HL Deb 29 January 1986 vol 470 cc684-92

3.42 p.m.

Lord Gray of Contin

My Lords, with the leave of the House I shall now repeat a Statement being made in another place by my right honourable and learned friend the Secretary of State for Scotland. The Statement is as follows:

"With permission, Mr. Speaker, I think it would be helpful to the House if I made a short Statement on specifically Scottish issues arising from yesterday's publication of the Green Paper Paying for Local Government.

"The general lines of the proposals were explained by my right honourable friend the Secretary of State for the Environment. The Government are ready to deal with the manifest defects of the present system of paying for local services and we plan to introduce legislation which will replace unfair domestic rates by a community charge; will bring reasonable protection to shops and businesses; will set up a fairer and simpler grant system and remove the need for the present system of penalties against local authorities. We have invited comments on these proposals by 31st July.

"In Scotland experience of the last few years has shown conclusively that existing domestic rates are wholly unacceptable to a very wide range of the population. We recognise this and are therefore at present planning for early legislation in the coming Parliamentary Session to abolish the domestic rating system in Scotland. The Green Paper envisages that all domestic rate bills in Scotland would be cut by 40 per cent. with effect from 1st April 1989 and would be finally abolished at the end of March 1992. It will follow that there will be no further revaluation of domestic property in Scotland.

"The proposed community charge will, we believe, be fairer than domestic rates. Those who have been used to contributing nothing from their earnings to the revenue raised by domestic rates may regret this new charge, but most will accept that it is not unreasonable that we should discontinue a system that imposes the full burden on a minority of the public including some of the poorest members of the community.

"Shopkeepers and businessmen who have had taxation without representation will now be protected from the effects of an unfair system and increases in their rates will only occur on the basis of a national index. Business in both rural and urban areas will find this far preferable to the Scottish system.

"Scottish local authorities will, we hope, welcome the end of the present system of penalties that has not helped the relationship between central and local government.

"For some time the Scottish public, and ratepayers in particular, have called for effective action. These proposals represent a fair and reasonable response and we look forward to hearing the views of ratepayers and others affected by them."

My Lords, that concludes the Statement.

Lord Ross of Marnock

My Lords, we are all grateful to the Minister of State for the short Statement he has made on the changes that are proposed to the rating system in Scotland and in the Government financing of services in Scotland. Having said that, there is very little I can say that is going to be flattering to the Government.

We have been here before. In fact, we had a White Paper—I happen to have a copy here—in August 1983, which was followed by a Bill the following year and by another Bill just last year, the basis of which was that the rating system is basically sound but needs improvement. However, all that was done was something in relation to reed beds and caravan parks. The Government then had another thought—a thought after a very wild Tory Party Conference. It is barely two years ago since that conference. Of course, the Prime Minister went to that and trouble was ahead for the Scottish Office; and certainly there was no promotion on that occasion for the Secretary of State for Scotland.

The position has not improved since then. So here is a system which is now claimed to be fairer than anything we have had for all these generations, but was discarded in the Government's own White Paper in 1983 which, of course, followed a Green Paper. How does something that was bureaucratic, unfair and difficult to control now become the centrepiece of fairness? The Minister read the sentence, will replace unfair domestic rates by a community charge". I hope he is not telling us that he is replacing something that is unfair with something that is fair.

We have had the advantage that the Statement was made elsewhere yesterday in a much fuller way. Indeed, the Scottish Minister held a press conference in Scotland yesterday while we were tied to the delights of salmon fishing. But we have the advantage of what happened in respect of that. It is interesting to see what the Glasgow Herald said. We do not read of an overwhelming welcome. It states: A recipe for administrative disaster and worse in many ways than the existing system". It also says: A flat rate tax is regressive". The demand for reform will not die down, but there is no point in going from a bad system to a worse one. The Scotman states: It is much less fair than the existing system—it will bear down most heavily on those least able to afford it. In fact, with this new domestic rate system the people who will be better off are the wealthiest in Scotland. There is not a Scot sitting here who is a resident in Scotland, and who pays rates for it, who will be worse off. Every one of us here will be better off. But what about the ordinary Scots? They will be worse off.

Of course we are all concerned about the rating system in Scotland and about the unfairness of it. But the fact is that the basic weakness of the present rating system is the narrow base. Over the years governments have put on to this narrow base more and more heavy responsibilities, and not all of them are local. I do not consider education to be a local responsibility, yet the heaviest burden on that narrow base is education. The police, fire services and help for the handicapped are not local services; they are services that are national. The more one puts on to this narrow base the more dangerous it becomes from the point of view of crumbling.

This is what has been happening in recent years. The Government have been reducing their share of payments in respect of these national services, leaving the heavier burden on this narrow rate base, and that has brought it to the brink of crumbling.

Why? We have this position in Scotland and we shall have until 31st July to look at it. It will not be changed, because we are told in the Statement which has just been read that we are moving speedily to legislation; that is in the early part of the next Session of Parliament, which will probably begin in November. I see Ministers sitting in front of me, including the Secretary of State for Scotland. There are three of them who are connected with the drawing up of legislation. How long does it take to draw up a major Bill? This is not a Green Paper; it is really a White Paper, because the Government have made up their mind. Because of pledges that were made to the Tory party conference it will be carried out and it will be accomplished before the next election. So, we have the hysteria of the Tory party conference followed by the haste to do something in Scotland.

I am the last person to say that we should not go in advance in Scotland, but that is done when everybody is in agreement about it; and no one has agreed at all about this proposal. When you look at this question of a poll tax (call it what you like) of course it will fall most heavily on the urban areas and on those with the biggest families, who are not always the poorest. Who is going to cope with all this?

Let us also remember that we are racing into it in Scotland. The system will be in operation in Scotland in three years' time. There is no timetable for it in England and Wales. The interim period will be 10 years, but we do not know even when it will start. If it starts in Scotland in three years' time then we shall have two systems working. The system in respect of the non-domestic ratepayers will remain the same in Scotland, with a suggestion that it will contain something as a safeguard against inflation. A national charge in respect of non-domestic ratepayers cannot be introduced until it is introduced nationally in England. I said that it was a recipe for disaster; it will be a recipe for chaos.

Then there is the drawing up of the rolls. It will not be the electoral roll but a special and indeed a costly one. There will be a new offence created because people must register and if somebody moves house he will have to re-register. What will happen as regards students? Who is to be held responsible for payment? Will it be the head of the household? These proposals bristle with difficulties and the suggestion that this system will be better and fairer does not bear examination. I shall be well off under this system, but what about the poorer people in Ayr? Let us remember that 52 per cent. of the people will be worse off.

The only solution is to have a proper look at it and obtain an appreciation by the Government of their responsibility. If the Government are to load on to local government national and costly responsibilities, they should meet the charge nationally. To the extent that they are increasing their grants, the proposal comes nearer to the viewpoint of a local income tax. It cannot be suggested that young people do not pay anything at all. Young people pay consumer taxes—they spend at the shops, which are glad of it, and they pay VAT on everything—and young people do not get tax concessions as do married people. Young people make their contribution.

This proposal means that the poorer households will pay more and the richer households will pay less. How can the Government justify that? There may have been an outburst from certain Tories and businessmen in Scotland at the Tory party conference, but the general public in Scotland will not accept this proposal. It is a recipe for disaster, but the trouble is that it is only a recipe. We do not start to eat the cake that the Government are making until 1989 and we do not consume the whole thing until about 1990.

I hope that the Government will think again but I fear that they will not. I never thought I would see in a so-called Green Paper: The Government will not tolerate any delay beyond the minimum necessary". That is not the language of a Green Paper. It is rather the language of the Prime Minister. I think it must be her reaction to her reception at the Tory party conference which took place in the middle of a rates row. Certainly I cannot claim that there is any welcome for this Statement on this side of the House.

Viscount Thurso

I too thank the noble Lord the Minister for repeating the Statement made by his right honourable and learned friend in another place, but I am afraid I have to cease my kind words at this point because I think that this is a two-faced Statement.

I notice that the unfair domestic rates are to be replaced by a community charge, but the community charge, in the view of both parties on these Benches, is equally unfair and to be regretted. There is no element in it which covers the particular cases that require to be dealt with and it will fall heavily on those who are most unable to bear the burden. It is said that it will bring reasonable protection to shops and businesses but it is also said—and the noble Lord the Minister will correct me if I am wrong—that the present high revaluation of shops and businesses will be indexed so that it continues at that level. What it then says is that the effect of taxation without representation will be removed from shopkeepers and businessmen, but the Minister does not indicate how they are to obtain any representation whatsoever. At the moment he has indicated how they will be taxed but not how they will obtain representation.

There is a curious anomaly which I should like to ask the Minister to explain. In the printed paper which was given to this Front Bench it is stated that the rates will be determined by reference to some rational index. The noble Lord the Minister said that the rates will be on the basis of a national index. I wonder which he means and I wonder which nation's index will be used. Will it be an index based on the whole of Great Britain or an index based on Scotland alone?

In this connection I remind the Minister that yesterday from these Benches the noble Baroness, Lady Stedman, asked how the needs element will be decided between authorities. I think that this question is even more pertinent in the case of Scotland, where the difference in needs between, say, oil-rich Aberdeen and the poor, remote areas of Achiltibuie and Altnabreac is indeed very much greater than some of the differences in other parts of the country.

It is said in the Statement that a fairer and simpler grant system will be set up to remove the necessity for the present system of penalties against local authorities. Penalties against local authorities are to be removed by the Government because they are an invention of the Government and a "fairer and simpler grant system" really has nothing to do with the matter. They then go on to say that comments on these proposals are invited by 31st July. By the time the comments are collected and collated the legislation will be in draft, and we in your Lordships' House will have had no real chance to debate or argue the case which has been put by those who wish to comment. Indeed, in no place will real discussion take place on these important matters before the legislation comes in front of us. I should like to know what opportunities will be given to discuss these matters on the basis of the information that is already in our hands if not on the basis of the comments which have been asked for by 31st July.

I agree that the present rating system is unfair. It was unfair to revalue in Scotland when that did not happen in England and Wales. It is even more unfair then to index that and change it without giving people time to comment and discuss the changes. Does the Minister agree that government control will be increased, and that local income tax would provide better accountability, reduce local government dependence on central government and reduce even the government-imposed income tax?

4 p.m.

Lord Gray of Contin

My Lords, I am grateful to the noble Lord, Lord Ross of Marnock, for his comments and to the noble Viscount for giving the view of the Alliance parties. I did not expect either of them to give the Statement a word of welcome; indeed, it is their duty as the Opposition to pick holes in it as much as they can. The noble Lord said that we had been here before; when I heard his speech I too realised that. It was the speech that we hear from time to time: a general resume of what the press says, a general condemnation of the Government and a further rehearsal of what we have done in the past. What he failed to say is that, while we may have been here before, we have never followed this route, which is precisely what we were condemned for not doing in the past.

Lord Ross of Marnock

No, my Lords.

Lord Gray of Contin

Oh, yes, my Lords. We gave a pledge that we should find something to replace the present rating system. We did not come up with anything and for that were taken to task vigorously during the last election campaign. We have looked again at the situation and have come up with a scheme that we believe is better and more fair than the present system, and which will benefit a great many people. It is strange if the noble Lord or the noble Viscount can defend a scheme under which a poor, widowed pensioner pays the same amount if she happens to live in a similar house to a married couple with three sons, all of whom are working. I am sure that they do not really believe that.

Lord Ross of Marnock

My Lords—

Lord Gray of Contin

My Lords, the noble Lord has made his speech, and he asked one or two questions which I shall try to answer. He is a pensioner and appears to be happy with the situation, but I assure him that plenty of single pensioners in not nearly such comfortable circumstances will be a lot happier.

Single parent families will also benefit. There is to be a shift in the burden on taxpayers from householders to non-householders who will be brought into local tax for the first time. It is only fair and just that the people who live in the community, use its services and can afford to pay for them should be asked to make a reasonable contribution. Most important of all, the fact that they are making a contribution in the community will introduce a degree of accountability. In other words, if they live within a high-spending local authority they will want to know why that is so when they are making a positive contribution.

I was surprised that the noble Viscount introduced the question of local income tax. If he is dissatisfied with this scheme, let me assure him that the complexities and difficulties of local income tax would cause him even more concern. We have 56 district authorities in Scotland. With a local income tax each would be responsible for its administration. Each would fix its own level of tax.

Lord Ross of Marnock

Not necessarily, my Lords.

Lord Gray of Contin

My Lords, it means that there could conceivably be a wide range of taxation within Scotland. I hardly imagine that that would be popular.

The noble Viscount also asked about the national index. The ultimate intention is that there will be a national index from which the non-domestic ratepayer will be taxed at an agreed percentage. The noble Lord, Lord Ross, talked of the difficulties that he envisaged. He spoke about the register, but I cannot see that that is a major difficulty. He referred to a poll tax, but this is nothing to do with a poll tax. It will have nothing to do with the register of electors. There will be a separate register altogether which may contain the names of foreign nationals living in this country. Everyone living in a dwelling house in this country will appear on the register. It will be the responsibility of the householder to fill in the return of those who live in the house, and if he or she does not it is a chargeable offence. So there does not seem to be a great difficulty about that.

A degree of simplicity will be introduced. Those who pay will understand why they are paying what they are paying. Changes in tax bills should directly reflect councillors' spending policies and will not be obscured for complex grant reasons.

The noble Viscount mentioned taxation without representation. If we leave aside the contribution from national taxes and focus on rate income alone, the domestic ratepayer with the vote pays about 31 per cent., while those with no direct voice at local elections pay more than twice as much at 69 per cent.

Viscount Thurso

My Lords, can the noble Lord explain how a shopkeeper will suddenly be enfranchised—

Lord Gray of Contin

My Lords, at the present moment 3.9 million Scots have the vote. I want to develop this because this was a point that was raised. About 1.9 million are householders and thus liable to pay rates. The other 2 million are not billed directly and do not personally have to make any payment to their local authority. A proportion of those are spouses of ratepayers, but many of them, and the bulk of the other members of ratepayers' households, may have little idea of the cost of local services.

Furthermore, there are income related rebates financed almost entirely out of national taxation. Of the 1.9 million householders, only 1.1 million pay full rates. About 0.4 million receive some form of financial assistance in paying, and the remaining 0.4 million pay no rates at all. In effect, the last group know that they can safely vote for the more expensive local services without having to pay a penny towards them.

The local shopkeeper, businessman and industrialist contribute a large amount under the rating system and yet have no voice whatever locally for their contribution. We feel that that is wrong, and that is why we want to see the situation improved. The reduction in the rates will be balanced by the amount which is raised from the community levy—the community tax.

The new grant system was also mentioned by the noble Viscount. The Government aim to give councils grants which will allow them to provide similar levels of services to local residents at a similar community charge. There are two new main elements of grant. The first is needs grant, which will compensate authorities for the difficulties created in the cost of providing a standard level of services in the different areas of Scotland. It will be paid to each authority to meet the difference between its own expenditure need per adult and that of the authority in Scotland with the lowest assessed need per adult.

The second is the standard grant representing a uniform level of contribution from the national taxpayer to the cost of local services. It will be paid at a flat rate per adult to all areas. I did say that there was a six-month period for consultation. It is the hope of the Government that there will be wide consultation on this paper and that suggestions and comments will be forthcoming from a wide cross-section of those living in Scotland. With those remarks, I do not think that I need say more at this stage.

Lord Campbell of Croy

My Lords, I too should like to thank my noble friend for repeating this Statement drawing attention to particular factors affecting Scotland. I do not need to ask my noble friend whether he is aware that any alternative to the present rating system is bound to run into objections and difficulties. He has already heard some of them this afternoon, although some may be based on misapprehensions of the new scheme announced yesterday. But is my noble friend aware that none the less, there will be a widespread welcome in Scotland for this confirmation that domestic rates are to be abolished there, and within the life of this Parliament?

I should like my noble friend to confirm my understanding of the two Statements, yesterday and today—that it is proposed that domestic rates will disappear in Scotland before that happens in England and Wales. Is my noble friend aware that the new scheme proposed will be examined closely, I am sure, in all parts of your Lordships' House and also in detail in Scotland? Is he also aware that when the legislation eventually comes forward, we shall all of us be looking for ways in which we can improve the Government's scheme and, if possible, make it fairer to all parts of the population in Scotland?

Lord Gray of Contin

My Lords, I am most grateful to my noble friend who, of course, had great experience of the whole question of rates when he was Secretary of State for Scotland. Yes, I can confirm to him that it is the Government's intention to legislate in the forthcoming Session of Parliament—the Session, as the noble Lord, Lord Ross of Marnock said, that will start presumably in November this year. We envisage that from the end of the passing of the legislation there would be a phasing-in period of three years. I can confirm that also to my noble friend. I am grateful to him for the welcome that he has given the Green Paper. I hope that he may consider giving us the benefit of his experience in our deliberations upon it.

Lord Carmichael of Kelvingrove

My Lords, while thanking the noble Lord for making the Statement, may I ask him whether he can clear up the question of the timetable? The noble Lord says that we shall have until the end of July for consultation. So comments which are bound to be fairly voluminous and many of them expert, will only have been received by that time. After that, the Government will need to consider them. Is the noble Lord suggesting that a Bill will be presented early in the next Session? If so the problem arises that the Bill cannot be very thorough. We have had a number of pieces of Scottish legislation in respect of which new clauses have been written while the Bill is going through the House as the Government re-think their policy. On the other hand, the Bill cannot, surely, be left until too late in the Session because it will be an extremely controversial measure. Is the noble Lord aware that it will take a long time in the other place and, I am sure, a long time here? The Government would seem to be very optimistic if they believe that they can get a proper Bill out of what I consider a botched Green Paper within the proposed timetable.

Lord Gray of Contin

My Lords, as I indicated earlier, the Government have not just suddenly started thinking about this. The Government have been thinking about it for many years. They have not proceeded until now because there have always been difficulties and objections to the solutions which were being canvassed. It is only after great thought that the Government have been able to come forward with this proposal. So a great deal of the thinking has already been done. But the noble Lord is perfectly correct. There will be a great deal of effort needed from the end of the period of consultation and during the period when representations are being considered by the Government before a Bill can be finalised. I have little doubt, however, that the Scottish Office, with its usual keenness to get on with the job and having some excellent draftsmen available to it, will produce something in plenty of time for us to see it go through during the next Session of Parliament.