RATING AND VALUATION BILL

HL Deb 22 June 1961 vol 232 cc726-65

3.18 p.m.

Order of the Day for the House to be again in Committee read.

Moved, That the House do now resolve itself into Committee.—(Earl Jellicoe.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD MERTHYR in the Chair.]

LORD CAWLEY moved, after Clause 13 to insert the following new clause:

Effect on rent of owner's cessation of rateability .In the event of an owner ceasing to be rated in respect of any hereditament which is subject to the Rent Act, 1957, or in the event of the termination of a voluntary arrangement by an owner to collect the rates of such a hereditament on behalf of the local authority, the owner may by an appropriate adjustment of the rent convert the rent from a rent inclusive of rates to a rent exclusive of rates without any consent of the tenant.

The noble Lord said: This new clause deals with very similar matters to those dealt with in Clause 13. It arises from the fact that sometimes a local authority may cease to pay a compounding allowance to a landlord by which the landlord will collect the rates due as an inclusive sum with the rent. There are also cases of voluntary arrangements with the local council which may also be put an end to summarily at the will of the council. The National Federation of Property Owners have taken counsel's opinion, and they find that, as the law stands at present, it is necessary in those cases, if the landlord wishes to convert the rent and rates from an inclusive basis to an exclusive basis, that the tenant should give his consent.

Take first the case of the compulsory rate collector—that is to say, compulsory compounding. In this case it appears that if the allowance suddenly ceases the landlord will still have to collect the rates with his rent if the tenant refuses his permission. At the same time, it appears as though the local council may serve a rate demand on the tenant personally. There would therefore be considerable confusion. In the second case, of voluntary compounding, it may be that the landlord is left holding the baby if the tenant does not consent to paying his rates directly to the council, and the result will be that the landlord will be out of pocket. This Amendment is designed to abolish the requirement of the consent of the tenant to a change from the payment of rates inclusive to rates exclusive. I beg to move.

Amendment moved— After Clause 13 insert the new clause.—(Lord Cawley.)

EARL JELLICOE

I think my noble friend has explained the purpose of his Amendment extremely clearly; nevertheless I cannot advise your Lordships to accept it. In the first place, there are slight drafting defects in it. No provision, so far as I can see, is made in the proposed new clause for the date from which the change is to operate, or for notice to the tenant showing the way in which the alteration to the rent has been calculated. I think that if an Amendment along these lines were to be accepted something would have to be inserted to deal with those points. No doubt these defects could be remedied. Therefore, without dwelling longer on these drafting points, I should like to turn to what I call the more substantive objection as we see it.

I am informed that the present state of the law has not in fact given rise to difficulty—at least, those experts with whom I have discussed the matter are not aware of any difficulty; but they feel that the proposed change might invite a difficulty or possible unfairness. It might be that the tenant would not wish to resist reassessment of his rent on terms that he would be directly liable for the rates, but I do not think one should assume that that necessarily would always be the case. Tenants who pay their rates to their landlords weekly with their rent escape the painful necessity from which some of your Lordships doubtless suffer, of finding rates at longer intervals in larger sums and, in effect, in advance. Many rating authorities have made arrangements to collect rates by small instalments to meet the convenience of their ratepayers. My right honourable friend in fact welcomes this initiative. But some still do not do so, and it is our feeling that hardship could therefore result for a tenant who suddenly became liable, at the landlord's discretion, to be directly rated.

Those are the main practical reasons why I am not particularly happy about the proposed Amendment. In addition, there is a more general reason. Basically, the Amendment seems to deal more with rent matters than with matters of rates. I should not wish to argue that, from this point of view, the noble Lord's Amendment is not strictly relative to the Bill before your Lordships' House; but I should wish to make it clear that the Government, who are, as it were, the repositories of both renting and rating legislation, would feel it much more appropriate that provision for this sort of thing, should it be thought necessary, should be included in a Rent Act rather than in a piece of purely rating legislation.

LORD SILKIN

I do not want to add much to what the noble Earl has just said; I agree with practically everything that he has said. But, in addition, would not this Amendment involve the breaking of a contract between landlord and tenant, at the pleasure of the landlord? If a landlord and tenant agree on a rent which includes rates, it should not be open to one party, at his own pleasure, to say, "Now I am going to depart from this arrangement. I hereby give you notice that now we are on a different arrangement." I think I am right. Would that not be the effect of this Amendment? Could the noble Lord who moved this Amendment really justify that situation? I should have thought that, having made the bargain, the landlord ought to stick to it, just as the tenant should.

LORD CAWLEY

I think I can answer the noble Lord, Lord Silkin, in that I do not think it is likely that any particular contract will be drawn up between the parties as to the payment of rates inclusive.

LORD SILKIN

Not in writing; but this would involve a bargain which is struck as to what the rent will be, inclusive of the rates. That bargain stands, and it ought not to be open to either party, whether it is in writing or verbally, to depart from it.

LORD CAWLEY

I think I can say that if the surrounding circumstances suddenly change—that is to say, the local council reverses its policy—that may have some effect on the contract between the parties. However, as I see that Her Majesty's Government are unlikely to alter their view on this Amendment, I beg to withdraw it.

Amendment, by leave, withdrawn.

3.27 p.m.

LORD CAWLEY moved, after Clause 13 to insert the following new clause:

Landlord's notice of change in rates

".Where by virtue of a direction by a rating authority under subsection (1) of section eleven of the Act of 1925 an owner is rated in respect of a hereditament, section three of the Rent Act, 1957 (which relates to adjustments of rent in cases where the rates of dwellings are borne by the landlord) and the Second Schedule to the said Act shall have effect as if, in any case where there is an increase in or reduction of the poundage of the rates for the basic rental period, notice of such increase or reduction may be given to the tenant of that hereditament by the landlord thereof on any date not earlier than seven days after the date on which public notice of the rate is given pursuant to section six of the Act of 1925, and where notice of such increase or decrease is so given the rent limit shall be increased or decreased as from the date on which notice is given by the landlord, being a date not earlier than the commencement of the said rating period."

The noble Lord said: This Amendment deals with the collection of rates, and having been apprised by the noble Earl that the objection which is taken to the last Amendment will also be taken in this case, I think I might refer to the Title of the Bill, which is An Act to amend the law with respect to the valuation of property for the purposes of rates and with respect to the making and collection of rates. In my submission, this refers to the collection of rates. The law as it stands at present is that, in the case of an inclusive payment of rent and rates, if there is an increase in the rates at the beginning of the financial year, then the landlord may add the increase only when he personally receives the rating demand for his property. He may not do it at the time that the poundage is publicly announced. It is also provided that he may collect six weeks' arrears of rates and no more.

I live in the area of an urban authority which serves its rate demands within about a week of the fixing of the rate, This Amendment would not apply to such an authority; it would also have little effect if the rate increase is small. The effect, however, if the rate demand is sent to the landlord two months late, let us say, or if the rate increase is large—and it may certainly be large in 1963— is that the landlord may lose a fortnight's rates. That is a mi for point compared with the fact that the tenant may suddenly be faced with a demand for six weeks' increase of rates in arrear, which may be rather a hardship. I would say, in answer to the noble Earl, that unless he has a Rent Act before 1963 this evil is going to take place when there is a sudden rise in the rates.

The Amendment provides that if the landlord notifies the tenant at any period seven days after the poundage has been publicly announced, he may then charge the increased rent from that date onwards, I think this would be a much fairer system and it would not involve the tenant in having to pay these arrears of rates. I do not know what objection there is otherwise, but I can see that it would lead certainly to better relations between landlord and tenant. After all, the rate demand is bound to go to the landlord sooner or later. I beg to move.

Amendment moved— After Clause 13, insert the said new clause.—(Lord Cawley.)

EARL JELLICOE

I can quite see the point of my noble friend's Amendment, and I should like to tell him straight away that the Government are much more favourably disposed towards it than they were towards his last Amendment. I grant that in this case there is a problem which may well require amending legislation. But, again, I would suggest that there are a couple of drafting defects in the proposed Amendment. For example, whereas the Amendment allows the landlord to give the tenant notice of variations in the rate poundage, it does not provide for variations in the rate assessment, which, of course, equally affect the amount of rates paid. Again—and this is more than a drafting point; I think it is a point of substance—it seems to be biased in the landlord's favour, since it allows the landlord to pass on the burden of increased rates immediately but does not require him to pass on the benefit of reduced rates until a later stage.

In addition, somewhat diffidently, we rather feel that this Amendment, or an Amendment along these general lines, would come more properly under the umbrella of rent legislation than under the "brolly" of a Rating Act. For these reasons I hope that my noble friend will not press his Amendment in connection with this Bill, given the assurance, which I am glad to give him, that the Government certainly propose to bear the general difficulty which he has ventilated so clearly to-day very much in mind, it and when we can find an opportunity for suitable amending legislation.

LORD DERWENT

Having listened to my noble friend on the Front Bench I feel that, in effect, he agrees with the case put forward for this Amendment, but says we must wait for further legislation. Surely, the points he raised are largely drafting ones. It will cause certain hardship in certain cases before further legislation is brought in. Why cannot the Government take over this Amendment, redraft it and put it in at the next stage of the Bill? My noble friend has agreed to the argument. Why do not the Government handle the Amendment themselves and make it into law at once?

LORD CAWLEY

Of course, I entirely agree that the reduced rates ought to be handed on and the clause is defective. But, subject to what the noble Earl may say, I may find it necessary to raise the matter again at Report stage.

EARL JELLICOE

While taking note of my noble friend's warning, I should like to draw his attention to something which, again, I do not wish to labour. A similar Amendment was put down at the Committee stage in another place and was there considered to be outside the scope of this legislation. So I would suggest to him that he should give it a good deal of careful thought between now and the following stage.

LORD CAWLEY

The noble Earl will be aware that the Rules in another place are different from the Rules here.

EARL JELLICOE

I am aware of that; and also that this Bill will go back to another place.

LORD CAWLEY

In view of what has been said, I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 14 and 15 agreed to.

Clause 16 [Valuation of water undertakings]:

3.35 p.m.

LORD LATHAM moved, in subsection (2) (a), after "increased by" to insert "one-fifth of". The noble Lord said: rise to move Amendment No. 22 standing in my name. Amendment No. 23 is, of course, related to, if not entirely dependent upon, Amendment 22. This Amendment seeks to remove an anomaly and, as I submit, an unjust discrimination against water undertakings. I should like to be brief in explanation of the case for this Amendment, but I rather fear that the technicalities of the situation are such that they do not admit of very substantial brevity. The question of the assessment of water undertakings must be considered, I submit, in relation to the practice which is now followed in connection with similar undertakings and public services, to wit, gas and electricity undertakings. Previously, for many years, these three public utilities, all of which are essential for modern society, especially water, have been valued on a comparable and similar basis known as the profits basis. This amounted virtually to a value based upon the outstanding capital debts of the various undertakings.

As regards electricity, this was altered by the Local Government Act, 1948. It is the case that prior to then—and it continues—there was a movement away from the profits basis as ascertained. It involved a considerable delay; it frequently involved disputes and it led to refunds and numerous adjustments, and so the Government of the day in 1948 decided as regards the electricity industry to change the basis, and they did the same as regards the gas industry by the Rating and Valuation (Miscellaneous Provisions) Act, 1955. Now, through the agency of the present Bill, the Government propose to make a similar alteration in the method of valuing water undertakings for rating.

The new method of valuing water undertakings under the present Bill is to take the present values and to adjust them in the future according to two factors. The values will be first adjusted in accordance with the general level of valuations of other property—I think that is described as "the tone of the area". So if the general level of property goes up, then the general level of the water undertakings will go up proportionately. Secondly—and this is where we complain—and in addition, the value of the water undertaking is to go up or down according to the increase or decrease in the quantity of water supplied by the undertaking.

Under these provisions as at present drafted the adjustment in valuations will be directly proportionate to the increase in the quantity of water supplied. In the formulae that were applied to gas and electricity the adjustment on output is in proportion to one-fifth (not in relation to the whole) of the increase in output. "There's the rub." For a long period of time these three major public utilities, similar in many respects and all of them, as I have said, essential for society, have been valued on a particular and upon, relatively speaking, the same basis. A new method of valuation is introduced—we do not object to that—and this is applied in more or less the same way to both gas and electricity. But for the water undertakings the present Bill provides, as I have said, a similar system which has been modified so as to put the water undertakings in a considerably worse position.

No satisfactory explanation has yet been offered as to why the water undertakings should be treated in this different and discriminatory way. As a matter of fact, I understand that never during the course of the discussions between the Ministry and the authorities concerned was it ever brought to light or discussed that in both gas and electricity the increase in the assessment was to be proportionate to only one-fifth of the increase in output of gas and electricity. The water undertakings, I am assured, were most surprised when eventually they discovered this disparity and that they were to be subject, not to a 20 per cent. but to a 100 per cent. increase. Personally, I should have thought that if there was to be a difference in treatment between the three public utilities concerned then it would be, and ought to be, in favour of the water industry, because, if one had to choose between the three, there is no doubt at all that water is the most essential of them.

It has been suggested that one of the main purposes of the present clause is to bring water undertakings closer to an average assessment per thousand gallons of water supplied, and that placing water on the same basis as gas and electricity would have the reverse effect. It is difficult to see what substance there is in that particular argument. Clearly, on the old profits basis there were considerable differences between valuations of water undertakings if one tried to assess the valuations in terms of the quantity of water supplied. However, much as uniformity may be desirable, I submit that it is going a long way to suggest that the water industry must be badly treated in order to conform to an average.

It has also been suggested that the effect of making water the same as gas and electricity would be to reduce the rateable values of water undertakings, and that this would therefore be against the interests of the other ratepayers. In that connection, I may say that it is estimated that water undertakings generally pay about 11 per cent. of their total gross income in rates, whereas electricity pays 2 per cent., I think, and gas 3 per cent.—a very wide margin, and a very heavy additional burden cast upon water undertakings.

The present proposal penalises, in effect, the water undertaking which has large capital expenditures to meet in the future, and in that connection I should like to refer to the Metropolitan Water Board, of which I am a member. The shift of population from the central areas of London—the overspill, as they are called—into the urban and suburban areas of the Greater London area is having this effect; it is requiring the Metropolitan Water Board to add to its equipment, to add to its reservoirs, to add to its pipes and to add to its power stations—not to cater for additional custom, but to cater for custom and for consumers who formerly lived within the County of London or close to the central areas of London. They are the same consumers. In the result, there is a good deal of equipment, plant and facilities remaining in the County of London or in the central areas of London which is now under-used but which, nevertheless, has to be maintained. In addition, the Metropolitan Water Board is having to install new equipment, new reservoirs, new pipes and new power stations in the urban and suburban areas to which the overspill population has gone. And that, I imagine, would be the situation and the condition of many water undertakings in the built-up areas of cities and towns and the like.

In those circumstances, we say that there is no case for treating a water undertaking differently from gas and electricity. At the present time, the Metropolitan Water Board pays £1,400,000 in rates out of an income of some £13 million, which is roughly, as I have indicated earlier, 11 per cent. The expenditure of the Board continues to increase for the reasons, partly, that I have already given. In those circumstances, I press this Amendment, and ask your Lordships to see to it that water undertakings are treated fairly. I beg to move.

Amendment moved— Page 13, line 33, after ("by") insert ("one-fifth of").—(Lord Latham.)

EARL JELLICOE

I feel particularly shy about following the noble Lord into these watery mazes. I would grant that he has argued this case very persuasively. However, he has not quite persuaded me that it would be right for me to advise your Lordships to accept his Amendment. The first reason for that is the circumstances in which this formula was elaborated, to which the noble Lord drew some attention. The formula embodied in the Bill represents, I understand, a compromise which was suggested by the Ministry between proposals made respectively by the representatives of the associations of local authorities and by representatives of the water industry, who—

LORD LATHAM

My Lords, would it be fair to say that neither of the bodies—neither the rating authorities nor the water undertakings—held themselves to be bound by the compromise which ultimately emerged?

EARL JELLICOE

I am coming to that.

LORD LATHAM

I beg the noble Earl's pardon.

EARL JELLICOE

These two groups joined together in a sub-committee of the Working Party on Rating and Valuation to study the problem of finding a different method of assessing water undertakings for rating purposes. As the noble Lord has said, neither set of representatives was free to bind its principals. Nevertheless, the solution which they elaborated commanded general support subject to reservations—I would grant, subject to reservations—but they were not reservations on the substance of this particular Amendment. Since the noble Lord has raised the question of history, as it were, in connection with the proceedings of this Working Party, and has suggested that in some ways the representatives of the water industry have been "hard done by" because they were not told about or were unaware of the fact that in this important respect, at least, there was going to be a difference between the formula applied for the water industry in comparison with the formula applied for the gas and electricity industries, I would say only that the fact that a directly proportionate adjustment was proposed for the water industry was certainly made crystal clear in the discussion.

I would add that the provision for the one-fifth basis for gas and electricity is contained in no fewer than three Public Statutes, so I cannot see how the representatives of the water industry can argue that they were, in some way, tricked into this. The difference is made clear in three Public Statutes, and it was also explained in the discussions that there was to be this difference. From informal consultations with representatives of the associations of local authorities since this Amendment was put down, I think it is clear that the associations could be expected to object strongly to altering one particular aspect of the formula in favour of the water undertakings, and that if any special concession were made in that direction the associations would no doubt revive some of their proposals having the opposite effect.

LORD LATHAM

Do I understand that the Ministry have directly approached the rating authority on this matter since the Amendment was put down?

EARL JELLICOE

I think there is a certain amount of va et vient in any case between the Ministry and the Associations, but I think the phrase I used—and I would wish to keep to it—was "informal consultations".

LORD LATHAM

Have there been informal consultations with the Water Undertakers' Association?

EARL JELLICOE

I think there has certainly been fairly close contact. Although it would not be fair to describe the formula as a package deal between the two sides, at the same time if either sought to change it materially to its own advantage, the other would certainly expect the whole settlement to be reopened. I feel that in considering the noble Lord's Amendment your Lordships should at least bear that in mind.

But there are more substantial reasons why I wish to advise your Lordships against accepting this Amendment. In the first place, there are certain general themes running through this very carefully elaborated new formula which acceptance of the noble Lord's Amendment would completely disrupt. For example, a cardinal aim of the formula is to bring the assessments of water undertakings closer over a period of years to the national average in terms of rateable value per million gallons of water supplied; and all the members of the Working Party supported this objective. Indeed, I understand there was some feeling on both sides of the sub-committee that there was much to be said for adopting a standard rateable value of rate payment per million gallons and applying it forthwith to all undertakings.

On reflection, the sub-committee recognised that an adjustment of this kind would make, overnight, as were, sudden and probably quite indefensible changes in the rate liabilities of various undertakings, which would be quite intolerable to individual rate authorities and water undertakings alike. That, of course, arises from the fact that the disparity at the moment on the old profits basis is a very wide one indeed. This proposal was therefore abandoned, but the germ of the idea was retained in a gradual and, we should hope, more or less painless move toward a uniformity of rateable value over a period of years. And this will he lost if the Amendment is accepted.

LORD LATHAM

Why?

EARL JELLICOE

I will come to that straight away. If the Amendment is accepted, the effect would be not just to slow up the equalisation process, but actually to increase the "spread" of rateable value per million gallons on both sides of the national average. As my right honourable friend explained in another place—where a similar Amendment was rejected after a lengthy discussion in Committee—a water undertaking with a low assessment, if it were to increase its water output faster than the national average, would be assessed proportionately even lower. And vice versa: an undertaking with a high assessment at present expanding more slowly than the national average would become proportionately even more highly assessed. I think I could explain that to your Lordships, but I should certainly need a blackboard to do so. Therefore, I hope you will take my word for it.

Another difficulty in reconciling the noble Lord's Amendment with the principles underlying the new formula arises with the assessment of new undertakings. The proposals for them, as the noble Lord is familiar, are contained in paragraph 10 of the Second Schedule to the Bill. Broadly, for a period of ten or more years after it starts to supply water an undertaking is to be reassessed each year at the national average rateable value per million gallons of water supplied. Then it is to be introduced into the general provisions in Part II of the Bill in the first new lists prepared after the end of that transitional period. If the present Amendment were accepted, the choice would lie between assessing the new undertaking during the ten years or so—the starting years—at one-fifth of the national average, which would be absurd under-assessment; or leaving it to be assessed during those years at the full national average per million gallons supplied, with an abrupt change to the one-fifth adjustment when the undertaking enters the subsequent new lists.

The second solution would, I suggest, produce extremely arbitrary results and the greatest inequality between similar undertakings, which, because they started in different years, had different lengths of "transitional period" under paragraph 10 of the Second Schedule. I have pointed out that I think the proposed Amendment would present considerable difficulty with these new undertakings hut, having done that, I should not wish to rely too heavily on that argument, because I would agree that there are not all that number likely to come in.

The main arguments, as I understand them, in favour of the Amendment appear to be those advanced by the noble Lord: that the water industry is already badly done by in matters of rating, and that the formula, as it stands, means that the industry will be worse done by, especially in comparison with the electricity and gas industries. The complaint that water has always paid too much in rates is one with which your Lordships will be only too familiar. The complaint is not confined to the water industry; it is heard from almost every class of ratepayer. I think it is only to be expected that rates form a relatively high proportion of the outgoings of the industry in that it does not have to buy its raw material. That is a bald statement of fact which I advance only to refute the suggestion that there must be something intrinsically wrong with water assessments because they result in a large proportion of the undertakings' outgoings being devoted to rates.

It is not in any way a residual argument, as I think the noble Lord said on the Second Reading debate, for resisting this Amendment; nor is it, indeed, any part of the Government's case for so doing. I do not think it is a cast iron case that the water industry is so hardly done by. According to the sample figures produced by the Working Party, the rate-able values of water undertakings represented less than one per cent. of the effective capital value of these undertakings, and that, taking the national average compared with other assessments for other classes of ratepayers, is certainly not very high. I would ask your Lordships to bear that criterion in mind, gas opposed to the yardstick of 11 per cent. comparison between rates and income which the noble Lord produced. Moreover, as my right honourable friend made clear in another place, the average rateable value of the water industry in relation to the gross income fell at the 1956 revaluation, compared with the 1934 revaluation, by about half.

Nor can I really accept the noble Lord's contention that, just because the adjustment figure for growth for the gas and electricity industries is one-fifth, the same magic formula should necessarily apply to water. The argument, as I see Lt, appears to be based solely on an assumed equivalence between the water industry and the gas and electricity industries. No factual material has been produced by the noble Lord to show that these three industries are in fact so similar with respect to their rating assessments. The only link, so far as I know, is that before 1948 they were all assessed by the profits method, and that has no relevance to the present issue, since the volume of water supplied was irrelevant in that context.

Moreover, as was made clear during the Committee stage in the House of Commons, the formulae for the gas and electricity industries are quite different in a number of important ways from the proposed new formula for the water industry. For gas and electricity, adjustments of rateable value for changes in supplies are related to supply in a fixed base year. Then for gas and electricity, yearly adjustments are made within the five-year period, but for water there is only an annual adjustment of this sort if there is an increase or decrease in the volume supplied of over 10 per cent. Again there did not need to be the same attempt in the gas and electricity formulae to move towards consistency in the relationship between the output of individual concerns and their rateable value. So that there are already important differences in the formulae for the gas and electricity industries as compared with the one proposed for the water industry. I think it is a little misleading to take one difference out and look at it in isolation.

I must apologise for this long and tedious explanation of why the Government trust that your Lordships will not support the noble Lord's Amendment. May I briefly summarise the main arguments I have used? In the first place, we feel that acceptance of the noble Lord's Amendment would put this carefully elaborated formula back in the melting pot. Secondly we believe that this Amendment would upset the main principle underlying that formula—a desire to obtain greater equality within the industry in the assessment of individual water undertakings—and we believe that this principle is of the greatest importance. Thirdly, we see no reason in equity why the one-fifth adjustment as it applies in the gas and electricity formulae should be adopted here. Your Lordships already know that the gas and electricity formulae themselves are shortly to be reviewed. Then that one-fifth may well become different, or it may not—no one knows. I hope I have not given your Lordships the impression that I am claiming this formula is necessarily perfect; I am not, nor am I unaware that there are perfectly genuine anxieties in the industry.

In conclusion, I would make it clear to your Lordships that my right honourable friend fully appreciates the anxiety of the industry in case the application of the formula produces inequitable results. This issue was fully debated in another place, and that is why an Amendment providing for a review of the water provisions of the Bill in 1969–70 was added to the Bill as Clause 21 in another place. Therefore there is already in this Bill a cast-iron provision for a review of this formula after it has been given time to prove itself right or wrong. In the light of these considerations I would ask your Lordships not to accept the noble Lord's Amendment, should he press it.

LORD LATHAM

The noble Earl has done his best, and I congratulate him, but he 'has not answered the case put forward not only by myself but also by the Water Works Association. The Association has no objection to rationalising the situation and getting away from the old profits basis as presently calculated, nor has it any objection to some reasonable scheme for uniformity but not necessarily equalisation. It is the case that a number of undertakings will be in some little difficulty under the arrangement if the one-fifth proposal is embodied, but the older undertakings which have for nearly a century been providing water for the people of this country ought not to suffer because of new undertakings which are coming along, satisfactorily no doubt. I should have thought it was possible to defer an equitable towards the old undertakings and yet reasonably provide for the new ones.

I do not want to push the analogy between water, gas and electricity too far, but I will say that the gas and electricity industries have this advantage: that they engage in considerable ancillary activity—for example in providing domestic equipment, "consumer durables" as they are described—whereas a water undertaking has no such ancillary income. For the most part its income is from the sale of water and from such interest as may be receivable from its capital resources. The noble Earl made the point that the water industry liability is no greater than 1 per cent. of the industry's capital expenditure. I think that is what he said. That is not a very convincing argument.

EARL JELLICOE

My Lords, I said "effective capital value of its,hereditaments".

LORD LATHAM

That is all right. Capital value is the same thing. It has the same value because the money has been spent on capital elements. The more water to be supplied, the larger the demand to be met, the larger capital expenditure must be incurred, the larger capital values appear, in the balance sheet, and then it is found that as that increases the percentage of rates upon it necessarily diminishes, and therefore it is argued that the water undertakings are being under-assessed. That is quite fallacious. No business undertaking could be satisfactorily conducted on that economic assessment or ascertainment basis.

The noble Earl suggested that certain modifications in the formula would be necessary if this Amendment were accepted. But these differences are not basic; they are differences which could be incorporated in the formula without necessarily destroying its benefit otherwise, even were the formula so amended that in place of 100 per cent., 20 per cent. were inserted. In those circumstances it seems that the Minister was pushed back, in what I still describe as a residual argument, to an exiguous and alleged justification that the water industry does not have to buy its raw materials. That is the case; but it has to purify and store it before it becomes a usable raw material, and I am certain that the expenditure in doing that is not substantially less than the general cost of raw materials in manufacture and industry. However, the noble Earl has said that this question was argued and considered at length in Committee in another place, and that is so. Having regard to his assurance that the matter will be looked at—did I gather the noble Earl to say in 1968?

EARL JELLICOE

There is provision in the Bill for 1969–70.

LORD LATHAM

Having regard to that, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 16 to 18 agreed to.

Clause 19 [Ascertainment of average water supplies]:

4.11 p.m.

LORD LATHAM moved to add to subsection (5): For the purposes of this and the next succeeding subsection non-potable water shall not include water which is at any time made potable before supply to the consumer. The noble Lord said: The purpose of subsection (5) is to provide for a small number of water undertakings who, in addition to their ordinary potable water supplies, give a special supply of non-potable water for industrial and other purposes. I must confess that this is a "tickler" for complexity, but I feel bound, even so, to indicate the basis upon which this Amendment is put forward and leave to the noble Earl the signal duty of clarifying it and making it understandable.

To organise a supply of non-potable water takes less capital equipment and, therefore, for these water undertakings the subsection provides that only half the quantity of water supplied for non-potable purposes is to be taken into account for rating purposes. All that is perfectly clear. As a corollary to this the subsection also provides that where a bulk supply of non-potable water is given or taken, then each of the water undertakings involved is to pay rates on one-quarter of the amount of water taken or given, so that in the aggregate the two water undertakings pay between them on one half of the non-potable water. That is, in substance, what the clause does.

But the machinery in the clause for achieving that end is complicated (there will be no dispute about that, I think) and operates in this fashion. A water undertaking giving a bulk supply of non-potable water pays rates on one quarter of the amount of water supplied to the undertaking receiving the supply. The undertaking receiving the bulk supply of non-potable water pays on three-quarters of the amount of water taken. However, when the undertaking receiving the bulk supply of non-potable water supplies it to the consumer it receives a reduction of one-half, so that in the aggregate it pays only on one-quarter instead of one-half.

There is, however, no definition of non-potable water, and as at present drafted this subsection might well create difficulties as between water undertakings giving and taking the ordinary supplies of potable water. For a water undertaking giving a bulk supply can secure the benefit of paying on only one-quarter if the water it supplies can be considered as non-potable, within the meaning of that expression used in subsection (5); and this is then to the detriment of the water undertaker receiving the bulk supply, which would have to pay on three quarters. In order to ensure that the clause operates equitably, at least some partial definition of non-potable water supply should be included. This Amendment seeks to ensure that subsection (5) operates only where water undertakings are dealing with non-potable water throughout.

I understand that the Association has been in communication with the Ministry about this clause, and since I do not yet understand it, I am waiting for the noble Earl to clarify my mind. I beg to move.

Amendment moved— Page 18, line 34, at end insert the said paragraph.—(Lord Latham.)

VISCOUNT STONEHAVEN

Could the noble Earl, when he explains this difficulty, help me out a little? Does it refer to the question of the water being potable or the use to which the water is put? In many cases a large quantity of water is used—for example, in dairies for cooling—which is perfectly potable, but it is being used for a non-potable purpose. I should like to be clear just what that means.

EARL JELLICOE

I think it is the water itself, not what is done with it.

VISCOUNT STONEHAVEN

I thank by noble friend.

EARL JELLICOE

I am afraid the noble Lord, Lord Latham, has taken your Lordships into some very deep water—

LORD KILLEARN

Potable or non-potable?

EARL JELLICOE

—perhaps a little outside some of your Lordships' depths; but if you stay to swim with me, I warn you that you will almost certainly drown. Although I feel obliged to advise your Lordships not to make the proposed Amendment, which I am sure you all understand, I do so with some reluctance, since it seeks, I gather at the desire of the water industries, to make a modification in a provision which was made in another place in an attempt to meet their wishes. That is one of its many complications.

The noble Lord, Lord Latham, has explained this complicated provision with masterly simplicity, and I do not propose to accept his invitation to re-explain it. But I should like to attempt to point out to those of your Lordships who are versed in these water matters or are higher mathematicians some of its possible complications. It does, we think, possibly create a number of problems. There was a hint in what the noble Lord said that one of the things the water industry may fear here is that an undertaking providing a bulk supply of water to another water undertaking might seize upon some technical excuse —perhaps that the final stage of chlorination had not been carried out—to supply the water as non-potable and thus secure the benefit of the three-quarters reduction, leaving the other undertaking to carry the full three-quarters. The Amendment seeks to prevent that from happening when the undertaking which is supplied with non-potable water in bulk finishes the job of making it potable before supplying it to consumers. But the Amendment would also preclude the undertaking which really was supplying raw water in bulk, unfiltered and untreated in any way, from getting the benefit of the three-quarters reduction. In forestalling one possible abuse, it would create another possible unfairness.

If this were the only defect in this simple Amendment, my right honourable friend might be prepared, on the assumption that this was preferred by the industry as a whole, to agree that the Amendment should be made. But there are, as we see it, a number of other difficulties. In the first place, it is a little hard to see why the same volume of non-potable water supplied in bulk by an undertaking should count against that undertaking at half-volume if the acquiring undertaking sees fit to purify it, and at a quarter if the undertaking passes it on without purification. That would be the effect of the Amendment.

The quarters and halves are admittedly arbitrary, but when the production process is precisely the same, it is surely wrong that the bulk supplier's liability should be dependent upon what his customer does with the water after he has taken it over. Or, to take a more homely illustration, I take the example of somebody supplying wood to somebody else. The supplier would receive half price if something was done with that wood, but he would receive the whole price if nothing was done with it, without having any control over it either way. That is precisely the difficulty which this Amendment would cause.

LORD LATHAM

If I may say so, that is precisely the difficulty which I am told exists in the present Bill.

EARL JELLICOE

It is precisely the difficulty I am told this Amendment would cause. Unfortunately, I do not think your Lordships would understand me if I tried to explain it, and I should find it extremely difficult to explain. Equally, the provision would cause administrative difficulties. Suppose one undertaking receives supplies of non-potable water from two other undertakings, pools the supplies, and purifies part only of the total. Who is to say from which hulk supply the purified water came? Again, how is the bulk supplier of non-potable water to know what the acquiring undertaker will do with that water, which he has to know under other provisions of the Bill? It may be stored a while and lose its identity but the supply has to be certified in the meantime. In the circumstances (and I confess that I have drawn rather heavily upon expert advice here) I suggest to your Lordships that the Amendment, although I sympathise with the object behind it, is defective, and would probably give rise to more anomalies than it would remove.

LORD LATHAM

Simply stated, it is this. The Water Association takes the view that the Bill as drafted is defective in regard to the basis of ascertaining the rating, as it were, of the non-potable supply by one undertaking to another? It is not a question of the price of the water; it is what is to be included in the formula in the ascertainment of the rateable value of the undertaking. That is as I understand it. That is the only purpose of this Amendment, and the people who will have to argue with the valuation authorities as to what is the proper sum to be brought in in calculating or ascertaining what the rateable value of the undertaking is, are the water suppliers themselves; and they, through their association, say that difficulties will arise from the wording of the Bill as at present drafted. The noble Earl says, "That may or may not be so, but if this Amendment were carried, it would be even worse." That is the situation. I hope that the noble Earl will ask the Department to look at the matter again, and that we might be permitted to refer to it at the next stage. In those circumstances, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 19 agreed to.

Clauses 20 to 22 agreed to.

4.25 p.m.

LORD CHORLEY moved, after Clause 22 to insert the following new clause:

Amendment of 6&7 Eliz. 2, c. 55

". With effect from 1st April, 1960, the following paragraph shall be added to the Second Schedule to the Local Government Act, 1958, that is to say:

7.—(1) The Minister shall ascertain and certify in relation to the year 1959–60 and in relation to the Generating Board the amount of rateable value for each kilowatt of the aggregate installed capacity of the Board relevant to that year for the purposes of paragraph (2) of Clause 5 of this Schedule.

(2) In respect of each of the years 1960–61, 1961–62 and 1962–63 the amount of rateable value allocated under this Act to each rating area in respect of the generating activities of the Generating Board shall be the amount so certified as provided in the last preceding paragraph of this clause by the Minister multiplied by the installed capacity of the Board in that rating area for the purposes of this Schedule respectively relevant to each such year under the provisions of this Schedule.

(3) To the extent that in each of the years 1960–61, 1961–62 and 1962–63 the aggregate rateable value allocated to rating areas under the last preceding paragraph shall be greater than it would if this clause were not in force the aggregate amount of rateable value apportioned to the distribution activities of the Generating Board shall be reduced and the value of the said activities in each rating area shall be reduced in proportion."

The noble Lord said: I explained on the Second Reading debate in some little detail the difficulty which has arisen in connection with the rating of the electricity generating stations which had been left out of the 1948 Act, and in that way caused a real grievance. I do not want to go over all that ground again in detail. The point, of course, is that the 1958 Act, recognising the grievance of the 1948 Act, and wishing to put it right, introduced a formula which, with the best will in the world, has not proved altogether satisfactory in that connection. As I explained, it has resulted in a number of the local authorities in which generating stations exist not receiving the amounts which the more expanding areas—the areas with the more expanding generating stations—are receiving, That has, in fact, resulted in a loss to quite a number of urban districts, a loss running into several thousands of pounds per annum. This matter was raised in another place, and the Minister indicated that he would be prepared to look at this, but not at once—not, I think, until 1963, which is a sad prospect from the point of view of the local authorities in question.

The noble and learned Viscount who leads the House said, in effect, that these local authorities ought to be glad to have got something out of the 1958 Act, even if they still had a grievance and he seemed anxious to leave it at that. I am sure your Lordships will agree that that is not at all a satisfactory answer, if it is possible to devise some means of alleviating this grievance substantially during the intervening period. I agree that the matter cannot be put right 100 per cent. all at once, but it seems to me possible, by the formula introduced by the Amendment, at any rate to remove the sharpness of the sting to some extent from this grievance.

The proposal is that the Minister should calculate the amount of rating assessments in pounds, shillings and pence for each kilowatt of installed generating capacity in commission for the first year of the operation of the present formula, and that that amount of pounds, shillings and pence should remain constant for the second and subsequent years, until some fresh legislative provision is afterwards made. That would mean that for each generating station, the rating area in whose area it was would have a rating assessment static in unit value, but which could, and would, go up or down according to whether the generating station was extended or reduced in installed capacity. The figures for working out the calculation are already in existence and, I am informed, need not give rise to any difficulty. This proposal, of course, would necessarily create a shortfall somewhere else, because the 25 per cent. of the cumulo allocated to generating stations would clearly gradually increase. It is proposed, therefore, that that short-fall should come out of the 25 per cent. of the cumulo which is allocated to the main distribution activities of the Central Electricity Generating Board. No part of the shortfall would come out of the 25 per cent.^* of the cumulo which has been allocated to the distribution activities of the Area Boards, so that there would not be any grievance arising on that score.

Meeting the short-fall in that way would mean that all the rating authorities in the country who share in the distribution of the 50 per cent.^* of the cumulo allocated to the main distribution activities of the Generating Board would lose, but only, it would appear, a little. I understand that the amount of hardship caused in this way would be very small, because in any event that distribution is hypothetical, being based on a share-out of a national lump sum according to net annual value, and has no relation at all to the question whether or not there is in a rating area so much or so little—. or, indeed, none—of the main distribution system of the Generating Board. If I have made it clear, your Lordships will see that this is a method by which it appears that this grievance could to a substantial extent be ameliorated during this intervening period, and if that is so surely the noble Lord will be able to accept it and see that this grievance is to some extent remedied.

Amendment moved— After Clause 22, insert the said new clause. —(Lord Chorley.)

EARL JELLICOE

I think your Lordships will all agree that the noble Lord, Lord Chorley, has presented this Amendment very fairly. I will try to deal with it as quickly as possible, but I may have to detain your Lordships for a minute or two because there is a real difficulty here which the Government recognise. Perhaps, in amplification, I might illustrate the difficulty briefly with actual figures. For 1959–60 the basic value attributable to the Generating Board was £12,583,000. Half was allocated to generating activities and half to distribution activities. The generating capacity of the Board at March 31, 1958, was some 24,315,000 kilowatts, The amount of rateable value per kilowatt was thus about £0.25875. This is the amount which the Minister would be called upon to certify under subsection (1) of the noble Lord's clause.

By 1961–62 the Generating Board's rateable value had increased to about £13,004,000, reflecting an increase of 16.7 per cent. in supplies of electricity. Under the 1958 Act to which the noble Lord referred, the generating stations would again attract half of the rateable value—this would be £6,502,000—and the distribution activities would attract the other half. Rateable value per kilowatt of installed capacity would then fall to £0.23495. I apologise for these approximations; in fact I have omitted five decimal places. Under the clause, generating capacity having increases to about 27,674,000 kilowatts, the generating stations would attract only just over £7 million, leaving only £5,843,000 for distribution activities. In short—and this is the point of this exposition—in 1961–62, under the noble Lord's clause, distribution activities would get 10 per cent. less than under the 1958 Act as it stands. Put another way, distribution activities would get 7 per cent. less under the clause in 1961–62 than in 1959–60, while generating activities would get about 14 per cent. more.

I think it is quite clear from what the noble Lord, Lord Chorley, has said, and from the figures which I have given, that there is a problem to be tackled. The question is how to tackle it and when to tackle it. As to how to do it, maybe the noble Lord's way is the right way, but this is not necessarily so. About fifteen in every hundred rating areas have generating capacity within their boundaries, and the other eighty-five have not, and the fifteen, therefore, receive no part of the rateable value allocated to generating activities—no part, in short, of one-half of the Generating Board's total rateable value. It is difficult to see why they should suffer over two years a cut of some 7 per cent. in what little rateable value they do get from the Generating Board—a cut which will increase further in 1962–63. The noble Lord, with his usual ruthless logic, has rubbed salt in their wounds by making retrospective adjustments for 1960–61 and for so much of 1961–62 as has passed when this Bill receives the Royal Assent.

The noble Lord's argument, as I understand it, is that under the present formula the rating area with fixed generating capacity equally loses rateable value year by year without justification. Between 1959–60 and 1961–62 its loss will have been about 9 per cent., set off in small part by its share in the increase in distribution rateable value. Certainly there will be this loss; that is granted; but I would remind your Lordships that my noble friend the Leader of the House said during an earlier debate that it is only two years since the altered electricity formula came into force, and the altered formula gave areas with generating stations, for the first time since 1948, a substantial amount of rateable value in respect of these stations. The question, therefore, is whether the rating areas which get the largest share of the Generating Board's rateable value-50 per cent. of the value shared among 15 per cent. of the authorities—should be protected absolutely against losing any of it, at the expense of foisting a loss on the 85 per cent. of local authorities who share rather less than the other 50 per cent. The point which I am really putting to your Lordships is that there is no obvious answer to this particular difficulty. The noble Lord's solution may be along the right lines but if we adopted it we should in fact be helping a minority of rating areas at the expense of a majority.

That brings me to the "when". When should this problem, and it is admitted to be a problem, best be tackled? I hope I have shown that not only is this a complicated matter but there is also a balance of advantage here. Because of this, I cannot really advise your Lordships to take a snap decision to alter, in the way proposed by the noble Lord, a settlement which was arrived at after long negotiation between local authorities and the industry. It was a settlement which was deliberated over by two expert committees. Another reason against a snap answer, I should suggest, is that the electricity formula was not discussed at all by the Working Party which preceded the Bill your Lordships are now discussing.

I wish to assure the noble Lord that the Government recognise he has put his finger on an anomaly which may be developing in the application of the electricity formula, but the decrease in the rateable value of the generating stations is not the only aspect of the formula which may be causing difficulties. Surely the sensible answer is to review the whole formula as a package. This is precisely what my right honourable friend has undertaken to do after 1963. On the general revaluation of other rateable properties for the 1963 lists, the rateable values of the Electricity Boards will, of course, fall to be adjusted. There appears to the Government to be a considerable advantage in reviewing the electricity formula as a whole in the light of up-to-date values—the 1963 lists—rather than on the basis of lists which have only two years to run. For these reasons, while fully recognising that there is a difficulty here, I would suggest to your Lordships that this may not necessarily be the right way to tackle it and that this is certainly the wrong time to do so.

LORD CHORLEY

I am very grateful to the noble Earl for his sympathetic answer. I quite agree that it is obvious that we cannot make a major modification in the formula under the 1958 Act, but the whole object of this Amendment is to tide over the intervening period with what seems to me to be a sensible and possible way out. I am not sure that I quite understood the noble Earl: did he say that the result of this would be to accept the allocation on the distributive side? Because my information is that it would not affect the distributive side, although I quite agree that over all the rating authorities there would be a small loss which, according to the information I have, would be so small that it would not be regarded as a serious grievance. However, I should like to look rather more carefully at what the noble Lord said and consider the position, and possibly put an Amendment down again for further discussion at the next stage. In those circumstances, I hope your Lordships will allow me to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 23 to 26 agreed to.

Clause 27 [Short title, repeals, saving and extent]:

EARL JELLICOE

This is purely a drafting Amendment. I beg to move.

Amendment moved—

Page 22, line 15, after ("Schedule ") insert ("as from the passing of this Act, (c) in the case of the enactments specified in Part III of that Schedule ").—(Earl Jellicoe.)

On Question, Amendment agreed to.

Clause 27, as amended, agreed to.

First Schedule agreed to.

Second Schedule [Transitional Provisions as to Valuation of Statutory Water Undertakings]:

4.42 p.m.

EARL JELLICOE

This Amendment is virtually drafting, but at the same time it is designed to plug two small holes in the machinery for dealing with the assessment of new undertakings formed out of existing ones. I beg to move.

Amendment moved—

Page 25, line 19, leave out from end to ("in") in line 41 and insert ("the following provisions shall have effect for the period between the change and the coming into force of the first valuation lists to come into force after the change:—

1. (a) for the year in which the change takes place the rateable values of hereditaments which on the change become water hereditaments of a new undertaking shall he the same as they were before the change, the rateable value of any water hereditament of a new undertaking which is part of a hereditament which before the change was a water hereditament of another undertaking being ascertained by the Commissioners by apportionment;
2. (b) for any subsequent year the rateable values of water hereditaments of a new undertaking shall be such as the Commissioners may determine to be appropriate having regard to the cumulo-values for the undertakings wholly or partly comprised in the new undertaking;
3. (c) without prejudice to the generality of head (a) of this sub-paragraph, no alteration shall be made under section seventeen of this Act as respects water hereditaments of a new undertaking so as to affect the rateable values of such hereditaments for the year in which the change took place;
4. (d) in the application of the said section seventeen (for any subsequent year) as respects any period of years ending after the change—

1. (i) the undertakers carrying on a new undertaking shall be treated as having had in periods beginning before the change a yearly average supply ascertained by reference to the yearly average supplies of the undertakers carrying on the undertakings wholly or partly comprised in the new undertaking, and
2. (ii) the cumulo-value of a new undertaking shall be taken to be an amount ascertained by the Commissioners as that which appears to them appropriate having regard to the said cumulo-values;

and ".—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This Amendment also is purely drafting. I beg to move.

Amendment moved— Page 25, line 50, leave out ("(c)") and insert ("(b)").—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This again is a drafting Amendment. I beg to move.

Amendment moved— Page 26, line 1, leave out ("under head (d) thereof") and insert ("of the cumulo-value for a new undertaking for the purposes of the first valuation lists coming into force after the time of the change ").—(Earl Jellicoe).

On Question, Amendment agreed to.

Second Schedule, as amended, agreed to.

Third Schedule, agreed to.

Fourth Schedule [Minor and Consequental Amendments]:

EARL JELLICOE

This Amendment is purely drafting. I beg to move.

Amendment moved— Page 32, line 34, leave out ("proposals") and insert ("a proposal").—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL, JELLICOE

This again is purely drafting. I beg to move.

Amendment moved— Page 32, line 39, leave out from beginning to ("earlier") and insert ("first-mentioned appeal before all").—(Earl Jellicoe).

On Question, Amendment agreed to.

EARL JELLICOE moved, after paragraph 12 to insert:

".—(1) So much of subsection (2) of section three of the Valuation for Rating Act, 1953, as provides that a hereditament in which the whole, or substantially the whole, of the available accommodation is used for the letting of rooms singly for residential purposes shall for the purposes of that Act be deemed not to be used for the purposes of a private dwelling or private dwellings shall not apply in relation to a hereditament in which the whole, or substantially the whole, of that accommodation consists of dwellings—

1. (a) which have at any time been approved under section one of the Housing (Financial Provisions) Act, 1958 (dwellings qualifying for exchequer subsidies) or the corresponding provisions of any Act of the present Session relating to the giving of financial assistance for the provision of housing accommodation;
2. (b) which have been provided or improved in accordance with proposals approved under section nine of the said Act of 1958 (contributions for dwellings improved by local authorities); or
3. (c) in respect of which grants have at any time been paid to a housing association or development corporation under section twelve of the said Act of 1958 (grants for dwellings improved by housing associations or development corporations under arrangements with local authorities) or section thirty 756 of that Act (grants for dwellings improved by persons other than local authorities).

(2) Any reference in the foregoing sub-paragraph to any provision of the said Act of 1958 includes a reference to the corresponding provision of any enactment repealed by that Act.

(3) An alteration in a valuation list made in pursuance of a proposal made for the purpose of giving effect to sub-paragraph (1) of this paragraph, being an alteration which would by virtue of subsection (1) of section forty-two of the Act of 1948 (alterations retrospective to beginning of current rate period) be deemed to have had effect as from a date before the passing of this Act, shall be deemed to have had effect as from the passing of this Act."

The noble Earl said: This Amendment proposes to add a new paragraph to the Fourth Schedule. Its intention, which I hope will commend itself to your Lordships, is to make certain that certain flatlets provided for old people by local authorities, housing associations and development corporations are assessed at 1939 values for the remaining life of the current valuation lists, and that they will be eligible in 1963 for any derating that may flow from an order made under Clause 2 of this Bill. I would ask your Lordships to take this Amendment on trust. Its aim, I am sure, is one which your Lordships would wish to see achieved, and its drafting, I am told, ensures that that aim is achieved. Your Lordships will note that the Amendment is in the Fourth Schedule, and it is thus classified as a minor one.

I do not know precisely how many buildings are affected by this Amendment, but it is thought to be of the order of one hundred or so, of which half are probably already valued under the existing law at 1939 values. Although this is designed only as a minor adjustment of the boundary between private dwellings and the rest, the Government commend it to you as an adjustment which ought to be made. Inasmuch as the distinction between dwellinghouses and other properties which has caused the difficulty will largely cease to be relevant after the 1963 lists are superseded, the provision is also of a temporary nature. I beg to move.

Amendment moved— Page 34, line 21, at end insert the said paragraph.—(Earl Jellicoe.)

On Question, Amendment agreed to.

Fourth Schedule, as amended, agreed to.

Fifth Schedule [Enactments Repealed]:

THE CHAIRMAN OF COMMITTEES

There is a Manuscript Amendment in the name of the noble Lord, Lord Brabazon of Tara. In case your Lordships have not all got it, I will read it out. It is, at page 35, to leave out lines 8 and 9.

4.48 p.m.

LORD BRABAZON OF TARA

I hope that your Lordships will excuse my moving a Manuscript Amendment, because I know they are very tiresome things, especially when they are complicated. However, this one is of the simplest nature in the world. It is to remove from the Bill the repeal of the Scientific Societies Act, 1843. I cannot start without paying a tribute to the noble Earl, Lord jellicoe. We knew perfectly well that with his name he was very happy on the top of the water, but when he dealt with potable and non-potable water and swam through the current to the shore, only to be electrocuted when he got there, I think it was one of the most remarkable performances of good temper, study and knowledge, which he put before us this afternoon. I am not doing that with any idea of "buttering him up" to try to get him to accept my Amendment, because with a good deal of experience of these sort of things I have a slight doubt in my mind as to whether the Government will accept it. Never mind; I feel it my duty to draw attention to something which has occurred in the Bill which upsets me very much. I want to go on with, roughly, a speech which the noble Earl, Lord Halsbury, made in general terms, but which I want to speak on, if I may, in detail. It is an injustice, I think, that has been brought about by this particular Bill.

I have had the honour of being President of the Royal Institution now for some twelve years, I do not know if your Lordships all know the Royal Institution. It is 160 years old. It is one of the most famous scientific societies that exists. In case you do not know where it is, it is in Albemarle Street; and it is that building with those colossal columns which you pass without knowing what the building is. It is true that under the Scientific Societies Act we are a charitable society, and consequently we are entitled to the 50 per cent. rating rebate. But this new Bill, when it becomes an Act, is going to cost us £3,000 a year. We really do not know how to meet this burden, because we have already put up subscriptions; and it is a great labour of love, as you know, to run these societies taking the time of managers and people who are deserving of all praise; and at the end you get this tremendous fine put upon you.

The position of our Institution is most remarkable. It was started over 160 years ago to teach the upper classes science. Well, it has done that pretty well—we are all scientists to-day, especially noble Lords. It is, of course, technically a charity, and it is supported by voluntary membership. But I must say (although it does not sound very good from the advertising point of view) that those who subscribe to it get very little; they do it because they are interested in the spread of science. I do not know whether your Lordships know of our work. The great Friday evening lectures, I should have thought, were well known, and the Christmas lectures to what is called "juvenile auditory" are very famous. Now we have Sir Lawrence Bragg as a director.

Here I think we are doing a public service. We are giving lectures to sixth-form school boys during the week. We do something else which I think is invaluable—we get teachers on one particular subject to come to the Royal Institution and meet the greatest expert in England on that subject, and they can talk together on various matters. Your Lordships may say that that is not very exciting; that other bodies do a similar sort of thing. I should be inclined to doubt that in entirety. But where we are unique—and this is what I want to impress upon the Government—is that we run the Davy Faraday Laboratory. There is no other society that runs a lab. like ours—not even the Royal Society has its own lab. This we do out of our own funds, supported by a kindly industry. That is the point I want to stress more than anything else.

Lest you think that this is not one of the famous labs. in the world, may I draw your attention to the fact that it was in our lab. that Humphry Davy discovered iodine and also the miner's lamp. It was in our lab. that the great Faraday started all that electromagnetism which was the basis of all the generating of electricity in this country about which we have been talking this afternoon. It was in our lab. that James Dewar first liquefied gas. Sir William Bragg, working in our lab., started X-ray crystal analysis, for which he was awarded a Nobel Prize; and here to-day we have his son, Sir Lawrence Bragg, also a Nobel Prize winner.

Lest you should think that we have run down in experiments, and in initiative and imagination, let me tell you that it is only recently, in conjunction with the Cavendish Laboratory, that we announced to an astonished world the atomic structure of hæmoglobin and myoglobin. You may say, "What is the use of knowing about hæmoglobin?" When somebody asked him, "What is the use of your experiments?" Faraday said, "What is the use of a baby?"—good words!

I hope that I have impressed upon the noble Viscount the Leader of the House how apart we are from any other learned society and scientific society. I know that he is most keen on helping science. The D.S.I.R. support every great laboratory in our country with State funds. I approve of such a policy. We are the only lab. which does not get any funds from the State, and we are proud of our independence. If the Government do not help us, this Bill will cost us £3,000 a year extra. We are told, "Go to the Westminster City Council and ask for further relief." Of course, the people at Westminster are splendid people. But why they should pay for something which is national rather than local it is difficult to understand. With the greatest good will I cannot see that there is much hope along those lines. The Government tell us: "You will be met with a lot of sympathy, because your case will be put before the Joint Committee of the Royal Society and the British Academy." I would ask the noble Viscount to put something right. In the OFFICIAL REPORT of May 31, at column 865, he mentioned Royal Societies". Does he mean "societies" or just "the Royal Society"?

VISCOUNT HAILSHAM

That was a misprint in the OFFICIAL REPORT. I have taken steps to put that right.

LORD BRABAZON OF TARA

I thank the noble Viscount. I have nothing but the most profound respect for the Royal Society; but our Institution is also most venerable, and for us to go cap in hand on rate relief to a body of scientific specialists does not appeal to us as a sound piece of procedure.

Frankly, when you look at the figures there is really a tremendous fuss about nothing. The whole amount in money which these scientific societies will have to pay is £128,000. That is the money which is at present being derived from local authorities. I think it was the Treasury, or a representative of the Treasury, who said that he would allot money to these two bodies to give to people who deserved such money. If he gave the whole amount, that of course would fix the thing satisfactorily for all. Whether he can see his way to doing that, I do not know.

I quite understand that I should have raised this matter on Clause 9. I have put this Amendment down now as a sort of substitute, rather ingeniously, on the Schedules. But I quite understand the position of the Leader of the House. I cannot expect him to accept it at this late stage of the Bill, although there is much justice in it. But I would ask him this: will he think over the anomalous position that this Bill has manœuvred this Society into as a separate entity? Inasmuch as he is an encourager of science, I hope he will realise that he is not in this case an encourager of a lab. but a penaliser of it. I am sure he would hate to think about that, and that it would keep him up at nights. In conclusion, and to save time, I would say that I will withdraw the Amendment if he will just say a word, and I will raise it again on Clause 9 on the Report stage. By then perhaps he will have given some thought to it, and will, I hope, be able to say a word in our favour. I beg to move.

Amendment moved— Page 35, leave out lines 8 and 9.—(Lord Brabazon of Tara.)

VISCOUNT HAILSHAM

I am grateful to my noble friend for drawing my attention to the position of this laboratory, for which I need hardly say the Government have only the greatest respect and regard —both for its venerable past and for the distinguished scientific work which it has done and is still doing in the recent past and at present. I would thoroughly agree with him that the work which it is doing in conjunction with the Medical Research Council on protein structure is of the greatest importance. But the Amendment which is proposed does not deal with this laboratory as an independent entity; it deals once more with the scientific societies. The effect of the Amendment would be to delete the Scientific Societies Act, 1843 from the list of Statutes to be repealed in the Fifth Schedule.

This matter has been considered very carefully on a number of occasions, both in your Lordships' House and elsewhere. The Pritchard Committee gave very careful consideration to the case made to them in evidence by and on behalf of societies which are at present relieved of rates under the Scientific Societies Act, 1843. In paragraph 46 of their Report the Committee reported that the Act produced some very curious anomalies". Often they could see no difference between societies within and societies outside the exemption. The same paragraph continues: Some which are exempt appear to be less needy or less deserving of relief than others which have lost the exemption or have failed to gain it. Several of the societies now exempt seem to be fundamentally different from the kind of institution which Parliament had in mind. And then they went on to say, in paragraphs 138 and 139 of their Report: In many respects the arguments for the continuation of exemption for societies within the Act of 1843, and for its extension to other societies, were the same as those advanced to justify relief for charities. Much emphasis was, however, placed upon the importance to the nation, especially at the present time, of the work undertaken by scientific societies. We do not question this claim, but we do not consider that the national importance of work undertaken is a sufficient reason for complete exemption from local taxation. We can understand the desire of the societies to secure that as much as possible of their income is applied to the furtherance of their objects, but this is equally true of charities serving other purposes … we are not satisfied, therefore, that any of the societies exempt, or contending for exemption, under the Act of 1843 has a better claim to relief in present circumstances than any other charities. The Government accepted that advice and Clauses 9 and 10 of the Bill give effect to it.

The present Amendment, as my noble friend rightly apprehended, was put down to the Fifth Schedule in order to make good an omission of raising the matter in Clauses 9 and 10. Your Lordships have now been in possession of the general arguments for and against these exemptions on a number of occasions: first, when the noble Lord, Lord Adrian, raised it from the Cross Benches on the occasion when we were debating the work of my own Office some months ago; secondly, on the Second Reading of this Bill; and thirdly, when the noble Earl, Lord Halsbury, raised it again and I replied in much 'greater detail than I am doing now, at, I think, an earlier stage of this Bill—I cannot remember for the moment exactly at what point.

As your Lordships are aware, exemptions from rates have given rise to two extreme points of view. One is that which was put forward only two days ago, I think, by the noble Earl, Lord Lucan, that charities (and for this purpose this type of society is in the same position) should be subject to rates like anybody else, because, he said, with a great deal of force, these are very largely national societies; there is no particular reason why the ratepayers of Westminster should subsidise work on, say, hæmoglobin at the expense of their rate revenue, and for this reason the societies should be subject to rates unless the local authority gave them discretion. ary relief as giving a local benefit to the inhabitants of the area for which the local authority was responsible. That is a very logical case. We did not accept it, but I think it was put forward on Second Reading by my noble friend Lord Milverton, and it does represent, broadly speaking, the local authorities' point of view.

Against that, it is quite rightly pointed out on behalf of these societies that they do a great deal of very useful work. Many of them maintain libraries —indeed, in the case of the Royal Institution, I think, there is a library, apart from the laboratory to which my noble friend referred. They issue publications, all of which advance the cause of science and learning. And it is said on their behalf that the subscribers today are not all very wealthy people. They subscribe out of their taxed income, and the work of science and learning could hardly go on without the cumulative effect of what they are doing. I say very frankly that I recognise the force of that case; but I still think (and I am sure that the Committee will agree with me) that to continue an anomalous Act, an Act so full of anomalies as this one passed in 1843, which has proved practically unworkable in many respects and is productive of nothing but anomalies (it gives a compulsory 100 per cent. exemption to a very limited class of societies, which is not in fact being given to charities under this Bill) really is not justifiable at the present time. On the contrary, what we have done is to rely on the advice of the Pritchard Committee to make all charities, including the societies I have referred to, subject to a 50 per cent. exemption, with a voluntary, a discretionary, exemption as to the remaining 50 per cent.

I further said to the representatives of these bodies, who came to see me in a very powerful deputation, that we would examine any hardship which was placed upon them as the result of this Act in the context of their needs—but not in the context of rate relief or of rate subsidy. I think that, on the whole, that is a not ungenerous way of handling it. There is not, as a matter of fact, any very great urgency in the matter, assuming that their case is sympathetically considered. As your Lordships will see from the terms of the Bill, I think it is three years from now before any of these rates will be paid; and the full amount will not be paid until 1968.

The situation, therefore, is that we recognise that the repeal of the 1843 Act uncovers a general problem, which is the problem that the learned societies have all been carrying on their affairs in the taxation conditions of 1961 when much of the work they do is of direct public value—that we recognise—but we consider that the remedy proposed, of reverting to the position of 1843, is really not one that the House should support in the light of what we are doing for other similar bodies. For that reason I cannot accept this Amendment.

LORD BRABAZON OF TARA

I am quite prepared to withdraw my Amendment. In fact, I should like to say to the noble Viscount the Leader of the House that he made a very long speech when I told him he need not make one at all. He made it on the general point we have heard before, but he did not deal with the special point, which is that we run a laboratory, unlike any other society; and if he will bear that in mind on Clause 9 on the Report stage I shall be very much obliged. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

EARL JELLICOE

This is purely a drafting Amendment, which I beg to move.

Amendment moved— Page 36, leave out lines 14 to 16.—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This is also a drafting Amendment. I beg to move.

Amendment moved— Page 36, leave out line 28.—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This is also a drafting Amendment. I beg to move.

Amendment moved— Page 36, line 28, column 3, at end insert—"in section sixteen, in subsection (5), the words 'regulations or' and the words from 'and any' to the end of the subsection."—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This is a drafting Amendment. I beg to move.

Amendment moved— Page 36, leave out lines 32 to 34.—(Earl Jellicoe.)

On Question, Amendment agreed to.

EARL JELLICOE

This is a drafting Amendment, too. It is one which it gives me particular pleasure to move, as it is the last one.

Amendment moved—

Page 36, line 35, at end insert—

("ENACTMENTS REPEALED AS FROM THE PASSING OF THIS ACT
Session and Chapter	Short Title	Extent of Repeal
15 & 16 Geo. 5. c. 90.	The Rating and Valuation Act, 1925.	In section sixty-eight, the proviso to the definition of 'gross value'.
15 & 16 Geo. 6. &1 Eliz. 2. c. viii.	The London County Council (General Powers) Act, 1952.	Section twenty-five.
1 & 2 Eliz. 2. c. 42.	The Valuation for Rating Act, 1953.	Section six.
4 & 5 Eliz. 2. c. 9.	The Rating and Valuation(Miscellaneous Provisions) Act, 1955.	Section ten.
8 & 9 Eliz. 2. c. 12.	The Distress for Rates Act, 1960.	In section twelve, in subsection (3), the words from 'and the provisions' to the end.

PART III ")

—(Earl Jellicoe.)

On Question, Amendment agreed to.

Fifth Schedule, as amended, agreed to.

House resumed.