HL Deb 31 May 1961 vol 231 cc807-29

2.41 p.m.

Order of the Day for the Second Reading read.

EARL JELLICOE

My Lords, in moving the Second Reading of this Bill I would say that, while some quite interesting events are taking place on a neighbouring Down, I am surprised to see that quite a handful of your Lordships have come here to discuss the intoxicating subject of rating and valuation. Speaking personally, it being my duty—and I must confess it is a rather disturbing one—to introduce this Bill to-day, I only wish that all of your Lordships had joined the happy throng of punters. I make no apology, however, for detaining your Lordships for a short while in introducing this Bill today; for rates are pretty important. Last year they amounted to almost £700 million. That sum represented nearly one half of the total finance available for local government in England and Wales. And, as your Lordships well know, local government lies at the root of the affairs of this country.

This Bill is designed in essence to improve the rating system in England and Wales. It does not, of course, concern Scotland, where, as your Lordships know, things are ordered, if not better, at least differently. Most of its provisions are due to take effect on April 1, 1963, when new valuation lists, postponed for two years by the Rating and Valuation Act, 1959, are due to come into force. In essence, the Bill seeks to facilitate and ease the introduction of these new lists.

As the Explanatory Memorandum makes clear, the Bill has four main purposes. Its first purpose is clear from its first clause. Parenthetically, I must confess that this is the only clause of the entire Bill which I have been able to take, as it were, in my stride. It is, for example, a distinctly less esoteric affair than subsection (5) of Clause 14, whose charms I would commend to the connoisseurs of legalese. The aim of Clause 1 is, quite simply, to bring to an end the de-rating of industry and freight-transport. As your Lordships will recall, industry was first de-rated in 1929, in an attempt to mitigate the effects on British industry of the world depression. For 30 years, until 1959, industry was derated by 75 per cent. In that year its relief was reduced to 50 per cent.; and, because that change took place, as it were, almost in isolation, industry's rates virtually doubled overnight.

Why do the Government feel that the time has now come to rate industry fairly and squarely at 100 per cent. of current values? The first reason is that the Government consider it to be in the general interest that we should move towards a situation where all the main classes of rateable property are rated fully at current rental values. The abolition of industry's privileged position is a move in this direction. The second reason is that, without this change, industry's share of rates would in fact be very considerably, and inequitably, reduced. At present, the householders' share of the total rates is about 47.5 per cent.; the share of commerce and miscellaneous ratepayers is some 41 per cent.; and the share of industry and freight-transport is only 11.5 per cent.

In the current lists houses are assessed at 1939 levels. Under the law as it stands, they will be valued in the 1963 lists, the new lists, at current, free-market values. Commercial and other properties, like offices and shops, are to-day assessed at 1955 values, but they enjoy 20 per cent. derating. Automatically, under existing law, they will be revalued at current values for the new lists, losing, too, their 20 per cent. derating. Industry and freight-transport will also automatically be valued for the new lists at current values, but, apart from this Bill, they would continue to enjoy 50 per cent. derating. Plainly, the substantial changes automatically due to take place under existing legislation would be bound to lead to very considerable changes in the shares of the rate burden falling on the different classes of rateable property, Nobody can forecast the precise result, but the indications are that apart from this Bill the share of the rates borne by industry would fall very substantially indeed—perhaps by as much as a half.

There are two further considerations. Fortunately, we live in the England of 1961, not that of 1929. Whatever the situation of particular industries may be, it is clear that industry as a whole is no longer depressed. Again, it must be remembered that industry, unlike your Lordships, pays its rates out of its gross, untaxed profits. For these reasons, therefore, I trust that your Lordships will agree that the decision embodied in Clause 1 of this Bill, to rate industry fully, is entirely justified.

I now turn to Clause 2—the householders' clause. Even given the re-rating of industry, the 1963 revaluation could cause a very sharp increase indeed in the householders' share. The reason for this, of course, is simple. For shops and offices, as for industry, the yardstick for valuation will shift only from the 1955 levels to current values; but for the householder it will shift from 1939 values to current ones. Like some others of your Lordships, I have just paid my rates. I did so, as always, a little reluctantly, and under some pressure from my secretary; but my reluctance would have been far greater if I had been paying rates assessed at current values. Anxious though they are to iron out inequalities and to move towards full rating at current values for all the main classes of ratepayers, the Government have nevertheless decided that to do so at one bound would be to give the householder a brutal shock, and they feel that the shock should be cushioned. That is why Clause 2 of the Bill gives my right honourable friend the power temporarily to derate houses by order. That order, of course, would be only temporary. Its writ would run for only five years from 1963. It would also be subject to Affirmative Resolution by both Houses of Parliament.

Nevertheless, some of your Lordships may wonder why my right honourable friend is seeking these sweeping discretionary powers, affecting as they do, either directly or indirectly, every single ratepayer in the country. Why, you may ask, does this Bill not itself provide for a definite percentage by which houses should be derated, so that everyone should know where he will stand in the future? There is no sinister reason for the proposed order. Whilst the Government believe that the increased burden on the householder could very well prove intolerable, neither they nor anyone else can at present tell what the final sums will look like. It will be only by the end of this year that the valuation officers who are now working on the new assessments will be able to discern even the approximate future pattern.

Your Lordships may then ask: why not leave all this open until the end of the year? The answer lies in a simple matter of timing. The new lists are due to come into force, as your Lordships know, on April 1, 1963. The law requires that they should be forwarded to local authorities by the end of December, 1962. But there are some 16 million entries in them, my Lords, and if the legal requirement to forward them by the end of December, 1962, is to be met, this means that their typing must begin by the spring of next year. That means that any derating in favour of householders will have to be decided upon and approved by Parliament in the first three months of next year. If any such derating were to be part of a Bill, this timetable would be quite out of the question.

As I think I have made clear, my right honourable friend has no preconceived ideas about what the percentage of de-rating should be. We shall have to see how the new values work out for each of the main categories of property, and how the incidence of the rate burden will be affected, both nationally and locally. It may be possible to avoid fixing different percentages of derating for different areas. Clearly, differentials of this sort, with the anomalies which they create at the boundaries of rating areas, should be avoided if possible; but this will have to be settled next year under subsection (2) of clause 2 of the Bill. I wish to repeat here the assurance given on this point by my right honourable friend in another place, that the Government would regard an overall increase in the householders' share of as much as one-third as intolerable. The implication, of course, is that, should the householders' share rise by as much as that, my right honourable friend would certainly exercise his powers to derate. This is not to say, however, that should it rise by less than one-third the Minister would not act.

The next major purpose of the Bill is served by Clauses 9 and 10. These clauses, with one or two modifications, carry out the recommendations of an expert Committee, appointed under the Chairmanship of Sir Fred Pritchard, to review the present treatment, for rating purposes, of charities and kindred bodies. I think it fair to say that there has been universal recognition of the value and thoroughness of the Pritchard Committee's work and of their Report.

May I briefly direct your Lordships' gazes backwards? To the layman like myself much of our rating system appears a trifle quixotic, and there are anomalies in it. But nowhere do the anomalies lie thicker on the ground than in our treatment of charities and kindred bodies. Broadly speaking, the picture over the last 100 years or so has been much as follows. Certain properties have been entirely exempt—for instance, churches and chapels, voluntary schools, and, under the Scientific Societies Act, 1843, societies for science, literature, and the fine arts. In addition, many other properties have been partially derated as a result of sympathetic undervaluation by the local rating authority. But the picture as a whole (I think it is fair to say this) has not been without its complications and conclusions.

In 1950, under the Local Government Act, 1948, the Inland Revenue became centrally responsible for valuation for rating. In the 1956 lists they were obliged to value charities and other kindred organisations at the current 1956 values. The new values could well have had disastrous consequences for many valuable organisations, but the Rating and Valuation (Miscellaneous Provisions) Act of 1955 contained a holding provision (Section 8) which restricted the 1956–57 rate payments of these bodies to the amounts they had paid for the last year before the 1956 revaluation, and gave them a proportionate reduction for subsequent years. These arrangements still apply as a result of the further holding provisions of the Rating and Valuation Act, 1959.

The Pritchard Committee's proposal was that property occupied by charities should have 50 per cent. relief as of right, and that local authorities should have discretion to reduce or to remit the remaining 50 per cent. The Committee proposed that kindred bodies should not have any mandatory relief, but that local authorities should have power to reduce or remit their rates over a far wider field than has existed hitherto. The Pritchard Committee found that some very curious anomalies had resulted from the Scientific Societies Act of the last century. Some societies which were exempt appeared to be less needy or less deserving of relief than others which had lost exemption or had failed to gain it. The Committee, in the upshot, thought that none of the societies had a better claim to relief than other charities, and therefore recommended that the Act of 1843 should be repealed.

In one respect only does Clause 9 depart from the substance of the Pritchard Committee's recommendations. Your Lordships will observe that subsection (2) of that clause, together with the First Schedule to this Bill, would debar from mandatory 50 per cent. rate relief the grant-aided universities and university institutions in England and Wales. The Pritchard Committee concluded, "on balance" (as they put it), that the exclusion of the universities from relief would not be justified. There are doubtless strong arguments for and against this view. However, the Government do not consider, again on balance, that it would be right to compel the local rating authorities to give 50 per cent. mandatory rate relief for the very extensive buildings of the grant-aided universities at the expense, as it would be bound to be, of the other ratepayers. In any event, the Chancellor of the Exchequer has given an assurance that any additional rates falling on the universities as a result will be taken into account in determining the amount of recurrent grants which they receive from the Exchequer. The Oxford and Cambridge Colleges, however, have not been excluded from relief, since they do not receive grants from the University Grants Committee.

The fourth main purpose behind this Bill, my Lords, is to introduce a new method of valuing statutory water undertakings. It is dealt with in Part II and in the Second and Third Schedules. This part of the Bill may strike some of your Lordships as a bit complicated. I must confess that I have found it so, and, if only for that reason, I feel that it might be unwise to paddle too deeply in these particular waters. Your Lordships may prefer to immerse yourselves more fully at the Committee stage, or, better still, not to get wet at all.

The background, briefly, to the proposed scheme is as follows. Public utility undertakings very rarely rent their premises, so there is in their case little direct evidence—indeed, I think none—of rental value. But with its faculty for making legislation work, your Lordships' House, in its Judicial capacity, very early defined and approved a special method of valuing them by reference to their "accounts, receipts, or profits". Since the undertakings were almost always monopolies, with any extortionate tendencies curbed by controls of one sort or another on the amounts of their charges, it is perhaps rather surprising that this basis of valuation should have worked as well as it did; and, indeed, as it still does in parts of the field of rating.

Its field of application has, in fact, itself contracted. The nationalised railways and canals, and the nationalised gas and electricity industries, have already been legislated out of it because it was thought that the method was impracticable in the circumstances of nationalisation. It. has long been the hope, shared by the water industry, that some simpler and less litigious method might be found for that industry. The Bill gives expres- sion to the solution proposed after a full examination of the problem by the Working Party on Rating and Valuation, in which representatives of the local authority associations were joined for this purpose by representatives of the British Waterworks Association. I should like to make it quite clear that it was not a completely agreed solution. Both sides had reservations, but there appears to have been general acquiescence in the broad structure of the scheme.

The scheme, with which I will not detain your Lordships for long, starts from values actually in the current valuation lists—your Lordships will find that particular provision tucked away rather obscurely in Paragraph 2 of the Second Schedule. There is an initial reduction for undertakings whose rateable values are more than 50 per cent. higher, in proportion to their output of water, than the average for the country. Perhaps I may here digress for a moment to point out that one of the most striking anomalies of the accounts method of assessment has been the widely different relationships between assessments and water output. New or expanding undertakings, with heavy post-war capital expenditure to finance, have tended to attract relatively high assessments, while long-established undertakings, with relatively small debts, have tended to attract low assessments. In short, among water undertakings, the burden has tended to fall where it could least easily be borne.

Once starting value is settled, although the provisions are complex, the broad principles are tolerably straight-forward. First, the total value of any such undertaking—what is called its cumulo-value: a term which I think is introduced into a British Statute for the first time, although I understand that this term of art has, in part, a Scottish parentage—remains unchanged throughout the life of each valuation list, which is normally five years, unless its water output increases or falls by more than 10 per cent. If the water output increases by more than 10 per cent., the cumulo-value is increased by the product of the increase in water output and the national average rateable value per unit of output. That is Clause 17 (2), and its long-term effect is to tend to bring all water assessments nearer to the national average in proportion to water output, which is something of which both sides and the Working Party were in favour. If output falls by more than 10 per cent., the cumulo-value is reduced proportionally—that comes in Clause 17 (3). Otherwise the cumulo-value is constant for the five-year period. When new lists come to be prepared, the cumulo-value for the old lists is adjusted, in precisely the same way, for changes in water output since the old lists were prepared—and this whether or not the change is as much as 10 per cent.

In addition, at each general revaluation, the cumulo-value has to be adjusted for changes in the net annual values of all the properties which are at that time to be revalued in the ordinary way. This ensures that the value attributable to the water undertaking's property broadly follows the movement in the general level of rental values. That is the substance of the water provisions of the Bill. There are special refinements which can, if necessary, be examined in Committee. But I should perhaps mention that the cumulo-value is to be apportioned among rating areas in precisely the same way as at present, a result desired by both the industry and the local authority associations.

These, then, my Lords, are the four main purposes behind this Bill. Most of its other clauses are of substantially less importance, but not always, as I am sure your Lordships are glad to note, of less complexity! With an eye to the clock and recalling that there are other stages of this Bill ahead of us, I feel that your Lordships would not wish me to review these subsidiary clauses in minute detail. As I see it, they fall into a number of groups. The first are those which would give my right honourable friend the power to introduce by order a formula method of valuing certain clearly defined types of property. The aim here would be neither to increase nor to decrease their rate burden, but rather to introduce simpler, surer and more convenient methods of valuation. Clauses 3 and 4 are of this nature. The second group of clauses pick up certain recommendations of expert bodies. Clause 5 gives effect to recommendations of the Ritson Committee on the rating of plant and machinery, whilst Clause 13 takes account of the findings of a study group of the Institute of Municipal Treasurers and Accountants.

Another group of clauses seeks to remove what I think I may call obvious nonsenses, which the processes of time, or indeed, of the law, have disclosed. Clauses 7, 8 and 11, dealing, among other matters, with the assessment of certain burial grounds and the rating of parks, fall within this group. One clause, Clause 12, making superfluous the old rate book, is simply a matter of "keening un with the 20th century Joneses". The old rate book dates, I understand, from the Poor Relief Act of 1743. Since then, bookkeeping has become a rather more modern science, and this clause would, for example, permit a rating authority to use an electronic computer for maintaining its rate accounts and as a substitute for the good old rate book. Even in matters of rating, we must move with the times. Finally, a group of clauses—Clauses 6, 14 and 15, and indeed some paragraphs of the Fourth Schedule—are designed to aid both the ratepayer and the rating authority by improving certain rating and valuation procedures.

I do not suppose that this Bill is a particularly dramatic measure. I expect that it will not set the Thames on fire. Nevertheless, I believe that it to be an important Bill, which deserves the close attention of your Lordships' House. I also claim that it is a useful and necessary measure. I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2a.—(Earl Jellicoe.)

3.7 p.m.

LORD LATHAM

My Lords, I should first like most sincerely to congratulate the noble Earl on the admirable way in which he has submitted for Second Reading his first major measure. Notwithstanding the fact that rating and valuation is not a particularly scintillating subject, he succeeded in introducing this Bill, heavy with legal terms, with a lightness of phrase and with a sense of humour which I am sure has endeared him to your Lordships.

Whether we like it or not, rating and valuation affect everyone directly or indirectly, either as producer or consumer, or in the widest sense as a citizen. Like taxes, rates enter into the costs of almost everything which we consume or use. I was amused to hear the noble Earl's reference to the quixotic pattern of rating law and practice in this country. Of course, that quixotic pattern has been strenuously added to since 1951, for this is the eighth Bill dealing with rating and valuation introduced by the present Government. It is clear that the Minister of Housing and Local Government believes in serials, and this is the eighth instalment, with Orders in Council to flow from it in respect of relief to the residential ratepayer. I think it is not unfair to say that almost every successive measure has purported—and I stress the word "purported"—to correct the deficiencies of one or other of the previous measures.

This is an important Bill, and, as the noble Earl has said, it recognises that an unfair and, indeed, unjust burden would otherwise be cast upon householders when the 1963 valuation applies. The Bill purports to meet this consequence, but I submit that it does not. The Bill imposes no obligation upon the Minister. It seeks merely to give him power to act by order to cushion (I use the word of the noble Earl) the increase of rateable value at the whim and fancy of the Minister. Not that I can conjure up my erstwhile colleague on the London County Council in a whimsical mood: but there is no obligation upon him to submit an order. And whilst we note the near undertaking given by the noble Earl as to the Minister's intentions, in certain circumstances, if the increase exceeds some 33 per cent., the fact nevertheless remains, that there is nothing to compel the Minister to introduce an order; nor is there anything indicating the measure of relief which he will regard as being appropriate. In short, the thickness of the "cushion" (if there is any cushion) is to be left entirely to the Minister.

The proposal, as I read the Bill, is that such relief as may be granted will be granted only for a period of five years; and, of course, from an administrative point of view there may be something to be said for that. The Minister, moreover, is to have power to prescribe different reductions or reliefs for different areas, limited, it seems to me, to the county areas and the county borough areas, and not applying to any others. It is the case that the effect of the application of 1963 values to residential properties may be very different between different areas, especially if one area is mainly industrial and another is mainly residential. But this proposal to grant varied different measures of relief by reference to particular areas, and the (shall I say?) industrial and social development and character of the areas, is a fundamental departure from recent intentions and recent legislation.

As I understand it—and I do not think I am wrong in this respect—the object of transferring valuation from the rating authorities to the Valuation Department of the Inland Revenue was precisely in order that there might be a national level and a national pattern of valuation, which was not the case when the valuation was done by the rating authority. It is true that there were several Committees brought into existence to secure that the effects of the change should be not too pronounced. Nevertheless, rating by the rating authorities did lead to a number of glaring (and I use that word advisedly) inequalities as between one area and another. This was said to be corrected, and has been largely corrected, by the transfer of rating to the Inland Revenue. We are now going back, as it were, to a differential relief, if any relief be granted. I cannot think that this is a wise step to take.

The Times of November 19, 1960, said that this Bill promised to be one of the most controversial of the Session, and that surely has been the case. I think that perhaps this Bill holds almost a record for the number of days it was under consideration in Committee in another place. As the noble Earl has said, the cardinal feature is that as from April 1, 1963, dwellings at present rated on 1939 values will be rated on the then full current values. This cannot fail to lead to a drastic increase. The same issue of The Times expressed the view that the values were likely to be trebled. This increase, whether it be of that order or more or less, coupled with the increase of rents flowing from the operation of the Rent Act, 1957—of which some increase in values will in many cases be a reflection of the increase of rents—would, unless mitigated, as the noble Earl has indicated, cast an intolerable burden on the householder.

It is idle for the Minister of Housing and Local Government to say that assessments will not be influenced by the effects of whether the properties are controlled or not; for the whole level of rents has been raised by the operation of the Rent Acts, and the gathering measure of decontrol, which is coming about as every day passes. The Minister's former Parliamentary Secretary was much more correct and nearer the mark when he said, as he did in February, 1959, when the question of assessments and valuation was being discussed [OFFICIAL REPORT, Commons, Vol. 600, col. 872]: It is not even a matter of intelligent guesswork or intuition."— that is to say, valuation. It has to be founded on actual market conditions and the rents which willing tenants are prepared to pay to willing landlords. So the householder will face the double burden of higher rents, reflected in and leading to higher assessments; and in the result it is estimated that domestic property, which on April 1, 1959, represented 47.5 of the total rateable value in England and Wales, as from April 1, 1963, will represent 63 per cent., that is to say, an increase of 15.5 per cent.; while industrial and commercial properties (offices, cinemas and the like properties), which at present account for 52.5 per cent., will as from April 1, 1963, drop to 37 per cent.—that is to say, a reduction of 15.5 per cent. And this after the industrial and commercial properties all come in, as they will on that date, for a full 100 per cent. of rateable value.

All derating, as the noble Earl has said, except for agricultural properties and certain charities, will cease as from April 1, 1963. One is entitled to reflect with some sardonic humour that when on several occasions we on this side of the House sought to abolish the derating of industry altogether we were told with simulated gravity that it would do serious injury to industry, and especially to our export trade—which, of course, is normally prayed in aid when argument is otherwise feeble. Yet, lo and behold! as from April 1, 1963, all derating of industry is to go—and I think properly so—and we find the Minister himself adopting almost the language of our earlier submissions, even to the extent of saying, as we did at the time—and here I quote the Commons OFFICIAL REPORT, Vol. 631, col. 397: … it is right to bear in mind that, on average, the rates paid by industry are estimated to be less than 1 per cent. of the total turnover, so even if they were increased by 50 per cent. … which they will not be, they would still remain a very small part of the total expenses of the average firm. It goes on to say: Any increase in rates diminishes the firms' liability for tax. That diminution, of course, including profits tax, can run to something like 531 per cent., whereas the householder will pay the increased rates out of taxed income; he gets no relief. And so it seams to me that a Daniel has come to judgment—indeed, quite a number of Daniels have come to judgment. There is not a word about the poor old export trade, no tears, at a time when, if you please, we are told that the need to increase exports was never more vital to the health of our economy. The Government have seen the light. Let us, out of charity, pass the sponge over their former tergiversations.

So we say that this Bill is unsatisfactory, in that it fails to achieve its alleged purpose, namely, to avoid an excessive burden of rates falling upon the householder for the benefit and relief of nonresidential properties, especially those of flourishing industry and commerce. Its principal defects and deficiencies are, I submit, that it is not mandatory—it is optional to the Minister. The relief which will be necessary should be prescribed by way of a specified percentage of increase of rateable value or rates that could either be on the basis of valuation or, it could be, on the basis of rates payable. It should not be left, we submit, to the decision of the Minister whether he promotes an, order or not or, if he decides to promote the order, whether the measure of relief should be within his sole determination. Really what is needed—and this was said on Second Reading in another place—is a thorough, exhaustive examination of the whole question of the financial relations between local authorities and the central Government, and the whole basis and pattern of the rating and valuation system and practice in this country.

So much for the main features and the real raison d'être of this Bill. As the noble Earl has said, there are a number of miscellaneous provisions which are valuable, in that they tidy up, in some small manner, some of the disordered features of our rating system. I should like to touch upon two of these. The first is the proposal to bring some sort of order into the exemptions granted to charities and kindred bodies. What a wealth of uncertainty can be found in that word "kindred", as the noble Earl said. I should like—and I am sure my noble friends behind me would wish to be associated with this—to pay my tribute to the Pritchard Committee and the excellent work which they did. They handled very skilfully, I thought, a most complex matter, which is honeycombed with the vagaries of the past. If I may say so, the Government on the whole were wise to adopt most of the Committee's recommendations, which go some distance to tidy up and secure some measure of uniformity where imprecision was to be found. It is a useful first step.

As I understand it, the situation will be that, as regards prescribed charities, there will be a mandatory remission of 50 per cent. and there will then be the possibility and the right of the local authority to grant a further x per cent. up to 100 per cent. if they so wish. As regards kindred bodies, there is no mandatory remission, but there is a discretionary power in local authorities to remit up to 50 per cent. I think it should be said that these remissions, desirable though they may be, and generous as authorities may feel who make them, mean a subsidy or a grant by the other ratepayers of the district to these charities and kindred societies. They fall indiscriminately upon certain local authorities where, quite fortuitously, the eligible charity or kindred body is located within their area, although in many cases the work, purposes and benefits which flow from the activities of these societies are of a national character and benefit the nation, and not only the locality in which the head office or the premises may be situated. I think my noble friend Lord Lucan may wish to have a word upon this aspect, and on the fact that in certain boroughs the burden of this mandatory relief will be not inconsiderable.

There is one other point I should like to make with regard to the operation of the remission provisions in connection with charities and the like—a point in which I think some noble Lords would be interested, including my noble friend Lord Longford. The point is that they would like some clarification and, if possible, assurance as to the position of the enclosed religious communities in regard to their entitlement to remission. I gather that their position is safeguarded by an Amendment made in another place to Clause 9 of the Bill, but I am sure noble Lords interested would be glad to have an assurance from the Minister who is to reply to the debate.

With regard to the water undertakings, as a member of the Metropolitan Water Board I have, of course, been interested in the steps which have been taken to place the assessment of the water undertakings on a more up-to-date basis. I cannot yet accept the arguments which have been put forward as to why water undertakings should be dealt with differently from those of electricity and gas. I agree that it is a step forward to move from the present method of assessment, which can be quite inequitable, but, as I have said. I do not think the case has been made for differentiating between water and electricity and gas. So far as my reading of the proceedings in the Committee in this connection are concerned, I understand that the ultimate residue of justification for this differentiation was that, whereas the electricity and gas undertakings have to buy their raw material, water undertakings do not. Now that may appear to be the case, but it is not, because as much expenditure is involved in recovering the raw water and in its storage and pumping as would represent and equal the cost of the water as a raw material. It is only when the raw water has been dealt with and has become pure, potable water that it can be regarded as the raw material of the undertaking. From my reading of the debate which took place in Committee in another place, that seemed to be, as it were, the residual argument in support of this discrimination between public service authorities.

There are, as the noble Lord has said, several other proposals in the Bill all designed to tidy up the framework of the valuation and rating. But I repeat that the main elements of the Bill do not provide for meeting satisfactorily the situation which will exist as regards the residential ratepayer as from the 1st April, 1963. These and other defects of the Bill were debated and threshed out in another place in extenso, without, I must say, much reward. We on this side of the Chamber consider the Bill to be unsatisfactory; that it is really only another exercise—the eighth—in tinkering with the whole question of local government finance and local government rating. We nevertheless recognise that something must be done in order to avoid a situation which would be disastrous if the full weight of the 1963 valuations fell upon households; and therefore we shall not oppose the Second Reading.

3.32 p.m.

THE EARL OF HALSBURY

My Lords, addressing you upon a very technical matter, I shall confine my remarks to that small proportion of it which falls within my competence. I wish to speak of the effect which the new system—that is to say, this Bill—together with the fate of the Act of 1843 under the recommendations of the Pritchard Committee, will have on the learned societies. The transfer income involved in derating the latter is of negligible proportions compared to the tactical importance of doing so and providing in the future the equivalent of what has been customary in the past. What I have to say will, to some extent, be a repetition of what my noble friend Lord Adrian said last year. The effect of the new system will be to bury the old one. If and when your Lordships have seen fit to pass this Bill there will be many societies throughout the land who will paraphrase the words of the burial service: "The Lords have given; the Lords have taken away".

This Bill will have the effect of imposing burdens on societies which have not hitherto had to bear them while enfranchising those who hitherto have not had the benefit of derating. The effect of the older system was to effect a dichotomy between what I may call suppositious sheep and hypothetical goats. This distinction was not in any sense pejorative, as it was based not on the merit of any particular society's work but upon the terms of its charter or memorandum and articles of association. In emancipating the goats, the new system will place an unexpected burden upon the sheep. The effects on the scientific community of the new system can thus be very serious indeed. There is not only the fact that societies—among the most distinguished of all being the Royal Society, the Linnean Society, the Royal Geographic Society and many others—who hitherto have been wholly derated will now have to bear 50 per cent. of their due proportion of the rates; there is also going to be a very large measure, apparently, of uncertainty as to how the future system will be construed. I hope that the noble and learned Viscount who is going to reply on behalf of the Government will be in a position to tell us whether the Government are prepared to give some positive assurance as opposed to an expression of hope with respect to what they intend to do for such learned societies.

The sort of difficulties we ran into under the old system were exemplified by an experience I had one day standing for an hour in the witness box at the Marylebone Court giving evidence on behalf of a society—whether learned or not was what the court had to determine—which was largely concerned with sociological research. Was an institute largely devoted to sociological research engaged on activities which were social under the terms of the 1843 Act? After a lengthy argument it was decided they were not and, possibly thinking discretion the better part of valour, we did not appeal.

On another occasion the Institute of Fuel, either better advised, or more courageous or having a better case than I instanced earlier—I do not know which—found itself challenged by the Borough Council of Marylebone, with the support of the Treasury, on de-rating. This it had enjoyed ever since its foundation in 1927. It lost its status in the Marylebone Court and appealed to the Lands Tribunal. The appeal was dismissed. It went on from there to the Court of Appeal, where it was dismissed by a majority of two to one. Finally, the Institute appealed to your Lordships' House. The appeal was allowed and their status was restored to them retrospectively, with costs. Think of all the waste of time of learned scientists who work on the voluntary councils of these societies and who become involved in fighting endless suits through the courts to determine whether they are to pay rates or not!

I hope the new system, whatever it may be, will be something we can understand. I have no doubt that your Lordships, as I did when I was somewhat younger than I am now, used to play a game called "Russian Messages". The point of the game was the corruption of a message as it was handed from one recipient to another. The legislative equivalent of that is to tell Parliamentary draftsmen what you want, to pass that on to the Legislature, where it is amended, and finally hand it over to the courts for construction. Nobody ever seems to know exactly where they are in such a case. I do not think any of us know the solution to it, but I hope that what the Government finally introduce for the learned societies will be simple, understandable and practical.

What I should personally much prefer to see would be some definition of an exempt society as a scheduled exempt society, with the power to schedule in the hands of a Minister who would be advised by an advisory committee of representatives of scientific bodies; so that the scientific societies would be judged by their peers on a basis of what they were doing rather than by lawyers on a basis of what their memoranda and articles of association gave them power to do. Once every week the Royal Institution holds Friday evening discourses, following which tea is handed round to the members. One has to pay for one's tea, because it has been held that if the Institution gives its members a cup of tea the derating position under the old system would be prejudiced and the Institution might find itself liable to pay rates. Now if, for the future, we could have something which did not involve learned men having to sit round tables deciding whether their members might or might not have a free cup of tea, the whole scientific community would, I know, be deeply grateful.

On the question of why these societies should receive benefit, I should like to stress what has been said before: that they are voluntary bodies who are doing absolutely essential work. The Government have committed themselves over and over again, as it were, to a treaty of friendship with the world of science, and we are all grateful to the enlightened attitude of the noble and learned Viscount who represents the interests of science in this House as its Minister. But for the Government to spend more money on the scientific edifice and at the same time prejudice scientific societies would be, if I might put a material analogy to your Lordships, rather like extending a house at considerable cost and then helping to pay for it by ripping out all the telephone wires so that nobody inside it could communicate with anybody else. This is what the learned societies do: they are responsible for the lines of communication of the scientific community.

I do not know how many of your Lordships are familiar with what the proceedings of a scientific institution look like, but I trust I shall be in order in just thumbing over the pages of one monthly issue of the Journal of the Chemical Society. It is about 500 pages of close print, describing facts related to new discoveries in chemistry made and announced during the month. The volume for a year consists of about 5,000 pages of close print. It costs about £117,000 a year to produce. The whole of the editing is done voluntarily, and chemists throughout the world, in industries, working in practical research, or on whatever it may be, make use of these volumes. The Chemical Society is a body with an income of about £33,000 a year and out of that it maintains the administration which launches this Journal all over the world. The abstracting service is done by another body.

Here is the journal of the Operational Research Society. It is only a quarterly journal and is maintained by a small society whose total subscription income is little more than £2,000 a year. If that ceased publication because it became financially insolvent the scientific world would be the poorer for it. I most earnestly recommend to your Lordships that the fate of these learned societies which are responsible for the communications of the scientific world, all of which are done on a voluntary basis out of the subscriptions of their members, should be safeguarded by the attitude the Government take towards the new system.

I realise that I have discussed many matters which perhaps are on the borderline of what might be held to be in order, but the Pritchard Committee's findings were coupled to this Bill in another place, and the noble Earl who introduced the Bill referred to them, so I trust I have not been out of order in taking up a little time to tell your Lordships of some of the issues involved. We all very much admire the achievements of the noble and learned Viscount, Lord Hailsham, in his capacity as Minister for Science, but if he could produce once a month a volume as thick as the one in my hand, showing the things he had done as opposed to the things he hoped to do, he would deserve the gratitude of the nation, much as he enjoys our admiration for the grace and elegance with which he always addresses your Lordships' House. I would make a strong plea that he will at the earliest opportunity make a positive commitment on behalf of the Government to support the learned societies rather than an expression of hope as to what may happen some time before 1964.

3.45 p.m.

THE LORD BISHOP OF LEICESTER

My Lords, I am grateful for the opportunity to say a few words on the Second Reading of this Bill, not because I think it at all likely that I can throw any spiritual light on this rather mundane subject, but for the more practical reason that some of my friends on the so-called Churches Main Committee have taken unfair advantage of my presence here for the purpose of taking Prayers to ask me to voice some points they have very much in their minds. I would also apologise to the noble and learned Viscount for the fact that if our deliberations should go beyond 6 o'clock I shall not personally be here until the end.

THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)

If they do, I can assure the right reverend Prelate that I shall not be here to answer.

THE LORD BISHOP OF LEICESTER

That makes my absence easily excusable. There were just three points I wanted to mention. The first is to express the gratitude of the Churches to the Minister for including in the present form of the Bill, Clause 9 (9), which now makes it fully in order for parsonage houses of various kinds, whether or not they are technically charitable, to benefit from the statutory remission of one-half of the rates. It is no doubt thought that the amount of charity, both inside the parsonage houses and emanating from them, is a valuable quantity, and that it would be unwise to make this remission dependent upon their fully charitable nature. But from the practical point of view it will be of great benefit to the Churches, including the Church of England, and it was felt desirable that the gratitude of the Churches to the Government for this point should be mentioned.

The second point is one that has already been mentioned in the House and may be mentioned later on in this debate, and that is the position of the contemplative Orders. It is clearly understood that by a judgment of this House in 1949, these Orders are not charities in the technical sense. It was found impossible in another place, I understand, to accept an Amendment which would have brought the so-called contemplative Orders under the benefit of the statutory remission. But an Amendment has been made in Clause 9 (4) (b) whereby the word "religious" has been used instead of the former phrase "for the advancement of religion", and it is understood that this will make it possible for rating authorities to allow, at their discretion, remission of rates up to a certain amount for religious houses which have been described as non-charitable in the technical sense. If that is the most that is possible, it is nevertheless something for which the Church of England will be grateful, as well as, I believe, the Roman Catholic Church. The Church of England possesses about a dozen of such contemplative communities, and if they should in the end receive this concession from the local authorities it is something that would be a great help to the communities, which in the nature of the case have very limited resources.

I do not think I should delay the House by an extended argument about these Orders, but I think it might be helpful to say one word about the justification, if any, for allowing some kind of consideration to them. The people who are inside them, whether they are men or women, are people who have felt that they could best serve God and their fellow men by a life consisting almost entirely of prayer. It would be quite unfair to expect the general body of the population to enter fully into what is in their minds, any more than it would be possible to expect the man in the street to realise how much his life depends on that monthly volume of 500 pages produced by the Chemical Society. There are some things it is impossible to expect everybody to enter into. If the ordinary man were asked his view of these things he would probably give many different answers according to his background, some appreciative, and some mystified, if not scornful.

But the point that is relevant to this House is that the Churches, certainly the Church of England and the Roman Catholic Church, to go no further, believe that what is being done in these houses is of value in the total work of religion and the advancement of religion in the country. Therefore, if it is possible for these concessions to be given they will be appreciated by the Churches and will, I think, be felt by many to be fair and reasonable, because, in the nature of the case, one could hardly have an activity that was less materially productive than a life of contemplation and prayer. It is really for the community as a whole—the general community of the nation—to say whether or not it is prepared to look at these activities with an eye of favour and compassion.

There is one last point that I venture to raise. This I do entirely on my own authority, and perhaps it may better be considered at a later stage. On page 23 of the Bill, under paragraph 2 of the First Schedule, among those charities which are excluded from mandatory relief are the colleges, institutes and schools of the universities of Durham, London and Wales. It so happens that in my former work, before I became a Bishop, I was closely involved in the life of one of these colleges in the University of Durham, and I happen to know that at least two, and I think three, colleges which are constituent colleges of the University of Durham are, from the financial point of view, entirely independent and do not draw on the grants of the University Grants Committee. It would therefore, on a first view, seem rather unfair if they were deprived of some concessions in rating because of benefits which in fact they do not receive. I hope, therefore, that at some point the position of the independent colleges, which are nevertheless constituent colleges of the University of Durham, will be considered.