HL Deb 12 December 1977 vol 387 cc1897-904

4.55 p.m.

Baroness STEDMAN rose to move, That the National Coal Board (Rateable Values) Order 1977, laid before the House on 23rd November, be approved. The noble Baroness said: My Lords, the order before the House concerns the rating of operational property occupied by the National Coal Board in England and Wales. Public utilities such as the gas, water and electricity supply industries, and the National Coal Board, are not assessed piecemeal for rates by valuation officers, like other occupiers, because the normal principles of assessment cannot be readily applied to each of their properties in turn. Instead, the Secretary of State has to come to a view as to how the rateable value of the whole undertaking should be determined, so as to give a value which is as close as maybe to that which would have been derived had the undertaking been rated normally. He has to take into account the views of the undertaking in question and those of the local authority associations, and, where there are differences of view he has, in effect, to act as independent arbitrator. In doing so, he is able to rely on the independent and expert advice of the Valuation Office of the Inland Revenue. The end product of all this is a formula for the rateable value of the undertaking which is laid down in a statutory instrument.

In 1973, it was decided to review the working of all the formulae used to value the various public utilities and industries and to make such changes as were necessary. It was thought that some of the formulae in use at that time had got out of line with the true values of the undertakings and that comprehensive updating was necessary. New formulae for several of the other undertakings have already been brought into effect. In some cases these have involved substantial increases in the rateable values of the industry in question to bring them up to date; in other cases there have been reductions or little change. The National Coal Board and the water industry are now the only two industries outstanding. The order before the House, if it is approved, will now introduce a revised formula for the coal industry, leaving only the water industry still to complete.

The order makes three major changes, together with a few minor and presentational ones. First, the value of deep mines occupied by the National Coal Board is increased to £11.5 million for the year 1977–78, compared with their present value of £6.8 million, which was derived from the current 1963 National Coal Board (Valuation) Order. This, we believe, fairly represents the total rateable value were it possible to assess each of the 300-odd colleries individually. Of course, as under the present order, the rateable value will vary with output in subsequent years.

Secondly, opencast mining is rated by reference to the amount of mineral extracted and a value per ton, known as the "tonnage factor". This tonnage factor is prescribed instead of being assessed, as is the case for minerals other than coal. The present tonnage factor as determined by the existing order is about 4.2p per ton, and the order before us provides for this to be increased to 12½p, giving a rateable value of £1.4 million at current output of 11 million tons. Thirdly, associated properties, as they are termed—and these are a defined list of some 415 properties which include railway lines, sales depots and the like—are taken out of formula rating and rated in the normal way.

As I have explained, the order before us is based on the existing 1963 order, but it might help noble Lords if I run through the main provisions and explain the changes that have been made. As noble Lords will have observed, there are one or two mathematical formulae in the order and I hope that these will not cause undue alarm. Surprisingly, they do, in fact, express in simpler form essentially the same concepts as were included in the previous order for updating and allocating the rateable value of the Coal Board's property.

Article 3 provides for the assessment by formula of mine properties and opencast workings and for the apportionment of values of properties which should be partly rated by formula and partly by normal rating principles. The only significant change is that associated properties—the ones which I spoke about on the defined list—will now be rated by normal methods. The 1963 order ties the rateable value of these properties—the railway lines, the wharves and so on which clearly contain no mineral deposits—to those of mineral producing hereditaments where the value is controlled predominantly by the value of the mineral deposits. The change is aimed at removing the anomalies which arise when there are changes of occupier.

Article 5 is the most significant part of this order. It sets the rateable value of deep mines for 1977–1978 at £11.5 million. As this represents a considerable increase over the current rateable value of £6.8 million, I will explain the reasons for this decision. The present value is derived from the total value of all the Board's mines as at 1st April 1962, updated in proportion to the value of other extractive hereditaments and to the output of coal. No account has been taken of the modernisation that has taken place in collieries, nor of the fact that production is now concentrated in half the number of mines. Yet a few efficient centres of production have a higher value than several less efficient centres having the same total output, and these changes in the Board's mines should be reflected in an increase in value. A study of a sample of the Board's mines suggests that this increase ought to be 15 per cent.

The simple comparison with the rateable value of other mineral producing hereditaments is weighted towards the annual rental value of sand, gravel and other aggregate minerals. It has not properly reflected the increased value of coal as a source of energy. In the period from 1963 to 1974, for example, the selling price of coal rose 140 per cent., whereas the weighted average price of other minerals rose only 82 per cent. How far this should be reflected in the value of coal mines is a matter of judgment, but, taking a conservative estimate, it was thought that the rateable value of the mines should be increased by 15 per cent. in respect of this factor.

A further increase arises from the results of the 1971 Mines and Quarries Valuation Order. This order provided for a reduction of that part of the rateable value of a mineral producing hereditament that represents the royalty value of the mineral, and coal mines secured a reduction of 39 per cent. of their rateable value accordingly. On further review it appears, however, that this reduction was too large, since a large proportion of the value of a coal mine lies in the shafts and machinery rather than in the coal itself. The reduction in value should therefore have been less—20 per cent. in fact rather than 39 per cent.—and it is proposed to put this right in the new order.

Having regard to these three factors, we have decided that the present rateable value of £6.8 million should be raised to £11.5 million for 1977–78. As I have already said, this value will vary with output in future years, as the present order provides, although this variation is specified by symbols and not in words.

I expect that noble Lords will be wondering what effect increases of this nature will have on coal prices. Although the extra rates will amount to around £5 million, rates form only a very small part of the National Coal Board's expenses. The increased cost per ton of coal from a deep mine will only be 3.9p. By contrast, the current cost of coal is typically about £16 a ton. That is less than one-half of 1 per cent.

The formula in Article 6 provides for the apportionment of the national basic rateable value between rating districts. The equation looks formidible but the principle behind the calculations is the same as under the present order. It is simplified by the assessment of a single national rateable value rather than one split between the old divisions. In effect, the formula provides, as under the present order, that some fraction of the rateable value is associated with the shaft and some with the mineral deposits which are worked. They may, of course, lie in quite another rating district.

Under the 1963 order, 60 per cent. of the apportionment was associated with the mine shaft and 40 per cent. with the value of the mineral deposits. Noble Lords may have noticed that the formula now refers to 75 per cent. and 25 per cent. I referred before to the decision in 1971 to reduce the value of the mineral element in the assessment of rateable values by half, and therefore the 40 per cent. should be reduced. The ratios should thus not be 60 to 40 but 60 to 20, or 75 per cent. to 25 per cent.

The other major change is that in the provision for assessing opencast workings, contained now in articles 9 to 14 of the order, the provisions here are somewhat more straightforward. Each working is assessed individually. Under the 1963 order, the tonnage of coal produced at each working in a year is multiplied by a "tonnage factor", which is calculated by a formula and is currently about 4.2p. The result is the rateable value. Rates are then levied in the usual way. The order before us provides for the "tonnage factor" to be increased to 12½p, to be comparable (after taking into account such matters as the scale of the operation) with figures which are derived from the assessments of coal sites being exploited privately.

While much of the order simply repeats the existing provisions, deciding the rateable values to be set by it has not been an easy task, as witnessed by the long time it has taken to do. We have sought agreement between the parties but this has not been possible, and I am aware not only that the Board has expressed the view that its rateable value should be lower, but also that the local authority associations have said that it ought to be a good deal higher. We have therefore sought a balance between these views, based on the disinterested advice of the Government's Valuation Office, with the sole aim of bringing the rates the Board pays into line with those paid by other industrial ratepayers. We believe that we have achieved this and I therefore ask noble Lords to approve this order.

Moved, That the National Coal Board (Rateable Values) Order 1977, laid before the House on 23rd November, be approved.—(Baroness Stedman.)

5.8 p.m.

Lord SANDYS

My Lords, the House will be grateful to the noble Baroness for explaining an intricate mathematical formula with her usual precision and technique. From this side of the House may I emphasise what the noble Baroness has said. Agreement was indeed sought but none was reached. I should like to express the case so far as the National Coal Board are concerned. The National Coal Board claim that neither the new valuation figure of £11.5 million nor the general rise of 15 per cent. in the National Coal Board's rates is justified. In their view, these figures bear no relation to reality today. In fact, to coin a phrase, they appear to be plucked from the air.

The reason why your Lordships are faced with the order this afternoon is that the Department of the Environment have accepted the chief mineral valuer's recommendation which was discussed but not agreed between the authorities concerned, the Board and the Government. First, it is appreciated that there are 415 properties taken out of formula rating, but these are of course still subject to their own revaluation on the normal basis and they are not agreed. In our view the chief mineral valuer has made a basic confusion between value and market price.

This story goes back quite a long way. The noble Baroness referred to as far back as 1963, but I will go two years earlier, to a debate in another place in the Standing Committee when the then Minister of Housing and Local Government, Mr. Henry Brooke—now, of course, my noble friend Lord Brooke of Cumnor—said this on the Rating and Valuation Bill. The clause would enable new systems of assessment to be brought into force by order if they were agreed between the local authorities on the one hand and the undertakings concerned on the other. There is no suggestion that obtaining the benefit of a formula method of assessment should be regarded as a privilege. It is not designed to enable the undertakings concerned to pay less rates than they otherwise would and it is not designed to impose on them a greater rate liability". Further on in the debate he said: The points at issue will be purely technical because everything will be governed by the general statement I have made, namely that the new system must be agreeable to all concerned and must be designed neither to increase nor to diminish the total rate liability of the industry or the set of undertakings". It appears that an undertaking was given by a Minister which was accepted and passed unanimously when it came to that particular clause. It is further pointed out by the National Coal Board in regard to their claim that the chief mineral valuer has over-rated the present value, that between the years 1964 and 1975 in real terms their rates were increased by no less a factor than 26 per cent. I think it can be said that there is a parallel between what has been said earlier this afternoon on a previous order, which was also concerned with the Department represented by the noble Baroness, namely, the housing of homeless persons order, in which all local authorities and the Government got together and reached agreement and produced an order which was satisfactory to all sides of your Lordships' House. The parallel I should draw is with this order, where no such agreement has been reached, where the Coal Board cannot possibly accept what the Government have in mind and the local authorities take a somewhat different view from the Government themselves. I ask the noble Baroness whether it would be possible to achieve a revision of what the Government have in mind.

5.14 p.m.

Baroness STEDMAN

My Lords, I note the comments made by the noble Lord opposite and I, too, have been looking up to see what the then Mr. Henry Brooke said way back in 1961. As I understood what he said, it was that the object of a rating formula was, as nearly as possible, to put the industry concerned in the same position as it would have been in if there had been no formula, and that the values were left to be determined in the ordinary way. This was our understanding of those assurances which were given by the then Minister responsible. But, quite obviously, there is still scope for considerable differences of view on what the total rateable value of an industry would be if there was not a formula. This is the sort of problem that we have been trying to resolve over the past months. It is not only the concern of the National Coal Board; the National Union of Miners are also working in harmony with the NCB and are complaining that we are rating their industry too high.

The purpose of the formula is to facilitate the making of rating assessments, not to cause the industry concerned to pay more or less in rates; or, if you want to put it another way, if the NCB pays too much in rates, it is unfairly being asked to subsidise other ratepayers, but at the same time, if it pays too little, then it is itself being subsidised by other ratepayers, which is not fair to them. Here I take some comfort from the fact that the local authorities complain that we have not rated them heavily enough. The NCB and the NUM complain that we are hitting them too hard and one tends to think that if both are squealing we may perhaps have got it somewhere near right. I take note of what the noble Lord has said; we will look at it and will see how it works as time goes on; but I hope the House will accept the order this evening.

On Question, Motion agreed to.