§ 4.12 p.m.
§ Order of the Day for the Second Reading read.
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATH CLYDE)
My Lords, I rise to move that this Bill be now read a second time. The Bill deals with variation, rating and equalisation grant. In the field of Scottish local government it is the most important Bill since 1929; in the valuation code it is the most important measure since the Act of 1854. The Bill is based largely on the recommendations of the Committee presided over by Lord Sorn, whose Report was published in September, 1954. Here I should wish to express in your Lordships' House the Government's thanks to Lord Sorn and his colleagues, among whom was the noble Lord, Lord Greenhill, for the thorough and skilful way in which they dealt with the difficult and sometimes recondite matters which arose in the course of their inquiry. The Committee included members of all shades of political opinion and of varying background, but they unanimously recommended a number of fundamental changes in the Scottish system of valuation and rating.
Since the Bill was published in October last year, it has received much careful consideration both in another place and outside. I think your Lordships will agree with me that such consideration is highly appropriate for, while much of the 1035 subject matter of the Bill is highly technical, it is of great importance not only to local authorities but to every ratepayer in Scotland. As a result of the discussions which took place in another place, the original Bill has been modified in certain respects and the Government are now confident that in its present form it provides a comprehensive and improved system of valuation and rating.
In the Government's view, a good valuation and rating system should satisfy three tests. It should provide a means of raising local revenue without causing injustice as between one ratepayer and another; the valuations of comparable properties should themselves be comparable; and, rates should not be levied in such a way as to discourage the development of industry, the building of houses, or the repair of existing property. As the Sorn Committee found, the Scottish rating system does not satisfy these tests. The Bill attempts to provide a better system, and similarly it seeks to modify the present arrangements in regard to equalisation grant so as to provide fairer treatment for Scotland.
The most radical change which the Bill proposes to make in the rating system is the abolition of owners' rates. The Scottish system, under which part of the rates is paid by the owner, goes back as far as the seventeenth century, but it has become out of date with the great extension in local government services and the steep increase in their cost. The average rate levied on owners last year in Scotland was 7s. 10d. and the total sum payable by owners as a result of these rates was a little short of £22 million. Where rented property is concerned, the owner has to pay these rates out of the rent which he receives, and if the rates go up the owner will naturally seek to increase the rent which, your Lordships will recognise, is quite impossible where rent-controlled property is involved. But since, in general, every increase in the rent is rateable, the owner is caught in a vicious circle of paying rates upon rates.
Perhaps I should explain what I mean by rates upon rates. Suppose an owner, for one reason or another, wishes to increase his rent by £10 a year and that in the district where that property is 1036 situated the owners' rates are running at 10s. in the £. To obtain his £10 increase, he has to add the rate on that amount. In this instance that of course would be £5, so the rent would be increased by £15. But, as your Lordships will recognise, rates at 10s. in the £ on £15 are not £5 but £7 10s. 0d. and so he has to go on making further additions until he discovers that to recover the sum of £10 in rent he has to charge a sum of £20. Your Lordships will realise that the occupier of these premises has to pay occupiers' rates on that increased amount.
I will give your Lordships two actual examples of the result. For an owner to obtain an increase of £5 in Glasgow last year he would have been required to increase the rent by £8 10s. and the total cost to the tenant, taking occupiers' rates into account, would be over £14. That may seem peculiar to your Lordships, but there are worse instances than that, for, if we come to the higher rated areas of Lanarkshire, for the owner to obtain an extra £5 the cost to the tenant would be no less than £23 10s. 10d. Your Lordships will see that the true rent is obscured because the owner has to charge a gross rent which includes an element of owners' rates, and is also uncertain because he does not know from one year to another what his rating liability will be. Every time there is an increase in owners' rates, the sum available to meet the cost of maintaining the property becomes less.
In that connection, if I may go back to the year 1920, I find that a rent of £20 left the owner, after deduction of owners' rates, with £16 11s. 8d. To-day, the average is £12 3s. 4d. It is evident, therefore, that the system of owners' rates has had two very serious effects on the housing position in Scotland. It has discouraged the building of property for letting and, in the case of controlled houses, it has been an obstacle to landlords doing repairs which are as much in the tenant's interest as their own. The present system has a further disadvantage. It has made impossible a fair comparison of the rating resources of local authorities in Scotland and in England, and has prevented a proper allocation of Exchequer Equalisation Grant between the two countries.
1037 The Sorn Committee concluded that they were—and here I quote from their Report—in no doubt that owners' rates are now an unnecessary and harmful complication in the Scottish system of rating which disguises the finances of owners and occupiers of all classes of property and rating authorities alike, impedes the provision of housing and the growth of industry, and makes it impossible to introduce urgently necessary reforms in the valuation system.In the Government's view this unanimous conclusion of the Sorn Committee, which has been endorsed by—among many others—the Convention of Royal Burghs and the Association of County Councils in Scotland, should be accepted, and effect is given to it in Clause 16 of the Bill. The Government have also accepted the Sorn Committee's recommendation that when owners' rates are abolished rents should be adjusted so that landlords and tenants neither lose nor gain as a direct result of the Bill. Any future increase of a landlord's return on his property will depend not upon the passing of this Bill or upon any consequences that flow from this Bill. This adjustment is achieved by subsection (2) of Clause 16 and the Third Schedule.
The Bill also provides for an entirely new system of valuation. At present the rateable value of property in Scotland is, as a rule, the rent at which it is let, or at which the assessor estimates that it could be let. In present conditions this has led to great unfairness. For example, the rents at which most houses are let—and so their rateable values—are so controlled and fixed that they are now quite different from the rents and rateable values of other types of property, such as shops and offices. The Sorn Committee pointed out that any valuation system to be fair must ensure that occupiers of similar premises have similar valuations, and that the present system does not do this. They accordingly recommended a new procedure under which the gross annual value will no longer be tied to the actual rent where one is passing. Instead, the assessor will determine for all properties the fair rent at which they might reasonably be let. In other words, the new system will base the liability for local rates on an impartial estimate of the fair return which the property would command in a free market.
1038 The Bill also proposes a reform in the method of valuing agricultural property. At present agricultural houses and land and buildings are valued together and rated on one-eighth of their joint value. This method of giving effect to derating preserves the conventional principle of valuing an agricultural property as a whole, and was Intended to secure broadly the same result as in England and Wales, where farmhouses are valued in the ordinary way but agricultural land and other farm buildings are completely derated. The Sorn Committee found, however, that the Scottish system had produced anomalies as between different subjects and had led to misunderstanding as to the purpose of agricultural derating. They therefore recommended that in Scotland, as in England, the land should be entirely derated and houses valued in the ordinary way. Effect is given to this recommendation in Clause 7.
The Bill also provides a better method of calculating the amount of Exchequer Equalisation Grant which should be-paid to Scottish local authorities. The purpose of the Equalisation Grant is to bring the rating resources of the poorer authorities up to a national standard, but great difficulty has been found in the past in deciding what the standard should be in Scotland. As your Lordships will remember, various methods have been tried, and since the passing of the Local Government (Financial Provisions) (Scotland) Act, 1954, the total Scottish grant has been calculated as eleven-eightieths of the total English Brant.
This was, however, a temporary arrangement which has since been reexamined in the light of the Sorn Report by a committee under the chairmanship of the Parliamentary Under-Secretary. It is not possible until revaluation has been completed to determine the true relationship between rateable values in Scotland and in England, and the committee accordingly agreed that for the time being the Scottish grant must still be fixed on some interim basis. The Government have accepted the committee's recommendation and effect is given to this proposal in Clause 26 and the Sixth Schedule, and the new formula will operate from 16th May this year.
It has recently been estimated that for 1956–57 Scottish local authorities will receive approximately £2 million more by 1039 way of grant. No authority will lose as a result of the new formula, and while some will receive only small indirect benefits, many will benefit by as much as the equivalent of a 1s. rate or more. This is still an interim arrangement, and under Clause 29 will expire at the end of the sixth local financial year after the passing of the Bill.
Part III deals with the valuation and rating of gasworks. In pursuance of a suggestion made by the Sorn Committee, this difficult problem was examined by a working party of officials, and the scheme contained in Clauses 24 and 25 and the Fourth and Fifth Schedules is on the lines recommended in their report. It is based on the scheme contained in the English Act passed last year, but it also meets an objection taken by the Sorn Committee to the English scheme by providing for periodic reviews of the basic valuation used in determining the liability of the Gas Board for rates. These highly technical and complex proposals have been accepted by the Scottish Gas Board, and, with some reservations, by the local authority associations.
To sum up, the Government are convinced that the present valuation and rating system is out of date, is full of anomalies and is detrimental to Scottish development, and that the fundamental changes provided for in the Bill are essential. I have reason to hope that noble Lords opposite will agree with that sentiment. As I said previously, the noble Lord, Lord Greenhill, signed the unanimous Report presented by the Sorn Committee, and the noble Lord, Lord Mathers, made an eloquent appeal to the Government in 1954 not to delay in dealing with the reform of the Scottish rating system. The noble Lord was also a member of Lord Sorn's first Committee, which at least implied that something ought to be done.
I trust that your Lordships will agree that the passing of this Bill should not be delayed, since a great deal will have to be done after it receives the Royal Assent, and done very quickly in order to bring it into operation next year. In my view, there can be no doubt whatsoever that this Bill will be of immense benefit to Scotland, and that it will remove obstacles to the development of industry and the production of houses, 1040 and will ensure a fair deal for Scottish ratepayers. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Strathclyde.)
§ 4.29 p.m.
§ LORD BURDEN
My Lords, I would not dare to presume to intervene in a Scottish problem, and particularly such a complex problem as this, especially as my noble friends Lord Mathers and Lord Greenhill are experts in this matter. But, by the courtesy of my noble friend Lord Mathers, I rise just to make one point. If I may do so as a local government man, I should first like to express my gratification that these powers and responsibilities remain with the local authorities. The staff who have been engaged in this work, or some of them at any rate, are gravely apprehensive as to their future under the regulations which will be issued. I have met some of these men and women, and I can assure the noble Lord that when I say they are gravely apprehensive I am speaking the exact truth. I am sure it would be possible to clear away those apprehensions, and if the Minister in charge of the Bill would be so kind as to meet me with one of their representatives, I am sure we should be able to solve these problems. If I can take that to be so, I should be very happy indeed.
§ 4.32 p.m.
§ LORD MATHERS
My Lords, we are indebted to the noble Lord, Lord Strathclyde, for a very clear and comprehensive review of the position with which we are faced, and more particularly the position with which the Sorn Committee was faced when it set about its task of making the review upon which this Bill is so largely based. The noble Lord has certainly our unanimous agreement that this is a very important Bill. I am sure that he also has our endorsement of the tribute that he paid to Lord Sorn and those who worked with him so well in order to produce the document which is, as I say, the basis of this Bill.
The noble Lord has indicated that my noble friend Lord Greenhill was a member of that Committee, and he seemed to seize upon Lord Greenhill as a witness on his behalf. Then he harked back to an adventure of mine in this particular field when Mr. Tom Johnston was Secretary of State for Scotland and 1041 put me on a Committee that started under the then Dean of the Faculty of Advocates, who was named McIntyre, but finished under Lord Sorn, the same person. The Committee was set up to ascertain how it might be possible to accelerate the building of houses in Scotland. It made recommendations with regard to dealing with owners' rates in a way that would help to remove that particular obstacle to the greater provision of houses which were so much needed at that time.
The Sorn Committee did its work very well indeed, against a background of a tangled skein of administration and difficulty because of this owners' rates position. I was readily agreeable to what was proposed in that Committee for dealing with owners' rates. There was some apprehension then, I remember, about taking away the full responsibility of owners' rates, and the readiness with which I agreed to what was proposed was due to the fact that I had lived for fourteen years south of the Border and knew how much more smoothly the English system was working. It was there also that I had my only incursion into local politics when I served on the Carlisle City Council for a short period before I was moved to Edinburgh.
The Sorn Committee during the time of its work also had a background of considerable apprehensiveness on the part of tenants when it was known that there was a recommendation about the removal of owners' rats. I am sure that those tenants were in large measure labouring under a misapprehension; it was thought that that taking away of liability for owners rates would make serious difficulty for the tenant; but the noble Lord, Lord Strathclyde, has made it clear today that the component in the rent hereafter will be adjusted by lowering the rent to the extent of the amount of that rates component that has to be allowed for.
I am hoping that very great progress will be made under this Bill. It has had more extensive discussion, I think, in another place than any Bill which if can remember. Indeed, I have been saying to my honourable friends in another place that they seem to me to be talking the Bill threadbare, and it comes to us practically in that position. I do not profess to have read every word of the discussions that have taken place—that would have meant my going on a long vacation 1042 and settling down to it—but I observed that great care was being given to the discussion of the terms of the Bill when it was before the Committee in another place. I think now, therefore, that it is hardly necessary for this House to spend much time upon it. Most of the points have been made clear, and the Government's intention has been made clearly manifest.
There is a usefulness, however, that may come from this Bill's appearance here, and the fact that it can be discussed here. I am quite certain that during many of the exchanges in another place there was no certainty on the part of the Government as to whether they should or should not refuse what was being pleaded for f:7om the Opposition side of that House. I put it to the noble Lord in charge of the Bill: has he any news to give of the further consideration that I am sure must have been given to the Bill since it passed in another place; and whether there is anything that we can hope for in the way of improvement—I am talking from an Opposition point of view—along the line that was advanced in another place?
I have indicated the close contact that my noble friend Lord Greenhill has had with all that has gone to produce this Sorn Committee Report. But apart from that, of course, he is exceedingly well equipped, from his Scottish local authority experience, from his knowledge of affairs gained through his service as Treasurer of the City of Glasgow, to deal with this subject. That seems to me to make him very much better equipped than I am to deal with the intricacies of this Bill. I am glad that he has acceded to my wish that he should undertake that task to a much greater extent than could possibly be done by myself, but I wish to put on record the position of the Scottish Gas Board with regard to Part III of the Bill. The noble Lori, Lord Strathclyde, in his speech indicated that arrangements had been made in that connection. Here I must declare an interest because I am a part-time member of the Scottish Gas Board. We have accepted, with some misgivings and with some concern, the arrangements that have been made, but should like to put a statement on record for the information of all who care to read it, and, more particularly, for the information of the Government, in order that they may have at hand knowledge of 1043 how this Bill affects the gas industry in Scotland, and that in any considerations which arise they may have this point of view in mind.
I asked that some notes might be given to me in this regard, and the statement which I have received from the Chairman of the Scottish Gas Board is so clear and so succinct that I wish simply to put that statement on record at this point. Here it is:The Bill proposes certain changes in valuation which will affect the Scottish Gas Board. The present method of determining the Board's valuation for rating is known as the revenue principle. This principle operates by means of adjustments or disallowances on the Board's profit and loss account. If, taking one year with another, the Board makes neither profit nor loss in the ordinary accounting sense, the effect of the adjustments referred to is to produce a 'profit' (or 'surplus') the amount of which determines the annual rateable value. Broadly speaking, this 'surplus' is equivalent to the annual capital charges for interest and depreciation on the fixed assets of the Board.Year by year, therefore, the valuation reflects the rise or fall in capital expenditure. In the period since vesting date the Scottish Gas Board have had to incur high capital expenditure, mainly in the replacement of plant which could not be replaced during the ten years between 1939 and vesting date because of wartime and post-war shortages of labour and materials. In normal circumstances this expenditure, quite properly, would have entered into the valuation which, having been run down during the period of low replacement, would thereby be raised again to its original level. But owing to the inflationary conditions which have prevailed during the past seven years, when replacements have cost something like three times the cost of the assets replaced, the valuation is rising far beyond its original level. Thus the Board's valuation, because it is recalculated annually, is being rapidly influenced by inflated prices, whilst other valuations which are revised only at relatively long intervals are remaining comparatively static. Furthermore, any accounting profits earned in excess of the annual capital charges previously referred to, even if only for the purpose of creating those reserves required by the Gas Act, 1948, enter into the valuation on the revenue principle and are dissipated to the extent of at least 50 per cent. in rates. No other manufacturing industry to-day has to carry such a burden, and in other nationalised industries the revenue principle has been abandoned; for railway and electricity undertakings when they were nationalised in 1948 and for English Gas Boards by the recent Rating and Valuation (Miscellaneous Provisions) Act.The Sorn Committee, in paragraph 111 of their report, recognised the defects of the revenue principle of valuation especially in its application to undertakings which require to embark on both new and replacement construction during periods of sharply rising prices, and 1044 they recommend that alternative methods of valuing the Scottish Gas Board's undertaking should be investigated. This was done by a Working Party set up by the Secretary of State upon which the Scottish local authorities, the Scottish Gas Board and the Ministry of Fuel and Power were represented.In brief, the Valuation and Rating (Scotland) Bill provides that for the transitional period until 1961–62 the Scottish Gas Board's valuation shall be frozen at the level of the valuation for the current year. 1956–57, subject only to annual adjustment in respect of changes in output. During this transitional period, therefore, the Board's valuation will be treated similarly to other valuations in Scotland which are also to be frozen; furthermore, the method of determining the valuation during this time will resemble closely the methods used for determining the valuations of English Gas Boards and other nationalised industries, with this important exception, that the frozen valuation of 1956–57 will be at a higher level than the basic valuations of other nationalised industries, which are those of their respective pre-vesting years.In 1961–62 the Scottish Gas Board will be revalued, again on the revenue principle, but the normal operation of the principle will be modified in such ways as the Secretary of State may prescribe after consultation with the Board and the local authorities. A similar revaluation is to take place every fifth year after 1961–62. It is unfortunate that the revenue principle, albeit with modifications, is to be perpetuated in this way, having regard to the known deficiencies of this method of valuation; and it is not altogether satisfactory that the determination of future valuations should depend partly upon negotiations between the interested parties. The best that can be said for these provisions of the Bill is that they leave a measure of flexibility and provide for future discussions and negotiations out of which may ultimately emerge a more precise solution to what is admittedly a difficult and complicated problem.The method of apportioning the valuation of the Scottish Gas Board between the local authorities concerned throughout Scotland, which is now based upon the structural cost of the parts of the undertaking in each rating area, was also criticised by the Sorn Committee, and the Bill replaces it by a method based on the production and consumption of gas in each rating area. Such a method was introduced for Gas Boards in England and Wales by the Rating and Valuation (Miscellaneous Provisions) Act passed last year. Only experience will tell if the new method is more equitable than the old.That is the statement of the Scottish Gas Board. They are by no means satisfied that the provisions of the Bill will secure for them complete equality of treatment with other ratepayers, or with other nationalised industries, but they reluctantly accept the Bill as the best compromise at present obtainable between their views and those of the Scottish local authorities. I put that 1045 fairly long statement on record, in order that it may he a guide to the Government by enabling them to know what is the precise position of the Scottish Gas Board. It only remains for me to thank the noble Lord, Lord Strathclyde.. for the presentation of the Bill. We shall look forward to examining its details more closely at a later date.
§ 4.50 p.m.
§ THE MARQUESS OF LOTHIAN
My Lords, I should like to add my support and welcome to this Bill. I am certain that it will I be of immense value to house building in Scotland in the years to come. As the noble Lord, Lord Strathclyde, pointed out, it is a Bill of great technical complexity, and I feel that it would not be proper for a layman such as myself to plunge very deeply into its details, but I hope your Lordships will bear with me if I make a few observations on what might be some of its less important aspects.
The first matter on which I should like to touch concerns the assessors who will be acting under Clause 1 of the Bill. They are going to have great responsibility, and I think it is of the utmost importance that they should be men of the highest qualifications. I should like to suggest that, if possible, they should be members or fellows of the Land Agents Society or the Royal Institute of Chartered Surveyors. I feel flat the Scottish Valuation Advisory Council which is to be set up under Clause 3 would benefit by the experience of such people as retired county clerks, who are invariably men of the widest practical experience and wisdom in these matters, and, what I think is almost more important, they are men who have rightly earned the respect of the general public with whom they have dealt throughout their lives.
I am not quite happy about limiting the right of appeal to the year of revaluation—in other words, every five years—which Clause 9 sets out to do. I realise that under the relevant subsection are set out the widest possible exceptions to this, which cover practically every material change of circumstance and practically every emergency that can be thought of. If the exceptions are so comprehensive, it might be better to allow the right of 1046 appeal whenever a person wished to make it. I do not feel that the Appeals Committee would be swamped by a flood of trivial complaints. I think that the public's sense of responsibility would prevent that. Where an occupier makes an appeal against an assessment, it would be only fair that the owner should be notified. I appreciate that he does not come into the matter directly, but I think it would cause a great deal less confusion if that provision could be inserted in the Bill.
So far none of the noble Lords who has spoken has touched on Clause 17; I do not know why. The history of Clause 17 struck me as being a little curious. The Sorn Committee recommended that some portion of rates should be levied on the owners of unoccupied houses. When this Bill was first introduced in another place, no provision was made for that at all, and it was only on Report stage that Clause 17 was introduced. I think that your Lordships would be grateful if we could have a little more light thrown on this situation. Why exactly was a clause introduced in this manner, and what exactly does it set out to achieve?
I have only two observations to make on it at this stage. The first is that if Clause 17 is designed to remedy a particular situation that has arisen in a particular area in Scotland, I feel that it is rather hard on property owners throughout Scotland that they should have to suffer for the practice of what I am quite certain is a minority. My other point is that it can be argued reasonably that unoccupied premises benefit from the rates—for instance, from police protection and protection against fire—and that owners should pay some contribution towards the rates. I do not think that your Lordships would seriously quarrel with that. But I feel that if that is the case and if that is the reason for Clause 17, the proportion levied—the charge, as it is called—of 25 per cent. is too high. I think it should be 10 per cent. or possibly 15 per cent. I do not wish to detain your Lordships any longer. I should like once again to welcome the Bill. I think that on this occasion Scotland has learned something from England, and I feel certain that it Will be put to very good account.
§ 4.57 p.m.
§ LORD GREENHILL
My Lords, the noble Lord, Lord Strathclyde, was good enough to point out that I had been a member of the Sorn Committee, and since I am the only Member of either House who was a member of that Committee, perhaps I may be permitted to follow the noble Lord in congratulating Lord Sorn and to say how much he deserves every possible tribute we can pay him. As the noble Lord pointed out, the Committee's Report was unanimous, though the members of the Committee were of different political opinions. I am not sure that I feel comfortable under that piece of praise. Though it is true that we arrived at the same destination, it does not follow that we all trod exactly the same path in order to reach it. Part of the tribute due to Lord Sorn is due to his patience, his kindly manner and the charm of his personality, which perhaps subdued a little of the fire we might have shown and persuaded us that to modify a little our extreme positions would be more reasonable in the circumstances. There is no doubt that every member of the Committee was impressed by the profound knowledge and wide experience in the law and practice of valuation and rating that Lord Sorn undoubtedly possesses. We saw in his dealing with expert witnesses how well he was able to bring out all the difficult and intricate points of which valuation is so full.
If your Lordships will not think it egotistical, I would say that my own biases were along these lines. I was anxious to ensure that the rate burden, in the event of owners' rates being abolished, would not be too heavy on the poorer section of the community. Incidentally, I began with the view that owners' rates ought to be abolished because they were obsolete, they were creating the difficulties that the noble Lord, Lord Strathclyde, has to some extent mentioned, and it would be helpful if we could do away with this antiquated method of raising local revenues by substituting something which would achieve the same thing, without benefiting the landlords, on the one hand, or penalising the tenants, the occupiers, on the other. Another point that occurred to me, and about which I was concerned, was the question of equalisation grant, about which I will say a few words in a moment.
1048 The third point was the position of housing revenue accounts in local authority housing departments. Any little opposition that I felt to the remarks of the noble Lord, Lord Strathclyde, was due to what I sensed was an overemphasis of the difficulties that private landlords had suffered in the past. While I am not prepared to deny that in some cases they have suffered—and, indeed, part of the dilapidation we see in Scotland is due to the inability of some landlords to pay for the cost of keeping up their properties—nevertheless, I think that nowadays we had better realise that the increasingly large landlord is the local authority itself. No-one will know better than the noble Lord, Lord Strathclyde, how hopelessly distorted are the housing revenue accounts of local authorities by the unsatisfactory financial basis under which they are working just now. It seems absurd that in the case of Lanarkshire, for example, which the noble Lord, Lord Strathclyde, mentioned, although they are landlords and therefore are owners of property, they, as owners of property, have to pay owners' rates to themselves in excess of the amount that they receive for rents. I think that in some cases that is true.
It is, as I say, undoubted that this spiral effect of owners' rates has had an evil influence on the building of new houses, on the keeping in repair of old houses and on the erection of factories, because of the uncertainty of future trends. Therefore I feel that by the abolition of owners' rents we shall, in the long run, benefit considerably. Indeed, I think it is no exaggeration to say that, in anticipation of the passing of this Bill, we are already seeing a certain increase in the building of houses by factory owners who are anxious to house their own workers, because of the difficulty of getting homes for them near their work.
However, I am not quite so happy about the matter of equalisation of grant. A rough mental calculation suggested this. First of all, it is admitted that Scottish valuations were higher than English. Therefore, in the calculations of equalisation grant some kind of addition had to be made to the English average in order to bring it into what was hoped would be the line adequate for Scotland. The first figure adopted was 25 per cent., and it was adopted not as a result of any 1049 careful reckoning, but simply because some thirty years ago that had been the figure assumed as the appropriate figure; and, of course, it was found that that was totally inadequate. As the noble Lord, Lord Strathclyde, has already told us, that was changed to the Goschen formula. The Goschen formula has again been revised, and another basis, embodied in this Bill, has been adopted, it, too, being merely an interim arrangement.
Should this new formula be regarded as adequate? I am inclined to say that it should not. I say that not because of any fault I am finding with the Secretary of State but because I feel that behind this arrangement lies the hidden hand of the Treasury. My own calculation was something like this. If English valuations were to undergo the revaluation, which has now been completed, it would show (I guessed in those days) that English valuations would go up considerably; and if, on top of that. Scotland was to get its additional increase, then Scotland would get very much more than it is getting even under this particular formula Secondly, if Scotland were to go through its own revaluation, then, in my view—I may be wrong, of course—the valuations would come down considerably, if for no other reason than that the owner's proportion of rate would no longer be included in the valuation figure. Therefore, there would again be, for the purposes of equalisation grant, a much higher figure given to Scotland. If your Lordships wish an actual figure to be put upon that, I would say that if the present figure of equalisation for Scotland is something over £9 million, then you could multiply that by two, or even three, as the figure of equalisation grant which ought to come to Scotland under the basis of a revaluation in England and a revaluation in Scotland. That would mean a tremendous addition to the giant coming to Scotland. It would mean, also, a great reduction in the rate poundages which would be necessary to maintain that same revenue.
It seems strange to me that Clauses 26, 27 and 28 of the Bill, dealing with equalisation grant, were hardly debated in another place. When I ask myself why there should be this apparent ignoring of this valuable series of clauses, the only conclusion I can come to is that 1050 nobody understands them except the expert; nobody appreciates the significance of the formula contained in those clauses, and, therefore, they are just going through in ignorance. However, I feel that this Bill, with whatever faults it may possess, is a great advance on the position hitherto; and I believe that, with a greater uniformity of valuation throughout Great Britain, we shall certainly get a much more equitable distribution of the grant than has been the case hitherto.
But I do feel that a word of appeal should be made to those valuation authorities which the Bill will set up. If I understand the feeling that is prevalent at the moment, I think there is a certain resentment at the disturbance of the existing machinery which the Bill will create. As the noble Lord is aware, assessors and their staffs will cease to be employed at a certain date, and there will be a new appointment of staffs and assessors. As the noble Marquess, Lord Lothian, pointed our, the qualifications will be much more closely examined in future than they have been in the past, though I, for one, am not prepared to condemn the standard of those who have worked hitherto.
The areas will be different, and combinations will be necessary. I gather that some officials are saying to themselves, "Why should we work this at all? We are being disturbed. We are finding difficulty in getting staffs. It is going to cost us money, and we are not being paid for it." The Sorn Committee, as the noble Lord is aware, recommended that 50 per cent. of the costs of the valuation authorities should be met, and, for reasons which I frankly do not understand, the Secretary of State has not been prepared to grant authorities that proportion of the costs. My own belief is that if the Secretary of State could say to these authorities that he is prepared to consider making them a grant of 50 per cent. towards their valuation set-up costs, not only would the Secretary of State have, by virtue of the grant he gives, a greater control over the workings of these assessors' departments, but he would also have a much greater measure of good will in carrying through these difficult preliminary stages which are urgently needed. I hope that the Secretary of State will give that particular aspect his serious consideration, because I think it will lead to an improvement of the present situation.
1051 The other kind of appeal I should like to make is this. Whatever inconvenience present assessing authorities feel themselves under, they should, in the general interest, try to fall in with the requirements of this Bill, because in the long run not only will the individual authorities be more certain of their financial position, but the whole machine will run smoothly and efficiently and will not create the anomalies from which we have suffered in the past. I am highly gratified that the Government have, to some extent, embodied the Sorn Committee recommendations, and I hope that, with such improvements as we can suggest in the course of the Committee stage, this Bill will go through and become the law of the country.
§ 5.14 p.m.
My Lords, I wish to welcome this Bill, which is, as has been stated already, about the most important piece of legislation as regards Scotland which we have had before us for a very long time. I should also like to say how lucky we are to have the noble Lord, Lord Greenhill, with us for the later stages of this Bill, with his great knowledge of the Sorn Committee Report. There is only one doubt I have about this Bill, or one thing about which I am not happy, and that is Clause 17. The White Paper on Valuation and Rating in Scotland emphasised no fewer than nine times in the first two pages the desire and, I might say, the determination of the Government to abolish owners' rates. The White Paper ends up by saying:So long as owners' rates remain in any shape or form, the element of unpredictability which has proved so harmful in the past will also remain.It is true to say that in the Sorn Report itself, paragraph 148, dealing with unoccupied property, says:If owners' rates are abolished, unoccupied property would not be rateable at all. This, we think, is as it should be, but it has been suggested to us by an important local authority witness that the assessor should be entitled to designate separately in the Valuation Roll any unoccupied subject which is lettable but which the proprietor is not genuinely seeking to let.…The operative thing that conies next is:We agree that a provision for rating owners who are not genuinely seeking to let empty but lettable dwelling houses is reasonable.Then it goes on to say that property—
I am sorry. I goes on:but we doubt whether it is properly a matter for the assessor. It is not a valuation question but one rather, like the existing remission of occupiers' rates under Section 243 (2) of the Act of 1947, for the administrative discretion of the local authority. We therefore recommend that it should be dealt with by a provision to the effect that the local authority may after due notice levy such proportion of the new single rate …I do not want to read any more unless the noble Lord wishes. The point I want to bring out is that the Sorn Report confined itself to dwelling-houses, and it also definitely set a proportion of the single rate. With great respect, it does seem to me that the inclusion in the Bill of Clause 17 (5), which reads:A charge under this section shall be leviable and recoverable as if it were a rate and shall be treated as money paid as rates.is the sort of—shall I call it?—deception or masking which is hardly worthy of the Bill. There is a justification, possibly, for having some form of rates for services such as fire, police, and so on. I would be much happier if it were honestly admitted, and not covered up by what, to my mind, is not worthy of the Fourth Form at Eton as a form of deception.
If the noble Lord can tell us, I should like to know why the provision in Clause 17 goes far wider than the Sorn Committee Report. If he could tell us why that is, I should be most grateful. We must remember, as the noble Lord, Lord Greenhill, has told us, that the biggest landlord in Scotland to-day is the local authority. How often is the local authority going to leave its houses and make no attempt to let them? I hope I have not misrepresented the noble Lord—I think he did say that.
I will leave it at that. There is only one other thing which I think rather a pity. When we are having a complete reorganisation of the rating system, which is very much required, and when I think practically everybody is in favour of the whole scheme, I feel it is a pity that the position of Crown property was not taken into account and streamlined or cleaned up, 1053 whatever one likes to call it. I have in mind fire stations, police stations, G.P.O. property and Territorial drill halls. Most of them now pay a contribution, but the net result is that the contribution they pay to the local authorities, who are very short of money and supply full services to all these people, works out at about one-half of what it would do if they were rated under the normal method of rating that is proposed for the rest of the people. I shall have to be rather careful what I say about the Territorials, but I feel that in these days one can hardly say that the former reasons apply. They are not now really a local voluntary effort—I suppose they are, to some extent, but not to the same extent as they used to be. The War Office should face up to their commitments and pay proper rates. When all is said and done, what happens is that we have to receive a bigger equalisation grant, so we get the money in the end. I suggest that this matter should be streamlined and we should have a little automation in the Treasury.
§ 5.22 p.m.
THE EARL OF MANSFIELD
My Lords, with the other speakers, I welcome this Bill. Like both my noble friends on this side of the House, I think that Clause 17 needs a great deal more explanation. My noble friend Lord Lothian hinted tactfully at its possibly rather disreputable origins. I propose to be somewhat more explicit, because what the noble Marquess, Lord Lothian, said is perfectly true: that the rest of Scotland is to be invited to suffer for the sins, if they be sins, of Glasgow and what I may call its immediate surroundings. It will not be the first time that the rest of Scotland has been in that unfortunate position. Noble Lords are aware, I imagine, that the motto of Glasgow is "Let Glasgow flourish!" Under the Socialist administration, under which we have now suffered for a number of years, that motto has been unofficially extended to read "Let Glasgow flourish!—all except that miserable section of its inhabitants which dares to own private property in the shape of houses."
The fact that the housing situation in Glasgow is as it is to-day is largely due to the implacable hostility that the town councils show to the building of houses for owner occupancy, or indeed to houses 1054 belonging to any private person at all. I hold no brief for Glasgow property owners as a whole—many of them in the past have undoubtedly kept houses in a very poor condition—but why does a landlord keep a house empty when he is obviously losing money by so doing? In nine out of ten cases, the reason is that he wishes to sell the property, and the reason he cannot sell it is not always that he is asking too high a price; sometimes it is that he does not wish to sell because he wants to get rid of the whole block of similar houses.
Again and again your Lordships will see in Scottish papers notifications of sales of one or more houses to wind up a trust. I have frequently noticed, in the case of a trustee of a will, or a public institution or a local authority which is receiving a legacy or something of that sort, how long proceedings have been delayed because the trust could not be wound up owing to its having certain real estate that could not be disposed of. Very often to sell a block of houses without vacant possession means that the owner—and that owner, all too often, is a person of very limited means—must lose a great deal of the value of the property. Therefore, to assume that everyone who keeps a house empty is doing so for some malevolent purpose, is entirely incorrect.
Where it is done unjustifiably applies almost entirely to the Glasgow area. But even there, why should the small property owner be deprived of a large proportion of the value of the house? I submit it is unfair. It is most unfortunate that Clause 17 should ever have been accepted by the Government. I should like to see it exorcised altogether on the Committee stage, or, if it is not to be removed, the figure of 25 per cent, reduced to the much more reasonable figure of, say, 10 per cent., as was proposed by the noble Marquess, Lord Lothian, If that is not done, we shall be in danger of inflicting a definite injustice on small property owners who, whatever the town council of Glasgow say, are by no means always persons of ill repute.
§ LORD GREENHILL
I am not sure what the Standing Orders of your Lordships' House are, but, since this is an attack upon a city with which I have had and still have some connections, perhaps I might get up, not to apologise 1055 for Glasgow but to clarify the position and convince the noble Earl that Glasgow is not nearly so bad—
§ SEVERAL NOBLE LORDS: Order, Order!
§ LORD GREENHILL
If I am permitted by the House to make this explanation, I will give it. It is for your Lordships to say.
§ THE DUKE OF BUCCLEUCH AND QUEENSBERRY
My Lords, may I add only two or three sentences in order to emphasise further how great is the demand and approval for this Bill. My noble friend Lord Strathclyde is justified in claiming that this is a most important Bill. There is general agreement that it is a great advance. There has been long discussion in another place, with many Amendments of the Bill and criticisms, but it is recognised that this is a very useful Bill. Our criticisms here have been limited to one or two points, and in other respects I think there is little need for controversy. I submit that Scotland is indebted to the Secretary of State, to the noble Lord, Lord Strathclyde, and to their advisers for the great care and trouble they have taken in the preparation of this Bill. It will be most helpful in rating and housing problems in Scotland. We have a very good Secretary of State for Scotland, who devotes himself whole-heartedly to the affairs of Scotland. Now that this discussion has taken place, I suggest that our thanks are due to him and to the noble Lord, Lord Strathclyde, for this Bill.
§ 5.27 p.m.
§ LORD STRATHCLYDE
My Lords, I should like first of all to thank all those noble Lords who have taken part in our debate this afternoon for the helpful manner in which they have put forward their various suggestions. I will reply to the best of my ability to such points as appear to call for a reply from me now. I should like to say, even in the absence of the noble Lord, Lord Burden, so that it may be on the record, that I shall be very pleased to meet him at any time which is convenient to him with any persons whom he cares to bring with him for the purposes which he mentioned in the course of his remarks.
The noble Lord, Lord Mathers, asked me whether I could give any news as to further improvements. I am sure your 1056 Lordships will be gratified to learn that the Government cannot at this moment think of any further Amendments to this Bill. I hope that will help to speed it on its way through this House. I have to thank the noble Lord for the full explanation he gave about the position of the Scottish Gas Board, which will be noted, naturally, when the Report of this debate is printed. The new suggestions are really more fair and logical than those which have been in being up till now. I hope that they will prove satisfactory when they are put into operation.
The noble Marquess, Lord Lothian, said that assessors should be men of the highest qualifications, and he suggested that members of the Land Agents' Society and of the Institute of Chartered Surveyors should be considered. There is no reason whatsoever to prevent their being considered, and in due course no doubt they will be. Then he asked me about the Scottish Valuation Advisory Council and about county clerks being on that body. I can tell him that there is nothing in the Bill to prevent the appointment of county clerks, provided that they are men experienced in law or in valuation. The noble Marquess also mentioned the question of appeals. The owner will receive notice of the valuation, and it does not seem to be necessary for him to receive notice of any appeal since, of course, under the new arrangements, he will not be called upon to pay the rates.
Now I come to the clause which appears to be troubling most noble Lords, Clause 17, which was mentioned both by the noble Marquess, Lord Lothian, and also by the noble Viscount, Lord Stone-haven. I was invited by the noble Marquess to say why my right honourable friend the Secretary of State proceeded as he did, and he asked me what the clause sets out to achieve. I agree with the history which the noble Marquess mentioned, but, of course, Clause 17 was introduced as the result of an undertaking which was given by my right honourable friend the Secretary of State during the discussion on the Committee stage in another place. When the Bill was originally put forward the clause was not there, and it was inserted on the Report stage, as the result of that undertaking.
There is obviously a great difference of opinion on this matter, but I think the 1057 real reason which made the Secretary of State give an undertaking to consider the matter was that it was a recommendation of the Sorn Committee; and it seems that there is at least some justification for requiring an owner who deliberately keeps his property empty without reason to pay at least something towards the cost of services which are provided. There are the police who, after all, give him some, measure of protection there are the fire services, which give him another measure of protection; and it may even be that the fact of his unoccupied house being there was taken into consideration when, for instance, a new water main was laid in the vicinity by the county council or by the local authority. For these reasons, my right honourable friend came to the conclusion that it was right that owners of unoccupied property who keep their property unoccupied without any reasonable cause should contribute something towards those services. As I have said, there may be differences of opinion, but it seems to me—
§ THE EARL OF STAIR
May I interrupt with one question? Who is to be the judge of the reasonable cause? That is the only thing that is worrying me.
§ LORD STRATHCLYDE
In the first instance, the local authority. But the owner, if he is dissatisfied, can go to the sheriff; and then, of course, the decision will be that of the sheriff. I think that noble Lords will find that there are considerable safeguards in Clause 17, and I hope that those safeguards will be sufficient to prevent any injustice from being done to those who happen to have unoccupied houses.
§ LORD STRATHCLYDE
The noble Lord says, "for over six months." It may be for a longer period than that, because the noble Lord will realise that the local authority have first of all to satisfy themselves as to the conditions under which the house is being kept unoccupied, and then there is to be six months' notice before anything can be done in the matter.
§ LORD MATHERS
That is what seek to suggest; that quite a considerable time must elapse before any attempt can be made to apply this 25 per cent.
§ LORD STRATHCLYDE
Beyond that, I hope that the other safeguards will be sufficient. The noble Lord, Lord Greenhill, said he thought the only thing he would take me to task about was that I had over-emphasised the difficulties of private landlords. May I say to the noble Lord that he has known me for a great many years, and I think that he knows very well what my views on that subject are: that no body of persons in this country has ever been treated so badly as private landlords, even in the last forty years. I have said that repeatedly in the noble Lord's presence in another place. I have said it often in the City Council in Glasgow many years ago. I say it can be proved over and over again.
My Lords, we are not, of course, debating a measure dealing with rents or the treatment of property owners; we are debating the question of rating and valuation, and on that topic the noble Lord has referred to the equalisation grant. I rather thought that the noble Lord was almost taking me to task because, in the first place, this equalisation grant system was introduced and only 25 per cent. was added so far as Scotland was concerned. He did, say that it was adopted as a result of no careful reckoning and was quite inadequate. Of course, I had no responsibility for the Government which introduced that measure—indeed, it was stated at the time that the 25 per cent. was quite inadequate. Since then, it has been increased to eleven-eightieths of the amount paid in England. The noble Lord says that the new formula is again inadequate. That may well be so, but I do not think that at this moment anyone is in a position to judge. I thought that the trend of the noble Lord's argument was merely to reinforce the statement that I made in the course of my remarks: that it was not possible to arrive at any just apportionment as between the two countries until revaluation had been completed.
The noble Lord also referred to resentment at the new distribution of assessors' areas and, duties, and, in particular, at the fact that the Government had not seen fit to accept the Sorn Committee's recommendation that a grant of 50 per cent, should be given in respect of the cost of assessors' staff. The explanation of that is quite simple. My right honourable friend the Secretary of State gave the local authorities the option as to whether this service should remain a local authority 1059 service or whether it should be undertaken by the Inland Revenue, as it is in England. The local authorities, so far as I understand it, came down on the side that it should remain a local authority service. That being so, the Government can see no just reason why they should give a grant in respect of this service which is now a local authority service and does not receive grant, and which is going to continue to be a local government service.
I think I have answered that part of Lord Stonehaven's speech which referred to Clause 17, and, if he will allow me, I should like to communicate with him in regard to the point he made about Crown property.
Before the noble Lord sits down, would he just reply to the one part which he has not answered, or perhaps I have not heard it—namely, why the clause in the Bill is wider than the recommendation of the Sorn Committee? Why are factories and farmlands or all properties included in regard to the 25 per cent. rate, whereas the Sorn Committee recommended only dwelling-houses?
§ LORD STRATHCLYDE
I am sorry if I omitted to answer that point. The reason is that my right honourable friend and the Government considered that this was the logical course to take.
I hope that I have answered most of the questions that were put to me. I will conclude by again thanking noble Lords who have taken part in the debate and, in particular, express my sincere thanks to the noble Duke, the Duke of Buccleuch and Queensberry, for his reference to the Secretary of State and his advisers and the amount of work they have put into this Bill, and also for the further remarks that he made in relation to my right honourable friend.
On Question, Bill read 2a, and committed to a Committee of the Whole House.