Commercial Rate Limitation (Scotland) (Hansard, 1 May 1985)

§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I beg to move, That leave be given to bring in a Bill to empower the Secretary of State for Scotland to set a ceiling on increases in rateable value imposed by assessors on commercial premises in the course of revaluations in Scotland; to make emergency powers available in the short term to provide assistance to those commercial ratepayers whose commercial viability is threatened by rate cost increases of more than 25 per cent. as a direct result of revaluation: and for connected purposes. The Bill is necessary for a number of good and cogent reasons. Equally important, however, is the need for the Government to act or at least to make their position clear immediately. In this context, that means that decisions must be taken and announced within the next two weeks. In my view, if an announcement is not made before the Conservative party conference in Perth. it will be too late. A financial formula must be found to give some hope to the thousands of commercial ratepayers, both large and small, who face rate increases for 1985 of the same magnitude as their net profits for 1984.

This month, businesses will face the first instalment of the 1985–86 rates. Although some increase in the commercial rate burden has been anticipated in their budgets, it is unreasonable to expect businesses to have anticipated the extent of the increases. Many are now unable to draw up realistic budgets which will balance for 1985–86 and are being told by their financial advisers that they are no longer viable as a direct result of the rate increases. If nothing is done between now and mid-May, business men will have to choose between substantial staff lay-offs, at best, or total closure, at worst. The Bill is thus no academic contribution to the current debate about the need for rate reform. It seeks to throw an emergency lifeline to business men on the brink of going under for good.

It is now widely agreed that the combination of the reductions in rate support grant suffered by local authorities in recent years and the recent revaluation have produced an unexpectedly heavy burden on ratepayers in general. The Government recognised that in relation to the domestic sector by bringing forward a welcome increase in domestic rate relief to the extent of £38.5 million. When that relief was given, Ministers were still making soothing, platitudinous noises about the increased burden on commercial ratepayers, basing their argument on the average figures available at that time. We were told that on average commercial ratepayers in Scotland would suffer increases of 1 per cent., 2 per cent. or perhaps 3 per cent. We were also told that there would be winners as well as losers—that applies to Russian roulette, too. The Government also said that individuals who believed that they had been assessed unfairly could resort to the appeals procedure, but I submit that Ministers can no longer hide behind average increases which disguise wildly fluctuating individual increases.

The detailed information in the draft valuation rolls is not yet generally available because they will not all be published until the end of May or early June. However, there are specific examples of individual increases, sometimes concentrated in discreet localities. They have exploded the myth that there is no problem: there is a very real and urgent problem, as can be shown by referring to only a few examples.

261 I begin in the northernmost part of the United Kingdom, and quote, courtesy of the Shetland chamber of commerce, a camera shop which in 1984 paid rates of £500; in 1985 it is expected to pay £2,712. The only way to meet that increase is by selling extra cameras and film, but there is no way in which that can be done. It is quite unrealistic for such increases to be borne by shops.

I have two specific problem areas in my constituency. One is the market square in Kelso and the other in patches of the new developments in Hawick, where rate bills have increased by 100 to 150 per cent. Those are cost increases, not changes in rateable value.

I am told that the position is even worse in Perth, and worse still in Edinburgh with sevenfold increases in rateable value producing increases of 10 or 12 times in the amount of cash having to be paid.

This morning I was interested to receive some information from the director of finance, Mr. Kenneth Patterson, who said in a letter to his regional councillors that the average increase in rates payable had been split according to the following categories and in the following ways: the domestic increase across the Strathclyde region is, on average. 21.6 per cent.; industrial subjects have been decreased by 3.8 per cent.; shops have increased by 38.7 per cent., offices by 25.6 per cent., hotels by 22.7 per cent., and other commercial subjects, which include wholesale warehouses, bonded stores and retail warehouses, have been decreased by 16.9 per cent. The Strathclyde finance department reckons that the rates to be collected due to the expenditure increase in its budget and other matters are 11.4 per cent., so anything over that figure in the categories mentioned will be a direct result of revaluation. That explodes the myth that the commercial sector is suffering an average increase in the low, single-digit range.

This does not affect only small business. Information has been given to me by a major shoe retailer which has 138 outlets throughout Scotland, shops with household names. In its 1985–86 budget it assumed a 10 per cent. increase in rates, which made a figure of £728,000 for rates payable. The rate demand that it has received indicates an average 54 per cent. increase in rates, giving a figure of £1,028,000 in rates payable. Increases of that order will mean either closing 30 of the smaller branches, making about 120 employees redundant, or raising the prices in Scotland, which would mean a differential price structure. The same shoes would cost 3 per cent. more in Scotland than in England.

I pay tribute to the work being done by the Scottish branch of the National Federation of Self-Employed, which is doing its best to assist individual businesses that have been affected by the increases. I turned to that organisation in desperation when trying to seek redress for some of my constituents in Kelso and Hawick, and it was through its instigation that I conceived the scheme for selective rate relief which is enshrined in the Bill.

262 The Government claim that they have no legal machinery available to provide selective relief in the commercial sector. I acknowledge that, and this Bill seeks to provide the bones for that machinery. I do not make any extravagant claims about it—adjustment may be necessary in the suggested relief threshold of 25 per cent. There may be difficulty in defining commercial subjects. There may be problems also in designing a detailed test for need.

I am prepared to listen to the Government's arguments when we come to consider the Bill's detailed provisions. However, I am convinced that there is a need for urgent legislation. Given the political will, I am sure that a measure of selective rate relief in the commercial sector could be made available forthwith.

There is no prospect of salvation by means of the appeals procedure and it is not good enough for Ministers to use that as an excuse for legislative inactivity. The appeals procedure, like the original assessments, pays no regard to enterprises' ability to pay. It will be cruelly to raise false hopes to recommend appeals as a remedy for the ills that some businesses are suffering. The appeals procedure is hopelessly overburdened and it will take years to sort it out. Moreover, commercial subjects will have to wait until all the domestic appeals have been dealt with.

The Government have no alternative but to produce the necessary primary legislation to find the £4 million or £5 million needed to mount the rescue package. My right hon. and hon. Friends and I would give any such scheme our enthusiastic support. If the Government bring forward the necessary legislation, they will still be able to rescue hundreds of small businesses from extinction. If they do not, the Secretary of State might just as well take a bulldozer to many of the high streets of small and large towns in Scotland, and he will deserve richly the political retribution that will be visited upon him. If he does nothing, he will deserve everything coming to him.