HC Deb 09 December 1986 vol 107 cc200-78

Order for Second Reading read.

4.39 pm
The Secretary of State for Scotland (Mr. Malcolm Rifkind)

I beg to move, That the Bill be now read a Second time.

The Bill is a radical and reforming measure which will abolish a discredited and unpopular local tax. It is well known why the domestic rating system has become completely discredited, and I shall not go into that in detail. One can sum up by saying that the unpopularity and unacceptability of domestic rates in Scotland stems from their unfairness and unaccountability, and the arbitrary and capricious way in which they apply.

One needs only a short time to see the force of such an argument. The unfairness of the rating sustem has existed for years, but it has become more profound as the size of rates bills has increased, and one sees the illogicality of a system of local taxation which excludes such a substantial proportion of the adult population.

If we exclude spouses of ratepayers, who can be said to be influenced by local authorities' rates decisions, Scotland is left with an estimated three quarters of a million adults who, because they are neither the owners nor the tenants of residential property, are not liable under the system of local taxation. That figure represents some 20 per cent. of all adults in Scotland. I have yet to hear from the Opposition, or any other quarter, a logical or rational reason why such a substantial proportion of the adult population should be excluded from the sole system of local taxation in Scotland.

We should imagine the likely reaction of the Opposition to my introducing a Bill which would set in place a tax in Scotland which excluded ab initio 20 per cent. of the adult population, not because they are unable to pay, not because they do not benefit from the services for which the tax is being raised or for any other rational or logical reason, but simply because they happen not to own or rent domestic residential property. I would be accused on all sides of introducing a system which is grossly unfair, totally unacceptable, does not relate to ability to pay and arbitrarily excludes large numbers of the adult community.

Mr. Robert Maclennan (Caithness and Sutherland)

If that is so, why did the Government twice back rates so clearly, and why did the Secretary of State subscribe rates?

Mr. Rifkind

Like many others, we have spent several years looking for an ideal alternative which would command the enthusiastic support of the whole population, including the hon. Gentleman. He should be aware that in the real world the question to ask is whether the existing system is tolerable. If it is not, it is necessary to replace it.

My criticism of domestic rates—that it excludes a substantial proportion of the adult community—also applies to the alliance's preference of a local income tax. It, too, would exclude a large section of the adult community and be equally as unacceptable as the present system for that reason.

I have to tell the hon. Member for Glasgow, Garscadden (Mr. Dewar) in particular that if, as he doubtless will, he criticises the Government's proposals, he will have to do slightly better than he has in the past when defending his support for the existing rating system—a system which continues to exclude some 20 per cent. of the adult population on no rational or logical basis.

Mr. Donald Dewar (Glasgow, Garscadden)

For the sake of the record, will the Secretary of State tell us what proportion of the adult population in Scotland do not pay income tax?

Mr. Rifkind

The hon. Gentleman anticipates what I was about to say next. I have demonstrated why I believe that the existing system is unfair, but there is a second consideration, and that is its profound lack of accountability with regard to the relationship between the adult population and local authorities.

The hon. Member for Garscadden made a comparison with income tax. I shall answer that point explicitly and specifically. He is aware that the whole of the adult population pay through their taxes to meet the requirements of central Government. The whole population pay value added tax and other indirect taxes, and a substantial proportion pay income tax. There is no adult in the land who is exempt from both direct and indirect taxes, and the Government's decisions on expenditure have to be financed through the taxation system by direct and indirect taxes.

A system of accountability exists with regard to central Government because the whole of the adult population, by direct or indirect means, or, in many cases, by both, fund the Government's expenditure requirements. With local taxation, however, because rates are the sole source of local authority taxation, a substantial proportion of the adult population make no contribution at all, so there is a profound lack of accountability.

Mr. Willie W. Hamilton (Fife, Central)

The right hon. and learned Gentleman is contradicting himself. The people who are not paying rates now pay direct or indirect taxes which go to the local authority, so they all pay, directly or indirectly, to the local council.

Mr. Rifkind

The hon. Gentleman has made a profound but entirely irrelevant observation. We are trying to identify whether, when a local authority reaches its decisions on expenditure, those whom it asks for a democratic mandate or the introduction of those expenditure measures are those who will fund the measures, either in part or in whole. The hon. Gentleman knows perfectly well that, while such a principle applies with regard to central Government expenditure, it does not apply with regard to a substantial proportion of the adult population and the decisions of local authorities.

The present system is profoundly unfair, lacks accountability and applies arbitrarily and capriciously. I say that not simply because of the well documented evidence of individuals in one property who pay the same as many adults who live in a comparable property, which is a well-known anomaly and injustice which the Opposition seem happy to tolerate indefinitely, but because there are other ways in which the system is arbitrary and capricious.

The system is a profound disincentive to the improvement of homes. Even relatively modest improvements incur an increase in tax. It is extraordinary that whereas when a growing family needs larger accommodation the rest of the tax system provides tax advantages to help cope with the additional expenditure, the rating system imposes an additional tax burden if people move to larger accommodation.

Mr. John Mark Taylor (Solihull)

Does my right hon. and learned Friend agree that there are many of us in England who would very much like his colleagues to be prevailed upon to provide for England a system similar to that which he is proposing for Scotland?

Mr. Rifkind

I am happy to tell my hon. Friend that his wish will be granted, because my right hon. Friend the Secretary of State for the Environment and the rest of the Government are as enthusiastic about the proposals for England and Wales as they are about those for Scotland.

Mr. Robin Squire (Hornchurch)

I am stunned into intervening by the comment of my hon. Friend the Member for Solihull (Mr. Taylor). Is my right hon. and learned Friend aware that it is precisely because these proposals are being trailed as a pilot for England and Wales that some of us are most unhappy and cannot find ourselves able to support the Bill?

Mr. Rifkind

My hon. Friend is misinformed. As my right hon. Friend the Secretary of State for the Environment has made clear, similar legislation in respect of Wales and Scotland is to be proposed. It will not depend on the implementation of the Scottish proposals, because the Scottish proposals will come into effect only from 1989, by which time English legislation will have been put to the House for its approval.

Mr. Jim Craigen (Glasgow, Maryhill)

One feature of income tax and VAT is that they apply equally in Scotland, England and Wales. How can the Secretary of State justify introducing a half-baked scheme which does not in any way guarantee that Scottish ratepayers will be better off, and doing nothing about the non-domestic sector in Scotland, England or Wales?

Mr. Rifkind

The hon. Gentleman has not read our proposals. That criticism is pretty rich coming from a Scottish Labour Member of Parliament who subscribes to the proposal that a Scottish Assembly should have the power to levy an additional tax on top of income tax and other taxes paid by the Scottish public.

We have an existing system that is unfair, unaccountable, capricious and arbitrary in its application. Therefore, on that basis we are entitled to compare the existing structure with what the Government propose. I do not believe that it can seriously be doubted that a universal community charge of the kind proposed by the Government will ensure a level of accountability that is fundamental to any democratic system.

From a very early stage we have made it clear that we have accepted as right and proper that those who are on the lowest incomes should be protected from the full effect of the community charge. The Bill makes it clear that a rebate system will apply, and that will ensure that those who are on the lowest incomes will not be expected to pay the full community charge. I shall come to the detail later in my comments, and I simply wish to put forward the basic points now.

The Opposition's argument that under our proposals all will pay the same is not only profoundly wrong, but entirely misleading about their effect on those who listen to such observations. The hon. Member for Garscadden knows perfectly well that all will not pay the same and that those on the lowest incomes will be protected from the full effects of the community charge. In many cases a large proportion of the community charge will not be paid by those whose incomes do not justify its payment.

I wish to go through the details of the Bill and discuss its main proposals.

Mr. James Wallace (Orkney and Shetland)

The right hon. and learned Gentleman will recall that in the Green Paper, "Paying for Local Government", he said that special consideration would be given to the two island councils in my constituency with regard to the new proposals. I have gone through the Bill, and I cannot see where the special considerations are catered for. Perhaps the right hon. and learned Gentleman will say what they are and, when he goes through the Bill, give some indication of them?

Mr. Rifkind

I understand that one of the main concerns of the island councils is the implication of a national non-domestic rate of the kind proposed as the ultimate objective of the Government. If the hon. Gentleman has studied the Bill, he will be aware that it simply proposes the indexing of the non-domestic sector. That does not in any way produce the kind of difficulty which the island councils have identified. Therefore, for the reasons that I have stated, the Bill ought to be acceptable to them.

The first three clauses of part I provide for the abolition of domestic rates. A firm and clear timetable is set out. The process will begin on 1 April 1989, by which time all domestic subjects will have been identified in the valuation roll. The Bill provides a mechanism for sharply reducing the rate poundage to be applied to these subjects in the three years beginning on 1 April 1989, and domestic rates will have gone entirely by 1 April 1992. That, above all, is what the Bill offers the people of Scotland, and the Opposition will challenge it at their peril.

Clause 4 provides important safeguards for non-domestic ratepayers. No longer will they be subject to sudden sharp increases in their rate bills—something which has been very damaging to business of all sizes in Scotland. Instead, the Bill provides a ceiling to be calculated each year from 1989–90 onwards, pegged to the rate of inflation, within which local authorities must set their non-domestic rate. This provision has been widely welcomed by representatives of industry and commerce in Scotland. Indeed, only yesterday the Scottish chambers of commerce, representing many thousands of small businesses, repeated their total support for the Government's proposals.

Concern has been expressed that local authorities might take action to raise artificially the starting point for the process of determing the non-domestic ceiling as set out in clause 4. There would be no purpose in this. Under the provisions of the clause the Secretary of State would be empowered to prescribe the base rate rather than using the actual 1988–89 figure, and this would be done in circumstances where it was clear that a distortion had been made for example, through the abnormal use of balances. In view of the existence of this provision, I doubt whether local authorities in Scotland will act in the manner suggested. In the long term we will be aiming to seek harmonisation of the valuation systems north and south of the border, as a preliminary to moving to a uniform business rate.

Mr. Michael Forsyth (Stirling)

I wonder whether my right hon. and learned Friend can explain to the House why, given the extent of the distortions that have been caused in the commercial sector, and also for organisations such as sports clubs and other bodies, it is necessary to wait before going ahead with ensuring that the valuation methods used in Scotland broadly reflect those in England?

Mr. Rifkind

Talks are already taking place at a professional level among those involved in valuation matters north and south of the border. It is clearly desirable to achieve progress towards a common valuation, for the reasons identified by my hon. Friend. The Government are committed to it, and I know that my hon. Friend will welcome that commitment.

Mr. Bruce Millan (Glasgow, Govan)

Will the uniform business rate be uniform within Scotland, or uniform within Great Britain?

Mr. Rifkind

These matters are not covered in the Bill because, at this stage, we are simply introducing the index of non-domestic rates. They are matters that must be identified and dealt with when proposals of that kind are put before the House.

Part II creates the new system of community charges and the associated arrangements for registration and collection. Clause 9 introduces the charges, which are to replace rates as the means of meeting local authority expenses net of other sources of income. The focal point of the new system is the personal community charge, imposed under clause 10. This is the means by which the new system will provide its essential element of accountability, since the personal community charge is to be payable by everyone aged 18 or over with their sole or main residence in each local authority area. There will be only very limited exemptions—those who are still receiving child benefit, and those who are resident in prisons or hospitals. Otherwise, it is intended that the charge should be for practical purposes a universal obligation on the adult population, although there will of course be a rebate scheme to protect those for whom payment of the full amount would be too heavy a burden. I shall return to this when I deal with the provisions of part IV.

Clause 10 does not attempt to provide a statutory definition of what is meant by the concept of sole or main residence. Much has been heard from critics of our proposals about the difficulty of defining this. We should not lose sight of the fact that for the vast bulk of people who live in one place at one time there will be no room for any reasonable doubts. For many others, for example with second homes or pieds-a-terre, there would similarly be no doubt about what constitutes their main residence. All the examples of the difficult cases which have been quoted show that no simple rule, such as a minimum period for residence or counting the number of days in a year spent in each place, would always give the right answer. Quite simply, a body of case law will have to be allowed to build up, just as has happened for electoral registration and mortgage tax relief.

There is one case, however, where a simple rule does seem sensible. It is our intention that students should be liable for the community charge and that they should be registered throughout their course of study at their term-time address. The alternative would be that they should register and de-register several times a year, which would be an unnecessary complication.

Mr. Malcolm Bruce (Gordon)

Does the Secretary of State acknowledge that the consequence of what he has just said is that students who are normally resident in England but are pursuing a course at a Scottish university will be required to pay the community charge? The consequence of that will be that Scottish universities will find it difficult to compete in attracting students, because English local authorities will not provide the difference for the community charge. As rector of Dundee university, I can say that the Scottish universities are concerned about the Bill's implications.

Mr. Rifkind

There are a good number of students who pay rates at the moment. They are not exempt because they come from south of the border. We have made it clear that students eligible for grant will receive a flat rate increase to help them to meet their community charge liability. That will be available to all those who are eligible for grant, even where the present parental contribution means that they receive no payment. That helps to meet the point made by the hon. Gentleman.

Clause 12 provides for a standard community charge which is payable on houses which cease to be liable for domestic rates, but where there is no registered resident paying the personal community charge. The charge will thus be payable in respect of second homes, as proposed in the Green Paper. The owners of these will thereby continue to make a contribution towards the costs of local services in the area of their second home. The standard community charge will also be payable on other empty houses, although we envisage using the powers of the clause to provide exemption for empty houses which are uninhabitable and to provide a period of grace after a house becomes empty before the charge is liable to be paid in respect of it. The amount of the charge will be determined by each local authority, as a multiplier set for the whole of its area of between one and two units of the personal community charge.

As I have explained, the personal community charge will be as near as possible to a universal obligation on all adult residents. We have to recognise, however, that some individuals may be very mobile and that it would be unreasonable to seek to keep track of them through the registration system. The large majority of individuals in this category live in various forms of communal establishment, such as hostels. Clause 13, therefore, makes provision for a collective community charge to be imposed in such circumstances. This will be payable by the landlord, who will be empowered to recover contributions from individual residents, limited to the amount they would have been due to pay in any period had they been liable for the personal community charge. I stress that I do not envisage widespread use being made of the collective community charge in Scotland, and in the guidance to be given to registration officers I intend that the importance of achieving individual registration wherever possible should he stressed.

Mr. Michael J. Martin (Glasgow, Springburn)

Does the Secretary of State accept that we have hostels for working men and women in Glasgow and all our major cities? As I understand it, he is suggesting that the owners of those buildings will be required daily to calculate what a resident owes. Will that not mean that increased burdens will be imposed on the single adult homeless in our cities?

Mr. Rifkind

It does not mean anything of the sort. I notice that the Scottish Council for the Single Homeless has said that it would prefer a personal community charge to a collective one. Naturally, my hon. Friends and I will wish to give detailed consideration to that point to see whether it would be administratively preferable. The objective is to ensure that the individuals concerned pay the equivalent sum irrespective of whether it is calculated on a personal basis or through a collective system. There will be no opportunity for an additional burden, such as the hon. Gentleman appears to fear.

The rest of part II deals with procedures for registration and collection of the community charge. Clause 14 provides that the assessor should be the community charge registration officer. This will be a statutory post, with the same degree of statutory independence as the assessor enjoys at present. Clause 14 requires local authorities to provide sufficient resources to enable the task of registration to he carried out properly. The reason for giving these duties to the assessor is that they relate closely to his existing work in a number of respects. There will be an important interface between the valuation system and the provisions which govern liability for the community charge, and assessors have considerable experience of the operation of the electoral registration system, the techniques of which are in some respects similar to community charge registration, although the two systems will be entirely distinct.

Clause 16 provides for the initial establishment of the register. The timetable we have in mind is that by early summer 1988 the registration officer should be in a position to start the first canvass. He will then prepare the register, which will come into force at a date to be prescribed in the autumn of 1988. Clause 16 provides that at that stage every individual who is registered should receive a personal notification which will include details of the contents of his entry and of his rights of appeal. We have decided to have a rolling register, kept continuously up to date, and the provisions designed to achieve this will come into force at this stage. Clause 17 provides for amendments to be made to the register and for those affected to be notified, once again with information about their rights of appeal.

Clause 18 confers rights of appeal in relation to registration. Initially, as with electoral registration, appeals may be made to the registration officer and rules will be prescribed governing how he is to deal with these. Anyone dissatisfied with this decision can appeal to the sheriff. Detailed provisions are made to deal with cases where someone is appealing simultaneously about registration in two difference areas. I am satisfied that, overall, these provisions will ensure prompt and fair treatment for those in dispute about their registration and that, as I have explained ealier, a body of case law to enable difficult questions to be decided will swiftly build up.

Mr. Allen McKay (Barnsley, West and Penistone)

As the Secretary of State knows, the electoral register is 7 per cent. wrong when it is printed and the person responsible for filling in the form is the head of the household. Will the head of the household be responsible for filling in the new form? How will the Secretary of State attempt to overcome the 7 per cent. fault in the system at present?

Mr. Rifkind

That is a perfectly fair question. The hon. Gentleman will be aware that the electoral register is filled in only once a year, so anything in it that is incorrect because of the movement of population cannot be corrected until 12 months later. It is intended that the community charge register should be a rolling register, precisely to deal with the type of problem that the hon. Gentleman has identified. I shall deal directly with the question of the individual who will be responsible for filling in the register.

Adequate flows of information will be the key to establishing and maintaining a satisfactory register, and clauses 19 and 20 provide for this. The registration officer will have access to information about those, using other local authority services to check whether they are registered, though the Bill contains power to place certain information "off limits". I envisage that this will be used to ensure that police records and certain information in the social work domain is not used in the registration process.

One of the most important sources of information will be canvassing, and clause 19 introduces the concept of a responsible person at each address who will be under a duty to provide information to the registration officer, either in response to general canvasses or particular inquiries. The concept of a responsible person, simply defined as the owner or tenant in the majority of cases, has been introduced in response to criticisms that the earlier concept of a "head of household" was outmoded and might prove to be undefinable. There will be a system of civil penalties, imposed by the registration officer, on responsible persons who fail to provide information or who give false information. We have adopted this approach in preference to the earlier proposal that failure to provide information or the provision of false inforation should be a criminal offence. The provisions now contained in the Bill have been generally welcomed. [HON. MEMBERS: "By whom?"] I am referring to the proposals in the clauses with which I am dealing.

As I have explained, the community charge will be for practical purposes a universal liability, and I therefore consider it reasonable that individuals should be under an obligation to take steps to ensure that they meet that liability. Clause 20 therefore requires individuals who become liable to pay the personal or standard community charge or whose circumstances change to notify the registration officer. No specific offence is associated with failure to comply with this duty, but the clause provides that any individual who is identified as having avoided registration shall be liable to pay the amount of the charge due from the date when his residence began, together with interest. If he has avoided liability for three months or more he will also be subject to a surcharge of 30 per cent. of the amount due, subject to a minimum of £50. These provisions are similar to the civil penalties associated with other forms of tax evasion, for example in relation to VAT. Overall, I am satisfied that the provisions that we now propose for setting up and maintaining the register and for enforcing registration are capable of operating satisfactorily, producing good coverage, without imposing undue burdens on individuals.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

What will happen if an individual persists in non-payment?

Mr. Rifkind

Exactly the same will happen as happens at present. We are told that there have been 25,000 applications for debt recovery of non-payment of rates in Strathclyde alone. Therefore, the non-payment of one's local tax will not be a new problem. There are well recognised debt recovery procedures for those who do not pay their community charge.

Mr. Martin

What about l8-year-olds?

Mr. Rifkind

Many such individuals are at present ratepayers. If they fail to pay their rates, they are subject to exactly the same debt recovery measures as will be appropriate in future for non-payment of community charge.

Mr. Martin

This legislation will cover a great many people under the age of 21. What property will debt collectors be able to get back from them if they evade tax? Guitars? Hi-Fi? Various other pieces of equipment? In houses which I know of with teenagers, those are their only belongings.

Mr. Rifkind

We should be clear about what we are discussing. If we are discussing an 18 or 19-year-old who is in employment—

Mr. Martin

Most of them are out of work.

Mr. Rifkind

If the hon. Gentleman will contain himself for a moment, I shall answer him. If he is referring to young adults who are in employment, he knows perfectly well that they should not be treated any differently from anyone else who is in employment. If he is referring to young adults who are unemployed, why should the rules that apply to a single unemployed person aged 19 be different from those that apply to a single unemployed person aged 35, 45 or 55? The hon. Gentleman knows perfectly well that a person who is unemployed may be entitled to a significant rebate, which will depend on his total income at any given moment. However, the hon. Gentleman also knows that an 18-year-old is likely to have far fewer commitments than a person several years older. If the hon. Gentleman is really concerned about such matters, he will be aware that people in that age group expect to be treated as adults in every other respect. Therefore, to suggest that they should somehow be exempted from local taxation to which the rest of the community are liable is not only profoundly illogical, but entirely meaningless.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I listened carefully to the Secretary of State when he spoke about the enforcement procedures for non-payment of rates or the community charge. Does he accept that when he brings in the new 20 per cent. contribution for those who claim benefit, he will be asking local authorities to pursue much smaller sums of money? At present local authorities may find it worth while to pursue somebody for non-payment of a year's annual rate, but they will not find it economic to pursue somebody through the courts for sums of less than £50.

Mr. Rifkind

The hon. Gentleman is referring to the social security legislation which the House has already approved. It is not appropriate for me to comment further on that at present.

Clause 21 provides that every individual will be able to inspect all the register entries relating to him at any time. Otherwise, only a list of addresses and names, like the electoral register, will be available for public inspection. That will safeguard private information—for example, whether a particular address is somebody's second home.

Clause 23 and schedule 2 make provision for the levying and collection of community charges which in many respects will be similar to the present arrangements for rates, although the Bill envisages a pattern of 12 monthly instalments rather than 10. District councils, new town development corporations and the Scottish Special Housing Association will collect community charges from people living in houses which they let, on a similar basis to their involvement in rate collection at present. This will ensure that the administrative burden is spread and that the maximum advantage is taken of existing resources and expertise in operating the new system.

Clause 26 makes provision for a community charge rebate scheme. Rate rebates will, of course, also be payable during the three-year transitional period.

The community charge rebate scheme will be based on the reformed scheme of housing benefit for rates, to be introduced on 1 April 1988. Under this scheme, each individual will be required to make a minimum contribution, and, as the Green Paper made clear, the illustrations of the overall effects of such a scheme in annex J of the Green Paper were based on a minimum figure of 20 per cent. The limited sample size of the data on which the figures are based means that a fully detailed analysis such as that contained in annex J can be provided only at the Great Britain level.

As I have made clear, however, we are confident that the Great Britain figures present an accurate pictue of the situation in Scotland, and an analysis that we have recently been able to carry out on the limited Scottish data available confirms this. For example, it is estimated that 90 per cent. of single pensioner households and 85 per cent. of other single adult households, including one-parent families, would gain in Scotland. The numbers of gainers and losers overall would be approximately equal.

A rebate scheme in this form will provide protection for those most in need of it, including many on whom the present rating system places particularly unfair burdens. The pattern of gainers and losers which the analysis shows gives the lie to Opposition claims that it is a measure which is simply aimed at helping the rich at the expense of the poor. What we seek is a fairer deal for all sectors of society.

I make no apology for the fact that the Bill does not contain details of the rebate scheme. It would be totally unrealistic to set out the necessary level of detail in primary legislation, and no detailed social security scheme is set out in that way. It would also be impossible, as the precise details of the scheme can only be settled once the reformed housing benefit scheme has been worked out in detail by my right hon. Friend the Secretary of State for Social Services. That is still the subject of extensive consultations with the local authority associations and others.

Mr. Dewar

I am grateful to the Secretary of State for giving way. I understand what he said about the details, but will he confirm that it is the Government's intention that everybody should pay at least 20 per cent. of whatever form of local taxation is in being in April 1988? There have been rumours that that is being reconsidered. Will the right hon. and learned Gentleman tell us where the authority for that will appear? Will it be in the form of regulations, or will there be further primary legislation? As yet, that authority does not appear anywhere.

Mr. Rifkind

The provision is permissible under the social security legislation which the House recently approved. Under that legislation, it will be appropriate for orders to be presented to the House to define the specific levels of rebate, either under the existing rating system or with regard to any future system of community charge. The precise figures that will apply will be announced when such an order is presented to the House. For illustrative purposes we have used the figure of 20 per cent. to suggest the likely level of minimum payment that would be expected from those liable for the community charge.

Mr. Hugh Brown (Glasgow, Provan)

The Secretary of State has been very generous in giving way, and I appreciate that, as I am sure does the whole House. However, he must be more specific. His example was not simply illustrative. Many people now pay no rent or rates, but the assumption is that they will pay at least 20 per cent. of the community charge. As that will be added expenditure for them, the Secretary of State must clarify his point.

Mr. Rifkind

The hon. Gentleman will appreciate that the provision in the Social Security Act 1986 will come into effect in 1988 under the existing rating system in Scotland and in England and Wales. Therefore, the matter is neither directly nor indirectly dependent on the legislation that I am introducing to the House. It will come into effect in Scotland while the rating system applies 100 per cent. for existing ratepayers. Questions on that are perfectly understandable, but they do not relate to the Bill that I am introducing. Therefore, I must ask the hon. Gentleman to raise his perfectly legitimate point in a different forum.

We intend—and we have made it clear—to introduce a rebate system comparable to that which is available under the domestic rating structure. Precise details of that will be announced at the appropriate time.

Let me deal now with the water and sewerage provisions of the Bill—clause 27 and schedule 5. I know that the House has been awaiting them for some time. We shall discuss them thoroughly at the appropriate stage of the Bill, and I shall not take up the time of the House now in going through them in detail. However, there are three points that I would emphasise.

First, we have aimed not to change the present system of charging except where that is necessary to meet the principles of the Bill. As at present, domestic consumers and occupiers of industrial and commercial premises who do not get their water by meter will pay an identifiable charge in respect of their water supply. Therefore, the difference is that, whereas at present the charge relates only to the premises—so that, no matter how many people live in a house, the water rate is the same—in future there will be a community water charge payable by every adult living in a house connected to a public water supply.

Mr. Dewar

I wish to raise a matter of detail, but one that is also of general interest. Traditionally, in Scotland, the water rate has been part of the overall rate poundage in terms of payment. Why is there to be a separate water community charge?

Mr. Rifkind

I advise the hon. Gentleman to look at his rates demand when he gets home. If he does so, he will see that the sum that he pays for water is specifically identified. We propose no substantive change in that arrangement, other than what is essential as a result of the community charge principle.

Mr. Nicholas Fairbairn (Perth and Kinross)

I do not know what is happening in Garscadden, but I can assure my right hon. and learned Friend that in Fife one is charged for water on a separate bill, even if one has one's own supply, which is thoroughly unfair. What my right hon. and learned Friend is introducing in the community charge is the standard charge that we pay for telephones, cars, television and everything else, and that is fair.

Mr. Rifkind

I thank my hon. and learned Friend. Under our new proposals he may consume as much water as he chooses without his water charge increasing, so in that respect it is not exactly comparable to electricity and telephone charges. Our proposals will be a better reflection of water use than the present system, because, clearly a household which has several persons living in it is likely to consume far more water than one with a single person living in it. That is a valid proposition. At present prices, it is estimated that the community charge will average about £17 a year for each qualifying adult.

A second way in which the new system of charges will be fairer than that which applies at present is in the sewerage charges for non-domestic premises. This will be payable only for those premises which are connected to public sewers, whereas at present non-domestic ratepayers are liable to pay this charge whether or not they are connected.

Thirdly, we are taking steps to require local authorities to charge fair rates to all categories of those who use water and sewerage services and to make it clear to all those paying for the services how the rates are arrived at.

This legislation is, of course, primarily about the local taxpayers' contribution to local authority expenditure, but under the new arrangements the Government will continue to pay their share of the cost of local services, from national tax revenues. The arrangements for paying a revenue support grant, set out in schedule 4, are similar to, but simpler than, the present arrangements for distributing rate support grant. The greater accountability that will arise from the introduction of community charges allows us to dispense with grant penalties, and I am sure that all hon. Members will welcome this. It is, however, essential that we continue to protect the community charge payer from the vagaries of the few extreme and irresponsible councils, and we are therefore proposing a reserve power to secure reductions in personal community charge where that may be necessary. The detail of that is in schedule 3.

I have dealt with the details of the Bill at some length—

Mr. Milian

The right hon. and learned Gentleman has said nothing about the safety net arrangement.

Mr. Rifkind

I am happy to confirm that we propose a safety net arrangement to ensure that the system of revenue support grant that will be paid to the local authorities will not place undue burdens upon those local authorities with regard to the level of community charge that they will have to impose upon their local community. It is desirable to ensure a degree of stability and predictability for local authorities, and that is why there will be the safety net arrangements.

Hon. Members who wish a fuller explanation of any particular points in the Bill may find helpful the commentary that I have made available in the Library.

I have described the Bill and the Government's proposals for the abolition of domestic rates at some length. I think that the hon. Member for Garscadden will concede that, far from the Bill being the framework measure which he prophesied some weeks ago, it is a substantial piece of legislation which illustrates the enormous amount of work and careful thought that has gone into the Government's basic proposals.

I hope that the hon. Gentleman will have some opportunity today to give us the Opposition's views on the necessary improvements that they would wish to make in the present system. We know that at the moment the Labour party is the only political party in Scotland which wishes to keep domestic rates. However, it has made it clear in the past that it does not believe that the present domestic rating system is perfect.

The hon. Gentleman has said that he wishes to see improvements. Councillor Fagan, the president of the Convention of Scottish Local Authorities, has said that he wishes to see improvements, as do other Labour local authorities, but there has been complete silence over exactly what improvements they wish to propose. We have spent the last year preparing detailed proposals which are now put forward in legislative form so that the Scottish public are aware of the alternative to domestic rates that the Government propose. There have been no proposals from the Labour party on what it would do about the present system.

I should, perhaps, make one qualification. The hon. Member for Garscadden has put forward one change to the rating system, and that is to impose, for the first time, a rating on agricultural land and holdings. That appears to be the sole act of creativity that the past few months have produced in the thinking of the Labour party. He must know perfectly well that that is simply not good enough. If he wants the public to believe that the Labour party accepts that domestic rates need to be changed, the public will expect him today, from the Dispatch Box, to explain and to expand on the reforms which the Labour party, if it ever had the opportunity, would wish to implement. I await with interest, but without any great expectation, what the hon. Gentleman has to say.

The Government have put forward proposals which will at long last abolish a descredited system and replace it with a system which is not only fairer, more accountable, less capricious and arbitrary than domestic rates, but a system which will ensure that the public in Scotland have a system of local finance which will be suitable for the years to come.

Mr. Deputy Speaker (Sir Paul Dean)

I should inform the House that Mr. Speaker has not selected the amendment in the name of the leader of the Liberal party.

5.25 pm
Mr. Donald Dewar (Glasgow, Garscadden)

The Government are bravely living down their reputation for consistency and principle. These days they are showing a remarkable flexibility. The new pragmatism is rampant. They will jump through almost any hoop if they have to.

We know that the Conservative party has been flirting with reform of the rating system since the early 1970s, but in recent years it set in hand, properly and fairly, an inquiry and an investigation which came, as the House knows, to a measured and considered conclusion that was announced in a White Paper in August 1983.

The House also knows that that White Paper specifically dismissed the preferred solution that we are now being asked to consider. It came to the conclusion that it wanted to defend the rating system which is now so reviled. Therefore, it is a remarkable conversion—almost a revolution—that we find ourselves now confronted with that rejected proposal in the form of the Bill that we are discussing. That conversion has nothing to do with social justice or democracy and it has everything to do with imagined political advantage.

What is being offered is a poll-tax—so much per skull across the board. According to the Green Paper, 52 per cent. of Scottish households will lose and 48 per cent. gain. I stress the word "households" because a Scottish Office press release, with which the Secretary of State will he familiar, said: How many people will be liable to pay the community charge? About 3.85 million adults aged 18 and over will be liable to pay the charge. What percentage would gain and what percentage would lose? The Green Paper indicated that in broad terms about half would be better off. It actually said that 52 per cent. of households would be worse off, but I suppose that that might be defended as about half, although that is a rather odd way of putting it. However, as almost all—a large proportion—of those households will contain an above-average number of adults, I suspect that a much larger percentage of the electorate will be faced with a debit balance. That is a hard and unpalatable fact with which some of the enthusiasts behind the Secretary of State will have to live in the months and years that lie ahead.

The essence of our case is equity and who are the losers and who are the gainers. It is brutally clear that the areas that will lose are the deprived housing schemes on the limits of cities and the battered inner-city areas—the areas that are already disadvantaged. This is essentially regressive legislation—regressive even when it is compared with the present rating system. The reason for that is self-evident. There is, I concede, a rough and imperfect correlation between what is paid under the rates and one's personal income. By and large, wealthy people live in up-market housing with high rateable values and pay more.

I see the hon. Member for Renfrew, West and Inverclyde (Mrs. McCurley) expressing her dissent. Let me give her a quotation which she may find of interest, because it puts my case fairly and succinctly. It says: A poll tax is assumed to be levied on all adults in the household irrespective of income … the lower-income households would pay a higer proportion of their income in tax than the higher-income households. Moreover, since domestic rate payments tend to increase with income—though less than proportionately—replacing rates by a poll tax will mean that higher-income households gain more or lose less … than the lower-income households of the same type. That is exactly what I have been saying, and it is a quotation from the Government's Green Paper on the alternatives to the rating system. On that occasion they were right, and now they are wrong.

Mr. Michael Forsyth

I refer the hon. Gentleman to figure 11 in the Green Paper, which shows clearly that households on net incomes of less than £75 a week will pay a smaller proportion of their income in community charge than in rates.

Mr. Dewar

I am delighted to deal with that point because it illustrates the hypocrisy of the exercise. For a start, we have been unable to discover how many households have such a low household income. I suspect that it is comparatively few. Moreover, under the present rating system, almost all of them would be paying nothing. That figure is based on the assumption that for many, particularly single people, 20 per cent. of community charge is less than 20 per cent. of the rates. However, if it were not for the so-called Fowler review and the recent Social Security Act, those people would be in a neutral state because they would be paying nothing. That illustrates the sham of the statistics produced in the Green Paper.

Let me develop the point about equity and who will lose. The hon. Member for Renfrew, West and Inverclyde is a Glaswegian by birth and is familiar with the city. If she takes the Glasgow wards and, using the Government's figures, examines the present rates income from the areas, and considers what would result from a community charge on a like-with-like basis, she will discover that there will be enormous shifts between wards within the city of Glasgow.

Let me take the constituency of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton). Using the Government's figures, the take for Castlemilk under the community charge will increase by 25 per cent. The take for Newlands, down the road, will fall by 24 per cent. Who will tell me that that has anything to do with equity or justice? The take for Kelvindale, where I live, will drop by 29 per cent. and for Drumchapel, a deprived scheme in my constituency, by 25 per cent. Anderston, a battered inner-city area, will pay 48 per cent. more. These figures show the indefensible shape of things to come.

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

What about rebates?

Mr. Dewar

The figures may be altered to some extent by the rebate situation.

Mr. Rifkind


Mr. Dewar

The Secretary of State would be in a better position if he had produced the rebate figures, which would have allowed us to make the calculations. We would then have listened to him with more patience.

Mr. Rifkind

The hon. Gentleman is suggesting—it was clear from his remarks—that additional hardship would be imposed on certain areas of his constituency, or elsewhere in Glasgow, to the benefit of other areas. He did not point out, nor admit until it was dragged out of him, that he was not taking account of rebates and the fact that people living in these areas, if they are as deprived as the hon. Gentleman has suggested, will be unlikely to pay the community charge. The rebate will not be paid by them and the amount of revenue raised from these areas will be infinitely less than the hon. Gentleman has suggested.

Mr. Dewar

The proof of the pudding, as the Secretary of State will recognise, will come if we get to the point where, unfortunately, the system is introduced. I understand, and am advised by people more expert in municipal finance than I am, that such shifts will appear.

Let me give another example, one that is perhaps more limited but might be of interest to the Secretary of State. I admit that it is extreme to make the point, but my calculations show that in the West Granton area of Pilton, with the switch to community charge, each household will be paying about £105 a year more and in Spylow Park, Colinton, £1,052 less. That is the key to this matter.

I am sure that the Secretary of State will not suggest and maintain, because I believe that he has some honesty about these matters, that the effect of the introduction of the community charge will be a substantial shift between areas. He may argue about the scale but he will not admit that there will be a substantial shift of the kind that I have described. If he looks at the areas in Edinburgh which will do badly out of the shift—wards such as Haymarket, Harbour, Lorne, Dalry or St. Giles—he will find that there is an extraordinary correlation between the level of unemployment and the areas that will do badly in the switch to the poll tax. The case is there for anybody to see. What I am saying fairly and honestly represents the shifts with which we shall be faced.

Mr. Rifkind

Will the hon. Gentleman acknowledge that the Government's illustrations in their Green Paper are based on illustrations taking account of the housing benefit system? If he wishes to make alternative comparisons, he should also take into account the implications if rebates are paid on a basis comparable to that described by the Green Paper. He knows that he has not done that, but sought simply to make an emotional contribution.

Mr. Dewar

I asked some parliamentary questions intended to obtain these figures, but the Secretary of State said that he could not answer them. He is not making a convincing charge. There is no doubt that there will be the shift that I have described. The Secretary of State is not able to, and will not, deny that. This is a charter for prosperous suburbia and the only end product will be a thin and ragged cheer from the beleaguered Scottish Conservative party.

Mr. Barry Henderson (Fife, North-East)

Is the hon. Gentleman not arguing against the existing system of domestic rates? He is postulating the idea of two people living in the same kind of house in different parts of the city who, although they have substantially different means, pay substantially different amounts for identical services, so that the better off pays less and the poorer pays more.

Mr. Dewar

I recognise that point and I recognise that there is a case which no doubt the hon. Gentleman will deploy. As I understand it, the defence for this measure is that certain categories of people will do well, particularly single people of modest means living alone. It is pointed out that it tackles the problem of multiple incomes next door to somebody with a single salary coming into the household. I recognise that that case can be made, but if we are worried about the person on low income who is suffering, we must examine the adequacy of our rebate system. Surely the hon. Gentleman understands that one should not say that there are problems about the existing system and then introduce another system that creates inequalities and injustices on a far wider scale. There is no doubt about that.

The other day, I got a letter from someone in the city of Perth living in a basement flat with low rateable value, because of low amenity. Two large flats above him, each occupied by a single person, have high rateable values because of the value of the house and its amenity. Suddenly, as a result of the community charge, the person in the basement flat will be paying twice as much. The equity of that is not clear to that individual, and I can understand his feelings.

This is not just an inner-city problem. I am interested in rural areas as well, as the Secretary of State knows. There is no doubt, as COSLA has pointed out, that there is little point in paying the same community charge in Tiree as in Oban, or the same regional community charge in Mull as in Bearsden. When I put this to the Under-Secretary in a radio programme the other day, he said that it costs more to deliver services in remote areas, so that was fair. I found that answer a litle lacking in sympathy.

It seems that the already disadvantaged will be further oppressed and, if I can use the terminology of popular capitalism, areas which already have cash flow problems will be asked to bear a greater burden. I shall give the House an example. I shall name my source immediately. The quotation comes from the Child Poverty Action Group, but it makes the case from an impartial source. It asks the Government to reconsider their proposals which

owe more to a perceived need to be seen to be doing something about rates than to clarity of vision. We find it difficult to believe that a proposal which so blatantly favours the rich over the poor can be given serious consideration in a Green Paper which purports to be concerned about fairness. The other major point that has been made by the Secretary of State is accountability. That features prominently in the case for the defence.

Mr. Rifkind

Does the hon. Gentleman mean prosecution?

Mr. Dewar

No, in the right hon. and learned Gentleman's case it features in the defence of the measure.

I have been reading what has been said by Conservative Members up and down the country. Many of the speeches pay tribute to their loyal endeavour but not necessarily to their understanding of what has been happening. A quotation from the hon. Member for Cunninghame, North (Mr. Corrie) appeared in the Ardrossan and Saltcoats Herald of Friday 5 December. He gave us a succinct and no doubt well-thought-out defence of the community charge. He said, all in one sentence: On the domestic front the community charge will not only give councillors the right to determine their own levels of spending, it will remove the unfairness and illogicality of the present system of demand whilst injecting into the democratic process a real degree of interest come district and regional election time with financial accountability becoming a live issue. It is deathless prose. All I can say is that if the hon. Member for Cunninghame, North, believes that the measure gives councillors the right to determine their own levels of spending, he has not read schedule 3 where the whole excessive and unreasonable expenditure provision is imported by the back door.

The strengthening of local democracy is a nonsense of an argument. What will happen—I am sure that the House appreciates this—is that the buoyancy in local revenue will be confined entirely to the domestic sector. Perhaps 20 per cent. will be subject to local control, but all the rest will be frozen by central Government or will be controlled directly by central Government in terms of the grant system. It does not seem that reducing local initiative to 20 per cent. of the spend is a great leap forward for local control and local democracy.

I shall not spend a lot of time on this, but I recognise the attraction of the freeze for the non-domestic ratepayer in terms of industrial problems. However, I must say to the Secretary of State that there will be much debate in Committee about the indicator he has chosen for the retail price index. We shall want to know a great deal more about what is in store in terms of the revaluation in 1990.

There is no doubt that if the entire Government package is implemented, not just in this Bill but ultimately with the standard national business rate distributed per capita, it will be an enormous blow to local democracy. I assume that the Secretary of State has read the memorandum of the Confederation of British Industry. It says that the uniform business rate will remove the element of local accountability inherent in the present system. The CBI is right. It will be the death of local accountability and local democracy, although that is something the Secretary of State is praying in aid in defence of this measure.

What is even more worrying is that if only the domestic sector will bear the burden of any increased expenditure, clearly one is building in an escalator that will have serious consequences. Let us assume that in future years the revenue support grant is cut and that we get, for example, a settlement comparable to the teachers' settlement—there will be other settlements in other years. A large proportion of that has to be raised by an increase in local income. All of that will now fall upon the people paying the community charge, the old domestic ratepaying sector. It will not be spread across the board, because all the rest is frozen or controlled by central Government. The result is that, on COSLA's figures, if one has to find another 6 per cent. of income, there will be an 18 per cent. increase in the community charge. It is an extraordinary argument to say that one is doing that to defend and protect the equivalent of the ratepayer, that is the person in the domestic sector, when one is building that sort of escalator into the system.

Mr. Steve Norris (Oxford, East)

Does the hon. Gentleman agree that one of the great virtues of the system will be that if a Government choose to reduce the proportion of total expenditure provided by grant, it will be perfectly obvious to all that that is what has been done? Local authorities will not be able to hide behind a cloud of obfuscation, spending money as if it is going out of fashion and then blaming the Government's complex grant system for the conclusion. Surely, that is the effect of the proposals.

Mr. Dewar

The hon. Gentleman may be talking about confusion and difficulties in England. In Scotland most people know—this explains the local election results over the past year or two—where the fault lies in that respect.

Another remarkable argument—I paraphrase but I think that I do it fairly—is that the Secretary of State is saying that if one does not contribute to local taxation one should not be allowed to vote in local elections, or, alternatively—I put the best complexion on it from his point of view—if one does not contribute in that way one cannot be trusted to exercise a vote responsibly. That means that one cannot be trusted to vote in the way the Secretary of State would like. That is extraordinary.

Admittedly, the Secretary of State has a problem. He has to find some explanation for the fact that of all the district councils in Scotland, the Tories now control only one, Eastwood. No doubt that has driven him to this rather cynical assumption about family life in Scotland. Apparently he assumes that a wife has no concern about how the rates are paid. Presumably adult children do not contribute under the present system in the normal Scottish household. I would have thought that they did. The argument advanced by the Secretary of State is totally undermined by the fact that in his Green Paper he assumes that husband and wife spouses will be jointly and severally liable for the payment of their respective poll taxes.

Mr. Rilkind

Leaving spouses aside, I think that the House is entitled to know the Labour party's position. Does it defend the fact and wish to continue the system under which 20 per cent. of adults in Scotland make no contribution through local tax finance to the cost of local government? Will the hon. Gentleman clarify that?

Mr. Willie W. Hamilton

They all contribute.

Mr. Dewar

I agree with my hon. Friend the Member for Fife, Central (Mr. Hamilton) that all those people through taxation, direct or indirect, are making a contribution. I am told that only 50 per cent. of people do not pay income tax in this country and that does not raise the ire or fluster the calm of the Secretary of State. The truth, and he knows it, is that at the back of this whole thing there is a rather unpleasant political aim to build into the system an incentive for people to vote for low-spending authorities. As I said earlier, local government results and the opinion polls have shown that people are not interested in that sort of local government parsimony.

Mr. Fairbairn


Mr. Dewar

I shall not give way at the moment.

There is anger in Scotland about that. I know that there is anger on Conservative Benches when we refer to a poll tax. It is perfectly fair to refer to it as a poll tax because a poll tax is so much per head. Anyone who has a respect for the English language knows that that is fair.

Another point involved in the argument of accountability is that the Green Paper and operational documents all assume, as the House knows, that one way in which we shall decide whether the register for community charge purposes is accurate is by cross-referencing and crosschecking with the electoral register. If people wish to avoid paying their poll tax, clearly there is an incentive not to register their vote. It may be an indirect link, but it is one that the House should not take lightly.

I accept that many right hon. and hon. Members want to speak in the debate, but I must spend some time on the administrative problems, because they can soberly be described as enormous.

Mr. Fairbairn

The hon. Gentleman suggests that this is a system in which one can vote only for a low-spending authority. Surely the abominable nature of the present system is that people can vote for a high-spending authority without having to contribute to that high expenditure.

Mr. Dewar

The hon. Gentleman is overstating what I said. I said that there was a political attempt to build in an incentive to support low-spending policies. I do not think that that will work because I know what has happened in local elections in almost every part of Scotland because I have looked at the poll evidence. I take the rather simple view that the system should be neutral in that respect and that people should vote acording to their principles and what they want. The Government are looking for political advantage from these reforms.

Enormous administrative problems will arise. The Scottish Consumers Council has issued a carefully researched substantial paper which has been on the desk of the Secretary of State for some time. It states: The problems of the community charge proposals are insuperable. The Government should think again. The right hon. and learned Gentleman should heed that short comment.

We are told that there is to be a register—a bargain at an estimated cost of £9 million. But people move about. As we know from parliamentary answers, the turnover of names on an electoral register can be as high as 20 or 25 per cent. a year. There will be formidable problems in tracing people, in apportioning poll tax liability, perhaps between different electoral areas, and in collecting the tax. I know that mobility is common because there is a great deal of passage between Garscadden and Clydebank. A young man may live at Drumchapel in Garscadden, move to Clydebank to live with grandparents and move back to Garscadden, all within a year. The 12 monthly payments—they will all be equal, except for the first—will have to be apportioned. A person may have to be pursued in more than one electoral area if he has not paid. It is a nightmare. The problems of enforcement will be baffling.

Another Scottish Office press notice on the enforcement of payments and penalties seems to fall into the head-in-the-sand school of politics. It states: In the relatively rare cases where arrears are built up the tried and tested procedures for rates recovery will be adapted for community charge recovery". I do not know what that means but no doubt we shall find out in Committee. The Society of Messengers-at-Arms and Sheriff Officers reckons that in Strathclyde alone, excluding the sheriffdom of Glasgow and Strathkelvin, 25,000 summary warrants were issued for arrears of rates in one rating year. It is not a new problem. The sheriffs' society believes—this is only its professional judgment, but it must be taken seriously—that the enormous increase in the number of people coming into the net with the introduction of the community charge and the possible increase in the number of people at the bottom end of the income scale who may find it difficult to meet their liabilities may result in a fourfold minimum increase in the number of warrants issued. We should think about that. In the society's view, the system is unworkable, despite the buttressing mass of civil penalties and surcharges which is being introduced.

I shall cite some examples, to which, no doubt, we shall return in Committee. The Society of Messengers-at-Arms and Sheriff Officers says that it will not have a right to enter premises when the debtor is not the householder. To recover from people who are not householders, the society believes that it must have that right. Will it get that right from the Government? The society says that there are no means of identifying the goods of a young, perhaps single, man living in his father's house. What will be the means of identifying those goods so that they can be pinded and sold? The society says that it will be impossible to arrest wages because it will not be possible to trace the pay packet position of young single men living perhaps in their parents' house. It suggests seriously that the register should contain the national insurance number of everyone who is liable to pay the community charge so that it can trace where people work in order to arrest their wages and recover arrears. I presume that that is not a reasonable proposition in the minds of Ministers. If it is not, they must answer the practical question: how will the system work? It is no exaggeration to say that the system is a nightmare. Cool assessment suggests that it is inadequate and impractical. The answer is simple—we would not introduce a system with so many obvious faults.

The Solicitor-General for Scotland (Mr. Peter Fraser)

What would the Labour party do?

Mr. Dewar

We shall come to that.

What about the problem of rebates? The region will collect and calculate the rebate on the community charge. The district will collect and calculate the rebate on the rent. During the transitional period, another system will be running in tandem. This is a recipe for an appalling problem. I have been told that, once the Bill is implemented, there will be no fewer than 13 different charges.

There will be chaos in respect of students and communal establishments. The Scottish Assessors Association—not a body that we would normally pray in aid—said, in respect of the arrangements for communal establishments, that it has a multitude of problems and in our opinion major, continuing and difficult litigation seems inevitable. I see no point in introducing a system that inevitably brings in its wake continuing and difficult litigation. I am in favour of people paying any form of taxation that they are due and liable to pay, and I do not want any mistake to be made about that. But in a recent radio programme the Under-Secretary of State advanced the view that there was no need to worry because we were a law-abiding race. That is an optimistic assumption which is illustrated by our experience of vehicle excise licences and television licences which provides depressing precedents.

Our fears are widely shared. The Society of Messengers-at-Arms and Sheriff Officers stated: The net effect of this unenforceability against a large section of the population will produce the opposite effect envisaged by the Scottish Law Commission in their Report on Diligence … as it becomes common knowledge that more and more defaulters are not being forced to pay their Community Charge, greater numbers will try to avoid payment. The Scottish Consumers Council said: In the absence of effective methods of collection and enforcement, default will he widespread. If that is not impartial, perhaps the Secretary of State will listen to the Law Society of Scotland, which has commented not specifically on the principle of the Bill but on the operational issues raised by the right hon. and learned Gentleman. Its working party concluded: The Working Party therefore doubts whether the proposed system meets the 3 main tests which, according to … the Green Paper, a local tax should satisfy—i.e. technical adequacy, fairness and the encouragement of local democratic accountability. The working party went on to say that the proposed system did not meet those tests. That is the Law Society's view, having looked at the problems that will be thrown up.

I recognise the fact that the Secretary of State has said in the past that we are devoted to the rating system, this led to what he is pleased to call a "corrupt" system, largely because of political advantage. That is a ludicrous charge, and I think that the right hon. and learned Gentleman knows it. It is a desperate counter-attack to divert attention from his difficulties and, given those difficulties, I am not surprised. He has said consistently that the rating system is in trouble, but he has not drawn attention to the fact that it is in trouble because it is bearing a burden for which it was never designed and because the central Government contribution has been ruthlessly cut as the Treasury has shifted responsibility for funding local services to the ratepayer. If we could do something about that, we would be in a much better position.

This debate is on the Government's specific proposals. The Secretary of State has not convinced me that there is a case for abandoning a system, which in August 1983 his predecessor—the right hon. and learned Gentleman as a member of the Government assented to it—described as basically sound, for something infinitely worse. The attack on the poll tax is well founded and formidable and has been mounted on almost every front. Local government north and south of the border has united on this issue. Even the Association of District Councils which, as the Secretary of State knows, is under Tory control, has asked for this measure to be stopped so that there can be further consideration of the options.

Mr. Ancram

This is an important point. I understand that the right hon. Gentleman is saying that there is nothing wrong with the rating system at the moment and that the Labour party would not tamper with it. In that case, I put this point to him. On 17 November, the hon. Member for Copeland (Dr. Cunningham) said: we shall certainly reform the rating system, but we shall keep a property-based tax. Will the hon. Gentleman explain precisely what is meant by that totally incomprehensible statement?

Mr. Dewar

It is totally comprehensible. The hon. Gentleman's comment does not prove very much. I repeat that in 1983 the Government described the rating system, which they now revile, as basically sound. To abandon that system and in its place to put the nightmarish capacity for chaos that is built into the Government's plans would be imprudent and not in the public interest.

Of course the Secretary of State is right that all taxes are unpopular, but the Government are encouraging criticism of the rating system for very obvious and cynical reasons. They are banking on the fact that nobody will appreciate the consequences of their proposals. They are telling just half the story. What is even more disreputable is that they are backing up just half the story, the story of abolition, by half-truths, which they know are half-truths. Their tactics are legislation without implementation.

It is a curious and unique experiment. No other country in western Europe or anywhere else has introduced a poll tax. They know that it is inherently weak and that it breeds injustice and inequality. Therefore, they have all rejected it. Only the Secretary of State who, to be fair, inherited it from his predecessor believes that it is necessary to defend the poll tax.

Mr. Rifkind

I must repeat to the hon. Gentleman the question that my hon. Friend the Under-Secretary of State for Scotland asked him, because he has not answered it. His hon. Friend the Member for Copeland (Dr. Cunningham) said: we shall certainly reform the rating system."—[Official Report, 17 November 1986; Vol. 105, c. 350.] Will the hon. Gentleman explain what the Labour party proposes to do about reforming the rating system?

Mr. Dewar

The right hon. and learned Gentleman is, understandably, not anxious to discuss his own Bill. However, if he is interested, we shall do something about the shift in resources to which I have already referred. Furthermore, suggestions about capital values and a number of other matters are being canvassed. When the Labour party forms the next Government after the general election, no doubt the right hon. and learned Gentleman and his motley crew will have an opportunity, from these Benches, of commenting on them.

We are being asked to introduce a local taxation system which, according to the explanatory and financial memorandum, will cost between £17 million and £22 million a year in additional administrative costs. For what purpose are we being asked to bear those additional administrative costs? We are being asked to bear them because the Government are determined to lumber us with and penalise us by a scheme that is without friends or supporters in Scotland. It is misconceived in principle, regressive in impact and unworkable in practice. None of us wants anything to do with it.

6.2 pm

Mr. Alex Fletcher (Edinburgh, Central)

I congratulate my right hon. and learned Friend the Secretary of State upon introducing the Bill. I congratulate also my hon. Friend the Member for Edinburgh, South (Mr. Ancram) who worked hard during the last few months on preparing this legislation. I hope, Mr. Deputy Speaker, that my hon. Friend the Member for Stirling (Mr. Forsyth) will catch your eye, because he campaigned effectively earlier this year for a tax of this kind.

My right hon. and learned Friend made a clear and unanswerable case for the Bill. I say "unanswerable", having listened to the speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar). I mean in no way to insult the hon. Gentleman. If anybody could have found an answer to my right hon. and learned Friend's proposition, I believe that the hon. Member for Garscadden would have found it. One of his difficulties is that he is not sure whether he is speaking for the prosecution or for the defence. However, he is very much on the defensive about the Scottish rating system.

I start from the premise that there is no such thing as a good tax or an absolutely fair tax. This Bill, which provides for a community charge, is no exception to that premise. However, there is such a thing as a bad tax—indeed, a penal tax, as anyone who pays domestic rates in Scotland knows. That is how most people would describe the present Scottish domestic rating system. Only the Labour party believes that a tax on people's homes—which is increased when they improve the quality of their homes by using their savings, or by borrowing, or by do-it-yourself—should not be abolished. However, a Labour Government would have maintained the ancient tax on windows and then would have complained bitterly about the number of unemployed window cleaners.

The Labour party clings to the view that domestic rates redistribute wealth and that the rich should be soaked to help the poor. If that is so, the rich in my constituency are pensioners on fixed incomes, teachers, tradesmen, bank and insurance clerks, secretaries and civil servants. Those are the people whom I represent in Edinburgh, Central. Those are the people who have to pay the bills for the increased spending by Lothian regional council and Edinburgh district council.

That applies also to the Labour party's plans for a Scottish Assembly with so-called full economic powers. How I welcome that commitment in the Labour party's election programme. As has already been said, one of the apparent attractions of the proposed Assembly is the power to adjust the rate of income tax in Scotland. That is bound to lead to people dancing with joy in the streets of Edinburgh, Glasgow and elsewhere. But we note the word "adjust". It means that the Labour party's Assembly would do to income tax what Labour local authorities do to the rates. It would keep putting them up. What an exciting prospect for Scotland after the next general election. Clearly, the Labour party's policy is to make Scotland the highest rated and the highest taxed country in Europe. That is its programme and its policy after the next general election. With opposition of that kind, I relish the prospect of the next general election campaign.

The Labour party has made it known that my constituency, Edinburgh, Central, is one of the seats that they will target at the next election. The man on the Tynecastle omnibus could be excused for believing that if the Labour party is successful this will be good for Edinburgh. However, the only good thing about being the holder of a targeted seat is that I and my constituents in both the Old Town and the New Town, and in places like Shandon, Tollcross and Stockbridge, will have the benefit of Labour activists from all over Scotland telling us why we should pay higher rates and taxes than ever before—and why we should pay more for the 4,500 empty council houses and the half-empty schools in Edinburgh.

The Liberal party—very much depleted at present on the Liberal Bench—has as big a problem with this Bill as it has with its defence policy. The more it studies the problem, the more it realises that the Government have got it about right. It cannot possibly justify the bureaucracy of a local taxation system to collect just 13 per cent. of local authority income, the contribution made by domestic rates. The best advice that I can give the Liberal and the Social Democratic parties is that they should hold another special conference—this time, I suggest, at the East Kilbride centre 1 tax office, where they would learn about just the kind of bureaucracy that would be needed if they were ever given the opportunity to implement their local income tax plans in Scotland.

I listened to what was said by the hon. Member for Garscadden about schedule 3 to the Bill. However, after all that the Government have said about ensuring that this legislation will provide better local accountability and better local democracy, I am surprised to find that the Bill introduces another kind of rate-capping procedure. I do not see the need for it. If people vote with a sense of responsibility for the taxes that are to be levied on them, and if those who elect a spendthrift Labour authority then find that the community charge is £500 or £600, so be it. That is what they have voted for. I suggest to my hon. Friends that there is no way in which they should intervene with any kind of rate-capping procedure. I hope that that will be reconsidered. Perhaps my hon. Friend who will reply to the debate might reconsider it now and tell us at 9 o'clock that he takes my point.

This Bill has consequences for the rest of the United Kingdom. I hope that the Government and the Opposition will not be too parochial or narrow about this debate or about the Committee stage. I hope that some English hon. Members in all parts of the House will have an opportunity to speak in the debate and an opportunity to serve on the Committee. I am perfectly willing to give my place in the Committee to my hon. Friend the Member for Oxford, East (Mr. Norris). I have served with him on Committees before and I highly recommend him to any Minister who is looking for a chap who will scrutinise carefully and participate well in a Committee debate. This is not just an important piece of Scottish legislation: it is a breakthrough in the whole system of local taxation in the United Kingdom. That is the way it should be debated in the House and in Committee and that is the way that it will be judged.

6.10 pm
Mr. Donald Stewart (Western Isles)

The hon. Member for Edinburgh, Central (Mr. Fletcher) says that there is no such thing as a good tax. If by that he means that no tax can be devised that will not cause howls of anguish from somebody, the House would agree with him, but on this side of the House there is little agreement on much else of what the hon. Gentleman said.

In Scotland the Bill is recognised as a panic measure. The revolt of the Government's own supporters at the idea of a second revaluation in Scotland when England has not had one since 1973 frightened the Government into instant solutions. Like many ill-thought-out solutions, the remedy looks like being worse than the disease. I do not defend the system of domestic rates. My party has argued for many years that they should be entirely abolished and that major changes should be made to commercial and industrial ratings. However, unfair as it is and riddled as it is with anomalies, the present system of property values bears some relationship to the ability to pay, crude rule of thumb though it is.

The per capita poll tax that we are discussing is even worse than the existing system. It hits hardest the low paid, even if there are rebates or exemptions for the unemployed. It is also highly impractical. How do the Government plan to take care of exemptions for periodic unemployment? How will registration be enforced without an army of officials, and how will payment be recovered from non-payers? The Scottish Council for Voluntary Services says: The new charge will be more regressive than rates, with those on low to moderate incomes losing most. Those on high incomes will be the biggest gainers. The council says that the illustrative example of a single pensioner compared to a family of four adults is true but untypical. Only 9 per cent. of households are headed by single pensioners and only 8 per cent. of households have more than three working adults in them.

My party's option is for a local income tax because this appears to us to be the best way to raise local revenue. It is progressive, spreads the burden more widely and fairly and is the only option that varies according to the ability to pay. I gather that the Government or Scottish Office supporters pretend that this is not practical because of restrictions on computerisation in the Inland Revenue. I have checked with the Inland Revenue and I have found that the system will be ready in time. It is already prepared for schedule E and is under way for schedule D, where there is no problem. The bulk of computerisation of pay-as-you-earn will be finished in 1988 and the last office will be finished in April 1989. Any argument on that basis against a local income tax falls to the ground.

Mr. Ancram

I should like to understand the proposals by the hon. Gentleman's party. What does he propose to do about those who do not pay tax through PAYE?

Mr. Stewart

Those people will be covered by schedule D. In any case, the Government will bring in exemptions for people who do not pay under PAYE.

Mr. Norris

Will the right hon. Gentleman give way on this specific point?

Mr. Stewart


I mentioned the number of revaluations in Scotland compared to the number in England. I should like to draw attention to the enormous discrepancies between rates paid on similar properties in both countries. There are glaring amomalies and injustices in the rating of similar properties in Scotland and England. Richard Shops, in Sauchiehall street, Glasgow, has a rateable value of £67,000. The same company's shop in Birmingham city centre is rated at £17,263. For obvious reasons, the Glasgow shop is now closed. The Albany hotel in Glasgow has a rateable value of £413,500 but its sister hotel in Birmingham is rated at £56,638.

The story of sports clubs is similar. The Ardrossan indoor bowling club pays £18,000 in rates, but the same type of club in Darlington pays £5,500. Scottish chemical plants, rated on what is called the contractor's principle, pay on average 2.5 times the amount paid by similar English and Welsh plants. Stirling university's rates for 1984–85 were £13.58 per sq m compared to £3.96 per sq m for the university of East Anglia. Both universities are about the same age and the same size.

Mr. Craigen

The Bill will not redress that disparity. Does the right hon. Gentleman agree that the Secretary of State made it clear that the Government have not begun to think about the implications of the uniform business rate in sorting out these disparities?

Mr. Stewart

The hon. Gentleman's point is totally valid and it is one that I was proposing to develop. I have numerous other examples but I shall not take up the time of the House by relating them. In short, the gross injustice should worry the Government. This Bill will bring no relief on that point.

I should now like to draw attention to a matter arising from the Bill which will affect the crofting counties. The Valuation and Rating (Scotland) Act 1956 gave crofters a 50 per cent. reduction from gross to net in the valuation of their housing. Neither the local authority nor other ratepayers lost anything by this reduction. The reasons which induced the Government of the day to make this concession were higher unemployment, higher prices, higher transport costs and lower wages. Generally, those reasons are still valid in the crofting areas.

The concession has been agreed and accepted by all Governments for 30 years and if it was a fair and reasonable benefit for deprived areas during that time, it must be maintained in some form under this legislation. Apart from the financial implications, the social implications are serious. There will be an exodus from the remoter parts to the nearest towns because crofters will lose not only the reduction in valuation but the reduction in rating that they got for the remoteness of their dwelling houses.

Mr. Michael Forsyth

Can the right hon. Gentleman explain how those crofters will be helped by his party's proposal for a local income tax? They live in an area where the income base is small and where the level of local income tax would be extremely high. For those reasons, they would be much worse off under his proposals—unless he destroyed accountability by redistributing income.

Mr. Stewart

Our point about the tax is that it would be based on an ability to pay. If people have the ability to pay they will do so, and if they do not have that ability they will not pay. That is quite simple.

Another matter about which I should like to speak is commercial and industrial rating. My party believes that this should continue as a contribution to the services from which commercial firms benefit. It has been suggested that company turnovers should be taken into account. There is a need for major reform to avoid repeating the recent scandal when thousands of small businesses were in danger of closure due to the massive overnight increase in rates which brought about the Bill.

The rates crisis has been exacerbated by cuts in rate support grant. Over the years, functions and services have been foisted on to local authorities by decisions made by various Governments. There was no question about it. They were accepted while they were adequately funded. There was no problem. The Government have been reducing the rate support grant. As a proportion of council budgets, it was 75 per cent. in 1975–76, and is 56.6 per cent. in the current financial year. These grants should be restored to local authorities. Education takes 41 per cent. of total council spending. Surely this matter ought to be a national responsibility. My constituency sends more students to university per head of population than any other part of the United Kingdom. In other words, a poor community is footing the bill for the benefit of wealthier societies and, often, other countries.

The Scottish Office pretends that the legislation will give some kind of gift to Scotland which is denied to our friends south of the border. Everyone knows that we are laboratory guinea pigs. Even the English Association of Metropolitan Authorities has taken the unusual step of issuing a brief on a purely Scottish Bill. That association knows what is coming. It knows that the Bill lacks fairness and democratic accountability and that it is technically inadequate. It takes Scotland's finance out of the frying pan and puts it into the fire.

6.21 pm
Sir Hector Monro (Dumfries)

The speeches made by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and the right hon. Member for Western Isles (Mr. Donald Stewart), for the Scottish National party, were singularly disappointing. They did not give one idea about the direction in which they wished to go regarding rates in the future. The right hon. Gentleman talked about local income tax and about panic measures. It has been a mighty long panic for the past 25 years. Every political party in the House has been trying to find an alternative. The right hon. Gentleman is absolutely right: at long last, the Government have decided to take action about domestic rates. Today no one in his senses would try to introduce the present system of rating from scratch. The subject has grown like Topsy for about 100 years. It is high time that we had something that was not only fairer but easier to understand.

Conservative Members, despite the prompting from the Government Front Bench, have noted that the Labour party has been singularly coy about saying anything about agricultural ratings. Rating agricultural land is a serious issue in the countryside, which the hon. Member for Glasgow, Garscadden attempted to represent at the end of his speech. He dodged the issue of rating agricultural land and buildings. It would have a catastrophic effect on agriculture in Scotland and, indeed, throughout the United Kingdom.

There have been endless inquiries and discussions about how to improve the rating system. There have been debates, the Layfield report, White Papers and Green Papers. It is right that, with this legislation we should come to a conclusion on domestic rates. We note that other political parties have failed to come forward with any concrete suggestions that could satisfactorily be implemented in future.

Mr. Gordon Wilson (Dundee, East)

Local income tax.

Sir Hector Monro

The hon. Gentleman is scoffing about wanting to bring in local income tax. Of course, it often boils down to the crucial question whether it is to be a local income tax or a community charge. In Scotland alone, a local income tax can be astonishingly difficult to implement. There are 56 rating authorities.

Mr. John Maxton (Glasgow, Cathcart)

Fifty-six different community charges.

Sir Hector Monro

Not necessarily: a register of where people work as well as where they are to be paid. In Scotland, where many districts are relatively small, people may live and work in different districts. Where will the Government charge their local income tax—where they live or where they work? This includes the Border when it comes to working in south Scotland or the north of England. A local income tax will make only about 60 per cent. of residents liable to pay locally, and that will reduce accountability. It is an important part of the policy of the Bill.

Mr. Maxton

Is the hon. Gentleman aware that it is equally true that, at a national level, only 50 per cent. of adults who are eligible to vote pay income tax? Why is that not considered to be a lack of accountability?

Sir Hector Monro

There is VAT.

Mr. Maxton

On the point of VAT, since the hon. Gentleman wishes to raise it at the same time, the poorest in our community do not pay income tax or rates and pay little in VAT because, quite rightly, no Government has been prepared to put VAT on basic commodities.

Sir Hector Monro

The hon. Gentleman made an intervention and answered it himself. Everyone in the country pays indirect taxes one way or another. I do not think the hon. Gentleman's point is valid. It has been right to adopt the community charge as the best option. It is disappointing that the Labour party in particular has not been able to put forward any alternative. [Interruption.] If Opposition Members think that the present system is so wonderful, why is there such an outcry in Scotland about the rating system generally and the wish for change?

There is a host of reasons why we should proceed towards a community charge. It will get rid of the great issue of revaluation of domestic properties. One will be able to improve or extend one's house without having to have it revalued and without paying any further towards rates. It will certainly help single householders, and particularly pensioners who live alone. That will be welcomed.

Certainly, it will be much fairer for households in which more than one wage packet come in. Some households have three or four wage packets coming in. I am glad that my right hon. and learned Friend the Secretary of State has brought in systems for rebates for the less well off and, I hope, the unemployed. That is to be through the housing benfit system and will be advantageous. Arrangements will be brought in especially for students. It is important to note that families with perhaps two to four children can move to a bigger house without paying increased rates. The Bill will help those families in particular. The increase in non-domestic rates, being pegged, will be limited to inflation. When the time comes, it will he clearer to the business community how much they will have to pay. They will realise that rates will he increased only by inflation.

Of course one appreciates the concern of local authorities that the scheme will be difficult to operate. Many schemes have been brought in by way of Government legislation and local government administration. I remind hon. Members of the great brouhaha when the Labour party brought in the selective employment tax. The House went into orbit. Yet, in a thoroughly unfair way, that tax operated for some while until it was repealed. I can think of other administrative difficulties in local government, which have been overcome by the skill of officials. After hiccups to begin with, the difficulties have settled down. In 10 years, we shall wonder what all the fuss was about in 1986.

The key thing is that officials must remember that the change is in the interest of ratepayers, not for the administrative convenience of local authorities. If the ratepayers feel that they are getting a fairer and better system, it is absolutely right that it should be implemented as soon as possible.

The Bill contains many Committee points. It is full of issues that will have to be thrashed out in detail in Committee—for example, the scheme for second homes, which I am glad the Government have introduced, caravans, holiday lets and so on. All those issues will be important. I believe that we shall find reasonable solutions in Committee. Some of the issues raised by the Scottish Council for Voluntary Organisations will be Committee points—for example, more than one single family living in one house, and how that problem will be resolved in the long run.

Another issue was touched on by the right hon. Member for Western Isles which is probably outwith the details of the Bill. That is the unfair valuation of sports grounds, on which we thought we had made substantial progress in the Rating and Valuation (Amendment.) (Scotland) Act 1984. Mr. Alex Kilgour and Mr. William Mann have campaigned well in Scotland and highlighted the importance of mandatory rate relief for sporting facilities. I hope that what they have started will grow.

The only point that I make to the House and to my hon. Friend the Under-Secretary of State, who has been intimately involved, is that that is nothing new. I looked up the debate on the Finance Bill on 19 November 1966, when I moved an amendment to bring in mandatory derating of 50 per cent. for sports grounds. It was thrown out by the then Labour Government. So there is nothing new under the sun. I hope that there will be a move by authorities to give mandatory relief whenever possible. I hope, too, that my hon. Friend the Minister will think again about the problem that is facing an important part of Scottish economic life, with regard to sporting lets. Tourists and others come to hotels in the countryside but they are being severely penalised because sporting rates are so much higher in Scotland than in England and Wales.

I say to my hon. Friend the Under-Secretary and to my right hon. and learned Friend the Secretary of State that the Bill is a welcome measure. I hope that as it proceeds through Committee the anomalies that some hon. Members have highlighted will be removed and that by the time the Act is implemented in years to come, it will be welcomed, particularly by householders who are now paying rates that are far too high and who will be much better off under the community charge system.

6.32 pm
Mr. William McKelvey (Kilmarnock and Loudoun)

When I looked at the Bill, I must confess—perhaps this will stun the Minister—that I thought I might have been prepared to support clause 1 had it been a one-clause Bill. However, I could not in any way support clauses 2 to 32. Having read most of the Bill—it is long-drawn-out and badly written—I must ask who the author of the new system is.

I deplore the fashion in which the Bill has been introduced. In a way, it is a protective measure. It has been introduced so that the Government can protect that rare and disappearing species up in Scotland called the Conservative politician. Because, after revaluation, there was such a squeal of anguish from Conservative politicians north of the border who were terrified that they would lose their seats, Labour Members are being hustled into what we consider to be a lousy, unfair, cumbersome and uncaring piece of legislation, possibly the worst that has ever come from the Government, and that is saying something when one thinks of some of the regressive legislation that the Government have put through the House.

We must ask who made up the Bill. I imagine that it was a case of co-authorship. There are bits of Hans Christian Andersen that I recognise in the middle. There is certainly a good piece of Dennis Wheatley. The piece that intrigues me might have been injected by the hon. Member for Stirling (Mr. Forsyth)—who is busy writing his notes or cheques at the moment—and is probably from the St. Andrews think tank.

I do not often quote, because I always misquote. On this occasion I shall misquote again. This "quotation" comes from another William. This is Willie Shakespeare, I believe:

  • "Oh what a tangled web we weave,
  • In trying domestic rates to relieve.
The Government will be sorry that they ever embarked on this road. Let us look at some of the people who do not support the Bill and have not been mentioned so far. I should mention the Chartered Institute of Public Finance and Accountancy, only because it celebrated its centenary last year. That august body, which is certainly no bastion of Socialism, has deplored the Bill and said that there is nothing at all about it that it likes. The Scottish Council for Voluntary Organisations has similar beliefs. In the Convention of Scottish Local Authorities, 53 local authorities are against and three are for.

So where is the support for the measure coming from? If we were fair, and if we were to say, "Hands up those parliamentarians who will gain financially from this piece of legislation," precious few could not put up their hands. I am not being unfair, but it just so happens that I have some valuations taken at random from the Edinburgh roll. It would not be fair to mention names, so I shall not do so, but I shall tell the House the area in which the people live, and if people's faces go red, we shall know who they are. I mention first Duddingston Village. Current rates are £1,511 multiplied by 58.8p, giving rates payable of £888.47. For two adults on the electoral roll, the community charge of £229 multiplied by two is £458. If we subtract that from £888.47, we have a rebate of £430.47, or £8.28 a week. That is not bad. That is a fair and equitable system. We are shifting the burden. People on Members of Parliament's salaries will get a rebate by and large, although I understand that some Labour Members, for example my hon. Friend the Member for Dundee, West (Mr. Ross), will pay substantially more.

I have another example from Edinburgh. I shall not give the address because I have no intention of embarrassing individual Members. The house is approximately in Ainslie Place and between numbers four and eight. Current rates are £2,044, multiplied by 58.8p, giving rates payable of £1,201.87. For two adults on the electoral roll, the community charge, being £229 multiplied by two, is £458. That gives a grand saving of £743.87 or £14.31 a week. Some teenagers are forced to live on less than that sum.

Mr. Henderson

Is not one of the attractive possibilities that might emerge from the community charge the fact that fairly high-spending local authorities, such as Edinburgh now, and Lothian not so long ago, will exercise a more responsible role than in the past? All ratepayers in Edinburgh are likely to benefit, not just those whose addresses the hon. Gentleman refrained from giving.

Mr. McKelvey

The hon. Gentleman knows that I have said in the past that people get the councillors they vote for and the councillors they deserve. If they continue to vote for councillors, they will support the policies that they carry out in office. That is democracy, and there is nothing unfair about it.

I shall mention two matters which the Bill does not touch upon which create serious problems for people north of the border. One is the chemical industry and the difficulties that it has met in paying rates through the contractor's principle; this has already been mentioned. No one would argue that our rating system was devised by the appliance of science. At worst it is a guesstimate, and at best it is someone's attitude, guesswork, balance of payments or a way of drawing in money. The system is not based on any science, but the contractor's principle and the opportunities that it has given for assessors north of the border to operate in the chemical industry puts that industry at a tremendous disadvantage vis-á-vis similar plants south of the border.

The system reveals some ridiculous examples. For example, immediately a pipeline crosses the border at Carlisle or Gretna, 50 per cent. more must be paid in rates in Scotland for the same pipeline carrying the same solution than in England. That is ludicrous and crazy.

When the Government speak of a evaluation and an equalisation, does that mean that Scottish rates will go down to those of England? Or is it more likely, since England has not had a recent revaluation, that the opposite will happen? If we introduced a revaluation in England now, the squeal of anguish that we heard in Scotland at the revaluation there would be drowned in an absolute roar of anguish from those who would have to pay those rates south of the border.

Another example illustrates my point even more dramatically. A large petrochemical plant which was recently built in Fife and provides jobs for people there now pays eight times what it would have paid if it had been built in England. It is impossible to reconcile the two figures. As its rates bill in Scotland is almost £10 million, as against £1.8 million in England, if there was any threat of closure of one of of the two plants, there would be an advantage of £8.5 million from closing the Scottish plant. That is a further threat to continued employment in Scotland.

Mr. Michael Forsyth

I have considerable sympathy with the hon. Gentleman's points about the inequity of the contractor's principle, but does he accept that it is a valuation system based on capital values, which is what the hon. Member for Glasgow, Garscadden (Mr. Dewar) said the Labour party was considering as an alternative?

Mr. McKelvey

Theoretically, the hon. Gentleman may think that it is based on those values, but as there are no comparisons, in many cases, it is a stab in the dark. It is no more scientific than that. I could evaluate those properties just as well as the assessors are doing at present and take their fee.

We have already heard about the difficulties of some of our sporting clubs and racecourses because of the differences between north and south of the border. Again, the Government should move on equalisation. It is no good their saying that they have legislated for that and that if a racecourse north of the border can find a similar or identical racecourse in the south and make a comparison the assessors will take that into consideration and sort out the problem. So far, thousands of appeals have taken place and not one equalisation has been made. That does not encourage appellants to go through the process. We still eagerly await someone breaking tha mould so that we can apply it to other places. That formula will not work.

Mr. David Lambie (Cunninghame, South)

How can one compare a racecourse in Scotland which was revalued two years ago with a similar racecourse in England or Wales which has not been revalued since 1973? There is no comparison. We are comparing 1973 figures with 1985 figures. It is a sham.

Mr. McKelvey

Of course, my hon. Friend is correct. For some years, he and my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) have been meeting organisations which have this growing difficulty. We knew and forecast exactly what would happen on the last revaluation and of course that has come to pass.

I am mainly worried about short measure reforms that we can use to save the lives and existences of amateur sports clubs. On Friday I was present at a well-attended meeting in Kilmarnock. The Secretary of State for Defence was in attendance, not as a Defence Minister, although he had to defend some Government policies, but as a Member of Parliament for that area. He was there to discuss sports clubs with the 90 people, representing 28 different sports clubs, many of which are at the point of bankruptcy, who made up the audience. If there is no cash injection to those clubs by way of rates relief, they will go under. When they go under, the facilities that they provide for hundreds, nay thousands, of young children will end. What will happen on terms of human misery, apart from the cost, if we cast those boys and girls out on to the streets? Vandalism will increase, they will be encouraged to roam about in gangs, there will be increases in glue sniffing and all the other anti-social things which I am sure all of us would try to prevent.

I know that the Minister will say that the Government have legislated so that regional authorities can, by law, derate any of those clubs. I make two appeals—one to the regional authorities. I understand, as do all Opposition Members, why they are nervous about derating for any specific group, because whenever that is done and a barrier is drawn up, a group on the other side of the barrier pushes forward and tries to get its derating. One example is the voluntary groups, which do much excellent work. Over the years, because central Government have been clobbering the regional authorities for money, they are nervous about moving in that direction. I ask them—even considering that and the dangers that are involved in taking such a step—to save those sports clubs by inviting applications for derating from all those clubs. Those that are needy, deserving and due to go under could be saved by immediate derating.

If the Secretary of State for Scotland is genuine—he appeared to be in generous mood when he made his statement—he should promote that generosity and consider paying pound for pound with local authorities. I am not asking him to pay for the difference in rates that would be lost through the derating of the sports clubs, but if he is genuine and as interested in sports clubs, the welfare of young people and the hundreds of unemployed people who take advantage of the sports clubs and all the people who work voluntarily to support them as he says he is, and if he genuinely believes that he should help them, he can do so by telling the regions that for every club that they derate he will give them half the money that has been lost. That would show the regions that he is serious about giving immediate assistance to a pressing problem, and would assure us that he is genuine in what he says about rates.

I shall volunteer to serve on the Committee that will consider the Bill, although I realise that I shall be inflicting punishment on myself. I warn the Minister and Conservative Members that there will be no easy passage for the Bill. We will fight tooth and nail on every sentence and every clause, and we will table thousands of amendments. Perhaps our first amendment should be to clause 1. It would probably solve the entire problem. We should take out the words "1st April" and insert, "the 12th of never".

6.50 pm
Mr. Barry Henderson (Fife, North-East)

It was entertaining to listen to the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey). As he worried about the effect on Scotland of fewer Conservative Members than there were when we had more than half the votes of the Scottish people, I could not help but reflect that since the hon. Member for Glasgow, Garscadden (Mr. Dewar) sat down there has been no Labour Member in the Chamber who comes nearer to my constituency than Glasgow—

Mr. Alfred Morris (Manchester, Wythenshawe)

What about Manchester?

Mr. Henderson

Manchester is even further away.

The hon. Member for Kilmarnock and Loudoun spoke of the difficulties of valuation. I should have thought that that would be a benefit of the Bill. The sudden changes that valuation can create in the amount that people must pay towards local government is one reason why many people want to have the rating reform offered in the Bill. The hon. Gentleman said that Moss Morran paid more in rates than if it had been built in the south. I remind him that the Labour Front Bench put a Whip on his party to vote to ensure that Moss Morran would pay even more than it is paying now. It is to the credit of Labour Members of Parliament in Fife that they supported the Government and ensured that Moss Morran would not have the higher rates bill that other Labour Members sought.

I congratulate my right hon. and learned Friend the Secretary of State and my hon. Friend the Under-Secretary of State, the hon. Member for Edinburgh, South (Mr. Ancram), on having delivered a workable scheme to replace the discredited system of domestic rates.

Mr. Maxton

Why is it discredited?

Mr. Henderson

I do not wish to take up too much time going over ground that has been gone over well, especially by the hon. Member for Cunninghame, South (Mr. Lambie), who, in every debate until this one—I have not seen him trying to catch your eye, Mr. Deputy Speaker—

Mr. Lambie

The hon. Gentleman knows that there are three Labour Members for Ayrshire constituencies and that we take it in turn to speak. My hon. Friend the Member for Kilmarnock and Loudoun (Mr. McKelvey) spoke for us tonight. The hon. Gentleman would not wish us to hog the debate all the time.

I have been making my rates speech in the House since 1970. Everyone knows it and I do not wish to repeat it. All I can say is that I have been the only person who has been consistent since 1970 in wishing to abolish local rates and introduce a national tax. I believe that there should be a 100 per cent. Government grant for local services and that local rates should be abolished. If the Secretary of State for Scotland had supported that view during the past four or five years, we would not be wasting our time with this debate tonight.

Mr. Henderson

I am glad that I gave way to the hon. Gentleman. Since I came to the House in 1974, I have heard him make that speech. It is a good speech. He was much more eloquent than I could hope to be in explaining why the rating system is discredited. The hon. Gentleman has said it consistently and with great passion year in and year out. He has gained the respect of hon. Members on both sides of the House for the firmness of his convictions on the matter. I am sorry that he has decided not to speak on the Second Reading of this Bill.

Conservative Members agree with the hon. Gentleman that the domestic rates system is discredited and should be replaced, although I acknowledge that this method of replacement is not the one that he has favoured until now. His view has been creditable. At one stage I was so determined to see the end of the rating system that I was prepared to accept his extremely radical solution and go for 100 per cent. block grant. However, over the years, I have shifted my position. The hon. Gentleman has not. He has been conservative and consistent in his view. I changed my view because I thought it important to have a clearly defined basis that recognised local control over local events and to make a clear distinction in the relationship between local expenditure and local taxation. That is why, on balance, I favour the solution in the Bill.

The Bill will be much more just than the present system. If I had known that the right hon. Member for Western Isles (Mr. Stewart) would not he in his place, I would have told him that I planned to mention his speech. On behalf of the Scottish National party, he appeared to favour a local income tax as a way of getting rid of domestic rates. Has he calculated the cost to his constituents or to the constituents of any hon. Members who support a local income tax? I have not done the arithmetic because I do not know enough to do the calculation off the top of my head, but I should be surprised if the income of people in the Western Isles was sufficient, even at 100 per cent. income tax, to meet the costs of local government in the Western Isles.

The right hon. Gentleman said in answer to an intervention that at least people would be paying according to their ability because it was related to income, but that would not apply if the rate of income tax was confiscatory in nature. I hope that my hon. Friend the Under-Secretary of State, who has more information than I have, will give us a more accurate view on what might be the effect of a local income tax in constituencies such as the Western Isles and others represented by hon. Members who support the idea. At first sight, but only at first sight, a local income tax has some attractions. The more one examines it, the more one sees that it has all the disadvantages and few of the advantages of the existing system.

People believe that rates are an extraordinary burden upon them, but domestic ratepayers in Scotland contribute only 13 per cent. of local government expenditure. That is at the root of the problem and the sense of injustice with the rating system, but it is also a reason why the charge of regressive taxation made by the hon. Member for Garscadden does not wash. We shall ask the community charge to meet 13 per cent. of local government expenditure. The rest will be paid by business or by central Government on behalf of the national taxpayer. That balances the interests of the better-off and the less well-off.

The hon. Member for Kilmarnock and Loudoun mentioned sports grounds. As I advised those in Fife who were worried about the rating of sports grounds, the present system contains the means by which amateur sports grounds can be relieved of rates. A decision of Fife regional council proved that point. On the question of professional sports grounds, I was glad to hear the hon. Member for Cunninghame, South point out the differences in valuation between Scotland and England. It is an important factor. Another factor is the expenditure policies of local authorities north and south of the border. That also plays an important part in making the valuation. Professional sports clubs regularly came to the House to lobby and draw attention to the problems of the high rates that they are paying in comparison to their equivalents in England. I calculated what a major Glasgow sports club would pay if it was based in Aberdeen—not south of the border, simply in Aberdeen. There would be a difference of more than £20,000 a year simply by shifting the club from Glasgow to Aberdeen. Of course, the difference would be even greater now.

Mr. McKelvey

I do not follow the hon. Gentleman's argument. If the valuations were equalised for the football clubs and race courses with the poundage paid in England, they would pay more rates. Are there no authorities in England which you would describe as high spenders? Are there high spenders only among Scottish authorities? The hon. Gentleman's equation does not balance.

Mr. Henderson

The hon. Gentleman appeared by his use of the word "you" to refer to Mr. Deputy Speaker, but I do not want to bring Mr. Deputy Speaker into my equation.

The hon. Gentleman misunderstands me. I did not say that there is no inequality between Scottish and English sports grounds, because there is. However, my point is that there are also inequalities within Scotland. It is not just a question of inequalities north and south of the border; inequalities also exist in Scotland. The inequalities are most severely felt by Scottish businesses which are competing with businesses in other parts of the United Kingdom. That specifically applies to tourist facilities. I have heard from people who run caravan parks, and to some extent a caravan park in Fife is competing for business with a caravan park in Cornwall. It is a scandal that there are such immense differences in ratings.

There are other facilities where there is competition between a firm in Scotland and a firm down south, and where the combination of the spending of the local authority and the valuation system places an unfair burden on the Scottish firm and reduces its capacity to compete effectively.

The most important consequence of the Bill becoming law will be the way in which it will improve accountable democracy in Scotland. Everyone will have a vested interest in examining the costs and benefits provided by the local authority. In other words, we will all be interested in the value for money provided by the authority. That is an accountability that does not exist at present, and to that extent democracy is weakened. That is the most important part that the Bill will play in making life more just and fairer in Scotland. The Bill will make Scotland a more truly democratic country than it is at present.

Of course, there will be gainers and losers. No one has ever concealed that. No Conservative Member has ever concealed the fact that there will be gainers and losers.

Mr. McKelvey

That is because Conservative Members are all gainers.

Mr. Henderson

The hon. Gentleman has just asked who will be the gainers. Three quarters of households will be gainers, or at least will be no more than £1 a week worse off. That is the overall effect of gainers and losers.

As I said earlier in an intervention, I believe that everyone will benefit from better local government which has a greater concern to provide better value for money. At the end of the day, the expenditure policies of local authorities will determine the total cost of local government. Fife regional council has been Labour controlled since the reorganisation of local government. That council has taken us from the lowest to the highest rated area in Scotland in just 10 years. No excuses can alter the fact that the expenditure policies of the council have brought that about.

Mr. Milian


Mr. Henderson

It is not nonsense, it is a fact. If the right hon. Gentleman can recall the time when he was Secretary of State for Scotland, he will remember that Fife regional council then was a lot more responsible, yet he chopped a lot more of its budget than any Secretary of State for Scotland has done under this Government. He will remember the 6,000 fewer staff in Scottish local government—the number that he slashed from local government in one year. We do not need to hear about cuts from the right hon. Gentleman, who knows more about that than anyone else. He introduced cuts more sharply, more harshly and more unreasonably than anyone else.

To that extent, I accept that in 1979 the expenditures of Fife regional council were a good deal less than they are now. That was partly due to the work of the right hon. Member for Glasgow, Govan (Mr. Millan) in screwing down the expenditure of Scottish local authorities. I acknowledge that. However, since then Fife has continued, regardless of help from central Government, and regardless of the wishes of the majority of ratepayers, to increase its expenditure every year. The council has gone to the limit of what it thought it could get away with before it was hit by the Government for gross over-expenditure. The council has done a great disservice to the people of Fife, who must bear the burden, and to the business community, which provides the jobs that are much needed at the moment.

Even Fife regional council, which I have severely criticised for its expenditure policies over the years and its lack of sense of priorities in expenditure, acknowledges that in north-east Fife and in my constituency the people will be significantly better off as a result of the community charge. On that basis, I am prepared to accept the judgment of Fife regional council. I support the Bill because I believe that it will improve matters for my constituents, and because it will produce a more just system.

7.6 pm

Mr. Bruce Milian (Glasgow, Govan)

The reasons given by the Secretary of State this afternoon for the introduction of the Bill had nothing to do with the real genesis of this legislation. The Bill is another manifestation of the breakdown in the relationship between central and local government. That is the direct responsibility of the way in which the Government have behaved over the seven years since 1979. The Government have attempted to screw down local government expenditure and to control it by one device or another. They have tried to impose penalties when local authorities have not behaved in a way that is considered acceptable to the Scottish Office. The Government have behaved in a thoroughly authoritarian manner towards local authorities and they have accompanied that approach with considerable reductions in the amount of assistance from central Government to local government.

The rate support grant percentage for the current year is 56 per cent. whereas the Government inherited an RSG percentage of 68.5 per cent. in Scotland. They have made these grants on relevant expenditures that have been consistently understated and unrealistic. The result is that, with an extremely modest real increase in expenditure by local authorities in Scotland, there has been considerable increase in the rates burden. In 1978–79 the average domestic rates in Scotland were £132. In 1985–86 that figure had risen to £392; almost three times the 1978 figure, and, of course, the rates have increased again in the current year. That is the real crisis in local government finance. It has nothing to do with the rating system per se, it has more to do with the way in which the Government have treated local authorities over the past seven years.

Any tax, whether it is rates, local taxation or central taxation, that has too much burden placed upon it, will eventually give under the strain. That is true of local taxation and local rates and also about income tax, VAT and any other form of local or central taxation. The crisis came in 1985 because of the Government's mishandling of the 1985 revaluation in Scotland. The Bill was born out of the panic that was generated by the effects of that revaluation. It has nothing to do with providing greater accountability, fairness or getting rid of unsatisfactory features of the domestic rating system. Scotland is now bearing the first of the burdens of the 1985 revaluation and is getting legislation first.

There is no ideal tax. The Secretary of State mentioned an ideal alternative. I agree that there is none, and the Bill certainly does not provide it. I am not maintaining that the rating system is ideal, but I have no difficulty defending it, because it has many virtues and advantages. It is cheap and easy to administer and, with a sensible system of Government support through the rate support grant, it has considerable flexibility. Scotland has had industrial and agricultural derating. We have had domestic rate relief and special relief through special legislation to deal with some of the worst consequences of the 1985 revaluation.

A few years ago, when there were special burdens on certain local authorities because of the oil boom, special adjustments were written into RSG. We have a system of specific and general grants and a system of distribution—RSG—which is subject to adjustment. One could say, if one wanted to be pejorative, that it is open to manipulation — which it has been under the present Government — but it can be used to change the distribution pattern between local authorities. That feature is retained in the Bill, so if there is a problem with manipulation, the Bill will not remove it.

With domestic rates, it must be emphasised that, with housing benefit, the burden can be related considerably to the ability to pay. It is nonsense to talk about rates and to fail to take housing benefit into account. The Government's complaint about housing benefit is not that it does not work but that it works too well—it excludes some ratepayers from paying any rates. The Government are here ensuring that everybody contributes to local expenditure.

There is no need to defend the rating system, however, because the Government are retaining it for non-domestic ratepayers. The odd thing about that is that many of the complaints and anomalies have nothing to do with domestic rates. The hon. Member for Fife, North-East (Mr. Henderson) spoke about sports clubs, but they will not be affected in the slightest by the Bill. The chemical industry and the contractor's principle also has nothing to do with domestic rates. There are anomalies and injustices, but the Bill does not tackle them. The Bill is no great deal for industrial ratepayers.

All we are given in the Bill is a temporary freeze at the existing level, which non-domestic ratepayers consider is too high. Like other ratepayers, they have suffered from the drastic reduction in grants of the past seven years. Increasing the valuation according to the retail price index in the transitional years is not appropriate. Besides, I oppose in principle anything in taxation legislation which protects one group of taxpayers for the future. No Government can bind a successor in that respect, so the idea that industry is getting some great favour in the shape of the freeze is a nonsense.

If the non-domestic sector wants to see what is in store for it, it should look beyond 1990, when there will be another revaluation which will cover England as well. I understand that the idea is to get valuation practices, procedures, bases and legislation uniform by 1990 so that revaluations can be uniform and there can be a uniform business rate. I asked the Secretary of State earlier today whether that would be uniform in Scotland or throughout Britain, and he replied that that had not been decided. That decision is crucial for businesses in Scotland because a uniform business rate throughout Britain would be much more favourable to Scottish businesses than a uniform business rate throughout Scotland.

Mr. Michael Forsyth


Mr. Milian

There are several reasons. The Secretary of State cannot answer that absolutely basic point—whether the rate will be uniform throughout Britain or throughout Scotland.

When we have the revaluation in 1990, whereas the difference for Scotland will represent the five years between 1985 and 1990, the difference for England will represent the 17 years from 1973 to 1990. I do not what the effect of the revaluation will be, but we should bear in mind the consequences of a five-year revaluation. The Government speak of protecting business from dramatic changes, but there will be a considerable problem for businesses on both sides of the border in 1990, but presumably especially so in the south.

There will be winners and losers among business and among local authorities. If there is a uniform rate which is redistributed on a per capita basis, businesses in rural Scotland will pay more rates because they are at present rated below average, but local authorities will gain because redistribution of the business rate will give them more as rural local authorities, on average, have less industry than local authorities in urban areas such as Glasgow, Dundee and Aberdeen.

There will be a wholesale upset in 1990, and the Bill does not deal with that. When we ask the Government how they will tackle that upset, they have no answers. The Government dodge the questions, but the consequences that I have outlined are part and parcel of the proposals in the Green Paper and the results of the Government's intentions. There will be havoc in 1990 such as will make the 1985 revaluation in Scotland look like a minor hiccup.

Mr. Henderson

I am not quite sure whether the right hon. Gentleman is advocating a revaluation in England or whether he is saying that there should not be one because it would be so awful.

Mr. Milian

There should have been a revaluation in England long before now but the Government have dodged it. I introduced a revaluation in 1978 because I believed it was the honest thing to do. I do not criticise the previous Secretary of State for Scotland for having the revaluation in 1985, but I criticise him for not anticipating the results of that revaluation. The Government were caught by surprise when the results became available. It is quite wrong to go 17 years without a revaluation.

The Government are not being frank in the Bill, nor with the House or with business generally about the possible consequences in 1990. We should bear in mind the basic point that, although we discuss the burden of rates on business such rates are tax deductible. Whether corporation tax or income tax is paid it is deductible and therefore there is a reduction of the burden on businesses.

I shall not go on any longer about non domestic rates as I wish to draw attention to some of the consequences that the Government have not thought through, or, if they have, about which, they are not telling us their thoughts. The immediate issue is domestic rating. I agree with my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) that the property that one occupies to some extent reflects one's ability to pay. Obviously, there is not a 100 per cent. correlation, but I do not find many people who are earning reasonable incomes living in the worst properties in my constituency. At least two Conservative Members live in my constituency, and they certainly do not live in the worst properties there. That is sensible.

Mr. Norris

This is the second time that the question of whether incomes are broadly related to property values has arisen. The Green Paper made quite clear that 10 per cent. of those earning £300 a week or more lived in property in the bottom quartile of rateable value while 7 per cent. of those earning £50 a week or more lived in property in the top quartile of rateable values. Surely the truth is that there is an insufficient link between income and property value. That makes a nonsense of the concept of capital value assessment.

Mr. Milian

That 7 per cent. who earn less than £50 a week and who live in the best kind of property are not paying rates because the whole of the rates will be paid through housing benefits. At that level, housing benefits take care of many such anomalies, including people living in property which is beyond their means.

I find the accountability argument sinister. Such an argument could be applied to central as well as local taxation. There are many pensioners who are not contributing in any way to the community. There are others on supplementary benefit. It is no use saying that they are all paying VAT. Of course, they may be paying VAT but when one is on supplementary benefit the VAT paid is only giving back to the Exchequer money which one has already received by way of supplementary benefit. Unfortunately, there are millions in our country who, because of unemployment, are not making a taxation contribution to the economy. Are we to deprive them of the vote? Will it be argued that, unless such people pay a certain amount of income tax or other charge, regardless of their income, there is no accountability at central Government level.

The accountability argument is phoney and in any case grossly exaggerates the numbers who are concerned. For example, if one takes into account married couples that reduces the numbers considerably. Other young people are temporarily not ratepayers but as soon as they get a house of their own they become ratepayers. Those young people lucky enough to be in a job and still living at home are likely to be heavy contributors to general taxation in terms of smoking, drinking and other entertainments which are, at the moment, heavily taxed.

When one sets aside all the arguments, the reality is that under this system a greater burden will be placed upon the poorer people, and a lesser burden on the better off. If that is not the position I do not know what the dickens we are doing having the Bill in the first place. If the Bill does not redistribute the burden in some way what is the purpose of the exercise? The purpose of the exercise is to put more of a burden on people less able to pay.

The comparisons made in the Green Paper are thoroughly dishonest—nearly as dishonest as the Secretary of State's public expenditure statement this afternoon. The Comparisons have always been done on the basis that the 20 per cent. minimum contribution to rates under the present system will happen in any case. The imposition of the 20 per cent. minimum contribution is part of the process of putting more of the burden on the poorer sections of the community and taking it off the better off.

One problem concerning the future has not been dealt with by the Secretary of State. I asked the right hon. and learned Gentleman a question about it but he gave an extremely inadequate answer. It concerns the safety net. If the new system is introduced at the same time as the redistributed grant—many Conservative members do not seem to understand that it is not just a question of changing the basis of local domestic taxation; there is also a change in the grant distribution—it will have a detrimental effect on the areas of Scotland that most need Government help, including my city of Glasgow.

If all these changes happened at once one would not be talking about a community charge in Glasgow, for example, of £262; it would be £314. I do not know how the safety net will operate. The Secretary of State could not tell us this afternoon. It will he self financing, however. I have news for the hon. Member for Fife, North East (Mr. Henderson) and other Conservative Members. If one takes the examples of Dumfries and Annandale and Eskdale their figure for the community charge, without the safety net, could go down to £108, but with the safety net they will be paying £172. They do not regard it as a safety net.

The redistribution is temporary and is only shielding the full effects of the system from those areas which will be worst affected. The Secretary of State did not mention any of this. I asked him a question but he gave an answer in general terms which did not explain the reality of the situation. Comparing the present system with the new proposals it is clear that, for many areas, the situation will get worse—it is not static—once the new grant system and the poll tax take effect.

As my hon. Friend the Member for Garscadden said, the poll tax is an administrative nightmare. Property does not move but people do. It is often difficult to keep track of people. We do not carry identity cards in this country and it is possible to move from Glasgow to Edinburgh or from Edinburgh to Aberdeen. One does not have to tell anyone about it—even, presumably, one's wife. That may be the idea of the move in the first place.

Under the new system one is under an obligation, as soon as one moves from Glasgow to Edinburgh, to tell the registration officer that one is resident in Edinburgh. If that is not done one is committing an offence. I am glad to say it is not a criminal offence. The administrative costs of the new system are more expensive than the present system. It will give rise to all sorts of difficulties. The Government have paid absolutely no attention to representations on this matter from COSLA and the Chartered Institute of Public Finance and Accountancy and all the people who must administer the system.

Basically the Government think that they will get away with the new tax because it will be phased in over a period, because there will be a safety net and because it will be complicated and people will not know what is happening. It will not immediately hit those who will suffer under it so everything will be all right. The Government made the same miscalculation about the cuts in rate support grant and the penalties for local authorities. In the first year it was not too bad, but eventually it hit people and the Government, and the 1985 revaluation was the last straw that broke the camel's back. The same will happen here.

Leaving aside all the details, the essential feature of the system is that 80 per cent. of local government expenditure will be centrally controlled, and only 20 per cent. will be in the control of local authorities. They will have to make expenditure decisions, knowing that if they want to spend more, the burden will be placed on only one sector of local taxpayers, namely the domestic sector. As soon as the domestic sector understands what is happening, the opposition that has already been expressed against the Bill, will become greater.

This is all unnecessary because the reasons for the crisis have arisen not from fundamental difficiencies in the rating system, but from the way in which the Government have dealt with the rating system and local authorities during the past seven years.

If I were asked how I would reform the system, my first, biggest, simplest reform would be to increase the amount of central Government support for local authorities to restore some of the money that has been taken away from local authorities, leaving ratepayers to bear the burden. In other words, I would stop punishing ratepayers. That would do a tremendous amount to reform the local government system. I would not introduce the new proposals on housing benefit which, again, will hit the poorest members of the community, and I would do something about revaluation.

At one time we had, not periodical revaluation, but continuous revaluation. Even with periodic revaluation there is no reason why there should not be transitional arrangements, so that the whole burden of a revaluation does not take effect at once. Those simple reforms are always in the hands of any Government who genuinely want to give a fair deal to local authorities and ratepayers.

I have never seen local income tax as a substitute for rates, but it could be an important supplement to them. Even then, I am not particularly enthusiastic about local income tax. I would prefer to see it used for a Scottish assembly than for local authority taxation.

The idea that because the Government have introduced this iniquitous Bill the rest of us must run about and produce all sorts of fanciful proposals for reforming the rating system is absurd. If one is hitting one's head against a brick wall, the first step is to stop. The trouble is that the Government have been hitting the heads of local authorities and ratepayers against a brick wall and first we need them to stop doing that.

This is an iniquitous Bill and it will not prove popular, although the Government mistakenly believe it will. Their idea of what is popular in Scotland is demonstrated by their performance at public opinion polls and district and regional elections. We shall oppose these proposals and if the Bill, unfortunately, is passed, it should be repealed and replaced by a system which provides much more sensible relationships between local and central Government.

7.33 pm
Mr. Michael Forsyth (Stirling)

I am grateful for the opportunity to follow the right hon. Member for Glasgow, Govan (Mr. Millan). I shall not follow all the highways and byways of the various options to which he treated us, but I must dispute his central theme, which was that the community charge would not enhance accountability.

The right hon. Gentleman seemed to argue that the rate support grant was the principal source of the problem. He quoted some likely figures for a community charge, and we have seen them published by the Scottish Office in The Scotsman and the Glasgow Herald. I am a little puzzled, because the community charge figures at district level for this financial year are £81 for Stirling district council, but £48 for Falkirk district council and £47 for Clackmannan district council. Yet all three authorities have similar problems—indeed, if anything, those faced by Falkirk and Clackmannan are greater and all three are Labour controlled.

In Stirling the extreme Left is in power, spending as if money has gone out of fashion. That accounts for the cost of local government on a community charge basis almost doubling. For most of my constituents the news that the district council is costing them nearly twice as much as those in Falkirk and Clackmannan would come as a great surprise. What is wrong with the present system is that when the excessive bill drops through the letter box, my constituents have no way of knowing that. The community charge will draw that into sharp relief. To show that I am impartial in my views on this matter, and to give all parties an opportunity, I should say that the community charge in Perth and Kinross would be £42.

We have not yet heard what the alliance parties have to say, and I am a little puzzled why Liberal Members in particular and, indeed, SDP Members who represent Scottish constituencies, should be so opposed to the Bill. After all, their constituents will benefit considerably. At district level and for the community charge as a whole their constituencies would have the lowest figures. For example, in Tweeddale the figure would be £30, in Gordon it would be £25, and in Inverness it would be £32, compared with Stirling's £81. There are special circumstances in Shetland, but the total community charge there would be £101 compared with Stirling's £223. Therefore, why are the alliance parties so determined to inflict considerably higher costs on their constituents by opposing the Bill? That is the reality of the impact of the community charge on their areas.

Mr. Henderson

Does my hon. Friend agree that there is a slight similarity between the position of Liberal Members on this issue and their position on council housing? They seem to be in favour of council house sales in principle, but not in practice, and here they seem to be in favour in principle of getting rid of domestic rates, but they produce an impossible method in practice.

Mr. Forsyth

Yes. I accept my hon. Friend's point. To be fair to Liberal Members, there is a distinction. With the sale of council houses only a proportion of their constituents could benefit, and by their weasel position on that perhaps they are disadvantaging only a section of their electorate, but in this case they are disadvantaging every elector in the area.

Mr. Wallace

The hon. Gentleman said that every constituent would be disadvantaged because of our opposition to the Bill. Has he tried to work out the rateable values and the rates paid by some of my constituents? Even the figure that he has given for a possible community charge in Shetland would seriously disadvantage many of my constituents.

Mr. Forsyth

As I understand it—it is always difficult to divine Liberal policy—the hon. Gentleman's policy is against both the rating system and the Government's proposals. Therefore, it is a disingenuous attempt to argue that some people who are paying rates now will be worse off under the community charge at the same time as arguing against the rating system. Instead, the hon. Gentleman proposes a local income tax. In his constituency few people earn high salaries and the base from which the revenue would have to be drawn is narrow. His constituents would be among those who the Green Paper says would have to pay an additional 11p on the basic rate of tax, so his constituents, whom he pretends to defend, and who are currently paying income tax at 29p in the pound, would pay it at 40p in the pound on low wage levels.

The right hon. Member for Western Isles (Mr. Stewart) is not present, but he is in a similar position. His community charge would be £110 and he, too, has a narrow income base in his constituency. Therefore, he would be condemning his constituents to paying 40p in the pound. When I put that point to him, he said that it was nonsense and that the whole point about local income tax is that it reflects the ability to pay.

The right hon. Gentleman appears to be on the point of recognising the importance of rates of tax. He might even join us in the Lobby in future and vote for cutting the basic rate of tax, because, like every Member of the Liberal and Social Democratic parties, he is condemning his constituents to paying high rates of tax, especially those who are least able to pay. I notice that the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) is leaving the Chamber, unable to answer my point. Let us hear less about fairness from that neck of the woods.

The right hon. Member for Glasgow, Govan (Mr. Milan) began by being sympathetic to business and then observed that, of course, rates are tax deductible. I have news for him, because the high spending of councils such as Stirling and others that are run by his party has resulted in many businesses being unable to make profits. If they do not make profits, they cannot claim the tax deductions. That is why areas of Glasgow and other parts of Scotland have been blighted and businesses destroyed. In turn, when a revaluation is performed, the assessors say, "There are no businesses, this is a deprived area. Mark down the rateable value." However, they mark them up in my constituency and in others, thus spreading the canker of deprivation and destruction that high rates have produced in Scotland.

The right hon. Member for Govan admitted that a uniform United Kingdom business rate would be of considerable advantage to Scotland. I asked him why, and he said that it was because of revaluation. However, revaluation has nothing whatever to do with the overall aggregate levels of rates that are paid by businesses. Scotland would benefit considerably from a UK-wide business rate poundage because many Scottish councils are controlled by his party and are, therefore, committed to extravagant policies and to levying high rates.

The hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) discussed the contractor's principle. I advise my hon. Friend the Minister that I am disappointed that we have not taken the opportunity in the Bill to deal with the problems that arise from valuation methods in Scotland. I am sorry that the hon. Member for Kilmarnock and Loudoun is not in the Chamber. However, it was evident from his remarks that he did not understand the contractor's principle.

Sports clubs and other organisations are in difficulties as a result of valuations performed on the contractor's principle, because it operates on the basis of capital valuation. That was dragged out by force from the hon. Member for Glasgow, Garscadden (Mr. Dewar) as being his party's thought on what it might do. It is ludicrous to look at the capital value of a sports club that can be used for only part of the year, take a proportion of that and call it the rateable value.

In England, the revenue principle is more dominant. It considers the revenue that could be raised and assesses the rateable value on that basis. Although the sympathy of Labour Members for sports clubs is welcome and predictable, their intellectual commitment is suspect and, once again, they have nothing to offer in terms of a coherent policy.

I am surprised that the hon. Member for Kilmarnock and Loudoun should have gone to such lengths to suggest to the Government that they might have a pound-forpound basis to help with rating relief for sports clubs, because we have substantially increased the rate support grant for Scottish local authorities, giving them more than adequate mileage to use their discretionary powers to give total relief, if they wish, to sports clubs.

The costs are very small and are much less than Labour authorities have squandered in the not too distant past on grants to striking miners and other causes that are dear to their hearts. Indeed, what Fife paid to the striking miners would almost cover the cost of giving complete relief to every sports club in Scotland. [Interruption] I advise the hon. Member for Glasgow, Cathcart (Mr. Maxton) that the only clubs that enjoy mandatory relief by statute are the miners' welfare clubs in Scotland. There may be a lesson in that, and one can predict why it came about.

The debate has been most revealing. Once again the Liberal and Social Democratic parties have a policy which will not work and which is different from everybody else's. The Labour party has come out as the reactionary party. It is the party for the status quo and without a new idea. I congratulate my right hon. and learned Friend the Secretary of State on the Bill, which is radical, and which is a real attempt to deal with a problem which has dogged successive Governments.

The Labour party is defending a system that is a legacy from a time when land was the sole measure of wealth. It is defending a system that penalises the pensioner, although year after year we hear speeches from Opposition Members saying that we should do more for the single pensioner and the widowed pensioner, and that is quite right. However, the hon. Member for Garscadden has brushed aside single pensioners as representing a mere 9 per cent. of the electorate—

Mr. Maxton

Perhaps the hon. Gentleman would tell us how many single pensioners and widows pay rates under the present system. May we have those figures? I asked the Minister to provide those figures because the whole case seems to be based on them, but he was unable to tell us.

Mr. Forsyth

I am grateful to the hon. Gentleman, but if he had been listening to the speech of his hon. Friend the Member for Garscadden he would have heard him say 9 per cent.

Mr. Maxton

That is different.

Mr. Forsyth

It is an odd argument that considers single pensioners—many of whom pay income tax—not in terms of the justice of helping them when they are perhaps stuck in family homes and facing huge rate bills on small incomes, but on the basis of what percentage of the population they represent. That is especially odd when it comes from the party which accuses us of being the accountancy regime in politics.—[Interruption.] The Labour party cares only about perpetuating a system in which the minority of people have to pay for the extravagances of the party in power. If the Labour party itself had designed the rating system it could not be more perfect, but what has gone wrong with the system is that not only has it become unfair, but that it has encouraged irresponsibility in our councils. That is why there is politics on the rates, and why, up and down the country, including Scotland, the conventions of local government have broken down.

There is a fundamental flaw in an argument that seeks to fund local government solely by a redistributive tax. There should be an element of charge, because local government does, after all, provide services. If the unfairness of the present system is that rates are levied regardless of ability to pay, it is also unfair that the rates that are levied bear no relation to the services that are received.

The right hon. Member for Govan, who has now left the Chamber, was honest enough to say that he fully supported the revaluation. I have to confess that I do not remember his saying so in the Chamber at the time. However, we are grateful for his support on that matter.

I wish that the hon. Member for Garscadden would clearly tell the Scottish people that the Labour party supports the revaluation and future revaluations of the domestic scene. If one supports the rating system and claims to be concerned about fairness, implicit in that is a belief in regular revaluations. We have not heard that from the hon. Member for Garscadden, but perhaps we shall hear it later in the debate.

Let me spend a little time talking about local income tax, which seems to be the only alternative that we hear from the Opposition Benches. I have already made the point that it would have the effect of crippling rural areas in Scotland, crippling constituencies which are represented by Liberal and Social Democratic Members and crippling constituencies represented by at least one Member of the Scottish National party.

I am surprised that hon. Members have not made the point that the interesting thing about the local income tax proposal is that when one makes the point about the narrowness of the tax base the vague assertion is made that there could be some sort of grant to redistribute the money. [Interruption.] I shall gladly give way to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) if he can explain to me how that would work.

Mr. Kirkwood

I shall make my own speech in my own time.

Mr. Forsyth

The hon. Gentleman does not know. We have been given no clear idea of how that would work. however, perhaps I can assist him.

One way would be simply to say that all local government finance will be funded by a local income tax which will be the same in every area—4.5p in the pound—and the money will be dished out by the Government, but that would introduce central funding of local government. That would not be a local income tax. A lot of money could be spent to set up a bureaucracy to collect the money at local level, and in doing so the Liberals would give us that ultimate freedom of information—the ability for local government officers and councillors to find out how much each and every one of us earns. Not many of their constituents would want that.

If we go back to the idea that money would be collected centrally, which is more sensible, the Liberals, and Scottish nationalists and others who support local income tax would have destroyed local government and the very local accountability about which they talk. Local income tax would not be perceptible to those who are paying it. It would be taken from their pay packets and people would not know how much had gone to central Government, how much to local government or how much in national insurance and other stoppages.

Mr. Norris

I agree with my hon. Friend's points. Will he consider what might happen given that at present one pays income tax in relation to the place of one's employment, but presumably one would pay local income tax in relation to one's place of residence? As the two are frequently different, how, even from a technical point of view, could they be reconciled?

Mr. Forsyth

My hon. Friend makes a good point. At the moment, as I understand it, the Inland Revenue operates on the basis of people's place of work address. A new register would have to be drawn up. Yet we are being attacked because it is said that it would be impracticable to set up a register to collect a community charge.

Hon. Members on both sides of the House have had experience of constituents who write to us because their mortgage relief has not caught up with the fact that they moved house three years ago. The Inland Revenue deals expeditiously with such matters, but such problems add a burden. Imagine the effects on local businesses having to deal with 56 different levels of local income tax in Scotland alone, all varying from year to year. They would have to take account of the fact that Joe Bloggs had moved, and inform the Inland Revenue each time. That is a recipe for complete chaos. It would be bureaucracy gone mad. Yet that is put forward on the basis that our system is too complicated and difficult to administer.

Mr. Maxton

I accept the point made by the hon. Member for Oxford, East (Mr. Norris) about the present situation, but if the hon. Member for Stirling (Mr. Forsyth), has talked to any Treasury Ministers he will be aware that the Inland Revenue is presently undertaking the computerisation of the system. I have been to a seminar on that with Treasury Ministers, and it is they who claim that such problems will eventually be overcome. If the hon. Gentleman were to deal with other objections to local income tax, he would get on much better.

Mr. Forsyth

I am grateful to the hon. Gentleman. He makes a fair point about the computerisation of the Inland Revenue. I can only say that I recently computerised my constituency casework and it has taken me a year to make the system work properly. A computer is only a tool. It does not change the fundamentals of the situation with which one must deal. There would be 65 different rates of tax. All that is different from the point of view of the register is that, instead of local government having to make up the register, control and police it, the Liberals, Scottish nationalists and others who advocate local income tax are passing the burden on to small businesses. That is from a party which tells us that it is concerned about the burden on small businesses.

Mr. Michael Hirst (Strathkelvin and Bearsden)

Does my hon. Friend agree that there is a further patent disadvantage about a system of local income tax, and that is that it would result in disproportionately severe tax burdens upon people who, be they print workers or successful entrepreneurs, have high incomes and who would be bled white to contribute to local government services?

Mr. Forsyth

That is true. That brings me to the point that was fairly made by the hon. Member for Garscadden, when he tried to imply that there should be some equity in local government and that the amount that people pay towards services should be based on their ability to pay. What he did not take into account was my hon. Friend's point that the vast amount of local authority income comes from the Government, the bulk of which is from taxation, so that those people are already contributing through their income tax to the cost of local government. Therefore, there is a progressive element. The community charge, to which Opposition Members object because they say it is regressive—

Mr. John Home Robertson (East Lothian)

The poll tax.

Mr. Forsyth

—or the poll tax—is less than one sixth of total revenue.

It is interesting that the hon. Gentleman tries to get us to call it a poll tax rather than a community charge. Opposition Members are so bankrupt of arguments that they are reduced to trying to give it a name which implies some threat to the right to vote. They cannot argue against it on the basis of what it is. Therefore, they insist upon using the term "poll tax", which, I freely admit, I have used in the past to advocate such a system, but it is misguided, because it implies that the right to vote is somehow connected with it, which it is not.

Even if the advocates of local income tax had managed to get their administrative act together, there is still one good local government reason for it being a bad system for funding local authorities—the highly buoyant nature of local income tax as a source of revenue. Even a small increment in local income tax will produce extremely large sums of money for local authorities. I think that it is true that for most local authorities a ½p local income tax would account for almost 10 per cent. of their total revenues. That means that efficient councils would not be able to demonstrate to their local income tax payers their efficiency by cutting the rate of income tax. If they did make savings, they would have to be at least 10 per cent. in order to make a ½p cut, which the Inland Revenue, even with its computers, says is the smallest sum with which it could consider dealing. Equally, it means that if they put ½p or 1p on local income tax, a huge increase in revenues will occur, and who doubts that most local authorities would find the means to spend that money? It would be an accelerator for high spending by local authorities and make them less accountable.

Mr. Henderson

I have been following closely my hon. Friend's argument, and clearly he is extremely knowledgeable. However, has he not underestimated the problem of collecting local income tax from small business men? Presumably, the party advocating local income tax envisages it for the whole of the United Kingdom, so there will be not just the 56 local authorities in Scotland, but the 400-odd in England and Wales with which the employer must keep in touch.

Mr. Forsyth

The hon. Member for Cathcart is keen on computers and implied that he is interested in the idea of local income tax.

Mr. Maxton

indicated dissent.

Mr. Forsyth

Well, those who are interested in the idea can treat us to an account of how those who have computerised payroll systems on a United Kingdom basis will programme their computers to deal with the varying changes. My hon. Friend the Member for Fife, North-East (Mr. Henderson) is right.

We have heard rather a lot about White Papers and Layfield and all the reports on the funding of local government. Layfield pointed out that a local income tax could not be levied at district level because the local authority is too small. That means that one has to levy at regional level in Scotland, which means that there has to be something else to raise the revenue for the district. We look forward to hearing from the hon. Member for Cathcart what that something else will be, and how it will work.

I appreciate that I have gone on for some time, and we are all looking forward to hearing how alliance Members will deal with local income tax. However, is it possible for my hon. Friend the Minister to consider putting certain aspects before the Committee? Is there not a case for putting in a requirement to force local authorities to take some action about sports grounds and perhaps introduce some element of mandatory derating? If it is possible to do that, perhaps we can go a little further and consider the possibility of harmonising methods of valuation.

I am worried about enforcement. I am disappointed that it will not be a criminal offence not to pay the community charge. I wonder whether we should consider people having a community charge number, which would be required for them to claim benefits or receive other services. I see no objection to that in principle, any more than there is objection to people having a national insurance number before they take up employment.

Could we not improve the Bill so that, instead of saying that when people move they have to apportion the amounts payable in each area, we could opt for a system rather like the census? Where someone is resident on a given day should be regarded as determining his obligation for a community charge, and on a swings and roundabouts basis authorities would gain and loose equally and there would be no disadvantage. This would simplify administration.

Opposition Members have made great play of the fact that we have rejected particular methods in the past and not tackled the problems for 10 years. My right hon. and learned Friend the Secretary of State is to be congratulated on grasping the nettle, for holding it fast and for introducing a system which is politically brave. I believe that when the people of Scotland see that the Opposition parties have nothing to offer but the status quo, which has long since been discredited, they will support us at the polls, whether they are gainers or losers.

8.3 pm

Mr. Robert Maclennan (Caithness and Sutherland)

It is perhaps not surprising that the hon. Member for Stirling (Mr. Forsyth) devoted the larger part of a long speech to shadow boxing about local income tax. It was somewhat galling that he had to rely on misinterpretations of the proposals of the two alliance parties on this subject because there had been no contribution to the debate for three and a half hours from any alliance Member and he had to go on suppositions and interventions to make his point.

The hon. Member for Fife, North-East (Mr. Henderson) said that the speech of the hon. Member for Stirling was informed, but it was not. Had it been, he would have known that it is not a novel suggestion to finance local government by local income tax, and that it is a tax employed by many democracies, notably in 13 states in the United States of America. If he had come to grips with the reality of local income tax, instead of creating fantastic opposition to it, he would have realised that if one lived and worked in the city of New York, one would pay income tax to the city, to the state and to the federal Government.

It has never been argued, not even by this Government, who are opposed to local income tax, that it is not possible to introduce it. It has always been accepted, from Layfield on, that it would be possible to introduce it, and to do so by the latter part of this decade, when the process of computerisation by the Inland Revenue will be complete. The Government chose to reject this, not on the grounds of inoperability, but because they prefer a form of taxation that will allow them much greater control over local authority spending, because they do not choose to strengthen local authority accountability and because they wish to reduce the freedom of local government to spend.

The system of taxation advocated by the hon. Member for Stirling, which the Government are proposing in the Bill, is not, by contrast to local income tax, known in any civilised country. It is a bizarre, inequitable, and extremely burdensome tax. It will be impossible to collect. It will lead to the greatest discontent in Scotland when its incidence is felt.

It is not entirely surprising that the Government should have spent so little time discussing the merits of their case, because it is not possible to present the community charge, as they choose to call it, as the culmination of a careful process of reviewing local government finance options and the alternatives to domestic rates. The Government were bound to domestic rates from the day they took office back in 1979 until there was an uproar at the Conservative party conference last year. The Government set their face against the criticism made about local rates by the two parties of the alliance.

Mr. Norris

I am amazed that the hon. Gentleman should draw the conclusion that community charges are unknown. In a great many areas, not only in this country but in Europe, it is well known for local services to be provided on the basis of a specific charge. That is the basis of the community charge proposal.

Mr. Maclennan

That is obviously an illustration of the hon. Gentleman's total failure to understand that a community charge is not for specific services provided. It is a compulsory tax imposed on everyone. That is different from payment for specific charges and neither the hon. Gentleman nor any member of the Government can produce a single example of a community charge as they define it in operation in any other country.

Mr. Michael Forsyth


Mr. Maclennan

The hon. Gentleman did not find time to put that example into his half-hour speech. Even in Japan, it is so varied according to income that it is much closer to a local income tax than a poll tax.

The reality is that the Government have not once, but twice, professed their commitment to domestic rates. They did so in their 1981 Green Paper on the alternative to rates and in their White Paper of August 1983 they described local domestic rates as the "best of the options". The sudden conversion is not really a systematic thinking through of the problems. It is to deal with a rather acute little political problem that the Conservative party in Scotland has faced and which is making certain hon. Members, such as the hon. Member for Strathkelvin and Bearsden (Mr. Hirst), who looks ever more precarious in his constituency, feel uncomfortable. The Government stated in their White Paper of August 1983 that they have concluded and announced to Parliament that rates should remain for the foreseeable future the main source of local revenue for local Government. What is the background to this extraordinary volte-face?

Mr. Michael Hirst (Strathkelvin and Bearsden)

What about the hon. Gentleman's party?

Mr. Maclennan

I shall come to my party's proposal, but I now intend to deal with what is before the House tonight, which is the Government's retrogressive and burdensome attack on local government and the poorer people in this country.

Three factors have led our sinuous Secretary of State to bring forward this deceptive Bill. The first is the desire of the Government to continue their war against the freedom of local authorities to determine their own levels of expenditure. Almost every Session in this Parliament, as the right hon. Member for Glasgow, Govan (Mr. Milian) pointed out, has seen the Government introducing a new twist of the screw by some legislative means or some cut in the rate support grant to reduce the scope of local authorities to deliver the services that Parliament has entrusted to them. The Government have tried to pretend that local authorities have been profligate in their rating policy. Certainly some have been more spendthrift than the majority. The reality is that in local authorities throughout the length and breadth of Scotland service provision is being cut back by the deliberate action of the Government.

The next factor to account for the Bill is what I think could properly be described as the Perth revolt.

Mr. Hirst


Mr. Maclennan

I will not give way. I have had to wait for three and a half hours to participate in the debate and I propose to develop my argument before I give way. I do not see why I should keep out other hon. Members who have also been waiting.

The cornered and angry Conservative activists confronted the Government in Perth with the need to do something to wipe out the recollection of the injustices wrought by rates revaluation. If necessary, Ministers would have to incur the acute indigestion caused by eating their own words. Despite their repeated earlier defence of the rating system, which, in their words, was "highly perceptible well understood, cheap to collect and difficult to evade", they were prepared to do that.

No one doubts that the Secretary of State for Scotland is a smart chap. His improvisation on the theme of local government irresponsibility today, however, bears little relationship to what he and his colleagues have been saying and doing for six years. He hopes that his bravura in introducing this Bill in the dying Session of this Parliament will serve to distract his audience from what has gone before.

The next factor that the Secretary of State regards as favourable to his proposals is their timing. The Scottish electors are being asked to buy now and pay later. The hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) threatened to introduce 1,000 amendments to the Bill. I think that it is fair to predict that that would result only in the Government introducing the guillotine and leaving the details of the Bill largely undebated. It is a fair guess that an election will be interposed before the implementation of the Bill and its full and nasty impact is felt by the suffering Scottish electors.

I was interested to read in the Local Government Chronicle an analysis of the impact of the proposed poll tax on Durham. The analysis has been carried out for local government in that area by the John Gibson Consultative Group. It is an important analysis, because it is the first one that attempts to put flesh upon what the Government are proposing. It points out that the Government decided to move on this matter in Scotland because 100,000 Scottish households—about 5.26 per cent. of the total—had experienced an increase in their rates of more than one third following revaluation. The Durham study shows that the Government's criterion of the unacceptable is far exceeded by the imposition of the poll tax. It shows that in the eight different districts of the Durham county council the percentage of households with bill increases of more than 20 per cent. will be, on average, about 50 per cent. One goes as high as 69.56 per cent. In fact, according to the study, it is bound to result in every local authority in England, Scotland and Wales suffering an extraordinary increase in their total tax under the Government's proposals. I commend the study to the House.

As I said earlier, it is not the Government who have been consistently drawing attention over the years to the unsatisfactory and arbitrary nature of the rating system. Unlike the Labour party, the two parties of the alliance are not bound to the rating system. We see that it has certain attractions and a certain sort of rough justice about it. The possession of real property offers some rough measurement of the wealth of the ratepayer but there are too many anomalies and the system has become too complex for the ratepayer to perceive that what he is being asked to pay is just. I do not think that the right hon. Member for Govan's defence of the rating system on the grounds of flexibility is good enough. Almost every year it had become necessary to introduce changes in the calculation of the rate support grant to reflect changed perceptions of need and to bring new reliefs from the burden of rates. That led to a system of such complexity that perhaps only the right hon. Member for Govan fully understood how it operated. That complexity was a sufficient reason, in my judgment, for looking carefully at the continuance of the rate system.

Mr. Peter Lilley (St. Albans)

Would the hon. Gentleman explain whether the system that his party proposes to introduce, if he is going to mention it at all, would contain a needs element and, if so, how it would be calculated if not by the present system?

Mr. Maclennan

I shall turn, more quickly if I do not give way to interventions, to the question of a local income tax which the alliance parties favour. In drawing attention to the inadequacies of the rating system, we had rather better authority in the form of the Layfield committee on local government finance. We have consistently advocated a move to a form of local taxation that we believe will be much more popular with the Scottish people—a local income tax. Our views about its popularity are fortified by opinion polls which show that it is overwhelmingly the most popular system of taxation for local government. A February Gallup poll was the last full poll on the subject that I have been able to find. It found that the public favoured local income tax by a majority of two to one over any of the alternative systems proposed.

The Secretary of State sought to dress up the Bill as an attempt to increase the accountability of local authorities. The Bill's true intent is to extend the sway of the Government's economic dogmas to the local sphere. It is more concerned to control the quantity of services and the manner in which local government provides them than to strengthen local government accountability.

The Bill is a centralising measure. By making local government dependent for 87 per cent. of its funds on central Government, the Bill will ensure that local government has to accept central Government priorities and policies. That figure was given in a parliamentary answer by the Under-Secretary of State for Scotland—the hon. Member for Edinburgh, South (Mr. Ancram). If he believed in true local accountability, he would not be sucking into the centre control over local spending. He would be seeking to create local authorities that were genuinely accountable and answerable to their electors, and would be giving them genuine control.

It was always accepted, until the Conservative party came to power, that local authorities, although bound by legal framework setting out their duties, were not governed by the policies of central Government. However, the Government are determined that local government must be submissive to their policy framework. That is a novel constitutional doctrine, but it was set out by the Government in their reply to the House of Lords Select Committee on Science and Technology in House of Lords paper No. 243.

There is little point in having local authorities, councillors and elections if they have to follow the policies of central Government. The obligation of those authorities is to accept the law and within the law to make their policies. That may be extremely inconvenient to central Government, although I believe that it does not have an impact on the macro-economic management of the economy if local government seeks to finance its additional expenditure from taxation raised by its own hand, provided local authorities' borrowing powers are controlled. Such a policy may be unpopular with the local electors, but the remedy lies not in drawing financial controls ever tighter but in instituting an electoral system which ensures that the views of the electors are fairly and proportionately reflected in local government.

The Conservative Administration has firmly set its face against this. If they were seriously interested in promoting local accountability, they would easily dispose of the extremists in local government by introducing a fair electoral system. But they will not do that. It would rather sustain this great gulf between itself and the Opposition than bring the voices of moderation and sense into local government.

Mr. Norris

Will the hon. Gentleman give way on this point?

Mr. Maclennan

No, I shall not. The hon. Gentleman's interventions have punctuated every hon. Member's speech.

The essence of the Government's justification for this wretched Bill is that it will ensure that locally raised revenue is drawn from the population at large and not just from the 30 per cent. of the electorate who pay domestic rates. The Government make much of the proposal whereby non-domestic rates should ultimately be pooled nationally and distributed on a per capita basis. That is a bizarre suggestion, because non-domestic rates will be unrelated not only to the ability of businesses to pay—businesses, even more than the individual ratepayer, caused the Government embarrassment in Perth—but to the consumption by businesses of local services. There may be a reduction in the extent to which the responsible authority—central Government—will be accountable for the tax of those who pay.

In Scotland, no less than 62 per cent. of rate income is raised from non-domestic ratepayers who do not have a local vote. The Government are doing precious little about that. They are just index-linking the payment of the non-domestic rate until they can bring about this pool system over which local government will have no control. It is only two years since the Government introduced an arrangement whereby at least businesses had a right of consultation with local authorities. When these powers are transferred to central Government, what right of consultation will businesses have? Once again, the Secretary of State is shrouding behind a smokescreen his intention of depriving local authorities of the ability to respond to business needs.

If the Government proceed to pool the non-domestic rate, it will have a considerable impact on local authorities resources. The Public Finance Foundation—a wholly independent source—found that some local authorities drawing on that pool would receive more than they would require to carry their total rate-borne expenditure.

Mr. Hirst

Will the hon. Gentleman tell us in straightforward terms whether the alliance supports indexing for non-domestic ratepayers? Many small business men in Scotland eagerly await what the alliance will do.

Mr. Maclennan

They are right to be eager, because they can be sure that they will get a better deal than they are getting from the Government.

Mr. Hirst

Answer the question.

Mr. Maclennan

Indexing, of course, is an interim measure. It is perfectly acceptable, but it does not go nearly far enough to protect local business from the vagaries of the existing system. It will not equalise the rates imposed on local businesses in Scotland. It will not do anything to protect local businesses from the depredations of profligate local authorities. The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) should not try to deceive the small businesses in his constituency, implying that they are receiving a great bounty from the Government, when the reverse is true.

Pooling the non-domestic rate would result in a sharp increase in the local taxation of businesses. Nineteen authorities, including Caithness and Sutherland, would have to pay no community charge at all. What sort of local accountability will my constituents have if, as a result of the redistribution of the pooled non-domestic rate, they are not required to pay any local taxation? It is the reductio ad absurdum of local finance when local government becomes 100 per cent. dependent on central Government spending. That will happen if the Government's proposals are accepted.

If one accepts the Government's figures on the changing burden of funding local services, one sees that there are some spectacular gainers and losers. I have looked at the figures that concern my constituency, before the pooling of the non-domestic rate. If domestic rate relief is phased out, as seems highly likely—indeed, this conforms with the Government's present policy—the increase in individual tax per adult per year will be £26 in Caithness and £28 in Sutherland.

The Bill is indeed most unacceptable in its impact on the individual elector. The term "community charge" is entirely bogus, for the reasons that I gave to the hon. Member for Oxford, East (Mr. Norris). It does not relate to the amount of service used and it involves no choice over the use of the service that the word "charge" implies. It is precisely those people who will have to pay the community charge, and who are not at present paying rates as householders, who make least use of local government services—that is, mainly young adults aged 18 to 24.

The main categories of expenditure are directed towards young people and the elderly. If the local tax were indeed a charge, families with children at school and persons aged 75 and over would be required to pay higher local taxes than working adults without children. At the level of the individual taxpayer, the community charge paid will no more reflect the services taken up than do rates at present. In truth, the so-called charge is a compulsory charge, and it is properly called a poll tax. It will he much more regressive than the present system. Pensioner couples and young, non-householder unemployed adults will be particularly badly affected.

The Government have concealed their impact of their proposals on individuals but, again to quote the Public Finance Foundation, it has been explained thus: While it is difficult to quote precise figures given the almost deliberate attempt of the 1986 Green Paper to mislead the reader, it is clear that the totality of reform makes households with net actual incomes below £200 a week considerably worse off whilst those over £200 per week are considerably better off. That is precisely the point. The poll tax is not related to ability to pay. It is designed to be unpopular from the start. It is intended to taint local government. Its purpose is to act as a disincentive to increased spending and taxation.

Due to its gearing effect, a local authority spending 10 per cent. above average would need a tax rate three times that for expenditure 10 per cent. below the average, while at 20 per cent. below, there would be no need to levy a tax at all. With high grant, quite small increases in local spending require much greater increases in tax rates. It is those percentage increases alone which the public could control at local level. In the Government's view, local accountability is satisfied by controlling this marginal expenditure borne by local electors. It is a narrow and flawed concept of local accountability.

Turning to administration—I shall cut my remarks short, although I must draw attention to the fact that, in opening the debate the Minister spoke for three quarters of an hour, that the Front Bench spokesman for the Labour party also spoke for about three quarters of an hour and that this is the first intervention by an alliance speaker in the debate—the administration of this tax has been criticised by those who will have responsibility for it. It has been dismissed by the Convention of Scottish Local Authorities, by the Chartered Institute of Public Finance and Accountancy, by the Law Society of Scotland, by the sheriffs' officers and by anybody who has any knowledge of these matters.

According to the explanatory and financial memorandum, the cost of introducing the system has been set at roughly what it would cost to introduce an Assembly for Scotland. Let the Government, soon to be the Opposition, not criticise the cost of establishing a Scottish Assembly when they so lightly embark upon an increase in the cost of levying local taxation. The problem of evasion is huge. The Government argue that it can be minimised by crosschecks with the electoral roll, by canvassing households, by checks on those using local services and by a number of other snooper techniques. The reality is that it will not be enforced and that it will be brought into disrepute.

The Government ought to have used these seven lean years of government to introduce a worked-out system of local income tax which would have given genuine local accountability to local government and have helped to reduce the tied nature of local government spending. The existing criticism that may be made of local government finance is that it is so heavily dependent upon central Government grant that it induces irresponsibility. It is important that that should be changed.

Our view is that a local income tax system—which would not be a wholly new tax, because at present income tax is paid to central Government and then returns in the form of grant to local authorities—would result in a link between the provision of services and the paying for services. It is the true argument that the Government are abusing to justify the introduction of the poll tax.

On average, under our proposed system, householders would end up paying the same amount of local, Scottish and national income tax together as they pay at present in rates and national income tax combined. The changes would not mean an additional taxation burden.

We recommend that non-domestic rates should become part of national taxation but, unlike the Government's proposal, that taxation would be used to finance the equalisation of local authority resources. It would be the best means of ensuring that local authorities have the means to meet the service needs of their communities.

It has been dismaying to watch this Government's approach to local finance unroll over seven years and finally to unravel with the introduction of a tax that led to the peasant's revolt in England in 1381. It has not been reconsidered since, and for good reason. When the opportunity comes to vote against the Bill, we shall take it, and we shall take our case against it to the country. And in the election we shall win the argument.

8.36 pm
Mr. Michael Hirst (Strathkelvin and Bearsden)

Spectators of Scottish debates must sense a certain predictability about their course. Today's debate has been no different from previous debates. It has been predictable the range of arguments deployed on both sides. Once in again the Secretary of State for Scotland has bested the hon. Member for Glasgow, Garscadden (Mr. Dewar) at the Dispatch Box. It has also been predictable, in that there was a 33-minute speech by the hon. Member for Caithness and Sutherland (Mr. Maclennan) which contained nothing about the alliance policy. I was slightly amused to hear the hon. Member for Caithness and Sutherland say that he would take the alliance case to the people at the next election. I just hope that the people of Caithness and Sutherland have the time to listen to him, if they have not fallen asleep.

Today the Opposition have dwelt strongly upon fairness. Fairness, or the lack of fairness, has characterised all their arguments. I do not recall that there has ever been a cheep from them about the unfairness of 750,000 people in Scotland who have incomes not contributing to local government costs. I was amazed to hear Opposition speakers refer to young people having to contribute to the community charge although they make no use of local government services. When I visit my local sports centre and use its club and swimming facilities, I am the old man there. Most of the other people there are youngsters—those whom the Opposition think do not use local government services.

It is offensive to hear members of the Opposition parties scoffing about little old ladies living on their own who, by being thrifty, have made savings and whose income means that they do not qualify for any relief or rebate. Yet the rates bill represents their largest single outgoing in the year. I am amazed that they are unaware that elderly people and single-parent families have had to sell the family home and move to a smaller house because they cannot afford the rates burden. The hon. Member for Western Isles (Mr. Stewart) was very dismissive about little old ladies. Nevertheless, rates bear heavily on them. We heard the alliance talking about rough justice. It is rough justice and one of the things that delights me about this measure is the justice that it will bring to the elderly, the widows, the single-parent families—all those people who for too long have been the victims of injustice and unfairness.

In considering unfairness we must stop and think about the people who do the desirable thing of improving their properties. Having put in central heating or built an extension they discover that the rates bill goes up. That is unfair. It seems mad to encourage people to become owners of property and to keep their housing stock in good condition and at the same time to penalise them with higher rates hills when they improve those properties.

Mr. Wallace

I, too, have used that argument against the rating system. Is the increase in rates for someone improving his property as the hon. Member describes greater than the value added tax imposed by the Government on people who carry out such repairs?

Mr. Hirst

The hon. Gentleman much espouses the concept of Europe and he knows that VAT on major property improvements or extensions operates throughout the Community. Of course they will pay more VAT, but at the end of the day they will have a substantive capital asset. My complaint is that income outgoing in a higher rates bill year after year is unfair. [Interruption.] The hon. Gentleman should be careful about running down that line. When we talk about fairness we should be thinking about fairness for the non-domestic ratepayers, the people who have no opportunity to exercise their rights at the ballot box. No one in the Opposition has taken the trouble to think about the effect of unfairness on small businesses which, year by year, have suffered rates increases substantially beyond the rate of inflation.

The Edinburgh chamber of commerce says it all. The veritable forest of "To Let" boards in Princes street speaks volumes for the fact that high rates drive out business. I welcome the efforts that the Bill will make to protect the business sector until such time as there is a national revaluation followed by a simplification and standardisation of valuation procedures. There is no reason why there cannnot be consensus in the House on the matter, because every hon. Member must know of an example from his constituency of a business which, endeavouring to compete in Scotland, faces rates bills substanially higher than those of its potential competitors in other parts of Britain. I have an example of a constituent who owns a cold store. His rates bill is £130,000 per annum. A cold store of comparable size in Manchester pays £39,000. How can that man run a business, make a profit, provide employment and create wealth when he has to operate with such a severe disadvantage?

My hon. Friend the Member for Fife, North-East (Mr. Henderson) was right to speak of the unfair burden on the Scottish business ratepayer. That burden must be lifted. The small business man in Scotland is acutely worried about his rates bill and I hope that he will watch carefully as the Labour party and probably the alliance oppose the various provisions within this Bill that would bring relief to such businessmen.

I listened carefully to the speech by the hon. Member for Garscadden who expressed the views of his party about how it would tackle rates. When pressed again and again by my colleagues on the Front Bench about what the Labour party would do about rates, he wriggled and squirmed and was evasive. Finally, he was taxed about the speech made by the hon. Member for Copeland (Dr. Cunningham) who, we understand, speaks for the Labour party on rating matters, and the hon. Member for Garscadden said, "We could think about capital values." Capital values would be severely injurious to people. What about somebody who lives in a small house in a rundown area that has suddenly become gentrified? That person would suddenly discover that the capital value of his property had increased, but at the same time so would his annual rates bill. If the Labour party goes down the road of capital values, it will encounter massive hostility and objections.

The hon. Member for Garscadden raised one point that is worth greater examination and I should be grateful if my hon. Friend the Minister would address it in his winding-up speech. The hon. Gentleman spoke about non-domestic rates. When they become index-linked, a local authority will be faced with a substantial amount of additional expenditure—perhaps because of a national settlement or some other factor outwith its control. If it cannot look to the non-domestic sector to make a contribution to those extra costs, they will fall disproportionately severely on the domestic ratepayer or the community charge payers. Can the Minister tell us what the Government intend to do in such cases? Would they increase the needs allowance to avoid the impact falling too severely on the domestic ratepayer, or would some other arrangement be made?

We saw no sign from the Opposition of any real alternative to the present rating system. I hope that people in Scotland will recognise that there is only one party, the party in government, which is prepared to tackle the nettle of domestic rates in the way that the Government are doing. I recall the vehemence with which the hon. Member for Garscadden and some of his hon. Friends have said they intend to oppose the Bill root and branch. I hope that the people of Scotland will remember that the Labour party opposed root and branch tenants' rights to buy their council homes and the right of an employee to have a secret ballot before taking strike action. In time, just as those things are now accepted and welcomed by the public at large, people will see that the community charge is a much fairer way of financing local government.

Why is there opposition to the Bill? Accountability must surely be one of the features that we seek in the new arrangements. At the moment, one of the primary weaknesses of the rating system is that it does not confer accountability. The people who have to pay rates are not necessarily in a position to influence the spending policies of local authorities. By this Bill accountability is enhanced, and that is why the Labour party is running scared of it.

The hon. Member for Glasgow, Springburn (Mr. Martin) protested strongly about young people being expected to make a contribution to the community charge, albeit on a fully rebated basis. He said that it was quite impracticable and unreasonable to expect them to make any payment and that they might well seek to evade it. There are some interesting statistics about the number of young people in Scotland who take on credit sale arrangements for hi-fi sets and things like that. If the hon. Member for Springburn bothered to look at the statistics, he would discover that young people in Scotland have the best record in the country for honouring their debts under credit sale agreements. It is grossly insulting to suggest that they would seek to evade their appropriate share of the cost of local government. To say that they are irresponsible is a gross calumny on them, and the hon. Gentleman ought to be ashamed.

There is one final point that I should like the Minister to address. We have had a limited discussion on the impact of the community charges on a collective basis. Can the Minister tell me what will happen when a property is let out in rooms to students or other people who pay rent to the owner of the property? That rent includes a proportionate share of the rates. As I read the Bill, it does not appear that that sort of property would be covered by a collective community charge. I know that there is some anxiety over this matter, because people have made representations to me, and it would be helpful if the Minister could give me a substantive answer or write to me about it. I listened carefully to the speeches by the proponents of local income tax, the alternative which the SNP and the alliance pretend is the great way to sort out this whole matter.

Frankly, I was staggered by the way in which the right hon. Member for Western Isles skated over the problem of schedule D taxpayers and seemed to assume that they could be brought into the computer net in the same way as any employee. I remind Opposition Members that centre 1 has operated for the past 16 years. If Opposition Members' constituents do not bring them problems about their notice of coding or their tax affairs at centre 1, their surgeries are not well publicised, or their constituents are remarkably lucky. With 56 rates of local income tax, it is clear that better-off people, who would be subject to a higher charge, will swarm out of the higher rated areas into lower rated areas.

It must be a proven fact that areas with a high, strong income base would have a low local income tax. Correspondingly, comparatively lower income areas would have a much higher local income tax. If the proposal is merely to collect the whole lot and spread it out again, local government accountability will go right out of the window. How is it possible to overlook the fact that the largest proportion of costs and the largest amount of local government income come, and will continue to come, from the Exchequer, to which all people in the country pay according to their ability?

I must conclude my remarks because I know that other hon. Members wish to contribute to the debate. I ask my right hon. and hon. Friends on the Government Front Bench, in the weeks and months ahead when we consider the Bill, to be prepared to take account of the representations made by responsible people. It is surely in the interests of everybody in Scotland that we get the most workable, practicable and fair alternative to the rating system.

8.51 pm
Mr. Michael J. Martin (Glasgow, Springburn)

I know that it is not always in your power, Mr. Deputy Speaker, to curtail the length of hon. Members' speeches, but it is deplorable that, in a debate such as this, the SDP spokesman, the hon. Member for Caithness and Sutherland (Mr. Maclennan) took half an hour to speak. I know that you, Mr. Deputy Speaker, have to be fair to hon. Members in minority parties, but they should return that fairness by ensuring that they do not speak for too long. It is unfair when other hon. Members wish to participate in the debate.

The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) stated that young Scottish people have a good record in repaying their debts. He is a chartered accountant. He will be used to dealing with people who pay debts. He knows all about statements, bank accounts, and so on. He will know that a young Scottish person aged 18 to 21 very seldom will get into debt unless his or her parents, who are householders, are prepared to act as guarantors. Many young people, who are fortunate enough to be able to acquire debt at that age, have the restraining hands of their parents to make sure that they pay on time. This is a different situation. It means that debt is to be imposed on young people whether they like it or not.

The Secretary of State said that people have the legal right to vote and, therefore, have to take the disadvantages along with it. A person who, at the age of 18, sets up a home, runs a house and incurs debts, has to take the same responsibility as someone my age and someone else in the community who is a householder. But if a young perosn decides to remain in the home into which he or she was born, there is no reason in the world why they should have certain penalties imposed upon them.

I have a teenage family. My son and daughter have a commitment to put something into the household. I can assure the House that that money is put in on Friday, and by Monday they look for funds from their mother to go to the disco or to do something else. It is not fair to put a burden of responsibility of that nature on to young people of that age.

The Secretary of State said that the community tax would be fair. The hon. Member for Strathkelvin and Bearsden knows full well that the area that will gain from the passage of the Bill is the Bearsden area in his constituency. The people in that area will pay about 13 per cent. above the Scottish average, yet, in a city such as Glasgow, they will pay 18 per cent. above the average, with all the problems of poverty and deprivation that that city has. We all want to see the inner cities repopulated. There have been successful attempts in the cities of Edinburgh and Glasgow to get housing into the city centres. We all know that if rateable values or community charges go down in outer and suburban areas of our cities, property prices will go up. The trend will be reversed, and we have been trying to avoid that for many years. We are working towards bringing people into city centres.

The hon. Member for Strathkelvin and Bearsden suggested that this will be a simpler scheme. I cannot see how it will be simpler. The Secretary of State and other hon. Members have hidden the fact that, in the early years of the scheme, we shall still have about 13 different rate charges. We shall still have domestic rates. They will exist for a number of years to come. We shall still have non-domestic charges for water and the services. We shall have charges for the non-domestic ratepayer for region and district. There are personal community charges for region and district. The standard community charge will be for the region and district. There is also a collective community charge.

The Secretary of State for Scotland is a legal advocate. He can say things with a straight face—that is part of his legal training—but I do not know how he can stand at the Dispatch Box and, with a straight face, say that this will be a simple method of paying local taxes. That is nonsense. It is not borne out by the facts.

I understand from the director of finance at Glasgow district council that, at the moment, a pensioner with an income of £40.60 does not need to pay anything in rates. If the Bill is passed, that person will have to find 1.20 a week. It does not appear to be fair to pensioners at the moment.

Students have been mentioned. The Secretary of State said that it was nonsense to argue that students would be paying more. My understanding is that the Scottish Office intends to make arrangements whereby students will receive about 80 per cent. of the Scottish average charge in their grant. If Glasgow is to be 18 per cent. above the Scottish average, students in Glasgow will be at a disadvantage, and that could discourage students from coming to the university in Glasgow, and perhaps to Edinburgh and other cities. It could prevent them coming north of the border.

I am not happy with what the Secretary of State said about lodging houses and hostels. He stated that there would not be an extra charge for people living in that accommodation, yet according to the Scottish Office's proposals, those who are in charge of the hostels—not always charitable institutions—will be required to make allowances or calculations on a daily basis. That will mean extra administration for those establishments. I am sure that those who are in charge of the hostels will not say that they will bear the cost of the extra administration. That cost will be put on to people who are in less fortunate circumstances than most people in the community. I do not see how it can be said that that section of the community will be helped.

Sheriffs' warrants will be served on more young people than at present. Instead of a decrease in the number of debts collected under that unfortunate method, there could be an increase. I heard the Secretary of State say that if bills were not paid timeously, a surcharge would be put on the individuals, amounting to about one third of the outstanding debt.

In the community in which I was brought up, I remember seeing the sheriff's officers come to some of the households. It was not a very nice sight to see furniture pointed in preparation for warrant sales, when sheriffs' officers marked household items. Even if the person against whom the action was taken stated that the item of furniture did not belong to him, but belonged to a friend or relative, it was still pointed.

How will the Secretary of State collect debt that has been incurred by a young person in the household of someone who has no responsibility for paying the debt? In my home, my son owns a hi-fi set. Some of the records that he plays on the set might belong to me, his sister or his mother. How will the sheriff's officer ensure that he repossesses only those goods that belong to the individual who incurred the debt'? That will be an impossible task. The hon. Member for Strathkelvin and Bearsden bleats on about us not paying due regard to the needs of an elderly person. An elderly mother with a family of three or four could be harassed several times during the year because of young people not paying debts.

The new grant system to local government apparently will be such that the Secretary of State will not need to take cognisance of pay, price increases and population change. No instructions are to be given to the Secretary of State on how to introduce or calculate that grant. That puts us in a worse position than at present, when at least the Secretary of State has to do those things. Therefore, I seriously urge the Government to reconsider what they are doing. They will impose a great deal of hardship throughout Scotland.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

I am grateful for the hon. Gentleman's brevity.

9.4 pm

Mr. Steve Norris (Oxford, East)

I endorse that, Mr. Deputy Speaker. I am equally grateful for the brevity of the hon. Member for Glasgow, Springburn (Mr. Martin). It has been a privilege for someone from south of the border to listen to the debate. There is great interest in this subject south of the border. I regard our Scottish colleagues as trail blazers rather than as guinea pigs in one of the most important developments, if not the most important, in local government this century.

I am also pleased that I can return to my right hon. Friend the Secretary of State for the Environment and tell him that, if the sum total of the arguments advanced against his proposals are those that we have heard tonight, he will have little to fear when the proposals for England come before the House.

In the short time available, I shall make one or two observations which perhaps can be taken on board during the passage of the Bill. The first is on enforcement. Ironically, the matter was raised by the hon. Member for Springburn. Rita Hale from CIPFA talked about the national Wham! record collection that might emerge if a local authority were to try to proceed against young people, many of whose only assets might be a ghetto blaster and a collection of Wham! records. That is an uninviting spectacle and one that no serious-minded Administration could contemplate.

A radical proposal such as the community charge demands a radical solution. That must be found in the concept of attachment to benefits. As hon. Members will know, there is a clear arrangement whereby recalcitrant or involuntary contributors to divorce settlements contribute via an attachment to earnings order. That is a perfectly straightforward practice which states that, if they are not prepared to pay voluntarily, the court will attach their earnings. All hon. Members probably have constituents who get into difficulties with statutory undertakers and must have the bills paid direct by deduction from DHSS benefits until the individual is back on par, at which point there will be a debate as to whether it would be helpful to him to pay his bills quarterly, or whether he should continue with a system of direct contribution. If we are to overcome the problems of enforcement, we must do so by a radical re-examination of the entire principle of attachment of benefits.

Secondly, I shall stress something that has not emerged from the discussion—what the poverty trap is. There has been much talk about the poor not benefiting from these proposals. That ignores the fact that the rebate system enforced at present will continue under the new proposals and the fact that the 20 per cent. contribution contained in the Social Security Act 1986 could perfectly well be adjusted by an equal adjustment in the rates of supplementary or unemployment benefit.

On that basis, it is evident that those who have no income are no better or worse off. But the crucial factor which has been studiously ignored by all Opposition Members who have spoken is the fact that it is especially the widow who lives in a poverty trap, where she has just enough income to put her over the level at which she would receive any supplementary benefit and/or allowances and benefits, including rate relief, who would be one of the greatest beneficiaries of the welcome measure which the Government seek to introduce.

It is extraordinary that a party which has its social conscience firmly sewn on to its sleeve, can ignore a great number of people who would be substantial beneficiaries of the new system. I say to Opposition Members that the correlation between that poverty trap and single occupancy is far too inconvenient for them to ignore. It is far too great a correlation.

My third point goes to the heart of what we see as the role of local government. In a Fabian Society article, Alan Alexander linked the politicisation of local government to the cynicism among young Labour voters over the betrayal, as they saw it, of the Wilson years. Perhaps it was, but my local authority has long since ceased to remember its true role as a provider of services and a body that will simply get on with the job of sweeping the streets, cleaning the bins, keeping the lights on and doing all the other jobs that I wish to see it do as a provider of services.

It is a fundamental misconception to see this charge as a poll tax. If a poll tax was a primary form of taxation, it would be regressive. The community charge reflects our fundamental desire to return accountability to local government and to ensure that it reflects a charge for services.

Earlier in the debate, my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) invited me to participate in these proceedings. I am pleased to have had this brief opportunity to do so. Having listened to the entire debate, I shall have to spurn his further invitation to join the Committee. None the less, I am convinced, having heard all the arguments for and against, that the measure will find the greatest favour with the House. I look forward to its introduction in England and Wales, where it will be greeted with equal enthusiasm.

9.10 pm
Mr. John Maxton (Glasgow, Cathcart)

I would welcome the hon. Member for Oxford, East (Mr. Norris) on to the Committee if the rules of the House allowed it — there is some doubt about whether an English Member can serve on a Committee that is discussing a Bill for Scotland—especially as he comes from an area where I used to live. The hon. Gentleman was wrong to say that those who receive rebates now will automatically receive rebates under the new scheme. First, we do not know what the new rebate system will be, and, secondly, the existing rebates will be changed dramatically in 1988 by the Social Security Act 1986, under which many people will be taken off housing benefit and, therefore, will get no rates rebate or relief. Young people are not covered by the scheme, and we are not sure how they will be covered in the future.

The Green Paper made it clear that a youngster aged 18, 19 or 20 on unemployment benefit was unlikely to get a rebate. That must be made clear. Many youngsters should be aware that that is the case.

Why are we discussing the Bill at all? Despite all the fine words from Conservative Members and from the Secretary of State in a recent article in the Glasgow Evening Times, the Tory party has no manifesto commitment to the abolition of rates. The 1983 manifesto did not include rates. The 1979 manifesto did not include a commitment to abolish rates.

The last Conservative manifesto to suggest the abolition of rates was the 1974 manifesto. The Under-Secretary of State, the hon. Member for Argyll and Bute (Mr. MacKay), might be interested in this in view of the troubles that he is having with teachers. It also suggested transferring expenditure on teachers' salaries directly to the Exchequer to relieve the burden. It stated that the Conservatives would replace the domestic rating system by taxes more broadly based and related to people's ability to pay. Even now, they have not fulfilled their manifesto commitment, because they are introducing a tax that has nothing to do with people's ability to pay.

The hon. Member for Edinburgh, Central (Mr. Fletcher) spent some time attacking the Labour party about the Assembly, but the manifesto which committed the Conservatives to the abolition of rates also committed them to the establishment of a Scottish Assembly with revenue-raising powers. He seems to have forgotten that, although he remembers other matters.

Mr. Fletcher

The difference between the two parties is that we learn from experience but the Labour party does not.

Mr. Maxton

It is fairly obvious from the Bill that the Conservative party has learnt nothing about the abolition of rates.

We must examine the way in which the Government have handled the matter. Conservative Members are hiding behind widows' skirts. Practically the only argument that we have consistently heard from Tory Members during the debate is contained in their attack on the ground that there are widows in Scotland living in large houses, with small incomes and paying large amounts in rates.

Mr. Rifkind

Small houses.

Mr. Maxton

The Secretary of State says, small houses. If they are living in small houses, they are not paying especially large amounts in rates. However, we have no idea how many widows are so affected. The Government keep throwing these widows up as an emotional smokescreen to hide behind. I specifically asked the Minister how many single householders in Scotland pay rates and he could not tell me because he does not know. We do not know the facts upon which the Government base their case.

It may be that only 2 or 3 per cent. of householders are widows. However, it comes very hard from the Government to accuse the Opposition of not caring for widows' interests when the Government have ensured that there are fewer home helps in Scotland today than there were in 1979 and that fewer meals on wheels are served today than in 1979; and by cutting rate support grant the Government have pushed up the rates tremendously for widows.

The Secretary of State is up to his usual tricks. He is having his little private jokes and his laughs on the side. He never takes anything very seriously, as we well know. However, the fact remains that the people whom the Government continue to call in aid were present in 1981 when the Green Paper was published. However, in the Scottish White Paper in 1983 the Government claimed: There is little point in replacing rates with an untried and unfamiliar system having little support from the outset. The Government have therefore decided to make reforms to the rating system which is basically sound but needs improvement. In the English and Welsh White Paper the Government said: The Government recognise that rates are far from being an ideal or popular tax. But they do have advantages … They are well understood, cheap to collect and very difficult to evade. They act as an incentive to the most efficient use of property. No property tax can be directly related to the ability to pay; but rate rebates, now incorporated in housing benefit, together with Supplementary Benefit, have been designed to reduce hardship. The Government have concluded and announced to Parliament that rates should remain"— this is the important point— for the forseeable future the main source of local revenue for local government. Yet in the news release produced in connection with the Bill, the Government ignore the 1983 White Paper and refer to the 1981 Green Paper and state: "Like others before it, the Government proceeded to make minor improvements to the system but always in the firm knowledge that the days of the domestic rating system were, in reality, numbered."

In other words, the Government have said that they knew in 1983 that the days of rates were numbered and that they would be done away with. There is a massive contradiction between what the Government said in 1983 and what they are saying now.

Mr. Craigen

Does my hon. Friend think that it is even more significant that as early as January 1984 the former Secretary of State for the Environment, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), told the House that the poll tax suffered from fatal defects?

Mr. Maxton

My hon. Friend is quite right; and the White Paper claims that the poll tax suffered from defects. It is worth while stressing that the Green Paper suggested the poll tax only as an addition to rates. It never suggested that it should totally replace rates. The Government have changed their mind dramatically. It is not the widow living on her own who is the problem, because she existed before the Government got the fright of their lives when they introduced revaluation in Scotland.

There is nothing basically wrong with revaluation but, in combination with massive cuts in rate support grant, a dramatic increase in rates is inevitable. That is precisely what happened. The Tory faithful started to scream, the Government's standing in the opinion polls, already low, plummeted even lower, and they looked desperately for some solution which would not necessarily help the widow, as she could have been helped by a much better rebate system. They came up with a system which was designed primarily to relieve the tax burden on those whom they perceived as their voters and to put it on to those whom they perceived as our voters. That is the simple political fact behind the poll tax. The Government are shifting the burden from the wealthy to the poor.

If the Secretary of State doubts my assertion, I shall give him an example drawn from the constituency of my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), just as he drew examples from mine. An employed couple living in Kinfaun drive in Drumchapel who are not getting any rebates pay £377.50 in rates. They will pay £446.25 in poll tax. That is a low estimate of what poll tax will be in Glasgow. Those people who know Glasgow will know that Wittingham drive is a smart part of the city. Perhaps the Government Whip lives there, although he represents Aberdeen.

Mr. Gerald Malone (Aberdeen, South)

Close by.

Mr. Maxton

Close by. The average rates per house are £1,007 in that street, and the average rate bill per head is £416.52. The average poll tax per head will be £245. The person in Wittingham drive who lives in an expensive house and is earning a good income will pay less in tax than less well-off people in Drumchapel. Nobody can claim that that is a fair system of taxation. It is extremely regressive. Such examples can be found time and again throughout Scotland.

The Secretary of State has tried desperately to put all of my constituents in Castlemilk on the dole, and therefore make them eligible for rebate, but he has not quite succeeded. There are some who are in employment, and they will pay more tax than people in better-off parts of my constituency.

Mr. Barry Porter (Wirral, South)

I am much obliged to the hon. Gentleman for speaking in his native Oxfordshire accent so that those of us who are English can understand what is going on. I do not believe that a poll tax is an appropriate way in which to deal with local taxation, but it is equally clear that, despite the Government's resistence to the various alterations that the hon. Gentleman has mentioned, the Bill appears to be the most appropriate way in which to deal with the fairness argument. The hon. Gentleman has not yet persuaded me what the Labour party would do in regard to rates. He will have to face this issue next year after we have won the general election.

Mr. Maxton

One of the themes throughout this debate is that the Government have put up a scheme because they were in desperate straits in Scotland. They have proposed an unfair, unworkable and undemocratic scheme. Conservative Members then turn round and ask us what we would do about rates.

I believe that there is considerable merit in what the Government said about rates in 1983. They made perfectly fair points. They believed it then. Why should we disbelieve those arguments now? We are prepared to examine alternatives, but in the short term we would return to a rating system. It cannot be right to replace one tax which is considered to be unfair and put in its place one that is even more unfair and unjust. It would be easier to continue the present rating system until we have time to consider alternatives rather than to introduce something new.

The Government have no logical argument in terms of the community charge of the poll tax and they simply keep on saying to the Opposition, "What would you do?" The only thing that I like about that is the admission that they think we might form the next Government and will therefore be in a position to do something about it.

The Government are introducing an unfair and regressive tax. It is also an undemocratic tax—

Mr. Porter


Mr. Maxton

If the hon. Gentleman cares to listen, I shall tell him.

The tax is undemocratic because it is based on a principle which I thought we had done away with at the beginning of this century when we said that there should be universal suffrage. Then the property qualifications for voting were abolished completely. However, the Secretary of State, throughout his speech, said that there must be some relationship between people paying taxes at a local level and their right to vote. The right hon. and learned Gentleman has said that to achieve accountability, there must be a relationship between the payment of taxes and the right to vote.

The principle of the argument is undemocratic. The undemocratic nature of a poll tax is recognised in many parts of the United States where it is unconstitutional to introduce it because it is considered that it will interfere with the democratic process.

Let us take the example of what will happen to students as a result of the Bill. The Secretary of State made it quite clear that students must register for the poll tax at their place of study. They must register not at home but where they study. Therefore, students will consider how they can get themselves off the register at home.

There will be a major disincentive for students to register for electoral purposes at their home address. If they are on the electoral register at their home address it is inevitable that, when the assessor is drawing up the register for the poll tax, he will make a comparison—in fact, he is obliged by the Bill to make such a comparison. He will see a name on the electoral register at such-andsuch an address and he will therefore put that name on the register for the poll tax. It will then be up to the student to get himself off that register. If he does not he will find himself paying two poll taxes. [HON. MEMBERS: "Rubbish".] Unless students get themselves off the register, of course they will have to pay two poll taxes.

Mr. Nicholas Soames (Crawley)

Has the hon. Gentleman read the Bill?

Mr. Maxton

I have read the Bill. The fact is that students will have to go through a complicated procedure to get themselves off the register. [Laughter.] As usual the Secretary of State fails to take anything seriously. He thinks that his inane giggling is an answer to every debate. Students will find it difficult to get themselves off the second register and to avoid paying two poll taxes. That is undemocratic.

Others may think it is easier to evade the tax by staying off the electoral register, which will be the major point of comparison.

Mr. Norris

The hon. Gentleman is presenting a travesty of the Government's proposals in suggesting that students will be denied their democratic rights simply because the Bill lays down clear arrangements about what students should do and where they should register for the community charge. It is a complete scaremongering exercise. The hon. Gentleman should be worthy of better than that.

Mr. Maxton

It is not a scaremongering exercise to suggest that the assessor will use the electoral register as his major point of comparison for his register. He will draw people from the electoral register for poll tax. There are dangers that people will not register in order to avoid paying poll tax or paying it twice.

My hon. Friend the Member for Garscadden spoke about rebates and said that today's circumstances were different. The Under-Secretary of State suggested that that was history and in the past. I accept that the Act of Parliament is past and there may be nothing at this stage that we can do about it, but it must be remembered that the Social Security Act 1986 is not in force. When the Secretary of State gives figures for rebates, he talks about the present rebate system, not the one that will be in force when the poll tax comes into existence. He talks about the same people receiving rebates who are receiving them now. Obviously, many people will be taken out of housing benefit by the Social Security Act, many will receive considerably less benefit as a result of it and rebates will be assessed in a completely different way.

The Secretary of State failed to give a straight answer to the question whether everybody would have to pay the 20 per cent. that is in the Social Security Act. He was careful never to say that anybody would get a complete rebate. He was always careful to say that most people would receive a rebate on some of the poll tax.

Some people will have to pay the 20 per cent. for example, the young unemployed man to whom my hon. Friend the Member for Glasgow, Springburn (Mr. Martin) referred will have a debt of £50 or £60. The Secretary of State said that the payment would be £1 a week. If he does not pay it—

Mr. Rilkind

Should he pay it?

Mr. Maxton

Of course he should pay it. [Laughter.] How clever. The Secretary of State is surely not suggesting that a Labour Member, and in particular me, should suggest non-payment? Does the Secretary of State believe that the citizens of Strathclyde who own cars, most of whom are considerably wealthier than me—the young unemployed—should pay the parking fines left on their cars? I assume he would say, "Yes, of course." The fact is that 50 per cent. of them do not. The idea suggested by the Minister on the radio recently that the people of Scotland are so honest that they will pay their community charge is not borne out by the good citizens of Glasgow paying parking tickets—many of whom probably come from Strathkelvin and Bearsden.

Some youngsters will evade the tax and then we shall have to go through the complicated legal procedure of trying to get £50 from them. It is not worth a local authority beginning the process of law to obtain £50 from young unemployed people. They may be registered in Castlemilk or Drumchapel, but they may have taken the advice of the Chancellor of the Duchy of Lancaster and got on their bikes to look for work in the south of England. Are we to go through a complicated procedure to trace them? When they are traced, what will they have? It is optimistic to think that they will have various items of stereo equipment. They are more likely to have only a small Walkman. Are we to go through a complicated procedure to take such an item off them to pay their debts? That is nonsense.

This is a had Bill. It will not work, it is unfair, and it will distort the democratic process. I urge my hon. Friends to vote against it tonight.

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

The Bill enacts one of the most fundamental reforms of local government finance in Scotland for a generation or more. It is therefore hardly surprising that it has given rise to a debate of strong feelings and genuine concerns. In a major and radical reform of this kind that is inevitable. I hope to be able to respond to those concerns, if not tonight, in Committee.

Above all, the Bill abolishes a discredited and outdated system of raising local finance—the domestic rates. It replaces that system with a new source of revenue, the community charge, which is simpler, fairer and more democratic. It further makes provision to protect commercial and business ratepayers from the swingeing increases which have been so damaging to them and the jobs that they provided in the past. I am grateful to my hon. Friends for the welcome that they have given it. They speak for the ratepayers of Scotland, who have been burdened unfairly for too long and too hard. I also pay tribute to my hon. Friend the Member for Oxford, East (Mr. Norris) who sat through the debate and made a valuable contribution at the end.

One might have thought that the need to reform the rating system was common ground in the House tonight. It almost is, with the remarkable exception of the main Opposition party, but there were not many Opposition Members here this afternoon, and perhaps some of those who were not here might have supported our measures.

Until the hon. Member for Glasgow, Cathcart (Mr. Maxton) sat down, I had some lingering hopes that we might hear the Labour party's view on the rating system. I thought that we might have had a definite and positive statement of its position, not on what it did not want, but on what it did—either a robust defence of the present rating system, or a cogent and comprehensive alternative to it. We have had neither—the first because the present system is no longer defensible in any rational or democratic terms, and the second because, quite simply, it has no alternative and it knows that there is no workable or acceptable system other than that which we propose in the Bill.

We have had a demonstration of doublespeak, of spinning in ever-decreasing circles, and of desperately hoping that the Scottish people will not notice that the Opposition have no policy other than the system that we have, which can no longer be defended. I hope that the message that reaches the people of Scotland from today's debate is that under Labour the Scottish ratepayer will continue to suffer, with the certainty of a domestic revaluation in 1990. If that is the Labour party's position at the next election, the Scottish people will have something to say about it.

Let us look at the rating system which, according to the hon. Member for Glasgow, Garscadden (Mr. Dewar), the Labour party is defending, and which it uses to compare our proposals and to find them unfair. If it is justified in making the comparisons that it has made in the debate, it must argue that the present system is fair enough in order to make such comparisons against it.

In democratic terms, it is inconceivable that anyone can defend as fair a system of local taxation in which only 39 per cent. of the electorate pay anything, and only 29 per cent. pay in full for their share of the benefits that they receive. It is even harder to defend the fairness of a system where no account is taken of the numbers of people involved in receiving benefits or paying for them.

The hon. Member for Cathcart may be relieved to hear that I shall not talk about the person to whom he dismissively referred as the small widow, but on radio the other day the hon. Member for Garscadden and I were faced with a call from a retired teacher, living alone, who had saved all his life to buy his own house and who lived next door to a family of four earners. He rightly resented the fact that his contribution to local government services was the same as theirs together. To give him his due, the hon. Member for Garscadden did not try to defend that situation. He merely avoided answering the question because he knew that there was no answer to it.

More fundamental, however, is the illogicality of domestic rates as a way of paying for local government. It is a property tax which bears little relation to local government spending or the benefit that the local taxpayer gets from it. It is a tax where the shape of the home, the extent of insulation in it, or even whether the garage can take two cars side by side or end on, dictates what one pays towards local government services, although there is no relationship between the two. Added to that is the necessary concomitant of a rating system—revaluations. Revaluations, as we know too well in Scotland, are hardly conducive to stability. Without any action on the part of local government or the ratepayer, they can almost overnight massively increase the bill which the ratepayer has to pay.

All in all, it is a system which cannot be justified or continued. It is neither democratic nor fair, but it is against that system that Opposition Members compare the community charge and pronounce it unfair. As a comparator, its credibility is shot through and their conclusions are invalid, and even if they were not, the fact that they have not taken into account the rebate would make their comparison unacceptable.

Mr. Lambie

The hon. Gentleman said that there would be no revaluation in Scotland in 1990. Will he confirm that revaluation will still take place in 1990 in Scotland for industrial properties? Will he also confirm that no revaluation will take place of domestic or non-domestic properties in England in 1990?

Mr. Ancram

The intention with regard to non-domestic properties is that there will be simultaneous revaluations in England and in Scotland in 1990. If the hon. Gentleman supports this legislation there will be no domestic revaluation in Scotland in 1990, and he will be able to prove finally to the ratepayers of Troon, about whom he has spoken so often, that he cares for their interests.

We have also been accused tonight of introducing a system that takes no account of ability to pay. At the lower end of the incomes scale, I reject that. The rebate scheme that we have outlined, both in the debate and in the commentary, makes it clear that those on low incomes will be protected, even if—I confirm this to the hon. Member for Cathcart—everyone, rightly, has to contribute something. The hon. Gentleman has not read the Social Security Act carefully. It does not mention a percentage, and I am sure he will agree that the rebate system that we impose on houses should be the same system as we impose on the community charge, otherwise two different systems will create the confusion and concern that he outlined.

Ability to pay is a factor in the community charge. The hon. Member for Fife, Central (Mr. Hamilton), who is not in the Chamber at the moment, fairly put his finger on the point. He said that 60 per cent. of local government spending in Scotland is paid for by the central taxpayer, where ability to pay is inherent, not only through income tax, but through VAT and excise duties. Including the community charge, the top tenth of households in terms of income will contribute 19 times as much as the bottom tenth, and the average of that top tenth is way below the level at which the Leader of the Opposition believes they should be taxed. That system is right and it will continue.

Only 13 per cent. of local government expenditure in Scotland is covered by the domestic rate and will be covered by the community charge. It is only there that democratic accountability can be created, and it is only right that in that small sector each adult, rebates apart, should pay the same.

The ability to pay has at least brought one clear statement of policy from the Opposition Benches. The spokesman for the alliance, the hon. Member for Caithness and Sutherland (Mr. Maclennan), and the right hon. Member for Western Isles (Mr. Stewart) have come out clearly in favour of local income tax. That was the only clear thing said by the hon. Member for Caithness and Sutherland. The policy was unclear. Indeed, if one blinked, one missed it.

In the processes leading to the Bill some of us were attracted to the concept of LIT until we looked at it in detail. I have to say that it failed on almost every count. Many of the reasons for that were put excellently by my hon. Friends the Members for Stirling (Mr. Forsyth) and for Dumfries (Sir H. Monro) and I do not want to reiterate them. The spokesman for the alliance said that effectively the system would be run through PAYE—[Interruption.] I apologise if that was said by the right hon. Member for Western Isles. I sometimes find it difficult to distinguish the parties. If it was done through PAYE, it would become one of many deductions above the bottom line. I ask the House to consider seriously how many people would notice it. Those not on PAYE would not feel the effect of a particular rate of LIT for up to 18 months, during which time the rate of that tax might have changed.

Let us start with the hypothesis that a local income tax is to be introduced. Those who propose it argue that it would be less onerous on the less well off than the community charge. That point was raised by my hon. Friend the Member for Fife, North-East (Mr. Henderson) and my hon. Friend the Member for Stirling. They asked me to provide figures to show whether that was true. I shall give some examples based on 1985–86 figures.

If we assume—I am again taking the points raised by the spokesman for the alliance and the right hon. Member for Western Isles—an equalised local income tax system with the yield of Ip in the pound of local income tax, the same per adult in all areas—that is a formal equalising system—we find that a single man on the average manual worker's wage would pay between £266 and £399 in the regions of Scotland, depending on which region he was in. That is an average of £361. Under the community charge, he would pay between £153 and £229, an average of £207. Therefore, on average under LIT he would be £154 worse off. In fact, every manual worker who is single with an income of over £112 a week would be worse off.

When I tell the House that 80 per cent. of manual workers in full-time employment had an income in excess of that figure in 1985–86, the implications of local income tax become even clearer. I must say to alliance Members and to Members of the Scottish National party, if they disagree with the figures, why do they not put their own figures before us? We have called upon them for many months to do so. The fact that they have not done that makes me believe that they have not worked it out properly. I want to tell them what their system would do.

Young adults in employment living with their parents are another sector about which there has been a good deal of concern. In 1985–86, 70 per cent. of full-time male manual workers in the age group 21 to 24 had an income in excess of £112 a week, which is a measure of the proportion of those in that age group living at home who would be worse of under a local income tax system. It is for that reason that we believe that the system proposed in the Bill is not only right but fairer than any other system that has been suggested tonight.

Mr. Maclennan


Mr. Ancram

The hon. Gentleman has had time to state his policy. He did not do it and he will now have to wait for another occasion.

I am prepared to concede that no scheme of local taxation can be perfect. I appreciate some of the concerns raised tonight.

Mr. McKelvey


Mr. Ancram

The hon. Member for Cathcart asked how many single pensioners and single parents there are. Those two categories together form about 20 per cent. of all tax units. For him to say that the benefits that would adhere to those should be disregarded leads me to question the concern that the hon. Gentleman and his party have for vulnerable groups within our society.

Mr. Maxton

That is not the question. The question is, how many of those single households, in the present circumstances of rebates, actually pay rates?

Mr. Ancram

The hon. Gentleman has seen the Green Paper and the calculations. I have waited for him to say that he believes that it was right that, under any system, those people should gain, but he has ignored them. He has effectively said that they are a small minority and that we need not bother about them. That is certainly not the Government's view.

We heard a fascinating suggestion, which, in a sense, came from the hon. Member for Garscadden and from the hon. Member for Caithness and Sutherland, that, in some way, the Bill was less democratic in terms of local government because the Government would be directly funding a greater proportion of total local government expenditure. That is a fascinating argument after years of hearing, every time rate support grant was reduced, that we were loosening control over local government by removing some of the central control that we had through the grant system.

The hon. Member for Garscadden referred to the number of summary warrants. The summary warrants system for rates is an effective system of diligence, because it leads to the recovery of money due. Only a relatively small number of summary warrants for rates lead to further diligence, and only a tiny number lead to warrant sales which, as the Scottish Law Commission's report on diligence and debtor protection pointed out, are almost unknown in rates cases. The system, especially when it is reformed this year, will be perfectly capable of dealing with that type of problem.

My hon. Friend the Member for Stirling asked whether registration should be based on residence at a qualifying date. The weight of the views on consultation was in favour of a rolling register rather than a fixed one such as the electoral register. My right hon. and learned Friend the Secretary of State said that a rolling register would maximise accuracy and efficiency in the system.

My hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) asked why we were retaining the basis of selective action in the Bill to limit the community charge. The Bill abolishes two of the three present mechanisms of control. It gets rid of grant penalties and general rate capping, and I hope that my hon. Friend welcomes that. We believe that it is important to have a power in reserve,—which we would hope not to use—in case we find particularly at the start of a four-year period, that a council is prepared to behave irresponsibly, to the severe detriment of those who are paying the community charge. My right hon. and learned Friend the Secretary of State believes that this power should be used only sparingly, and he would hope not to have to use it at all.

My hon. Friend the Member for Dumfries asked about shooting rates. [Laughter.] The Government will be asking the working party of the Scottish Assessors Association and the Inland Revenue valuation office to examine present Scottish and English law and practice on the valuation of shooting rights and to make recommendations for a necessary change in legislation to ensure that the situation is treated equitably north and south of the border. The Opposition may laugh, but on the Labour front Bench there is an hon. Member who, I recollect, once tabled an amendment in connection with the matter that my hon. Friend the Member for Dumfries raised.

My hon. Friend the Member for Stirling asked about sports clubs. Local authorities are empowered to give relief of up to 100 per cent. if those clubs meet the required criteria. We believe that it is right that local authorities should have that discretion, because they are the only bodies which can see in each case whether that discretion is merited. We will ask the working party of the Scottish Assessors Association and the Inland Revenue valuation office to examine present Scottish and English practice and to make recommendations for necessary change, which I hope will be implemented in time for the 1990 revaluations. I appreciate that one of the major concerns is the different levels of rates paid by sports clubs north and south of the border.

Towards the end of his speech the hon. Member for Garscadden was forced to admit that if he had to suggest some reform of the rating system he would look at a system of capital values. He should return to the Layfield report and see what the committee had to say about that. Although Layfield did not say that such a system was impossible, he had a number of severe reservations about it which, were they to occur in practice, would create a situation which was no better and very little different from that which we had under the rating system in the past, whose time, we believe, has come and gone.

The hon. Member for Cathcart suggested that this was a panic measure, and he referred to various manifesto commitments. It is a strange argument that although we took one view at one stage and revised that view later, we are not entitled to do so. One of the failings of the hon. Gentleman's party is that it is so doctrinaire that once it has stated a policy we have to wait for generations before it realises that that policy no longer applies and that it must be changed.

There has been opposition to the proposed system throughout the debate. We have been told that the community charge system will create unacceptable financial burdens for those who pay little or nothing to local government. I do not for a moment deny that payments of up to £5 a week in the highest charge areas are significant, nor do I suggest that the payment, by those on full rebate, of £1 a week, again in the highest charge areas, will be difficult to find, even though it is only just over the price of a pint of beer. That is precisely why the system is being phased in over three years. Of course sums of that kind matter. Accountability would hardly be created if they did not matter. However, the level of charge will be much lower in those areas where authorities do not spend more than they need to spend.

I find it hard to accept the attitude of Opposition Members that these are cruel and unacceptable burdens to place on the poorer members of society, and I shall put the matter into perspective. During the last few months the Labour party has made official promises to the electorate. We are now able to cost those promises. If we believe them—and it is a big "if"—and if we accept that the Labour party would raise direct taxes only on those who earn over £27,000 a year, the cost of its programme would result in a VAT increase of 43 per cent. According to our calculations, it would mean that the lowest tenth of households, in income terms, would have to find an additional £351 a year for VAT—nearly £7 a week—and that they would still have to find the money to pay for the rates. Compared with our proposals, it is extraordinary that the Opposition should make such a point about that.

If we do not believe the Labour party's direct tax increase restriction, and if it took that road rather than increasing VAT, income tax would be increased to 53p in the pound. For the average male manual worker that would mean an increase of £23.50 a week if he was married, or £29 a week if he was single. Or it might be a combination of both, or it might be that the Opposition do not expect to be called upon to fulfil their promises. If ever there was a case of crocodile tears, that is what we have had tonight from Opposition Members.

The Bill is no short-term stop gap. It is no hurried or temporary expedient. It is a well considered and well worked out reform which sets up a new and viable system for financing local government for generations to come. It creates a new balance, a new fairness and a strengthening of local democracy and accountability which will stand the test of time. No wonder that the Opposition hate it. It means the end of a system that has underwritten their profligacy at local level, which has drained ratepayers, which has milked businesses and destroyed jobs, but which has been the bedrock of their local government survival. The ratepayers of Scotland have waited long for this Bill, and I call on my hon. Friends to support it.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 258, Noes 204.

Division No. 24] [9.59 pm
Adley, Robert Clark, Sir W. (Croydon S)
Aitken, Jonathan Clarke, Rt Hon K. (Rushcliffe)
Alexander, Richard Cockeram, Eric
Amess, David Colvin, Michael
Ancram, Michael Conway, Derek
Arnold, Tom Coombs, Simon
Ashby, David Cope, John
Aspinwall, Jack Corrie, John
Atkins, Robert (South Ribble) Couchman, James
Atkinson, David (B'm'th E) Crouch, David
Baker, Nicholas (Dorset N) Currie, Mrs Edwina
Baldry, Tony Dickens, Geoffrey
Banks, Robert (Harrogate) Dicks, Terry
Batiste, Spencer Dorrell, Stephen
Bellingham, Henry Douglas-Hamilton, Lord J.
Bendall, Vivian Dover, Den
Bevan, David Gilroy Dunn, Robert
Biffen, Rt Hon John Durant, Tony
Biggs-Davison, Sir John Dykes, Hugh
Blackburn, John Eggar, Tim
Blaker, Rt Hon Sir Peter Evennett, David
Body, Sir Richard Eyre, Sir Reginald
Bonsor, Sir Nicholas Fairbairn, Nicholas
Boscawen, Hon Robert Fallon, Michael
Bottomley, Peter Favell, Anthony
Bottomley, Mrs Virginia Finsberg, Sir Geoffrey
Bowden, A. (Brighton K'to'n) Fletcher, Alexander
Bowden, Gerald (Dulwich) Fookes, Miss Janet
Boyson, Dr Rhodes Forman, Nigel
Braine, Rt Hon Sir Bernard Forsyth, Michael (Stirling)
Brandon-Bravo, Martin Forth, Eric
Bright, Graham Fox, Sir Marcus
Brinton, Tim Franks, Cecil
Brown, M. (Brigg & Cl'thpes) Fraser, Peter (Angus East)
Browne, John Freeman, Roger
Bruinvels, Peter Fry, Peter
Buchanan-Smith, Rt Hon A. Gale, Roger
Buck, Sir Antony Galley, Roy
Bulmer, Esmond Gardiner, George (Reigate)
Burt, Alistair Gardner, Sir Edward (Fylde)
Butcher, John Garel-Jones, Tristan
Butler, Rt Hon Sir Adam Glyn, Dr Alan
Butterfill, John Goodhart, Sir Philip
Carlisle, John (Luton N) Goodlad, Alastair
Carlisle, Kenneth (Lincoln) Gow, Ian
Carttiss, Michael Gower, Sir Raymond
Cash, William Grant, Sir Anthony
Channon, Rt Hon Paul Greenway, Harry
Churchill, W. S. Gregory, Conal
Clark, Hon A. (Plym'th S'n) Griffiths, Peter (Portsm'th N)
Clark, Dr Michael (Rochford) Ground, Patrick
Grylls, Michael Powley, John
Hamilton, Hon A. (Epsom) Rhodes James, Robert
Hamilton, Neil (Tatton) Rifkind, Rt Hon Malcolm
Hampson, Dr Keith Roberts, Wyn (Conwy)
Hanley, Jeremy Robinson, Mark (N'port W)
Hannam, John Roe, Mrs Marion
Hargreaves, Kenneth Rossi, Sir Hugh
Harris, David Rost, Peter
Harvey, Robert Rowe, Andrew
Haselhurst, Alan Rumbold, Mrs Angela
Havers, Rt Hon Sir Michael Sackville, Hon Thomas
Hawkins, C. (High Peak) Sainsbury, Hon Timothy
Hayes, J. St. John-Stevas, Rt Hon N.
Hayhoe, Rt Hon Barney Sayeed, Jonathan
Hayward, Robert Scott, Nicholas
Heathcoat-Amory, David Shaw, Giles (Pudsey)
Heddle, John Shaw, Sir Michael (Scarb')
Henderson, Barry Shelton, William (Streatham)
Heseltine, Rt Hon Michael Shepherd, Colin (Hereford)
Hickmet, Richard Shersby, Michael
Hicks, Robert Silvester, Fred
Higgins, Rt Hon Terence L. Sims, Roger
Hill, James Smith, Tim (Beaconsfield)
Hirst, Michael Soames, Hon Nicholas
Hogg, Hon Douglas (Gr'th'm) Spencer, Derek
Holland, Sir Philip (Gedling) Spicer, Michael (S Worcs)
Holt, Richard Stanbrook, Ivor
Hordern, Sir Peter Stanley, Rt Hon John
Howard, Michael Steen, Anthony
Howarth, Gerald (Cannock) Stern, Michael
Howell, Rt Hon D. (G'ldford) Stevens, Lewis (Nuneaton)
Hubbard-Miles, Peter Stewart, Allan (Eastwood)
Hunt, David (Wirral W) Stewart, Andrew (Sherwood)
Hunt, John (Ravensbourne) Stewart, Ian (Hertf'dshire N)
Hunter, Andrew Stradling Thomas, Sir John
Irving, Charles Sumberg, David
Jenkin, Rt Hon Patrick Taylor, John (Solihull)
Jessel, Toby Taylor, Teddy (S'end E)
Johnson Smith, Sir Geoffrey Temple-Morris, Peter
Jones, Gwilym (Cardiff N) Terlezki, Stefan
Jones, Robert (Herts W) Thompson, Donald (Calder V)
Kellett-Bowman, Mrs Elaine Thompson, Patrick (N'ich N)
Key, Robert Thornton, Malcolm
King, Roger (B'ham N'field) Thurnham, Peter
Knight, Greg (Derby N) Townend, John (Bridlington)
Knight, Dame Jill (Edgbaston) Townsend, Cyril D. (B'heath)
Knowles, Michael Tracey, Richard
Knox, David Trippier, David
Lamont, Rt Hon Norman Trotter, Neville
Lang, Ian Twinn, Dr Ian
Latham, Michael van Straubenzee, Sir W.
Lawler, Geoffrey Vaughan, Sir Gerard
Lee, John (Pendle) Viggers, Peter
Lennox-Boyd, Hon Mark Waddington, David
Lloyd, Sir Ian (Havant) Wakeham, Rt Hon John
Lloyd, Peter (Fareham) Waldegrave, Hon William
McCurley, Mrs Anna Walden, George
MacKay, John (Argyll & Bute) Walker, Rt Hon P. (W'cester)
Maclean, David John Waller, Gary
McLoughlin, Patrick Walters, Dennis
Major, John Ward, John
Maude, Hon Francis Wardle, C. (Bexhill)
Maxwell-Hyslop, Robin Warren, Kenneth
Merchant, Piers Watson, John
Mitchell, David (Hants NW) Watts, John
Monro, Sir Hector Wells, Sir John (Maidstone)
Montgomery, Sir Fergus Wheeler, John
Neale, Gerrard Whitfield, John
Neubert, Michael Wiggin, Jerry
Nicholls, Patrick Wilkinson, John
Norris, Steven Winterton, Nicholas
Onslow, Cranley Wolfson, Mark
Osborn, Sir John Wood, Timothy
Page, Sir John (Harrow W) Woodcock, Michael
Patten, Christopher (Bath) Young, Sir George (Acton)
Peacock, Mrs Elizabeth Younger, Pt Hon George
Percival, Rt Hon Sir Ian
Pollock, Alexander Tellers for the Ayes:
Porter, Barry Mr. Gerald Malone and
Portillo, Michael Mr. David Lightbown.
Abse, Leo Flannery, Martin
Alton, David Foot, Rt Hon Michael
Anderson, Donald Foster, Derek
Archer, Rt Hon Peter Foulkes, George
Ashdown, Paddy Fraser, J. (Norwood)
Ashley, Rt Hon Jack Freeson, Rt Hon Reginald
Atkinson, N. (Tottenham) Freud, Clement
Bagier, Gordon A. T. Garrett, W. E.
Banks, Tony (Newham NW) Godman, Dr Norman
Barnett, Guy Golding, Mrs Llin
Barren, Kevin Gould, Bryan
Beckett, Mrs Margaret Gourlay, Harry
Beith, A. J. Hamilton, W. W. (Fife Central)
Bell, Stuart Hardy, Peter
Benn, Rt Hon Tony Harrison, Rt Hon Walter
Bennett, A. (Dent'n & Red'sh) Hart, Rt Hon Dame Judith
Bermingham, Gerald Haynes, Frank
Bidwell, Sydney Healey, Rt Hon Denis
Blair, Anthony Heffer, Eric S.
Boothroyd, Miss Betty Hogg, N. (C'nauld & Kilsyth)
Boyes, Roland Holland, Stuart (Vauxhall)
Bray, Dr Jeremy Home Robertson, John
Brown, Gordon (D'f'mline E) Howarth, George (Knowsley, N)
Brown, Hugh D. (Provan) Howell, Rt Hon D. (S'heath)
Brown, N. (N'c'tle-u-Tyne E) Howells, Geraint
Bruce, Malcolm Hoyle, Douglas
Caborn, Richard Hughes, Robert (Aberdeen N)
Callaghan, Jim (Heyw'd & M) Hughes, Roy (Newport East)
Campbell, Ian Hughes, Simon (Southwark)
Campbell-Savours, Dale Janner, Hon Greville
Carlile, Alexander (Montg'y) Jenkins, Rt Hon Roy (Hillh'd)
Carter-Jones, Lewis John, Brynmor
Cartwright, John Johnston, Sir Russell
Clark, Dr David (S Shields) Jones, Barry (Alyn & Deeside)
Clarke, Thomas Kaufman, Rt Hon Gerald
Clay, Robert Kennedy, Charles
Clelland, David Gordon Kinnock, Rt Hon Neil
Clwyd, Mrs Ann Kirkwood, Archy
Cocks, Rt Hon M. (Bristol S) Lambie, David
Cohen, Harry Lamond, James
Coleman, Donald Leadbitter, Ted
Conlan, Bernard Leighton, Ronald
Cook, Frank (Stockton North) Lewis, Ron (Carlisle)
Cook, Robin F. (Livingston) Lewis, Terence (Worsley)
Corbett, Robin Litherland, Robert
Corbyn, Jeremy Livsey, Richard
Cox, Thomas (Tooting) Lloyd, Tony (Stretford)
Craigen, J. M. Lofthouse, Geoffrey
Crowther, Stan McCartney, Hugh
Cunliffe, Lawrence McGuire, Michael
Cunningham, Dr John McKay, Allen (Penistone)
Dalyell, Tam McKelvey, William
Davies, Rt Hon Denzil (L'lli) MacKenzie, Rt Hon Gregor
Davies, Ronald (Caerphilly) Maclennan, Robert
Davis, Terry (B'ham, H'ge H'l) McNamara, Kevin
Dewar, Donald McTaggart, Robert
Dixon, Donald Madden, Max
Dobson, Frank Marek, Dr John
Dormand, Jack Marshall, David (Shettleston)
Dubs, Alfred Martin, Michael
Duffy, A. E. P. Maxton, John
Dunwoody, Hon Mrs G. Meacher, Michael
Eadie, Alex Meadowcroft, Michael
Eastham, Ken Michie, William
Edwards, Bob (W'h'mpt'n SE) Mikardo, Ian
Evans, John (St. Helens N) Millan, Rt Hon Bruce
Fatchett, Derek Miller, Dr M. S. (E Kilbride)
Field, Frank (Birkenhead) Mitchell, Austin (G't Grimsby)
Fields, T. (L'pool Broad Gn) Morris, Rt Hon A. (W'shawe)
Fisher, Mark Morris, Rt Hon J. (Aberavon)
Nellist, David Silkin, Rt Hon J.
Oakes, Rt Hon Gordon Skinner, Dennis
O'Brien, William Smith, C.(Isl'ton S & F'bury)
O'Neill, Martin Smith, Rt Hon J. (M'ds E)
Orme, Rt Hon Stanley Snape, Peter
Owen, Rt Hon Dr David Soley, Clive
Park, George Spearing, Nigel
Parry, Robert Steel, Rt Hon David
Pavitt, Laurie Stewart, Rt Hon D. (W Isles)
Pendry, Tom Stott, Roger
Penhaligon, David Strang, Gavin
Pike, Peter Straw, Jack
Powell, Rt Hon J. E. Thomas, Dafydd (Merioneth)
Powell, Raymond (Ogmore) Thomas, Dr R. (Carmarthen)
Prescott, John Thompson, J. (Wansbeck)
Radice, Giles Thorne, Stan (Preston)
Raynsford, Nick Tinn, James
Redmond, Martin Torney, Tom
Rees, Rt Hon M. (Leeds S) Wainwright, R.
Richardson, Ms Jo Wallace, James
Roberts, Ernest (Hackney N) Wardell, Gareth (Gower)
Robertson, George Wareing, Robert
Robinson, G. (Coventry NW) Weetch, Ken
Rogers, Allan White, James
Rooker, J. W. Wigley, Dafydd
Ross, Ernest (Dundee W) Williams, Rt Hon A.
Ross, Stephen (Isle of Wight) Wilson, Gordon
Rowlands, Ted Winnick, David
Sedgemore, Brian Wrigglesworth, Ian
Sheldon, Rt Hon R. Young, David (Bolton SE)
Shields, Mrs Elizabeth
Shore, Rt Hon Peter Tellers for the Noes:
Short, Ms Clare (Ladywood) Mr. James Hamilton and
Short, Mrs R.(W'hampt'n NE) Mr. Allen Adams.

Question accordingly agreed to.

Bill read a Second time and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).