§ The Chairman of Ways and Means (Mr. Michael Morris)With this it will be convenient to take the following amendments:
- No. 2, in page 1, leave out lines 28 and 29.
- No. 3, in page 2, leave out lines 1 and 2.
§ Mr. VazMay I say how pleased I am to see the Under-Secretary of State, who has returned to the debate following an absence. One of the interesting aspects of the debate on the Bill has been the lack of interest of the Secretary of State in the proceedings. Unlike my hon. Friend the Member for Blackburn (Mr. Straw), who was present yesterday and is present today, the Secretary of State has not made a single appearance during the various stages of the Bill and has had to rely on the Under-Secretary of State and the Minister of State to put the arguments.
One of the reasons why the Opposition opposed the allocation of time motion on which the House has just divided was that we wished to give the House the opportunity to scrutinise the Bill. One of the most worrying aspects of the Bill is the group of clauses that will continue to give special treatment to privatised utility companies —gas, electricity and water. That continues the orders that were made in the Non-Domestic Rating Acts of 1993 and 1992. In particular, it continues the special treatment conferred by article 9 of the British Gas plc (Rateable Values) Order 1989, article 9(3) of the Electricity Supply Industry (Rateable Values) Order 1989 and article 9(3) of the Water Undertakers (Rateable Values) Order 1989.
We have tabled the amendments to seek to remove the special treatment that has been given to the utilities, which have done extremely well as a result of the Government's privatisation policy. That policy has resulted in their being able to achieve huge profits and, as I shall show shortly, to remunerate their chairmen and chief officers with huge salaries. That has been a matter of comment not only outside the House but in the House by hon. Members of all parties. Therefore, it is extremely important to examine the proposals and seek ways in which we can ensure that the overall pool of money that will be made available for distribution to local authorities is as large as possible.
Conferring special treatment on those privatised utilities will mean, in the long run, that they will not contribute to ensuring that the pool is topped up in a way that Opposition Members and many people and organisations outside the House believe would be fair.
May I also make it clear, as it has been a matter of comment during previous stages of the Bill, that the Opposition are wholly in favour of the subsidies being given to businesses in Britain. We therefore support the principles of the Bill, in so far as they repeat the principles enunciated during the passage of the 1992 and 1993 Acts.
398 Businesses have suffered greatly due to the difficulties caused by the recession, which is shown quite clearly by the fact that the number of businesses approaching local authorities to obtain support through section 49 of the 1989 Act has increased dramatically. The last figures that we have for hardship cases show that, under section 49 of that Act, local authorities paid more than £1 million to support businesses.
The amendments would ensure that the amount of money that will go into the pool will increase, thereby enabling businesses to ensure that they are able to cope with the very serious recession that has affected the country during the past few years. Because of that recession the previous Minister of State—the right hon. Member for Wokingham (Mr. Redwood), who is now the Secretary of State for Wales—came before the House a year ago to ensure that the arrangements continued. That is why the Government are returning for the fifth time in four years to ensure that the amount of subsidy available to local businesses is kept at an acceptable level.
If the amendments are accepted, the privatised utilities —gas, electricity and water—will be able to contribute a much greater amount to the pool, which will diminish the amount of money that the Secretary of State will have to put in. That would mean an overall increase in the amount distributed to local authorities and would, therefore, assist local councils.
I hope that the amendments will be accepted. If the Minister needs any enticing, I merely point out that the privatised utilities have done extremely well during the past few years. There can be no better source of information or statistics that hon. Members on both sides of the House can accept than the Library, which has produced for me a note setting out the pre-tax profits of some of the companies to which the Government wish to give special treatment.
British Gas made a pre-tax profit for the year 1992–93 of £1,054 million and its chairman, Mr. Evans, received £379,000 in remuneration for that financial year. Why on earth should the pool be diminished to give special treatment to British Gas, under orders passed in 1989, when it has made more than £1 billion in profits and its chairman is receiving such a large remuneration? It is certainly a great deal more than that received by Ministers of the Crown or even the Prime Minister.
Special arrangements are to be provided for the water industry under article 9(3) of the Water Undertakers (Rateable Values) Order 1989. How much profit have the water companies made? Last year North West Water made a profit of £247 million; it pays its chairman £238,000 a year. Northumbrian Water made £69 million in pre-tax profits last year and pays its chairman £91,000. Severn Trent Water—the water authority which covers my constituency—made a pre-tax profit of £270 million and the remuneration of its chairman was £179,000. Southern Water made a profit of £119 million and its chairman receives £170,000. South West Water made £93 million and its chairman receives £112,000. Thames Water made £251 million, Welsh Water made £156 million, Wessex Water made £86 million and Yorkshire Water made £139 million. They paid their chairmen £155,000, £156,000, £164,000 and £156,000 respectively.
Will the Minister explain why special treatment is to be given to the water authorities when their profits are so vast 399 and when the amount of money that they made available in remuneration for their chairmen was high last year and I am sure will again be high this year?
Article 9(3) of the Electricity Supply Industry (Rateable Values) Order 1989, which I re-read this morning—I am sure that the Minister has also re-read it—shows that special treatment will again be given to the electricity undertakings, which made almost as much pre-tax profit as the water companies.
East Midlands Electricity made £155 million and pays its chairman £226,000. Eastern Electricity made £183 million and pays its chairman £238,000. London Electricity made £146 million; Manweb, £111 million; Midlands Electricity, £167 million; Northern Electric, £111 million; Norweb, £157 million; Seeboard, £113 million; South Wales Electricity, £87 million; South Western Electricity, £111 million; Southern Electric, £187 million; and Yorkshire Electricity, £156 million. The salaries of their chairmen vary from £226,000 a year to £167,000.
The Government have given no explanation of why it is necessary to continue this year an order made in 1989. All it will mean is that companies that have done extremely well during the past few years will be indirectly rewarded by the Government. If we set aside the sweeteners and the other support given to those industries when they were privatised and merely look at the support offered because of that special treatment, we see that the amount of money available to the pool will be diminished. Why is it important? It is for the very reason put forward by my hon. Friend the Member for Blackburn on Second Reading. Not one Conservative Member came to the Chamber and spoke in support of Government policy.
We are so concerned about the effects of the Bill because of the fundamental change that has been made since the passage of the 1993 Act. The clauses making that change take away the duty of the Secretary of State to make good the shortfall and replace it with a power. From the comments of the Minister for Local Government and Planning during the debates on the money resolution and on Second Reading, we know that he is not concerned about the fact that he has not even devised the scheme that will be in place after 1995. He made that absolutely clear. He did not know what the scheme would do, yet he expects the Committee to approve a clause that will give special treatment to companies that have made billions of pounds in the past few years. That is unacceptable.
No argument in favour of that special treatment was made on Second Reading, and the Minister did not refer to it tonight, although he had the opportunity to do so. All that we have been offered by the hon. Gentleman is the stock phrase used by other ministerial colleagues. He has pushed the official Government line that the Bill must be passed as quickly as possible to ensure that the billing arrangements are established so that local authorities do not suffer.
7.30 pm
We witnessed an extraordinary performance earlier, when the Minister failed to allow proper scrutiny of the issue and cast aside our objections. He knows that it is essential that we ensure that local government gets as many resources as possible. The amendment will ensure that they 400 receive more resources, certainly more than they did last year in terms of their take from the non-domestic rating pool.
The Minister should study the number of bankruptcies and business failures that have occurred in the past few years. For the years 1990 to 1993, the number of business failures was 28,935, 47,777, 62,767 and 55,673 respectively. The level of the business rate contributed to the enormous costs facing local businesses. British Gas, the water companies, East Midlands Electricity and Northern Electric, however, have done extremely well, even during the recession—some would say because of the recession. Why should businesses in my constituency and those of other right hon. and hon. Members not benefit from the money made available from the rates pool?
I hope that the Minister will accept that the amendments are modest. They have been tabled as a means of helping the Minister and the Government through a difficult economic time. They will result in more money being available for the pool.
The Minister may reply by suggesting that the commitment to the utilities was made in 1989 by one of his predecessors or the then Secretary of State for Trade and Industry when those utilities were sold off. He may argue that the House must be bound by that commitment. The situation has changed, however, because we have had a recession, which has caused 55,000 businesses to go bust. Those utilities, however, have done extremely well.
Now is the opportunity to replace the current system with a reasonable course of action to ensure that those who make more are able to pay more. The enterprises that have got away with special treatment should, quite properly, be made accountable for the money that they have made.
§ Mr. BettsI strongly support what my hon. Friend the Member for Leicester, East (Mr. Vaz) has said about the intention behind the amendment.
I understand that the transitional arrangements in the Bill will ensure that those businesses that are subject to a large increase in their business rate as a result of a revaluation will be offered some assistance to offset the financial impact of it. The Opposition have made it clear that they have no objection to the revaluation exercise or to the implementation of transitional arrangements that protect businesses that would otherwise suffer a marked increase in their business rate. It must be accepted, however, that a revaluation reflects certain changes that have occurred in the standing of a business vis-a-vis other businesses since the previous valuation. Those revaluations reflect current conditions. The transitional arrangements should act as a cushion against the impact of different valuations on certain businesses, out there in the real world.
No one has sought to argue that small companies should not be cushioned from the effects of an increase in their valuations. That is right and proper, because many do not have large financial reserves. Many others have suffered tremendously in the past three years of the recession. They should be protected from any sudden increase in their rateable valuation and the new rates should be phased in.
There is some question about whether larger businesses should be protected, although I accept that, in the past three years, larger businesses in the manufacturing sector have not made profits. Many have simply marked time, while 401 others have made losses. It is reasonable that some protection should be offered to them, particularly in the current economic climate.
The amendment concerns those companies that have done extremely well, even in the recession. My hon. Friend the Member for Leicester, East read out the profits that have been made by the privatised utilities and none of them is in any financial danger because of lower profits. None of them is making a loss.
When my hon. Friend read out the list of those privatised utilities and the profits that they have made, I thought in particular of those that serve my constituency, Yorkshire Water, Severn Trent Water, East Midlands Electricity and Yorkshire Electricity. The combined profits of those four companies come to £700 million, which is substantially more than the £90 million shortfall that the Government have catered for in the Bill. That profit represents an awful lot of money. Those companies are hardly on the brink of disaster. They are unlikely to be rocked by the effects of a revaluation, however large the rate increase might be. Why then do the Government want to offer transitional arrangements for those utilities? What is the justification for that?
The Government claim that they have budgetary problems of their own and we know that local authorities face similar problems, so why have the Government chosen to spend money on the utilities, which make excessive profits? Why have they been allowed to get away without paying a proper rateable value according to latest revaluations?
§ Mr. VazMy hon. Friend served for 16 years as a Sheffield city councillor and for five years as leader of that great city. Does he agree that it will be extremely difficult to explain to Sheffield city council and other local authorities that the amount of money available to them has been reduced because the Government are showing favour to their friends in big business by allowing them special treatment?
§ Mr. BettsMy hon. Friend puts the argument succinctly. I do not know how I would begin to explain to my local authority in Sheffield and my constituents why they should face reductions in their services, worth between £30 million and £40 million in the next financial year, while the Government attempt to give what can only be described as a subsidy and a hand-out to utilities that already make excessive profits. Perhaps the Minister could help me. It is an obscene waste of public money to introduce legislation that allows those utilities to pay lower rates than the revaluations have deemed that they should pay.
That is what transitional arrangements do. They do not say that the rateable values are wrong, but simply that business should be cushioned from the immediate impact of what it is deemed proper that they should pay for a period.
There is no problem with small businesses or the manufacturing industry. I want the Minister to say clearly what would happen to those utilities if the transitional relief was not available to them. Can he name one consequence that would have any impact on those businesses, on the people whom they employ and on the services that they provide to people throughout the country, from not allowing it? I do not believe that he can, 402 but he may find many other things that he could do, if the money were available to the Treasury, to help local government deliver better services throughout the country.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry)It might be helpful if I put the amendment, which is in quite a narrow context, into some perspective. Underneath the inescapable complexities of the drafting, the principle of the relief scheme is simple. Without it, some 360,000 non-domestic properties still in so-called upward transition would be subject to real-terms rate increases next year of up to 20 per cent. for larger properties. For a number of sectors posing unusually difficult valuation problems, principally former public utilities, rateable values are made by the Secretary of State rather than arrived at through conventional valuation. That is the reason why they are in that category. It is not because they happen to be former utilities, but because they present difficult valuation properties.
For properties of those categories still in upward transition there would have been real rate increases of up to 20 per cent. next year. Clause 1(4) substitutes a limit of 10 per cent. That would ensure that, for the purposes of the scheme, such properties are treated on all fours with other large hereditaments. The hon. Member for Leicester, East (Mr. Vaz) said that they were being given special treatment. That is not the case. They are being treated in exactly the same way as every other conventionally rated property.
§ Mr. VazThe Minister accepts delegations from local authorities all over the country. He was visited recently by a delegation from Leicester, which made a strong case for additional Government funding and resources to make up for the cuts in Government expenditure for Leicester. He knows all of that, and the context in which local government operates at the moment.
Therefore, how can he justify giving special treatment —that is what it amounts to—through a subsidy to British Gas, which made profits of £1,054 million last year, and to the water companies, which, between them, made £1,615 million last year, and to the electricity companies when, as he knows, ordinary local businesses have suffered because of the recession? The Opposition do not oppose his proposals to give a subsidy to business. We believe that it is important at a time of recession and that is why we did not vote against the Second Reading.
In the amendment, we are putting forward a proper reflection of what happened in the economy over the past few years. We want the Government to accept, in what is a modest amendment, that those who have done well should not be subsidised, but should be taxed at a proper and appropriate level; a level that they can manage to deal with quite effectively.
§ The ChairmanOrder. That was a long intervention.
§ The ChairmanWe may be in Committee, and an hon. Member may contribute many times. Interventions, by convention, are short and succinct, to put the Minister on the spot, or to ask a question.
§ Mr. VazOn a point of order, Mr. Morris. Of course I will accept your guidance. I shall take that as a nod that I should interrupt the Minister several times before he finishes.
§ Mr. BaldryThe amendment is in a narrow compass. Essentially, what the hon. Gentleman wants, as he has made clear, is that utilities should be treated differently from other business. We see no merit in setting higher limits on transitional rate bill increases for utilities than for other industrial rate payers. The laws of natural equity expect that every business be treated the same. The extra burden on their customers could be significant in some cases. I shall use as an example the rates bill that the National Grid Company would pay in Wales next year, because businesses within that category are not all privatised businesses as the hon. Gentleman sought to suggest. They include nationalised industries such as British Waterways and organisations such as National Grid.
§ Mr. VazIt is a narrow point, and that is why we have been careful in the way in which we have tabled our amendments. We have not included the railways rateable values order, because of the difficulties that that organisation faces. We have been specific in selecting in this amendment those utilities that we believe can bear the full rateable value.
I refer the Minister to the speech by his predecessor at column 855 of Hansard of 27 April when it was accepted that it was the recession that had meant that a new proposal had to be brought forward.
§ Mr. BaldryI am aware that the Opposition have not included the railways. If the hon. Gentleman had been listening to what I was saying, he would know that neither the National Grid nor British Waterways is a railway. But they would come within the context of the amendment. The rates bill that the National Grid Company would pay in Wales next year would be nearly £1.75 million higher if the amendments were accepted.
It is a narrow point and the Government believe that in equity everyone should be treated in the same way. On those grounds, the Government urge the Committee to reject the amendments.
§ Mr. VazIt is a sad state of affairs that a Minister of the Crown can argue that British Gas, the water authorities and electricity companies should be treated in exactly the same way as local businesses. As I said at the start of the debate, the Opposition do not oppose the subsidy that is being given. Indeed, we support the additional help for businesses. That is why on the previous occasion when the matter came before the House we supported the principle of additional help to local businesses, as put forward in the Non-Domestic Rating Bill of 1992–93.
We object to the unfairness that the Government wish to proceed with; an unfairness that was properly outlined by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). My hon. Friend speaks with vast experience of the difficulties that local businesses face. As someone who led a local authority, he knows very well the problems that local businesses have, and their difficulties in paying their taxes and, as then, their rates. I am sure that, in the conversations that my hon. Friend had with local businesses as leader of Sheffield city council, they expressed to him their concerns about the level of rates and then the level of uniform business rates that they had to 404 pay. The amendment is narrow. It deals with those particular industries. It sets out clearly the fact that we should not give them special treatment.
Of course, they will be given special treatment, because the whole purpose of the Bill is to give support to those businesses that are in difficulty because of the recession. I refer the Minister to the comments made by his then hon. Friend, now his right hon. Friend the Secretary of State for Wales. He said:
Bearing in mind the effects of the recession, the Government decided last year not to add to the burden on businesses."—[Official Report, 27 April 1993; Vol. 223, c. 853.]There would be no burden on businesses if British Gas, with profits of more than £1 billion, the water companies and the electricity companies, were to pay their fair share of rates; nor would the Government be in any way criticised for making those privatised utilities pay what they should pay. Rather, the public would applaud their decision to make them do so because it would directly benefit the small businesses that have suffered from the recession.I hope that the Minister will be prepared to accept the amendments. I am not convinced by anything that he has said. Ministers in Committee and on Second Reading have come to the Dispatch Box and read out a few lines prepared for them on the basis of what happened last year. They assume that everything is the same. However, everything is not the same, and everything should not be the same.
The privatised utilities that have done well should pay more or what is fair because that will benefit the pool. It will mean that the Secretary of State will have to put less into the pool by way of compensating for the shortfall, a promise that he made verbally but has not put in the Bill. That will mean that the pressure on the Government to provide assistance in other areas of policy will be reduced.
The amendments will help, not hinder the Government. They will paint the Minister and his colleagues as reasonable and fair people who are prepared to allow those who make more to pay more.
§ Amendment negatived.
§ Clause 1 ordered to stand part of the Bill.