§ 6.15 p.m.
§ Order of the Day for the Second Reading read.
§ THE MINISTER OF STATE, SCOTTISH OFFICE (LORD CRAIGTON)
My Lords, the reason why this Bill is required at this time is that the arrangements for the payment of Exchequer Equalisation Grant in Scotland expire on May 15, 1963. So, by that date, without this Bill, we have no authority to pay the grant. Clause 1, therefore, continues the present arrangements, as amended by the Bill, and continues the review every five years. It is gratifying that the method of calculation of the grant as between England and Scotland was so satisfactorily defined in the Valuation and Rating (Scotland) Act, 1956, and it is also gratifying for Scotland to know that, as a result of revaluation in England and Wales, the total amount of grant, at least for this year, will now be in the neighbourhood of £22 million. Otherwise, it would have been about £20 million.
As is usual with Bills of this nature, opportunity has been taken to legislate on a number of matters relevant to local authority finance. Scotland to-day is a changing Scotland and it is necessary and proper that the law governing our affairs should change also. We have taken this opportunity to improve the effectiveness of the Exchequer Grant and 148 rating systems and to contribute towards the improvement of the Scottish economy. For example, in Clause 8, the weighting for general grant can now be varied by order, as is already the case in England. In this way—after discussion, of course, with the local authorities—we hope to spread the load more fairly in the changing circumstances of population.
Clause 10 is of major importance to certain sections of Scottish industry. When we came to compare re-rated Scotland with re-rated England, we found that the burden of full rates upon Scottish industry would have put Scotland proportionately at a disadvantage. Clause 10, therefore, preserves 50 per cent. de-rating for industry until 1966–67 and even then the Secretary of State has powers to do other than reinstate full re-rating.
Part II of the Bill, apart from Clause 10, deals with the mechanics of valuation. It is understandable that changes should have been found necessary in the Act of 1956, and other valuation Acts. One important provision here is in subsection (1) of Clause 15. It would be of value to put on record the circumstances behind this. In discussion with the Scottish local authorities before the 1956 Act they were offered a choice: either the Inland Revenue Valuation Office would value Scotland for them, as they do in England and Wales (and they would make no charge for it), or the Scottish local authorities could employ their own assessors at their own expense to do their valuations for them. Rather unlike the traditional picture of the Scotsman, they accepted the latter course. The danger of lack of uniformity of valuation was discussed at the time, and the risk was thought to be acceptable. In the event, certainly in the view of the Scottish Valuation Advisory Council, considerable uniformity was achieved, but after the revaluation some local authorities had doubts, and these, in the years of valuation to come, are now set at rest by this subsection, which permits comparison with other areas.
There is an improvement in Clause 14 in the definition of agricultural buildings, which do not, of course, pay rates. Under the 1956 Act, and unlike conditions in England where an agricultural building is not located on a farm, the farmer occupying it does not get relief 149 from rates. This is now put right. Secondly, there are cases where a group of farmers use for agricultural purposes a building not necessarily on any of their farms. Such use should qualify for de-rating and now qualifies in Clause 14.
Clause 2 and its connected clauses deal with the changeover for Equalisation Grant purposes from the rateable value basis to the product of a penny rate. In adopting the penny rate system we have followed England and Wales. The advantage of taking the product of a penny rate as compared with rateable value is that allowance can be made for reduced rate receipts from certain properties—primarily those that are unoccupied and those that are given either discretionary or mandatory relief from rates. A penny rate is therefore a more accurate yardstick of the wealth of a local authority. Clause 2 adopts it for Equalisation Grant purposes. Clause 7 uses it for apportionment and the calculation of requisitions, and Clause 9 attempts, for those who can understand it, to explain what it is.
I come now to the one facet in the payment of Equalisation Grant with which the Opposition in another place disagreed perhaps more unanimously than do the local authorities themselves. The Government quite understand this. Some local authorities were getting in effect a blank cheque drawn on the taxpayer to help to offset their low rents, and that system is now brought to an end. The whole principle of Exchequer Equalisation Grant is to bring the poorer local authorities up to a minimum level as though Scotland were an average part of England and Wales. The poorer authorities rightly get a higher proportion of grant than the wealthier authorities, but their poverty was sometimes the result of unreasonably low local authority rents.
The Public Accounts Committee drew our attention to this and pointed out that this added burden of poverty was recompensed by the taxpayer to a considerable extent and arose from a deliberate decision by the local authority. Under Clause 3 this state of affairs is brought to an end. For grant purposes we take gross annual value as the yardstick of fair rent that could and should be attained by the local authority. If they choose to charge rents lower than this, the difference must come from the rate- 150 payer and should not come from the taxpayer, and that difference, whatever it may be, expressed in terms of grant, is to be refunded to the Exchequer.
Of course, there are a number of saving provisions, as will be seen from the table in Clause 3. A level of rent approaching gross value might not be reached until 1965–66. Secondly, there will always be those householders who cannot afford the full standard rent. No local authority can be expected to adopt a general rent at gross value without adopting a rent rebate system. This is provided for in the table by making the ultimate standard 95 per cent. of gross annual value.
There may be cases, especially in the areas of high unemployment, where the amount of rebates is so high that it would be too difficult for the local authority to reach the 95 per cent. standard. In these cases, they can adopt the third column of the table, namely, full annual value less rebates—granted under an approved scheme—if this would in terms of grant receivable pay them better. These provisions, my Lords, really need no justification. We really must get local authority housing finance in Scotland put on the right lines. Gross annual value is an impartial measure of rental value, and there is nothing at all improper in local authorities exceeding it in the case of tenants who can afford to pay more; but the least we can expect is that they should, apart from rebates, reach gross annual value. We really should not ask the taxpayer to subsidise them when they go below a level of gross annual value less rebates.
My Lords, this then is the Bill. I am sure that your Lordships will agree that in the many ways I have described it will benefit Scotland. It was introduced at the commencement of this Session; it has taken rather a long time in another place. As I said at the beginning of my speech, the local authorities, if they are to be paid equalisation grant and keep their finance in order, must have the Bill by May 15, so I would ask the co-operation of your Lordships in giving this a speedy, if not an easy, passage. I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Craigton.)
§ 6.25 p.m.
§ LORD HUGHES
My Lords, I wish to thank the noble Lord, Lord Craigton, for 151 the explanation he has given of the Bill; and it will not surprise him if I start off by saying that I cannot give the same measure of welcome to every clause of the Bill that he himself has done. Some of the measures of the Bill are such that I can do no other than commend them, because I must accept that even the present Government do some things right sometimes. For instance, Clause 2 of the Bill, altering the formula from the rateable value and standard rateable value to the product of the penny rate and the product of the standard penny rate, is one that is, I think, generally acceptable to the local authorities, because it takes account of those elements of value which do not produce any revenue, and it became of added importance when mandatory relief to various charities was given last year. The Government are to be commended for taking the earliest opportunity of placing one local authority in a comfortable position with another, because, things being as they are, an authority like Edinburgh, for instance, found itself losing proportionately a great deal more money than other authorities, due to so many headquarters of charities being located in Edinburgh. This helps to right a comparatively small but, nevertheless, important injustice.
Clause 3 is the clause of this Bill which has perhaps received the most publicity and has been the subject of most argument. It has been borne in on me, in discussions that I have had to-day, that the official attitude to this Bill, and to Clause 3, is not that it is a proposal to increase the rents of corporation houses in Scotland, although that is the general impression that the public have taken from it, but that by imposing certain percentages of gross annual value, with a penalty attaching if they fail, the Government are using a big stick to compel local authorities to come up to a more realistic rent figure. There are many points of view about what is a realistic rent figure, but, accepting for one moment that what is proposed in the Bill is realistic and leaving aside the argument whether it is, I should like to examine the matter further.
The Minister of State used words which were not completely consistent, as I thought, with this contention that the primary purpose of Clause 3 is to diminish the demands on the Exchequer; that the taxpayer should not be expected 152 to subsidise through Exchequer Equalisation Grants unduly low rents. He was speaking a little faster than I can write, and I am afraid my shorthand is now far too rusty to use. However, he said something like this: that we must get local authority rents on a right level. That is not exactly what he said but I do not think it differs from the gist of it. If that be the case, then it is important that the timetable visualised in the clause should be adhered to.
The Secretary of State speaking in another place, made it perfectly obvious that he thought gross annual value was not a high target for local authorities to attain in their local authority rents, and one which would not be outwith the capabilities of large numbers of occupants of council houses; and that those who did find them high should receive relief through the measure of rent rebate. But, having said that, he pointed out that it was reasonable that this should be reached over a period of time. In the debate in the Scottish Grand Committee on November 27, the Secretary of State (I am quoting from column 11 of the OFFICIAL REPORT of the Committee) used these words:The minimum which the Bill sets for this purpose is 95 per cent. of the aggregate gross annual value of a local authority's houses. But this will not be reached till 1965–66. In the previous two years the minimum will be 85 per cent. and 90 per cent. respectively of the total gross annual values.I do not wish to do the Secretary of State an injustice, and I think it is fair that I should emphasise the fact that he used the word "minimum", because he does not believe that 85, 90 or 95 per cent. at the end of the day is a reasonable target. But he accepted it as reasonable for these particular years, the steps to be accomplished at that time on a journey which would not necessarily end at that figure and in that year.
The same theme was followed by the Under-Secretary of State, Mr. Leburn, at the second sitting of the Scottish Grand Committee, when he said [column 103]:If local authorities respond in the way in which we want them to respond, they will not lose anything.That is a slightly different aspect of the matter from the one to which the Secretary of State was referring, but I propose to tie them together now. Clause 3, as originally before another place, gave three percentages, 85, 90 and 95 in the 153 respective years, 1963–64, 1964–65 and 1965–66. As a result of the discussions at the Committee stage of the Bill, the Government accepted that local authorities, particularly those with relatively high unemployment, might be faced with substantial diminutions of their rent income through the operations of a rebate system. As the noble Lord, Lord Craigton, mentioned, they were given the opportunity of choosing a second set of figures, which in each case is 5 per cent. higher. If they elect to take that as the basis for their notional rent level, then they need not worry about the extent to which rent rebate eats into the income receivable, because the rent rebate element will be ignored and, provided their gross income before rebates reaches the figure which is 5 per cent. higher, they will receive the full amount of their Exchequer Equalisation Grants.
One thing which I have found out by reference to the statements which have been issued by the Government from time to time is that at the present time the average rent in Scotland is somewhat less than 75 per cent. of the gross annual value. The actual gross annual value in Scotland of local authority houses was between £46 and £47 per house—that is an average figure taken over houses of all sizes. The actual rent charged at the last time of the ascertainment of average rents in Scotland was 12s. 3d. per week, which represents 68 per cent. of a gross annual value of £47. That percentage will now be changed upwards to some extent, because between the time of the ascertainment of that average figure of 12s. 3d. and the present date a number of local authorities, either or their own free will or by compulsion, have increased their rents. But I am quite certain that the average rent level is still below 75 per cent. of the gross annual value. If the proportion is 75 per cent. or less on May 15, we have this impossible position being imposed: that the local authority, in order to protect their Equalisation Grant, must maintain an average rent of 85 per cent. during the year 1963–64.
I would ask the noble Lord to accept that I am talking facts when I say that it would not be possible for local authorities to increase present rents before August of this year. Some houses are let on a quarterly basis, some on a monthly, and some on a weekly basis; and the necessary machinery of issuing 154 notices to quit and sending out new notices would be such that the earliest date that a new rent level could be established would be August 28, 1963. That means that a quarter of the year would have elapsed at the present rental of 75 per cent. or less. Now what does that mean? It means that a local authority which elected to take the lower scales, and which has a 75 per cent. rent at the present time, in order to accomplish an average of 85 per cent. for the whole year would have to raise their rents to 88 per cent. of the gross annual value for the remaining nine months of the year. If they wish to take the higher scale to have the benefit of the rent rebate provisions, they would have to raise their rents in August of this year to 95 per cent.
The Secretary of State for Scotland gave a firm statement that local authorities would be given up to 1965–66 to reach this higher target. But the sheer mechanics of the timing of this Bill are such that at least half the local authorities in Scotland will be forced into a position where they will have within three months to raise their rents to the sort of percentage which the Bill visualises as being attained in May, 1965.
§ LORD MOLSON
My Lords, the noble Lord will appreciate that the Bill was introduced and published in November of last year. The local authorities have had full warning of what was likely to happen.
§ LORD HUGHES
I anticipated that someone would make that statement, so I am not taken by surprise and I am not without answer. If the Bill were still in the form in which it was introduced, or even when it was discussed at Second Reading, that might be a valid argument. But, in fact, the acceptance of the second scale of values would mean that many local authorities will have to double the rents they are presently charging, and that local authorities which would not previously look at rent rebate schemes are now being compelled to bring in rent rebate proposals in order to do justice to their tenants at lower income levels.
Had the local authorities proceeded to bring forward rent proposals at Second Reading stage, they would then have been faced with the prospect, if they wanted to take advantage of the more favourable 155 conditions which did not exist in the Bill until it reached Report stage in another place, of taking steps to amend the proposals which they made to take effect as from May 15. So that a local authority which proceeded on the basis that what was presented to another place on Second Reading in November or December was what was ultimately to emerge, would be looking rather foolish in having to amend its proposals almost immediately they were put into effect. It shows that it is not reasonable to assume that, no matter how well-intentioned the Government may be, Parliament will necessarily pass a measure in the form in which it was first introduced; and I think it is a dangerous principle to expect local authorities to proceed on the basis that a Bill introduced must necessarily be a measure passed. After all, we have waited a long time this afternoon to discuss this Bill, because the House was engaged in discussing a Bill which went through your Lordships' House entirely a long time ago but, notwithstanding the Government's intentions, did not succeed in becoming law; and if local authorities then had started making particular arrangements in relation to weights and measures in expecting that the Bill was to go through in 1961 they would be looking very foolish at this moment.
I would also emphasise that the Secretary of State, in relation to the local authority with which I have had some connection in the past, Dundee—which was subjected to an inquiry into its rent structure recently—has just approved a rent structure of 75 per cent. of gross annual value, to take effect from May 28, although he made it perfectly clear to them that he did not think it a fair rent. But he has nevertheless approved it and he has authorised its introduction from May 28. The result is that Dundee, if it is to protect its grant, will have to proceed in August to jump to a rent of 95 per cent. I suggest that it is quite unreasonable to put into a measure a timetable which, because the Bill has taken much longer to go through another place than the Government may have visualised, is now impossible of implementation as it is laid down; and the pledge which the Secretary of State for Scotland gave that local authorities would 156 have until 1965 to reach the figure of 95 per cent. is, by the sheer effect of time, impossible of attainment and they will be forced into this position either in August or, at the latest, in November of this year.
I know that the noble Lord, Lord Molson, has expressed views on local authority rents in the past and I have not the slightest doubt that he looks on this measure, as I confess I looked on it, as one which will be a useful weapon for getting the local authorities to raise their rents, not because they want to but because they are not prepared to face up to the consequences of having their grant diminished. It was rather a shock, therefore, to find what a puny weapon this is in relation to many of the local Scottish authorities.
I have mentioned Dundee, and I will not apologise to your Lordships for quoting the figures for Dundee, because they are the ones with which I am most familiar. The average gross annual value in Dundee is some £51 per house. There are approximately 23,000 houses, which gives a total gross annual value of, say, £1,200,000 a year. The rent which I have mentioned as being authorised is 75 per cent. They must attain a rent of 85 per cent. if they are to protect their grant. The difference is 10 per cent. of £1,200,000, which is £120,000. I am quite certain that there are Members of your Lordships' House who will probably be under the same impression as I was, not having gone into the mechanism of this Exchequer Equalisation Grant formula, that a local authority falling short of its target by some £120,000 would suffer some very important deduction of grant. But what Dundee stands to lose—I must admit I am appalled to find out—is 3 per cent. of £120,000; so that the penalty which will be imposed by the Secretary of State on the Dundee Council is a loss of some £3,600 in this present year, and £7,200 next year.
If an authority, which was prepared to court the unwelcome publicity of an inquiry into its affairs and the report which was made by the Commissioner to the Secretary of State earlier this year, has the choice of letting its rents remain at 75 per cent. of gross annual value or increasing them by another £240,000 in order to keep, at the end of the day, £7,200 of grant, I am quite certain what 157 the answer will be. It will be that the Secretary of State will fail lamentably in his objective of getting these rents up to 95 per cent. of gross annual value. The same position, I understand, applies in Glasgow. These two cities between them must be the builders of at least one-third of the council houses in Scotland.
In Aberdeen the position is even worse. At the present time the rents in Aberdeen, fixed last year, are 60 per cent. of gross annual value. If Aberdeen wanted to protect their grant—and I think they have a little more to lose than Dundee, but still not a large sum of money—they would have to raise their rents to an average of 110 per cent. of gross annual value for the rest of this year, or, if they elected to go for the higher scale for the benefit of rent rebate deduction, they would have to raise their rents to 120 per cent. of gross annual value.
It may be that people will say that gross annual value is not necessarily an end in itself and there is nothing wrong with 120 per cent., but the Secretary of State and the Government could be made to look very foolish by the Aberdeen town council if the council elected to do so, because they could raise their rents to 110 per cent. or 120 per cent. this year, and say, "We are doing this because we are compelled to do so by the Secretary of State for Scotland in order to protect our Exchequer Equalisation Grant, but the Secretary of State will permit us, without any loss of grant, to reduce the percentage to 95 per cent. or 90 per cent. next year, as the case may be." So, the local authority can reduce its rents by 25 per cent. next year. I do not know what the Aberdeen town council will do in these circumstances. But there is something wrong with a Bill, a side effect of which is to raise the rent of corporation houses in Scotland, if it is possible to protect grants by increasing rents this year, and to accomplish exactly the same protection by taking away part of the increase again in the succeeding year.
I propose at the Committee stare of this Bill to table an Amendment which I think will remedy both of these anomalies without any loss of revenue to the Government. I propose, in relation to year 1963–64 only, to make an alteration, which is that the 85 per cent. or the 158 90 per cent. formula, as the case may be, should apply to the year as from August 28, so that the local authority will only have to reach these averages in nine months of this year. It means that they have three months in which to put their house in order and if they do not use the three months to increase to these figures, then the responsibility is theirs, but they cannot legitimately say to Parliament, "You published a time-table which was physically impossible for us to accomplish."
It is a simple amendment but its consequences, I gather, are not quite so simple. It might mean that the Bill could not become an Act before May 15, and the Minister of State, Lord Craigton, said, in his opening remarks, that the first purpose of the Bill was to permit the continuation of Exchequer Equalisation Grants which otherwise would expire at May 15 next. If this Bill does not become an Act before May 15 there will be a period—it may be some days or some weeks—during which there is no authority to pay Exchequer Equalisation Grants. That, I suggest to your Lordships, need be no hardship, because another Amendment can be included in the Bill enabling Exchequer Equalisation Grants to be payable as from May 15.
I know it will be stated that another place has strong objections to making grants payable retrospectively, and I should not normally have made such a suggestion; but I could not do it at a better time, because another place is presently engaged in considering a Bill which does effect this proposal: the grants payable by the Board of Trade in areas of high unemployment are to be effected retrospectively from April 3. So the principle of retrospection has been accepted in this particular Session; and, having accepted it as a major matter of principle on another measure, I have little doubt that they would accept it in this measure purely as a piece of machinery, in order to enable them to accomplish what they had intended to do in the first place.
I am sorry to have gone so long on this and into so many details, but I think it is a most important point; and if the Bill is to accomplish both objectives, of diminishing the demand on the Exchequer to subsidise housing deficits and, as a side issue, to raise corporation council house rents, then it will do 159 so only if it is obviously workable; and that, I suggest to your Lordships, is not the position at the present time.
About the remainder of the Bill your Lordships will be glad to know I have much less to say. I have some questions to ask, and it may be that the noble Lord, Lord Craigton, will be able to answer them. He will probably be able to answer most of them when he is closing the debate. Clause 5 wipes out the Exchequer Transitional Grants by the year 1966–67, diminishing them each year by 20 per cent. I understand—I am not certain about this, and if I am wrong the point does not arise—that recently these have been diminished at the rate of 10 per cent. If that is so, why is the reduction in the next four years at the rate of 20 per cent. per annum? I emphasise to the noble Lord that I am not sure of this 10 per cent. position; I may have been misinformed.
Then, on Clause 8, one of the clauses to which the noble Lord, Lord Craigton, referred as arising from changed circumstances in Scotland, the weighting for increases and reductions in population is being applied for the first time to cities and large boroughs, as mentioned in the Explanatory Memorandum. I should like to ask if the word "county" in the clause and in Schedule 2, which provides the mechanics, covers the cities, on the basis that the cities are county cities; because otherwise there would not appear to be any reference to cities in this proposal. I suspect that that is the answer, but I should like to have confirmation of that point.
I go now to Clause 10. That relates to derating and I have some queries there also. Clause 10(2) says:Notwithstanding anything in the foregoing subsection the Secretary of State may by order provide that in respect of the year 1966–67and such immediately subsequent years, if any, as may be specified in the order the rateable value of the said lands and heritages shall be the amount produced by deducting from the net annual value thereof such percentage of than value as may be so specified….At the present moment there is 50 per cent. derating, so the percentage deducted is 50 per cent. Would the wording of this subsection permit the Secretary of State to increase the percentage beyond 50 per cent. in the year 1966–67? 160 Whilst one accepts it as a logical follow on from that clause that if in 1966–67 the Secretary of State was of the opinion that the state of industry in Scotland was such that it would not be a wise thing to abolish de-rating, he would continue the present position, as he has already done, because it was due to go this year on the original intention and the present set-up is being continued until 1966–67. The wording of this proposal would seem to contemplate the Secretary of State might institute in 1966–67 and subsequent years 75 per cent. de-rating or even full de-rating. Is that the position and does the Government think it necessary to take quite so wide a power as that: that things could be so bad in 1966–67 that they would wish to retrace the ground already covered? It is one thing seeking to maintain the status quo. It seems to be unnecessarily wide to be seeking to go beyond that. I should like to know the position there.
Subsection (3) says:In an order under the last foregoing subsection different provision may be made for lands and heritages in different rating areas.Does this visualise for the first time the possibility that de-rating might be continued in certain areas, say of high unemployment, and abandoned in others; that we might, for instance, find de-rating being continued in Lanarkshire, Clyde-side, Dundee or other areas where unemployment was high or where for any other reason industry was requiring exceptional assistance? The Minister did not mention that, and it seems that if that is the intention it is a very wide departure from existing practice, although one which I personally would not quarrel with.
If there is a case for continuing de-rating after it is otherwise due to go, it certainly is reasonable that it should be continued only in those areas where circumstances are such that it is required, and it ought not to be applied necessarily over the whole of Scotland merely to give relief to industries which are particularly hard pressed in certain areas. In fact, I should have very much preferred the discretion to go wider than that. There should be an opportunity of exercising discretion even inside a rating area; it should be given to industries which require it and not every industry, prosperous or otherwise, in a 161 particular area. That was the real objection to de-rating in those areas: that companies making a great deal of money got de-rating and there was no means test applied. It ought not to be beyond the wit of the Government to devise some means by which de-rating is given only to those who really require it. The Minister may have something more to say on that.
I go from Clause 10 to Clause 14. This is the provision relating to agricultural lands and heritages. I am not quite so happy about it as the noble Lord, Lord Craigton, was. It seems to visualise the possibility of an agricultural organisation, say a farm or a company operating a group of farms, maintaining an office quite remote from their farms, from their agricultural subjects; say, for example, a company owning farms in the Lothians and in Fife maintaining its office and doing business from an office in Edinburgh. Would that office, which would be related solely to the operations of this agricultural concern, be considered an agricultural operation? Could it have its office in the centre of Edinburgh de-rated? If that is the position, it seems to be rather an unnecessary one.
Clause 15 is one that I have no difficulty in supporting. It was, I think, a completely anomalous and ridiculous position that when someone was appealing against the valuation that the city or county assessor placed on his property, he could compare it only with subjects inside the valuation area. In these days, when big building organisations are putting up houses all over the country, the easiest comparison for many people to make was with other houses built by the same organisation in another part of the country. Firms like Wimpey's are building simultaneously the same type of house in perhaps twenty different places in Scotland; yet there are twenty different values placed on a particular type of house which they build. In no case, in the past, was the appellant able to cite as an example in support of his appeal what was being done in another area. This new clause gives people that right of appeal, and I think that it will be most generally welcomed by everyone, except the assessors who found themselves in a strong position in having only to defend their own assessment without having it subjected to comparison with what assessors had done elsewhere.
162 Clause 16 enables local authorities to fix their rates even before the beginning of the financial year. I take it, however, that that does not in any way affect the requirement that the local authorities must prepare an estimate of their expenditure for the coming year, and if they have these assessments ready before the end of the year they can proceed, on the basis of the estimate, to levy their rate in April or May, if they want to, instead of waiting until June, July, August or September, as is the position at present. I should like to make absolutely certain that this is not in any way enabling authorities to dispense with the preparation of proper estimates of their expenditure in the ensuing year.
My last point is in relation to Clause 18. What I have to say in relation to that is quite simple: I should like to ask the noble Lord, Lord Craigton, what it means. I have looked at it. It may be that it is a follow-on to Clause 17. I do not know what it means, but it says that a subject is not to be deemed to be occupied by reason only that it is subject to a tenancy or a sub-tenancy. It may be that the intention is to deal with the case where a man has a property subject to a tenancy but cannot get any rent out of the tenants. Such a man, clearly could not describe the property as "unlet". But I should have thought that that case would be covered by the previous clause, in that he would be "unable to recover the amount paid by him to the rating authority". However, I should be grateful for an explanation.
There are many other clauses in the Bill to which I have made no reference at all. That is because they are either innocuous or are comparatively unimportant, although nevertheless necessary. To sum up, my principal objection to this Bill arises from Clause 3. I may at Committee stage be saying more about these percentages. At this particular stage I thought it reasonable that I should not allow my views on what is a reasonable percentage of the fixed gross annual value to come into the argument. I have kept that aside, because I wished to concentrate on the fact that, given the acceptance of the Secretary of State's objective of keeping down the charge on the Exchequer in relation to housing deficits, and the other issue of getting corporation rents up to a reasonable value, Clause 3 163 as presently worded, seems calculatedly ill-advised to attain these objectives.
§ 7.5 p.m.
§ LORD MOLSON
My Lords, the attitude of the Opposition in this House is greatly different from their attitude in another place, and I feel that we have heard an extremely reasonable and constructive speech from the noble Lord, whose experience in these matters will, I am sure, cause the Government to give great attention to what he has said. It was because of the attack launched upon this Bill in another place that I felt under some obligation to give support to it.
Last year, when we were considering the Housing (Scotland) Bill, with its Clause 29 giving to the Secretary of State power to deal with what one might call scandalous cases, I said [OFFICIAL REPORT, Vol. 240, col. 28]:I only wish that instead of confining his activities to this rather drastic action in really scandalous cases…the Secretary of State had drafted this Bill in order to give also a general financial encouragement to ail the local authorities in Scotland to pursue a wiser policy in regard to rents.I confess that I was misled by the Opposition argument in another place, when they moved a reasoned objection to the Bill on the ground that it was going to cause so large a reduction in the grant to Scottish local authorities, so that I was hardly prepared to hear the small figures that have been advanced by the noble Lord, Lord Hughes. I can only say that the Opposition would have been much embarrassed had he been in another place and not here, because his argument would most effectively have demolished most of what they have said.
§ LORD HUGHES
My Lords, may I intervene? The noble Lord, Lord Molson, is not quite correct there, because the Opposition in another place were aware of these figures. The Secretary of State for Scotland was good enough to reply to a Question, or had no alternative but to supply information in regard to, it may be, not every one of the local authorities in Scotland, but a large list of them. If it is of interest to the noble Lord, Lord Molson, he will see in the OFFICIAL REPORT of another place for Friday, February 5, in columns 243 and 244, a complete list of the amount in 164 deductions which these local authorities will suffer by way of grant. In many cases these figures are already out of date, but they are out of date because the amount of grant which they will lose is now smaller as the result of subsequent increases which have taken place in the rates. So that is the worst that can happen to anybody. So the Opposition in another place were not talking in ignorance of these figures. Although they are low in some places, they are comparatively high amounts for some of the smaller local authorities, but not for the large ones.
§ LORD MOLSON
Had they had those figures and done their homework, it is hardly likely that Miss Margaret Herbison would have moved the rejection of the Bill on the ground that [OFFICIAL REPORT, Commons, Vol. 669 (No. 33), col. 598]:This House declines to give a Second Reading to a Bill the effect of which is to reduce considerably the total Exchequer Equalisation Grant paid to Scottish load authorities.Obviously, the effect of this Bill will be to give great encouragement to local authorities in Scotland to raise their rents to a more reasonable level. I do not apologise far quoting again from Cmnd. Paper 1520, Housing in Scotland, because it is so much better than anything that has been produced by the Ministry of Housing and Local Government in England. I do not think that the fundamental principle of housing rents has ever been more clearly stated than in that White Paper. Paragraph 17 starts off by saying:The housing problems in Scotland…cannot be satisfactorily tackled until housing finance is put on a realistic basis; in other words, until the rents charged for local authority houses reach a more reasonable level.It is as a result of these extremely low rents in Scotland that at the time this White Paper was issued private enterprise was providing only 26 per cent. of the new houses in Scotland, as compared with 64 per cent. in England and Wales.
When one looks at the latest figures one sees that the average rent for houses in the whole of Scotland is, as the noble Lard has said, only 12s. 3d. a week, compared to a figure of over £1 a week in England and Wales. Whereas in 165 England the tenant pays some three-quarters of the cost of providing a house, in Scotland the proportion is only one-third. So it is no wonder that the White Paper said, in paragraph 19:Apart from placing an unfair burden on the general body of ratepayers, the maintenance of unduly low rent levels for local authority houses has many other effects. In the first place, on the houses themselves; for when a local authority's housing revenue account is heavily in deficit they are tempted to save money on the design and equipment of their houses and to cut out desirable features…I do not agree with the views of the Secretary of State that Parliament should not seek to limit the discretion of local authorities in the rents which they charge. Certainly the Bill which we passed last year, and in particular Section 29, has already proved extremely valuable. I very much doubt whether Dundee would have agreed to increase its rents from the figure of only 7s. 7d., as the noble Lord has said, to 75 per cent. of the gross annual value, had it not been for the powers which the Secretary of State acquired under the Act of last year.
An extremely interesting article on this Bill appeared in the Glasgow Herald on November 2 last. The writer said that the Governmentare rightfully protecting the taxpayer, but further vigilance will be needed on behalf of the ratepayer.This Bill, of course, seeks only to ensure that unreasonably low rents do not result in the payment of an unreasonably high grant in respect of those houses, but it is still left to a local authority to leave rents at a far lower level than that at which they stand in England, with all the ill-effects that have been pointed out in the White Paper. I feel that the Government have taken an important step in the right direction and are entitled to your Lordships' support on this Bill. I hope that this is not the of what they are going to do in this matter, because, as they themselves have said, the great problem of unsatisfactory housing in Scotland will never be satisfactorily settled until rents generally have been raised to a more reasonable level.
§ 7.15 p.m.
§ LORD CRAIGTON
My Lords, the noble Lord, Lord Hughes, has given this Bill a welcome, though pitched, perhaps, in a minor key, and I should like to add to the congratulations given him by my noble friend Lord Molson. The noble 166 Lord certainly speaks with an authority which is embarrassing to anyone standing across the Table from him. He made the statement that the general impression of the Bill is that it fixes rents. I should make it clear, as was made clear during the proceedings on the Bill in another place, that while the Government wish to see higher rents the purpose of Clause 3 is to protect the taxpayer against paying Exchequer Equalisation Grant on housing deficits that are due to unreasonably low rents. That is the tenor of this whole Bill. I agree with my noble friend Lord Molson that the Bill will encourage local authorities to raise rents to a more reasonable level.
My noble friend wants us to go further and faster; but we are making progress. I should like to remind him, in relation to this progress, of his own speech in your Lordships' House on May 7, 1962, in which (speaking, of course, on another Bill) he asked [OFFICIAL REPORT, Vol. 240, col. 27]:Why is nothing done in Clause 3…to bring financial influence to bear by making the subsidy in some degree conditional upon reasonable economic rents being charged to those able to pay them?The noble Lord will at least say that Clause 3 of this Bill does what he asked there.
§ LORD CRAIGTON
As a matter of interest, he was referring then to an average rent of 9s. Now, a year later, the average rent is about 12s. 3d. So we are making progress, and this is just another important step.
§ LORD HUGHES
My Lords, if I may intervene, I think the noble Lord, Lord Craigton, said that the Exchequer Equalisation Grant this year would be of the order of £20 million. The Secretary of State, during the Second Reading debate in another place, said that if the local authorities all had the penalty imposed against them the amount of diminution of Exchequer grant that could be extracted in penalty would be £900,000; so that it has a very long way to go.
§ LORD CRAIGTON
The noble Lord spoke of Clause 3 and the administrative difficulty of some local authorities in avoiding loss of Equalisation Grant in the first year without a sharp increase in rents. I thought that he made rather heavy weather of this, and he built a great edifice of injustice, which he then proceeded to demolish by referring to the sanctions in Clause 3 as "a puny weapon". Although I cannot go all the way with him, he has raised an important administrative point, and I think I should give a word of advice and warning to local authorities. If their rents are low now, an increase will need to be made very soon if a reduction in their Exchequer Equalisation Grant under Clause 3 is to be avoided, since their net income will have to average 85 per cent. over the whole year. So that the longer they wait after May 16, 1963, before putting up their rents, the higher these rents will have to be put up if the 85 per cent. average is to be achieved.
Although it is proper to sound this note of urgency, I feel, as my noble friend Lord Molson felt, that local authorities, who have known of this provision at least since the Second Reading in another place on November 27 last year, know what the position is. Moreover, they have had warning since the end of 1961 that the Secretary of State regards gross annual value as a guide to reasonable rent. We all know the point made by the noble Lord, Lord Hughes, about Bills that are not passed. But I can remember that when Bills have been introduced, for example to reduce housing subsidies by a certain date, there has been a flood of housing applications received before that date—quite properly—in order to retain the higher subsidy. So I think we must assume that local authorities know how to read a Bill when it is first published, and how to react to it. But this is a somewhat technical point and we can discuss it much more fully in Committee. I promise the noble Lord that I will examine the point most carefully, but I cannot promise any more.
The noble Lord then asked me about Clause 5 and said: why is there a reduction of 20 per cent. in the Transitional Grants? The Transitional Grants for Exchequer Equalisation Grant have remained fixed since they were instituted, and they are now to be wound up over 168 a period. I think that in mentioning a 10 per cent. reduction the noble Lord was thinking about General Grant and not Equalisation Grant. On Clause 8 he asked whether in the variation of the weighted population calculation a city is a county. As I myself said in conversation with him, I thought a city was a county. I must tell him that I was wrong, and that a city is a large burgh for the purposes of the Act. For the purposes of the Bill a city is embraced in the words "large burgh" and not in the word "county".
§ LORD HUGHES
My Lords, is that absolutely certain? I thought that these authorities in Scotland which were regarded as large burghs were listed and described by name in 1929. It is not my recollection that the four cities were included in that list of large burghs.
§ LORD CRAIGTON
I have taken advice on this and this is the advice I have been given from the highest quarter. If I am wrong, I will write to the noble Lord; but I have taken advice and I am advised that for the purpose of this Bill, and for the purpose of the Local Government Acts, a large burgh includes a city.
The noble Lord asked, in connection with Clause 10, whether my right honourable friend could vary the extent of de-rating after the end of the period. I was not quite clear what his point was, but the position under Clause 10 is that my right honourable friend could bring in a degree of re-rating that the circumstances at the time justified. He could, for example, bring in 25 per cent. de-rating for Scotland as a whole or complete re-rating for Scotland or parts of Scotland, or 25 per cent. de-rating for certain areas. The position is that we do not know what is going to happen and we must see that Scotland gets a fair deal in relation to the circumstances at the time.
§ LORD HUGHES
My Lords, I am sorry that I have not made myself clear. I must apologise for intervening again, but because I have not made myself clear I have not got the answer to my question. The power which the Secretary of State is taking is to vary de-rating after that period. At present the extent of de-rating is 50 per cent. Does his power to vary include making that 75 per cent. or 100 per cent. de-rating as well as diminishing? The noble Lord spoke of 169 making it perhaps 25 per cent. or nothing at all, and that was a point that I wanted to establish. Is he taking power to make de-rating greater than it is at the present time?
§ LORD CRAIGTON
I see. I doubt very much whether my right honourable friend would do that. Subject to correction, "varying" would mean varying up or down.
§ LORD CRAIGTON
The noble Lord asked me about Clause 14, and asked whether an office was an agricultural building. That would depend on the interpretation of the words in the clauseused solely in connection with agricultural operations".But it seems to me most unlikely that the court would regard an office as eligible for de-rating. The noble Lord asked how Clause 16 affects the preparation of estimates. It makes no difference whatever.
Finally, the noble Lord referred to Clause 18, and he asked what it meant. I did not know, either; so I have got an answer ready. This clause is intended to ensure that unoccupied property is not denied rating relief under Section 243 of the 1947 Act simply because it is the subject of a tenancy or sub-tenancy. A recent judicial decision Glasgow Corporation v. Perrydale has laid it down that, as a result of the definition of "occupier" in Section 379 of the Act, property is to be regarded as occupied if it is the subject of a tenancy, irrespective of whether any use is being made of it. The court pointed out that if any remedy was wanted for this situation, it must be sought by amendment of the Statute, and this is what we propose. Under this clause, Section 243 will now have effect so as to enable exemption from rates to be given to property which is unoccupied and unfurnished. The fact that the property may be let will not by itself disqualify it from rating relief, though the existence of the lease may be a material factor in determining whether it is occupied.
§ LORD HUGHES
My Lords, the property can be unoccupied and unfurnished and yet the tenant might be paying rent for it. Presumably it is 170 also a condition that no money is passing as a result of the tenancy.
§ LORD CRAIGTON
My Lords, that is right. The only point to establish was that the very fact that the house was let did not itself mean that it had to pay rates.
§ LORD MOLSON
My Lords, is my noble friend sure that he is correct in the answer he has just given? I thought that what he said was that a house could be deemed to be unoccupied even though it was let. If it is let then rent must be paid in respect of it; and I thought the meaning of this clause was that, if in fact it was not occupied, it might be freed from rates in spite of the fact that rent was being paid for it.
§ LORD CRAIGTON
My Lords, I am sorry; the noble Lord, Lord Molson, is right: that is exactly the intention. Farmers had a let cottage and rates were paid on it although the cottage was not occupied, and "let" and "occupied" under the present law are the same thing.
§ LORD HUGHES
My Lords, the other point which the noble Lord did not answer, I think because of my intervention on the de-rating aspect, was whether I was right in assuming that Clause 10(3) (I think it was) gave the power to permit de-rating on a regional basis, which does not exist at the present time.
§ LORD CRAIGTON
A fundamental departure. I am very grateful to your Lordships for the welcome given to this Bill.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.