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`(1) For section 3 of the Abolition of Domestic Rates Etc. (Scotland) Act 1987 (determination of non-domestic rates) there shall be substituted the following section—
§ "Non-domestic rates: interim provisions.
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3A.—(1) The Secretary of State shall, in respect of each of the financial years specified in subsection (2) below, prescribe for each local authority a rate which shall be their non-domestic rate in respect of that year.
(2) The financial years referred to in subsection (1) above are those beginning with the financial year 1990–91 and ending with that immediately before the financial year in respect of which the non-domestic rate is first prescribed under section 3B of this Act.
(3) Non-domestic rates shall be levied in accordance with section 7 of the Local Government (Scotland) Act 1975 by each rating authority in respect of lands and heritages—
(4) The rates prescribed under subsection (1) above shall he known—
(2) Accordingly—
§ Brought up, and read the First time.
§ The Minister of State, Scottish Office (Mr. Ian Lang)I beg to move, That the clause be read a Second time.
§ Mr. SpeakerWith this we may take the following: Government new clause 47 and Government amendments Nos. 274, 272, 263, 269, 268, 264, 265, 273, 266, 270, 267 and 271.
§ Mr. LangNew clauses 46 and 47 replace the existing section 3 in the Abolition of Domestic Rates Etc. (Scotland) Act 1987. Their purpose is to allow us to implement our recently announced policy of moving towards a common non-domestic rate poundage in Scotland. The other amendments in this grouping, including the changes in the grant provisions, are consequential.
The existing section 3 of the 1987 Act provides powers for the Secretary of State to prescribe the maximum annual increase in each local authority's non-domestic rate. The effect of the new clauses is to replace the existing section of the 1987 Act with two new provisions. The first is a transitional provision under which the Secretary of State will be able to prescribe each year the actual rather than the maximum non-domestic rate of each authority. Our intention is to use that power to move the different rate poundages gradually, over the transitional period, towards a common level.
Where the effect is to reduce an authority's rate income by comparison with what it would otherwise have been, the loss in rate income to that authority will be substantially compensated for by grant. By the end of the transitional period it is intended to reach a common rate poundage for all authorities, which will be at the same level as the English uniform business rate. Once that has been achieved, the second new provision will come into force, under which thereafter the Secretary of State will simply prescribe a uniform non-domestic rate each year for the whole of Scotland.
§ Mr. John Maxton (Glasgow, Cathcart)The Minister says that the uniform business rate will be prescribed by the Secretary of State for the whole of Scotland. Presumably it is prescribed for the whole United Kingdom.
§ Mr. LangNo. I am referring to the rate that my right hon. and learned Friend the Secretary of State for Scotland will prescribe, which will be for the whole of Scotland. As our purpose is to achieve a level playing field throughout the United Kingdom, however, the hon. Gentleman is right to suspect that the figure is likely to be identical to that for England.
Amendments Nos. 272 and 274 simplify the provisions of schedule 4 to the 1987 Act, which concern grants distribution, to bring them into line with the new business rate policy and to ensure that grant can be distributed as required to compensate authorities which lose rate income as we move towards a uniform business rate.
The new business rate proposals deliver a commitment specifically announced by my right hon. and learned Friend last month, but we have said consistently for a long time now that we intend to sort out the long-recognised problem of the excessive rate burden on Scottish business. We have already made progress on harmonisation of valuation procedures north and south of the border. That has been a major exercise, the fruits of which will become clear with the 1990 revaluations. We are now completing the picture. Having announced our intentions on poundages on 8 May, we have wasted no time in presenting the proposed legislative changes so that we can begin to implement the new policy in the financial year 1990–91.
Our proposals have been widely welcomed—indeed, I think it would be fair to say that they have been universally welcomed—as proposals that will remedy the long-standing disadvantage under which the business community in Scotland labours. Their rates are too high compared with those of their competitors south of the border.
§ Mr. Malcolm Bruce (Gordon)Does the Minister expect the 1990 revaluation for businesses in Scotland to be as popular with the business community as the last revaluation?
§ Mr. LangI expect it to be even more popular.
Prominent among those who in recent months urged us to present some proposals was the Convention of Scottish Local Authorities, and it is fair to say that COSLA has also welcomed our announcement. It is a pity that it did not convert to that course sooner—its spending and its present rate poundages might not have been so high and its problem might have been much smaller—but a late conversion is better than none and we shall of course look to local authorities to make their modest contribution to the solution.
My officials and those of COSLA have recently gone over the proposals in some detail. That dialogue will continue between now and the time when—subject to the approval of Parliament—we begin to operate the new proposals with our announcement of the distribution of revenue support grant in the autumn.
With these new clauses and amendments we set in place the coping stone on the archway that we have been building, through which Scottish business can pass to a fairer business rates environment—to the proverbial level playing field that will enable it to operate on level rates terms with other businesses in the rest of the United Kingdom. The problem has developed over many years; the Government have tackled it, and we are now on our way to solving it.
§ Mr. MaxtonI am aware of the fact that at present there is more interest in rottweiler dogs than in the Scottish non-domestic rating system. When I was canvassing recently during the Glasgow, Central by-election I had the paw of a rottweiler dog put on a very tender part of my anatomy. If any hon. Member ever tries to canvass after having been hit there, he will always thereafter take some interest in rottweiler dogs.
This is an important issue for Scotland. It is an absolute disgrace and a contemptuous act by the Secretary of State for Scotland to put such an important clause at the tail end of the Bill. It will lead to an important change in Scotland's non-domestic rating system. It has been tagged on to a Bill that has nothing whatsoever to do with the subject; it deals largely with English matters. If the Secretary of State had been prepared to say to the Opposition in Scotland that the Government wanted to introduce a small Scottish Bill to deal with the matter, I am sure that he would have had a fair hearing. However, the Scottish Tories are running so scared that they are not prepared to legislate, if they can possibly avoid it, for Scotland by means of a Scottish Bill and to face up to Scottish Members of Parliament. The way in which the Secretary of State now handles Scottish affairs shows both his cowardice and his contempt of the House of Commons.
We welcome the change. I have reservations about the uniform business rate, but if there has to be such a rate, Scottish businesses must not be prejudiced or jeopardised. If the Scottish non-domestic rating system were to be left as it is while England and Wales had a uniform business rate, Scottish businesses would be in trouble with their competitors south of the border. We welcome the change, therefore, on those grounds and look forward to its implementation.
It has taken a lot of pressure from the Opposition, the business community, the Convention of Scottish Local Authorities and local authorities to get the Government to this stage. On 8 May the Secretary of State said that a substantial amount of the money that would be lost to local authorities—£250 million in the longer run—would be made up substantially by the Government in the form of new money. He went on to say that that would have to be found
from the resources negotiated in the normal way each year for the Scottish expenditure programme … I will be assuming that local authorities will be willing to play their part by absorbing a small proportion through modest expenditure reductions or efficiency gains.The Opposition, local authorities and COSLA want to know exactly what that small proportion is. What proportion of the £250 million will Scottish local authorities have to find?This will not apply to all Scottish local authorities. If there is to be equalisation, those local authorities with higher non-domestic rate poundages will find that they are reduced, whereas those local authorities with lower domestic rate poundages will not lose revenue during the transitional period. Local authorities where there is the greatest need, because of social deprivation, unemployment and the need to stimulate the growth of industry in the area, will suffer. What proportion will local authorities have to find? If it is a large proportion, two things could happen. Either local authorities would have to cut services to the public, including the poorest people in society, or —this is perhaps more important—there would be an increase in the poll tax in those local authority areas.
1004 We already find in Scotland that the poll tax levels and the poll tax itself are totally abhorrent. It would be absurd if the Government put pressure on local authorities to benefit Scottish business—we accept that it will do that —but poll tax payers, the poor in society, had to pick up the tab. We want a commitment that the Government will pay the whole of the £250 million in grant, preferably in new money, to the Scottish local authorities. That is the fair way to proceed and the way to ensure that the burden is borne not by the people of Scotland but by taxpayers throughout the United Kingdom.
We welcome this measure, but we also expect answers to my questions. I hope that the Minister can provide them.
§ Mr. Tony Worthington (Clydebank and Milngavie)The Minister of State has brought a new dimension to the term "brass neck". Only after considerable pressure from all sections of society in Scotland have we been given in the Bill a proposal on the business rate. Unusually, I congratulate the CBI and the chambers of commerce as well as COSLA, the Scottish Trades Union Congress, all sections of society—[Interruption.]—and me—on the pressure that has been put on the Government to move some way towards solving this problem. I congratulate Mr. W. M. Mann, who has ceaselessly lobbied people throughout Scotland, pointing out the unfairness involved. I congratulate the Glasgow Herald as well on its campaign. The Government have claimed credit for their actions, but 11 months ago the Minister of State said that it was a question not of when but of if there would be equalisation. They cannot claim any credit.
We are talking about a level playing field throughout Europe in 1992, but the Government have found it impossible to allow Scotland to be put on a level playing field in respect of the United Kingdom. They got themselves into an extraordinary muddle. At one stage they said that it would be impossible to have equalisation of rates throughout Great Britain until two complete revaluations had occurred—the revaluation in 1990 and the one in 1995. People inferred, correctly, that there would not be harmonisation of the business rate until the turn of the century.
We remember all the fuss about the substantial piece of legislation to lay down the level of the poll tax. That is the most contentious issue in the Glasgow, Central by-election. That rate is only 21 per cent. of the income for Scottish local government, whereas this issue is concerned with 28 per cent. What have we had? We have had a statement by the Secretary of State for Scotland to an outside body, and this is the first time that we have had a chance to discuss it in the House.
It is extraordinary that the Government introduced the poll tax by arguing that local government caused the shut-down of local industry. They have not followed through their logic but have simply index-linked the local business rate. Using their logic, if business in one area has been treated unfairly, they have perpetuated that unfairness. Why did they do that in Scotland? It was because the Minister's own region would have suffered from the harmonisation of rates.
We have been told that there will be 90 per cent. harmonisation of rating practices in Scotland by 1990. Is it true, however, that some of the most difficult problems 1005 will remain? It has been asserted that licensed premises and hotels will be at a considerable disadvantage, with licensed premises paying two and a half times more and some hotels paying five times more in rates than is the case in England and Wales. How quickly will that sort of discrepancy disappear?
Following on from what my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said, I must tell the Minister that it is not good enough simply to say that there will be a contribution from local authorities without specifying the size of that contribution. If harmonisation of the business rate in Scotland is done without an almost total contribution from the Treasury through new money, it will be at the expense of the individual poll tax payer. We do not want to buy a pig in a poke. We want to know the dimensions of the settlement and how much local government will have to contribute.
§ Mr. James Wallace (Orkney and Shetland)The Government's new clauses are important and I do not agree with the Opposition that to introduce them at this stage is wrong per se. If something is good, the sooner that it is brought in the better. The Opposition's criticism is not strong.
Special provisions were introduced in the 1984 legislation to try to deal with the gross distortions between the Scottish and English valuations. The Government have tried to find some way by which Scottish business could be treated on an equal footing with English business, but it is fair to say that the expectations of the 1984 legislation have not been realised. Obviously some new means must be found.
Although the Government's proposal is generally welcome, I fear that in some important respects it will be at some cost to local government. For example, we should not overlook the reduction in scope for local accountability and decision-making. Although the statutory consultation with non-domestic ratepayers under the 1984 legislation has had mixed success, in my constituency local councillors were expected to account for their expenditure plans in some detail, perhaps in a way that was more successful than is usually the case at a local government election.
The proposal means removing from the determination of local government one of its sources of revenue that has some buoyancy. The only scope left for any local discretion and decision-making will be on the level of the poll tax, which is not a particularly buoyant tax. That will be a real loss for local government.
I want the Minister to consider the problems that will affect my constituency and rural Scotland generally. During questions last Wednesday, the Secretary of State said—and I welcome it—that he was still committed to special arrangements for Orkney and Scotland. He said that his officials would be in touch with local authorities in my constituency to work out the arrangements.
In my constituency, because of the oil terminals, the proportion of local revenue raised from non-domestic rates is high. Anything affecting that could have a considerable impact on local revenue. I welcome the fact that a pooling of Scottish non-domestic rates is not being proposed, but what has the Minister in mind for making special arrangements? He will be aware that for a number of years Shetland Islands council has tried to repay debts that were incurred to build the infrastructure to cope with the oil developments, so that when the through-put of oil 1006 declined the rate burden on the terminals would be less. It is important that non-domestic ratepayers in Shetland, having paid an additional price to store up funds for a rainy day, are not deprived, when that rainy day comes, of an umbrella. I should welcome an assurance on that from the Minister.
It is clear that Government intend to reduce the rate poundage in Scotland to a level equivalent to that in England and Wales. It has been suggested that, throughout Scotland, rates will inevitably come down. The Government have made it clear that they will not fully compensate local authorities for a reduction in revenue, and one fears that any shortfall will have to be met by the poll tax payer.
Do the Government have figures showing which authorities in Scotland have a lower non-domestic rate poundage than the average for authorities in England and Wales? When the Secretary of State made his announcement, the director of finance for Grampian region said that it contained insufficient detail. He said:
We have the lowest non-domestic rate in Scotland, so fundamentally, we will not get the same degree of benefit as elsewhere. There is also the possibility, depending upon the way the final plans work out, that we could be that little hit worse off.Will the Minister give some figures so that we can work out what the likely effects of the Secretary of State's announcement will be? If some local authorities gain more than under the present arrangements, does the Scottish Office plan to dock that from revenue support grant? If so, it would further reduce local authorities' decision-making powers.An attempt to put Scottish business on an equal footing with that in England and Wales is welcome. The Minister must be aware that, in rural areas, not least in my constituency, the Government's proposals may lead to problems, and that we are yet to be satisfied about them.
§ Mr. Malcolm BruceI want to intervene briefly and to follow my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), who mentioned my area.
The Secretary of State proposes to fix a rate before we move to a uniform rate. Will the Minister explain how that will be done? In the present circumstances, the rate set would be different from authority to authority, but what criteria will be applied? Will the Secretary of State penalise authorities that have set low rates or those that have set high rates? Will he try to adjust the rate, possibly by taking money from Grampian and transferring it to Lothian or Strathclyde, as he has done under the poll tax? Given the way in which Grampian region has been clobbered, people in the region would like to know that we shall not be clobbered on the business rate.
What criteria will be applied to the income of local authorities? My hon. Friend the Member for Orkney and Shetland quoted the director of finance for Grampian region, which reflected the director's concern that Grampian may experience a reduction in rate. I suspect that other authorities may suffer further reductions, without having a firm idea where additional grant will come from and when it will be declared so that they can plan and budget ahead.
The third question relates to the implications of the second phase—the uniform business rate. The consequence of the uniform business rate is that there will, inevitably, be winners and losers. I am sure that the Minister will have been harangued on this as frequently as 1007 I and my colleagues have been, especially by the National Federation of Self Employed and Small Businesses. The point that it made, and that I want to make, is that it seems that lower-rated businesses in rural areas, once we move to a uniform business rate, will inevitably be the losers. Will the Minister acknowledge that that is the case? If not, why not? If it is, what other measures does he propose to introduce to ensure that areas—
§ It being Ten o'clock, the debate stood adjourned.