§ 4.52 p.m.
§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin)My Lords, I beg to move that the Gas Hereditaments (Rateable Values) (Amendment) Order 1979 which was laid before the House on 6th November be approved. This is a technical instrument which is uncontentious and which has been accepted by the Gas Corporation and local authority associations with whom we have consulted. For these reasons I propose to introduce the order only briefly, although I should be happy to answer any questions your Lordships might raise. The purpose of the order is to bring up to date the arrangements by which the total rateable value of the Gas Corporation is distributed among individual local authorities. It does not affect the total liability of the gas industry to rates.
This is an obscure subject and some background explanation might be helpful. The gas industry, in common with several other nationalised industries and public utilities, is rated by statutory formulae. This is because the normal methods of assessing properties for rating—that is, by establishing their annual rental value—are quite inappropriate when dealing with gas mains, compressor stations and the rest of the Gas Corporation's operational property. Offices and showrooms are rated normally, however.
In the case of the gas industry, there are two relevant statutory instruments: the Gas Hereditaments (Rateable Values) 315 Order 1976, and the National Gas Terminals (Rateable Values) Order 1976. The order before us today amends the first of these, and there is a parallel order not requiring Affirmative Resolution which amends the second. The extant orders prescribe a total rateable value of £60 million for all the industry's operational property for a base (1976–77); provide a method of uprating that total rateable value to reflect the changing activitiy of the industry; and, prescribe formulae for the distribution of the total rateable value between rating authorities. Your Lordships may see from the orders that most of these matters are dealt with in one main order and that there is a subsidiary one, made under different powers, which deals only with the distribution of some 4 per cent. of the rateable value to a handful of large natural gas terminals and storage stations, which are identified in the order.
The two orders need revision because the Gas Corporation's investment in its operational property now shows a different balance between types of installations. The distribution of rateable value ought to take account of that change. The distribution formulae which specify these arrangements are now out of date in two respects. First, the existing orders make no provision for the construction of new facilities in Mid-Suffolk and at Avonmouth. Secondly, the relative book values of the different types of property have changed considerably since 1976.
The Secretary of State has therefore made two new orders which amend the distribution formulae to take account of these changes. One of the new orders amends the secondary order of 1976, dealing only with natural gas terminals and storage facilities. It does not require Affirmative Resolution procedure.
My Lords, the other order before us today amends the distribution arrangements for the bulk of operational property. It adds to the relevant substantive order a reference to the new compressor station in mid-Suffolk and it amends the ratios specified in distribution between categories of operational property. The new ratios reflect the relative book values of the categories at 31st March, 1978. This was the latest date for which information was available when the order was drafted. The new formulae will provide for a 316 larger share of the total rateable value to be distributed to areas where investment has taken place in the major facilities of the natural gas transmission system. There will tend to be reductions in the rateable values for other areas, the majority, although they will still have a share of the largest portion of rateable value (65 per cent.) which is distributed in respect of the more general part of the system. I hope your Lordships will agree that the order before us makes necessary amendments to the distributional arrangements and I commend it to the House.
§ Moved, That the order laid before the House on 6th November be approved.—(Lord Bellwin.)
§ Baroness BIRKMy Lords, may I compliment the Minister on making the totally incomprehensible slightly more comprehensible; although I would not say that, even with his explanation, it is something that one would want to put to music. It is still a complicated document and the formulae are particularly so. I accept that, up to now, both parties have been in favour of the cumulo system. At the same time, I understand the feeling of the local authorities associations, especially the ACC and the AMA, who feel that it deprives many of their member authorities of rate income to which they feel entitled. This is because the present cumulo varies with the number of firms supplied per mile of trunk main and, where the number of firms does not increase and extra miles of gas main are brought into use, this appears to them to result in a reduction of the cumulo and therefore a reduction in their rate income. With the coming into operation of the mid-Suffolk compressor station here, again, it is felt by many local authorities that the total cumulo should not merely be redistributed but that these new facilities should produce a new rateable value.
I should like also to ask the Minister whether the fear that rural areas will benefit at the expense of urban areas is justified. This is because of the positioning of many gas compressors which are either on the coast or in some form of rural area. Finally, I should like to ask the Minister when there will be another fundamental review of the cumulo so that the imbalance between the cumulo rating system and the common rating system is not further exacerbated.
§ Lord BELLWINMy Lords, regarding the distribution favouring rural at the expense of urban areas, there is no bias towards rural areas. Most of the rural areas, like most of the urban ones, are among the majority of authorities that will see a reduction being made in their gas rateable values. The redistribution is proposed simply to take account of where the Gas Corporation's investment is increasing, and where it is declining. This is a notoriously difficult matter.
To apply rating to the statutory undertaking, and all that surrounds it is of course complex. The last Conservative Government set up a review of the formula rating in 1973 and the Labour Government concluded it. When the last Government established principles for rating the gas industry in 1976 it was expected by the industry and local authorities that amendment would be needed at some time to bring the formulae up to date, and that is what we are discussing today. The Gas Corporation and the local authorities expected the system to last; and, in my view, there is nothing to gain at this time by reopening the fundamental questions just three years after they were settled.
§ Baroness BIRKMy Lords, before the noble Lord sits down, may I press him further? Perhaps he will write to me; I do not expect to have an answer now. Regarding the rural areas, it is not a question of the distribution of gas, it is that they are areas which are better recipients of the building of compressors. Perhaps the noble Lord will write to me and give me some idea of the distribution between urban and rural areas of the compressors that have been built. That really is the point—the actual building of the compressors.
§ Lord BELLWINMy Lords, I shall be delighted to write to the noble Baroness.
§ On Question, Motion agreed to.