GENERAL RATE (PUBLIC UTILITIES) BILL [H.L.] (Hansard, 7 December 1976)

§ Baroness STEDMAN
My Lords, I beg to move that this Bill be now read a second time. Your Lordships may have noticed that in another place questions have been asked about the rate liability of certain public utilities. The Government have had to point out that, unfortunately, the orders which should determine the current rateable values of the National Coal Board and mines and quarries, together with the order which determined the rateable values of statutory docks and harbours until 1st April 1976, were all inadvertently allowed to lapse in 1974. Additionally a mistake was made in another order made earlier this year which prescribes a rating formula for the gas industry. However, there was a promise that legislation would be introduced to validate the lapsed orders, and to correct 525 the error in the gas order. The Bill now before your Lordships' House fulfils that promise.
My Lords, this is a small Bill, but because it deals with complicated matters it is by no means simple. It would not be appropriate on Second Reading to take your Lordships through the clauses line by line; we shall have the opportunity later, if the Bill commends itself to your Lordships, to examine the measure in that kind of detail. But I will attempt to explain as simply as I can the main provisions of the Bill.
Clause 1 deals with the lapsed orders. In common with many public utilities, the National Coal Board, mines and quarries and statutory docks and harbours are rated by formulae, since normal methods of valuation would be very difficult to apply. Such formulae are often determined under order-making powers to avoid having to come to Parliament with a Bill every time an amendment is needed. This is the case in the industries in question, and the order-making powers were contained in Section 35 of the General Rate Act 1967. Five orders were made either under this section or under the section in the Rating and Valuation Act 1961 which became Section 35 on the consolidation of rating law in the 1967 Act. They are listed in the Explanatory and Financial Memorandum.
Section 35 of the 1967 Act was superseded by Section 19 of the Local Government Act 1974, and the 1974 Act quite properly repealed Section 35. The Act contained no saving for the orders already made under Section 35, but it gave power to include savings of that kind in commencement orders bringing parts of the Act into operation. Unfortunately, the commencement order bringing the repeal of Section 35, among other provisions, into operation failed to make the necessary saving for the Section 35 orders. Those orders have thus been void since 1st April 1974, the date when the repeal of Section 35 came into operation.
This means that the property occupied by the National Coal Board and other mines and quarries are now, and have been since 1974, rateable in accordance with the ordinary rating provisions of the General Rate Act 1967, and not, as was intended, in accordance with the formulae 526 prescribed in the lapsed orders. A new order for docks and harbours, made under Section 19 of the 1974 Act, came into effect on 1st April 1976. Thus docks and harbours were rateable in accordance with ordinary rating provisions in 1974/75 and 1975/76, but are now rateable under the new order. All interests affected have acted on the assumption that the orders have remained in force. To leave matters to be sorted out under the present law would cause a large number of amendments to valuation lists, involved negotiations, and probably litigation, to no good purpose.
Clause 1 of the Bill therefore provides that any order made under Section 35 shall not be affected by the repeal of that section by the Local Government Act 1974, and, furthermore, that all such orders shall be deemed to have been made under Section 19 of the 1974 Act. Additionally the clause provides for one of the revived orders—the Docks and Harbours (Valuation) Order 1971—to be revoked from 1st April 1976. This is because the order was superseded on that date by the Docks and Harbours (Valuation) Order 1976. The 1971 order was not revoked at that time because it was realised that it had already lapsed.
May I now turn to Clause 2 which deals with the error made in the Gas Hereditaments (Rateable Values) Order 1976. This order specifies a method for determining the rateable value of the British Gas Corporation from 1st April 1976 onwards. It does this by applying a formula to the earlier value specified in the 1967 General Rate Act. Unfortunately, when the formula was devised we overlooked the fact that the 1967 value had been substantially increased by order in 1972. Although the current order refers to the value specified in the 1967 Act, we are advised that this reference must be taken to mean the 1967 figure as amended by the 1972 order. This gives a rateable value of about £150 million, instead of the intended £60 million. Although it is the £60 million which, as broken down in accordance with the prescribed formula, now appears in the valuation lists, the entries in the list have not been calculated in the manner required by law, and valuation officers could be compelled to insert the higher rateable values in the valuation lists. Thus the British Gas Corporation 527 could find itself being liable to pay two and a half times as much as Parliament intended.
Clause 2 of the Bill amends the order to specify the intended value of £60 million in place of the existing incorrect formula. This amendment is retrospective to 1st April 1976. Additionally we are taking the opportunity of ensuring that the enabling power, Section 19 of the Local Government Act 1974, does allow a figure to be specified instead of a formula. This is dealt with in Clause 4. I am sure that noble Lords will join me in greeting this latter provision with some relief since it should result in at least some simplification of rating formulae that your Lordships' House may have to consider in the future.
May I also briefly mention Clause 3. This provides for the indemnification of rating authorities, Valuation Office officials and all other persons against any consequences incurred as a result of the errors rectified by Clauses 1 and 2. Valuation officers have been responsible for maintaining valuation lists in accordance with the orders in question, and rating authorities have been levying rates on those values. All those concerned in such activities have proceeded on the basis that the errors have not been made.
My Lords, the net result of these measures will be to ensure that the rates on the industries concerned have been paid, and will be paid, in accordance with the provisions previously agreed by Parliament. The proposals will not injure the ratepayers concerned. They have acted on the assumption that these errors have not been made, and the intended rateable values have been accepted. I apologise for the fact that this Bill is necessary. In mitigation, I can only say that the law for which my colleagues and I in the Department are responsible is vast and constantly changing. This is not of course to suggest that we take such matters lightly. Far from it. We will continue in our attempts to ensure that such amending legislation is not found to be necessary. I commend this Bill to the House.

§ Baroness YOUNG
My Lords, I should like to thank the noble Baroness, Lady Stedman, for introducing this Bill and explaining it. As she has said, it is a short Bill, one of only five clauses, but it is immensely technical. In preparation for it I felt that, rather than consulting anybody, I should have had a few tutorials in higher mathematics, because trying to understand the order affected by it and its algebraic formula is indeed a formidable task. But I accept, as she does, that it is a Bill that is non-controversial. It is obviously right that what has been a mistake should be corrected as soon as possible, and that indeed if there was to be any controversy, it should have been at the stage of the subordinate legislation or in the Schedules to the Local Government Act 1974.
As I understand the Bill, Clause 1 puts back into legislation what was inadvertently taken out by the Local Government Act 1974 and, as I understand Clause 2, it alters the arbitrary basis of the formula for determining the basis of the valuation of the gas industry so that local authorities can rate correctly, starting from a base of £60 million, which is the accepted agreed amount between the local authorities and the gas industry. There are two general points which I wish to raise. First, I did not quite appreciate—I shall understand if the noble Baroness cannot answer this today—how the alteration to the Gas Hereditaments (Rateable Values) Order 1976 would work on the basis of the alterations proposed in Clause 2. Probably I misunderstood the order which, as I said earlier, is very complicated. But if in fact the basis of the rateable value is fixed for £60 million a year, I cannot see why it is necessary to have a formula to calculate it. If it is calculated it should surely come out at £60 million; if it does not come out at that, there is no point in having the formula and one might as well say that it is fixed. Thus, I simply do not understand the basis on which all that is to be determined; but I may be that there is a point in this that I have missed. What I can understand is that if the basis is not correct, then local authorities either could collect considerably more than they should or alternatively less than they should, so it is very important to get it sorted out. I should have thought that whatever was the 529 basis, it is a matter which should be subject to calculation and should not simply have to be fixed.
Secondly, I looked to see whether the Layfield Committee had anything to say on this point, and, as I am sure the noble Baroness will be aware, on page 173, paragraph 80, they comment on the formula rating of public utilities. It seems to me that the Bill bears out the criticism which Layfield makes: The discussion between the parties is not based on any very clear set of principles"— that is, between the public utilities and the local authorities as a basis of rate-making— Local authority associations have suggested that the current arrangements are unsatisfactory because the contribution of these industries is too low and also because the procedures are unsatisfactory. Indeed, the fact that it has been necessary to bring forward this little Bill indicates the complexities of the situation and the very unsatisfactory nature of them. The Layfield Committee go on to say at the end of the same paragraph: We recommend that the responsibility for the valuation of public utilities for rating should be given to an independent body". That is one of their recommendations, and I hope the noble Baroness can say whether the Government will at any rate have a debate on the Layfield Report and whether there is any prospect of legislation arising from any of their proposals. I recognise of course that their proposal for a local income tax is outside the scope of this Bill. Nevertheless, this proposal, like a number of others, does not seem to go against the basic principle of the rating system, is obviously desired by local authorities and would, it seems to me, be of benefit to them, particularly at this critical juncture.
There is a further reason for looking at this matter. About 18 months ago the Government decided not to revalue property while the Layfield Committee was sitting, on the grounds that it was not at all clear that the Layfield Committee would recommend that the rating system should be continued. Now that the Layfield Committee has recommended that the rating system should be continued but that there should be a local income tax as well, the reason for not revaluing falls to the ground. Of course, we get into further complications on matters 530 like the valuation of utilities, which is a very complicated subject in itself, which too become increasingly out of date. These are very important matters of public policy, and I should be glad if the Bill gives an opportunity for the noble Baroness to say something on them. May I assure her, as I indicated at the beginning, that I do not regard the Bill as being in any way controversial? It is necessary and I am glad we have it before us, but it would be helpful to see it set in the general context of local authority finance, which is in such a critical position at the present time.

§ Baroness STEDMAN
My Lords, I welcome the support of the noble Baroness for the Bill. I regret that it was necessary to bring such a Bill before the House, to right the errors that had been made. The question of the Gas Hereditaments (Rateable Values) Order 1976 is a rather complicated matter to go into shortly. In fact the formula which we put forward in that order was supposed to arrive at the figure of £60 million, but actually arrived at a figure two and a half times that amount, which is perhaps why noble Lords will welcome the comment I made about Clause 4; that we are now able to use figures rather than these complicated formulae. That may make it a little more easy for your Lordships, as well as those who are serving us, to work out the amount.
As for the Layfield criticism of formula rating, the Layfield Report is of course a matter for consideration by my right honourable friend and his colleagues at the moment, and I am sure that they will note the comments of the noble Baroness and will take those into consideration. I hope there will be an opportunity for this House to discuss such of the recommendations of the Layfield Report as the Government are proposing to implement. I should have thought that your Lordships' House was a very good place to initiate a debate on the Layfield principles, and I shall certainly bring that to the attention of my right honourable friend.