers in Scotland. No one in Scotland can understand why the same Government can say that we can go 12 years without a revaluation in England, but that we must have a revaluation in Scotland now.
§ Mr. Millan
No, I do not think so. If my hon. Friend does not mind, I should like to finish this point.
At one time, the Government promised to abolish domestic rates. We knew several months ago that there would be considerable trouble. The argument was set out in the debate on the rate support grant on 24 January this year by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and some Back Benchers, but the Government refused to acknowledge the reality. The Secretary of State said that everything would be all right and the increase would be only 13 per cent. for domestic ratepayers, as if it were some great triumph, when he is trying to screw down public servants to wage increases of 3 and 4 per cent. We warned him that the rates increase for domestic ratepayers would be considerably higher than 13 per cent., and so it has turned out to be.
That need not have happened. The revaluation need not have happened. Even if the Government, for good reasons or bad, decided to go ahead with revaluation, when they saw the results that were coming out, there was no reason why domestic ratepayers should not have been effectively shielded from those considerable increases. In the original rate support grant settlement, the domestic element could have been considerably higher than it was. It has been slightly increased since, and I shall return to that matter. The Government could even have decided on a redistribution of the rating burden between the different categories and classes of ratepayers, with the balance between them remaining essentially the same as it had been before the revaluation. Incidentally, the Secretary of State toyed with that idea at one time and announced that that was the way in which he would proceed. However, none of those things happened.
We did not have an effective shielding of the domestic ratepayers, and the inevitable happened. The figures came out and showed that the average increase for domestic ratepayers in Scotland was to be not 13 per cent., but 27 per cent.—rather more than double what the Secretary of State had estimated. Horror of horrors, some of those substantial increases were happening in Tory areas — 326 again as we had forecast in the debate on 24 January—where district councils had done their best to keep within the guidelines sent out by the Secretary of State.
At first the Secretary of State was going to brazen it out. Sir James Gould traipsed down to London and was rebuffed. He was told that he was causing an unnecessary disturbance and that he should go away and think again. He went home to Scotland with his tail between his legs and apologised to the party in Scotland for causing that little upset. The Secretary of State was not able to brazen it out, because of the real sense of outrage in his own ranks and among ratepayers in Scotland.
We then had the Secretary of State coming to the House on a Friday—
§ Mr. Millan
Indeed. It was before the Scottish Labour party conference, when the right hon. Gentleman hoped that nobody would be here. He said that he was going to produce an extra £38.5 million by way of domestic element. We are meant to be grateful for the fact that he has produced that, but it has only come off another part of the Scottish Office budget, which is already in straitened circumstances. Even with the £38.5 million, the increases are still on average 21 per cent. in Scotland, according to the Convention of Scottish Local Authorities' figures that have been published.
There is now talk of a review. We have had many such reviews before. It will go over the same old ground. There is nothing new in that. It will not find some magic solution to solve all the problems which we now face. A poll tax is being considered. I can say right away, speaking for myself and, I think, for my hon. Friends as well, that we are absolutely opposed to anything that is so bitterly and fundamentally regressive as a poll tax. We shall oppose any such idea. Of course local income tax is a possibility, but the idea that we can replace the complete rating system with that is nonsense—it is a non-starter. For many years I have been in favour of a local income tax, but it will not solve the problems.
The reality is that the rating system can work reasonably well, provided that it is not over-burdened, but it has been over-burdened by the deliberate actions of the Government. That is why we are in such a mess. Revaluation is simply the straw that has broken the camel's back. The whole behaviour of the Government since 1979 has caused the trouble that we now face. I hope that the ratepayers of Scotland understand that.
We have not been living in halcyon days in 1984–85. The domestic ratepayer in Scotland has been paying two and half times as much as in 1978–79, the last year of the Labour Government. He paid £132 then and has paid £328 in the year now ending. There will be an average rates bill of £397 in the coming year, despite the £38.5 million to which I have referred. The rate burden on the average domestic ratepayer in 1985–86 will be just over three times what it was in 1978–79.
The Government have deliberately taken the burden off themselves and put it on the backs of local ratepayers. They have reduced the rate of grant which they inherited of 68.5 per cent. to 56.6 per cent. for the forthcoming year. Indeed, in reality the figures will be lower than that because it is paid on inadequate and unrealistic figures.
I and my hon. Friends have consistently pointed out the problems in every rate support grant debate, and especially 327 in the debate on 24 January. According to the Government, local authorities over-budgeted by £114 million for the year about to end and are paying the penalty of £90 million. I warned the Secretary of State in explicit terms that there would be considerable over-budgeting in 1985–86, and that is what has happened. The so-called excess budgets stand at £90 million for 1985–86.
Before Conservative Members say that that simply illustrates the profligacy of local authorities, I must tell them that COSLA estimated — and the figures have never been denied — that if local authorities had standstill budgets in real terms, even using the Government's inflation figures—which, needless to say, are underestimated — they would require £101 million more in the current year just to stand still. If the figure is £90, they are not standing still but are actually reducing their budgeted expenditure in real terms.
§ Mr. Millan
No, I shall not give way. This is a short debate and I am aware that many of my hon. Friends want to contribute to it.
In effect, we have standstill budgets. There is no real increase in local authority expenditure. In the forthcoming year the average domestic ratepayer in Scotland will pay 21 per cent. more than he did in 1984–85. He will pay three times more in cash terms than he did in the last year of the previous Labour Government. At the same time, he will receive poorer services for the additional payments that he is making. We shall again go through the dreary business of penalties. There will be fire and brimstone from the Secretary of State for Scotland about how tough he will be and all the rest of it.
Over the past five or six years we have seen a deliberate attack by the Secretary of State on local authorities, on local democracy and on local services. At last the Secretary of State has been found out. It is a pity that he was not found out sooner. He is responsible for the crisis. It is clear that responsibility rests on his shoulders. If he would deal decently and honestly with local authorities, even at this late stage, he could undo some of the damage that he has done.
§ Sir Hector Monro (Dumfries)
This much-heralded attack on the Government has fallen astonishingly flat. We expected to see at least 30 or 40 Scottish Socialist Members in their places to mount the attack, but we see only 13, of which two are from the shadow Scottish Office, two from the shadow Foreign Office, two from the Opposition Whips' Office and one from the shadow Ministry of Agriculture, Fisheries and Food. There is hardly a Scottish Opposition Back Bencher in his place. Even the Chairman of the Select Committee on Scottish Affairs is in his place to help pad out the attendance of Labour Members.
Where is the hon. Member for Fife, Central (Mr. Hamilton), who was making snide remarks on Monday about the probable attendance this evening? I have a very good idea where he is. Scottish Labour Members have been shouting the odds in the press ever since the debate was announced. We were told that it would be a devastating attack on the Government. If the Opposition can get only six Back Benchers to attend, it is a pretty miserable affair for them. Of course, I did not expect any Scottish SDP Members to be present.
§ Sir Hector Monro
I am coming to the rates. For the moment I am directing myself to the non-existent attack from the Opposition. The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) might have been playing the halls tonight as a rather second-rate Billy Connolly. He would do rather better if he stuck to the Belgrano. I suppose that it is unfortunate that he does not have his other half in the Chamber this evening, the hon. Member for Linlithgow (Mr. Dalyell).
I was called to take up the remarks of the right hon. Member for Glasgow, Govan (Mr. Millan), and that was reminiscent of the mid-1970s, when he was Secretary of State for Scotland. The then Conservative Opposition complained bitterly about the way that he was handling rate support grant and revaluation. I recall frequently saying to the right hon. Gentleman, as I have since he left Office, that we were a long way from getting—Well, we have another starter. The right hon. and learned Member for Monklands, East (Mr. Smith) has entered the Chamber. I was saying that I remember saying frequently to the right hon. Member for Govan that there was no balance between authorities within the guidelines, especially in the rural areas, and the rate support grant.
I accept that there has been a reduction in the RSG over the years, and rightly so in terms of public expenditure. As both sides accept, that greatly affected authorities which were keeping within their guidelines. Coupled with revaluation, it has brought about a very serious situation.
The Opposition, however, have not given sufficient consideration to the great improvement in domestic rates due to the relief provided by my right hon. Friend the Secretary of State. The figure of 21 per cent. that is bandied about in the press may well turn out to be nearer 14 or 15 per cent. when the rates are actually paid, although much will depend on the revaluation of individual properties. Nevertheless, we should not underestimate what my right hon. Friend has done. As it was done in two stages—first allowing 5p and then a further 3p—it is clear that he was always well aware of that issue.
We should also like to know—my hon. Friend the Under-Secretary of State may not be able to tell us, as it is not his responsibility—how the assessors arrive at different factors for different areas, whether it be of 2.6 as in one district in my constituency, 2.4, 2.3 or whatever. That has a serious impact on the resource element available to district authorities as well as on regional rates. Whatever the reason for the difference in the factors, this has become one of the most serious issues of the revaluation. It will be interesting to see how the figures stand up to the many appeals that I predict will take place in the coming months.
Great concern has also been aroused among my hon. Friends—and, one hopes, among the Opposition—about the actual figures put on domestic, commercial and industrial property. I have heard of increases from £5,000 to £25,000 for shops in Dumfries and of threefold and even fivefold increases for other properties. As my hon. Friend the Member for Tayside, North (Mr. Walker) has said, the increases applied to hotels will inevitably affect the tourist industry and will cost owners and occupiers a substantial amount when the rates have to be paid.
§ Mr. Ancram
As I said the other day in relation to the Borders, although in areas such as my hon. Friend's 329 constituency valuations for commercial properties have been increased, there are also gainers, albeit not in my hon. Friend's constituency. It is interesting to note, for instance, that the North-West Castle hotel in Stranraer has had a reduction of 30 per cent. in the actual rates to be paid.
§ Sir Hector Monro
That is splendid news for the North-West Castle—a hostelry of the highest repute and an excellent curling club. I hope that it will now be able to offer special discounts to regular customers.
My hon. Friend the Under-Secretary of State may also have some helpful news for us as to whether the provisions of the Rating and Valuation (Amendment) (Scotland) Act 1984 relating to sports grounds have proved effective. I appreciate that this is likely to go to appeal, but my hon. Friend may be able to impart some interesting knowledge with regard to Celtic, Ayr races, Ayr football club, and so on. I believe that there may be some good news for sports ground owners and it would be interesting to hear some figures when my hon. Friend winds up the debate. Indeed, I should be happy to give way now if he has managed to locate the information.
§ Mr. Ancram
I am grateful to my hon. Friend for giving way, as he mentioned Ayr football club. I understand that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) has some interests in that area. He might be interested to learn that what it pays in rates will be reduced by 48 per cent. as a result of the revaluation.
§ Sir Hector Monro
There we are. Let us have some cheers from the hon. Gentleman who lives in that beautiful countryside. I am sorry to see that he has departed. [HON. MEMBERS: "He is up there in the Strangers' Gallery.") From that exalted position, he has even further to bend to my hon. Friend the Minister, who has achieved such assistance for his football club.
We have all read with interest — I am sure that Opposition Members will have read every page —the Layfield report and subsequent Green Papers. We all appreciate that it is astonishingly difficult to find the right time to make improvements to the rating system. I shall not pronounce now how I think it should be done. I listened with interest to those with greater knowledge. The present system seems so unfair that it cannot go on for more than another year or two while the proper legislation is brought through the House.
A relatively small number of people pay the rates, yet they are the victims of Socialist Administrations which are profligate with other people's money. We must find a better system so that we can look after all ratepayers. I am sure that the Government will ensure that the present system does not continue one year longer than is necessary. I am sure that they will make every effort to ensure that an alternative system is in the pipeline and ready for operation as soon as possible.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I should like to bring a note of rationality and reasonableness to the debate. Anyone who thinks that the present system is a shambles, as I do, has to make clear 330 his view on the revaluation. Given the present system of rating reviews to raise local government finance, it is imperative to have regular revaluations.
The Minister should consider closely the work done by the Anderson commission of inquiry into commercial rating in 1970. It concluded that it was reasonable to have regular revaluations only on the basis of their being carried out simultaneous north and south of the border. Those whose live just across the River Tweed from England find it unreasonable that they must bear burdens which their English neighbours escape. That point must be borne in mind. We would accept a regular revaluation, although I must qualify that by saying, as the right hon. Member for Glasgow, Govan (Mr. Millan) eloquently said, that the Government could have anticipated many of the difficulties more sensitively. There are devices and ways of cushioning the blows. Although I give the Government credit fro bringing forward extra domestic relief, it may not be enough.
Earlier, the Government were criticised for the sums that they were giving away. I give them credit for putting back some money, but the fact that it was necessary to do so when they did it demonstrates that they had not fully anticipated the effects of the combination of revaluation and reductions in rate support grant. That is the Government's philosophy and policy and they are entitled to hold that view, but they are culpable for not looking sufficiently far ahead and anticipating the way in which the reduction in rate support grant would compound the revaluation. The Government should be condemned for that.
I agree with much that has been said about the effects of the domestic increases. My experience shows that retired and elderly people who live on fixed incomes without the benefit of large capital sums are extremely nervous about the way in which the domestic position is affecting and will affect them in future.
More important is the position that affects commercial ratepayers, especially small businesses. The National Federation of the Self-Employed and Small Businesses has done a great deal of work in my constituency and other areas in trying to assist appeals that will be necessary. The Minister has said in exchanges with me that he believes that the appeal mechanism will deal with the problem.
§ Mr. Kirkwood
The appeal mechanism will deal with the problem, if it is unfair. However, the problem is more fundamental than that. Money is now much tighter than it was at the time of the last revaluation, which caused tremendous heartache. We must take into account the present high interest rates. Small businesses have had commercial increases visited on them which bear no relation to their profitability, as the hon. Member for Tayside, North (Mr. Walker) said. They cannot anticipate the increases, such as those from revaluations and changes in the rate support grant this year. There is no security for them in future.
Family businesses find it extremely difficult to control their costs. They often employ members of the family and, like everyone else, they face increased costs, but can increase their income only by increasing the number of customers. In some cases that is impossible. The Under-Secretary comes from an area where there is a huge landward population, and knows that many such 331 businesses are situated in small villages and towns. Local authorities throughout Scotland are working hard to sustain landward populations. Changes such as these will have a dramatic impact. The Minister may say that it is localised, but I have examples from my constituency and from my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), and, although the hon. Member for Tayside, North did not regale us with examples, all over Scotland there are many small businesses in rural areas which will suffer. If they do not suffer to the extent of closing, they will let the fabric of their heritable property suffer, whether it is a shop, a garage, a hotel and or whatever. They are laying in store problems for the future. The problems of tourism are also intimately involved, and the Government will have to take them into account.
§ Mr. Michael Forsyth (Stirling)
The hon. Gentleman has defined the problem eloquently. What is the solution? Does he favour the Liberal party's previous solution of a local income tax, given that it would take until the early 1990s to introduce such a reform?
§ Mr. Kirkwood
I am grateful to the hon. Gentleman for intervening, because he brings me to my concluding point. If people criticise what is happening now, they must say what should happen in its place. If I were the Under-Secretary of State for Scotland now, the position is so serious for commercial ratepayers that I would introduce an emergency package of relief for them. The hon. Gentleman may say that the machinery is not easily available for that, and I accept that. As he says, commercial ratepayers are not represented locally in terms of votes on local authorities. Therefore, it is unreasonable to expect them to suffer increases of more than 50 per cent. in the short term.
It may not be easy to resolve the problem, but one device could be investigated. If the average multiplier of commercial rates is 2.6 across the board, why do we not consider giving cash relief on an established needs basis to every commercial ratepayer who has suffered a rate increase of a multiplier in excess of 4? In some parts of the country the multiplier is nothing like 2.6; it is somewhere between 4 and 7. The Stirling area is one such area. In the Scottish Grand Committee on Monday the hon. Member for Cunninghame, North (Mr. Corrie) and the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) talked about such increases. We can all show cases where the multiplier is more than 4. I do not believe that, numerically, that would be a big number. I would guess—it is a fag-packet estimate—that between 1,000 and 1,500 businesses in Scotland are in that position. If they all received an average cash payment of £1,000—that is another fag-packet estimate — the Government would have to spend only £1 million or £1.5 million, which would be a lifeline to those small businesses. That is what I would do, because the problem is so serious that it would merit such treatment.
If the Minister is searching for gestures that are slightly more hollow but which nevertheless would be welcome, he could increase the percentage that commercial ratepayers could retain while they appeal. At present, the proportion is 10 per cent. Some of those businesses will not last a year. If the Minister made the proportion 50 per cent., to give those businesses a breathing space until their affairs were in order, he would do much to help. Those are the short-term measures that we should be considering now.
332 For the long term, the Liberal party has a well-developed policy on local income tax which could be brought forward. The computerisation programme could be put on stream earlier. I know that that is the argument which the Minister will put forward in defence of the local income tax not being introduced earlier.
The right hon. Member for Govan said that a local income tax would not be the complete answer, and I agree with him. It would have to be supported by central funding. But it is not impossible. This revaluation is my first—I hope that it is my last—and I do not believe that the present system can survive.
§ Dr. Jeremy Bray (Motherwell, South)
Is the hon. Gentleman aware that small business people in my constituency are being told that the appeals delay will be not one year but two years? Does he accept that they have no chance of staying in business if their cases take so long?
§ Mr. Kirkwood
That is a valuable point, which gives me a good point on which to wind up my speech.
In my constituency I have had meetings, and I know that other hon. Members have had similar experiences, which have shown that traders are getting together and are systematically and in concert using the appeal procedure, which will get clogged up. If that happens, there is no early prospect of getting this business resolved. I make no apology for indulging in special pleading for small businesses in the commercial sector. I hope that the Secretary of State will consider some of the ideas that I have put forward.
§ 12 midnight
§ Mr. Michael Hirst (Strathkelvin and Bearsden)
I feel that I am uniquely entitled, if not well qualified, to speak in this debate, as my constituents have the invidious distinction of paying the highest rates in Scotland, and probably, outside central London, the highest rates in Britain. I was somewhat rueful to note in The Times this morning that the average rates for Kensington and Chelsea for next year are £743, when many of my constituents would give their eye teeth to be paying only £743.
It was perhaps inevitable that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) should choose this subject, but it was wrong and unjust of him to try to make political capital out of the understandable fears of the people of Scotland. Labour's position on local government spending bears just a moment of examination. Labour party members are the people who invariably support higher spending. Has one ever heard of a Labour-controlled local authority that wants fewer services? Labour party members can find the money for the striking miners when it suits them. They are the people in Edinburgh district council who have not spared any expense to put up signs all around the city advertising their peculiar notion that higher local spending produces more local authority jobs. They are the people who are sending their councillors off on a freebie to Cordoba to study nuclear-free zones, with not the slightest consideration for the poor ratepayers at home who have to pick up the tab for them. They are the people who, in Glasgow, were prepared to knock down a block of tenements rather than sell them to the private sector.
I invite the House, although it is gone midnight, to consider what the prevailing level of rates in Scotland would be if it were not for the efforts that my right hon.
333 Friend the Secretary of State for Scotland has made to restrain local government spending. The Conservative party does not take credit for the fact that local government spending is higher in quantum terms than it was in 1979.
Some Labour Members support revaluation, and I give them credit for their honesty in admitting it. They did so in 1982 when the matter was first discussed, and do so now that it is back on the agenda. They are the people who want higher spending and are not willing to compromise over any restriction on services. That cocktail must mean higher rates for ratepayers. It was an unconvincing performance for the hon. Member for Carrick, Cumnock and Doon Valley to weep crocodile tears on behalf of Scottish ratepayers when one looks at the example of his friends in local government.
I recognise the widespread concern in Scotland, and the bewilderment and anger of many people who will have to pay substantially higher rates next year. They ask two legitimate questions. The first is why they in Scotland should have a revaluation when there is no revaluation south of the border, and the second is why, on this occasion, the domestic ratepayers are suffering.
Although the principles of rating may be similar north and south of the border, the practices are different. I notice that the hon. Member for Dundee, East (Mr. Wilson) is here. He rather likes the way of organising our rating system that we have in Scotland. The fact that the assessors are bound by statute to have regular revaluations in Scotland, but that the Inland Revenue south of the border is able to postpone, apparently indefinitely, its revaluations is a grievance that Scottish ratepayers are right to articulate.
I note that Scottish requirements are dealt with under legislation that was passed by the last Labour Government, supported by the Liberal party. Is it not the ultimate hypocrisy that the Opposition should now be weeping crocodile tears about the increases? Scottish ratepayers must not be allowed to forget that the Act of Parliament which calls for periodic revaluation in Scotland was passed by a Labour Government.
§ Mr. Home Robertson
Will the hon. Gentleman reflect upon the fact, since he referred to hypocrisy, that the manifesto commitment of his party was as follows:We will also take steps to bring the Scottish and English valuation systems more into line, to prevent anomalies occurring."?What has gone wrong?
§ Mr. Hirst
I spent most of last winter sitting in Committee all through the night on the Rating and Valuation (Amendment) (Scotland) Act. The hon. Gentleman was the Whip on duty and I was convinced that he was blinkered, if not asleep. The fact that he has asked that question, when I recall that we spent about six hours talking about English comparators, proves to me that the Committee discussions went right over his head.
The other question which many of my constituents are asking is why Scottish domestic ratepayers have come out worse. Few domestic ratepayers recall that the result of the 1978 revaluation was that industrial ratepayers were hammered while domestic ratepayers were treated relatively lightly. However, inflation was running at 25 per cent. under the last Labour Government. Although the 334 amount paid by domestic ratepayers went down after the 1978 revaluation, none of us noticed the difference because of the prevailing rate of inflation.
This time, however, there is a partial redress of the imbalance, or so we are told. Industrial ratepayers will pay less while commercial ratepayers come out about even, but I have heard of no commercial ratepayer in my constituency who finds himself the uniquely favoured recipient of a neutral rates bill. I very much hope that the Minister will be able to leap to his feet, as he has already done with unfailing regularity, and tell me about some of the commercial ratepayers in Strathkelvin and Bearsden who have been presented with a neutral rates bill.
The domestic ratepayer will bear a larger share of the burden, and my right hon. Friend the Secretary of State was prepared to acknowledge that fact. Although the Opposition may scoff, he was prepared to come to the House and offer Scottish domestic ratepayers more relief than their friends in COSLA had requested. The 5p initially and the extra 3p subsequently may be scorned by the Opposition, but it is not scorned by my ratepayers, who appreciate the relief that has been given.
The right hon. Member for Glasgow, Govan (Mr. Millan) was right when he said that one of the causes of higher rates was the reduction in rate support grant. That fact has to be recognised by all hon. Members. It would be quite wrong of me to welcome higher spending on health, social services and law and order without at the same time accepting that other budgets will suffer a consequential reduction. Although I regret the reduction in the level of rate support grant, I accept that it is part of the package which my right hon. and hon. Friends in the Scottish Office believed it right to implement.
My concern does not stop at the quantum of rate support grant but extends to its distribution. This has caused much anguish in district councils. The needs element of rate support grant has been substantially curtailed. I have made representations privately to the Minister and publicly—[Interruption.] Hon. Members do me a disservice if they think that I am thinking of only one local authority. I am concerned about both local authorities in my constituency. Both have suffered reductions, although they are of different complexions. The irony is that, if ever there was an example of a local authority running its affairs in a prudent and careful way it is the Bearsden and Milngavie district council. I am grateful to the Minister for his assurances. He acknowledges the prudent way in which that council has conducted itself. I am grateful for his extra support on the non housing revenue account allocation this year.
Such a substantial reduction puts pressures on local authorities, their officials and councillors and ultimately upon the ratepayers. I am not ashamed to admit that I argued for a slower shift of resources from the districts to the regions because I believe that a massive shift will create difficulties. As a pragmatist, I am a gradualist in all things. [Interruption.] I am sure that the people of Scotland will be reassured by the fact that after midnight signs of life come from the Opposition Benches.
I repeat the concern that I expressed on Monday in the Scottish Grand Committee about the rate support grant allocation for 1986–87. I was heartened by the Minister's assurance that he and the Secretary of State would consider my representations carefully. However, like many other hon. Members, I find rates an unsatisfactory method of financing local government expenditure. They are 335 regressive. They take no account of ability to pay. The people who are most severely affected by rates are those on modest incomes, those who have retired but have some savings, and those who are on a level of income which is just too high to obtain benefit, but for whom rates take a significant proportion of their income.
The rating system takes no account of the use made of local services. How many times is resentment expressed to hon. Members on all sides of the House by people who can see that some neighbouring households enjoy four or five incomes, but pay the same rates?
The Rating and Valuation (Amendment) (Scotland) Act 1984 made several welcome improvements to the rating system, but one of the objections to the system is that overspending is passed back to the ratepayer. The real losers are the ratepayers who suffer loss of grant, not the people who enjoy the extra services which contribute to the overspending. Construction firms and small businesses who could have a share of the capital spending cake, which is forfeited because of overspending, also suffer.
§ Mr. Henderson
Is my hon. Friend aware that an overspend of only 5 per cent. by five regional councils, which does not sound very much, works out in practice, for the reasons that my hon. Friend is giving, in ratepayers having to face a 22 per cent. increase in rates, whereas if there is a cut of 5 per cent., the effect on rate increases in regional councils would be only 2 per cent.?
§ Mr. Hirst
I am grateful to my hon. Friend for making the point. He has made with eloquence a point which can be repeated in councils the length and breadth of Scotland. It is the same old thing, that he, like me, must reflect ruefully upon the fact that the local authority was prepared to churn out money as though is was from a printing machine when it came to helping its friends in the mining community, whose misery was self-inflicted, unlike the misery inflicted upon ratepayers as a result of what has been done.
I have to argue strongly for a review of the system, not least because the relationship between local government and central Government must be reformed. I believe that there are substantial advantages to be obtained from removing the inevitable haggling that results year after year, the penalties that are imposed on local government for profligacy and the objectionable results that are often passed back to the ratepayers as a result of overspending.
I believe—here I may be at variance with some of my hon. Friends — that, when the history books are written, revaluation will be shown to have been the catalyst that brought about the reform of the domestic rating system which we all want. I believe that the injustices of the system and the way in which it has worked out in practice have created an irresistible momentum for change which I hope will be picked up and reflected in action by Government.
I have to utter a word of caution, because there will be those who will argue that there is advantage and merit in Scotland being the guinea pig for some sort of United Kingdom change. The great beauty of the Government is that we have the breadth of vision and the breadth of debate. Unfortunately, that is not be found on the Opposition Benches, whose Members have given us a predictable response. I urge caution because I recognise that a Scotland-only solution will narrow the alternatives. At this stage, I should like to see the field left as open as 336 possible. I do not believe that there is any advantage in hurrying towards a solution which will take us off one hook merely to impale us upon another. [Laughter.] I think that it is tragic that the hon. Member for Carrick, Cumnock and Doon Valley should be bursting with laughter about a serious matter which afflicts his constituents as well as mine. I believe that, when Opposition Members read Hansard, they will reflect upon the matter.
I do not want a botched solution. I want to see a solution that takes account of the momentum for change both north and south of the border, and one that properly takes account of ability to pay and the use made of local services.
I am bound to confess to a preference for a system of local income tax with some control. I accept that there will be problems in achieving this, although hon. Members who were present last Wednesday to hear the Financial Secretary to the Treasury winding up the debate on the Budget will be aware that he explained that the developments in the computerisation of taxpayers' records south of the border were likely to take place sooner than many of us had otherwise expected. In bringing together the tax and Budget systems, I hope that my right hon. and hon. Friends in Government will not forget the possibility that must exist for developing a system of income tax.
§ Mr. Forsyth
Allowing for the problem of computerisation, how would my hon. Friend overcome the problem, with a local income tax, that the Inland Revenue say that the minimum by which the tax could be increased would be a halfpenny, meaning that local authorities would have to increase their revenue by amounts of 10 per cent. on each occasion. That would encourage the very profligacy about which he has been complaining.
§ Mr. Hirst
That is a legitimate point. If the political will exists, such problems can be overcome. At the end of the day, a hybrid solution may be produced, though I am not attracted by that possibility.
I hope that tonight the Minister will be able to reassure the beleaguered Scottish ratepayers that the Government understand the problem, that an important element has been the overspending—which seems to be encouraged by Opposition Members—and that there is at least the prospect of a commitment to reform.
§ Mr. David Lambie (Cunninghame, South)
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) said that many small businesses would find themselves bankrupt before their appeals were decided. Indeed, he thought that appeals could take a year or two to decide. I am one of the few hon. Members who participated in a major appeal at the time of the 1978 revaluation. Four years passed before we received a decision from the appeals tribunal in Edinburgh, and that appeal concerned just over 50 ratepayers. Today, almost everybody who has recently received an assessment has indicated an intention to appeal.
Appeals of this nature must be based on comparisons. The only way to obtain a comparison is to check the valuation rolls. As those documents are not printed and available locally, an appeal cannot even be started. For that reason, the hon. Member for Roxburgh and 337 Berwickshire made a valid point when he said that small businesses would be bankrupt before their appeals were resolved.
§ Mr. Ancram
It is worth remembering that under section 9 of the Local Government (Scotland) Act 1975 there is a proviso for rating authorities to agree with the appellant for the payment of less than 90 per cent. until the appeal has been determined. Local authorities may wish to consider that.
§ Mr. Lambie
On that basis, people who have been charged an increase of, say, £100, could be told, "If you appeal, we will save you £10 this year, but you must pay £90 of the increase." The important part is the £90, not the rebate that they will be given while the appeal is under consideration. The Minister's point represents only a sop. He has no experience of these matters. He should consult the Secretary of State, who knows how long it takes to get these matters settled. Many of the right hon. Gentleman's constituents in Ayr were time-barred from appealing because of the delay that was involved in reaching what has become known as the Troon decision. Therefore, before the hon. Gentleman tries to be smart, let him consult the Secretary of State for Scotland.
The point was made by the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) that the Government have said that in regard to commercial property the revaluation is neutral. Let them tell the shopkeepers in the main street in Callendar, or the people in my area, or the people in the constituency of the hon. Member for Cunninghame, North (Mr. Come), that it is a neutral revaluation. It is all right for the Under-Secretary to come to the Dispatch Box and say that everything in the garden is lovely and that Ayr racecourse and Ayr United football club will get massive reductions in their rates bills.
What will the hon. Gentleman say to all the bowling clubs in North Ayrshire? What will he say to Ardeer bowling club, for example, with a membership of 82 men and 44 women, where the rateable value of £1,750 will be increased to £4,400, an increase of 251 per cent.? The members will be well pleased when I tell them that all the supporters of Ayr United are doing well. All the friends of the hon. Member for Dumfries (Sir H. Monro) who go down to Ayr racecourse will be pleased that it is doing well. What about the ordinary people who are members of bowling clubs which will be put out of business because of the effects of revaluation?
My hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) talked about the by-election result for the North Kyle seat on Strathclyde regional council. That is an area I know well. I was glad to lose it from my old constituency of Central Ayrshire under the boundary revision, because there were not many Labour voters in it. Some of my Labour colleagues were angry when I said that that part of Central Ayrshire should go to the constituency of the Secretary of State. He was happy to get it.
One of the reasons why the Tories lost that by-election may have been that they sent down their old friend, John Davidson, the Scottish director of the Confederation of British Industry, to speak to the young Tories in Troon the Saturday before the by-election. What did he speak about? He told them that revaluation was the greatest thing since 338 sliced bread and that ICI's rates had been substantially reduced. The week before, John Harvey-Jones, the chairman of ICI, made a statement in London that ICI had made £1,000 million profit last year. The ratepayers of Troon had to cheer that. ICI, Beechams and Roches are getting their rates reduced, but the ratepayers in Troon are getting their rates increased. That was probably why the Tories lost the by-election. If the Labour party ever wants a spokesman before a by-election, it should send for John Davidson. He will make a good job of it; he is certainly honest. The CBI is organised and financed by big business, and he is not interested in the small businesses in my area.
I shall have to say to the garage owners in my area and in that of the hon. Member for Cunninghame, North, "It is all right. ICI is getting its rates reduced." During the past three years local garage owners have slimmed down their organisations to the bone. Throughout Scotland, garages are going bankrupt because of the economic conditions, and now they are facing increased valuations. For example, in Irvine, one garage rateable value was £4,555; it is now up to £8,500. In Dairy, in the constituency of the hon. Member for Cunninghame, North, the old rateable value of another garage was £10,247; the new rateable value is £19,150. What is the solution? Men will have to be sacked and facilities curtailed.
§ Mr. Lambie
The hon. Member will speak for himself, and I am sure that he will support me when he catches your eye, Mr. Deputy Speaker.
I am sorry that the hon. Member for Dumfries is not here, because earlier he participated in much banter. Matters are too serious for ratepayers in Scotland for hon. Members to make party political speeches. The ratepayers want decisions—now, not by and by. There should be a united front of all hon. Members interested in being fair to Scotland's ratepayers—not just the major industries—whom we are supposed to represent.
§ Mr. Bill Walker
In what would the hon. Gentleman like Conservative Members to join him? It is lovely to be "fair". How does the hon. Gentleman propose to be fair?
§ Mr. Lambie
It is always wrong to give way at this stage of a speech. If the hon. Gentleman had waited, I would have answered the point.
Matters are too serious for party political speeches and for people to indulge in banter about what happened in 1971, 1976 and 1982. As a Member of Parliament representing Troon until the last election, I know how substantial increases in valuation can effect people, especially those on low incomes. It does me no good to say that there is a voice shouting in the wilderness, although I must be fair and point out that our campaign had the full support of the right hon. Member for Ayr (Mr. Younger) from 1978–79 until he became Secretary of State for Scotland. He then left the team and battled with me. I am looking for support from hon. Members so that immediate decisions can be taken to help people.
The foundation of the modern Scottish rating system was the Poor Law (Scotland) Act 1845. Since the passing of that legislation, there have been a series of royal commissions, departmental committees and working parties looking into the rating system. There is nothing 339 new in examining complaints about the system. Every one of those major committees, with one exception, has until recently come out in favour of the present rating system.
In 1976, the Labour Government set up the Layfield committee to investigate rates in the United Kingdom. It too, after all its investigations, came out in favour of the present basic rating system, although it said that it should be modified by the introduction of an element of local income tax. In 1982, when the Select Committee on the Environment decided to investigate the rating system, it also came out, after all the evidence, in favour of the present rating system. Therefore, those who want to change the system must do so in a way that counteracts all the evidence that has been given to the various royal commissions, departmental committees, working parties, Select Committees and so on since 1845.
It is not right that, as the hon. Member for Strathkelvin and Bearsden said, revaluation was stopped in England and Wales because the Inland Revenue refused to do it. That is not true. Revaluation was stopped in England and Wales in 1979 when the present Secretary of State for Defence, who was then Secretary of State for the Environment, went to a Tory party conference and told the ratepayers of England and Wales to tear up the assessment forms that had been issued by the Inland Revenue.
If the Secretary of State is really serious, why does he not tell the ratepayers of Scotland to tear up their revaluation notices, get us back to square one, and give us a chance to look at the alternatives? Let us not interfere at this stage with the balance between domestic ratepayers, commercial ratepayers and industrial ratepayers.
That is one of the things which the hon. Member for Tayside, North (Mr. Walker) and all of us should be advocating if we are serious. I cannot expect the hon. Member for Strathkelvin and Bearsden to support me, because he is a young guy looking for promotion, as are some hon. Members on this side as well, but old stagers like the hon. Member for Tayside, North and my old friend the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) have nothing to gain in the promotion stakes. The latter has already burnt his boats. He should be speaking up in support of the ratepayers.
In 1981, after the Secretary of State for the Environment had told the ratepayers of England and Wales to tear up their assessment notices, the Government published a Green Paper on alternatives to domestic rates. They looked at the alternatives—a local sales tax, local income tax, the poll tax, so dearly loved by the hon. Member for Stirling (Mr. Forsyth)—and rejected them completely.
The Government also put forward the other alternative—the correct one, which I think we should be following—which is assigned Exchequer revenue for such things as education and police, even considering 100 per cent. Government grants. Education is now 50 per cent. of all local government expenditure. Why do the Government not finance education completely? That would solve many of the problems. I know that many councillors and other people, including myself until a certain stage, said that we could not have 100 per cent. Government grants because that would be doing away with local democracy, but there is no local democracy now. Why do we not change the Government? It was a Labour Government who brought in indicative costs. Local authorities are never again to be given a free hand. We have to accept that. The 340 Government set the sum of money that is given to local authorities. Local democracy should then consist of the local council deciding on the priorities within the budget.
§ Mr. Lambie
I am just about to finish.
I can remember the old days when my father was treasurer of the borough of Saltcoats, and when the councillors could sit down and say, "How can we benefit the people who stay in Saltcoats?" My father could manipulate grants by the Labour or Conservative Government, no matter how they were paid out; for example, the old equalisation grant. Saltcoats always did well because we had a person who could use local democracy. We built houses when the rates of interest were low. It might not have been a Socialist solution, but we stopped building them when the rates of interest were high. There were no developments then. When the subsidies came down, we stopped building. When the subsidies went up, my God we built. When subsidies were stopped for general housing and the Government started to give subsidies for multi-storey development, we said that Saltcoats would build two blocks of multi-storey flats. We were the smallest town in Britain, but we built multi-storey flats. Because of Dick Mabon we got permission, although it was against the advice of the then Secretary of State. We got the highest subsidy available.
That was local democracy, but it cannot happen now. My right hon. and hon. Friends and I should say to the Secretary of State, "Let us scrap the rate order tomorrow." The Secretary of State should withdraw it. We should say to him, "Let us tear up the valuation notices and get back to the old valuation." He should give us the opportunity of looking at the alternatives. We could find quick alternatives. My right hon. Friend the Member for Glasgow, Govan (Mr. Millan) said that we could not change things overnight—
§ Mr. Lambie
I thought that my right hon. Friend said that.
The people in Southern Ireland abolished local rates on domestic properties overnight. Why does the Secretary of State not do that? If we want to give a lead, we should do that.
If Conservative Members and my right hon. and hon. Friends in the Opposition are thinking of helping the ratepayers of Scotland, let us unite and stop all this party political battle and banter from one side of the House to another. Let us get things done. We shall force Ministers on the Front Bench to play fair to the ratepayers.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
Order. I remind the House, as speeches seem to be getting longer, that we need brevity if all those anxious to speak are to be able to do so.
§ Mr. John Corrie (Cunninghame, North)
I find myself in trouble again because I am going to agree with much of what the hon. Member for Cunninghame, South (Mr. Lambie) has just said. Before I go any further, I should like to be the one to claim the small prize of the hon. Member 341 for Carrick, Cumnock and Doon Valley (Mr. Foulkes) for the highest revaluation, at 550 per cent. No one has yet made such a claim.
I remind the House that the hon. Member for Glasgow, Garscadden (Mr. Dewar) stood at the Dispatch Box in July 1982, when we had the postponement of rating revaluation. He insisted that the Government went ahead with that revaluation when it came about in 1983–84. I assume that, when he stood there and said that, he hoped that he would win that election, so he must have been perfectly happy to see a rate revaluation coming up.
I am probably the only person on Conservative Benches who sat on the Committee with my right hon. Friend the Prime Minister in 1974, looking at ways of changing the present system. It was agreed, as many Opposition Members have said, that we should repeal domestic rates. However, in 1974, it would have taken a few hundred million to wipe out domestic rates. After five years of the Labour Government, by the time we came to power in 1979, that figure had increased to a few thousand million. When we came to power, that was part of the reason why it was not done.
It is interesting to note the reactions to poll tax from the Opposition. There is no doubt that, whatever else it would do, local authorities would be less inclined to push up a poll tax when it affected people who were also the voters. That may be right, when there is so much opposition to a poll tax from the Labour party. However, it is at that moment that I part company from my hon. Friend the Minister, because no issue in Scotland has angered my constituents more than revaluation has over the past few months. During 11 years in Parliament, I have never had such bitter, angry and, on many occasions, vile letters as I have received during the past few months.
People do not want even to try to understand why revaluation has taken place—they are against it and that is the end of it. Reasoned replies trying to explain why it has occurred are not accepted. Even more worrying, it has provoked nationalistic feelings in Scotland such as we have not seen since 1974. That is bad for Scotland.
The regular theme running through many of the letters is that Scotland has become a second-class nation. People wonder why they should be hammered when the English have escaped revaluation. It is no use saying that it is 12 years and England is out of phase, so when the time comes there will be 1,400 per cent. increases in England. We do not know whether that time will come. It is no use saying that domestic rates in Scotland are more, on average, than they are in England because the whole thing is distorted by housing in Scotland. It is no use saying that we must compare like with like because that does not hold water.
Hotels, sporting grounds and shops are not just hundreds but often thousands of pounds out of phase between England and Scotland. The whole rating system is now so discredited that the public will no longer tolerate it. There can be no more ifs and buts—it is no use tinkering with the rotten system, because the more we do so the more rotten it will become. We must change the system.
Many constituents are angry about the way that the assessors work. They believe that assessors, at the stroke of a pen, can decide the valuation of any property. Because there are so many assessors and so many variables throughout Scotland, there is a real distortion in the 342 valuation of properties. The worry is that if someone appeals and uses a friend's property with a ower valuation as an example, that friend's property valuation might be raised. Can my hon. Friend the Minister confirm that?
I make no apology for putting forward some examples, such as the small island of Cumbrae which is a tourist island with a small population. It depends on its tourists, hotels and shops. I thank Mr. Bill Reid from the local tourist association for producing figures. The domestic rateable value in total has risen from £173,000 to £493,000, a factor of 2.86. That of the house has risen from £56 to £308—an increase of 550 per cent. The domestic rate paid has risen from £246,000 to £326,000 — an increase of 32.1 per cent. On commercial properties, the rateable value in total has risen from £74,000 to £175,000—an increase of 229 per cent. The rates payable have risen from £103,000 to £122,000—an increase of 17.3 per cent. The rates bill in total for that small island, which depends on its small shops and businesses in the short summer season, has risen from £377,000 to £478,000—an increase of £101,000 or 26.3 per cent. That is about £90 per head of the population.
I was there last week and saw tears of despair among many of the shopkeepers, who cannot face such an increase. There was one small bar whose rateable value increased from £800 to £4,400. Businesses cannot cope with such impositions. The story is the same throughout the constituency. I was reading the local newspaper only today about a famous restaurant in the area that is called The Moorings. The business hoped to reopen for the tourist season, but it has been told that if it did its new rateable value would be £60,000, an increase of £15,000 since last year. The management has decided not to reopen the restaurant. That is a disaster for Larga, which is a tourist area.
There are three options. My right hon. Friend the Secretary of State could do nothing. That would be unacceptable to both sides of the House and to the public generally. Secondly, he could find extra finance. I accept that he has already done so, and that has made a difference. However, it is highly unlikely that he will be able to do so again in the light of the present constraints. Thirdly, he could find a fairer way to spread the burden. That must be done so that those who pay are those who can afford to do so. We must overcome the unfortunate and, indeed, tragic circumstances that many are now facing.
§ Mr. Michael J. Martin (Glasgow, Springburn)
I was interested to hear the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) attack local authorities such as Glasgow.
§ Mr. Martin
The hon. Gentleman has a cheek to attack any local authority for spending, for he is not slow to spend himself. He spends his Tory party funds on sending out newsletters that sometimes consist of six pages. He does so every month.
§ Mr. Martin
I put it to him when I was on the Edinburgh relief road inquiry that it was good of him to send a birthday card to a young girl in his constituency. He could not remember the girl to whom he had sent the 343 card. He explained that he sent out so many birthday cards that he could not remember the individuals. If local authorities emulate the hon. Gentleman's example, they will be spending a great deal of money.
§ Mr. Martin
The hon. Member for Strathkelvin and Bearsden attacks local authorities when he knows that he imposed a burden of £39 million on the good people of Edinburgh by approving a relief road—
§ Mr. Hirst
I do not think that this is the time or the place to discuss the relief road. However, I remind the hon. Member that the merits of the case were well proved. Does he approve of the decision taken by his local authority, Glasgow district council, to prefer a hole in the ground to selling flats to private enterprise? That is the attitude that it takes in pursuit of political ideology.
§ Mr. Martin
The hon. Gentleman claimed that he did not attack Glasgow and now he has reminded us that he did.
§ Mr. Martin
Those in glasshouses should not take a bath. The hon. Gentleman should not attack others for spending when he did exactly that only a few weeks ago. He was given legal advice by high respected Queen's counsel on the eighth day of an inquiry. He was advised that the inquiry should not proceed as it was not proper that it should. The hon. Gentleman could have stopped it after eight days but he decided that it should continue. The inquiry continued for 52 days, with six QCs receiving £750 a day. He cost the taxpayers nearly £1 million by not taking legal advice. He should not attack Glasgow for doing anything which might be considered illegal. He is not so good at taking legal advice himself.
§ Mr. Martin
The hon. Gentleman forgets that the senior officials who give advice to Glasgow councillors all live in his constituency. They all live in Bearsden. He should not attack Glasgow too much, because he may be having a go at his own constituents and he badly needs their votes. He should remember how many people in his constituency depend for their livelihood on Glasgow district council and Strathclyde region, so when he imagines that he is attacking a Labour administration he is in fact attacking his own constituents.
The hon. Gentleman also forgets that his local authority, to which he gives a pat on the back, does not have the Scottish Opera, the Scottish National Orchestra or the world famous Burrell art collection in its area.
§ Mr. Martin
No, I will not give way. We have been asked to keep our contributions short. The hon. Gentleman was not here earlier.
§ Mr. Martin
I do not care where the hon. Gentleman was. He was not here to take part in the debate.
The hon. Member for Strathkelvin and Bearsden should remember that a great deal of Glasgow's financing goes to the benefit of people living in the peripheral areas of Glasgow who do not contribute to the rates.
§ Mr. Martin
No, I have given way to the hon. Gentleman already.
My secretary has been on the phone to the Scottish Office to inquire about the poverty fund that the EEC is supposed to have set up. If local authorities are under attack, that fund should be available for projects in Springburn because there is a great deal of poverty in my community. I understand that about £100,000 is available from the EEC to help projects such as the after-school care scheme devised by the Springburn single parents association. With the sum available we shall be lucky to finance four projects a year in Scotland. It is clear, therefore, that the millions of pounds that the Secretary of State says are available to help ratepayers are in fact coming from other funds within the Scottish Office.
If help is not forthcoming from the Scottish Office for projects in my community, there will be pressure on the local authority. As a result of high unemployment and the other problems faced by communities such as mine, more and more authorities have to consider schemes that they would not have considered in the past when help was available from the Scottish Office, the Manpower Services Commission or the urban aid scheme.
§ Mr. Martin
No, I will not give way. I have waited for hours to make my contribution. The hon. Gentleman has already said his piece. Indeed, if he had not taken so long about it, we should be a good deal further ahead.
There are now more burdens on local authorities than ever before because of the problems presented to them by the Scottish Office. It is nonsense just to listen to small business men as though they were the only people worth considering. As long as I have been involved in local and national government, shopkeepers and business men have complained about the rates. However, they do not tell us that they depend on local government spending to make a living. Lafferty, the building company, would not exist if it were not for local government spending. Subcontractors who work for such companies would not be in business if it were not for local government expenditure, so they cannot complain about paying rates for their premises. Indeed, they often lobby councillors, COSLA, Members of Parliament and Ministers for more spending on housing and road building.
Many shopkeepers approached me about the building of the Blindcraft workshop in Springburn. That workshop will not bring business directly, but it will indirectly as there will be more passing trade and activity in the area. If it had not been for Strathclyde regional council, it would not have been decided to bring the biggest blind workshop in Europe to my constituency. They cannot have it both ways—they cannot have projects in Scotland and not pay rates.
No matter what we introduce, whether rates, a poll tax or any other form of tax, there is no such thing as a popular tax. Whatever we introduce, people will complain.
§ 1.1 am
§ Lord James Douglas-Hamilton (Edinburgh, West)
I have listened with great interest to the hon. Member for Glasgow, Springburn (Mr. Martin). For small business men and commercial ratepayers, we have heard of rateable values increasing from £800 to £4,000. In one case in my constituency, the increase was from nearly £700 to well above £2,000.
345 Commercial ratepayers should be considered sympathetically and urgently. They should be made aware of the accelerated appeal procedure. During an appeal they are entitled to a 10 per cent. rebate. Can it be increased? It should surely be possible to table a suitable amendment or new clause to the Law Reform (Miscellaneous Provisions) (Scotland) Bill on Report. I should be grateful if my hon. Friend the Minister would give that serious consideration.
There is nothing quite so powerful as an idea whose time has come, and the commitment that the rating system should be abolished within the lifetime of a parliament is such an idea. Revaluation will act as a catalyst, as my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) said. The central issue is the unfairness of the system and the fact that only a small proportion of the electorate contribute the vast proportion of the rates burden.
We should also consider the lack of accountability of the assessors. I vividly remember taking a group to see the assessor in Edinburgh after the new runway of Edinburgh Airport was built. It was clear that those living near the airport would suffer much heavier noise levels and have to have double glazing and the rest; yet he would not give them a reduction in rateable value. They took him to court and eventually defeated him. He refused to give way until forced to do so. My constituents shared the legal costs so that none bore too heavy a risk.
§ Mr. Norman Hogg (Cumbernauld and Kilsyth)
Did not the Conservative party say that the idea's time had come in February 1974, when they made a manifesto commitment to abolish the rates? By 1979, that time had moved on and it had been abandoned altogether by 1983.
§ Lord James Douglas-Hamilton
I cannot speculate what would have happened, if the Conservatives had won that election, but since they did not, the matter is academic. The present position is very different from that which persisted in the past. Domestic relief will help, but something stronger is required now.
I now turn to the solution that would work well in practice. A block grant on its own is insufficient because it would lead to inflexibility and the risk of continual confrontations. A substantial block grant funded from income tax, which covered the main services to a large extent and contributed between 70 and 90 per cent. of the expenditure required, would go a long way towards meeting the problem. If a balance is required, poll tax is a possibility. A poll tax needs an equal sum to be charged per capita, irrespective of income. That is not an insurmountable objection if the block grant is sufficiently large. However, there would be the problem of collection of a poll tax. I hope that my hon. Friend will think through all the implications of collection seriously before any firm decisions are made on that matter. I hope that he will also consider small businesses.
We heard earlier about racecourses. Will my hon. Friend also consider Edinburgh zoo? It is the highest rated zoo in the whole of Britain. It has the finest national collection of animals in Scotland. In the overall scheme of things, that may be a minor matter, but nevertheless it is important for Edinburgh. The time for fulfilling the promise to domestic ratepayers has come, and I hope that it will not be long before it is fulfilled.
§ 1.6 am
§ Mr. John Home Robertson (East Lothian)
The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) made that ringing statement with all the conviction of a man with a majority of 498. In due course we shall see whether the time has come for the reform of local government finance, or for new representation for the city of Edinburgh.
The hon. Gentleman cannot escape the fact that, whatever the rights and wrongs of the rating system, the Government have distorted the way in which the rating system bears on ratepayers in Scotland. The Government have gone to enormous lengths to confuse the issue of rates during the past six years. Year after year, they have cut the rate support grant and blamed local councils for the consequences of those cuts. We have seen an unprecedented shift of the burden of payment for local services away from central Government rate support grant to the poor suffering ratepayers. The Minister and the House know that, and the penny is beginning to drop among the ratepayers.
The rate support grant comes from funds raised through relatively fair central Government taxation, while rates are a spectacularly unfair, arbitrary form of local taxation. We have known that for a long time. We have had seven years of shameless humbug from what is left of the Conservative party in Scotland. How well we remember the hon. Member for Edinburgh, South (Mr. Ancram) sitting on the Back Benches four years ago ranting about Lothian regional council being the rogue elephant authority of Scottish politics because it had the audacity to try to protect the services that it was elected to provide.
Year after year the Government have taken action to force up the rates, but each year, with yet another diversionary tactic, local councils were vilified and we had the fascinating new concept of mandatory guidelines, clawbacks of rate support grant and, finally, rate capping. The latest round of rate support grant cuts, compounded by the effects of the revaluation, have been the last straw for the electorate and ratepayers of Scotland. The Scottish assessors have finally blown the Secretary of State's cover, and the poor Under-Secretary of State, the hon. Member for Eastwood (Mr. Stewart), has been left to face the music.
I have some sympathy with the ratepayers of Eastwood and Ayr, because some parts of my constituency are similarly afflicted with irrationally inflated rateable values. I am thinking especially of north Berwick. Those anomalies were more or less tolerable when rates accounted for only a relatively small proportion of local authority budgets, but since successive cuts have meant that rate support grant has been shrunk out of all recognition from what it was before the Government came to power, all Scottish ratepayers have something to protest about.
In my constituency, the ratepayers of East Lothian district must pay 14.1 per cent. more in rates, although the district council has cut its net expenditure by 6 per cent. I would have wished the district council to improve some services and to spend more money, but the restraints imposed by the Secretary of State compel that local authority to restrict its budget. The fact that, despite the cuts, rates have increased graphically illustrates the impact 347 of the latest round of rate support grant cuts. To make matters worse, the revaluation has shifted an even greater share of the burden onto domestic and commercial ratepayers.
The Secretary of State for Scotland has been caught with his hands in the till, and he has panicked. Domestic rate relief has been increased by 3p, and we have unprecedented fluttering in the Tory dovecotes of Scotland. But the fact that the Secretary of State is flapping his wings does not mean that he will necessarily take off. As my hon. Friend the Member for Cumbernauld and Kilsyth (Mr. Hogg) said, we have been through this before. In February 1974, the Prime Minister gave a manifesto commitment to scrap the domestic rating system. What be came of that? Earlier, I referred to the Scottish Conservative manifesto of 1983 which, under the heading, "Local government: saving ratepayers' money", said:We will also take steps to bring the Scottish and English valuation systems more into line to prevent anomalies occurring.I put that point to the hon. Member for Strathkelvin and Bearsden (Mr. Hirst), who tried to wriggle out of it by saying that the Government had done something about race courses. There is only one race course in my constituency, and I am unaware of any in the hon. Gentleman's constituency. I do not believe that that reform has been of much help to the commercial and domestic ratepayers of Scotland.
We know now that the anomalies between the Scottish and English systems are being aggravated. The Scottish Tory party manifesto continued:We will make the valuation system more responsive to changing economic circumstances and make it possible for ratepayers to appeal more readily and for appeals to be settled quickly.My hon. Friend the Member for Cumbernauld and Kilsyth suggested that every ratepayer in Scotland should lodge an appeal with the assessor. We shall see whether that ploy works. I would certainly not blame anyone for doing so.
The Government have overloaded the rating system to such an extent that it has become intolerable. They could put matters right by restoring a realistic level of rate support grant or by extending a special rating relief package. If they fail to do that, the rating system seems likely to collapse. The Secretary of State is caught between the electors of Troon and the Chancellor of the Exchequer. It will be fascinating to see which way he jumps.
§ Mr. Nicholas Fairbairn (Perth and Kinross)
The rating system is an undemocratic system of taxation. First, the two contributors of commerce and industry have no vote. Of those who have a vote, 60 per cent. receive rate rebates, and of the 30 or 40 per cent. who do not receive rebates, only the householder pays. Therefore, the great benefit is to those who receive the services, and the great penalty is to those who must pay for those services. The system must go. If there is one benefit from the split of the various mechanisms that we have had, it is that the death knell of this disastrous system has at last been sounded.
The Socialists have overspent in their regions, and as Jamaica street has been changed from a shopping street into a desert, so the assessor has had to assess Jamaica street down and the prosperous little towns in the country areas up. As that has happened the needs element has been 348 depressed, and the ratepayers who had something of which to be proud in frugal communities have suffered. That has been the result of the formula.
I do not blame my right hon. Friend the Secretary of State for that fact. I find little comfort from the right hon. Member for Glasgow, Govan (Mr. Millan), who put through the Act introducing this measure in the first place. He does not even have a house in Scotland, so why is he saying that this is unfair?
§ Mr. Fairbairn
If the right hon. Gentleman has two houses, he is a true Socialist.
It is no good having achieved a situation in which the formula has squinted everything and punished the frugal. It has benefited the rate support grant of Socialist, extravagent authorities, such as Edinburgh, while punishing those, such as Perth and Kinross, which have been frugal. Whether or not that was the intention, that is the fact. It is no good talking about averages and saying that the North-West Castle hotel in Stranraer has had a decrease in its rates. Hurrah, it has had a decrease in its rates and if my hon. Friend the Under-Secretary were to go to Stranraer for the weekend, I have no doubt that there would be a 24 per cent. decrease in the cost of his bedroom.
That does not alter the fact that in our ordinary ratepaying areas we have a dangerous situation. Let us take a typical coffee shop in Crieff. In real cash terms, its owners will have to pay an 83 per cent. increase in real terms. They will have to obtain £70 more a week. They can put up their prices by 3 per cent., and add that to the 5 per cent. increase on wages and the 5 per cent. extra that they will have to pay on goods, plus VAT, and so on, but that is not realistic.
The Government must face the reality of the fact that in Perthshire domestic ratepayers will be faced with real 30, 35, 42 or even 48 per cent. increases. It is no good saying that they can stay in some stupid hotel in Stranraer, or watch football somewhere, when on their principal bill—rates are the biggest bill—they will face an increase.
Many people who are old, or who own shops, or who support tourism, or who have bought their own houses, or who are saving for their retirement, and whom we were elected to help, will, as a result of this mechanism, be victims. I do not want to give any help to the Opposition, who love it when the ratepayers, the retired, those who live in Perthshire and those who own their houses, whom they despise, are victims.
If a revaluation system causes inequity for individuals and also unemployment by putting small businesses out of work, and if it damages tourism, closes hotels and harms frugal authorities which have done their best to be economical and sensible, or those who have saved up to buy their own homes or for their retirement, the formula is per se wrong.
I am not interested in averages, or in whether the rates for one bowling green or one hotel go up or down. With inflation at 5 per cent. there cannot be a rating system in Scotland which forces some people to pay a penalty which in no circumstances is it possible for them to sustain. Be it domestic, with relief provided by the Secretary of State, be it commercial, with no relief, or be it commercial—down or up I care not. A system which creates such inconsequential unfairness cannot be tolerated. It is unfair 349 to those who have done their best by their families and to those who have tried to set up in business or attract tourists. The home is the biggest investment that most people ever make. People should not be turned out of their homes by taxation if their circumstances change. Any system that creates such inhumanity is, I believe, wrong and must be swept away forthwith.
Royal Commissions act like bureaucrats, who have a staggering capacity to find a problem to any solution. Nothing could be worse than this system. It is inequitable and unfair. The Minister believes, as I do, in home ownership and in small businesses, tourism and employment. We must not allow a mechanism to be justified by averages if that mechanism harms employment, tourism, commerce and industry. It must be prevented from doing so much damage. We must prevent it now.
§ Mr. Jim Craigen (Glasgow, Maryhill)
The hon. and learned Member for Perth and Kinross (Mr. Fairbairn) is right to advise the Minister that a crisis is upon us. We do not have much time for reflection about reform. As the hon. and learned Gentleman said, many households and businesses are faced with immediate problems as a result of the 1985 revaluation and the cut in the 1985–86 rate support grant by the Government.
Ministers must have been alarmed when the number held by my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) came up tonight in the ballot. Revaluation, as a five-yearly exercise, has always been dramatic, but the 1985 revaluation is nightmarish because of the postponement by the Government for political reasons of the one due in 1983. Many of us believed that it would lead to a reform of the system after the general election.
After dallying all these years on rates reform, it looks as if we shall be propelled within weeks into reform proposals by Ministers, or perhaps the Prime Minister. The Perth Conservative conference in May might be a dress rehearsal for the measures that are about to be inflicted upon us. I wonder whether the Prime Minister will make a major pronouncement at Perth. Perhaps we shall have another "Declaration of Perth." We know what happened to the last one.
The suggestion of a poll tax is being floated. I noticed the disparity in views between the hon. Member for Stirling (Mr. Forsyth) and the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) tonight. Scotland is apparently to be the science lab for experimentation in rates reform, with Scottish ratepayers as the guinea pigs, possibly having attached to their heads £200 per member of their household. No one has yet determined the extent of the poll tax.
The hon. Member for Cunninghame, North (Mr. Corrie) and I entered the House at the same time. He referred to comparisons between Scotland and England. For years, Ministers have said that ratepayers down south pay less than ratepayers in Scotland. Now they are changing their tune and telling us that we do not know how lucky we are in Scotland because south of the Tweed ratepayers pay more.
I understand that the average rate bill in England for 1985–86 will be £420 per annum, including water charges, 350 whereas the average in Scotland will be £397 per annum. Many people rightly wonder how, without revaluation, local authorities in England can operate. I received a letter from a constituent only today asking that question. Perhaps the Minister will explain how authorities have been able to cope since 1973 without revaluation. As my hon. Friend the Member for Carrick, Cumnock and Doon Valley said, English domestic ratepayers are likely to have a 9 per cent. increase in their bills.
The period allowed for appeals was mentioned by my hon. Friend the Member for Cunninghame, South (Mr. Lambie). Although this will run to 15 September, the Scottish Office has spent nearly £100,000 advertising the appeals machinery. As my hon. Friend the Member for Motherwell, South (Dr. Bray) aptly pointed out, there may well be a two-year period of uncertainty about the amounts that have to be paid. No wonder that another constituent wrote to me suggesting that the Secretary of State for Scotland might be taken before what was called the Race Relations Board because the constituent thought that the Secretary of State was doing down ratepayers in Scotland.
The Minister knows that I had correspondence with him at the beginning of the year concerning an article in the Glasgow Herald about disparities north and south of the border. The Minister's reply to my letter dated 30 January was a marvel. He concluded by saying:At the present time we cannot say with certainty how the results of the coming valuation will be perceived … People must have the chance to consider the results of the revaluation and the new appeal provisions must be given a chance to work before anyone can conclude that there remain significant valuation problems to be resolved.
When I listened to the hon. Member for Dumfries (Sir H. Monro) tonight, I wondered what we had been doing in debates on the Rating and Valuation (Amendment) Scotland Bill. He made many speeches during consideration of that long Bill, in the course of which the Government promised that the legislation was going to sort out all the anomalies, except for the zoos. We wait for this legislation to bring comparability between the two systems. The Minister on a number of occasions turned down a suggestion that I made that one cannot have two separate systems of valuation north and south of the border and expect uniformity as a result.
§ Mr. David Marshall (Glasgow, Shettleston)
I am grateful to my hon. Friend for giving way, especially as I missed most of the debate because, in common with some other hon. Members, I was until recently entrapped in the Standing Committee which is considering the Transport Bill.
My hon. Friend referred to anomalies. I should like to give him one example in my constituency which emphasises the point particularly well. It is the case of a lady who advises me that she has an empty yard with no buildings on it; she is what is commonly referred to as one of the show people. She keeps a caravan in the yard for six months of the year, and then is out and about in the country as one of the show people for the remaining six months. Her rateable value has increased from £390 to £2,000, an increase of over 500 per cent. What sort of anomaly is that?
§ Mr. Craigen
I can only say to my hon. Friend that we were told that the derating of caravans would help sort out these problems.
I saw a press report that my hon. Friend the Member for Cumbernauld and Kilsyth (Mr. Hogg) had got quite 351 excited about remarks in the Glasgow Herald that the Solicitor-General was "dumbfounded" by the increases, and that the right hon. Member for Stirling was "outraged". My hon. Friend described them as a couple of chocolate soldiers. He does a disservice to soldiery in this country. I think that they are more like a couple of chocolate smarties. We awaited the rebellion on the Government Back Benches tonight. In fact, I saw a report that the hon. member for Dumfries was to lead a deputation to see the Prime Minister, no less. I have heard the hon. Gentleman's speech, and he sounded more like the grand old duke of York: he went up the hill, and now he is taking the troops back down again.
Conservative Back Benchers are stuck with the past actions of their Ministers in relation to revaluation and yearly reduced rate support grants. This is hardly the time for them to complain about those matters, to which they consented. We are indeed facing a crisis. The Government should at least restore the cuts that they have made this year, of all years with revaluation, in the rate support grant orders for Scotland.
That would help a little with the enormous bills that domestic ratepayers in particular, but also many commercial ratepayers, will face in the coming year. The situation is horrendous for ratepayers. I am seriously worried about the state of local government in Scotland because, as a result of this operation overload, the Government are imposing more burdens on the rating system than it is capable of bearing.
§ The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)
We did not need tonight's debate to make us more aware of the concern and deep anxiety that is felt in Scotland on the subject of rates. There has been considerable seriousness on the Conservative Benches tonight on this issue. On the Opposition Benches, on the other hand, there has been much frivolity and laughter. If we needed proof that this debate was an opportunist attempt by Opposition Members to take advantage of ratepayers, their attitude and behaviour in the Chamber tonight provided that proof.
The concern that ratepayers feel is shared by the Government. It is important, therefore, that we have a chance—as the debate has provided—to put the matter into perspective and to canvass the problem. Many points have been raised, but the thread to have come through the debate most strongly is that the rating system is unsatisfactory. We have never made any secret of our dissatisfaction with the system, and I shall say more on that later.
We start, as the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) rightly said, from the fact that rates are at present the system by which we finance local government. I wish, in the light of that, to look at the revaluation and the points that have been made about it.
I was surprised by the remarks of the right hon. Member for Glasgow, Govan (Mr. Millan), who seemed to suggest that there was no reason for the revaluation. He also seemed to say that the wisdom that came after the event, and certainly after one had left office, led him to believe that there were other ways of doing it, and he put forward a number of different ways by which he thought it could be done.
352 Labour's shadow Minister of State, when the right hon. Member for Govan was shadow Secretary of State, said in July 1982:The Minister should make it clear now that there will be no more flirting with this halfway house and parboiled non-solution.Those were the words of the hon. Member for Glasgow, Garscadden (Mr. Dewar) about a mixed system of revaluation. He went on:He should tell us that there will be a proper revaluation in 1985–86".—[Official Report, 28 July 1982; Vol. 28, c. 1195.] That is the revaluation about which we are talking tonight, and at least the hon. Member for Garscadden has had the honesty in recent months to make it clear that he does not take the view that this revaluation is wrong.
The first main question to be asked tonight was: why the revaluation? I do not want to go into all the basic reasons for revaluation, except to point out that revaluations as a whole do not affect the total burden of rateborne expenditure. They share out that burden according to individual property valuations. It is important in such circumstances that those valuations must not only be fair but up to date. That is why we have always had regular revaluations.
It is interesting to remember that we have had revaluations in 1961, 1966, 1971, 1978, when again there had been a two-year postponement, and now in 1985. In Scotland we have revaluations regularly by statute. It is important to realise that that is different from the English system, where there are revaluations at the discretion of the Government.
Several hon. Members have called for a postponement. I have already made the point that the date of the revaluation was set in the order in 1982. That was already a postponement. The House decided at that time that it would postpone the revaluation until now.
I think that the hon. Member for Cunninghame, South (Mr. Lambie) was the only Member who raised the possibility effectively of a postponement or a cancellation at this stage. To cancel or try to postpone a revaluation after it has been effectively completed would be a practical impossibility. We would be saying to those who have gained, "Whatever the valuer thinks about your position, you will have to go on paying more." They might have good grounds for appeal, and that might have implications for the rating basis.
Also, to postpone the revaluation at this stage, once local authority budgets have been drawn up on the basis of what the revaluation has achieved, not least in terms of the resources element, would throw local government finance in Scotland into total chaos. Neither the local authorities nor the ratepayers would thank us for doing that.
In regard to the effects of revaluation, the hon. Member for Glasgow, Maryhill (Mr. Craigen) fairly pointed out that the average figure for England for 1985–86 will still be higher than the average rate expenditure in Scotland, the figures being £429 in England, compared with £397 in Scotland, despite the fact that we have had two revaluations since the English last had theirs. The real burden in terms of rates lies in rate poundage and not in revaluation.
I have to accept that there are variations. My hon. Friend the Member for Cunninghame, North (Mr. Corrie) produced examples which we all have to take seriously. If there is unfairness in any valuation that has been arrived 353 at by the assessor, there is a system of appeal which we brought up to date in the Rating and Valuation (Amendment) (Scotland) Act 1984. That is available to allow people to test the assessor's views in the court.
§ Mr. Craigen
My real question was: how did the authorities in England cope when they last had a revaluation in 1973?
§ Mr. Ancram
The hon. Gentleman must appreciate that valuations do not affect how authorities cope, because the authorities receive the money that they want, based on the rating base that they find. What has happened, I suspect, in England as much as in Scotland is that there are people who are sitting on valuations which are well out of date and which probably require them to pay levels of rates which are highly unfair.
The overall balance within the revaluation transferred the burden from the industrial to the domestic ratepayer, the reverse of the last revaluation. Overall, the commercial effects were basically neutral. That became apparent to us in the autumn.
§ Mr. Ancram
My hon. Friend may say, "Rubbish". He dislikes averages, but we have to look at the overall position. The overall effect on commercial valuations was effectively neutral. He raised one or two examples. Even within his constituency there are commercial operations, such as, for instance, the bakery in Dunkeld road in Perth, which will have a reduction in its valuation of £3,085. All I will say once again is that we have to consider a revaluation in terms of the balances that it creates.
When it became clear to us in the autumn that the main burden was falling on domestic ratepayers, we took action immediately, through the domestic rate relief and reduced industrial derating, to halve the effect of revaluation and the rate support grant settlement on the domestic ratepayers. Only later, when we saw the effect which the budgets of local authorities would have—the fact that, once again, we would see local authorities overspending—did we realise that we had to do more. We increased the domestic rate relief by a further 3p — overall a multiplication of eight times the previous level.
Many people may have scoffed at what they called the 3p increase. It is worth considering what that is worth to the individual ratepayer. On a valuation of £500, £40 is met by domestic relief on the rate bill. On a valuation of £2,000, £160 is met by domestic relief on the rate bill.
§ Mr. Ancram
This includes the whole 8p. For the average ratepayer in Scotland it is a subsidy of roughly 11 per cent. on the average rate bill. Taken against the increases that are likely, especially in areas which have low rates and have spent within guidelines but still have high values, the subsidy will aid those ratepayers—in many cases, by more than 50 per cent. of their increases. To scoff at those increased subsidies is not worthy of Labour Members.
The hon. Member for Maryhill talked about the rate support grant. He seemed to forget that domestic relief is part of RSG. That rate support grant has now been increased by £42 million over last year's amount. The total 354 of domestic relief has been increased by £88 million. It is worth considering that the cost of revaluation to the domestic ratepayer out of the total changes this year was £90 million, £88 million of which has now been met through domestic relief. Despite the variations, it would be arguable—
§ Mr. Ancram
Those figures are available. Despite the variations the Government have effectively dealt with the whole cost of revaluation.
§ Mr. Ancram
I cannot give way, because I have only two minutes left to speak.
The basic problem is that two thirds of the increase of 17 per cent. in domestic rates is applicable to local government overspending. The effect of revaluation and RSG settlements accounts for 6.5 per cent., and the rest of the 17 per cent. is due to revaluation.
§ Mr. Dewar
The point has passed to some extent. The problem is that, however much the hon. Gentleman may plead his case, it will carry no credibility, because people will look at the bill which they will have to meet in the end. People are really suffering from the cuts in the rate support grant settlement that have been forced on them, with the support of the rebel Government Back Benchers, during the past few years. If the hon. Gentleman really wants to help, he will, as we have urged, remove some of the unreasonable burden which has caused the whole system to creak and reach the point of collapse. The general thrust of the cuts which his policy represents have created real problems for ratepayers of every kind.
§ Mr. Ancram
I assume that the hon. Gentleman is making a case for an increase in the needs element of RSG. Is he seriously suggesting that if there were an increase in the needs element of RSG, in the majority of authorities in Scotland it would go to the ratepayers, or will it go — as is most likely — to increase expenditure? [Interruption.] If the right hon. Member for Govan, would stop and listen, he might discover that things have moved on since the days when he was Secretary of State for Scotland.
Let me make the point again that the basic reason for dealing with the problems of the domestic ratepayer through the domestic relief is precisely that that relief goes individually to the domestic ratepayers and helps most those who have the highest valuation. Those who have been hardest hit by the revaluation benefit most from the domestic relief. It fits hon. Gentlemen ill to mock the fact that very large sums of money have been put into this. As the hon. Member for Garscadden said, when the bills come in those who feared very high increases will find that the Government have helped them.
Turning to commercial ratepayers, I believe that what has been said in this debate shows that within the variations very serious problems arise. If those 355 commercial ratepayers believe that increases of the kind about which we have heard tonight are unfair, they are entitled to take those on appeal against the assessor and require him to test his proposition in the courts. I hope that hon. Members who have mentioned this possibility will look at the way in which we improved the situation last year, not least by the accelerated appeal procedure. I hope that that will be tried in the weeks and months to come.
The hon. Member for Roxburgh and Berwickshire mentioned the proposition of a special financial deal for commercial ratepayers. I must say in all honesty that there is no machinery; it would require primary legislation. I must ask him this question: what would happen to those who gained in that neutral balance? Would they be allowed to keep what they had got? That could not be done in any way that could be regarded as fair.
Finally, I turn to the basic question of where we go from here. A number of my hon. Friends have put forward various suggestions. The Government are listening to and looking at all the suggestions that are coming forward at this time. We have never made any secret of our dissatisfaction with the rating system or of our determination to make improvements in the way that local government is financed. Despite our disappointment that no agreed solution emerged from the very thorough and comprehensive examination that we ran before the last election, we have continued to work towards discovering a better way.
As was announced last October, well before the results of revaluation were known, we have set up a ministerial study, in which I am involved with my right hon. Friend the Minister of State and my hon. Friend the Parliamentary Under-Secretary of State for the Department of the Environment. I would not wish to pre-empt the consideration that we are making in that review. It follows from what my right hon. Friend the Prime Minister said today that we are determined to find an agreed solution to the problem. We believe that the system that we have at the moment is unfair and discriminatory. Some of the anomalies have been highlighted by the revaluation. I do not believe that there is any easy way in which solutions to this problem can be found, but our determination remains undiminished.