§ House again in Committee.
§ Clause 13 [Duty to consult industrial and commercial ratepayers]:
Lord Graham of Edmonton moved Amendment No. 93:
Page 9 line 32, at end insert (", or any other organisation or person or I ody of persons with whom consultation appears to it to be desirable,").
§ The noble Lord said: We come to what is considered by many, certainly by me, to be a very important clause and one to which I hope we shall do justice, certainly in the eyes of those outside the Committee who, like me, consider that this amendment is very constructive, as indeed is Clause 13.
Although later we shall deal precisely with the obligations and sanctions of an authority, Clause 13 lays a duty on authorities to:
consult persons or bodies appearing to it to be representative of industrial and commercial ratepayers".
§ Certainly we on this side of the Committee believe that this is a very useful additional device in terms of consultation. However, we are still puzzled as to why industrial and commercial ratepayers are especially singled out for this treatment.
§ Throughout these debates and others reference has been made to those who pay rates. I believe that earlier in today's debates reference was made to those who vote and who do not pay rates. There is a popular myth that rates which are paid by businesses are paid by the businessmen or the businesswomen. Of course, that is not strictly the case. Almost invariably the rates borne by a business are paid by the goods and services of the business. If a factory's rates or a shop's rates increase, because a business needs to be competitive the cost of its goods and services increases. We shall come to another argument as to the detrimental effect upon the ability of a business to remain competitive if it has to pass on rates. However, I certainly hold the view that the need to consult with businessmen, and industrial and commercial users is a very satisfactory way of going about things.
§ Many years ago I was leader of the Enfield Council. Today I received a letter from the town clerk of Enfield (which I note is also in the hands of other members of this Committee, including the noble Baroness, Lady Gardner of Parkes; and I shall certainly ensure that the noble Lord, Lord Bellwin, receives a copy because he is always assiduous in sending me copies of letters that he receives from Enfield), who points out that for many years it has been good practice in an authority such as Enfield to consult with the local business community. It is, of course, interesting that the body with which Enfield Council consults is the Enfield District Manufacturers' Association, which is representative of the industrialists in the borough. That is absolutely true, but it is a very narrow interpretation.877
§ The biggest ratepayer in most communities is the local co-operative society. From the size of its business and its spread of operations in Enfield, the co-operative society is one of the biggest ratepayers in Enfield. Globally the co-operative movement pays about £50 million, and the CWS, the banks and insurance companies pay about £20 million. This leads us into an interesting argument, which will arise from the guidance which the Minister will give us on this, as to how precisely one goes about consulting. We shall then find ourselves in some kind of hornets' nest.
§ Enfield Council also tells me, quite rightly, that the leader of the council and other senior members have periodic meetings with the Federation of Enfield Residents' and Ratepayers' Associations. In my view, that is absolutely the correct procedure.
The amendment which I seek to move says:
or any other organisation or person or body of persons with whom consultation appears to it to be desirable".
§ We all have our separate lists of those to include and perhaps those to exclude. I am quite certain that what the Government have said is that in this rate situation there is a body of people—the businessmen or the industrialists—who feel especially hard done by. So we say to councils, "You must consult with these people". In a moment we shall come to the question of meaningful consultation and whether or not local councils take as much notice of their consultation process as do the Government. It is a moot point as to how much notice the Government take and how much notice a local council takes. Certainly every local council reaches a predetermination; it takes advice and guidance and forms a view. The local business community will include not only those who are members of the district manufacturers' association or the chamber of commerce, but other business interests as well. There is a very good reason why some people may not be members of a corporate body. But you invite them in and you must have something to tell them. You must say, "We are thinking of moving towards this or that situation". Then you open up the discussion and ask them what they think.
§ Most ratepayers will start with the premise that they would like to pay less. Then there will be an argument. Many of them will say that they do not think the council should spend its money on this or that service; there will be members present who will have their own views. The council will have to listen to them very carefully and decide an order of priority. At the end of the day the Government will decide, but the council will come to a view on what the rate shall be. It is quite certain that the local business community—that is my global phrase which includes industrialists, commercial ratepayers and those who are members of and those who are not members of a body—will be disappointed in one way or another. They may be satisfied that the council has done all it wants.
§ You then have the situation, as applies in Enfield, where meaningful discussions take place with the Federation of Residents' and Ratepayers' Associations. I live in that London borough; I attend my local ratepayers' association meetings and its annual social evening, which is a very well-attended event. The noble Baroness, Lady Gardner, and I were there last year, and they are genuine and sincere people. At the end of the day the council has the 878 problem of trying to reconcile the differences of opinion. We on this side of the Committee believe that Clause 13(1) is a good clause. It is right and proper that a duty be laid upon a council to consult with industrial and commercial ratepayers. We are simply saying that other people have as great an interest in the outcome of the rate-making process as the industrial and commercial ratepayers; certainly the domestic ratepayers have as much interest in the rates to be paid.
§ Therefore, one looks for a body which will represent them. Certainly the employees in an authority have a great interest. Therefore, I assume that the Government will look sympathetically at amendments which lay a duty upon the council, before it strikes a rate, to have had meaningful discussions with the employees of an authority, otherwise what is the point of a so-called partnership? It is on that basis that we on this side of the Committee consider that this is a sensible clause. It extends the process of consultation. We should like to see the Government look sympathetically at how this can be extended.
§ The Minister should also spend some time— and the night is young—in going through the procedure of whether he considers that consultation may be a charade or a facade; or perhaps after the consultation process the Government are prepared to listen to the pleas of the council that it has been badly done by in terms of rate support grant and other Government action. The Minister needs to spell out the position, since it appears as though people who will be badly affected but who are articulate will get something whereas at the end of the day it will turn out to be very little. Many a council will say to the Government, "it is all very well listening to the views of people who are affected, but that will mean everybody".
§ I repeat the basis on which I earlier made the point, which is that most business rate payments in one way or another are paid by the consumer of the goods and services, or the shareholders, or the employees. In other words, there is not a person who is called the businessman, out of whose pocket is paid the increase in the rates. There are lots of other bodies comparably affected. Therefore I hope that the Minister will be able to say something helpful and accept this amendment in the spirit in which it has been moved. I beg to move.
§ 8.52 p.m.
§ Baroness Gardner of Parkes
My noble friend Lady Macleod has asked me to speak for her on this amendment, on which I also speak for myself. As the noble Lord, Lord Graham, said, we have received a copy of the letter from Enfield. It is strange how this authority keeps coming back into our debates. There are a few points in the letter that the noble Lord has overlooked. First, it makes clear that consultation is already wider than will be demanded by this Bill. He will find that that is so in any well-managed local authority. There is already wide consultation.
However, in some local authorities business interests have been overlooked because in particular the elected councillors are more anxious about being re-elected and are therefore more concerned with the person who has the actual vote. That is where the industrial and commercial ratepayers have not been 879 receiving adequate consideration in terms of the rate. But I think that the noble Lord's view that a business is not a ratepayer is simplistic. I have had letters from various businesses in Enfield. They have made clear that although an individual person might not be represented as paying the business rate, the whole business and the jobs of those people employed in it are at stake if the rate goes up to such an extent that the business is unable to continue. It is an important factor; only so much can be passed on to the consumer. There comes a point when the consumer stops buying, as, indeed, the noble Lord said. The point is reached where the goods are no longer competitive. From that point on the business is in that unhappy spiral which can take it down and into bankruptcy.
Although there were a great many valid points with which I agreed in the noble Lord's speech, I think that this amendment is unnecessary. Every local authority can now consult anyone it thinks desirable to consult. I support the wording in the clause which gives this particular commitment.
§ Lord Mottistone
What disappointed me about the speech of the noble Lord, Lord Graham, was that at both the beginning and the end he sought to create the impression that the phrase in the Bill which refers to "industrial and commercial ratepayers" was referring to individual people.
§ Lord Mottistone
That is how it came over. It seemed to me that that was the gloss the noble Lord was putting on it, because he then talked about it not affecting businessmen and business women. The fact is that it is not talking about people; it is talking about businesses, which have to struggle to remain in existence. The noble Lord took his argument on to the fact that they will pass their extra costs on to the customer. They will pass on their costs to the customer only if they are inefficient and they cannot make a success of their business.
The rates are a greater burden than taxes on companies as a whole throughout the country, and this is a problem. It is right that this Bill should identify industrial and commercial ratepayers as a special entity, because they are a special entity for rating purposes. It is not right to diffuse the whole of the subsection in the way that this amendment seeks to do, because as my noble friend Lady Gardner has said, there is ample opportunity for discussing with other people. In any case, by their vote the domestic ratepayers can have a hand in who is in power on their particular council, whereas business companies cannot. They deserve special identification. I believe that this is a dangerous amendment which would diffuse what is a special purpose to deal with a special case.
In his persuasive way the noble Lord—and I noticed that the chaps did not switch on the timing device, and so he did not know how long he was going on, which was a long time—tried to cast on this situation a different view from the simple picture that this Bill creates. I hope that my noble friend will have a strong 880 argument and help to persuade the noble Lord, Lord Graham, that his amendment would be better withdrawn.
§ The Earl of Avon
I am not sure that my arguments are all that strong, but I hope, anyway, that I can put the noble Lord's mind at rest, which is what I shall seek to do. In including this provision in the Bill the Government were conscious of the widespread concern felt by business about the lack of opportunity to influence high levels of rates, even though non-domestic ratepayers account for nearly 60 per cent. of local authorities' rate income. We looked at the possibility of reintroducing the business vote, but that
Instead, the provisions in Clause 13 of the Bill will give business ratepayers the opportunity to be heard and to make their views known. We intend to provide in the code of guidance and regulations the necessary framework to ensure that this duly operates both flexibly and effectively. I assure the noble Lord, Lord Graham, that it is intended not to be a charade, but a two-way process. I hope that, businesses will increase their understanding of local authorities at the same time as they make their views known.
I come to the specific amendment. It would not, as I see it, in practice extend to anyone the duty to consult, since it leaves local authorities with full discretion to decide which, if any, other organisations they think it will be desirable to consult. The local authorities are already free to consult whoever they want about whatever they want. We are not in any way restricting this fundamental freedom.
The purpose of the clause is to give industrial and commercial ratepayers, who provide nearly half of local authorities' rate income, an opportunity to influence the level of those rates. Domestic ratepayers are already able to influence their council's policies and programmes through the ballot box, and for this reason we have not extended the duty to consult to them or their representative. However, I accept that there may be some non-domestic ratepayers who could not be defined as industrial or commercial (and I give such examples as universities or hospitals) who may wish to make known their views.
§ The Earl of Avon
I notice that the noble Lord says, nationalised industries. I know that he has an amendment later about electricity boards.
We intend to suggest in the code of guidance that local authorities may wish to consider whether they should also consult representatives of other non-domestic ratepayers who are not industrial or commercial. The amendment before us would carry no more statutory weight than that since it is, I expect deliberately, very vague. I hope that the noble Lord will agree on reflection that there is no need for his amendment. I assure the Committee that there is nothing in Clause 13 that will restrict local authorities from consulting as widely as they wish.
§ Lord Lloyd of Kilgerran
The Minister said very candidly when he opened his speech that his argument, after all, would not be very strong. As I listened to him as carefully as I could I began to get 881 further assurances from his speech that his argument certainly was weaker and weaker as it went on. I understand that the noble Baroness, Lady Gardner of Parkes, in her objections to the amendment, which I feel could be useful, relied on the fact that so many local authorities consult very widely. But in my limited experience, I have come across many local authorities who do not bother to consult widely. They see it as a matter of principle not to do so. Therefore I counter her argument by saying that there are a large number of authorities who will consult widely but there are also a lot of authorities which do not consult widely enough.
The noble Lord the Minister referred to the fact that there might be universities, colleges or polytechnics —so important these days—in a particular local authority which should be consulted. There is no harm therefore in putting an amendment like this into the Bill suggesting that in their discretion local authorities should consult as widely as possible. I appreciate that there may be some little administrative difficulties, but it is in the discretion of the local authority to consult widely. It does not limit the present powers that local authorities have, but it puts into a Bill the desirability of wide discretion, as is the main theme of the amendment.
§ Lord Graham of Edmonton
I consider that this has been a useful short debate. May I repeat that we on this side of the House fully support the intention of Clause 13(1) that the industrial and commercial ratepayers be consulted, I remind the Committee that the noble Baroness, Lady Gardner of Parkes, has said that our amendment is unnecessary. In her experience, Clause 13(1) is unnecessary because there is consultation taking place in Enfield, as I told the House and the noble Baroness confirms, with the local industrial and commercial community, with the exception of the local co-operative society. In the Enfield area and, I believe, in many others, the local co-operative society is the biggest single ratepayer. I repeat the figure—more than £50 million is paid by co-operative societies and £20 million by the national federations.
I noted that the Minister who replied said that it would be his intention to point out in the guidance that it was open to the local authority whether to consult others and widen the consultation. It would be a scandal if some credence is given to consultation in the future and then it is left to the discretion of local authorities so that they can pick and choose, particularly if large ratepayers are excluded.
§ Baroness Gardner of Parkes
I should like to ask the noble Lord, Lord Graham of Edmonton, whether he considers that the Co-op would be covered as a commercial ratepayer. I would have thought that it would be covered by the present wording in Clause 13. It seems that that is his major concern about the Co-op. I would also ask him to comment on the point made previously in the Minister's reply about the phrase:consultation with whom it appears to be desirable".Surely those who are not consulting now could consider anyone they are not consulting is not desirable to consult with.
§ Lord Graham of Edmonton
I mentioned that I had the feeling that councils would be looking for shortcuts in consultation. For instance, if there is a local chamber of trade, ipso facto, they will consult with the local chamber of trade. In Enfield, they will consult, as they do now, with the manufacturers' association. If there is a large business which is neither a member of the chamber of trade or of the manufacturers' association, I would certainly rest happily on the understanding which was written into guidance and circulars that, in effect, if there are bodies which for their own good reasons are not members of those central consulting bodies, they would be in the process of consultation.
If the interpretation which is given by the noble Baroness, Lady Gardner of Parkes, that one of the largest industrial and commercial ratepayers in the London Borough of Enfield would be involved is correct, then I rest happily. But we are trying to get understandings from the Minister, and the Minister has said it would be left open to any council to decide whom it should consult. Then he gave a little credence to my point, which is that this will lay no obligation other than urging authorities to consult with industrial and commercial ratepayers, if they decide on the manner in which they do it—if it is narrow, if there is any malice involved—it is entirely up to them. So far as I am concerned, the points that have been made have certainly been interesting.
The Minister said that non-domestic ratepayers paid 60 per cent. of the rates. He was very careful not to say that non-domestic equalled business and industrial; because, as the Minister knows, when one looks at 100 per cent. of the rate income other than by central government, there are more than the two categories of domestic and business—there are others too. So we are in the interesting area that a very articulate group of people—businessmen, whom we all support throughout the House—have been able to make the case and have it written into the Bill that they, of all groups, are entitled to special treatment. All I am saying is that the Federation of Ratepayers in many areas would also consider that it has an equally valid claim to at least appear to be consulted by the local council.
I repeat the point that the council which goes into consultation is going to get some very interesting arguments, because some groups will be in favour of continuing expenditure on one head in the budget, and others will be interested in others. The council will have to make those difficult decisions.
I meant to indicate at the commencement of my speech that I have always had a connection with the co-operative movement outside the House, in the other House and which I continue to have here. The co-operative movement—the Co-operative Union—welcomes this clause of the Bill. All I am seeking to do is to say that what the House believes is right for businessmen ought also to be extended to others. But I am satisfied that we have had a reasonable debate. I beg leave to withdraw the amendment, but reserve the right to come back at some later stage.
§ Amendment, by leave, withdrawn.883
§ 9.8 p.m.
Lord Underhill moved Amendment No. 94:
Page 10, line 2 after ("State") insert (", in consultation with, and after taking into account any representations received from such associations of local authorities as appeear to him to be concerned and any local authority with which consultation appears to him to be desirable,")
The noble Lord said: The previous debate has been extremely helpful and noble Lords will note that the Minister referred to the guidance to be given. Noble Lords should note the wording of subsection (3) which says:
an authority shall have regard to any guidance issued by the Secretary of State concerning … persons or bodies to be regarded … as representative of"—
industry and commerce—
and … the timing and manner of consultation under this section".
§ The fact that the Secretary of State considers it necessary that guidance shall be given would suggest that there is envisaged that, unless proper guidance is given, there could be some difficulties in carrying out this provision, of which we accept the principle, as my noble friend Lord Graham of Edmonton said.
§ The Minister said in reply that the guidance must be such as to allow flexibility. I would suggest that it must also be guidance that makes a proposal both realistic and practical. If the Minister is to give this guidance to authorities, who shall be regarded as representative of industry and commerce? If he is to give guidance as to the manner and timing of these consultations to local authorities, surely he ought to have the best possible advice. What better advice could there be than that of the associations representing local authorities? The three associations will surely be consulted by the Minister and will give him advice so that he can give guidance on this important matter. No one is taking any power away from the Minister. In the amendment we are endeavouring to give the Minister some additional assistance.
§ There are places in the Bill where it is written in that there shall be consultation with the associations of local authorities. There are other places in the Bill where we have tried to put this in and the Minister has resisted it. This is one of those occasions where we are not arguing about the principle of this clause. This is one of those occasions where it is highly desirable that the Minister should consult the associations of local authorities so that he can give the best possible guidance; guidance which will be of a practical nature, for unless it is practical it will be useless to local authorities.
§ There is a further amendment to follow, Amendment No. 94ZA. All I would say is that the proposal I am making would produce more precise guidance whereas in the amendment it would be rather imprecise. We think the guidance ought to be such that local authorities will find it extremely helpful in carrying it out. The clause makes it quite clear that they must have regard to the guidance. Therefore it is vital that that guidance should be fit and proper.
§ The Earl of Avon
As the noble Lord, Lord Underhill, carefully explained, this amendment relates to the code of practice and regulations that we propose to issue on the new duty to consult representatives of 884 business ratepayers before fixing rates and precepts. First, I should like to assure the Committee that the Government intend to hold full consultations with the local authority associations, as well as business and other interested organisations, about the contents of both the code of guidance and the regulations. Indeed that process has already begun. We have asked a wide range of more than 100 organisations—including the local authority associations—for their preliminary views, and my colleagues and officials have held useful and productive meetings with the local authority associations and business organisations on many of the detailed aspects of this provision. So we already have a good idea of what both sides would like to see in the code of guidance and regulations, and we shall give them opportunity to comment on drafts of each which we expect to be able to issue for consideration very shortly, perhaps even by Report stage.
The amendment would place a duty on my right honourable friend to do something when he already intends to do very much more. The amendment singles out the local authority associations. But the clause which we are debating involves two parties—local authorities and business representatives. It would seem somewhat odd, in those circumstances, that the Secretary of State should have a duty to consult the local authority associations but not representatives of business organisations.
The amendment also requires my right honourable friend to take into account "any representations received". My right honourable friend would certainly want to consider any representations made by local authority associations, but the wording of the amendment gives the implication that he might be bound to give effect to any representations he receives from the associations. We have debated this before, and I am sure that the Committee will agree with me that this is going a little too far. As I have said, we have already consulted widely, and shall consult again when drafts have been prepared. I do not believe that any statutory consultation would improve on that.
There is a small technical point, which is that if we had a statutory process we could not begin that until the Bill is law and earlier consultations will not, in fact, count. So this amendment could actually mean a delay in producing the guidance for consultations this autumn on the 1985–86 rates and precepts. We hope to have this ready very soon after enactment, and I do not think the delay while we carry out statutory consultations will benefit the local authorities. They need this guidance well before the autumn so that they may start setting up the necessary consultation arrangements. I hope that I have said enough to allay any fears that the noble Lord, Lord Underhill, may have, and to make him feel that it is not really necessary for him to press the amendment.
§ Lord Mottistone
May I underline the point that my noble friend has made about the fact that it seems rather unfair, in view of the nature of Clause 13(1), that business organisations should not be consulted, too? If there are to be preliminary consultations, they are rather one-sided. All the other points made by my noble friend put my mind at rest, and I hope they have done the same for the noble Lord, too.
§ Lord Underhill
I am grateful to the Minister for his response. It will be understood that in these matters I am advised by one of the associations, the Association of Metropolitan Authorities. I am certain that the information that the noble Earl has given will be appreciated. The reason why the amendment refers only to the associations is not for them to be consulted as vested interests, as bodies of ratepayers, but as representatives of the authorities who have got to carry out these consultations. Therefore, it is vital that they should help the Minister in drawing up the guidance to be given. That is the important point.
Although I am going to ask leave to withdraw this amendment, the Minister implied that the wording of the amendment was such that the Secretary of State would be bound to put into effect any views made to him—and that is not my interpretation—after taking them into account. It merely means that he will have to treat the representations very seriously. I hope that the consultations which, as he has said, are already starting, or which are to be carried out, will be real consultations; because we have evidence on such other matters as the streamlining of the cities that, frankly, all the consultations under the sun do not seem to be making one iota of difference to the determination of the Government to carry out what they intend to do. These consultations must be such as to help to ensure that the consultations with industry and commerce are suitably carried out. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Pennock moved Amendment No. 94ZA:
Page 10, line 6, at end insert—
("( ) Notwithstanding subsection (3)(a) above, where any person or body has been nominated by industrial and commercial ratepayers as their representative for the purposes of this section and where such a person or body represents a substantial proportion of such ratepayers in terms of rates payable, an authority shall not be regarded as having performed its duty under subsection (1) above unless its consultations include consultations with such person or body.").
§ The noble Lord said: As a comparative newcomer to your Lordships' House I have listened with rapt attention over the last four hours or so, and with an interest which, if I am honest, has waxed and waned, but which, I am happy to say has waxed rather than waned, to the constitutionally weighty matters that have been discussed and often the fine intellectual distortions and interpretations which have occurred between them. We have heard much of the infringement of democratic responsibility between central and local government; we have heard much of the accountability of the respective powers; we have heard much of the need for the protection of the powers and responsibilities of them; and, having listened for four hours, I come to the regretful conclusion that, whatever the outcome, industry, business and commerce is always caught in the crossfire.
§ The crossfire is that, whatever conclusions you come to, it is business and commerce which largely have to pay for them. Sometimes I have thought that not only are we caught in the crossfire but we are gagged and bound in such a way that the only way in which we can express our views is to roll our eyes somewhat before 886 the demolition begins. Speaking, therefore, with some seriousness, I recognise that the Government are aware of this problem, that business and commerce have not been able to express themselves on these weighty matters, and in this Bill, I think, they have come a long way to recognise that business and commerce need to be consulted.
§ I would agree with the noble Lord, Lord Graham, that businessmen do not pay for these things out of their own pockets; but he and I know full well that if we have to pay, and have to pay in such an exorbitant way that we are not able to pass on the costs to our customers, we go out of business. And if we go out of business it is not just the businessmen but the employees, the shareholders and everyone concerned who are affected. To us, this is a matter of considerable importance. It is my contention that, although the Bill comes a long way, farther than ever before, in seeking to respond to, and be aware of, the business and industrial interests, it still, nevertheless, states that the local authority should consult with those who appear to it, the local authority, to be suitable representatives of business and commerce.
§ This seems to me quite inimical to our democratic concepts, and perhaps, speaking more pragmatically, much worse in that you will not get the better people; you will not get a continuity of debate which leads to a sense of accountability; you will not get an effective dialogue between the representatives of business, commerce and local government if the decision as to who is to be consulted is taken by local government. Bear in mind what the noble Lord, Lord Lloyd of Kilgerran, said, that many local authorities do not bother to discuss with business anyway. So, the purpose of my amendment is that surely business and commerce should have its own responsibility to decide for itself who is going to represent it in its discussions with local government.
§ The noble Lord the Minister has said that there will be a code of guidance, a code of practice, which will probably deal with these matters. I have met in my industrial career many codes of guidance, and I regret that often they are rather like the Beatitudes, the Sermon on the Mount—everyone agrees with them but few people put them into practice. The purpose of my amendment is to seek to stiffen this and to give industry, commerce and business a little more responsibility in deciding for itself who shall represent it when it comes to discussions with local government.
I am by education a stunted historian, and I recall that the clarion cry of no taxation without representation has rung through our nation throughout the centuries. I seem to recall that in another place John Hampden said it in such a way that the House was shut down for 11 years. I recall that at the time of the American colonies also pleading against taxation without representation Edmund Burke, the then representative for Bristol, said:
Great empires and little minds go ill together".
I do not represent great empires; I do not believe that Government today has a little mind, but I would plead that business and commerce on this issue should be able to decide for themselves who shall represent their case, who shall defend their interests in a matter which is, to them, of supreme importance.
§ 9.23 p.m.
§ The Earl of Avon
That was a very moving speech from my noble friend Lord Pennock. I only wish that, instead of 11 days at Easter, we could occasionally have 11 years. I share the desire of my noble friend Lord Pennock and of the noble Lord, Lord Graham of Edmonton, to ensure that this clause operates effectively. That is certainly the wish of the Government and we thought hard about it. Perhaps I could just tell your Lordships something behind our thoughts. We concluded that the structure set out in Clause 13 was the most effective means of achieving our aim. First, it imposes a general duty on local authorities to consult; second, it requires them to have regard to guidance issued by the Secretary of State as to who should be consulted and how that consultation shall be effective; third, it confers powers on the Secretary of State to prescribe in regulations information to be supplied to consultees. We decided on this three-tier structure precisely because we believe that the provisions must be flexible enough to take account of local circumstances and to enable local authorities and businessmen to build on existing best practice.
We did not feel it would be possible in primary legislation to specify the pattern of consultation that would be appropriate in all circumstances. Instead we will be covering this in a code of practice to which local authorities must have regard. We shall be recommending that where organisations such as the CBI and Chambers of Commerce represent business ratepayers in an area they should be brought into the consultation process. Certainly we would expect to ask authorities to consult any person or body which represents either a substantial number of business ratepayers or which is contributing a substantial proportion of their rate income. So the code of guidance which my right honourable friend will be issuing will deal with the question of who should be consulted, and it will be able to do so more fully and more flexibly than any specific provision in the legislation such as that which has been proposed.
I understand my noble friend's concern that a local authority might try to evade its duty by consulting only representatives of a particular group of business ratepayers or by ignoring another important group. We have, sadly, become aware that we can no longer expect all local authorities to act, as we would believe, sensibly; but they are all required to act reasonably. A local authority that ignored both the code of practice to which it must have regard and the claims to be consulted of a body representing a substantial proportion of industrial and commercial ratepayers in terms of rates payable would surely not be acting reasonably and they would lay themselves open to challenge in the courts. So I hope my noble friend will feel that it is not necessary to press his amendment. Indeed, if I may say so, his wording is such that I would find it hard to see how it would be more easily enforceable under his amendment than under the existing proposals.
But I must also suggest that it raises a difficulty. This is because it ties a local authority to consulting one group of business ratepayers, measured by the size of rates paid, where these exist as a nominated body. This we would certainly want the local authorities to do; but we should then mention others that would be 888 equally worthy of consultation. It is because of the diversity of such bodies across the country that we felt it right to cover this aspect of the process in a code of practice and not in the primary legislation. I hope that I have to some extent persuaded my noble friend by these arguments. I know he has poured cold water upon the code of practice, but I hope he will understand the difficulties.
§ Baroness Seear
Before the noble Lord sits down, may I ask him what meaning he attaches to the phrase "must have regard"? Is it not perfectly clear that this in fact has no force? What is the meaning of the word "must"?
§ The Earl of Avon
I think I must rely on what it says, that it would have force, because it leaves them open to a challenge in the courts.
§ Viscount Ridley
Before my noble friend Lord Pennock replies to the unanswerable arguments of my noble friend Lord Avon, would he not agree that half the trouble is that not enough people from business enter local government? I have said this before and I have personal experience of people saying that they are far too busy to stand for election. They leave the way open for the sort of extremists which have caused this Bill to be brought before us.
§ Lord Gisborough
I have some sympathy with the amendment. I am not myself convinced of this recourse to the courts because if business and commerce do not feel, even if consulted, that they are being adequately taken into account by the authority, I cannot see that there is any way. through the courts, they could ever prove that the authority had or had not adequately consulted them.
§ Baroness Fisher of Rednal
I would not disagree violently with what the noble Lord. Lord Pennock. has said, but I hope it would be two-way traffic and that the consultation would be from industry and commerce if they were thinking seriously of moving out of an area. I speak of the West Midlands, where very many large organisations have moved out because they are multinational and so on, and this makes a tremendous difference to the amount of rates which come into any particular authority. So if they want consultation on the actual rate fixing it is important that they play their part. If they are going to say. "We are going to pull out of your area", that could affect the rate demand that they are thinking of levying. There needs to be that balance, I think.
§ Lord Mottistone
If I may speak before my noble friend replies, I should like to make a special point. What the noble Baroness. Lady Fisher, has just said is very important and needs to be taken note of. but it is not really part of the Bill as it stands. What disappoints me is that Clause 13 is entitled. "Duty to consult industrial and commercial ratepayers". In replying to Amendment No. 93. my noble friend said, in effect, that the guidelines would require a local authority to consult pretty well anybody and not to make a speciality of the commercial and business ratepayers, which is the point of the Government's clause. I hope that this broad brush arrangement, to try to get the noble 889 Lord, Lord Graham, to stop fighting a battle for the Co-op in Enfield, will not reflect itself throughout the country quite as it came across to me.
§ Lord Graham of Edmonton
May I ask the Minister to take on board—and, by the way, there are double stamps on Tuesday in Enfield—that I should like him to pay particular attention to the point made by the Leader on the Liberal Benches; that is, the action that is open to a dissatisfied commercial ratepayer who feels that his representations have not been fully taken into account. At the end of the day, as I said more than once on Amendment No. 93, a council must be left to determine its own priorities, having regard to the representations that have been made. If what the Minister is saying is that anyone who is consulted and feels that the outcome is not to his liking, is then entitled, on the basis of that and that alone, to take the council to court, I can imagine that many councils will run away from consultation if they can possibly do so. We may have misunderstood the position, or the Minister may have explained it in a way that was difficult to understand, but I should be glad if he could speak more to that point.
§ The Earl of Avon
If I try to clarify the position, I shall probably get people more mixed up than I did before. To start with, I gather that the Co-op is included, anyway. Clause 13 is concerned with a duty to consult industrial and commercial ratepayers, and I said that the purpose of the clause is to give industrial and commercial ratepayers an opportunity to influence the level of those rates. I also mentioned that we might define more fully "industrial or commercial", such as universities or hospitals. That is what led my noble friend to have a doubt. The noble Baroness, Lady Seear, was asking about the word "must". The duty is to consult; so that is a "must". What they do after the consultation will be up to the local authorities, but the duty rests on them to consult. That is where the duty lies, and that is where they would lay themselves open to a challenge in court.
§ Lord Pennock
Having listened to the debate, may I beg leave to withdraw my amendment, in the light of my noble friend's assertion that the points which we have raised will be covered in the code of guidance which is to be introduced? But bearing in mind my earlier somewhat unworthy suspicions of such documents, would it be possible for us to see at Report stage some outline of this code of guidance, so that we can be reassured on the points which we have sought to represent this evening?
§ The Earl of Avon
I hesitate to give an undertaking. It is our hope to get it by then, but the fulfilment of my hopes is usually a little delayed. However, we shall certainly see what we can do.
§ Amendment, by leave, withdrawn.
§ Clause 13 agreed to.
§ 9.34 p.m.
§ Lord Mottistone moved Amendment No. 94A:
§ After Clause 13, insert the following new clause:—
§ ("Reduced rating for industrial and commercial purposes.890
§ "19A. The rateable value of industrial and commercial hereditaments shall, for the purposes of valuation lists in force at the appointed day as from that day, and for the purposes of subsequent valuation lists, be ascertained as follows:
- (a) in the case of an industrial or commercial hereditament shown in the valuation list as being occupied and used wholly for industrial or commercial purposes, the rateable value of the hereditament shall, subject as hereinafter provided, be taken to be ninety per cent. of the net annual value thereof;
- (b) in the case of an industrial or commercial hereditament shown in a valuation list as being occupied and used partly for industrial or commercial purposes, the rateable value of the hereditament shall, subject as hereinafter provided, be taken to be an amount equal to ninety per cent. of the net annual value shown in the list as apportioned to the occupation and user of the hereditament for industrial or commercial purposes, together with the whole of the net annual value so shown as apportioned to the occupation and user of the hereditament for other purposes.".").
§ The noble Lord said: This amendment is a repetition and we have gone around the buoy before. I have a record of the Committee stage of the Local Government Finance Act in May 1982. It is fair to say that on this amendment, and on the others which we have put down, I have received advice from the CBI. As part of a general approach to improve United Kingdom competitiveness, it is established industrial policy to seek to restrain the cost increases imposed on business. In the recent recession, rates posed an increasing problem for business. They are now the heaviest tax that trade and industry have to bear. Total rates paid by United Kingdom business in 1983–84 will be close to £6 billion, compared with about £4 billion in mainstream corporation tax and, hitherto, £1.7 billion in employers' national insurance surcharge.
§ Furthermore, since 1979 rates paid by industry have risen about one and a half to two times more than other costs and prices. From 1929 to 1963 industry benefited from partial derating. I believe that once again industrial concerns have a particularly strong case for relief, but it should be granted to the whole business sector to improve competitiveness. Where companies are seeing some signs of recovery, lower rate bills would give business more funds to invest in the future, and those companies whose existence is threatened would be helped to survive.
§ I argue also for the introduction of partial business derating on grounds of fairness. This amendment would remove the inequity of the present rating system which results in domestic ratepayers in England and Wales being subsidised by the domestic rate relief of 18.5p per pound of rateable value. Business is also dealt with harshly compared with agriculture, which is derated, yet the arguments for business being treated similarly are certainly as strong.
§ The problem is that if my amendment were accepted, which asks for a 10 per cent. reduction, where would the Government find their £600 million? We should have thought that in the first year it could be paid for by the Government through an increase in the rate support grant, but in due course—this depends on the reaction and the efficiency of the local authorities—it is worth noting that the Audit Commission believes that between £1 billion and £2 billion per annum can be saved by local authorities in England and Wales alone through increased efficiency and effectiveness in their spending. If that were to 891 come about, and if local authorities were interested in making themselves effective rather than in doing other things, which we shall not refer to while speaking about this amendment, the question of finding £600 million would be dead easy.
§ So, coming up for the second time (or is it the third?) I ask the Government to consider that business interests should be given fairness and encouragement for their own development so that they may achieve the efficiency on which the well-being of all of us, including the local authorities, depends. I hope that the Government will give very favourable consideration to this amendment. If they do not like its wording, that is another matter; but the underlying principle is one which I hope they will accept. I beg to move.
§ Lord Bellwin
I hope that my noble friend is not coming up for the third time. I should hate to lose him, as he is one of my most avid and regular supporters. My noble friend and the CBI know well that the Government agree when they say that industry and commerce need some respite from the mounting rate burden. This is a major reason why we have introduced the Bill. However, we must be sure that any help we provide for industry and commerce is well directed in order to have maximum effect.
The substantial loss in rate income which would result from the amendment would have to be made up by either the taxpayers or the ratepayers, so that some of the relief would feed straight back into higher rate poundages. That cannot make sense. We are providing real help to industry and commerce in the highest spending authorities by our proposals in Part I and Part II of this Bill.
We have taken note of the serious problems which rates may pose for declining industries or those having to leave property empty because of the recession. We have introduced new regulations relieving empty industrial property of rates altogether. In Part III of the Bill, we have introduced a right for all non-domestic ratepayers to pay their rates in 10 monthly instalments. We have provided a new duty on local authorities, as was debated a few moments ago, to consult representatives of business ratepayers about their expenditure plans. These actions will give help where it is most needed.
My noble friend's amendment would simply shift the burden of rates without doing anything to reduce it overall. I most heartily concur with the last sentiments he expressed, about opportunities for local authorities to provide services at lesser cost. Earlier today I was talking about just that. But the relief given to industry and commerce by this amendment would be offset by a substantial additional burden on ratepayers generally or on taxpayers—perhaps adding around 8p to rate poundages in the absence of additional government grant. This would be a major additional burden for domestic ratepayers. It would also partly offset the gains businesses would make from the proposed derating.
Passing the burden on to taxpayers would have an equally undesirable consequence. We are committed to reducing the burden of tax on incomes—not increasing it. Moreover, my right honourable friend 892 the Chancellor of the Exchequer announced in his Budget a number of measures to help businesses and encourage economic activity. These include radical changes to make the tax system more even-handed as between capital and labour and as between different types of investment, to encourage greater efficiency. Taxes paid by businesses will be substantially reduced over 1984–85 and 1985–86, taking the two years together, and profits after tax increased for all sectors.
There will be a continuing benefit to businesses from the lower rates of corporation tax and the abolition of the National Insurance surcharge. We hope to encourage greater investment, yielding a higher average pre-tax return than under the previous discriminatory system, through measures which must contribute to better employment prospects. The measures we are taking on the wider tax front and in this Bill will reduce the burden of rates on all ratepayers—and they are, I believe, the best way to help businesses.
I do not in any way underestimate the problems faced by businesses in meeting their rates bills. Indeed, we may discuss this point further in relation to other amendments to be debated tonight. I do not believe that across-the-board relief would help to provide assistance where it is most needed. I am sure from the discussions which have taken place in the past few years that my noble friend understands very clearly that I have a great deal of sympathy and understanding, but I fear that this amendment is not the way to help at this particular moment in time.
§ Lord Broxbourne
I wish to intervene for only a brief moment. It may be that my noble friend Lord Mottistone—in spite of his enviably equable, cheerful and optimistic disposition—may be a little disappointed by the reply of his noble friend the Minister in this regard. This amendment makes a relatively modest suggestion for improving the position of industrial hereditaments. I believe it has been common ground in the discussions on this Bill to date that industrial hereditaments and industrial ratepayers are in a disadvantaged and somewhat unenviable position at the present time.
The proposed measure would take effect as an addendum to Section 19 of the General Rate Act 1967 under which, as your Lordships know, there is a dichotomy between the methods of assessing the rateable value of residential herediatments under subsection (2) and any other hereditaments under subsection (3)—which, of course, includes industrial hereditaments.
Under subsection (2), for the residential hereditaments, one calculates the gross value and then it is flexible to the extent that deducted therefrom are sums specified by ministerial order. In the case of industrial hereditaments it is a more stark liability because the net annual value of such hereditaments is based on the calculation of the net annual value of the property without any deductions whatever. What is proposed here, if I understand the proposition correctly, is a relatively modest 10 per cent. deduction from that net annual value.
When one reflects on the history of the matter, it is I think an appropriate epithet to say that it is relatively modest. My noble friend has reminded your Lordships 893 that in 1929 industry was wholly derated as a parallel action to the derating of agriculture. From that time their paths, of course, have diverged. Agriculture today continues to be wholly derated. On the other hand, industry is wholly rated. It is therefore in the balance of things as they are today in the economic sphere, not an unreasonable proposition.
My noble friend the Minister said that he cannot accept the amendment at present and I have no doubt that my noble friends will accept that decision. However, I think that it is reasonable to ask the Minister, with his right honourable friend the Secretary of State and other ministerial colleagues, to give further thought between now and Report to ways in which they can ease the position of industrial hereditaments and thereby promote and sustain the wellbeing of the economy of the nation.
§ Lord Bellwin
May I just say a brief few words to thank my noble friend for his intervention. On this amendment I fear that I cannot go any further than I have said. In a few moments we shall be coming to one or two other amendments where possibly I might be able to be somewhat more forthcoming, but on this amendment we have to stay where we are.
§ Lord Pennock
I underline the Minister's predicament, which is, as my noble friend has said, that a 10 per cent. reduction is not very much especially compared with the 100 per cent. reduction for agriculture and the 10 per cent. reduction for the domestic ratepayer. But 10 per cent. reduction is, nevertheless, £600 million for the simple reason that industry is at the moment paying out £6 billion and that is such a high figure in the first place. I can therefore understand the predicament; but perhaps the Government can also understand that the nature of the predicament is such because industry for too long and too largely has been paying this enormous imposition.
§ Lord Mottistone
I am grateful to my noble friend the Minister; but I am even more grateful to my noble friend Lord Broxbourne because I think that he has pointed a way through. I feel that perhaps governments—and I do not mean party government because this rates problem has gone on for a long time—have all the time studied and considered the problem primarily from the end of the domestic ratepayer. The situation that has developed is that the basic arrangement by which business and industry pay for services rendered by the local authority—which is the basic principle of the matter—has diverged so much and there are so many special rules and exceptions that there is little relation between the two. The question of taxing business could well deserve an across-the-board look in order to produce a rate 894 system which paid for services rendered and a taxation system—I am talking about a neutral total income for the Government which would have to be adjusted—so that the resultant picture looked fairer to business ratepayers; that is, the companies.
I welcome the thought of my noble friend Lord Broxbourne that what I am suggesting could take place between now and Report. I do not believe it can because I do not think Ministers talk that frequently and fast enough, but of course it would be super if my noble friend the Minister had come back with an amendment which dealt with all these problems that fast. Even if he cannot, it would be very nice if he could say now that what I have just suggested, about looking at the whole problem of business and industrial taxation in order to reduce an obviously fairer balance, is something at which he and his colleagues might look.
§ Baroness Birk
After hearing what he said, I wonder whether it occurred to the noble Lord, Lord Mottistone, and the noble Lord, Lord Broxbourne, and the noble Lord, Lord Pennock, in view of the other amendments that are going to come before us, that they might suggest to their noble friend the Minister that he sets up an inquiry into the rating system, both industrial and domestic.
§ Lord Mottistone
No, because I am proposing that we set up, not an inquiry into the rating system but an inquiry into the industrial taxation system, which is rather different. I do not know if my noble friend is going to respond.
§ Lord Bellwin
I always respond. I think this is really where I came in at the very first debate on the very first issue of this whole matter. I would only repeat what I said then, that of course nothing is forever. It was my noble friend Lord Sandford, I think, who moved the original amendment—with my noble friend Lady Birk as I recall, as to where do we all go in the future. I say again, as I said then, that the legislation here has to be in place to tackle the immediate problems with which we are faced, plus other legislation which will shortly be coming here. When all that is in place and working, then it may very well be that there will be a moment when a wider look is called for. But I do feel that I would have to agree here with the noble Baroness, Lady Birk, that to do something on its own is not; it would only exacerbate problems. If anything is to be done, it has to be something else way beyond that. But right now we have got immediate problems to deal with, and that is what we are doing now.
§ Amendment, by leave, withdrawn.895
§ 9.53 p.m.
§ Lord Bellwin moved Amendment No. 94AA:
§ After Clause 13, insert the following new clause:
§ ("Provision of information to ratepayers. 1967 c. 9.
§ (a) as to the past or proposed expenditure of—
- (i) the rating authority; or
- (ii) any authority by which a precept has been issued to the rating authority,
§ (b) as to any increase or reduction in the rates made by the rating authority or in the precepts issued to it.
§ (2) Rules under that section may require an authority having power to issue precepts to serve notices on ratepayers in its area containing information—
- (a) as to its past or proposed expenditure and as to the financing of that expenditure; and
- (b) as to any increase or reduction in the precepts issued by the authority.
§ (3) Rules made by virtue of this section may make different provision for different cases; and any notice required to be served by rules made by virtue of this section shall be in such form (if any) as the rules may prescribe.
§ (4) An authority having power to issue precepts to a rating authority shall supply that authority with such information as is reasonably necessary for enabling it to comply with any requirements imposed by rules made by virtue of subsection (1) above; and a rating authority shall supply an authority having power to issue precepts to it with such information as is reasonably necessary for enabling the precepting authority to serve any notices required by rules made by virtue of subsection (2) above.")
§ The noble Lord said: The Government have made very clear their concern that local authorities should be more accountable to their ratepayers. We have yet to discuss Clause 14, which introduces a new right for occupiers who pay rates through their local authority landlord to receive the same information in relation to the rate and the background to their local authority's spending as those of us who pay rates direct. We also announced in our White Paper Rates that we would seek to ensure that ratepayers are provided with clear information as to how their rate bill is apportioned between the rating and precepting authorities. We propose to introduce new rate demand rules to require that this information be shown on the face of the rate demand note.
§ However, I am sure local authorities would agree with me when I say that information on how much each rating and precepting authority is spending and how that expenditure is being financed is clearly useful to ratepayers. Of course, many authorities already recognise this and produce exceptionally clear explanations for all ratepayers. We introduced a code of practice with recommendations on the content of such notices in 1980 called Explaining the Local Authority Rate Bill. Many authorities have certainly taken its message to heart and used it well.
§ This amendment extends the Secretary of State's powers under Section 113 of the General Rates Act 1967 to make rules governing the content of the rate demand note itself to cover information relating to expenditure, financing and changes in rate or precept levels. We feel that we need these powers to ensure that all ratepayers have access to the sort of background information produced by the best authorities. This will 896 be particularly useful in ensuring the accountability of the new joint boards and the new directly elected education authority for inner London because ratepayers will be less well acquainted with the role of these upper tier authorities.
§ We shall be discussing the content of new rules with the local authority associations and other interested parties and we expect to use the extended powers next year in order to bring new rules into effect for the 1986–87 rate demands. We shall incorporate in the new rules the changes already proposed to ensure that ratepayers are aware of the amount of their individual rate bills attributable to the levy made by each major authority in their area. I believe that local authorities will welcome this breathing space to revise their rate demand forms as appropriate. I also believe that this extension of existing powers to make rules in relation to rate demands will enable us to improve the account-ability of authorities to their ratepayers. I therefore commend the amendment and the associated amendment to the Long Title. I beg to move.
§ Baroness Birk
I wonder whether I may ask the Minister a couple of questions. Obviously, account-ability is blurred by precepting. I understand the point about bringing information from precepting authorities to ratepayers directly. Will this be done at the expense of the precepting authority, or will the Government make money available? There will be an additional amount of expenditure involved. At first glance, although I have not had much chance to look at it. it seems that this could be quite an expensive operation. Will it also be the case that the Home Secretary and the Secretary of State for Transport provide the information for the Metropolitan Police and the London Regional Transport precepts? Will parishes be covered by the amendment? They are formally precepting authorities, are they not?
§ Lord Bellwin
I do not see why there should be any additional cost. The rate demand note goes out now; it will merely be a matter of what goes on to it. What we seek is that there should be a clear exposition of each of the rating or precepting authorities' charge set forth in such a manner as I am sure will be mutually agreed with the associations. I do not think that there is any real difference here at all. There are many areas where there is a difference, but I do not think that this is one of them. The actual form and layout will be decided jointly by consultation. In terms of the cost, I do not see why there need be any addition at all.
The only other point that I have not yet covered relates to parish councils. I would not have expected that their precept would be included, but I hear what the noble Baroness says and I shall certainly want to consult about that. Again, it would be a matter for the associations. It is quite a sticky point that is raised by the question of parishes. It can have far more significance than some may think. As I speak now I do not think that it is the intention that they should be included, any more than they are now. Nevertheless, the noble Baroness makes a good point. I shall want to check it out carefully, and I shall be in touch with her about it.
§ Baroness Fisher of Rednal
I have listened to what the noble Lord has said. I am in receipt of about half a dozen rate demand notes. Some are excellently done, and include diagrams. If the Minister is issuing information asking for this to be done, I hope he will state that it should be done in simple English. The language of rates is very difficult. If ratepayers are to gain benefit, it must be done in words that they understand.
§ On Question, amendment agreed to.
§ Clause 14 agreed to.
§ Lord Pennock moved Amendment No. 94B:
§ After Clause 14, insert the following new clause:
§ ("Removal of right to levy rates on unoccupied industrial
and commercial purposes.
§ .—(1) The Secretary of State may by order direct that in respect of—
- (a) hereditaments which have been and remain constructed or adapted for use as factories, mills or other premises of a similar character for use wholly or mainly for industrial purposes; or
- (b) hereditaments (not comprising one or more dwelling-houses or having a floor space not exceeding 240 square feet and used as a lock-up garage) whose net annual value falls to be determined under section 19(2) of the 1967 Act,
§ (2) The power to make an order under this section shall be exercisable by statutory instrument.
§ (3) A statutory instrument containing such an order shall be subject to annulment in pursuance of a resolution of either House of Parliament.")
§ The noble Lord said: In speaking to Amendment No. 94B, which is really to do with the non-payment of rates for empty premises, I should like also to associate Amendment No. 94C, which relates to the non-payment of rates for empty warehouses.
§ Amendment No. 94C: After Clause 14, insert the following new clause:
§ ("Removal of right to levy rates on empty warehouses.
§ "(g) the hereditament is held for the purpose of being available for the storage in the course of any trade—
- (i) of goods or materials which are to be used in the manufacture of other goods or materials;
- (ii) of goods or materials which are to be subjected, in the course of a trade, to any process;
- (iii) of goods or materials which, having been manufactured or produced or subjected, in the course of a trade, to any process, have not yet been delivered to any purchaser; or
- (iv) of goods or materials on their arrival by sea or air into any part of the United Kingdom;".")
§ The principle involved is exactly the same in both cases, and it is a simple one. Rates are a tax paid by business in return for the beneficial occupation of a property. Where that property is not occupied beneficially it seems somewhat inequitable to pay rates simply because the property exists. Speaking perhaps more practically, rates have to be paid for out of profits. If the premises are empty, no profits can be earned; so the rates have to be paid out of profits from 898 the business or from other parts of the business which might exist. Support is required which possibly and probably renders the other parts of the business uncompetitive and so it is threatened. It seems that if one has a factory which is empty, not only is it inequitable to pay rates on it but one is also threatening in the medium term, and perhaps even in the short term, the very existence of the business and the number of jobs that are involved.
§ In the case of the domestic ratepayer, if an individual has no income or insufficient income steps are taken to take this into account and some relief is accorded. It seems to us that the same principle should be applied where it is palpable that due to the premises being empty no profits are being earned. If one moves to the question of a warehouse which is empty, the payment of rates becomes even more penal. Rates usually amount to something like 2 per cent. to 5 per cent. of the total cost of running a factory.
§ In view of the fireworks noise from outside I feel there is opposition in the upper regions. However, in the case of a warehouse which is unoccupied, frequently the rates are approximately from 15 per cent. to 20 per cent. of the total cost of keeping that warehouse in being. It is our contention that the inequity of paying rates on a warehouse is even stronger than in the case of a factory. I am bound to say that the Government have recognised this; first, with rates for empty premises in allowing local government to restrict the total rate to 50 per cent. of the original rate which was required; and also by proposing recently to end the payment of rates for empty industrial premises.
§ Through this amendment we are seeking also to include warehouses, shops, offices and other business establishments that are empty and are still paying rates, for the same reasons that the Government have sought to introduce the amendments so far. In this case, unlike the previous amendment, which although modest in its percentage was somewhat penal in its effect on Government costs, we calculate that the cost to the Government would be somewhere between £10 million and £15 million. In recognising the justice and the equity of the cause and the effect of continued payment for empty premises—eventually unemployment—the Government have come a long way. The purpose of these two amendments is to ask them to come just a little further and adopt the logical conclusion of their efforts so far.
§ Lord Evans of Claughton
I have to declare an interest. I am president of the National Association of Warehouse Keepers; sometimes I wonder why I am, but nevertheless I am. In supporting the amendments which the noble Lord, Lord Pennock, has moved I should like to direct attention particularly to Amendment No. 94C, which deals with warehouses. The noble Lord has dealt very well with the problem of warehouse keepers. My association points out that while other industries may be worker intensive, warehouses tend to be very highly rates intensive. They are particularly affected by the failure of the Government to include them in the exclusion from payment of rates for empty premises, because 899 industrial premises, for some reason, which no doubt is shrouded in some mist in the Department of the Environment, have been excluded—and bearing in mind the fireworks noises from outside, I think that the national association is taking things a bit far when they introduce gunfire to support their case here!
However, it seems to me that if industrial premises that are vacant should be allowed to claim total exemption from rates, why should warehouses not be able to do so? They are particularly exposed, for the reasons that the noble Lord gave earlier. Also there is very fierce competition in the areas where they are most vulnerable in the north of England from freeports and from enterpise zones. Freeports and enterprise zones are not subject to rates at all. Anyone who has warehousing facilities there—whether occupied or unoccupied—is released from any responsibility for rates. The warehouse keeper in an area just outside an enterprise zone or a freeport is in a very difficult position in competing with those who are within that area.
In addition to that, industrial de-stocking during the recent—
§ Lord Evans of Claughton
—recession that the country has suffered. I do wish that the noble Lord, Lord Graham, would not make my speeches for me, although they are very much better than mine. But as the noble Lord says, "during the recent recession", induced no doubt by a Conservative Government as the noble Lord, Lord Graham, would also say. The rates account, as the noble Lord, Lord Pennock, has said, for up to 30 per cent. of the outgoings of warehousing companies. The rate is a much higher percentage than for the rest of industry.
If we could persuade the Government to agree to this amendment, I gather that the loss of income to local authorities would amount to as little as 0.05 per cent. of income received at present from warehouses. So in view of the fact that the warehousing industry is hard pressed both because of competition from freeports and from enterprise zones and because of the de-stocking brought about by the Government's policies, the Government should consider this amendment and Amendment No. 94C very seriously, I think that they should also take seriously the other amendment moved by the noble Lord, Lord Pennock.
My particular concern is to try to ensure that something can be done for the warehousing industry which is suffering very heavily at the moment. If this support is not given to them, I suspect that they will go on doing what they are doing at present—that is, closing warehouses, taking the roofs off them and very often vandalising them in order to avoid paying rates. Of course, more important than that, they are introducing a very considerable element of unemployment. This is a very serious point so far as the warehousing industry is concerned, and I hope that it will be treated sympathetically by the Minister in his reply.
§ Lord Bellwin
The Government are very conscious of the problems that empty property rates can cause and which my noble friend has elucidated. I can say from my own experience that in Leeds we never ever rated any empty properties and nor do they do so today, so far as I am aware.
I will not again go over all the measures that we have taken and are taking to reduce rates and to help businessmen generally. They will of course help ratepayers owning empty properties as much as others. But specific assistance on empty property has been given through the Rating Exemption of Unoccupied Industrial Hereditaments Regulations 1984 which my right honourable friend laid on 8th March. These stop local authorities from levying any rates on empty industrial hereditaments from 1st April 1984. This relief could be extended more widely—and I wonder whether my noble friend appreciates this point—without primary legislation, and to that extent the complicated structure created by Amendments Nos. 94B and 94C, which will exempt warehouses from empty property rates, is actually not necessary.
However, we have had to set priorities. The cost of extending relief to all empty non-domestic property, or even just to warehouses, would result in a further substantial loss of potential income for local authorities. In our view it is right to relieve empty industrial property of a burden that in the current climate cannot be effective in providing an incentive to make full use of empty properties because the market demand for such property does not exist. But in many parts of the country there is a demand for empty warehousing and commercial properties, and we consider it right that local authorities should retain the discretion to levy an empty property rate of up to 50 per cent. on these properties. But I am pleased to say that many choose not to do so, though there may still be circumstances where it is appropriate.
I shall not make a great meal of this. I should like to conclude by saying that, despite what I have just said, I appreciate that the boundary between industrial property and warehousing may actually be blurred in places, and this must be at least as true of the boundary between warehousing and certain retail operations; but there is still an area of blurring here. To give 100 per cent. relief to empty warehousing could add perhaps half as much again to the potential cost of the relief which we have already introduced for empty industrial property. If my noble friend thinks it would help, I shall look at this again. I am sure he knows that I am anything but optimistic about it, and I very much doubt whether we can help. But I believe that there is a blurring, and for that reason, before we have to reach a conclusion on it, I should be willing to have another look at it.
§ Lord Pennock
With that assurance from my noble friend the Minister, we are very happy to withdraw this amendment.
§ Amendment, by leave, withdrawn.901
§ 10.12 p.m.
§ Lord Mottistone moved Amendment No. 94BA:
§ After Clause 14, insert the following new clause:
§ ("Rate relief fur partially used business premises.
§ "25A.—(1) This section applies where—
- (a) part of any hereditament, which has been and remains constructed or adapted for use as a factory, mill or other premises of a similar character for use wholly or mainly for industrial purposes, is not so used (the unused part); or
- (b) part of any hereditament comprising a commercial building is not used for the purpose for which it has been used remains constructed or adapted for use (the unused part):
§ Provided that in either case no other use is made of the unused hereditament, but notwithstanding that the building or plant or machinery therein, or appurtenant land is or continues to be maintained in a workable condition.
§ (2) In this section, references to a hereditament comprising a commercial building are references to a hereditament (not being a dwelling house or a hereditament having a floor space not exceeding 240 square feet and used as a lock-up garage) whose net annual value falls to be ascertained under section 19(2) of this Act.
§ (3) If the rating authority is satisfied upon application in the prescribed form being made to it that—
- (a) either paragraph (a) or (b) of subsection (1) above applies in respect of a hereditament; and
- (b) the unused part under the said subsection (1) is sufficiently identified in the prescribed form,
- (i) the date upon which such agreement is reached; or
- (ii) the commencement of the rate period in which the request was made,
§ (4) The event referred to in subsection (3) above is whichever is the first to occur of the following:
- (a) any of the unused part becomes used;
- (b) a further apportionment of the value of the hereditament is made;
- (c) the person in occupation of the hereditament at the time that the apportionment under this section is made ceases to be in occupation.
§ (5)(a) In determining whether the unused part is sufficiently identified for the purpose of paragraph (b) of subsection (3) above the rating authority shall have regard to the requirements of the valuation officer in determining whether he could reasonably carry out the apportionment mentioned in subsection (3) above if requested so to do and if either the applicant or the valuation officer is dissatisfied with the decision of the rating authority he may apply to the local valuation court who on hearing the applicant, the rating authority and the valuation officer or such of them as choose to appear before it may confirm or reverse the decision of the local authority;
§ (b) no appeal shall lie from the decision of the local valuation court.
§ (6) Without prejudice to any other statutory rights vested in any person where an application has been received by a rating authority the valuation officer may at any time enter upon the relevant hereditament to satisfy himself that the unused part is or has been or is likely to remain unused and such right of entry shall continue until any of the events mentioned in subsection (4) above occurs.
§ (7)(a) Where at any time in any period during which it has been represented to the rating authority that part of a hereditament is, was or will be an unused part as defined above that part or any of it was not in the opinion of the rating authority 902 unused as so represented the authority may require rates to be paid in respect of the whole hereditament as if none of it is, was or had been during the relevant period an unused part and may require interest to be paid on the said amount of rates at such reasonable rate as may from time to time be prescribed by the Secretary of State as if the whole of the said amount of rates had been due on the first day upon which any part of the rates in respect of the unused part would normally have fallen due if no application under section (1) above had been made;
§ (b) where a rating authority requires an amount to be paid by way of rates under paragraph (a) above the said sum shall be paid, without any option to pay by instalments under section 50 of this Act, on such date following the notification by the rating authority to the person liable for the rates on the hereditament upon which the next normal payment of rates on that hereditament falls due or if there is no such date on the thirty-first day after the said notification and allowance shall be made for any rates already paid on the part of the hereditament which was not represented to be unused;
§ (c) where an amount falls to be paid under this subsection all rights and remedies shall be available to all parties concerned as if the said amount was a normal amount of rates and all time limits shall apply having due regard to the date for payment specified in paragraph (b) above.
§ (8) In this section—
- (a) the prescribed form shall be such form as the Secretary of State shall from time to time prescribe as being necessary for the proper application of this section;
- (b) the Secretary of State shall issue regulations governing procedures for appeals under subsection (5) above;
- (c) the Secretary of State shall exercise his powers under this section by Statutory Instrument which shall be of no effect until laid before and approved by a resolution of the House of Commons.".")
§ The noble Lord said: Again, this amendment is one that I have been around the buoy on before. During consideration of the Local Government, Planning and Land (No. 2) Bill in October 1980 I jolly nearly won a Division against the Government, the voting being 59 to 61, which was better than the Opposition did this afternoon, but sadly I did not win. We returned to the charge again in the Local Government Finance Bill in May 1982. It is called "mothballing". The problem is to deal with the case where part of business premises is taken out of use but maintained for eventual re-use when economic conditions improve. We would ask that a local authority be required to apportion the rateable value of the premises between the unused part and the remaining part of the hereditament.
§ A number of examples exist in large and complex premises, parts of which cannot normally be vacated and separately let off, where a major item of plant—for example, a blast furnace, with associated plant and control rooms—is held on a care and maintenance basis but is not in productive use. If the plant was rendered incapable of beneficial occupation—for example, by partial demolition—it would cease to form part of the hereditament and its value would be deleted, but if left intact, the item has to be included in the overall value of the property. This places an unfair burden on industry, and we ask that a provision should be made for giving "mothballing" rate relief without undue difficulty. This would constitute a positive step towards preserving the industrial base.
§ The important point is that, of the amendments which have been brought before your Lordships on the earlier occasions, about which I have spoken, in 1980, at any rate, this type of amendment received support from all sides of the Chamber—from these Benches and the Benches opposite. I believe that it is an amendment which perhaps the Government might 903 now move towards meeting. I shall be most interested to hear what my noble friend has to say. I beg to move.
§ Lofd Bellwin
There are many problems associated with Amendment No. 94BA. Of course, as my noble friend says, one has to be sympathetic with the underlying proposals, but there are considerable practical problems of definition. There would be the placing of an onus on valuation officers to identify unused parts of hereditaments. It would be hard to make the law clearcut. It must be a recipe for uncertainty. There would also be enforcement problems, not to mention the cost of the proposed relief.
I fear, without going into more detail, willing though I am to do so, that Amendment No. 94BA would not be workable or, frankly, I am bound to say, justifiable in terms of directing relief to where it is most needed. However, I have much sympathy with the arguments that my noble friend has put forward in this context. There are two measures which we could usefully introduce to help businesses suffering from the recession without the serious problems of the proposal that has been tabled, and which we might table at Report.
The first would be to amend section 25 of the General Rate Act 1967. At present local authorities are discouraged from using this discretionary power to provide temporary rate relief for buildings which are temporarily unoccupied because no provision is made for ending the relief unless the unoccupied part is re-occupied. That is one area where we could take steps to encourage greater use of the power by local authorities. Therefore, I propose—and I hope that my noble friend will be pleased to hear me say so—to table an appropriate amendment on that at Report.
The second amendment which I hope my noble friend would consider a valuable addition to this Bill relates to premises unused save for the storage of plant and machinery previously used there, or intended for use there. Again we believe that priority for relief should be given to businesses which have to close premises but do not wish to strip out all their plant or machinery, or feel that thus equipped the building may be more easily let.
We propose therefore to consider introducing at Report stage an amendment to provide that such premises should be treated as though they were empty. I hope that my noble friend will accept my assurances that the Government are well aware of business ratepayers. I think he understands why we have to consider, however, all the other problems, and not least the practicality of proposals, the cost, the effect on other ratepayers and taxpayers, in short that we have to set priorities. But with what I hope will be valuable improvements I hope that my noble friend will feel able to withdraw his amendment for the reasons I have given.
§ Lord Mottistone
I am indeed grateful to my noble friend. Do I understand that he has two amendments in contemplation to deal with my one amendment?
§ Lord Bellwin
Whether we do it in the form of two separate amendments, which is what I believe at the 904 moment we intend to do, or in some other form, perhaps my noble friend would leave for me to discuss with the draftsman. Certainly we will cover the points I have mentioned.
§ Lord Mottistone
I am grateful to my noble friend, and I look forward with great interest and hope to the next stage of the Bill. I beg leave to withdraw my amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 94C not moved.]
§ Clause 15 [Miscellaneous amendments and repeals]:
§ On Question, Whether Clause 15 shall stand part of the Bill?
§ Lord Sandford
With Clause 15 we come to the end of Part III, headed Other Provisions Relating to Rates and Precepts. I want to make three brief points. First we welcome the modest progress which has been made in this Part towards improving and reforming the rates system. Secondly, to thank my noble friend on the Front Bench for the meeting he arranged last Thursday with a number of us to examine with him the scope for making more improvements and speeding up the rate at which those improvements are made. Finally, to express the hope that before the Bill leaves us, and to a large extent between now and the next stage, we may be able to identify together further steps that can be taken to speed up progress on the matters listed in Chapter 5 of the annexe to the White Paper, on a good number of which there is not too much progress to be seen at the moment.
§ Clause 15 agreed to.
§ Clause 16 agreed to.
§ Clause 17 [Commencement]:
§ [Amendments Nos. 95 and 96 not moved.]
§ Clause 17 agreed to.
§ [Amendment No. 97 not moved.]
§ Clause 18 [Short Title, Interpretation and extent]:
§ [Amendment No. 98 had been withdrawn from the Marshalled List.]
§ [Amendment No. 98ZA not moved.]
§ Clause 18 agreed to.
§ Schedule 1 [Miscellaneous amendments and repeals]:
Lord Bellwin moved Amendment No. 98ZB:
Page 17, line 14, at end insert—
§ ("Domestic rate relief
§ 7A.—(1) In section 48(5) of the principal Act for the word "movable" there shall be substituted the words "two or more moveable" and in paragraph 3 of Schedule 13 to that Act before the word "moveable" there shall be inserted the words "two or more".
§ (2) This paragraph shall be deemed always to have had effect.").
§ The noble Lord said: This amendment inserts a new paragraph into Schedule 1 to clarify the legislation relating to provision of domestic rate relief for caravans and houseboats by the definition of private dwelling as used in Schedule 13 of the General Rate 905 Act. Since it is intended as a clarification of existing legislation I hope that the Committee will accept this amendment.
§ On Question, amendment agreed to.
The Earl of Avon moved Amendment No. 98ZC:
Page 17, line 16, after ("8") insert—
("(1) In section 50(1) of the principal Act for the words from "(not being a tenant" to "through the owner" there shall be substituted the words "is liable to pay any rates in respect of a hereditament"; and for the words "any rates", in both places where they occur, there shall be substituted the words "the rates".")
The noble Earl said: I will speak to this amendment together with Amendment No. 98ZD.
Amendment No. 98ZD: Page 17, line 16, leave out ("the principal") and insert ("that").
§ These amendments fulfil our intention to extend to all ratepayers the right to pay rates by instalments. Section 50 of the General Rate Act 1967 provided the right to pay rates in monthly instalments to all domestic occupiers and we extended this in the Local Government Planning and Land Act 1980 to the occupiers of non-domestic property between certain rateable value limits. We have recently increased the upper limit to £10,000 in London and £5,000 elsewhere.
§ Following consultations on our proposals for rate reform contained in our White Paper, Rates, we decided to remove those limits altogether from the beginning of the next rating year, this extending the right to pay rates by instalment to all occupiers both domestic and non-domestic. However, some owners who are not occupiers also pay rates. These are the owners of unoccupied properties and owners who are rated on behalf of the occupier under provision of Section 55 or 56 of the General Rate Act. The Bill as drafted does not extend the right to pay by instalments to such ratepaying owners because the original provisions contained in section 50 of the 1967 Act relate only to occupiers. I hope that with this explanation the Committee will accept the two amendments.
§ On Question, amendment agreed to.
§ The Earl of Avon moved Amendment No. 98ZD:
§ [Printed above.]
§ On Question, amendment agreed to.
Lord Mottistone moved Amendment No. 98A:
Page 17, line 22, leave out paragraphs 9 to 16 and insert—
("9.—(1) For section 70(1) of the principal Act there shall be substituted—
(1) The valuation officer shall, within twenty-eight days after the date on which a proposal under section 69 of this Act is served on him, or within seven days after the date on which such a proposal is made by him, as the case may be, transmit a copy thereof, together with a statement in writing of the right of objection conferred by subsection (2) of this section, to the occupier of the hereditament to which the proposal relates, not being the maker of the proposal.
(2) For section 70(2) of the principal Act there shall be substituted—
(2) The owner or occupier of the whole or any part of a hereditament to which the proposal relates may, within twenty-eight days from the date on which notice is served under
subsection (1) of this section on the occupier, serve on the valuation officer notice in writing of objection to the proposal; and, where the proposal was made otherwise than by the valuation officer, the valuation officer shall, within twenty-eight days of the date on which a notice of objection is served on him, transmit a copy thereof to the make of the proposal.
§ (3) Paragraph (e) of section 72(2) of the principal Act is repealed.
§ (4) In section 73(2)(a) of the principal Act, the words "and to the rating authority" are repealed.
§ (5) Paragraph (d) of section 76(4) of the principal Act is repealed.")
§ The noble Lord said: The purpose of this amendment is to remove the existing right of rating authorities to receive details of, or intervene in, the procedure for challenging proposals for the alteration of the current valuation list except where the rating authority is itself the proposer or ratepayer. It has only relatively recently become the case that local authorities have done this—I say recently, I mean within the past ten or fifteen years. It can be extremely costly to businesses when they do it.
§ I therefore believe that rating authorities should no longer have a statutory right to receive details of, or intervene in, any challenge initiated by another party nor to make a challenge to a direction. This arrange-ment would achieve both simplicity and a fair balance between the rights of individual ratepayers and those of local ratepayers as a whole. The changes introduced by the Local Government Act 1947, whereby the reponsibility for rating assessments was transferred to valuation offices, have now been in effect for more than 30 years. During that time the valuation officers have shown clearly that they are able to fulfil their functions in a fair and impartial manner, and the intervention of a third party in the form of a rating authority is totally unnecessary. The revised procedures resulting from the proposed amendment would also have the effect—this comes back to what I said in the first place—of reducing administrative costs for all parties currently involved in the assessment process.
§ As to the changes that the Government are introducing in the Bill under paragraphs 9 to 16 (those I am seeking to replace in Schedule 1), I want to raise a technical point of detail relating to the new procedures for rating appeals. Under the planned procedure for valuation office proposals, where the rating authority makes an objection, the valuation officer is required to send a copy to the occupier. There is no such arrangement in the case of valuation office proposals and I think there should be. Perhaps this is a matter which my noble friend might agree to look at before the Report stage and possibly either accept my amendment, which would deal with the problem, or introduce a technical amendment to his own part of the Bill at the next stage. I beg to move.
§ The Earl of Avon
My noble friend has taken us into some detailed technicalities of rating practice. I hope that I need not deal with every consequence of the proposed amendment but, as my noble friend suggests, we shall study it and write to him on any further points we have.
Basically, the amendment would remove the right of rating authorities to become involved in proposals for changes to the valuation list which are initiated by 907 another party, except where their own property is involved. In order to effect this change my noble friend wishes to remove from the Bill paragraphs 9 to 16, which, as well as making a more limited change in the direction he seeks, provide some minor, but nevertheless worthwhile, changes to the procedures surrounding the process of altering the valuation list. These changes will, we expect, result in an annual saving of some 65 staff in the valuation office.
My noble friend mentioned appeals. The failure to send ratepayers separate notifications when an appeal is referred to a local authority valuation court will lead to uncertainty, but I do not believe that it will really be a problem. Interested parties will be told at the beginning of an appeal of the alternative course that the proceedings can take and the local valuation officer will be on hand to offer advice as needed.
I should be sorry to see lost the improvements that we have put down. They will eliminate a great deal of the paperwork involved in making changes to the valuation list in a way which I believe will be helpful to all concerned. At this stage in the evening I do not propose to go into more detail, but we shall consider my noble friend's remarks and perhaps write to him in more detail about our own story.
§ Lord Mottistone
I am most grateful to my noble friend. It is a complicated subject and unsuitable for this time of night. As usual, schedules always seem to come at the end. I am delighted that my noble friend is to write to me; I hope that he will, even if he does not really want to. With that, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
The Earl of Avon moved Amendment No. 98AA:
Page 21, tine 5, leave out from ("list") to end of line 11 and insert—
("(c) minutes of the proceedings of any local valuation court with respect to the valuation list currently in force in a rating area or, subject to subsection (3) of this section, the immediately preceding valuation list; and
(d) minutes of the proceedings of any rating authority during the preceding ten years or, where the valuation list currently in force in the rating area of an authority was transmitted to it under section 68(2) of this Act before the commencement of that period, during the period since the list was transmitted to the authority.").
§ The noble Earl said: If I may, I shall take with the leave of the Committee, Amendments Nos. 98AA and 98AB together.
Amendment No. 98AB: Page 21, leave out line 23 and insert—
(4) for the purposes of this section the expression "ratepayer" includes an occupier who pays a rent inclusive of rates, and also includes any person authorised by a ratepayer to act on his behalf under this section.").
§ These are technical amendments to correct two minor deficiencies in paragraph 17 of Schedule 1, which time-limits rights of access to certain old rating records. We have included these provisions in the Bill in order to relieve the valuation office, rating authorities, and local valuation courts, of the burden and expense of keeping available for inspection old records which could have no possible relevance to present day valuation and rating matters. It is not our intention either to restrict the rights of ratepayers or of 908 valuation officers in relation to the kind of records to which they might reasonably need to have access or to restrict in any way the persons entitled to such access. These two amendments will ensure that provisions in paragraph 17 fulfil these intentions. I recommend them to the Committee. I beg to move Amendment No. 98AA.
§ On Question, amendment agreed to.
§ The Earl of Avon moved Amendment No. 98AB:
§ [Printed above.]
§ On Question, amendment agreed to.
§ Lord Graham of Edmonton moved Amendment No. 98B:
§ Page 21, line 28, at end insert—
§ (". For paragraph 5(1) of Schedule 7 to the principal Act there shall be substituted—
§ "(l)(a) Subject to sub-paragraph (2) of this paragraph, the basic electricity rateable value shall be taken to be £175 million and the share thereof of the Generating Board shall be one half of that sum and the share thereof of each Area Board shall be a percentage of one half of that sum calculated as follows:—
- (i) such percentage of 50 per cent. thereof as the gross value of the fixed assets of that Board bears to the aggregate gross value of the fixed assets of all Area Boards;
- (ii) such percentage of 25 per cent. there of as the gross income from the sales of electricity (excluding inter-Board sales) of that Board bears to the aggregate gross income from sales of electricity of all Area Boards;
- (iii) such percentage of 25 per cent. thereof as the number of sales of electricity units (excluding inter-Board sales) by that Board bears to the aggregate number of sales of electricity units by all Area Boards.
§ (b) For the purposes of this sub-paragraph in relation in any year the gross value of the fixed assets of an Area Board shall be taken to be the gross value thereof as shown in the annual accounts of that Board at the 31st March falling next but one before the beginning of that year and the gross income and number of sales of electrical units of an Area Board shall be taken to be those respective figures as shown in the annual accounts for the purposes of 12 months ending 31st March falling next but one before the beginning of that year." ")
§ The noble Lord said: I apologise for the lateness of the hour. This amendment, which is a fairly full one, requires a background note. Before 1948 certain complexities had arisen in regard to the rating of electricity undertakings. The problem centred on the fact that cables, et cetera, in each rating area were treated as a separate hereditament, which entailed valuing separately parts of undertakings which were of little value when taken by themselves, although they might form a vital link in the undertaking as a whole.
§ The Local Government Act 1948 remedied the situation by derating electricity hereditaments and providing for the making of bulk payments, in lieu of rates, by the electricity industry for the benefit of local authorities. Under that Act, the then British Electricity Authority were required to make such payments, of the sums specified in the Act, year by year subject to certain adjustments; and that Act further required the area electricity boards to contribute towards the payments so made.
§ The apportionment of these payments among the authority and the area boards was made in accordance with the joint recommendations of Sir Harold Howitt and Sir George Erskine, who were appointed, after consultation with the then Minister of Fuel and Power and in agreement with the area boards, to advise the 909 authority on the matter. They recommended that the payment should be allocated between the authority and the area boards on the basis of a primary apportionment between the authority, on the one hand, and the area boards (taken together) on the other, related to the amounts of their respective fixed assets, and then the amount allocated to the area boards to be apportioned between them as follows: 40 per cent. on the basis of the relative amounts of fixed assets; 20 per cent. on the basis of the relative gross income from sales of electricity (excluding inter-board sales); 20 per cent. on the basis of sales of units (excluding inter-board sales); and 20 per cent. on the basis of the net surplus.
§ The Electricity Act 1957 established, and transferred the functions of the former British Electricity Authority to, the Electricity Council and the Central Electricity Generating Board; and the Local Government Act 1958 provided that, in place of the payment to local authorities in lieu of rates, any property of the Electricity Council would be rated by inclusion in the valuation lists but the CEGB and area electricity boards would be rated on a notional hereditament for which a total basic rateable value would be assessed in accordance with the provisions of that Act. Each of the said board's share of the basic rateable value was set out in a table in that Act as a percentage of the total sum, and these percentages arose from the apportionments which had been made under the Howitt/Erskine formula. That table was re-enacted in section 5(1) of Schedule 7 to the General Rate Act 1967.
§ In the early 1950s the London Electricity Board had the largest operational undertaking of any of the area electricity boards, which, under the Howitt/Erskine formula, resulted in that board having a correspondingly larger percentage share of the total sum payable in lieu of rates than any other area board. However, the operating position has changed considerably since then, and if the Howitt/Erskine formula was applied using the figures from the accounts of all the area boards for the last four years an entirely different set of percentages would arise. The percentage share for the London Electricity Board would drop from the present 7.05 per cent. to 5.32 per cent. which would result in a saving of some £6 million. From this it can be seen that by continuing to use the percentages calculated on the operating position in the 1950s the London Electricity Board and their consumers are now bearing an unfairly large share of the rate burden.
§ It will be noted that the Howitt/Erskine formula included as one of the factors in the equation the net surpluses of the respective boards. At the time, these were profits resulting from normal trading considerations. Now, however, the net surplus of each board results from the application of government directives and its relationship to those of other area boards is entirely arbitrary.
§ In present-day circumstances, therefore, it does not seem appropriate to include in the apportionment the net surplus of the boards. A more true reflection of the relative position of the boards would be given if the Howitt/Erskine formula were adjusted as follows: 50 per cent. on the basis of the relative amounts of fixed assets; 25 per cent. on the basis of the relative 910 gross income from sales of electricity; 25 per cent. on the basis of sales of units excluding inter-board sales.
§ The effect of the first amendment proposed to the Bill would be to substitute for sub-section 5(1) of Schedule 7 to the General Rate Act 1967 a new sub-section which incorporates the revised Howitt/Erskine formula as set out above. This is thought better than substituting the percentages which the formula gives rise to, since it will ensure that any future changes in the operational undertakings of respective boards would be reflected in the yearly apportionments.
§ The Committee may, however, feel that a change of this nature needs more time for discussion and consultation than the timetable for the present Bill would allow. Accordingly, an alternative approach is proposed by the second amendment. Sub-paragraph (2) of paragraph 5 of Schedule 7 to the General Rate Act 1967, and the re-enactment of powers in the Local Government Acts of 1948 and 1958, give the Minister power where by reason of any substantial change in circumstances it is expedient so to do, and after consultation with the electricity council and local authorities, where appropriate, to vary the sum which is to be taken to be the basic electricity rateable value, any order so made being subject to approval by a resolution of each House of Parliament.
§ The second amendment proposed would extend this power to enable the Minister—now the Secretary of State—in the same circumstances, and subject to the same safeguards, to vary by order the percentage share of the total sum of each of the electricity boards. The present power has been exercised on a number of occasions since 1948 raising the total sum in line with the general increase in rateable values. Thus the figure which appeared as £47,212,610 in the Act of 1967 now stands at £175 million. It would seem also to be an appropriate way of dealing with changes in the relative sizes of the operational undertakings of the various boards. Although such changes would not be likely to be reflected annually as would happen if the revised Howitt/Erskine formula were incorporated in Schedule 7, they would in due course (when the resulting imbalance became significant) give rise to appropriate adjustments through the exercise of the departmental power. I think the situation is reasonably clear.
§ Lord Graham of Edmonton
As I have said before, the night is young. This is a genuine case which should appeal to all, including the single Member on the other side behind the Front Bench who has constantly spoken of equity, fair play and reasonableness. Here we have a situation where I am told that the electricity consumers who are covered by the local electricity board are now paying £6 million more in 1984 than they would if there had been some adjustments to the situation.
I appreciate that, as on every other aspect of rates, where in fact we have a situation where someone is going to benefit, someone else is going to be adversely affected. We have a situation where, if the London Electicity Board consumers are advantaged by £6 million, of course some other consumers or some other area board are going to find that in effect they 911 will have to pay a little more. I acknowledge that; but I would think that many Members of this Committee who pay bills to the London Electricity Board would welcome the reply of the Minister and at least an indication that at the Ministry they have some thoughts on whether in 1984 a formula that was appropriate in 1950 ought not to be revised or adjusted. I believe this would be not only to the benefit of the London Electricity Board consumers but also would be well received by those who believe in equity and fair play. I beg to move, and I look forward to the debate.
§ Baroness Gardner of Parkes
I have a certain sympathy with this, as I likewise have been contacted by the London Electricity Board and they have put their case very thoroughly to me. But I think that this amendment is not so good as the second amendment which the noble Lord has down, because No. 98C seems to be a much more simple formula. I hope that the Minister will take this away and look at it, since it is a fairly complex matter. If there is an injustice it should be looked at.
§ The Earl of Avon
I think that the whole Committee—such as exists at the moment—will be very grateful to the noble Lord, Lord Graham of Edmonton, for his exposition of this amendment. When I reached my office in the Department of Energy this morning, I read in the newspapers that this amendment was down. Little did I realise that this evening I should actually be responding to it. Such is the way of life! But I hope the noble Lord will appreciate that I have a double edge to my response in that I do act for electricity as well.
The electricity industry, like most public utilities, is not valued for rating purposes in the normal manner, but by a formula set down in Schedule 7 to the General Rate Act 1967. This formula was updated by the Electricity Boards (Rateable Values) Order 1976. The formula prescribes a cumulo value for the whole operational undertaking of the electricity industry, which is then apportioned between the CEGB and the twelve area boards on a fixed percentage basis. This amount apportioned to each board is then varied each year to take account of changes in the output of that board compared with the output in the 1974 base year.
This Amendment No. 98A, as the noble Lord has explained, changes the basis of apportionment between boards. Amendment No. 98B would give my right honourable friend the Secretary of State power under paragraph 5(2) of Schedule 7 to the General Rate Act 1967 to vary, after consultation, the apportionment of the cumulo value between boards in future by order. I have no objection to this proposal in principle; but I must tell the noble Lord that, while I have no objection in principle to this amendment, it is an unnecessary duplication of existing powers. Section 19(4) of the Local Government Act 1974 already gives my right honourable friend the power to repeal or amend by order any provision contained in Schedule 7 to the General Rate Act 1967. Such an order would require the approval of both Houses and could only be made following consultation with interested parties. 912 Consultation with all those affected by the formula is of course a vital prerequisite to any change, and this is why I am afraid that the amendment is not immediately acceptable.
This scheme would help some area boards, particularly the London Electricity Board, at the expense of the rest. Setting aside for the moment the merits of change—and in particular this change—I do not see how we could make such an amendment to the apportionment of the cumulo without consulting all the affected parties. And of course this would include the local authority associations.
I readily concede that over the years since the apportionment was set in the 1950s, the relative positions of the boards have changed and the apportionment should be reviewed. I am concious that the London Electricity Board, in particular, consider the apportionment now to be anomalous and unfair. It is, however, just one of a number of anomalies that have developed over the years in the formulae used for rating assessments. The Government certainly intend to carry out a series of full reviews of those formulae in the context of the revaluation of non-domestic properties we will be carrying out. We shall certainly wish to use this opportunity to iron out anomalies as well as to reassess the rate liability of the various formula-rated industries. These reviews will be undertaken by working parties of officials from all interested parties, including the Electricity Council. We intend to begin preparatory work on these reviews later this year. I hope that with that explanation and also with that assurance—I realise that the noble Lord would like us to proceed even more quickly—he will be able to withdraw his present amendment.
§ Lord Graham of Edmonton
I intend to withdraw it, but may I first say that I am grateful for the support by the noble Baroness, Lady Gardner, of the principle, and for her sympathy with what is behind the amendments. I am also very grateful indeed for what I consider to be the constructive and sympathetic response of the Minister to the problems of the LEB. He quite rightly pointed out that when one is making a change of this kind it cannot possibly be arbitrary. It is no good this Committee taking a decision and finding that there are people who will be disadvan-taged, saying, "We do not get an adequate share". I acknowledge, as the Minister pointed out, the various consulting fora which exist, not least the Electricity Council. I think I understood the Minister to say that in a review which is taking place covering the year 1984, not simply on this but on other issues, he is likely to come forward and at least to indicate that the consultations have taken place.
People outside who have felt aggrieved about this, not least the LEB's consumers and those who look after their interests, have had to wait for an opportunity to raise the matter, and that opportunity presented itself with this Bill in this form. That is why I have taken advantage of this opportunity to raise the matter here tonight. I would certainly have preferred to raise it earlier in the day, because I genuinely believe that there could have been a much wider debate from the point of view of equity and other matters.
But in view of the response of the Minister I shall consult with those outside who have advised me on 913 these matters and I very much hope that it will not be necessary to come back again. In the light of those observations, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 98C and 99 not moved.]
The Earl of Avon moved Amendment No. 99A:
Page 22, line 46, at end insert—
§ ("Adjustment of grant for disparities in rate revenue
§ "(c) as if paragraph (e)—
- (i) were omitted except in relation to any exercise of the power conferred by subsection (1) above for a purpose mentioned in subsection (6)(b) or (c) above; and
- (ii) in relation to any such exercise of that power, referred to two classes, namely, councils of Inner London boroughs and councils of outer London boroughs."
§ (2) This paragraph has effect in relation to any financial year beginning on or after 1st April 1983.")
§ The noble Earl said: This is a technical amendment of the legislation which governs the block grant system. It is very simple, and unless the Committee wish it I do not intend to speak further. I beg to move.
§ On Question, amendment agreed to.
§ Schedule 1, as amended, agreed to.
§ Remaining schedule agreed to.914
§ In the Title:
Lord Bellwin moved Amendment No. 99B:
Line 5, after ("it;") insert ("to make provision for requiring additional information to be given to ratepayers;").
§ On Question, amendment agreed to.
§ [Amendments Nos. 100 and 101 not moved.]
§ Title, as amended, agreed to.
§ House resumed: Bill reported with the amendments.
§ House adjourned at eleven minutes before eleven o'clock.