§ 4.8 p.m.
§ Order of the Day for the Second Reading read.
§ LORD CRAIGTON
My Lords, this Bill directly concerns the Scottish local authorities, and all but two minor clauses directly affect local authority finance. The view of the Scottish local authorities on the Bill is that they agree all the provisions except Clause 4. The Bill is brought before your Lordships rather more quickly than usual because of Clause 1, which must be in operation by March 15 this year. This clause requires a few words of explanation.
As your Lordships know, rateable valuation, or standard rateable value where higher, is the basis of the distribution both of moneys paid by the central Government to local authorities by way of Exchequer equalisation grant and general grant, and of moneys paid by one local authority to another where services are provided in more than one local authority area. In the normal way the valuation for the preceding year is used for the apportionment of general grant and local expenditure.
Because of revaluation the Act of 1956 provided that for the current year, 1961–62, we should not use the previous year's rateable values, but that instead we should use estimates of the rateable values for this year which the assessors were required to estimate in April, 1961. But these estimates are imperfect and there have since been many valuation appeals. So Clause 1 provides that more up-to-date estimates of rateable valuation, made as at March 15, 1962, should be made and used as the basis for the apportionment of grant and expenditure. Even these estimates will not be final, because the last day for hearing local valuation appeals is not March 15 but May 15; but the local authorities agree with us that Clause 1 will be a great improvement on the existing arrangements.
Clause 1 requires the new estimates of rateable valuation and standard rateable value to be prepared; and authorises their use in the re-calculation of county requisitions and joint board apportion- 38 ments, and their use in the general grant calculation. Effect will be given to the adjustments in the various payments for 1962–63. The general grant calculation also includes a weighting for population, school children, and so on, and subsection (3) of Clause 1 permits the relevant figures of the recent Census to be used in the re-calculation, instead of the figures for the previous year.
Clause 2 deals with the British Transport Commission and the two Electricity Boards, who make payments, in lieu of rates, based on standard amounts. The payments are varied each year as average rate poundages and services supplied fluctuate. Under re-valuation, rate poundages have decreased because rateable values have increased; so the standard amounts must be recalculated so that the payments may remain broadly as before. Clause 2 makes the necessary adjustments. Clause 3 makes some small revisions in the calculation of the rates paid by the Scottish Gas Board, in order to secure a more equitable reckoning of gas purchased from other producers. Similar arrangements were made for England and Wales in the Local Government Act, 1958, and their application to Scotland has been agreed with the Gas Board.
Now, my Lords, we come to Clause 4, with which the local authorities do not agree. The history of this clause is quite straightforward. The Pritchard Committee was set up for England and Wales to recommend more permanent legislation to deal with the rating of charities following the withdrawal on revaluation by the Inland Revenue of the "sympathetic valuation" which had formerly been customary in many areas. As a result, the English Act of 1961 gave charities as defined in the Act a mandatory 50 per cent. rating relief and provided for a further discretionary relief for property occupied for charitable, educational or recreational purposes.
The recent revaluation in Scotland revealed that many Scottish charities had also been sympathetically assessed in the past. But the 1956 Act no longer allowed sympathetic assessments, and as a result the valuation of Scottish charities has in some cases risen very steeply indeed. Many charities extend both to England and Scotland, and so it was 39 understandable that my right honourable friend was under strong pressure that Scottish local authorities should give a mandatory 50 per cent. relief to charities as in England and Wales. The local authorities opposed the principle of this, and particularly objected to relief being granted to fee-paying and independent schools and similar borderline institutions. The Government feel, and we think your Lordships will agree, that Scotland cannot be less generous in the rating of charities than are England and Wales and that the method chosen for deciding what is or is not a charity could hardly be better. This is set out in subsection (10) (a) of Clause 4. If the charitable institution can convince the income tax authorities that they should not pay income tax, then they are entitled to a 50 per cent. rebate in their rates.
I turn now to the provisions of Clause 4. Subsection (1) means lower rates in the year 1962–63. The charities understand that they will have to pay the higher rates for 1961–62, but in England the lower rates take effect only from 1963–64. Subsection (2) provides the 50 per cent. mandatory relief, and subsections (3) and (4) exclude from that relief the Scottish universities. This follows the English Bill. The universities are a clearly definable class and are almost wholly financed by the Exchequer. The Secretary of State may include in the Schedule any institution which he considers ought to be classified with the universities for this purpose.
The next four subsections re-write Section 23 of the 1956 Act, which gives power to the local authority to grant relief, at their discretion, to charities, to non-profit-making philanthropic bodies in the widest sense, and to bodies providing recreation on a non-profit basis. These subsections make provision for the periods during which relief may be given, with a year's notice of alteration or cancellation where the period is undefined; and they ensure that the manse gets rating relief. Subsection (9) excludes from the whole clause places exclusively used for public religious worship and religious halls which are now totally exempt from rates under existing legislation, and also excludes from the clause 40 local authority property, on which full rates must be paid.
Clause 5 is a machinery clause to supplement Clause 4. Subsections (1) and (2) refer to a few charitable organisations which are now exempt entirely from rates, but which will come under the definition of Clause 4 and therefore pay half rates. A build-up towards the payment of half rates over a period of five years is allowed. The next four clauses deal with minor matters of a different character. Clause 6 helps development schemes. Where a local authority are undertaking public works they may, until the work is revenue-producing, hold up repayments of capital, and they may borrow to pay interest.
Clause 7 meets a need that has been found in practice for a valuation appeal committee to have a deputy secretary who has the powers of the secretary and can act on his behalf. Clause 8 refers to demand notes for rates which must show the basis of levying the ordinary rate and the domestic water rate. The basis of levying water rate was altered, with effect from 1961, under the 1956 Act, and this provision in Clause 8, which should have been in the 1956 Act, makes a consequential change in the information to be given on demand notes. The reason for Clause 9 is that the Scottish Valuation Advisory Committee has pointed out that unless clerical errors can be corrected the valuation roll would stay wrong for five years; but the rate-payer concerned must be advised and has the right of appeal. The remaining clauses are common form, and there is nothing to add about the Schedules, which are self-explanatory.
My Lords, this is a limited Bill dealing with urgent matters. Next year we shall need a more weighty measure dealing with important questions in this field and especially with the whole basis of the distribution of Exchequer equalisation grant; in particular, we shall consider the impact of the charities provision on the formula. The discussion of these matters will be helped by the revised valuation estimates to be provided under Clause 1 of this Bill. The present formula for Exchequer equalisation grant expires in May, 1963, and we shall introduce fresh legislation next Session in time to reach the Statute Book by 41 that date. My Lords, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Craigton.)
§ 4.17 p.m.
§ LORD HUGHES
My Lords, I should like to thank the noble Lord, Lord Craigton, for the brief yet perfectly clear way in which he has explained the Bill and its purposes to your Lordships. I should also like to congratulate him on adding to his vocabulary of phrases describing these Bills: for quite some time it was small and useful"; to-day we have had "limited and urgent". It would be difficult to disagree with the first of those, and in so far as Clause 1 is concerned the factor of urgency cannot possibly be denied. I feel that the Government are to be congratulated on the cunning with which they have tacked on to Clause 1, which the local authorities are exceedingly anxious to get, Clause 4, something which the local authorities do not want at all, and so have placed them in the position of having to accept Clause 4 if they are going to get the benefit of Clause 1.
I do not regard it as my purpose necessarily here to put forward things which the Scottish local authorities want. On the other hand, I feel that I am under an obligation to make some investigation into the reasons why they object to Clause 4—whether it is nothing other than a justifiable desire to hang on to what they have, or whether there is good reason for parting with it. It may be that I shall put down an Amendment at the Committee stage, though of that I am not at all sure; because I think that generally it is a reasonable position that charities, whether in Scotland or England, should be treated in roughly the same sort of way.
I doubt very much whether many people in Scotland will disagree with the 50 per cent. measure of relief as determined in the Bill. As the noble Lord, Lord Craigton, has indicated, I should think that the lines of disagreement will not be on the extent of the relief but rather, in a few borderline cases, over the bodies which might get it. The noble Lord has mentioned, for example, the fee-paying schools.
The City of Edinburgh, I understand, has objected particularly strenuously to this clause, probably because of the fact 42 that they have a much greater share of the offices of the Scottish authorities and perhaps, proportionately, will be affected more than any other Scottish local authority. By the same token, I think they also object to the measure of relief being given to fee-paying schools. I am not at all certain that Edinburgh is on such strong ground in the latter case, because if they are being hit in the extent to which they have to give relief, they have to accept it that for many a long day the rate which has had to be levied in Edinburgh for education purposes is very much less than it would have been if those schools had not all been located there. So they cannot get it coming and going.
In connection with the elimination of universities from relief, I greatly doubt whether anybody would wish to disagree with this step, because in fact the day has long gone by when the relief is given to universities—the relief, in fact, is to the Chancellor of the Exchequer; and as in recent years the tendency of the Government has been to load more and more on to the ratepayer, and to relieve the taxpayer, we must accept it as a small measure of belated assistance to the ratepayer that in this particular instance the Government have reversed the trend, and that the University Grants Committee accept the full responsibility of it.
I do not know whether this is the right way to do it. I read what had been said in another place on this measure, and I should like to correct the misapprehension of the Joint Under-Secretary of State for Scotland. When speaking about the giving of relief to universities, he said in the Scottish Grand Committee:As the Committee will be aware, as to three of the universities, all of them, with the exception of St. Andrews, at present receive relief under local Acts.I do not know whether he is correct in his arithmetic that three of them get relief. I have a feeling that he is right, but I am not certain. But he is certainly quite wrong when he mentions the exception as being St. Andrews. The position is that the University of St. Andrews did not receive any relief for that part of the University which is located in the City of St. Andrews, but it did receive substantial relief for Queen's 43 College, situated in the City of Dundee. In fact, the relief which was given to that part of the University of St. Andrews was the most generous in Scotland.
§ LORD CRAIGTON
The point, I think, is that my honourable friend was referring to local Acts. While it is agreed that Dundee does give relief to the part of St. Andrews University that is in Dundee, it is not given under any Act at all; it is not mandatory, but is purely discretionary relief. Therefore, my honourable friend is right and so is the noble Lord.
§ LORD HUGHES
I am not sure that he was right all the time, because in fact relief was given under a local Act. I think it was 48½ per cent. of occupiers' and 71 per cent. of owners' rates. It may be the other way round as to owners and occupiers, but I know that the percentages are right. I do not know how they arrived at the percentages, but it was certainly the highest measure of relief that was given, and it was only in 1957, when the whole question came up, that the present figure of 50 per cent. was substituted. That was done by local decision, by exercise of discretion; and since 1957, I gather, it has been a discretionary matter.
§ LORD HUGHES
I did not wish to lose the opportunity of correcting the impression that the meanest of the local authorities were those that had to do with the University of St. Andrews.
Your Lordships will forgive me if I do not follow the noble Lord, Lord Craigton, in speaking to all the rest of the clauses. In fact, I will go further and say that doubtless you will be grateful to me in that I do not feel it necessary to go through all the other clauses. With the best intentions in the world I cannot even disagree with what he said on them, and for that reason I am content to say that I support the Second Reading of this Bill, and hope that, because of its urgency, it will be possible for it speedily to pass through so that the local authorities in Scotland may obtain the benefit of Clause 1 even 44 though, in order to get it, they may have to face the difficulty of Clause 4.
§ 4.26 p.m.
§ VISCOUNT STUART OF FINDHORN
My Lords, I think that Clause 4 is the problem, because it is really most difficult to define the institutions which, under subsection (4), in the opinion of the Secretary of Stateought to be classified with the institutions mentioned in the Schedule, or omitting any institution or altering the description of any institution.It seems to me to be a difficult thing to define. If you do not like cats, you could argue that a cats' home is not charitable. Perhaps it is not. I do not think it ought to be. If you do not like foxes and think of them as vermin, you could argue that foxhounds were charitable institutions in helping to get rid of vermin. I think it is difficult to argue what is charitable and what is not, and I am not going to ask the Minister to give me a definition. Subsection (4) is supposed to make it clear to me, but I do not suppose it will make it clear to any court of law, or to anybody else that I am aware of. On that I can say no more at this stage; I do not even want an answer. But I am bothered if I understand how you are going to define a charitable institution under this Bill!
THE DUKE OF ATHOLL
My Lords, I welcome this Bill, but I should like to ask a couple of questions about Clause 9. I can see that there may be some necessity for Clause 9 so far as clerical errors are concerned. But I do not like it, as I cannot see that there is anything to stop the valuation officer, on second thoughts, from saying that anything he thinks is undervalued is so because of a clerical error, and the poor person has to go to the expense of appealing against that decision. I cannot see what is the point of having arithmetical errors. If the arithmetical error is in arriving at the figure on the valuation roll, surely that is not meant to be covered by this clause. If the arithmetical error is just in adding up the totals at the end, I cannot see that it matters if that is perpetuated, as these totals do not mean anything anyway. I was wondering whether it is really necessary to have the words "or arithmetical" at all in that clause.
§ 4.28 p.m.
My Lords, I should like to say one word about Clause 4, but before doing so I must confess to having an interest. Clause 4 affects me as it concerns the Royal National Lifeboat Institution. I do not think any local authority in Scotland would wish to be hostile to that institution. The only buildings that we should worry about are our lifeboat houses, of which we have a number scattered all round the coast. At the moment we are engaged in improving them, having to adapt them to take a different kind of boat from that which the old houses would hold. The new kind of boat gives a greater measure of safety to the crews manning it. I am most grateful for Clause 4 because it will make a great deal of difference to us in effecting these alterations and in maintaining our lifeboat houses. The question of rates will naturally arise. If the houses are going to attract a larger charge, this will affect us. Therefore I hope that Clause 4 will be maintained so far as concerns the Royal National Lifeboat Institution.
§ 4.30 p.m.
§ LORD CRAIGTON
My Lords, I am grateful to the noble Lord, Lord Hughes, for his welcome of the Bill. He twits me for describing these Bills as "small", or "useful", or "urgent". Of course he describes the Government in many ways; but this is the first time he has accused us of being cunning, in that we have tacked Clause 4 on to Clause 1. But, in all seriousness, I carefully examined the effect of the revaluation on the charities, and it was, I can assure him, very serious indeed. The matter was one of great urgency, and I know that the noble Lord, Lord Hughes, and all noble Lords feel that we should treat charities in the same way in Scotland as in England. I should like notice of the point about "or arithmetical" raised by my noble friend, but I will write to him about it. I am advised at the moment that "arithmetical error" means an error in calculation or adding up as against an error in professional opinion, if that is any help to him; but I should like to have another look at this question.
My noble friend Lord Stuart of Findhorn raised two points. First of all, he was not sure how one could decide what is or is not a charity. But 46 the yardstick we have taken is an absolutely cast-iron one and is one which is also used in England. Subsection (10) in Clause 4 says:Charity ' means an institution or other organisation … and 'charitable' is to be construed in the same way as if it were contained in the Income Tax Acts".Therefore, if any organisation can satisfy the income tax authorities (and that is not too easy) that under the Income Tax Acts they should be exempt from income tax, it is right and proper that they should automatically get 50 per cent. rate rebate.
§ VISCOUNT STUART OF FINDHORN
My Lords, does that include a home for lost cats? I am not keen abouts cats.
§ LORD CRAIGTON
If the Income Tax Acts allow the home for lost cats to be free of income tax, then it includes a home for lost cats.
§ LORD HUGHES
My Lords, I am not at all sure the noble Lord has dealt with the point made by the noble Viscount, Lord Stuart of Findhorn, because not everything which is a charity within the meaning of the Income Tax Acts is going to get relief. The universities, for example, are charities and are specific, ally included. I thought that what the noble Lord was referring to was the Secretary of State's power to put other charitable bodies on that list. I assumed that it was intended that the ones that might be added to the list were other bodies—not universities, but perhaps similar in kind to universities, without naming other possible institutions in Glasgow which were in some doubt.
§ LORD CRAIGTON
I was coming to that, in fact. What the noble Lord, Lord Hughes, says is quite right: that my right honourable friend's power to add to the list of universities is limited; he has to decide not whether an organisation is a charity but whether it is in a similar class to the universities; for example, the Royal College of Science and Technology in Glasgow. If my noble friend looks at subsection (4) of Clause 4 he will see the words:… which in his opinion ought to be classified with the institutions mentioned in that Schedule".That is a very limited power indeed. My Lords, I think I have answered all the questions put to me.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.