§ 3.25 p.m.
§ The MINISTER of STATE, SCOTTISH OFFICE (The Earl of Mansfield)My Lords, I beg to move that the draft Docks and Harbours (Rateable Values) 1939 (Scotland) Order 1979, which was laid before this House on 12th July this year, be approved. This order provides a method, or formula, for the determination of the rateable values of lands and buildings occupied by most dock and harbour undertakings in Scotland. It concerns those undertakings operated under powers conferred by statute or Statutory Instrument, and all the larger and most of the smaller Scottish docks and harbours are so operated.
The Secretary of State is empowered to prescribe, by order, formula valuation arrangements for certain undertakings where conventional valuation methods are unsatisfactory. Following a general review of the rating of public utilities started by the Scottish Office about two years ago, formula valuation orders were made last year for electricity, gas and other undertakings in Scotland. Statutory ports are also among the undertakings for which a formula may be prescribed, and the order now before your Lordships extends the application of formulae to such ports.
As I have said, formula valuation is appropriate where conventional valuation methods are found to be unsatisfactory, and I should explain in what respect conventional valuation methods have proved unsatisfactory for docks and harbours. Scottish dock and harbour undertakings are at present valued for rating on the " revenue " principle, which is long established but has certain weaknesses. Valuations at each revaluation are based on the average revenue of the undertaking over the preceding five years; a complex process and slow to reflect activity changes. Further, the method can produce low assessments for large undertakings with a substantial amount of business, where revenue only slightly exceeds deductible expenses; and, because loan charges are not a deductible expense, it can produce unduly high assessments for undertakings incurring heavy capital expenditure.
For these reasons, formula valuation of statutory docks and harbours was introduced in England and Wales some years ago; and the British Ports Association, believing that there would be advantage in extending a similar system to Scotland, invited the previous Government to consider the matter. The Scottish 1940 Office accordingly set up a Docks Working Group, which included representatives of the association and other port interests and of the Convention of Scottish Local Authorities. The group unanimously recommended adoption of formula valuation, generally on the lines of the arrangements in England and Wales. The draft order follows this recommendation.
As in England and Wales, the underlying object of formula valuation is that it should provide a more equitable method of arriving at port valuations and, while this will result in some redistribution of the rate burden among ports, it is not intended that formula valuation should alter significantly the overall share of the rate burden met by statutory ports in Scotland. This continuity is effected by Article 4(a) of the order, which provides that the rateable value of each statutory port for the first year of formula, 1979–80, will be 7½5 per cent. of the " relevant income " of the port for the preceding year: this particular percentage is adopted because it should produce valuations which in aggregate will be reasonably close to the aggregate of the existing valuations arrived at by conventional methods.
Noble Lords will observe that annual increases in the relevant income for any port for inflationary and other reasons will produce an increasing rateable value from year to year, whereas the rateable values of most other property is fixed for the quinquennium between revaluations, unless material changes cause an increase in values. I should explain that the fraction in Article 4(b) which is to be applied to the relevant income for future years to arrive at a valuation is intended to discount the effect of inflation which would otherwise be reflected twice in port rate-bills, once in the rateable value and again in the local rate poundage applied to it. This adjustment parallels a similar arrangement in England and Wales. The port and local authority interests directly concerned have been advised, through a consultation document issued last month, of the proposals in the order, and no substantial objection to the introduction of formula valuation has been received. I commend the order to the House, and I beg to move.
§ Moved, That the draft order, laid before the House on 12th July, be approved.—(The Earl of Mansfield.)
1941§ Lord STRABOLGIMy Lords, we on this side of the House are grateful to the noble Earl the Minister for explaining the purposes of this order. I understand that, as the noble Earl has said, these powers have already been used to provide formulae valuation for electricity, gas and railway undertakings in Scotland and also for the Post Office's Scottish telecommunications network. As the noble Earl has said, formulae valuation on broadly similar lines for docks and harbours has already been introduced in England and Wales and is, I understand, operating satisfactorily. I have no detailed points to raise on the order, and I hope that your Lordships will approve it.
§ On Question, Motion agreed to.