HL Deb 27 March 1980 vol 407 cc974-7

4.10 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin) rose to move, That the draft order laid before the House on 11th March, he approved. The noble Lord said: My Lords, this order reduces British Rail's liability to make payments in lieu of rates. The order arises because of changes in the status and business of the National Freight Corporation. This order deals with two problems. There is a need for a permanent revision of British Rail's contribution in lieu of rates, and the order introduces that. There has also been a transitional problem with the NFC, and the order covers that also.

Before I explain in detail the purpose and effect of the order, it may help noble Lords if I say something about the background. Instead of paying rates, as such, on their operational property, British Rail pay an amount in lieu of rates, calculated in accordance with statutory provisions. The Secretary of State then distributes the money between rating authorities. British Rail's liability for any year depends on a prescribed "standard amount", which this order would reduce, and on the average rate poundage set by local authorities in the previous year. They also pay rates, in the normal way, on non-operational property, such as hotels, refreshment rooms, and some offices. In turn, the National Freight Corporation are required to pay to British Rail a "fair" contribution in relation to premises which they occupy for the purposes of handling rail-related traffic. The amount of NFC's contribution is to be settled by agreement between the two boards.

The previous Administration reset the standard amount for British Rail in 1977. In view of this, we have not undertaken any fundamental review of British Rail's rating. The reduction that we are proposing arises from the changing circumstances of the National Freight Corporation. It is helpful to consider the transitional problem first. When the Freight Corporation was first established, most of its traffic was carried by rail. Now, however, over 50 per cent. of the traffic is entirely road-borne. Under rating law, road transport depots are assessed and rated by normal methods; and this is what has happened to much of NFC property which was previously used solely for rail-related traffic. This has created an additional cost on NFC; and up to now, there has been no offsetting reduction in NFC's obligation to contribute towards British Rail's payment in lieu of rates. The NFC have argued that they have been paying twice in respect of the same property: about £ 1/2 million a year too much, at least since 1978–79.

British Rail, understandably, have felt unable to agree a reduced contribution from NFC, if that would mean that their own payment would have to be increased so as to meet the total liability. The local authorities, on the other hand, felt that the raising of new separate assessments on some properties did not justify any reduction in the standard amount. They point out that the "standard amount" relates to the network as a whole, rather than to specific properties. However, because the changes have affected the whole nature of NFC's operations, we felt that we ought, in principle, to make some reduction in the British Rail "standard amount", so that they, in turn, could agree a reduced contribution from NFC.

This order represents a compromise reduction which, in effect, acknowledges an actual or potential overpayment by NFC over recent years. The joint burden of the two boards would be reduced for the single year 1980–81, so as to compensate for the period of overpayment. British Rail and the Freight Corporation have accepted this proposal, and I understand that they will make arrangements accordingly for the sharing of their joint burden in the coming year.

The local authority associations are disappointed with the proposal, but I would ask the House to accept that this order offers a reasonable compromise all round. In recent years, NFC's operations have changed so fundamentally that it would be wrong to expect them to continue paying an amount which no longer bore any relationship with their current methods of operation. Equally, British Rail should not be expected to take on an additional burden as a result of decisions made by NFC. Moreover, the local authorities have benefitted substantially in recent years from the new assessments on NFC's road traffic depots.

The order before us today also meets the long term requirements for NFC. Noble Lords will know that the Transport Bill proposes that the status of the National Freight Corporation should change on an "appointed day", when the corporation will become a company under the Companies Act. It will then also lose its special rating status: all its property will become rateable by normal methods, and the rating link with British Rail will be broken. The timescale for this process is still a matter of hypothesis; it depends on a number of factors, which are not our concern today.

We have therefore made a necessary working assumption for this order that NFC's status will change on 1st October this year. On that account, we have proposed a reduction of British Rail's "standard amount" by £ 1/2 million. This reduction would be the first half-yearly instalment of a permanent reduction of £ 1 million. The long-term intention is to reduce British Rail's gross liability by the amount that NFC contribute, thus leaving British Rail's own burden unchanged.

I should stress that we do not yet know precisely when NFC's status will be changed. When the actual timing is known we shall propose a new order to reflect a permanent adjustment to British Rail's liability in 1981–82, and to compensate for any discrepancy between the date of NFC becoming a Companies Act company, and the date of October 1980.

I am sorry that such a simple order has such a complicated background, but I commend it to the House. My Lords, I beg to move.

Moved, That the draft order laid before the House on 11th March, be approved.—(Lord Beliwin.)

4.16 p.m.


My Lords, I shall not detain the House for very long, since the noble Lord, Lord Bellwin, has given a lucid explanation of the order which, frankly, proposes a very sensible arrangement. In saying that, we on this side of the House do not necessarily support it, in view of the references to the National Freight Corporation and the Transport Bill, which has to be passed before the new arrangement comes into force. However, we regard this as a sensible proposal which seems to satisfy the British Railways Board, in that it will relieve them of the liability regarding rates on National Freight Corporation depots which are no longer rail-linked. The National Freight Corporation will no longer pay rates twice on the same properties, and it would appear that by and large the local authorities shall receive all the rates to which they are entitled, from either the British Railways Board or the National Freight Corporation. Therefore we give our support to the order.

On Question, Motion agreed to.