HC Deb 27 March 1985 vol 76 cc610-29

12 midnight

The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram)

I beg to move, That the Rate Support Grant (Scotland) (No. 2) Order 1985, dated 14th March 1985, a copy of which was laid before this House on 15th March, be approved. After last night's debate, there may be a slight sense of déjà vu about this debate. Nevertheless, this is an important order for ratepayers and I wish to explain fully the reasons behind it.

The order is a brief one with a simple purpose, which my right hon. Friend the Secretary of State explained to the House in his statement on 7 March. It increases the amount of aggregate Exchequer grant for 1985–86 by £38.5 million so that the domestic element of rate support grant can be increased by the same amount. The additional grant makes it possible for the level of domestic rate relief to be increased to 8p from the 5p which my right hon. Friend the Secretary of State announced in December as part of the 1985–86 rate support grant settlement.

The decisions by local authorities about rates attract widespread comment each year, and 1985 is no exception —especially as there is a further and confusing factor in the rates equation. But revaluation is not a novel concept. Regular revaluations are an accepted feature of the system in Scotland. Indeed, valuations were reviewed continuously until the passing of the Valuation and Rating (Scotland) Act 1956.

Since then, there have been revaluations in 1961, in 1966 when the Labour Government were in power, in 1971, in 1978 when the Labour party was again in power, and this year. Opposition Members accept that principle, which they reaffirmed as recently as the debate on the rate support grant order on 24 January. They seem to have altered their view only as the impact of revaluation on the domestic sector became apparent, although they leave out of account altogether the impact on rates of high expenditure by local authorities, a matter to which I shall return later.

Hon. Members will be familiar in general terms with the changes that revaluation will make to the shares of the rating burden borne by different sectors of ratepayers. As a great many figures have been produced on this recently it may help if I set out the position.

On 1 November last year the assessors, as required by statute, provided estimates of the outcome of revaluation to each rating authority—that is, the regions and islands councils—and to the authorities, the district councils, within them. The same information was provided to my right hon. Friend the Secretary of State. On the basis of these estimates of rateable value for each authority, by class of subject and assuming expenditure and grant as in 1984–85 terms, the post-revaluation picture in national terms which emerged indicated that the domestic share of the rate burden would go up by 17 per cent., the industrial would fall by 25 per cent., the commercial by 1 per cent. and that the "other" category, covering mainly public undertakings, would come down by 11 per cent. It was clear, therefore, that there would be a significant increase in the domestic rate burden and that some action was needed to mitigate the effect of revaluation on the domestic ratepayer in 1985–86.

On the basis of those estimates and in the light of my right hon. Friend's consultations with the Convention of Scottish Local Authorities he made his proposals for the 1985–86 rate support grant settlement. They are contained in the Rate Support Grant (Scotland) Order 1985, and in the Rating of Industry (Scotland) Order 1985, both of which were approved by the House on 24 January.

In particular, industrial derating was reduced to 40 per cent. and domestic rate relief was increased fivefold, taking it from the equivalent of 1p to 5p. That substantial increase was in part financed by a significant increase of £19 million in aggregate Exchequer grant which was announced as part of the settlement. The effect of the increase in domestic rate relief was to halve the effect of revaluation on the domestic sector, reducing the shift in the rating burden from 17 per cent. to 8 per cent. Making an allowance of 5 per cent. for inflation between 1984–85 and 1985–86, these arrangements would have meant an increase of 13 per cent. in the rating burden on the domestic sector provided, and this is an important proviso, that authorities spent in line with their guidelines in 1985–86 and reduced expenditure in response to the general abatement of grant in 1984–85.

I may say that the convention has not disputed the method on which these figures have been worked out. The method has been used consistently throughout our discussions with the convention as the most satisfactory way of estimating the effects of revaluation on different groups of rate payers.

If the hon. Member for Hamilton (Mr. Robertson), who keeps muttering about the revaluation in England, had attended the three-hour debate that we had on the subject, he might have heard the answer.

Mr. George Robertson (Hamilton)

I attended the debate last night. The arguments of the hon. Gentleman then were as weak as those that he puts forward now. They do not persuade a single Opposition Member. He would not persuade a fraction of the Tory party conference at Perth, if he dared to put forward those feeble arguments.

Mr. Ancram

The hon. Gentleman obviously does not listen, because I have not yet reached the subject matter of the order. I am giving the House facts and figures, to which the hon. Gentleman might like to listen.

Mr. Tam Dalyell (Linlithgow)

How is it that the West Lothian county cricket club, which has a modest ground at Boghall in Linlithgow, pays more than twice the rates of the famous and large Worcester county cricket ground in England?

Mr. Ancram

The hon. Gentleman has lived through enough revaluations to know that valuations are made by an independent assessor, and if they are unfair, there is a right of appeal against them.

The convention always forecasts higher figures because it assumes that all authorities will overspend. Not surprisingly, the convention forecasts were self-fulfilling, but this does not invalidate the figure of my right hon. Friend of what was available to ratepayers if authorities had spent in line with guidelines. However, overspending by authorities resulted in a very different picture—an increase in the domestic rate burden of 24 per cent. in Scotland. As one local authority after another struck its rate in the course of February, the extent of the burden on the domestic ratepayer became clearer.

In addition, in February much fuller details of the result of revaluation, as it affected individual properties, became known as the assessors delivered the new valuation rolls to authorities. While average movements in aggregate levels of rateable value for each area by sector had been known from November 1984, it became apparent that there was a significant range around the averages with some large increases, as we have learnt recently.

It became clear that the information which emerged in February about the level of some individual increases in domestic rate bills required urgent further action. My right hon. Friend took that action at the earliest possible opportunity.

On 7 March he announced a further substantial increase in the domestic element of rate support grant of £38.5 million. This enabled him to increase the total of the domestic element from £14 million in 1984–85 to £102 million in 1985–86, and increase domestic rate relief from 1p in the pound to 8p—an eight fold increase. This has been very widely welcomed on behalf of domestic ratepayers who were facing high rate bills. The relief of 8p in the pound means a reduction of £1 a week, or 11.5 per cent., in the average domestic rate bill in Scotland in 1985–86. It replaces domestic rate relief worth only 14p a week on average rate bills introduced at the time of the 1978 revaluation presided over by the Labour Government. It is clear evidence of the Government's concern for the domestic ratepayer.

Had local authorities spent in line with the Government's plans in 1984–85 and in 1985–86, domestic rates in Scotland would have increased by only 6.5 per cent. As it is, domestic rates will increase by 17.2 per cent. The difference between 6.5 per cent. and 17.2 per cent. is accounted for, not by revaluation or by reduction in the rate support grant percentage, but by the expenditure decisions of local authorities and their consequences.

Therefore, two thirds of the increase in domestic rates nationally is still due to overspending by authorities, and one third to inflation and a reduction in the grant percentage.

I appreciate that individual authorities differ from the national picture. Co-operative authorities spending at guideline are especially affected by the cut in the grant percentage. I have listened carefully to representations made by those local authorities and, indeed, by those who represent them, and I have said that we shall take those representations into account when considering the grant settlement for 1986–87.

What we have done will be of proportionately greater benefit to the ratepayers of authorities which set low rate poundages. That is because the domestic rate relief is paid per pound of rateable value, not per pound of the rate bill. Thus, for instance, a ratepayer in Perth and Kinross will proportionately benefit more than a ratepayer with the same rateable value in Glasgow. For the same reason, ratepayers with high rateable values will, in cash terms, benefit more than will those with low rateable values.

Mr. Donald Dewar (Glasgow, Garscadden)

Before the Minister concludes—

Mr. Ancram

I was not about to.

Mr. Dewar

I know, but just in case the hon. Gentleman comes to a premature end, having run out of good ideas and Scottish Office oratory, will he say why, if everything is so wonderful in the best of all Tory worlds, the Secretary of State for Scotland said on television that, because of the political consequences of the maladministration of the rating system, it is essential that there is action to reform it before the next general election? Is that a guarantee that there will be legislation before the next general election, and that the reform will be on the statute book, or is it merely a vague expression of intent that will not result in action?

Mr. Ancram

If the hon. Gentleman will allow me to make my speech in my own way, he may get the answer to that before long.

In his statement of 7 March, my right hon. Friend said that the cost of increasing domestic rate relief would be financed by adjustments within his existing policies and expenditure programmes. He has now worked out the details and announced the necessary cash limit changes today. Those which set the provision for industry will be reduced by £5.2 million, all of which bears upon provision for the Scottish development agency; roads and transport will be reduced by £4.8 million; and the hospital and community health parts of the health programme will be reduced by £5 million. My right hon. Friend will be able to adjust the agriculture Vote, which is reduced by £0.5 million, and the cash block for local authority housing, which was reduced by £10.5 million before the cash limits were announced on 19 March.

We expect to be able to abate the effect of the changes considerably by exercising the flexibility that we now have to carry forward to 1985–86 a proportion of the capital underspend in the current year. Although the exact amount cannot be announced until outturn figures are available, the capital programmes concerned look as though they will be substantially underspent. The result of our action to increase domestic rate relief to the level proposed in the order is almost to negate the average effect of revaluation on the domestic sector as a whole. In 1985–86, the domestic rate burden increased by £185 million. Of this, £90 million was accounted for by revaluation. That has been almost wiped out by the £88 million of domestic rate relief.

The remaining £95 million of the increase is accounted for by local authority overspending at £63 million and the reduction in grant and inflation of £32 million.

I accept, of course, that individual properties will have fared very differently in the revaluation. For those whose valuations have increased above the average there will still be significant increases in rate bills despite what we have been able to do for the domestic sector as a whole. I should like to stress again that any individual ratepayer who feels that his new valuation is incorrect has the opportunity to test on appeal the evidence underlying the valuation.

I am very much aware of the widespread criticism of the rating system which has resulted from revaluation in Scotland. The most unsatisfactory aspects of the rating system are fully appreciated by us. Since we came to office we have searched, so far without success I have to agree, for an acceptable alternative, and we have made significant improvements in the system, most recently in the Rating and Valuation (Amendment) (Scotland) Act 1984.

We are still looking for ways of removing the objectionable features of the present system of local government finance and a ministerial study into the whole question was announced last October. As I told the House yesterday, I am a member of the study team whose remit covers Scotland. As my right hon. Friend the Prime Minister said yesterday, we are determined to find an agreed solution to the problem. We believe that our present system is, despite the efforts we have made, still unfair. Revaluation has highlighted the problems. While we have to say that there are no easy answers, we are determined to find a more satisfactory system.

Mr. Dewar

Does the Minister think that it is responsible for the Secretary of State for Scotland to commit and pledge himself to action at a stage at which his junior Minister has just made it clear that he has no idea what the action should be?

Mr. Ancram

The hon. Gentleman knows that the review was set up in October last year with the intention of finding a solution to the problems that exist within local government financing. We are determined as a result of that review to find a solution, but, as the hon. Gentleman himself said, if I am right in my recollection of a speech he made the other day, this is not a matter to be rushed. If we are to find a proper answer to the real problems that exist, we must take our time in doing so.

In returning to the order, I hope that hon. Members will agree that it substantially mitigates the effects of revaluation on domestic ratepayers and I commend it to the House.

12.17 am
Mr. Jim Craigen (Glasgow, Maryhill)

I find it difficult to follow that. I am intrigued that the Minister is one of the three wise men who are currently studying rates reform. I referred on another occasion to the three wise monkeys. I am not sure in regard to rates reform whether he is hear no evil, speak no evil or see no evil. If the order were the good news for domestic ratepayers that the Government have heralded it as being, it would not be sneaked through the House after midnight.

I am tired of Scotland's Ministers putting Scottish affairs on the back burner. We are not saying no to this £38.5 million aid to domestic ratepayers, but it will not compensate them for the shift that took place in the revaluation or the cut that has been engineered by the Government in the rate support grant.

Ministers may feel that they will buy off trouble in Conservative Association executives. I wish there was a Conservative party conference every month — [HON. MEMBERS: "Or reselection."] If there were mandatory reselection for Conservative Members not one of them, save perhaps the hon. Member for Banff and Buchan (Mr. McQuarrie), would be chosen again as a candidate. But he let me down the last time. I was about to take away his title "the Buchan bulldog" because he sounded more like a Banff spaniel when he supported the Minister in his most recent announcement about domestic rate relief.

This increase comes nine weeks after the Government assured us that the rate support grant settlement for 1985–86 was adequate. We told the Government then, and we say again, that they have added to the hardship facing Scottish ratepayers. Year after year they have reduced the amount of rate support grant for essential local government services. The chickens are coming home to roost.

When the Minister talks about local authorities being in excess of guidelines, he should bear in mind that 36 authorities are within the guidelines, or within 1 per cent.

of the guidelines. I shall deal later with debt interest charges which are causing problems for local authorities in fixing their budgets.

The Government have reduced rate support grant from 68.5 per cent. in 1979–80 of approved relevant expenditure —in other words, programmes that were approved by the Scottish Office—to 56.6 per cent. for 1985–86. I think the Minister will confirm that, with the additional £38.5 million, the new rate support grant is 57.7 per cent.

The Government have gone over the top in their treatment of ratepayers in the coming year. They have mishandled the revaluation exercise and miscalculated the effects of their own rate support grant settlement for the coming year. In respect of local authorities, the Minister reminds me of the police inspector in "Casablanca" who, once the hero and the heroine have escaped, says, "Round up the usual suspects." It is always somebody else, never the Government, who is to blame.

Mr. Gerald Malone (Aberdeen, South)

If I can persuade the hon. Gentleman to come back for a moment from Harry's bar in Casablanca, will he please tell the House what he would have done about revaluation, because the Labour party agreed to that principle?

Mr. Craigen

The hon. Gentleman should have been here last night when we spent three hours on the subject of revaluation. When the Minister says he has a feeling of déjà vu, I have a feeling of weariness, because we are given no answers by this Government about the real problems that face Scottish ratepayers. In the early hours of yesterday morning the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) rightly said that percentages do not really bring home the significance of what is happening over the rate support grant cutbacks and the effects of revaluation.

Mr. Ancram

I am grateful to the hon. Gentleman for giving way, because my hon. Friend the Member for Aberdeen, South (Mr. Malone) asked him a particularly interesting question in view of the debate that took place on 28 July 1982, when the hon. Member for Glasgow, Garscadden (Mr. Dewar) said: The Minister should make it clear now that there will be no more flirting with this halfway house and parboiled non-solution. He should tell us that there will be a proper revaluation in 1985–86."— [Official Report, 28 July 1982; Vol. 28, c. 1195.] That was the hon. Gentleman's view then and it appeared to be the view of the Labour party at that time. Perhaps the hon. Gentleman will tell us whether he disagrees with it.

Mr. Craigen

That view was not held when there was a massive cut in rate support grant. The Minister did not listen to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) at that time. More significantly, the Government were prepared to proceed with a partial revaluation, and they have already established the precedent of fixed divisors between domestic and non-domestic ratepayers.

My hon. Friend the Member for Garscadden needs no lessons from the Government Front Bench, although occasionally he listens to me. The Parliamentary Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), has a district authority in excess of guidelines, although he shifts within the Scottish Office before the problems become too great for him.

I am glad that the Minister has confirmed that he told COSLA that the average increase in domestic rates will be significant this year as a result of the changes in the rates support grant and in revaluation. If the Minister thinks that the increase is acceptable, his view is different from that of the Treasury, which is always reminding us that it is trying to reduce inflation. Rate increases will be well above the rise in the retail price index in the coming year.

May we have some information about the difficulties that will face commercial ratepayers? There are four categories of commercial ratepayer. I understand that shops, offices and hotels face substantial increases, although the remaining category will enjoy a reduction.

Perhaps the Minister will comment on his recent discussions with COSLA, which wanted him to reinstate the needs element cut. The original rate support grant order had a significant impact upon domestic ratepayers and upon the district councils because of the way in which the Government altered the needs element in the grant.

We cannot ignore the way in which debt charges swallow up local authority resources. Current expenditure guidelines do not deal with loan charges. When the original rate support grant order was determined, interest rates were at 10.4 per cent., and we know what has happened recently. Can we expect a variation order in the foreseeable future?

Revaluation and outstanding appeals were mentioned in the debate yesterday. I think that we brought home to the Minister that it would take some time for many of the appeals to be settled. Will this not destabilise the grant-aid calculations?

Does the Minister refute the point put to him by a COSLA representative, that about £1,000 million has been taken out of the system since this Government came to office as a result of cuts in central Government aid to local authorities? In other words, a £1 billion rake-off by the Government has to be met by the rating system and the ratepayers.

The Government are the author of the present misfortunes facing the rating system and the ratepayers. Local government finance is complex enough at the best of times, but the ratepayers will be concussed by the twin effects of the revaluation and the rate support grant reductions. The Minister will reap the consequences of the whirlwind that he and his colleagues have set in motion.

12.30 am
Mr. Albert McQuarrie (Banff and Buchan)

I congratulate my right hon. Friend the Secretary of State, perhaps much to the dismay of the hon. Member for Glasgow, Maryhill (Mr. Craigen), on introducing the order. I might manage to please the hon. Member for Maryhill later in my speech, but now I should like to congratulate my right hon. Friend on increasing the amount of money for the rate support grant to local authorities to the tune of £38.5 million, which will have the effect of increasing domestic rate relief, as is well known, to 8p per pound of rateable value.

While any additional aid will be welcomed by the ratepayers, the cuts in RSG imposed on the local authorities for 1985–86 are such that there will be a huge impact on those local authorities. The best example that I can give is that of my local authority. I am not afraid to say this, because not the least affected is Banff and Buchan district council in my constituency, which has suffered a reduction of £857,429. Taking the 1984–85 needs element, that reduction was equivalent to a rate of 4p in the pound.

My hon. Friend the Minister is aware that a change in the distribution formula was introduced in 1984–85, which was expected to reduce the grant distributed to the district councils by the equivalent of a penny in the pound over the period of four years until 1987–88. However, as a result of the further reduction in support from Her Majesty's Government, and the transfer of support from the districts to the regions and the islands councils, Banff and Buchan district council may not receive any rate support grant needs element in 1986–87, and thereby the equivalent of a further 4p in the pound will require to be met from the rates during this financial year.

In that connection, I should like to draw my hon. Friend's attention to a letter that I received from the director of finance of Banff and Buchan council on 23 January 1985, in which he said: As you will be aware, not only has the Secretary of State reduced the total amount of Rate Support Grant payable to Scottish Local Authorities, but he has also changed the formula used to distribute this Grant in such a way that Regional Councils receive more Rate Support Grant (Needs), and District Councils are paid less. The director went on to quote the figures which I have just given about the two 4p rates. He said: In other words, losses of Rate Support Grant (Needs) will push the current District Council's Rate Poundage up by 61.5 per cent. over 2 years. The basis for this re-allocation of the available funds has not been made clear to me, but I understand has been made because the judgment of the Secretary of State is that it should take place. That is totally unacceptable to members of the Banff and Buchan district council, and it is similarly totally unacceptable to me.

Mr. Michael Hirst (Strathkelvin and Bearsden)

Will my hon. Friend give way?

Mr. McQuarrie

I shall not give way. Last night I tried unsuccessfully to get into the debate, and many hon. Members overstayed their leave, so I am going to do it tonight.

While the increase in relief, which is the subject of the order, has helped a little, the reductions imposed by my right hon. Friend the Secretary of State for 1985–86 and the prospects for future years will place a heavy burden on a low-spending authority such as Banff and Buchan, which has desperately endeavoured to keep within the guidelines set by my right hon. Friend.

This further reduction in rate support grant, with an assessment for 1985–86 of 72.26p in the pound per head of population, using the client-group approach, and after taking account of the specific grants, will mean that Banff and Buchan receive no rate support grant for needs element for 1986–87. The equivalent figure for 1984–85 was 53.11p. That implies for next year an increase of 36 per cent. My right hon. Friend has now announced the final calculation of the extraordinary expenses grant, which is the oil grant for 1981–82.

My local authority in 1985–86 will require to repay the sum of £150,428 of a provisional grant already received. When one considers the massive cut made between 1984–85 and 1985–86 of over £800,000, one can understand the great difficulty that my district council is facing in assessing a rate value which is not penal to the ratepayers in my constituency. It is therefore imperative that my right hon. Friend should consider two important factors in relation to the allocation of rate support grant.

The first is the increase in the threshold below which district councils receive no needs element of rate support grant, which should be revised to be in line with the rate of inflation. Secondly, no authority should lose grant per annum more than the equivalent of a penny rate as a result of any change in the distribution formula.

I am well aware that the relief that has been granted by my right hon. Friend in the order has been made in an attempt to reduce the tremendous burden that faces domestic ratepayers. I need not remind him of the largest public protest that has ever been known in Scotland over the rises which domestic ratepayers face. To give 8p in relief, as I have said, is commendable, but it is a drop in the bucket compared with what is essential if we are to remove the rates burden from the shoulders and the pockets of those who can ill afford these massive increases.

Mr. Ancram

I am slightly surprised that my hon. Friend feels that £88 million is a drop in the ocean. I appreciate the concern of his constituents. I hope he can confirm that the overall combined rating effect — we have to take region and district together—will be a 7.9 per cent. increase for the domestic ratepayer.

Mr. McQuarrie

That may be so, but a 7.9 per cent. increase, based on the revaluations means that the majority of my constituents who are householders or ratepayers will be required to pay a greater sum this year than last year. Whether it is a 7 per cent. or a 17 per cent. increase, it is still considerable.

I am aware that my hon. Friend had nothing to do with the recommendations agreed in 1982 by Parliament and which received the support of Opposition Members. I am sure that all my constituents and those of other hon. Members object to the savage way in which the assessors have made their decisions on the revaluations, which my right hon. Friend has tried to relieve by placing the order before the House. Some of the revaluations are monstrous. I have recommended all constituents who feel aggrieved about their valuations to make a formal appeal to the assessor. The answer is to have a complete review of the rating system in Scotland. The present system is archaic, and it has placed a great burden on those who pay rates.

It is no use the Opposition claiming that the Conservative Government created the problem, because it was created by the last Labour Government, who did nothing to solve it. The system has dragged on from one year to another for too long. Each year the situation becomes more difficult, with fewer people paying rates because of the large number who are living on social security.

Although the order is intended to be specifically for the benefit of domestic ratepayers, one must not forget, as the hon. Member for Maryhill said, the small and large businesses, which are suffering severely. We must look to measures which will relieve the hardship on these sectors.

I do not propose to read to the House the correspondence from the National Federation of Self-Employed and Small Businesses, as it will have been sent to all hon. Members. I draw attention only to the yellow sheet, which shows the Scottish revaluation, underlining the necessity to take action now.

Despite what has been said by the Opposition, this relief should be welcomed by all parties in the House. We want to find a satisfactory solution to the problem once and for all.

Mr. Dewar

What is it?

Mr. McQuarrie

I shall tell the hon. Gentleman. In the first instance I recommend that my right hon. and hon. Friends give some thought to removing the burden of education, police, transport and fire costs from the local authorities and bringing them into central Government, though not taking away the power of local authorities to operate the services. That is one means by which the rate funding incurred by a local authority could be reduced and brought into the national Exchequer. That is one of the small considerations of which my right hon. Friend might take cognisance when reviewing the matter at ministerial level.

All hon. Members represent ratepayers, and I believe that hon. Members of all parties want to find a solution. My right hon. Friend is making strenuous representations direct to the Cabinet and to the Prime Minister that a solution must be found now. The solution will be found; not because there is a Tory party conference, not because we in the Conservative party do not have re-selection, as do the Opposition, not because we fear defeat at the polls, but because there are Conservative Members who are honest.

Mr. Dewar

rose—

Mr. McQuarrie

I shall not give way. The hon. Member for Glasgow, Garscadden (Mr. Dewar) would not give way to me last night, and I shall not give way to him tonight.

There must be no fudging now on a matter which is of the greatest importance to all hon. Members, whatever their political allegiance. We must be seen to be looking after the interests of the people who elected us, in order to ensure that the ratepayers of Scotland are not disadvantaged against any other part of the United Kingdom.

Considerable complaint has rightly been made in Scotland that England has not had a revaluation since 1973. The revaluations and rates currently fixed by local authorities in England in many respects are much lower than those in Scotland.

The order will lead to the elimination of a penal tax on every householder in Scotland whose property has been the subject of revaluation, including council house tenants, who have faced large rent increases from local authorities. The action that my right hon. Friend has taken against high-spending authorities is to be commended. I welcome the order and I hope that by this time next year we shall have seen the last of the rating system in its present form. I hope also that a new system will be introduced and enacted in the next Session that will meet with the approval of the general body of ratepayers in Scotland.

Last Saturday, Lord Whitelaw said at Helensburgh that there must be a change in the rating system. He added that he had discussed the matter with the Prime Minister and with the Cabinet. He urged that we should legislate and introduce a new system in the next Session to ensure that a successor scheme is brought into effect. That is what the people of Scotland want and that is what Conservative Members will fight for. I hope that we shall receive the support of Members of all parties in this place to achieve that aim.

12.46 am
Mr. Hugh Brown (Glasgow, Provan)

I usually enjoy the speeches of the hon. Member for Banff and Buchan (Mr. McQuarrie), and I enjoyed his contribution this evening. The first part of his speech, which was well rehearsed, probably came from the Buchan district council. The second part showed at least that he has a good sense of humour. I enjoyed both parts of his speech.

We are dealing with a difficult subject. I have examined my file on rating and revaluation and discovered a host of unanswered oral questions in my name. When Scottish questions were last taken on the Floor of the House we did not even reach question No. 8. That leads me to observe that we need a serious debate on the principles of valuation and revaluation.

I am sure that the Minister made a good speech, but I did not understand the parts that I heard. I am sure that the parts that I did not hear, because of the noise, were good. He seemed to add nothing to a solution of the problem now. We should be more concerned with finding an answer now, not in the distant future.

I feel a sense of failure because I am almost tempted to support some parts of the case that the Minister was presenting. He is clearly the underdog. He does not have a Friend in the Chamber.

Mr. Bill Walker (Tayside, North)

rose—

Mr. Brown

I heard no great evidence of support for his case on Monday, Tuesday or today. If what I have heard since Monday is support, I would rather have opposition. At least I would know what others were about.

Mr. Walker

The hon. Gentleman has made the point that we have been dealing with Scottish business since Monday. This is the third day of our consideration of Scottish business. According to my calculations, some of us have now spent up to 20 hours on Scottish business. Does the hon. Gentleman agree that that destroys completely the argument of the hon. Member for Glasgow, Maryhill (Mr. Craigen)?

Mr. Brown

I have forgotten what my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) said. However, the debate should have taken place at an earlier hour. We probably all agree about that. That being so, I invite the hon. Member for Tayside, North (Mr. Walker) to make his own speech.

I am rather surprised that the Secretary of State for Scotland is not present this evening. I am aware that he has a Cabinet meeting tomorrow morning, but I think that he should have attended the debate.

The Government's record on rating is abysmal. There have been many promises in the past. I remember the Prime Minister's promises of 1974 and 1979. Indeed, even yesterday she left the impression that there was a commitment to reform or even to abolish the domestic rating system. Therefore, I am a bit sceptical about what is being said at the moment. It contrasts with what has been said in the past when nothing has been delivered. It has been associated with the inevitable attacks on local government.

A slight change is taking place. The hon. Member for Banff and Buchan never once said that he was representing a profligate local authority. The overall picture, that all the problems in local government have been created because of one or two Labour-controlled authorities, is nonsense. More and more people who take the trouble to look at the facts and figures are coming to that conclusion.

The issue is surely that there has been an increase in the rate burdens on two categories of ratepayers — commercial and domestic. We are just now getting information on the extent of those increases. Very little of those increases—this is where I agree with the Minister —is due to the revaluation.

My hon. Friend the Member for Maryhill can make his own defence of what was said a couple of years ago. I agree with him. I am in the privileged position that I speak for nobody but myself. I shall not even be answerable to the Provan constituency party for much longer. Therefore, I say definitely that I am in favour of regular revaluation within the rating system.

I would not make any great criticism of a Government who decide that they do not want an upheaval in a possible election year. I do not fault the Government for the mechanics of these matters. The Labour Government postponed the revaluation for two years. I do not remember the reason, but it did not seem very convincing. It was supposed to be too soon after reorganisation. Nevertheless, there were practical reasons. I am saying only that it was justifiable for the Labour Government to postpone it at that time, just as it may be for this Government for other reasons.

It is not the revaluation that has created the problem but the fact that local government is not popular. I have said this before. Conservative Members have a heavy responsibility for always attacking local government. They say that it is inefficient. Of course, they criticise Labour-controlled authorities. That sounds good. It might satisfy the nice ladies in the women's section of the Conservative party who do not know much about the facts of political life, but Conservative Members will not get away with that in the House.

Mr. Hirst

I admire the hon. Gentleman's reasonable point of view. Does he support the kind of spending plans that have been put forward by, for example, Edinburgh district council?

Mr. Brown

I shall neither defend nor criticise Edinburgh district council. I have enough bother trying to find out how Glasgow arrives at its decisions. I suspect that the hon. Gentleman does not know much about Edinburgh. If he sticks to Bearsden and Strathkelvin and Milngavie, he will be doing all right.

A popular clamour has now built up. A paragraph in the Layfield report said: Revaluations have always been unpopular with Governments since they are widely misunderstood. The easy way out has been to postpone the evil day. This makes the final reckoning all the more serious. Obviously, if the Government are cutting support to local authorities and if there are two years of other cuts and reduction, when revaluation comes it makes it worse. That is what Conservative Members are not facing. Indeed, the Government invited comments on their White Paper of August 1983, after the election. I wonder how many of those Conservative Members who are now squealing made any representations at that time to change the rating system or to abolish domestic rates. Two hands have been raised. I am delighted to know that. Those hon. Members can speak for themselves. However, there was no great clamour from the hon. Members for Strathkelvin and Bearsden (Mr. Hirst), for Stirling (Mr. Forsyth) or for Aberdeen, South (Mr. Malone) for the abolition of the domestic rate, even though they were invited to comment.

May I just—[Interruption.] Is there a private battle going on? I wish to point out to the Minister that Conservative Back Benchers are running scared. There is a great panic. In the past, Labour Members have been guilty of saying, "Oh, it was not me. It was the Government who did it. I have nothing to do with such Government decisions." The Parliament Under-Secretary of State, however, will not be able to opt out by using that argument.

Mr. Nicholas Fairbairn (Perth and Kinross)

The hon. Gentleman is being very fair, but I hope that he will acknowledge that for many years I have demonstrated the fact that the rating system is not democratic, combining taxation and democracy. I have said that again and again for 20 years.

Mr. Brown

I am not making a personal attack. I have some regard for the hon. and learned Gentleman, although that regard is reduced when I read some of the stuff that he writes in the Daily Express. I recognise that individual Members have long argued that the rating system is not satisfactory. The trouble is that they have not suggested any alternative that has been accepted. I do not want to talk about the technicalities of the possible alternatives. I wish only to say that the Secretary of State in his replies, and the Prime Minister, have both left the impression that there is to be some significant change, if not abolition of domestic rates. It must come soon.

We have heard about what the Secretary of State said on Channel 4. According to The Scotsman, he said: We have had one go at trying to reform rates and everyone was against the alternatives. This time we have to deliver. Not acting at all means that there will be severe political consequences. We would all agree wih that.

No-one is prepared to put up with the system as it is, and I agree with them. What does that mean? If the Secretary of State is not prepared to put up with the system as it is there must be some change. The Secretary of State is a Cabinet Minister. Why does he not make such statements to the House? Why does he make them on Channel 4? I am entitled to ask the Minister why the Secretary of State can make such a statement, and why Sir James Goold-poor man, trotting up and down—can now say: I am confident that we will succeed and that the whole country will thank us for it. What did Sir James mean by that? Has there been some meeting with the Prime Minister? Has agreement been reached on some concession or change.? If so, what is it? The House has a right to know.

I asked a question on Monday, and the Minister was good enough to reply to it. I asked what all this had to do with valuation levels in England. I do not know whether we are to hear from the Scottish National Party, but that has nothing to do with the matter. There is an idea that we are dragging our feet beause we have had more revaluations than England. That does not make a pennyworth of difference to the amount of public expenditure or of Government support to local authorities. That English red herring has nothig to do with the problem facing us. The second thing that I established—again the Minister was quite helpful—was that, because no legislation allows it, the Government cannot direct assessors to increase rates on commercial properties or to decrease rates on industrial premises. There is no doubt that this problem is a product of valuation in previous legislation to which we have all subscribed.

What concession is likely to be on offer? How will the Conservative party buy off the pressure that is coming from Conservative Members' constituents? What will they be told? Will the Select Committee consider the matter? There is no power to relieve commercial ratepayers. Is that worth examining? It must be established that the burdens on such ratepayers are wrong. Should we demand further relief for domestic ratepayers or should there be more rate support grant for all local authorities, which would reduce everyone's burden?

The House, not somebody watching Channel 4 or talking to Sir James Goold on the telephone, should be told. I do not know whether Conservative Members have met the Prime Minister yet. Will there be concessions, or will they be fobbed off with the information that legislation, which will solve the problem, will be introduced next year? That would be dishonest, although it would be in keeping with the Prime Minister's record. The Minister should say what relief or concessions the Government might be able to come up with in the short term.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. This is a short debate, and it would be helpful if we could have short speeches.

1.1 am

Mr. Nicholas Fairbairn (Perth and Kinross)

I shall be brief. My right hon. Friend the Secretary of State has given a considerable relief to domestic ratepayers. However, there is an inequity in the system and I look to my right hon. Friend to find other ways—I am sure that he will —to extinguish them.

I am unimpressed when I hear Opposition Members criticise the Government for difficulties in local government expenditure. No Opposition Member stops telling us that there should be an increase in such expenditure. Not one of them says that local authorities, which are extravagant, have distorted the system which was invented to protect the domestic, commercial and industrial ratepayer. All Opposition Members favour extravagance. They want the Government to provide more funds and local authorities to provide more services. They never stop saying that we should spend more.

The moment a system which prevents that appalling theft and fraud is established, the Opposition cry, "It is all your fault." If it had any other effects, they would say the same. They would say, "But spend more. Let central Government provide more funds. It is all the fault of the Secretary of State and the Treasury. You have reduced rate support grant and this and that. Just provide the funds", as if the Government were some sort of mad grandmother fairy scrooge who sat on money which she could otherwise bestow upon her children. That is the fallacy of Opposition Members.

The Opposition constantly eschew that there is money when it does not exist, and that the source of our problems is the fact that it is not thrown about enough. That is not the case. The source of our problems is simply a switching of extravagance. Authorities such as Glasgow which have been extravagant have closed down streets of commerce, and because no rates have been produced, smaller communities have suffered.

The squinting has come about because of irresponsible extravagant authorities. The Secretary of State has done his best to stop that. He has done well in an attempt to prevent the worst effects of that extravagance, and he has corrected it. I congratulate my right hon. Friend, although more must be done.

However, the blame rests on those who take the view that the right of a local authority is to be extravagant. That is what the Opposition imagine. I shall not repeat myself, other than to say that fiscal responsibility is essential. The Secretary of State had done his best to redress the squint which extravagance has forced upon the local authority system, but more must be done.

1.8 am

Mr. Donald Stewart (Western Isles)

I would contest the view of the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) that people are demanding undue extravagance from the Government for local authority expenditure. Authorities can no longer maintain even minimal services because of the chipping away that has occurred over the last few years. If the hon. and learned Gentleman comes to my constituency, I shall prove to him that that is true, and it is equally true of the whole of Scotland.

The hon. Member for Banff and Buchan (Mr. McQuarrie) took pride in the fact that, unlike the Labour party, the Conservative party has no reselection system. But what has happened with rating will teach Scottish Conservative Members that reselection is very much on the cards, only this time it will be carried out by the electors.

Some Opposition Members earlier today criticised the increase in the television licence fee, but that could be churlish because if the Scottish Tory conference is televised they might think that the more expensive licence is worth every penny.

The hon. Member for Glasgow, Provan (Mr. Brown) said that the fact that Scotland had had two revaluations while England had had none was a red herring. At Prime Minister's Question Time yesterday an English Member complained that rates in England had risen by 9 per cent. Yet here we have a Minister stating if not with approval at least with some satisfaction that the increase in Scotland is only 17 per cent. That is no red herring.

As the hon. Member for Banff and Buchan has said, the order is welcome in a sense, but it would not be necessary at all if the Secretary of State—under orders from his bosses in Whitehall and the Cabinet — had not consistently cut rate support grant in recent years. It is to be cut by about £70 million from this financial year to next. In 1984–85 rate support grant rose to 60 per cent. of relevant expenditure. If the 1985–86 settlement was restored to that percentage it would provide a further £84 million and reduce the burden on all categories of ratepayers by about 6 per cent.

As for relief on domestic rates, even with the increase from 5p to 8p proposed in the order only three areas— Moray, Inverness and Lochaber — will have average increases of under 5 per cent. on rates bills. The average increase for all areas will be about 21 per cent.

As the Secretary of State is no doubt well aware, ratepayers in Scotland are outraged at the increases to be imposed. He probably did not expect there to be such anger. His ministerial competence must therefore be in grave doubt, especially as it seems that the Scottish Office has made no request to the Cabinet for extra funds to keep the rate increases down.

That means that the rates relief increases will have to be met from the existing Scottish budget and we all know that that will mean less money for other things, such as health, housing and education, which are already suffering disastrously.

It should not be forgotten that the Scottish revaluation was due in 1982 but was postponed by the Scottish Office and the Government for political reasons, because they judged, fairly accurately, that a general election was in the offing. If the revaluation had gone ahead then, the percentage increase for domestic ratepayers would undoubtedly have been much smaller, especially as there would not have been such a swing in favour of the industrial ratepayer. The Scottish National party's policy at that time was that it was wrong to postpone the revaluation, although it must be stressed that we oppose the entire domestic rating system. Government statements that the system had to be reformed have been bypassed and the Conservatives now have to face the anger of their own supporters in Scotland.

Mr. Ancram

The right hon. Gentleman seemed to be saying that it was his party's policy that the revaluation should have gone ahead, but when the order postponing it was announced his hon. Friend the Member for Dundee, East (Mr. Wilson) said that it would be wrong to oppose the order and went on to say that there was nothing wrong with revaluation and much to be gained from it.

Mr. Stewart

We have never opposed revaluation as a principle. It has to take place from time to time because one cannot continue with the same valuations for years on end. Our objection is to the fact that Scotland has had two revaluations in a period in which England had none.

I was even more horrified to learn that the Secretary of State had been suggesting the introduction of a poll tax to supplement the rates system. That is the worst of both worlds. It is idiocy and not worth considering. It would probably just give the Government yet another excuse to cut rate support grant.

My party favours scrapping domestic rates completely and replacing them with a fully fledged system of local income tax. That would be a progressive tax and thus fairer than either the present system or a poll tax. It would also mean that local government would have some financial autonomy again, and we believe that that is a very important issue.

The incompetence and anti-Scottish prejudice of Ministers at the Scottish Office has been shown up and they fully deserve what is coming to them.

1.14 am
Mr. Charles Kennedy (Ross, Cromarty and Skye)

I shall follow the closing remarks of the right hon. Member for Western Isles (Mr. Stewart), and will not dodge the opportunity to say firmly what my hon. Friends and I would support to replace the mess of rating in Scotland, which confronts us. It is similar to that outlined by the right hon. Gentleman. It would be a system of local income tax. It would obviously need a measure of equalisation for the regions and districts that do not have the revenue base. As a result it would return greater autonomy, financial accountability and responsibility to the regions and districts. Even Conservative Members would agree that it would be a major improvement on the present position.

The order is disappointing. Commercial rates will not be given a level of assistance, even comparable to that which the Minister announced tonight for domestic rate payers. Let there be no doubt about that level. He re-emphasised in his opening speech that that will be bought at the expense of industry, roads, hospitals, agriculture and housing. That is little recompense to people on waiting lists for housing and hospitals, people in areas of industrial decline, people in agriculture who are suffering great problems at present, and people who would benefit from an injection of capital investment in the infrastructure and the roads network. There is little economic relief for Scotland.

Most interestingly, the Government's panic measure has not even commended itself to the National Federation of Self-Employed and Small Businesses, which at their annual conference in London last weekend dissociated itself completely from the economic policies being pursued by the Government. The hon. Member for Banff and Buchan (Mr. McQuarrie) will confirm that the Tory party, which is a minority party in terms of its political representation — [Interruption Hon. Members should look at the opinion polls. At present the Tory party is not in second place, but third. It is a minority political party in Scotland and is heading in the direction of becoming an even smaller minority. That is one of the few positive benefits for Scotland which will come from the complete shambles that the Scottish Office has made of this measure.

It is time to redress the injustice. We shall see what happens in Argyll and Bute. My party would opt for a system of local income tax, which would be fairer, spread the burden better than a poll tax system, as the hon. Member for Stirling (Mr. Forsyth) suggests, and would get away from the position that the Government have placed the ratepayers of Scotland in fairly and squarely tonight. We welcome any relief that is available, but they will do little to reverse the present reality. Therefore, we look forward to reversals at the polls.

1.19 am
Mr. Martin J. O'Neill (Clackmannan)

The right hon. Member for Western Isles (Mr. Stewart) and the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) said that there should be a local income tax, but they did not say whether there should be a local corporation tax for businesses. If there is no local corporation tax, there will still be revaluation and the anomalies that we are debating tonight.

In my constituency, those anomalies have resulted in Maclays brewery's rates bill being reduced by 12.14 per cent. It may be only accidental that the Younger family has a major shareholding in that brewery—[HON. MEMBERS: "Withdraw."] If the Secretary of State, whose family has that shareholding, were here I would be happy to give way and allow him to answer my point. If the Secretary of State cannot be here to debate an issue of this importance, I shall not withdraw my suggestion.

Mr. Fairbairn

On a point of order, Mr. Deputy Speaker. As I understand the implication of the hon. Gentleman's statement, he is suggesting that my right hon. Friend the Secretary of State has exercised a corrupt influence on the assessor. In my opinion, that is unparliamentary and it should be withdrawn.

Mr. Deputy Speaker

Order. I heard nothing containing that inference, and so far I have heard nothing that is out of order.

Mr. O'Neill

In Alloa, a short distance from the place about which I spoke, Fine Fare supermarket, which specialises in employing people part-time for about 20 hours a week—the sort of employment that was praised by the Chancellor of the Exchequer in his Budget statement—has suffered a 44 per cent. increase in rates as a result of the revaluation. We have riven across Scotland the sort of inconsistencies that I have just mentioned, and I could give chapter and verse for many others. It is a great burden on businesses and individuals.

During tonight's debate, in our discussions last night, in the press, and in a Channel 4 interview, we have seen the Government scurrying to find some kind of solution. I am sure that the Conservative party's Perth declaration on devolution in the 1960s was as worthless as anything that Conservative Members will say at the next Perth conference. This is the Government's biggest foul-up for some time. They have nowhere to hide. They have granted themselves a range of rate-capping powers which mean that no blame can be attached to Scottish local authorities for present rate bills. The blame rests with the Government because of the way in which they have operated the revaluation system.

I remember only too well sitting with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) during debates in the last Parliament when we suggested that we should have revaluation urgently. At that time, Conservative Members did not say a word about it. The only time that the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) and the Under-Secretary of State, the hon. Member for Eastwood (Mr. Stewart), spoke was to try to change the rating system in respect of outside pipework at the BP chemicals plant at Grangemouth. What happened as a result was that all ratepayers in Central region suffered a 6p in the pound increase in rates. The Government were running along behind the CBI. That was the Government's only contribution to rating reform in the last Parliament, and the ratepayers of Central region know it to their cost.

Had I the time, I could give the House another 10 examples of anomalies in the present system. The system of local government finance and fund raising is in a complete mess, and the only way to change it is not by declarations at Perth, but by a change of Government. If the Gallup poll issued today, which shows Labour ahead of the Tories by 6.5 points, is anything to go by, we shall have to wait at least until 1988 for realistic changes.

1.24 am
Mr. Ancram

I know that other hon. Members want to speak, but if I am to make any answer at all, I must speak now.

Apart from the disgraceful remarks that he made at the beginning, the hon. Member for Clackmannan (Mr. O'Neill) should not put his faith in opinion polls. I seem to remember that in 1981 he was doing precisely the same thing. The only poll that matters is the poll on election day itself.

One thing that has become clear during the debate is that the Labour party has no idea of what its policy on valuation or revaluation is. It must be a matter of embarrassment to the hon. Member for Glasgow, Garscadden (Mr. Dewar) when first of all his own Front Bench spokesman tonight denied and then, when challenged on that, misinterpreted, the point that he made in 1982. The hon. Member for Clackmannan is obviously completely out of line with his Front Bench, because the Opposition Front Bench has made it clear that it believes in revaluation and its principles.

Given the figures that I gave earlier, which are established figures and which show that one third of the average rate increases in the domestic sector in Scotland are attributable to revaluation and to the rate support grant settlement, and that two thirds are attributable to local government spending, my hon. and learned Friend the Member for Perth and Kinross (Mr. Fairbairn) was right in saying that it lies ill in the mouth of the Opposition to suggest that local government spending has nothing to do with the rating problems that we see today.

The right hon. Member for the Western Isles (Mr. Stewart) was another one who fell into that trap. He referred once again to the chopping of services since 1979. If services have been chopped, how can he explain, on figures that are agreed by COSLA, that even in the current year expenditure is 2 per cent. more in real terms than it was when the Government came into office? That is no chopping of services, and he knows it.

My hon. Friend the Member for Banff and Buchan (Mr McQuarrie) asked several questions, one of which I answered during his speech. He was right to say that this year the maximum loss in rate support grant was suffered by his authority, but no decisions have been taken for later years. Obviously, as I have already said, we will be taking account of the views expressed by low-spending authorities in reaching our decisions.

The repayment of the oil grant to which my hon. Friend referred arises because the actual expenditure submitted by the council is lower than the estimate submitted in 1980. I am sure that both he and the council will welcome the decision of my right hon. Friend not to make further calculations on the oil gramt for the years 1982–83 and 1983–84.

The hon. Member for Glasgow, Provan (Mr. Brown) made a reasoned speech about the whole question of revaluation. There was much in it on which he and I would be in agreement. He pressed me on the point about finding an alternative to the present system of financing local government. I refer him to the answer which my right hon. Friend the Prime Minister gave at Question Time yesterday, when in regard to the studies to which I referred earlier, she said: Those studies, both on the rating system and on the reform of local government finance, are under way. I hope that we shall be able to come to an agreed solution …If everyone sticks to his own pet scheme, we shall not get anywhere. That is evident from the number of schemes about which we have heard during the past two days. My right hon. Friend ended by saying: I hope that we shall be able to bring forward proposals which will command sufficient support to put them through." —[Official Report, 26 March, 1985; Vol. 76, c. 211] The hon. Member for Glasgow, Maryhill (Mr. Craigen) asked what response would be made to the convention's request for more grant. As he may know, the convention wrote to my right hon. Friend the Secretary of State at the beginning of March to ask him for an increase in grant of £31 million. Within days my right hon. Friend announced an increase in aggregate Exchequer grant of £38.5 million, more than COSLA had asked for.

Then, very much in line with what my hon. and learned Friend the Member for Perth and Kinross was saying, the convention asked for yet more grant in the form of more needs element. He was right in saying that this would encourage local authorities to spend more and perpetuate the problem of high spending, which we have been trying to tackle. If Opposition Members think that the needs element should have gone to help the ratepayers this year, it is worth remembering that it could not have done so because the rate had already been struck. The only way in which an extra needs element could have been used was in terms of expenditure.

As the results of appeals become known, adjustments are made to the resources element of the rate support grant. The system is designed to cope with such changes and translate them into adjustment in grant. Also, in regard to the reduction in rate support grant, it is worth remembering, at the risk of repeating something that has been said on a number of occasions, that the record for the largest reduction in a single year is still held by the right hon. Member for Glasgow, Govan (Mr. Millan).

The hon. Member for Maryhill also asked about interest rates. The grant to be paid to authorities takes account of interest rates as forecast in November 1984. The forecast will be revised in November 1985, and any additional grant paid. This is a long-established feature of the rate support grant system and it is obviously known to directors of finance when they prepare their budgets.

We have had a useful debate. What is absolutely apparent is that the order, which provides much needed relief for the domestic ratepayer, should be welcomed by every hon. Member. I hope that the efforts which have been made by my right hon. Friend to provide this much needed relief for the sore-pressed ratepayers of Scotland is something upon which the whole House can agree.

Question put and agreed to.

Resolved, That the Rate Support Grant (Scotland) (No. 2) Order 1985, dated 14th March 1985, a copy of which was laid before this House on 15th March, be approved.

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