§ 3.13 p.m.
§ Lord Glenarthur
My Lords, I beg to move that the Bill be now read a second time.
In January last year the Government published a Green Paper entitled Paying for Local Government.That document set out our ideas to correct, with fresh and vigorous determination, the anomalies in, and prevent in future frustration which had built up about, domestic rates in Scotland. Frustrations had come to a head with the revaluation of 1985. No earlier suggestions for changes—including, I admit, our own—had led to the radical proposal which would be needed to achieve that.
The Bill before your Lordships is the progeny of that Green Paper. It will sweep away the present archaic system of domestic rates which has understandably generated so much criticism, and will replace it by the community charge system. That system will represent a personal charge payable at a flat rate by all adults, with rebates for those on low incomes.
1320 What then is wrong with domestic rates as they stand as an appropriate method of local taxation? First, they are unfair. Secondly, they operate illogically in many ways. Thirdly, the complex process of keeping the domestic rate base up to date causes the sort of turbulence and upheaval we saw at the last revaluation. Above all, as a property tax no one can seriously consider that domestic rates are any longer a sensible way to pay for the wide range of local government services available.
Why should about 40 per cent. of the electorate who can vote for expenditure on local services make no contribution through local taxation towards the cost of those services? What is fair about a single householder—perhaps a widowed mother with children to bring up or a pensioner—having to contribute as much as a family next door with several working adults? We estimate that there are about 750,000 people who are neither ratepayers nor the spouses of ratepayers and who therefore make no direct contribution to the revenues of their local authorities. Why should so many people make no contribution at all? Surely those are all good examples of how unfair the present system is.
What of the illogicality of domestic rates? It shows up in a number of ways. The last revaluation made it very clear that the amount which people are required to pay through rates can often increase by amounts which bear little or no relation to local government spending or to the benefits which those individuals get from it. For example, domestic ratepayers in 1985–86 faced bills rising on average by 11 per cent. in Grampian, 15 per cent. in Borders, Dumfries and Galloway and 20 per cent. or more in Tayside, Fife and Strathclyde. Those changes were far removed from the movements in local authority spending in the same areas, which ranged from an increase of around 3 per cent. in Tayside to some 6 per cent. in Dumfries and Galloway and in Fife. That revaluation faced many Scottish householders with quite arbitrary and unpredictable impositions. Over 100,000 householders in Scotland faced increases of more than one third in their rate bills between 1984–85 and 1985–86. Does that point to the logic of the system? I think not, my Lords.
The determination of the amount which an individ-ual pays can also be affected by factors which appear illogical. Perhaps an illustration will help. The assessor assumes that houses are capable of being heated to a reasonable standard of comfort. But if this is done by electrical apparatus which can be dismantled and removed—such as night storage heaters—the value will be lower. Therefore, you may pay less for having your dustbin emptied if your heating is of one kind rather than another! These differences can perhaps be justified within the curious internal logic of the existing rating system and I accept that those responsible for administering that system operate it as carefully and as conscientiously as they can. But my point is simply this: it is no longer possible to argue that this complicated and apparently capricious system has any relevance to deciding how much individuals should contribute to the cost of local government.
The community charge which we propose should replace domestic rates meets this criticism head on. It will be fair. Each adult will make a flat rate 1321 contribution towards the cost of the local services he or she enjoys. Those whose incomes are low will get rebates. The system will be simple. No longer will complexities of revaluation or grant distribution obscure the clear message of how much individuals are being asked to pay towards the cost of the policies of their local authorities. Because of that, it will provide accountability. Individual voters will appreciate the cost to them of the policies they vote for, and if a local authority changes its level of spending, there will be a pound-for-pound impact on the community charge.
The community charge will replace domestic rates as the source of around 14 per cent. of the finance for local authority current expenditure. I must stress, however, that a substantial contribution will continue to come from central government—it is around 57 per cent. at the moment—and from non-domestic ratepayers who contribute 29 per cent. at present.
The Bill which is before us has been very thoroughly discussed in another place. When the guillotine was approved after 100 hours of debate, a generous allocation of time for the remainder allowed full discussion of all the remaining parts of the Bill. The Bill now incorporates many improvements which were made as a result of that extensive discussion, and they have been generally welcomed. The major change, welcomed by all parties within Parliament and by the relevant professional bodies, has been the removal from the Bill of provisions for a transitional period of three years which, the Government acknowledge, would have led to administrative difficulty and unnecessary expense.
I turn now to the main provisions of the Bill which is in six parts. Much of it, because it breaks new ground, is necessarily complex. However, I shall endeavour to keep my explanations simple. Part I of the Bill deals with rating and valuation. In it, Clause 1 provides that domestic rates will be abolished with effect from 1st April 1989, while Clause 2 provides the basic framework for that abolition. Its definition of domestic subjects to be removed from the valuation roll covers properties which are shown on the roll at present as dwelling houses, together with other categories of residential property to be prescribed by the Secretary of State. The decisions taken by assessors on whether or not to treat particular properties as domestic subjects will be subject to a right of appeal to local valuation appeal committees, just as assessors' decisions on valuations are at present.
So far my remarks have concentrated on the change from domestic rates to the community charge. Clause 3 of the Bill, however, provides me with an opportunity to say a word about non-domestic rates payable by businesses in Scotland. It provides for the control of increases in non-domestic rates. It sets out the method of calculating each year an index-linked ceiling, to be prescribed by the Secretary of State, within which local authorities must set their non-domestic rate poundage. The base rate for this process will be the poundage levied in 1988–89, adjusted to remove the element attributable to the public water rate, which will be charged for through a separate rate after 1989. There is provision for the Secretary of State to prescribe a base rate himself. He will do this in circumstances where the 1988–89 figure is 1322 distorted—for example, through the abnormal use of balances.
The provisions of this clause will provide business ratepayers in Scotland with much-needed protection. For too long they have been the milch cow of high spending local authorities, subject to large and unpredictable rate increases playing havoc with their business plans. In the longer term it is the Government's intention to move towards a national non-domestic rate but this cannot happen until the valuation systems north and south of the Border have been harmonised, a process which has already begun but which will take some time to complete.
The remainder of Part I is fairly technical but I should perhaps refer to Clause 5, which makes provision regarding references to rateable and other values in deeds, documents and statutes. It ensures that no difficulties of construction will arise from the fact that entries for domestic subjects will be deleted from valuation rolls from 1st April 1989.
The new system of community charges is provided for in Part II, which defines those liable to pay, establishes the registration system and provides for collection arrangements. The basis of the system, the personal community charge, is introduced by Clause 8. It is to be payable to each local authority by all those aged 18 and over who have their sole or main residence in the local authority area. Special provisions are made for students. They will be liable to pay the charge throughout the year in the local authority area where they are resident during term time. Married and cohabiting couples will be jointly and severally liable for the charge. This will not be the subject of inquiries made at the registration stage but will be helpful to local authorities in recovering sums unpaid where one partner has no income or assets. The amount of the community charge is determined under Clause 9, which provides, in simple terms, that the income from community charges would be sufficient to balance the books in essentially the same way that income from rates balances the books at present.
The Green Paper recognised that the abolition of domestic rates could provide a windfall for certain people such as the owners of second homes, and that is why we have proposed the standard community charge. Under Clause 10 this will be payable on domestic property where there is no registered resident—mainly second homes but also certain other unoccupied property. Such property of course leads to some demands on local services, both when it is occupied and when it is not, and it is right that a contribution should be made. Local authorities will have discretion to set the amount of the standard charge in the range from one to two units of the personal community charge.
The mechanism of the collective community charge is needed to cope with those who are so transient that individual registration is not a practical proposition. Under Clause 11, it will be payable by the owners of premises which are used as the sole or main residence of such people. The amount of the collective community charge will be a multiple of the personal community charge set by the registration officer to reflect the extent to which the premises are used for residential purposes. Landlords will be able to recover 1323 collective community charge contributions from their tenants, calculated on a daily basis at the same level as the personal community charge, and those contributions can be brought within the scope of the rebate scheme for which provision is made in Clause 24.
We consider that the responsibility for establishing the tax base for the new system should be given to a responsible local authority official. That is why the post of community charge registration officer will be created by Clause 12, which provides that these duties shall be conferred on the assessor. This reflects the interface between the rating system and the new system as well as the assessor's experience of registration matters under the electoral registration system. Clauses 13 to 15 provide for the establishment and maintenance of the register—a "rolling register"—kept continuously up-to-date. Those who move into or out of a local authority area during the year will pay only the amount of charge due in respect of their period of residence.
Appeals on registration matters are provided for by Clause 16. In the first instance these are to the registration officer, and then to the sheriff.
Clauses 17 and 18 deal with the collection of information by the registration officer for the purpose of establishing and maintaining the register. The main source of information will be a canvass, similar in many ways to the electoral canvass but not necessarily carried out at the same time for all areas each year. Information will be sought from a "responsible person" at each address. That person will normally be the owner-occupier or tenant-occupier. Individuals will be under a duty to notify the registration officer when they become liable for the charge or when their circumstances change. In contrast with the electoral registration system, the Bill does not provide for criminal sanctions on those who fail to return canvass forms or who provide false information. Instead the Bill provides for a system of civil penalties. We consider that only a limited part of the register, consisting of addresses and the names of those registered, should be available for public inspection, as set out in Clause 20.
Schedule 2, introduced by Clause 21, provides for the levying and collection of community charges. The main responsibility will rest with levying authorities, which will be regional and islands councils. In order to spread the workload, however, the Bill provides for a division of responsibility for collection between levying authorities and housing bodies, on essentially the same basis as the division of responsibility for collecting domestic rates at present. Thus housing bodies, which comprise district councils, new town development corporations and the Scottish Special Housing Association, will be responsible for collecting community charges from those living in houses let by those bodies. Schedule 2 also makes provision for the recovery of community charge debts. Some of your Lordships will be familiar with the issues at stake here, having recently completed consideration of the Debtors (Scotland) Bill.
The Government are confident that the increased accountability provided by the community charge 1324 proposals themselves will provide an effective constraint on local authority spending. But a last resort power is necessary, and Clause 22 and Schedule 3 of the Bill provide for selective action to limit community charges if a local authority's expenditure is "excessive and unreasonable". This parallels the present powers in relation to selective action on rates.
Clause 23 and Schedule 4 provide for the introduction of revenue support grant to replace rate support grant. Through this, central government will continue to pay their share of the cost of local services. The process of fixing and distributing the revenue support grant will be similar to that used at present for rate support grant but with some useful simplification. There will continue to be full consultation with the local authorities through their representative association.
Clause 24 provides for the introduction of a community charge rebate scheme. This will be based on the reformed scheme of housing benefit for rates being introduced on 1st April 1988. The mechanism of Clause 24 allows the Secretary of State to modify the Social Security Act 1986 so that the housing benefit scheme may apply to the community charge.
Clause 25 and Schedule 5 introduce a new system of charging for water and sewerage. The public water rate and a domestic water rate will be abolished. Domestic consumers connected to a public supply will pay for their water by a flat rate per capitacharge. On the non-domestic side there will be separate non-domestic water and non-domestic sewerage rates.
The remaining clauses of the Bill contain financial and technical provisions and deal with the application of the new system to Crown property. I have dealt with the provisions of the Bill at some length because of their scope and the important new concepts they introduce. We will of course have the opportunity to consider them in detail during later stages, and I shall certainly deal with particular points when I come to wind up later.
Much of the discussion of this Bill in another place, in public debate and in the media has centred on its consequences for individuals. These were very thoroughly analysed in the Green Paper. The facts speak for themselves. They are that 51 per cent. of households will be better off with the community charge and three-quarters will either be better off or lose less than £1 per week. More than 85 per cent. of all single pensioner households will gain and 30 per cent. of these will gain more than £1 per week. Other single adult households will also do well, with 80 per cent. gaining and of these more than half gaining more than £1 per week. Within the last group more than four-fifths of all one-parent families would gain, with about half of these gaining more than £1 per week.
The benefits which the new system will bring to these deserving sections of society in particular, as well as the greater degree of fairness and accountability which it will bring to local domestic taxation in general, make this Bill one of the most important and worthwhile pieces of Scottish legislation which has been before your Lordships in recent years. It is an opportunity to be grasped with both hands—an opportunity to restore confidence in local taxation to 1325 meet the needs of the community served by local government. I commend it to your Lordships.
§ Moved, That the Bill be now read a second time.—(Lord Glenarthur.)
§ 3.30 p.m.
§ Lord Ross of Marnock
My Lords, we are very grateful to the noble Lord for taking us through this "simple" Bill. I do not know how many of your Lordships have understood it. We are going to have some rather interesting times when it comes to Committee, when we shall get the real simplicity out of the Bill.
I have seen the list of speakers. I welcome the fact that there will be speakers from England and from Wales, because the legislation could have long-lasting effects upon local government not only in Scotland but in England and Wales as well.
I thought that the noble Lord skated very lightly over the exact origins of this Bill. One might imagine that the Government had been thinking of this for many years, which is not quite true. I can understand why the noble Lord is speaking. I used to wonder why my old friend the noble Lord, Lord Gray of Contin, was no longer on the Front Bench. But he has spoken in one of the many debates we had in this House on the subject of Scottish rates. I can remember him telling us—the noble Baroness, Lady Carnegy, will remember it to—that we did not need an inquiry into Scottish rates; we had fixed the rating system and agreed that it was all right.
We had two White Papers in 1983, one for Scotland. I have it here by chance. In paragraph 2 it reads:There is little point in replacing rates with an untried and unfamiliar system having little support from the outset. The Government have therefore decided to make reforms to the rating system which is basically sound but needs improvement".Now it is being abolished, after development over a century and a half.
The last big change was in 1956. I happen to have a record of that here, too, just by chance. I clung on to it as I was on the Committee of that Bill in another place. It created the revaluation system. It took agriculture out of rates. It took away owners' rates—at one time owners paid rates as well as occupiers—and left the actual payment of rates to the occupiers.
It is relevant that that was in 1956, but to give time for the new assessments and all the changes that were being made five years were allocated for people to prepare for it. We are now in the month of March 1987. By the time this Bill becomes an Act of Parliament it will probably be the month of May, and it has to come into force about a year and a half after that. Many difficult matters have still to be settled. There are 80 references to prescription; regulations have to be produced; there is preparing of the register, and right of appeal on that register. This has to be done long before 1st April 1989. I defy the Government to say that the process of the Bill in its next stages after it becomes an Act is going to be as hasty and ill-prepared as the Bill itself.
Where did the Bill come from? There was a White Paper in 1981 which dismissed the poll tax. It called it a poll tax. There was no euphemism about a 1326 community charge. By the way, there is not one community charge; there are six community charges. There is personal; there is standard, which does not mean standard at all, it is just a name; there is collective; there is water personal; there is water collective; and other water charges. We were given an indication in 1983 that it remained all right, and we had arguments here when I tried to persuade this House, failing by five votes, that we needed an inquiry. Many people supported me on that occasion, and I can see some of them sitting here. I leave out the noble Baroness, Lady Carnegy. No doubt she has changed her mind now and is a devotee of the poll tax, but I hope not.
It was not until 1985 that revaluation took place. Revaluation was scheduled for 1983, but because there was an election coming it was postponed until 1985, at which the time the Government decided that there would not be revaluation of all subjects; they decided there would be revaluation of non-domestic subjects because they were going to get rid of domestic rates. That was in 1983. But the Government changed their mind again, so do not blame revaluation. They decided to have no revaluation in England but the then Secretary of State, Mr. Younger, decided on revaluation of domestic rates and the other subjects in Scotland.
To the Government's surprise there were unexpected results. There was a shift to the benefit of industrial rating and to the disadvantage of domestic rating. Commercial rating was increased slightly, by 1.3 per cent., though many people thought that it was very much higher. There was an outcry in Scotland. I remember the picture in the Glasgow Heraldof Sir James Gould, the chairman of the Conservative Party, holding up his rates bill showing the increase and saying that it was appalling. One Minister said that he was dumbfounded.
A conference was shortly due in Perth. The noble Viscount, Lord Whitelaw, will remember it. He was there.
§ The Lord President of the Council (Viscount Whitelaw)
I am not sure I was there.
§ Lord Ross of Marnock
My information is right. The Scottish Office was still saying that rating must continue—I have the quotations here—just two months before that conference. I have a feeling that the noble Viscount had something to say to she who must be obeyed because she was coming up to address the conference. She discovered herself in a riot. Everyone was up in arms about what was happening. The Government threw money at the subject. They increased the domestic rating by, first, five pence and then by another three pence, but still the riot went on.
Mr. Younger then decided to approach the Treasury. He obtained an extra £50 million and produced a formula that would help people. The £50 million was not spent with the formula that was produced, and so the troubles went on.
After that, to distribute the money, we had a Bill in this House and we therefore had another chance to discuss Scottish rates. However, Mr. Younger had learned one thing—to listen. He was frankly told that changes had to be made. What did he say? I will not 1327 trust to my memory, so I shall read this out. The decision was, in looking at the rating system, that the Government were going to make changes. He said:This time we have to deliver. Not acting at all means there will be severe political consequences".That is the reason for this Bill. Therefore, we have this hasty measure and have started discussing it, but a report has never been produced about the studies the Government have made. They had one or two people giving them help in their studies, but no White Paper was produced.
We had a Green Paper, Paying for Local Government. It is priced £11.20. It was the talk of the Gorbals. Everyone was racing out to buy it. It is not a Green Paper but a glossy magazine, lacking only advertisements. The Government turned tail on everything they had been saying since 1974. Having discarded the poll tax, they discovered that they could call it a community charge and all would be well. However, everyone knows that a poll tax is the worst form of taxation. It is unfair. I challenge any noble Lord who has property in Scotland to tell me that he will be worse off. Is any noble Lord going to be worse off. What about the noble Lord himself?
Anyone who speaks in this place must declare an interest. I immediately declare an interest. I shall be £700 better off in a year. I think it is damnable that the poorest of the poor will be the worst affected. It is all very well the noble Lord talking about widows and pensioners. Can he tell me how many of these widows and pensioners in Scotland at present pay nothing at all? They pay nothing because they are too poor, but what is going to happen now?
It is said that there will be be rebates. There may be rebates is what the Bill says. We already know that these rebates will start by everyone paying at least 20 per cent. Therefore, the poorest who are paying nothing at the moment and who receive 100 per cent. rebates will receive only 80 per cent. rebates. Fifty-two per cent. of households will be worse off, and that is based on calculations of over a year ago. What the calculations are today, what they will be next year or the year after, with the way that local authorities are to be hamstrung, can only be surmised. The only rise that is uncontrolled by the Government will be this community service charge. Within a few years it will be higher than existing rates. I shall explain later how that will come about.
That is what is being produced and we are told that it is fair; but what did the Government say about rating in that respect? The English White Paper in 1983 said that rating was fair, that it was perceptible and that it was accountable. It said it was progressive, taking into account the rebates then available. However, the Government have taken all the arguments they used in 1983 in favour of the rating system and put them forward as available and right for this community charge. The Government have stood themselves on their head.
I have read all the debates which we have had in this House and which have taken place in another place. In 1985 the Government were saying that there must be a system which, first of all, is fair and related to ability to pay. There is nothing related to ability to pay in this 1328 Bill, when a millionaire, the noble Duke, the Duke of Atholl, will be paying less than his gardener, especially if his gardener is married and has to pay for two. How can the noble Lord, Lord Home, ethically justify such a situation?
Every noble Lord on the Government Benches, and indeed on this side, knows that the Bill is unfair. The only difference is that many of us accept that it is unfair. It is an appeal to greed, because the people who are satisfied with this Bill are the people who kicked up the row at the Tory Party conference in Perth. This is the biggest bribe that Tory voters have ever had; but the Government underestimate the sense of worth of the Scottish people. They do not regard it in this way. When one considers the Bill, are its proposals better or more efficient than the present system? It is reckoned by the experts in the field—the assessors, chartered surveyors and so on—that we shall be lucky if we are able to obtain an 80 per cent. collection. That is known from what happens at the present time.
As for the accuracy of the record, there can be no difficulty about valuation rolls, because houses do not move. However, people are mobile and where there is an invitation to people to evade tax, it will be taken up. Originally the Secretary of State said that about 1 million people would pay tax for the first time. That sounds nice, does it not? However, the figure includes wives. Ask any man in a Scottish home, "Who pays the taxes?", and he will say, "Oh, it's the wife who pays them". If spouses are removed, one is left with a figure of 750,000, but even that is not accurate. How many of those 750, 000 people are unemployed youngsters? They too are members of a household.
Sadly, I had to go to a funeral last Friday of a very dear friend. There I met another friend and I asked him, "How are you doing?". He said, "I am unemployed". "What about the boys?", I asked, because he has four boys. He told me that three of them were unemployed and one had had to get on his bike and is now in Manchester somewhere. That boy thinks that his home is in Scotland, but he had better remove his name quickly from the register or he too will be liable to pay £250 a year. Moreover, the man's wife is working. I presume that she will become the person responsible and be liable to pay tax on behalf of her husband. So there are five people, four of whom are unemployed, but each of whom is paying £250 tax. We are told that that is fair. It is soaking the workers and soaking the poor. The people who will be better off include many of those who are sitting in this Chamber, and I am one of them.
If one turns to the administrative difficulties about the register, one notices first of all that there is not one community charge. Everything was going to be so simple, it was said. This was to be a personal community charge, but now it has become a standard charge. That affects many Members of this House who have more than one home—although, mind you, that home has to be habitable and furnished. It is quite scandalous. We have been told that this is a personal charge, but now there is a standard charge which will not be paid by the people who are occupying the house unless they do so under a long lease. The charge is paid by someone who has a second home even though it is empty. This is a charge on property.
1329 The same is true of the collective charge. What about all the people who are living rough, for example, in London, and who sleep in hostels, Salvation Army homes and so on? How can anybody here say that they must be registered and indirectly made to pay this charge? They are all liable to pay the £250, or whatever it may be, and I fancy that by now it is somewhat greater than that. Such people may stay in a place for three days. The person who owns or runs that accommodation has to register those three days. He has to apportion the cost in relation to what is laid down by the registration officer, who may say, "This place has 75 per cent. occupancy which means such-and-such a multiplier of the number of community charges", and then he has to charge the person staying there and give him a receipt. If that person has already left, he has to be chased up. Can there be any possibility of 100 per cent. accuracy in such circumstances? Yet local authorities have to make such estimates in relation to their expenditure. It is quite scandalous.
There is also the new system of grants, about which I am very glad that the Minister of State did not say too much. Because of what local authorities have undergone in being penalised by the cutting of local government grants, people are sceptical about the Government's intentions on grants. All that will continue. The Government will control the grants and the amount of rates paid by non-domestic ratepayers. The Minister of State told us that what would be left would amount to 13 per cent.—and the Government talk about accountability! The accountability that most ratepayers seek from their local authorities is in respect of service. They have certainly been paying more for less service year after year. That does not happen just in London; it happens all over the country.
Why has this crumbling of the rating system happened? It has happened because we did what Sorn warned us not to do. We overloaded the system on to a very narrow base. Let us consider what has happened since the war. The education system has changed completely. The school-leaving age has been raised twice and now stands at 16, while more and more youngsters are staying on at school and taking advantage of the changes that have taken place in secondary education. That has meant another burden placed on local government.
We should also consider the whole system of environmental health, which has also placed a heavy burden on local authorities, as has an increased police force. Even as those burdens increased, we took people out of the rating system. The 1983 White Paper, of which the Government were so proud, actually took people out of the rating system. The great reform was in respect of caravans and reed beds—that was the great reform which came as a result of years of toil. Then the noble Viscount, Lord Whitelaw, appeared somewhere round about Bearsden and was told a few things about what was happening and about the feeling of the Conservative Party at the time and so he then went to Perth and told someone else to take his finger out. It is quite ridiculous that all that should have happened and then that this White Paper was produced.
I do not know whether your Lordships will take my word for these things, but mentioning the Leader of the 1330 House reminds me that I received the other day a paper from the Tory Reform Group which spoke about the reasons for this state of affairs. It seems that the Government were so incompetent that they blundered into this situation, taking one hazardous step after another, getting into a mess at the party conference. They are prepared to admit the truth. So far as I am concerned this is a disaster that has fallen now upon Scotland and will later be wished upon England. However, it cannot happen in England just now because England has not had a revaluation since 1973. We have been told that work on harmonisation is progressing. That was the burden of the Tory Party Manifesto during the last election in Scotland. It was said that they would harmonise the valuation systems in Scotland and England. They have not done so yet, but they are starting now.
What is the result? The change is scheduled for 1990. Legislation will be required after that date; and then it will be 1992, and, given another two or three years to introduce it, that will take us to 1995.
Meanwhile, the Minister of State thinks that the commercial people in Scotland will be delighted if they have retained their position with a maximum of non-domestic rates, as they will be next year, plus a limit on the retail price index. If there was anyone more vociferous in Scotland about rates than the domestic ratepayers at the Tory Party Conference it was the commercial ratepayers. I am not talking now about industrial ratepayers because they used to be subject to 50 per cent. or 75 per cent. derating. Then it was changed to 50 per cent., and last year when there was the hullabaloo about rates they were reduced because the ratepayers had been given some help under revaluation. The help given by the Treasury was reduced to 40 per cent. on derating.
However, what is happening to the commercial sector? It is well known that you will pay more in rates for a Marks and Spencer shop in Glasgow than you will pay in Oxford Street in London. It is well known that Rangers Football Club will pay more in rates than will Arsenal—many times more. They have done nothing about it so far and that is why we allow ourselves to buy one or two English players.
What will happen? This means virtually that the domestic ratepayers must bear the burden and the community charge of anything above the retail price index. We have just had a settlement for teachers in Scotland of 16 per cent; that is, 8 per cent. plus 8 per cent. What will the retail price index be? It will only be as high as that. Do you see the unfairness? If we have a settlement like that, apart from what the Government pay, the whole settlement must go on to the community charge.
Meantime, if there is an anomaly in relation to valuation and the higher rates paid in Scotland by commercial firms, that will carry on at least until 1995. They have not solved that one yet. The Inland Revenue do the valuation in England and Wales but they have not done a revaluation of domestic rates since 1973. Where are the teams who did it? Some of them are dead and gone, and no doubt as a result of what will happen today the Inland Revenue will have their hands full in relation to this matter, so it will be put off again. I doubt very much whether you will get revaluation in England in 1990.
1331 I should like to try to cheer up some of my English colleagues, but according to this it has got to come. Meantime, the anomaly in relation to Scottish commercial rates carries on. I think the Government ought a long time ago to have taken the opportunity to have a proper inquiry. We are receiving information every day about the difficulties of people in the community—from the Scottish Community Council, the Social Security Consortium, people from Age Concern Scotland, the NUS Scotland, Shelter, the Scottish Action on Dementia, the Scottish Society for the Mentally Handicapped. The mentally and physically handicapped have to pay and we have all these complaints.
There was an amendment in the other place and the Government said they could not see their way to assisting, that if they opened the way for exemptions the floodgates would be opened. This is the unfairness of the Bill. I do not see how anyone can justify it or see their way to applying it elsewhere. It is scandalous, and it stems from the ineptness and misjudgments of the Scottish Office and above all from what the Scottish Conservatives have done to Scottish rates.
I was Secretary of State for eight years so I know quite a few things about this. When I was Secretary of State, the rate support grant really met its share of local government taxation. As a matter of fact, in the year when we coped with the trauma of reorganising local authorities it was over 70 per cent, but in the last year of the Labour Government it was 68.5 per cent. What is it today? It is 56.6 per cent. If it had been retained at the level where the Labour Government left it and if it had been paid back to local authorities they would have been better off by £1,770 million. That was one of the main causes of the crumbling state: we not only overloaded it but we gave less and less to the local authorities.
That of course had to be followed up with all the clawbacks, penalties, general and individual, which have made a mockery of freedom in local government. The Layfield Committee said that what a government must do is to decide the difference in the relationship between local government and central government. That has not been addressed by this Government at all, but as sure as anything this is the real cause of trouble in local government—the Government cutting their share year by hear and then in order to clamp down and stop rate rises, cutting expenditure as well. The Government make all the decisions. They reckon up and decide what will be the relevant total expenditure. Then the Government decide what the rate share of that expenditure will be and leave the local authorities to do their best. That has been the reason for the confrontation with local authorities. It has been the fault of the Government. The reason for the crumbling has been the overloading and the underfinancing.
I was reading a letter from one of the people who sent us information, Mr. Miller, a dedicated chartered surveyor who worked privately and for local authorities. The conclusion he came to was that it would require a Royal Commission of people with wide experience outside to settle the problems and to offer us recommendations about the problems in the relationship with local government. It should then 1332 produce the kind of finance that will give us real local government.
In view of what is happening at the moment, local government is withering and I cannot see it attracting the right calibre of people who will take a pride in local government. Nothing matters more to the quality of life than local government, and with this community service charge, this personal community charge and the collective and standard community charges, we are making it more and more impossible for local government to carry on with the kind of pride we want to see in it.
We shall examine carefully all these matters. There may be some good in what is proposed but I have not yet seen it. I hope that when we reach the Committee stage we shall see the same interest from Members from the other parts of the United Kingdom as from Members from Scotland, because Scotland's wellbeing now will be the wellbeing of England and Wales in the next Parliament.
§ 4.9 p.m.
§ Lord Wilson of Langside
My Lords. among the several important points so forcefully put forward by the noble Lord, Lord Ross of Marnock, with none of which I seriously disagree, perhaps the most important was his call to alert the people of England and Wales to the circumstance that, if Parliament allows this Bill to be foisted on Scotland, the people of England and Wales will be the next to suffer under it.
The Minister's speech fulfilled my worst forebodings. It confirmed the impression that I have had since this exercise started: that the Government, like many of their predecessors, have not yet come to grips with the problem of local government finance. It occurred to me that they are no more at grips with this great problem than they were at the time of the antics at the Scottish Conservative Party conference, so graphically, picturesquely and unforgettably described by the noble Lord, Lord Ross of Marnock.
There was one point made by the Minister with which I agree. The time is ripe for change in the system of local government finance not only in Scotland but in England and Wales too. That seems to be the generally accepted view among those best qualified to judge the matter. So, it were as well not to dwell too long on the why of the matter and to try to concentrate on the how, which of course is much more difficult. Let us see whether the Government have it right this time. I said that the time was ripe for change. It is now almost 1 I years since the Layfield Committee's report on the subject was presented to Parliament. In the light of that, some may feel that the need for change is perhaps overripe. It would have been sensible to try to do the job in the early 1970s when we embarked on the restructuring of local government. Surely, having neglected the matter for so long, as we have, it is more important now to take such further time as is necessary to ensure that we get it right, rather than to rush at it, like the bull in the proverbial china shop—or is it the proverbial bull in the china shop?—as a result of the inspiration caused by the Conservative Party's antics at Perth.
The danger of that is we make a guddle of it again. That is what the Government look to be about. For, as 1333 the noble Lord, Lord Ross of Marnock, pointed out, it is no time at all, as these things go, since the Government were in effect saying that there was nothing fundamentally wrong with the domestic rating system and that all it needed was a little tidying up.
This measure, as was made clear by the noble Lord, Lord Ross of Marnock, is not a carefully worked out plan—the product of systematic thinking—so the first question for the Minister, which I hope that he will try to answer seriously, is: why the rush? The noble Lord, Lord Ross, and I think we know why the Government rushed at it, but let the Minster justify the approach. The House is entitled to have an answer.
From there, let me turn to the Layfield Committee's report. The foreword to that report referred to the daunting scale of a review of local government finance, involving in Britain the spending of some £13 billion a year, the management of some £25 billion of capital loans and the employment of 3 million people. It then went on to say:It is perhaps not surprising in the circumstances, particularly of unprecedented rates of inflation, that the year 1974 should have seen a crisis in local government finance. That crisis was serious and complex, symptomatic of lasting problems. It is a tribute to local authorities that they have served their communities and the nation so well since the second world war. In a period of great change and growth, marked by recurrent national crises, they have provided a great range of services essential to the life of the nation: the government and its departments have played an important part in the development of those services. In this Report we are highly critical of much that has occurred. We hope these criticisms will be of value in deciding what constructive steps should be taken to provide a much better set of financial arrangements for the future".That was the beginning of Layfield. From that introduction, those of your Lordships who have read it will remember, the report went on to deal with what the committee called the nature of the crisis which resulted in the committee's appointment—the origin and nature of the problem, the present confusion, the relationship between central and local government, and so on, through to what it called its solution.
There it was, all those years ago, and the Labour Government had the report to think about for three years. Two Conservative Governments had it for nearly eight years. What do we have from this Government? They were elected on the basis of a commitment to sound finance and sensible housekeeping. I was glad that they were elected in 1979 because I thought that it would be calamitous if those responsible for that winter of discontent were re-elected. What do we have from this Government, committed, as I have said, to sensible housekeeping and sound finance? For the domestic ratepayer, we have a regressive poll tax thinly disguised in a transparent fancy dress and labelled "community charge". For the non-domestic ratepayer, we have half-baked index-linking arrangements which will make no significant contribution to ironing out the vagaries of the present system in Scotland which cause so much trouble to non-domestic ratepayers and of which business and industry are so critical, and of course rightly critical.
It is an appalling reflection, against that background all those years ago, on the way we are governed. The Labour Government, who appointed the Layfield Committee because of the crisis they faced shortly 1334 after they were elected in 1974—they were doubtless facing a crisis for which they blamed their predecessors—did nothing. I fear that they learned nothing from their experience. Then along came the practitioners of sound finance with the poll tax. It is a great pity that all the jokes about what Wat Tyler and his lot did all those centuries ago when faced with a similar form of taxation were all made in the other place. One cannot re-use them. However, the people are increasingly alert to the fraudulent prospectuses of the Labour and Conservative Parties in this and other contexts.
This is a bad Bill. It is a bad Bill because first of all it will increase, perhaps to breaking point, the existing strains between central and local government which are so very damaging to the social, political and economic fabric of the country.
Secondly, the Bill is bad because it will increase the already excessive centralisation of power in Whitehall. It is also bad because the so-called community charge is misconceived and will undermine rather than strengthen local government. It will not achieve the degree of accountability that is claimed for it and which is required. In relation to the practicality of preparing and maintaining the new register that will be required The Timescommented:it will become a nightmare of new bureaucracy imposed by a government dedicated to the reverse.Policing the system will be immensely awkward and difficult everywhere, doubly so in the inner cities. I should think the administration costs will be double those of the rating system—perhaps more.
Finally, the Bill does nothing at all to remove or reduce the anomalies in the Scottish rating system which place an unfair burden on Scottish industry as a whole, and I understand within Scotland it will place a greater share of the burden of rates on the smaller firm as against the larger undertaking.
These are some of the conclusions of a significant majority of those concerned with local government finance who have made their representations on the Green Paper of last year and on the Bill to government. These are the views not only of CoSLA (the Convention of Scottish Local Authorities) and their English counterparts; namely, the associations of county councils, district councils and metropolitan authorities. Their concern is shared by a considerable number of people in a wide range of interests including the Scottish Consumer Council, the Scottish Council of Voluntary Organisations, the Association of Citizens Advice Bureaux, the National Federation of Self-Employed and Small Businesses, the Society of Local Authority Chief Executives and many others right down—or should I say up?—to the TRG which, translated, is the Tory Reform Group. I am sorry their most distinguished patron is not still with us.
The view that this is a fatally flawed measure does not rest merely on the representations of these various special interests. After all, it is sometimes in the nature of a special interest to be blind to the wood because of their obsession with the trees. It is not inconceivable that situations can arise in which the Government are right and all the special interests are wrong. It is when one has regard to the whole scenario that I have tried (I am sure ineffectively) to paint, particularly since 1335 1979, in the context of local government in general and local government finance in particular, that it is difficult to avoid the conclusion that this time the Government really have got it wrong—badly wrong. So wrong indeed that but for the now well-established convention of our constitution, I venture the view that on a free vote noble Lords who had weighed the argument and the evidence would refuse the Bill a Second Reading.
My eye was caught in this context by a passage in the submission on last year's Green Paper by the Scottish council of development and industry. It stated:The Bill will therefore give Scottish business ratepayers an experimental status. If the experiment of getting legislation through both Houses is successful the formula may be repeated for England and Wales. If unsuccessful the experiment will be abandoned. In the interim, and in either case, a General Election is likely to intervene.The passage continues:This is a disconcerting scenario.The last sentence is surely an understatement of the whole business.
Who on earth thought it prudent for this Government of all governments, to foist this Bill on Scotland, which will not be universally welcome, all because the Scottish Conservative Party got into a lather at Perth. No doubt they were panicked into it in the hope of saving what is left of the Tory vote in Scotland. It may be that in the very short term it will make a contribution to that end. But very soon, and increasingly as public awareness of the probable effect of this legislation grows in Scotland, it will be nothing more than another stick to the Scottish National Party with which to beat the drum—the sound of which is no more pleasing to me than I imagine it is to the Minister and his colleagues.
I wish that I had been a fly on the wall when this Bill was presented to the Cabinet committees through which is had to pass before going to Cabinet itself—I assume it did go to Cabinet. I wonder why no one rang a warning bell to alert the Committee—the Lord Advocate might have done so if he had thought about it—to the folly of using Scotland in the present political climate then as the guinea-pig for such an ill thought-out measure. Was it perhaps that the Committee met on a Friday morning after a late sitting the night before? Or was the Bill presented to the Committee by a junior Minister from the Scottish Office and did the non-Scottish Ministers think that this was just another wee Scottish ploy so that they did not seriously apply their minds to it?
I do not ask these questions frivolously. I ask them because while we on these Benches have been critical, sometimes highly critical, of much of this government's legislation, particularly in relation to local government, many of us have understood why the Government were doing what they were doing. This time round with this Bill, the folly of it all passeth all understanding.
§ 4.29 p.m.
§ The Lord Bishop of Ripon
My Lords, in the unavoidable absence of the right reverend Prelate the Bishop of London (who is chairman of the Churches Main Committee), I should like to bring to the attention of your Lordships an aspect of this Bill, as it 1336 affects the churches generally, which seems to have gone almost entirely unremarked. This is the matter of rates payable in respect of domestic accommodation (principally manses in Scotland) occupied by ministers of religion.
For many years it has been accepted that such premises should be accorded a statutory remission of 50 per cent. of the domestic rate payable. Churches in Scotland are at present entitled under Section 4 of the Local Government (Financial Provisions etc.) (Scotland) Act 1962 to such a remission from local rates on domestic premises occupied by their ministers.
In the Green Paper Paying for Local Governmentthe Government declared their intention of preserving the benefits of existing rate relief arrangements for charities which, of course, include the churches. Paragraph G36 of the Green Paper states:The Government intends to preserve the benefits of the existing rate relief arrangements for charities in the form of a discount from collective community charges.During the detailed discussions of this Bill which have already taken place no indication would appear to have been given as to how this intention is to be achieved. It does not seem that the matter has been dealt with in the measure as it has now been introduced into your Lordships' House.
The Churches hope that during the course of the consideration which your Lordships will accord this Bill, steps will be taken to ensure that effect is given to the undertaking by the Government to which I have referred. I hope that, in replying to this debate, the Minister will be able to give an assurance on this matter.
§ 4.31 p.m.
§ Baroness Carnegy of Lour
My Lords, it was with some relief that noble Lords heard a simple, straight, pointed question from the right reverend Prelate to the Minister about this Bill. We have had a long, somewhat girning session—which, for the sake of your Lordships who do not know the word, is spelt g-i-r-n-i-n-g—from the noble Lord, Lord Ross, and from the noble and learned Lord, Lord Wilson. I am not sure what either of them was saying he wanted to happen. We heard nothing about that; it was entirely negative. However, I expect that we shall hear more as the debate goes on.
The present system of financing local government now has few friends in Scotland. The Convention of Scottish Local Authorities itself, which is Labour-controlled, in responding to the Government's Green Paper, told the Secretary of State for Scotland that its position:is not one of satisfaction with the present arrangements".It was good indeed that the noble and learned Lord, Lord Wilson, agreed with that. Until recently there seemed at least some hope that domestic rates might be capable of reform. I know that I took that view, and the noble Lord, Lord Ross, is absolutely right about that. However, during the past three years the system has entirely collapsed and something new is absolutely unavoidable.
In looking at the Bill as a whole and later as we look at it in Committee, it seems to me essential that we constantly remind ourselves precisely why the old 1337 system has broken down, because the new system must be free of the fatal weaknesses of the old. Your Lordships are only too familiar with the reasons for the collapse of the system. They can be said to be threefold. First, there has been ever-decreasing accountability. With 40 per cent. of adults over 18 now paying no rates at all local democracy has become badly flawed. As a user of services, but someone who does not pay a penny towards the rates, it is easy to vote for councillors who promise to spend more and more. That is at least part of the reason, though not the whole reason, for the astonishing rate increases that, for example have taken place this year.
We have a more generous than usual central government grant, yet the average increase across Scotland is 15.1 per cent.—more than three times the rate of inflation. In the rural area of Angus where I live, which is now under Labour and SDP control, we have an increase of 16.5 per cent. and in Edinburgh there is a massive 32.9 per cent. increase, with all the damage to local business and employment that that involves. Greater accountability must be at the heart of the new system. CoSLA recognises this. Its representative, who was kind enough to come and meet Scottish Peers last week, told us that CoSLA wants a taxation base which is as wide as possible.
The second thing that has gone wrong is, as has already been said, the effect of the 1985–86 revaluation combined with that year's rate rise of 19.6 per cent. It was not just Sir James Gould and a few hundred members of the Scottish Conservative Party who were in a stew about that revaluation. In Tayside, where I live, valuations in my home town of Forfar went up six, five or four times and subsequent rate demands were treble and double those of the previous year. At the same time, elsewhere in our region, for example, in the city of Dundee, valuations fell in real terms and rate demands fell or stayed static. It was not that the valuers got it wrong. In Forfar subsequent sales and lets have on the whole confirmed what the valuers did. It was simply a shift in the comparative attractiveness of one area with another since the previous valuation seven years before. This was exacerbated by the large rate increase and this year it will be exacerbated again.
I do not know how any noble Lord in this House can suggest that the people of Tayside, or anywhere else in Scotland, should continue with this system for longer than they have to. A property-based tax, combined with rates unrelated to prices, is not nowadays a suitable way of funding local services. It amounts simply to a tax on local success. We must remember this as we look at the Bill. There are considerable implications for England and Wales, for which, after an even longer period since the last revaluation, a revaluation now would produce even greater distortions.
The third major weakness in the old system is that very few people have understood how central government's level of grant was worked out. It has, as a result, been extremely difficult for even the most attentive members of the electorate and indeed, in my own experience, many of the more attentive councillors to tell whether the changes in the rates were because of what councillors had done or what central government had done. It has been far too easy for each 1338 to blame the other. We need a simpler, clearer system for fixing central government support grant which all can understand.
As has been said, there were a number of possible alternative systems that the Government had to consider. We know from ministerial speeches that they looked particularly hard at local income tax. They rejected it and I am surprised when I read that the Alliance parties and the Scottish National Party are so keen on a local income tax. I also noticed that at the Labour Party Conference in Perth the other day they were saying that they were keen on it, though they added that they were not quite sure how it would work.
A local income tax to my mind certainly does not meet the basic criteria that I have just outlined; nor indeed does the half local income tax system suggested by the Tory Reform Group meet those criteria. Only 55 per cent. to 66 per cent. of Scots pay income tax at present. If local income tax was borne only by them, 40 per cent. to 45 per cent. of users of services would still pay nothing. The accountability would be no better than it is at present. If everyone were to be billed for local income tax, the collection would be no simpler than it would be under the community charge system.
If local income tax were to be collected centrally by the Revenue, it would be very hard indeed for each taxpayer to identify through pay as you earn how much was going to local government and how much to central government. The extra 2p to 3p average which the Government have calculated would be required on the basic rate—and I understand that it would go up to an extra 9p in the pound for better-off people—would not stand out in the way that answerability demands in the Bill.
§ Lord Wilson of Langside
My Lords, I am grateful to the noble Baroness for giving way. I understand that there are arguments about local income tax, but what I cannot understand—I wonder whether she would enlighten me—is why she says that she is surprised that the Alliance favoured it, since a wide range of people from the Layfield Committee right up to the Tory Reform Group recommended it.
§ Baroness Carnegy of Lour
My Lords, I had hoped that the Alliance has within them a party which had the ability to be radical and to look carefully at radical policies. If they have looked carefully at local income tax, I am surprised that they continue to favour it.
If local income tax were collected locally, many personal facts and figures which are at present confidential to the Revenue would need to be revealed to local government. Even more important in my view, living where I do, is the fact that because some areas have more and/or higher level taxpayers than others, and some (they may be the same areas) have lower local government costs than others, there must in fairness be equalisation in local income tax. That would mean a massive movement of money from one region to another and from one part of a region to another. There would need to be a massive movement of money from the Highland region, Borders, Dumfries and Galloway, for example, into Strathclyde. If local income tax was charged on second homes—for example, in Argyll where 30 per cent. of 1339 the houses are second homes—there would probably also be movement from there into the city. All of that would be unfair and unclear to the electorate, and very damaging to accountability.
It is attractive to think of local income tax as payment according to ability to pay. However, the Government's figures, based on averages, tell us that all single persons earning over £112 (that applies to over 80 per cent. of Scots single earners) would be worse off than under the community charge. A single person on an average manual wage of £164 a week would be £154 a year, or 50 per cent., worse off. A married man earning that amount, and with a nonworking wife, would be slightly better off, but 60 per cent. of married women work. Contribution according to ability to pay comes best through the central government grant (from the taxpayer) rather than through local income tax.
I believe that the Bill meets the essential criteria that I mentioned at the beginning of my remarks. It does so very much better than can a local income tax or a property tax still combined with rate levels unrelated to costs. Under this legislation everybody using local services will contribute to them. Everyone will receive a bill showing what they owe and what their money will pay for. Everyone will have a personal interest in the effectiveness of councillors and in the level and cost-effectiveness of services. Business and commerce will still contribute through a property-based tax but—and this is important—the rate level will be set nationally to ensure that it is related to prices. On a more easily understood formula, central government will contribute a fixed amount per head of population, and a variable amount to compensate for differences in spending needs.
Under the scheme, councillors will be responsible for setting the level of community charge. It will represent only 13 per cent. of funding of the local authority, but that, as the noble Lord, Lord Ross of Marnock, has said, is the 13 per cent. of the margin which will reflect local authority decisions and cost-effectiveness. The noble Lord seemed to think that that was a bad idea, but I believe that it is a very good idea. Councillors will be able to quantify to the electorate the effect on the community charge of the proposals and decisions that they make. That is the main area where local accountability will be apparent. Councillors will also be able to affect the attractiveness of the area to incoming or existing industry and commerce, and so will affect the rate base (the valuation of non-domestic property), which in turn will affect the amount coming to the area from industry and commerce. That too is where local accountability will lie.
Central government will decide the level of revenue support grant and the non-domestic rate. The system will be relatively easily understood and therefore central government accountability will take place there. That is also very important.
I have no doubt that the details of the Bill will be carefully scrutinised by your Lordships. We shall doubtless look carefully at the system for the collection of the community charge in respect of which there has been so much complaint. Given the principle that 1340 everybody contributes something—and I suggest that that principle has already been settled in another place—we shall see whether there are any improvements possible in the method of collection. CoSLA estimates that that will cost £57 million per year; an increase of £34 million on the cost of rate collection. I am not sure whether included in that figure is the cost of the domestic valuation. If that is so, I calculate that it is an increase of 0.9 per cent. of the current local authority spending. Perhaps the Minister will comment on that matter when he replies, because it is an interesting figure and I should like to know why it varies so much from the estimate in the Bill. We shall look at all those matters.
We shall also look at the system of rebates. I should like to know the position of the severely disabled in relation to the community charge, and also the specific position of the severely mentally handicapped. There will be much detailed discussion but, in principle, I submit that the Bill—a very radical Bill with radical changes in how we all pay for our local government —meets the essential criteria far better than any other system that has been suggested. I shall support the Bill's Second Reading.
§ 4.47 p. m
§ Lord Hughes
My Lords, it is a happy chance that my place on the list should be immediately after that of the noble Baroness, Lady Carnegy of Lour, with whom I have regularly had the most amicable disagreements. Nothing that she has said in this debate today will change the need for disagreement, but I hope that it will not require me not to continue to be amicable.
I had not intended to begin my speech other than by reference to what has been said by the Minister. However, I should first like to conclude my comments on the speech of the noble Baroness, Lady Carnegy. I noted two matters, and although I am not certain that I have written them down correctly, I have the sense of them. The noble Baroness said that we must remind ourselves that the system of local government has broken down. My noble friend Lord Ross of Marnock has already reminded the noble Baroness why it has broken down: it has broken down because the Government have reduced their contribution to Scottish rates by 12 per cent. The noble Baroness shakes her head, but in contradiction of her own statement and in contradiction of the shaking of her head, she went on to speak against income tax. I could be forgiven for thinking that this was a Bill in relation to income tax and not in relation to a poll tax. In commenting on that point, the noble Baroness said that the contribution, as regards ability to pay, comes better from local government. There have been cuts from 70 per cent. to 58 per cent. That is the contribution to the situation of central government.
When I consider all that has been said over the centuries against a poll tax, and what has been said in respect of this Bill, even though it has a different name, I did not think that the Minister would say anything with which I should be likely to agree. However, unlikely as it is, I find myself agreeing with his first statement. The Minister spoke about the present system and said that it was unfair and illogical. I doubt very much whether there is anyone in this House or in 1341 another place, or many people in Scotland who would disagree with that statement. The system is unfair; the system is illogical, and over the years it has become more and more difficult as patching up the system, giving rebates here and exemptions there, has made it more and more complicated. Obviously there was a desire to find an alternative system that might be fairer and less illogical.
It did not start at the Tory Party Conference in Perth. I first became a Minister in 1964. One of the things that was looked at when my noble friend was Secretary of State of Scotland was what could be done to put in a better system than the rating system. We were in the position in which Sir Winston Churchill once found himself with some civil servant—that for every solution that was put forward a problem could be found. At the end of that Labour Government we were no nearer finding an alternative.
The years have gone by. I am quite certain that succeeding governments of both parties have wanted to do something about the rating system, have wanted to make it a more modern way of dealing with local government, but until now nobody has attempted to do anything about it. I do not know how correct my noble friend was in attributing the change to the noble Viscount, Lord Whitelaw, but whatever he said he must have reminded the Prime Minister that before she became Prime Minister for the first time she gave an undertaking to abolish domestic rates. It seemed perhaps that she was reminded by all the difficulties about the revaluation in Scotland that this was the time to do something about it. So she threw caution to the winds and the poll tax emerged, despite all that even this Government had to say against it as recently as three or four years ago.
But I am wrong. She did not throw caution entirely to the winds. She said, I imagine, that she thought that this system has potential difficulties, so, "Let us try it out on the Scots. After all, we have very little to lose there. It does not look in Scotland as if they are just rushing in droves to vote Conservative at the election. So let us try it out there. Let us give an undertaking to have the same system in England at a later stage, but if after all it becomes obvious that the system is not working in Scotland, and if we are still the government, we have a perfect alibi for getting out of doing anything south of the Border". Personally I doubt very much whether the system will ever be applied in England and Wales because of the impossibilities which are inherent in the structure.
My noble friend said that he thought that only 80 per cent. of the potential would be collected. I do not know where he got the figure, but I got it quite independently in another way. I spoke to the finance officer of the Tayside region—like the noble Baroness, Lady Carnegy, that is where I live—and he said that they did not expect that they would manage to achieve more then 90 per cent. of the possible in the compilation of the register. He was not just talking for Tayside. In the discussions between finance officers this was the conclusion that they had generally arrived at. But then he went further. He said, "But we fear, we believe, that there will be another 10 per cent. that we will never catch up with".
1342 After all, look at what is supposed to be done. Everybody registers. Let us take it that 90 per cent. have registered. Then some of them do not like the idea of paying one-twelfth of something between £250 and £400 every month, and they go away. They notify the authorities that they are leaving the area so that their name is taken off the register and they do not have to pay there. I assume that before it is taken off they are supposed to say, "I will be going on the register in another place". There are bound to be some of them who will never do anything about going on the register in another place, particularly if they have gone to England where at least for a year they will have no obligation to do anything about it.
On that basis it does not mean that the system will not work, but what it means is that the charge will he infinitely greater than was being talked about some months ago. The range was indicated, as I understand it, from £180 to £300. I am told that on the basis of the existing position the community charge which will be required in Edinburgh will be £400, and in parts of the West it will be as great.
The noble Earl, Lord Perth, spoke to me a little while ago about the position of students. We have two universities in Glasgow, Glasgow University and Strathclyde University; we have two in Edinburgh. Those are two areas where the community charge is likely to be at its highest. What are the students there going to get? They are going to get 80 per cent. of a figure to be designated by the Secretary of State as the average for Scotland. The rest will be payable by the student. On the basis of what are now out-of-date figures, it was estimated that students in Glasgow will have to pay £140 each.
The noble Earl, Lord Perth, is worried about this. He is worried about what is going to happen to the students who would otherwise come to Scottish universities. Will they come to Glasgow? Will they come to Edinburgh? In many cases English universities have been the second choice, but they may become the first choice if this is going to take place. It is not surprising therefore that the universities are worried about what effect this is going to have on their position, and they are in great difficulties on finance at the present time.
The Minister quoted figures on a percentage basis for Scotland. I spent an interesting but hardworking time over the weekend getting a copy of the valuation roll for the Tayside region and the electoral register for the village of Comrie, in which I live. There are approximately 1,400 subjects on the valuation roll for that village; there are, I think, 1,56 I electors. The kind of things which are on the valuation roll vary. There are of course domestic subjects; there are shops; there are stores; there are no factories; there are fishing rights; there are shooting rights. All of those are on the valuation roll at the present time.
I was interested in the domestic subjects only. I made a number of comparisons. I have a lot of stuff here which it would be wrong to use at this stage, but I have a feeling that it may come in useful at Committee stage. I should like to give some quotations from the valuation roll. With one exception all my comparisons have been made with households which have two people who will be paying, because that presumably is the greatest number in Scotland. I 1343 ignored the ones where there were three, four or five, where the increase in payments will be so enormous, and I ignored the singles, though I shall come back to that at Committee stage because the way the pluses and the minuses balance each other out on the singles is interesting.
Here are some of the things that in the view of the noble Lord, Lord Glenarthur, make for a fairer and more logical system. There are two adjacent entries on page 133 of the roll. One lot will have their rate contribution—because there are two people—increased by 55 per cent.; those immediately next to them will have their rate contribution increased by 179 per cent. On page 136 one household will have the rate contribution increased by 65 per cent. On the same page another will have its contribution reduced by 52 per cent. Remember, I am talking about households in which there will be two contributing people. On the next page we have one household where the contribution will be reduced by 36 per cent. and on the same page another which will be increased by 122 per cent.
I have one exception to the comparison with two people because it caught my eye as I was turning over the pages. We have one mansion occupied by a single lady. I do not know her although I live in the small village. Perhaps she knows me and I may hear in church next Sunday. The rates on her mansion will be reduced by 74 per cent. There is a cottage in the grounds of the mansion occupied by two people who will be paying the community charge. Their rates will be increased by 176 per cent.
If your Lordships think that these figures are bad, they are by no means the worst. I went over skimming here and there and I found on page 150 somebody else whose rates will go up by 245 per cent. I thought "My God, this gets worse as you turn over the pages". Indeed it did and I stopped at page 153 in case I became too horrified at the results. There are two subjects on that page of the register, one of whose rates will be increased by 698 per cent. and another where the rates will be increased by 726 per cent. I think that is the point at which I wish to stop making comparisons. If that is logical, if that is fair, I think we ought to start rewriting the meaning of those words in the Oxford Dictionary.
§ Baroness Carnegy of Lour
My Lords, before the noble Lord sits down, I should like to ask him, as he is a long standing expert on this matter, whether, when he says that the rates will be increased, he can say with what he is comparing the estimated community charge? Is it with the rates that will be paid under the new rate just announced by Tayside region, or with the old rate or with the rateable value?
§ Lord Hughes
My Lords, I am glad that the noble Baroness asked me that because I meant to mention this figure. One of the things I asked the finance department was what it expected the community charge to be in Tayside. I was told it was expected to be £250. I said, "But the Scottish Peers met the people from CoSLA on Thursday last week, and the figure mentioned there was from £180 to £300, and I should not have thought that Tayside would have been so far up the scale as £250." He said, "I'd better have 1344 another look". He came back to me an hour later and said that the figure was perfectly right but, "It is as far as we can estimate in our present knowledge. It can vary by the extent to which, in the year after it comes into effect, the expenditure may be greater. We do not know what we shall get from the Government. We do not know whether we shall be getting a low grant once again or a high grant. These are the imponderables, but from what we know at the present time, known government grant, known local rates, the figure is £250." That is what I have used: the extent to which people will have to pay if the charge is £250 per head as against what the rates are likely to be in the coming year.
§ 5.4 p.m.
§ Lord Sanderson of Bowden
My Lords, I start by saying that I do not cavil at the present electoral system. I am sure that there are some noble Lords on the Alliance Benches who would wish that I did. I realise that the Labour Party in Scotland has 41 seats, as opposed to the Government, who hold 21, and the Alliance, who hold eight. But it is a fair point that at the last election over 880,000 people voted Conservative in Scotland, as opposed to Labour's 990,000 and the Alliance's 672,000. I say this because at times I feel that, I suppose quite rightly from their point of view, the Labour Party arrogate to themselves at general elections the right to speak for the Scots people in their entirety. I feel that Conservative voters represent a substantial number of Scots, as those figures imply.
My contention is that change in the rating system is demanded by very many customers north of the Border and it is time that the Government acted after years of debate. We have heard the noble Lord, Lord Hughes—
§ Lord Mackie of Benshie
My Lords, is the noble Lord advocating that a fairer system of voting be employed?
§ Lord Sanderson of Bowden
Yes indeed, my Lords, I am very glad that the noble Lord has mentioned a fairer system, as he puts it. Although we did not hear from the noble and learned Lord, Lord Wilson of Langside, about that system, perhaps we shall hear about it from the noble Lord, Lord Mackie, a little later. I look forward to that.
My contention is that change in the rating system is demanded by very many people. I imagine that on all sides of this House there is a realisation that one of the basic tenets of democracy is the principle that representation without taxation should be abhorred. I see no justification whatsoever for a system in local government that gives power without responsibility. Accountability at local elections is crucial and it is just not fair on elected representatives when they know that only 29 per cent. of the Scottish electorate pays full rates. That 29 per cent. is a very low figure indeed. A further 10 per cent. pays partial rates. A further 10 per cent. of ratepayers, because of rate rebates, pays no rates at all.
There is a definite need to strengthen the link between those who vote and those who pay. Much has been said in this debate, and no doubt will be added by subsequent speakers, about the Government's 1345 contribution of 57 per cent. to the whole of the budget of local authorities. We shall probably debate in Committee whether that is fair and reasonable as a proportion. I fully support the Government's intention to give rate rebates in community charges as the Bill intends. It is only right and proper and it is the only way it could possibly work anyway. But as it is expected that three-quarters of all households will be better off under the new system, or at least not losing more than 1 a week, I am sure that there must be some merit in considering this system as a valid one to operate. It is not a high price to pay for substituting better accountability for an outdated property tax.
Some argue that it is unfair to tax everyone. We have heard figures from the noble Lord, Lord Hughes, which I rather suspect as I cannot quite work them out, because my reading of the 20 per cent. community charge went something like this: students will be on the maximum rebate as I understand it. In my area in the Borders the community charge will cost a student 64p per week. That is less than the cost of a pint of beer, or perhaps more appropriately for the noble Lord, Lord Ross, who I understand is a keen smoker, in the area from which he comes it will cost 84 pence per week, which is quite a lot less than a packet of cigarettes.
§ Lord Hughes
My Lords, the noble Lord is not quite correct on that point because the student will not be paying 80 per cent. of the figure in the Borders because he is to pay 80 per cent. of a notional figure which will be laid down and which is expected to be the average for Scotland. If he is in a low community charge area he will benefit because his 80 per cent. of the average will be lower than he would have been paying at home. If he is in a higher rating area, the 80 per cent. of the average will leave him substantially out of pocket.
§ Lord Sanderson of Bowden
My Lords, I stand corrected on the point about anyone who is going to get maximum rebate who is not a student. But indeed if he is a student, yes, the average works. I understand that if he is a student in Aberdeen he is going to do reasonably well, whereas if he is in Glasgow under the present system he is going to do better. There will be losers and gainers but many people, of all parties and of none, long for a more suitable system than the one we have at the moment.
I look forward to hearing what the Alliance have to say about local income tax and I will not dwell on that at this stage. However, I have asked some councillors in my area whether they feel that the community charge will hit less hard on local people than local income tax. They certainly do not seem to be very keen about local income tax, and that surprises me, coming from the area of the Borders as I do. They are certainly not keen if equalisation comes into it, because then I understand that the Borders would have to subsidise the people of Strathclyde—and your Lordships will probably know that that is an extremely important thing to say if you come from my part of the world.
Some reference has been made today to the English Tory Reform Group and their views on the future of government finance. I have read their submission and I find them long on criticisms but rather short on solutions. What they say is that they are going to retain 1346 domestic rates but halve them, and will introduce a local income tax. That will mean local authorities administering both rates and the LIT system, paid direct to the local authority. Also, all betting tax proceeds in the area will go direct to the local authority. I doubt if the majority of adults in a local authority area do frequent betting shops, although I know they are very busy places. Finally, they say that the vehicle excise duty should go to local authorities in the area. But then what is going to be done about the funding of the national road programme?
Those are some of the questions I would ask of those who peddle the idea that the Tory Reform Group's ideas are constructive, and so on. Above all, as regards those who are not complaining about the idea that they are going to have bad dreams over trying to put the new community charge and all its works into effect, I believe that if they went down that road they would have absolute nightmares.
Your Lordships will not be surprised if I say something about non-domestic rates, since I am quite closely involved with business and industry in Scotland. Twenty-eight per cent. of the local authority budget is paid from that source and of course there are no voting rights attached. I should like to read a letter to your Lordships which I received recently from somebody in Ayrshire. It reads as follows.As you can see, my rates in the last ten years have gone up from £1,395 to £7,191. We are already being told that Strathclyde are going to impose a 19 per cent. increase this year and I fail to see why the Government will not force the region to keep this increase to only the rate of inflation.Then it goes on to the normal threats which I know many of your Lordships will get from members of any party in government as to what they intend to do about it.
How can small businesses go on in this way? Business increases—thank goodness!—will now be held to the rate of inflation, but I should like very much to have some clarification from the Minister about the starting-off point. I am not quite clear as to how that is arrived at for next year and what powers the Secretary of State has in that connection.
One of the biggest concerns in Scotland which has really raised the temperature among non-domestic ratepayers had been the difference in rates north and south of the Border; and that has already been alluded to. I believe that the Scotish business community has nothing to fear from the Government's intention in the long term to have a national non-domestic rate. The sooner valuations can be harmonised north and south of the Border the better. I have some experience of party conferences south of the Border as well as north of the Border and, believe you me, the feeling runs just as strongly south of the Border on this matter as it does north of it. The small traders have enormous problems and I believe that something must be done in this connection.
What we are debating today is a radical measure: yes. It is more expensive to operate: yes. Perhaps that was one of the reasons why it was held up in 1982–83. It is clear that greater accountability is necessary for the good of local government. I hope the measure receives support for the sake of many people, both domestically and in business. I have no doubt that at the Committee stage many of us from all sides will 1347 have many points to raise, particularly about the administration of the scheme, and will want to have some assurances that it can be done in the time, as the noble Lord, Lord Ross, so clearly pointed out. There will be problems about students and also about drifters; but on that particular point I am bound to say that the less well-off in the Borders and in the hills and round my place are just as important as those who are less well-off in the crofting counties.
There will be difficulties, but they must be surmounted. I understand the problem about bad debts. It is quite normal. When you have to move into an area where you are charging more people rather than fewer people, there will obviously be a real problem on bad debts which we shall have to debate. However, I was very interested to read in today's paper what Mr. John Stewart, the finance director of Dumfries and Galloway, said. I quote:I believe the system can be made to work.—That is the first expression from an administrator, to my knowledge, to the effect that it can be made to work.
We have in Scotland an expression, "it's aye been." That means, "It's been there for a long time and it had better go on that way." The property tax was easy to administer: yes. I believe it has outlived its usefulness. "It's aye been ower lang". I notice that the noble Lord, Lord Ross, when we were debating in this House the sale of council houses in Scotland said on 24th June 1980 that he thought the Government were wrong and that the idea would not commend itself to those who thought that local authorities could judge what was best for their own particular areas.
It is amazing how things can change; for only the other day I read the result of a MORI poll in Scotland which said that 71 per cent. of Scots approved of the sale of council houses. I know, and your Lordships know, how many Labour voters there are north of the Border. I hope that we debate this Bill very thoroughly indeed. I understand all the difficulties and all the objections, but I hope we shall get a positive result in the end.
§ 5.18 p.m.
§ Lord Kirkhill
My Lords, it is a statement of the obvious, which is nevertheless worth some emphasis this afternoon, if we keep in mind that the Government's declared aim is to reform the basis upon which local government is financed, and, it follows through, their overall objective is to reduce the amount of public spending by introducing, in their terms, local accountability.
The Government apparently believe that if people can be made to understand and contribute to the real cost to themselves of improvements in services they will, to quote the usual government spokesman, then be able to make sensible choice through the poll tax. But the proposed reforms have been widely criticised, and not only this afternoon, both for the unfounded assumptions upon which they are based and for the consequences for local government which would flow if they were to be implemented. Far from increasing local accountability, central government will have an 1348 even greater direct control over local government income and thereby will influence to a significant degree local government's ability to respond to local needs and local demands.
There were two recent statements relating to this topic of financing local government which should be brought before the attention of your Lordships this afternoon. One of those statements was made by the Government, following the consideration of views received on the Green Paper of five years ago called Alternatives to Domestic Rates,and my noble friend Lord Ross of Marnock quoted that statement in his earlier remarks. I am going to quote the statement again, because it should be quoted, and frequently, as the Government must be nailed with it. The statement was:There is little point in replacing rates with an untried and unfamiliar system having little support from the outset. The Government have therefore decided to make reforms to the rating system which is basically sound but needs improvement".There was another statement of more recent vintage which was made at the 1985 Conservative Party Conference by the Environment Secretary, Kenneth Baker. His statement was:The case for changing the domestic rating system is strong but, frankly, there are no magic solutions. If there had been any magic solutions then others before me would have found them".Those are two statements which we in this House should keep very much to the forefront of our minds as we discuss this Bill in its various stages.
It is amazing to compare those statements with the way in which this Government are now pressing on relentlessly to replace the basically sound system of rating with an untried and unfamiliar system, which has no support from the local authority associations in England, Wales and Scotland, nor has it support from the various professional bodies in Scotland, nor has it the support of any political grouping in Scotland, other than that of the Scots Tories to whom it was handed as an electoral sop for their continued support. This Bill has few friends and we should keep reminding the Government of that fact.
The Government claim that these reforms will bring about fairness and accountability—objectives which all would, of course, share. However, if we examine the facts we discover that unless the citizen concerned is a long-term prisoner or a hospital patient, there is to be no escaping the poll tax. If you are over 18, regardless of your income, you must pay up, and that includes the unemployed, the elderly and the disabled.
The Government say that one test that could be applied to this tax is that of fairness. Let us see. The Government assert that a poll tax is fairer than rates because its payment is more related to the benefit derived from local services. But this is not the case. Who makes more use of local services—a household of four adults each paying the poll tax or a single-parent household with four children, in which case only one poll tax would be paid? In terms of ability to pay, the Government state that overall a community charge would perform no worse than the rates.
The difficulties in this area are, first, that the Government have not given details of how the poll tax will interact with the benefit system; and, secondly, that the Social Security Act 1986 will mean that those presently receiving 100 per cent. rebates will have to 1349 make a contribution, probably 20 per cent., to their rates for poll tax.
But even from figures already provided by the Government, it is clear that by abolishing rates and setting up a flat rate poll tax the following difficulties will occur. First, in the upper income groups one-third can expect to gain more than £2 per week; secondly, in the rest of the population for every three gainers there will be four losers; thirdly, for households a little above the level qualifying for rebates, bills for local taxes would not only remain greatest relative to income but would actually increase; and, fourthly, although pensioners living alone are likely to be better off, for pensioner couples there will be more losers than there will be gainers.
The Government say, let us test this tax on the basis of accountability. Let us see. The argument put forward here is that there is a weak link between rating and paying for local services because,many of those entitled to vote for higher standards of local authority services either do not pay at all or do not pay full rates".Of Scotland's 3.9 million adults, about 1.9 million are householders liable to pay rates. The Government acknowledge that many of the remaining 2 million will be husbands or wives of ratepayers, but they are not billed directly, nor do they personally make any payment to their local authority. Of the 400,000 who pay no rates at all, the Government argue that under the present arrangements they can safely vote for higher services without having to pay a penny towards them.
The first point to which I draw attention is that many of the comments made about local taxpayers also apply nationally. For example, only one-half of all adults in Scotland pay income tax. Only 32 per cent. of central government expenditure is financed by income tax. In short, about 60 per cent. plus of central taxation is raised in ways not conducive to the Government's definition of accountability.
Secondly, not a shred of evidence is offered to show that people on low incomes vote for high spending. Unfortunately, no surveys of local electoral behaviour exist. But from general election studies it has been identified that the social groups with the highest propensity to abstain from voting are the young and the residual poor. Local election turnouts are lower than general election turnouts, at about 45 per cent. compared with 75 per cent. Indeed, national studies also show that people tend to vote almost evenly for the three main parties.
Thirdly, it is puzzling that high spending should be deemed to benefit the group to which I have just made reference. In fact the research evidence is clear that there is a big consensus, irrespective of social class, about public spending on universal services such as those provided by local government, particularly education. The poor can hardly be said to benefit disproportionately from spending on services such as roads, transport, water, sewerage, police, the fire service etc. If the Minister does not agree with that proposition, perhaps he will be good enough to tell us in his reply why he does not.
Additionally, the proposal to replace domestic rates by a poll tax will create practical problems of implementation which will have repercussions not 1350 only on the cost of collection, but on the right to individual privacy, as the need to establish liability and to enforce payment will require substantial disclosure of personal information to local government. Furthermore, the proposal to require a minimum charge of even 20 per cent. from those who have no income other than supplementary benefit is wrong in principle. Indeed, it is a political disgrace. But I am not surprised, given the track record of the present Government on social services to date.
Additionally, this system will be costly and ineffective in practice to a much greater extent than the corresponding provisions for domestic rates have ever been. I emphasise that the domestic rating system has already been incorporated in the Social Security Act which was passed last Session. That is a very important point. Along with many others, I believe that the disadvantages of the rating system have been overstated. Such a system, which has a long and proven track record, has been undermined, as my noble friend Lord Ross of Marnock emphasised, by substantial reductions in central government support combined with too infrequent updating of the tax base. In that way, significant variations have resulted from revaluations, which in turn provided the opportunity for those who feel that they have been disadvantaged to generate political pressure and adverse media coverage in respect of property rating.
I accept that the rating system is not ideal, though no tax is popular. However, it cannot be seriously claimed that the reforms proposed within this Bill offer a long-term solution to the problems of financing local government. The proposals for change offer little prospect of a fairer system of taxation or of responsive, accountable local government, as I think I have just demonstrated. Rather, they should be seen as a political response to the supporters of the Government. Ironically, those households which do well out of rating will do even better out of the community charge.
Nor will the proposals for business solve the problems. In the long run, the national business rate is dependent on England. In the short run, it will reinforce the status quo.It will not eliminate the variations which the Government claim to tackle. The new system will be less fair than rates. Many poor and elderly citizens who have served this country well will find their democratic rights being taxed. So too will many unemployed youngsters who have so far been denied the opportunity to work in our society. By contrast, I believe that rating is capable of defence and capable of reform. Those interested in achieving a strong system of local democracy, funded in a way which reflects overall ability to pay, will reject the government reforms as being democratically indefensible.
The Minister can be assured that this Bill will endure an hazardous passage through your Lordships' House, where I believe that the Opposition will be fearless in their scrutiny and their exposure of the basic fallacy inherent in the Bill.
§ 5.35 p.m.
§ Lord Hooson
My Lords, a Welshman is naturally reluctant to intervene on the Second Reading of a Bill which, on the face of it, applies only to Scotland. But 1351 there is no doubt that the principles which are being considered in this Bill are potentially of the greatest importance to the ratepayers and electors of England and Wales as well. Though I intervene when we are very close to our biennial visit as a country to Murrayfield, I feel considerable sympathy for the Scottish people because I am bound to say that this appears to be a hurried and ill-considered Bill.
There is no doubt that local government, both north and south of the border, is in a mess. That is partially the result of the actions of certain local authorities. It is partially the result of gross government interference in laying down constraints on responsible local government which should never have been imposed.
In 1976 we had the report of the Layfield Committee which was, I suppose, the most thorough inquiry into local government finance which has ever been carried out in this country. That committee was under the chairmanship of one of the most penetrating minds that I know. We have heard much of the merits of Sir Frank Layfield both in this House and in another place because of his recent report on Sizewell. Perhaps I may suggest to the Government that they go back and read that report on local government finance. The noble Viscount, Lord Ridley, was a distinguished reporting member of the distinguished team which formed that committee.
The Government base a large part of their argument for the new system on criticism of the existing system. There is little doubt that the present system has its shortcomings. Unlike the Government, the Alliance believe that the proposed system will be worse. It is claimed that the new Bill will remedy many of the faults attributed to the current system. The main faults which are identified are as follows. First, there is a narrow base of ratepayers, leading to a lack of account-ability on the part of local authorities, in that ratepayers are only a small part of the community being served and of the electorate. Secondly, it is said that there is an unfair burden of tax on certain low-income groups such as old people and widows with large houses who have very little income but who still must pay as much in rates as their welfare neighbours.
If noble Lords will read again the criticisms of the Layfield Committee in its review of the rating system, they will find that that system has existed in this country for three and a half centuries as the main source of local finance. Although the Layfield Report criticises it, it nevertheless concludes that there is a great deal to be said for retaining it as part of the system of raising local financing.
The fact that most people see the present system as unfair and would prefer an alternative system is seen as a justification for the new system in most of the arguments put forward. That is clearly an unsatisfactory way of considering the deficiencies of the new system. The deficiences can be broadly stated as follows. First, it is a regressive and unfair poll tax that is being imposed. The poll tax is the most primitive of all taxes, and it is the most unsatisfactory. That is the general view which has been held over many years. It really is astonishing that, having had a committee such as the Layfield Committee, a government can bring forward a Bill of this kind and 1352 make Scotland a guinea pig by introducing a poll tax after everything which as been said about it over the years. The result will be that virtually every adult over the age of 18 will be charged the same amount, irrespective of income. Even the poorest will have to pay 20 per cent. of the community charge.
It is argued that the poll tax will be fairer and that it will mean that widows and single people will not have to pay as much. But it is abundantly clear that there will be many instances of grossly unfair redistribution. We have heard various examples. A family of four who are all working in low-paid jobs may earn less than one middle-class manager or director; yet they would still have to pay four times as much in community charges. A widow living on supplementary benefit, an old-age pensioner or a young single unemployed person, if they are ratepayers today, will all be worse off under the new system simply because they will be paying a tax which none of them presently pay since they are all fully rebated. Fewer people are likely to be rebated on the community charge than are at present. While it may appear to be unfair—and it is unfair—for a single person in a house to pay the same rates as five people in a similar house, under the new system not only will the single person be better off but it is also very possible that the five people living next door will be better off as well. The difference between what they are paying now and what they will pay under the new system will be met by charging those who are currently not paying. They, for a considerable part, will be the poorer members of society.
This emphasises to me the problem of the whole government line. Most people would agree that the existing system is unfair in that pensioners living in large houses are charged large rates, and that single people who are householders pay very large amounts. However, this is no justification for shifting the burden on to other disadvantaged groups and other low income groups. You cannot say that it is unfair to a group but we shall change it by making it unfair to another group.
The proposed system seems even more unfair in that its effect will be to reduce the tax burden on the better off. I would certainly be better off under the proposed new system if it were brought in south of the Border. It will impose a tax on the very poorest members of society. The noble Baroness, Lady Carnegy, asked why a very considerable proportion of the population should not pay local taxes. The truth is that a large proportion of the population in the country do not pay national taxes. Why? It is because they are not rich enough to pay them. One of the aims of the Chancellor of the Exchequer today was to relieve some of the taxation on lower-earning people and those who are not earning in the community—
§ Lord Hooson
He has not? Well, I thought he might have, my Lords. Added to this, it is likely that the administrative costs of collecting the 20 per cent. charge from the poorest would outweigh the income generated. The Tory Reform Group document says that the 20 per cent. charge is effectively redundant, and surely it is absolutely right.
1353 My second criticism concerns the increased centralisation of control of local government finance. The Bill will further limit the power of local councils by reducing their control of local taxation on industrial and commercial properties. The Government will decide on the level of non-domestic rates which will be pegged to increases in the retail price index. Future increases in expenditure will therefore fall almost entirely on the community charge payers, which will serve to discourage increased local expenditure. This has all been imposed because there are some irresponsible local authorities but it will apply to every local authority, whether or not it is responsible.
This means that the higher the local expenditure, the higher the poll tax will be, regardless of whether there is any need for higher spending. The Bill substantially alters the balance of power between central and local government and puts the power firmly in the hands of national government. The major constitutional importance of the Bill should have been recognised in another place. It should have led to the debates in Committee being taken on the Floor of the House. Important constitutional changes are being introduced in Scotland which from the Government's own statements have wide implications for England and Wales. It should surely have been considered first by an all-party pre-legislative committee.
The non-domestic rates undermine the account-ability of local authorities to local business. The formula is to be based on the retail price index, which is not particularly relevant to local authorities, especially when one considers that a large part of their costs is in the form of wages, and other matters which are not covered in the retail price index. Without increasing expenditure, local authority costs could increase above the rate at which the retail price index increases, leading to a need for very large increases in the poll tax.
My third criticism of the Bill concerns the threat to civil liberties. The Bill is to a large extent an enabling Bill, which has led to many matters of importance remaining undefined. A problem is to be found concerning the confidentiality of information. The registration officer, for example, has the power to nominate persons to give information to him concern-ing the compilation of the register, perhaps requiring local authorities to surrender to him information given to them for other purposes. It is feared that elderly people may be harassed when registration officers call to ask questions. There has been very little definition of the rights of the individual as regards visits from the registration officer. The Bill's proposals are a recipe for fresh bureaucratic growth.
Perhaps I may say on behalf of the Alliance that it is important that we appreciate that the question of local government and its functions and what role we require local government to play in the future cannot be separated from the way in which we raise finance for it. This was clearly recognised by the Layfield Committee. I should like to quote the conclusions of the committee on local income tax. When the Government are putting forward their poll tax they could listen to the words of the Layfield Committee:A local tax on all personal incomes, the rate being set by the local authorities, is the only feasible major new source of income meriting further investigation".1354 So the poll tax did not even rank with Layfield.There are advantages and disadvantagesas there are for every system of raising finance for local government—but we conclude that it could perform a major role in local finances. In Chapter 14 we consider LIT alongside rating, grants and charges, and in the context of local government organisation as part of the overall financing system".I say on behalf of the Alliance that this Bill provides a remedy which is worse than the evil that it is trying to reform. People will see this very clearly. This was no place for a hurried, rushed and ill-considered Bill of this kind because it involves major changes in the relationship of local government and central government and involves the question of how finance is to be raised in the future in this very difficult sphere. How on earth the Government could, as it were, turn their back on the investigations of the Layfield Committee and totally disregard its recommendations I do not understand.
§ 5.47 p.m.
§ Lord Burton
My Lords, the principle of this Bill is of course, "He who pays the piper calls the tune". What could be more laudable than that? When I first went into local government a councillor had to be on the local government voters' role for the area, and to get on to that role one had to be a ratepayer for property valued, if I remember correctly, at £25 or more. This ensured that the greatest care was taken that the authority was managed as effectively as possible. Since then I have seen a steadily increasing deterioration, so that now there is rife what really amounts to attempts to bribe the electorate, often by wild expenditure of other people's money by the local authority.
Since reorganisation the situation has become even worse. It used to be said that the Highlands county councils consisted of lairds, who employed other people to do their work for them, ministers and priests, who were supposed to be employed by their churches, and socialists, who no one would employ! Now we have professional councillors who have no other work and get themselves on every committee and subcommittee they can and prolong the meetings so as to procure the largest possible amount of expenses.
For a short time I was out of local government and when I came back I noticed what enormous change there had been over quite a short period. The noble Lord, Lord Ross of Marnock, chided various of your Lordships for changing your minds on the method of financing local government. He went back over history. I have done the same, and in view of the abuses now being perpetrated is it any wonder if some of my noble friends have had a change of heart? My noble friend Lady Carnegy of Lour put her point very clearly and the reason she has changed her mind; and quite rightly too.
The noble Lord, Lord Hughes, blamed government grants for local government troubles. I must hotly refute that. My district council has held its rate steady for the past two years and this year has reduced its rate by If one council can do that, I cannot see why others have to have such massive increases. It is not because of government grants. The noble Lord, Lord Kirkhill, quoted changes in government thinking. I am 1355 sure he knows that the current system has been hotly abused in many quarters. In those circumstances there is no reason why the Government should not have had a change of view. Abuses clearly have to be put right.
This Bill attempts to make as many people as possible accountable for local government expenditure. What is wrong with that? That seems to be highly praiseworthy. However, the noble Lord, Lord Ross of Marnock, totally misrepresented the situation. He picked on my noble friend the Duke of Atholl as a single man—regrettably he is not here today, or no doubt he would have answered for himself—and put only one side of the equation. He referred only to the personal community charge and made no mention at all of all the other methods of financing local government. My noble friend the Duke of Atholl will continue to pay massive non-domestic rates. On one of his sawmills alone he will be paying several times the personal charge of his gardener, regardless of how big a family that gardener may have.
If we continue to pay the charges of those who are living in our tied houses, many of us will have to pay higher sums for local government, contrary to what the noble Lord, Lord Ross of Marnock, said. But I will not go into that subject at this juncture. The question of who pays for what in tied houses is a somewhat complicated matter.
The noble Lords, Lord Ross of Marnock and Lord Kirkhill, regaled us with the plight of the less well off. They seemed to ignore Part IV, Clause 24 of the Bill. They so distorted the effects of the Bill that I nearly decided to scrap the remainder of what I propose to say, but I am so concerned about many of the details of the Bill that I feel I must continue. I am not sure whether my noble friend will appreciate what follows.
The Scottish Office estimates that this Bill will add between £17 million and £20 million extra to local government expenditure in Scotland, which amounts to £4 per head of the adult population in extra costs. All that will result from that money will be more officials, as well as more hassle and bother for individuals. It seems that there will be so much extra litigation that the courts will be taking on 40 extra people. The Scottish Office has said that it does not know how many extra personnel will have to be employed by local authorities. Consequently it is not known how much extra accommodation will be required. How was the estimate of £17 million to £20 million extra expenditure compiled if the extra staffing and accommodation necessary was not known? Now that this Bill is so advanced, I wonder whether my noble friend can say whether it has become possible to estimate the extra requirements.
There are many details in this Bill which will lead to difficulty. One arises because community charges are to be collected monthly—12 times per year. There will be considerable personal and administrative inconvenience if one is to continue to meet the local taxes of those who live in tied cottages, but some district councils will have great problems. I do not know whether this applies to all district councils, but certainly a number of them collect the current rents and rates 10 times a year, I presume partly because of the holiday period in the summer and Christmas and 1356 New Year. If they are going to have to collect the community charge 12 times a year, which this Bill lays down that they should do, all their collections will have to be reorganised.
Then we are told that district councils will have to report on people living in their houses. The district councils do not know who are living in their houses. They know who is the tenant, but they do not know how many people are staying in the house. That is not the business of the local authority. Its responsibility is merely to ensure that the house is properly looked after. How are district councils to ascertain who is living in those houses?
In regard to water and sewerage charges, I hope my noble friend will bear in mind that there are many domestic subjects in Scotland who have their own water supplies and drainage. I hope that those people will not have to pay twice through having to pay for a public supply which they do not have, on top of the expense of their private supplies. I also note that fishings will be levied at one-eighth of their value for non-domestic water rates. Surely the contents of the fisherman's flask will already have been charged for water rates.
There are many more Committee points, but I hope that I have raised enough technical points today to show that there are technical points as well as political points which require careful scrutiny. It is incumbent on this House to ensure that Scotland gets legislation as sound and reasonable as it is possible for us to make when dealing with this complicated matter. I hope that this very important Scottish legislation will receive every possible consideration and that it will not be rushed through to clear the decks for an election, and that, as my noble friend Lord Sanderson of Bowden said, we shall achieve a positive result.
§ 5.56 p.m.
§ Lord Carmichael of Kelvingrove
My Lords, together with my noble friend Lord Ross of Marnock, I should like to say how glad I am that the noble Lord, Lord Underhill, will be taking a prominent part in this debate. We have had notable contributions from the Welsh Members, as I hope we shall from the English Members before the end of the debate. Undoubtedly this matter is being tested out in Scotland and I am sure that people from outside Scotland would regret it if they did not try to understand it at this point. So I am very pleased that those Peers are concerned about this Bill.
As others have done, I should like to declare a personal interest in this Bill. I shall probably save at least £400 a year if this Bill is brought forward and becomes law. If it should be extended to England as well as Scotland, I shall save another £400 a year, which is a reasonable figure, on the modest little place which I rent in London. We all like to save money, but I should not feel any jubilation in saving that money knowing that the tax paid is more unfair and much more regressive than even the present rating system.
There has been a certain amount of teasing of this side of the House for not giving an alternative to the present rating system. The assumption is that because the Government have come up with an idea we should either be able to counter it with a better idea or accept 1357 it. I would suggest that that is nonsense. The noble Baroness, Lady Carnegy, said that over about three years the system of local government had broken down. My noble friend Lord Ross of Marnock and others, particularly my noble friends Lord Kirkhill and Lord Hughes, commented on that when they pointed out the extra duties which have been placed on local government.
In the last few years there has been a big increase in the police force; there has been a very big increase in the cost of education; there has been a very big increase in social work responsibilities. In fact, when the Bill on social work was going through in 1986 one of the worries which many of us had was that social workers would be used to try to stem the breakdown of society in many ways. The increased unemployment, the overpopulation, the need for home helps because of the break-up of the family system—all of those have thrown great weight and expense on local government. I do not think we should be too critical of local government. I know of many councillors who spend a great deal of time trying to make local government work under very difficult conditions, particularly when they have lost the central government contribution to the extent that they have over the last few years.
I believe there is nothing wrong in all the mistakes made by noble Lords opposite when discussing the rates previously. The noble Baroness, Lady Carnegy, said that there was nothing better than the rating system, as did others. I do not mind that they are now changing theirs minds but it is wrong that they have changed their minds because the Conservative Party has panicked and brought forward a solution that was apparently devised on the back of an envelope and not a great deal more than that. It was plucked out of the air, though some credit should be paid to the hard-working civil servants who had to knock some sort of shape into a very bad idea and endeavour to put some logic and understanding into the Bill.
There are so many facets and unknown aspects to this Bill that it is possible to deal with only one or two in a short speech. The first matter that I raise is an example which shows how difficult the Bill will be to administer. I refer to students. My noble friend Lord Hughes referred to this aspect earlier. I certainly make no apologies for again raising this issue, because I live in, and once represented, an area of Glasgow which has a very high student population. They are students not only from Glasgow University and Strathclyde University but from Queens College, Jordanhill College and other institutions. They are extremely worried and concerned about the Bill.
First, there is a lack of definition in so many parts of it. There is much that has still to be filled out. I believe it has been suggested that about 70 orders will need to be brought forward. Perhaps the most worrying aspect of all in reading the speeches of the Secretary of State for Scotland in another place is that he spoke not once but several times about the answer to certain difficult problems only being possible when we have a body of case law. It is wrong to introduce so far-reaching and fundamental a Bill as this and not to have thought it through further, merely saying, "There are problems, but they will ultimately go to court for a decision and we will build up a system of case law which will help us".
1358 To go back to the student problem, the latest position is that the Scottish office says that all students will obtain a flat rate addition to their award. There will be no means testing. However, that addition will apply whether a student is going to Glasgow, Aberdeen, Stirling or any other university. Presumably it will be based on the lowest possible figure that the Government can calculate. If Stirling has a lower poll tax the Government will base the addition on that. Therefore, students will be disadvantaged if they live in an area where the poll tax is higher than the government calculation. In addition, although the Government will look at this flat rate, it will be only 80 per cent. of what the students will pay in community charge. Therefore, the students will be expected to pay 20 per cent. more this year than previously, although in this year they have had an increase in their awards of only 3.75 per cent.
How will students pay this additional money from the rather meagre grants that they receive? The only way of ensuring that there is any equity is for students to continue to have access to the benefit system for payment of the community charge, as they do at present with their rents. However, that would go completely against anything that the DHSS, under Mr. Fowler and Mr. Walden, are doing in their review. Access to the benefit system therefore depends on the detail of that benefit system and the outcome of the review by Mr. Walden and Mr. Fowler of student financial support.
One point that is important to note is that the 80 per cent. flat rate payment at the moment applies only to holders of Scottish Education Department awards. That has several fundamental flaws and is causing considerable concern not only to students but to the principals of all Scottish universities. They want to know how English local authorities administer their grants/awards when an English student goes to Scotland to study. They believe that the situation would be farcical. English local authorities would he giving their students grants which the authority would then draw back from the Department of Education and Science. However, the money would be paid to Scottish local authorities.
This is not a small problem. It is estimated that about 3,000 English students are at present studying in Scotland, so it is not a problem that can be ignored. What happens to further education students who receive their bursaries from Scottish local authorities? If they have to come in line with students on a SED award we shall have local authorities paying students money so that the students can give it back to them. That is a ridiculous situation and an administrative nightmare.
§ Lord Burton
My Lords, may I ask the noble Lord a question? Does he know how many Scottish students are going to England? Will not one cancel out the other?
§ Lord Carmichael of Kelvingrove
My Lords, it would not cancel it out for the individual student. The poll tax does not apply in England. For the individual student it will certainly not be cancelled out. The student going to Scotland will have this additional sum to pay unless there is access to the benefit system, 1359 which is doubtful. Therefore, the fall-back position for Scottish students must be that they have access to the benefit system.
The situation regarding overseas students will also affect Scotland unfairly. It is causing considerable concern to the principals of the eight Scottish universities. They are worried that because of the poll tax of £250—some people say it will be much higher—the English and Welsh universities will be able to attract foreign students who at present spend many millions of pounds every year in Scotland. The principals say that it is difficult in such a complex context to identify a simple course of action which will remedy all the problems that are foreseen—that is, the problems between Scotland and England, assuming that students are coming to the United Kingdom.
The principals of the eight Scottish universities suggest that, to avoid the main danger inherent in the current proposals as they affect the universities of Scotland, strong and urgent representations should be made to the effect that full-time students in higher education in Scotland should be exempted from all liability to pay community charges until such time as a community charge is levied on all students in the United Kingdom. That is an amendment which I hope to bring forward in Committee.
The Government accepted the basis of an amendment moved in another place by my right honourable friends which exposed the silliness and administrative impossibility of trying to introduce this scheme in three years, parallel with the existing rating scheme. When the Government wisely accepted that, they made it possible to give us a little more time in Scotland. With a little more time, if the Bill is to go through—assuming we have the same government after a general election—we should have the opportunity to delay the Bill in Scotland so that the English system could be brought up to date. If we delay the Scottish scheme until 1990 or 1991 and slightly speed up the English scheme, both systems could brought in together. At least this hotchpotch of a Bill would then have one or two of the anomalies removed. I hope the Minister will give these ideas some thought.
§ 6.10 p.m.
§ Baroness Elliot of Harwood
My Lords, I have listened to all the speeches in this extremely interesting debate and I appreciate what a lot of experts on Scottish local government we have in this House. First of all, I should like to congratulate the Minister on his simple and succinct presentation of the Bill, which I rise to support.
Having been in local government for many years—for 29 years I was a county councillor—I realise how many people benefit from the efficient and valuable services of local government and how many should, but do not, contribute toward the cost of them. Today there are 2 million people in Scotland who pay rates. Only 1.1 million pay full rates and some of the others get assistance in the form of rebates. Of the total population in Scotland, which is now over 5 million, under the new scheme 3.5 million will be brought within the scope of the community charge, all of whom benefit from and share in the services which are 1360 paid for in full today by 1.1 million ratepayers. That surely is not fair. The reason I think that the principle of the Bill is fair is that people who benefit should contribute.
I should like to read to your Lordships a letter that I received this morning from somebody whom I do not know and have never heard of before in my life. It is a signed letter written from Edinburgh. The writer says:I read in today's Scotsmanthat the Lords are to consider the proposed community charge tomorrow. Please support this. It is fair. All who enjoy public services should pay something if possible: if not, then relief can be arranged. I am a single woman who worked and saved to buy my home and because of my savings I cannot qualify for rates rebates in this highly rated city. Yet my neighbours with husbands and families who use more services than I do i.e. sports facilities, pay no more rates than I do. I am subsidising them. Please support the community charge. Thank you".I received this letter out of the blue this morning and I thought it so appropriate that I wanted to read it to your Lordships.
Many noble Lords have spoken about the unfairness which will ensue because some people will not be able to afford the community charge. In the Bill there are opportunities for handicapped and disabled people to obtain grants. Old and frail people and those who qualify under the 1986 Social Security Act will be able to make application for grant-aid. Similar measures apply to the single unemployed, single pensioners, single unemployed people with children and prisoners. There is a long list of people who can receive help under the Bill. It is a comprehensive list which covers many of those who may not be able to afford payment.
I listened closely to the noble Lord, Lord Carmichael, who is obviously a great expert on students, but I did not hear him admit that students will be able to get help from the allowance scheme if they are in difficulties. They will not be completely isolated and they will be able to obtain assistance.
Each person will be responsible for the community charge and a married couple will share that responsibility. I think that is only fair. The owner of a property will be responsible for the community charge but a tenant who has lived in the dwelling for 12 months or more will be responsible for the charge on his house or flat. One matter that I should record is that under the Bill, it will be possible for someone to be registered in two places, which means that he will have to pay the community charge twice. I think that the Minister should look at that system and see whether or not it can be changed, because that is not fair.
Initially the register will be compiled by local authorities but, as happens with the electoral register, once the register has been established people will return their tax form every year and registration should not be too difficult to organise. There has been a great deal of talk about people who move around. I have been in the same area for a great number of years and it has been my experience that the majority of people who live in towns and villages stay there for most of their lives. Indeed, they often inherit small cottages or properties in the area and continue to live there from one generation to another. That has been my experience. I do not think it would be difficult to collect the charge from a person established on such a roll of electors or a roll of community charges.
1361 I have connections with a consumer council, as your Lordships may know. The Scottish Consumer Council wrote to me and said it felt that the responsibility for providing information on a person's residence should not fall on a responsible person but on the individual who has to pay anyway. Perhaps the Government can look at this matter or maybe we can discuss it in Committee.
In addition to the community charge, the local authority will receive grants for particular services. Such support grants will be needed to compensate for the special needs of the varied and often difficult areas in which people live. Very isolated and sparsely populated areas mean that transport, education and other services are more expensive to provide than they are in other parts of the country. I understand that the Government will take that fact into consideration and that additional grants will be given to compensate for such problems.
I am concerned about the non-domestic rates, and many noble Lords also have mentioned the subject. In Scotland non-domestic rates are so high that small shopkeepers and businesses are being driven out of business and everywhere are seen empty shops and closed premises. I am glad to see from this Bill that the present rate (which in my opinion is too high) is to be frozen. Would it not be better to deal with the very difficult problem of non-domestic rates at the same time as we deal with domestic rates? If not, would it be possible to separate the two so that the issue of non-domestic rates can be dealt with in a different manner and more swiftly? There is no doubt at all that industrial rates are crippling. I hope that at some point the Government will find a way to help with this matter. It is a very serious problem and one longs to be able to do something to help these people.
I have received a letter from the Scottish Landowners' Federation with reference to rates on sports such as shooting. fishing and deer stalking. Apart from anything else, those sporting facilities employ 45,000 people directly and 43,000 people indirectly, mostly in very remote Scottish areas where employment will be difficult to find if those activities cannot be continued. The Countryside Commission of the United Kingdom, which includes Scotland as well as England, notes that Scotland pays 77 per cent. of the rates on shooting and other sports. That is very unfair. The letter from the Landowners' Federation asks that this matter be considered and the burden shared equally with England.
All those subjects will come up during the Committee stage of the Bill and I am sure that we shall discuss them at great length, but the principle which I support is that all those who benefit from local services should contribute to their cost. It is a principle that I continue to support and for which I shall vote.
§ 6.19 p.m.
§ Lord Morton of Shuna
My Lords, perhaps I may first touch on the difficulty, if not the impossibility, of creating an accurate register. Compared with a tax on houses this charge will be far more difficult and costly to administer. Houses do not move about. Contrary to the recollection of the noble Baroness, Lady Elliot, about the area with which she is familiar, electoral 1362 registers show that about 20 to 25 per cent. of names registered change each year. Those are the figures which I understand have been provided by the assessor who is responsible for the registers in Grampian, Tayside and Strathclyde. That is certainly my experience from such electioneering as I ever do in central Edinburgh.
If you are going to have a situation where 20 to 25 per cent. of the people in the area move every year, it will be extremely difficult to keep the register accurate. It is one thing to go round various parts of our cities to ask who lives there so that you can give them an opportunity to vote. It will be rather more difficult to be a canvasser and go round certain areas to ask people if they live there so that they may have the privilege of paying the community charge or the poll tax. There are areas in Glasgow and certainly in Edinburgh where these canvassers will be unpopular and where the information they get will not be entirely accurate.
When I was involved in prosecution, on one occasion I was taken to an area in Blackhill by the police in a marked police car to be shown the scene of the crime. But the police had to leave two uniformed officers at the police car to see that nothing happened to it. Who will be the canvassers whom this poor compiler of the register will employ? Who will do this job in certain areas of Glasgow, Dundee, Aberdeen, Edinburgh and no doubt other places? They will certainly not meet with a welcome and they may doubt the accuracy of the information they receive.
Assuming they get accurate information, how will they deal with the problem of what are the main or only residents? It is all very well to say—and as a lawyer I am delighted—that this will be developed out of case law. We have continually had to appoint more judges because of the pressure on the courts. No doubt this is all very well. We shall increase the expenditure on law and order. No doubt the crime rate will continue to go up. What happens in the situation which quite often arises of the widowed mother of a family who spends part of each year with each of her children in different areas? Where is her normal residence? Who has to pay and to which authority?
If I had a parent who went from my home in Edinburgh to my sister in Aberfeldy and then to my brother in Manchester, assuming that the poll charge ever comes into England—and I doubt whether it will ever come in even in Scotland—how will that person be dealt with? We have no clue. Is she to go onto a register in Aberfeldy for three months, come off it and go onto a register in Edinburgh, come off it and go onto a register in Manchester? It is a difficult situation.
Now we also have it in the Bill that people are to be jointly and severally liable if they are married to each other while they are living together or if they are living together as husband and wife while not married. That is fine, but occasionally one or other spouse has an argument, leaves home and goes to mother. At what point does the register say, "This man or woman is no longer permanently resident with the spouse. He or she has gone home to mother"? How many weeks do you give this trial separation? These are all problems to which there is no answer.
If somebody tries a job in another town or city, how long is that trial to last before he is regarded as 1363 resident? Those on low incomes are to receive some form of rebate, so far entirely unspecified. This is yet another area where we are to have regulations. The rebate scheme is likely to be based, as the students' scheme is, apparently, on an average of the community charge, and the person will get a rebate of 80 per cent. of the average community charge. But the community charge will not be the same in each area.
The universities have already been alluded to. Edinburgh and Glasgow have four universities. They will be the cities with the high community charge. How will it be fair for the student to receive the average which does not meet the community charge if he is a student at Glasgow, Heriot-Watt or Strathclyde? But if he is a student at Stirling University he may get more than the community charge, because the Stirling rate will be lower, or the St. Andrews rate will be lower. How is that going to be fair? That is quite apart from the difficulty which my noble friend Lord Carmichael pointed out, that the Scottish universities will be under terrible pressure from everybody else wanting to go and live in universities in England. No doubt the students will realise, as they do at the moment, that the Scottish universities are better, but there is a massive disincentive in this.
The next difficulty is that if you have somebody on a low income who is faced with 20 per cent. of the community charge, say, for ease of arithmetic—the community charge is £250; he has to pay 20 per cent. of that, £50—who will collect it and how often? At what point will the local authority write it off as uneconomic to collect? At the moment there is strong evidence from research that private companies consider it uneconomic to collect debts through court processes of £50. It just costs too much and you do not get the return. What will happen to recovery from an unemployed young man or woman who is moving about? That will be written off. This will get around and it will become a voluntary tax. Except for the householder, it will be a voluntary tax avoided by anybody who wants to do so, and the only price will be keeping off the electoral register. That does not say much for the democratic process.
Assuming the local authority gets a decree of £50 for an unemployed person, how will it get the money out? The sheriff officers have considerable doubt as to whether they have a right of entry to premises where the debtor is not the householder. What are they going to pind? What are they going to sell? Where is it coming from?
The Law Society of Scotland is one of many organisations, together with the Scottish Consumer Council, to whom the noble Baroness, Lady Elliot, referred, which find the working of this scheme to be totally impractical. It has nothing to do with fairness and nothing to do with anything else; it just will not work. The Tory Reform Group also considers that the most difficult aspect of all would be the policing of the system. The Times—oddperhaps for somebody on this side to be quoting The Times,but I think I am allowed to do so—on 17th December 1986 said that it would be a nightmare of a new bureaucracy imposed by the Government. The noble Lord, Lord Sanderson, is to be congratulated. After a year's search he has found one local authority official who thinks the 1364 scheme could work. That is a remarkable achievement. He is one out of how many local authority officials in Scotland who think it will not work?
§ Lord Sanderson of Bowden
My Lords, I have found one. There may be others, but this official has gone into print on the subject, which is more than can be said for many people.
§ Lord Morton of Shuna
My Lords, I am pleased. It would be a pity if that one was totally on his own. It is not great support. All the local authorities, CoSLA and everyone else involved with local government seem to think that the proposal in unworkable.
I shall turn to commercial and industrial properties—business rates. They are to be continued on the same valuation basis as before. Under the Bill that increase will be limited to the retail price index, which of course has nothing to do with the increase in prices for local government. The proposals will do nothing to meet the complaints, difficulties and injustices of people involved in paying non-domestic rates. I remind noble Lords opposite that the proposals meet with the hostility of the National Federation of the Self-Employed and Small Businesses and the Forum of Private Business, because in Scotland small firms pay substantially more rates as a percentage of pre-tax profits than large businesses.
Publicly quoted companies (plcs) pay between 1 per cent. and 5 per cent. of pre-tax profits in rates on their Scottish premises. Small firms in Scotland pay an average of 25 per cent. of their pre-tax profits in rates. There is no measure of relief there. That is the unfairness to which the Government have shut their eyes.
The Government have not produced one proposal to put that right. Small firms in Scotland pay more in rates as a percentage of their pre-tax profits than small firms in England. There is nothing in the Bill to put that right. It still astonishes me that a sports ground in Fife pays more in rates than Lord's Cricket Ground.
§ Lord Mackie of Benshie
My Lords, is the noble Lord not making a good case for the payment of a local income tax?
§ Lord Morton of Shuna
My Lords, a local income tax may well be one of the solutions. There may well have to be a mix. If the noble Lord had paid the attention that was due to the Scottish Labour Party Conference in Perth, he would have heard all about that
§ Lord Sanderson of Bowden
My Lords, as the noble Lord talked about Perth, would not a better solution from the Labour Party be the rating of agricultural land and buildings?
§ Lord Morton of Shuna
My Lords, is it not part of the general idea that everyone should make a payment towards local government? Is there something fair about keeping out agriculture but making the unemployed, the sick or the disabled pay? Perhaps there is. That is the position under the Bill.
The Bill provides that the business rate will be frozen at the 1988–89 figure plus the increase in the 1365 retail price index. That is unjust. First, it depends upon the assumption that the present division between domestic and non-domestic rates is correct. No one has thought fit to discuss that, let alone prove it. It depends also on the assumption that local government costs will increase in line with the retail price index, which over the past few years is demonstrably wrong.
In Lothian, the Conservative group proposed this year a rate increase in line with the retail price index. It was supported in that by the CBI. The rate increase it proposed was £24 million below the guidelines suggested by the Secretary of State, which presumably are thought by the noble Lord opposite to be reasonable.
If the community charge were in operation and business rates were limited to the increase in the retail price index, to meet the guideline figure the community charge would have to rise by about 60 per cent.—about £400 for each person. Let us leave Lothian, because since it changed political colour the Government seem to regard it as one of the major sinners. Let us look at Inverness, which has no record of conflict with the Government. Its district and regional councils regularly work close to guidelines. If we imagine the community charge to be in force and that two people, which is the norm, occupy a house, in 1986–87 for a house valued at £300, people would pay £196 in rates and the community charge would be £354. lithe house were valued at £900, the rates would be £590 and the two people would pay £354 in community charge.
I remind noble Lords that 82 per cent. of domestic subjects in Inverness have a valuation below £900. It is only when one reaches that figure that one pays less in community charge. If we take those figures and put on the rate increase that the region has put on and the district has reduced, both in line with guidelines, for the year 1987–88, under the rating system, the rates on the £300-house would rise to £228 and the two people living in the house would pay £488 in community charge. If it were a £900-house, the rates would rise to £685 and the community charge would be £488. The increase in community charge for Inverness would be 45 per cent. That is keeping within guidelines. That is how fair and reasonable the community charge will be.
If this proposal ever comes into operation, the burden on the community charge-payer will go up and up, and any link between the local authority and local businesses will decrease and decrease. It will be even worse if the idea of having a national non-domestic rate ever comes in.
Local business has an interest in local government and vice versa.They should work together. The effect of the proposals will be to separate them. Local authorities promote activities to encourage businesses. The Edinburgh Festival is one of the major activities. Businesses require extra police, fire and cleaning costs. If the burden of increased costs is to fall wholly on the domestic sector, the inclination will be not to provide increased cleansing in business areas, extra fire-fighting equipment for difficult factories and the extra educational facilities that particular businesses need.
It is also wrong to suggest that the burden of business rates has caused industry or business major difficulties. 1366 Since May of last year, as an example of the prosperity the Government have brought to the nation, 10 major employers have closed or are closing in Lothian with the loss of 1,650 jobs. Not one has claimed rates to be factor.
If I look at fairness, I look at my ability to pay. I shall pay less. I am a member of the Bar, a nice member of the middle class and suitably rewarded. I have a middle-class income, nowhere near the city of London levels. I have three sons. One is a social worker married to a civil servant. Another is an electrical engineer married to a nurse who also happens to be a midwife. My third son is unmarried and, typically in Scotland, he is unemployed. He cannot find a job. Each of them is buying a house. All three houses could, on floor area, fit comfortably into my house and leave some space. But if you take the income of the three boys and their two wives and add them up, the total is less than my income. Where is the fairness in that?
They are all relatively well off. They are not on low levels of income if you compare their incomes with the ordinary income of £100 per week. How can I say it is fair that I pay the same as somebody who is earning £100 a week? It is even more unfair that a pensioner in an old people's home, a person in a special home for mentally handicapped people or a person in one of the special homes run by the Scottish Spinal Cord Injury Assocation will apparently have to pay 20 per cent. of the community charge out of the £7.75 that the Government allow them to keep from their invalidity pension or their old age pension. The whole scheme is monstrously unfair and should not be proceeded with.
§ 6.41 p.m.
§ Lady Saltoun of Abernethy
My Lords, having examined the alternatives to the present rating system, as set out in papers of varying hues over the past few years, I am convinced that the option the Government have chosen is the right one. I have long thought that the burden of paying for the services provided by local government should be far more widely spread throughout the number of those who benefit from them; and that it was quite wrong that people whose own pockets would not suffer should be in a position to vote for ever-increasing expenditure for which others would have to pay. None of the other options really deal with this question, and therefore I welcome the Bill.
Having said that, there are a few areas which give me cause for concern. Much the most important is the question of the ability of pensioners, couples in particular, and others with low incomes—who will be receiving what will then be called income support grant—to pay without suffering hardship the 20 per cent. which I understand they will each probably still have to pay when receiving the maximum rebate of 80 per cent. of the community charge.
It really is a question of the rates of income support and what will be set as the minimum net income per person, or per couple, under the Social Security Act 1986 when it comes into force in April 1988. Then, as we shall still have the present rating system, the 80 per cent. maximum rebate will be on one rates payment, not on two community charges. Let us consider a couple living in a house in Fraserburgh where the rates 1367 at present are about £260 per year. With an 80 per cent. rebate, they will pay about £50 per year. On 23rd June 1986 during the Committee stage of the Social Security Bill there was a rather vague assurance from the noble Lord, Lord Trefgarne. He said (at col. 67 of Hansard)that a number of speakers were concerned that this may lead to some particular hardships, but the rates of income support had not been decided and would be set nearer the time, taking into account all these considerations.
We had that rather vague assurance regarding the question of rates; but the community charge will be payable by both husband and wife. In Grampian region it is likely to be around £170 a year which means that the couple will be paying about £68 per year. £16 may not sound a lot to noble Lords and myself, but to many people on low incomes it is quite a lot.
I should not wish to try to amend the Bill so that any adult who was neither in prison nor a long-stay hospital patient, or mentally disabled, paid nothing as was tried in another place. So far as I can see, there is no other way that the Bill can be amended to protect the very vulnerable people I have mentioned. The only way my mind—and possibly the minds of other noble Lords, who are clearly concerned about this matter—can be set at rest concerning this important matter would be if the Secretary of State for Social Security would give an undertaking that in Scotland the income support grant will be sufficient to ensure that no one, whether single and paying 20 per cent. of one community charge, or a couple paying 20 per cent. of two community charges and such water charges as may apply, will be worse off in real terms than they are at present. I hope that the noble Lord, Lord Glenarthur, can obtain that assurance from the Secretary of State.
My second area of concern is for the mentally disabled, when released from hospitals and being cared for in the community. I wonder whether the Government would consider exempting them from community charge?
Here, I shall have to declare an interest, otherwise I think the noble Lord, Lord Ross of Marnock, will have my blood. The noble Lord, Lord Burton, has already touched upon this matter, which is the payment of community charge by occupiers of tied houses. But, he did not say very much about it. At present employers normally pay the rates on tied houses, and under Section 33(4) of the Finance Act 1977, such payments are not treated as benefits in kind and are not taxable. However, under this Bill the occupier will have to pay their own community charge. There will certainly be pressure on employers to pay the community charge. It is not a practical proposition for provision to be made in a wages board settlement, as many farm workers do not live in tied houses and this would give no discretion to employers. I would seek an assurance from the Minister that similar tax treatment for payment by employers of additional wages to cover the community charge will be included in the Finance Bill before April 1989.
Even so, I can assure the noble Lord, Lord Ross of Marnock, that most of the rich landowners to whom he referred, like the noble Duke, the Duke of Atholl 1368 with many employees, most of them with wives and living in tied houses, will be much worse off. I am so glad to think that the noble Lord, Lord Ross, is not going to suffer in this way.
The noble Baroness, Lady Elliot of Harwood, mentioned the treatment of the question of sporting rates. I entirely agree with every word that she said and I shall not say anything more on that matter because she has covered the subject.
Lastly, the noble Earl, Lord Perth, who has an unavoidable engagement and was therefore unable to speak this afternoon, has asked me to raise a point which concerns him. It relates to Clause 8(4) under which university students are to be regarded as being solely or mainly resident at their place of residence in term time; and this will apply to all students, including foreign ones, without whom Scottish universities would be in a pretty bad way financially. So what will happen? The noble Earl and I very much fear that they will go to England and that in the three years, or however long it takes the Government to introduce a smilar system in England, our Scottish universities will be in danger of going bankrupt. It might be better to make the students' main residence their homes, at any rate until the whole of the United Kingdom is under the same system. I hope that the Government will reconsider that point.
§ 6.52 p.m.
§ Lord Ellenborough
My Lords, I am acutely conscious that I am one of the very few speakers who does not come from Scotland. Indeed, I come from that deprived part of the UK called England. I intervene as this Bill is a forerunner of a Bill for England and Wales and the Government have declared their intention to introduce similar legislation at a later stage after the general election.
As president of the National Union of Ratepayers Associations, which covers England and Wales but not Scotland, we are obviously concerned about this Bill in relation to the abolition of domestic rates and a replacement by a community charge tax. I feel bound to make some views known. Certainly the Government are to be congratulated on having the courage at long last to tackle this very difficult issue, as whatever they do will be unpopular. There will be very few or no votes or thanks in it at the end of the day, but what is important is that whatever replaces rates is seen to be fair. That is essential if it is to gain acceptance at large.
The National Union of Ratepayers Associations has campaigned for the abolition of rates for decades and greatly welcomes this aspect of the Bill. However, in common with so many other bodies and associations, what concerns us is what is proposed to replace rates; that is to say a community charge, which we feel is unsound and unfair and may be virtually impossible to implement.
Many noble Lords have talked this afternoon of what seemingly is becoming an administrative nightmare as regards putting this Bill into effect. There really is little point in getting rid of one form of local taxation—that is to say, rates—which is generally acknowleged to be unfair and unpopular if it is merely to be replaced by another form of tax which is just as unfair and unpopular, and possibly more so. This is 1369 especially silly when there is another means to hand by way of a local income tax, as all along recommended by the Layfield Committee as,the only feasible source of new income meriting further investigation".The noble Lord, Lord Hooson, quoted the very same passage a short time ago. It may well be that special considerations apply to Scotland. After the 1986 revaluation and the swingeing increases in rates throughout Scotland, it is perfectly understandable for people in Scotland to be so punch drunk as to feel that anything is better than the existing system. However, I can find little evidence of any real enthusiasm for a community charge. As I was going to speak in this debate I met the deputy secretary of the Convention of Scottish Local Authorities and I have read perhaps not all but a good many of the replies of individual local authorities and other bodies, most of which seem to be emphatically against a community charge. If there is not a consensus emerging towards a form of local income tax, at any rate a good many are veering towards it.
I am sadly aware that there are very few Conservative-controlled councils in Scotland, but it occurred to me that there must be one or two and possibly one may be Perth. Sure enough, I found that Perth and Kinross is Conservative-controlled; at least it was and I trust that it still is. Perth and Kinross, in its response to the Green Paper Paying for Local Government,said that the,community charge will be difficult and expensive to collect and likely to create public resentment because of the lack of equity and the ease of evasion".That seems to me just about to sum it up. There have been opinion polls on the subject. I do not think that there have been any lately but there was one some months ago in the Daily Telegraphand the result was 41 per cent. for local income tax, 24 per cent. for the existing system of rates and only 19 per cent. for a community charge. Of the 19 per cent. who were in favour of a community charge, more than half thought that the community charge would not be a flat rate but that it would be a variable rate.
As I see it, any reform of the domestic rating system must be based on a greater ability to pay, as in the case of national taxation. At present there are millions of people who vote in general elections who do not pay national income tax because their incomes are below the tax threshold. There is no outcry about this situation; it is acceptable and accountability is satisfied. It is difficult to see that local government should be treated any differently. Those who have to rely on supplementary benefit will not be affected by the level of their community charge and so are not likely to modify whatever their voting attitudes are at present, because presumably even the 20 per cent. minimum sum will ultimately have to be paid from public funds.
At the time of the publication of the Green Paper a year ago it was estimated that 57 per cent. of the electorate would pay under a system of local income tax. That is a very big improvement on the 34 per cent. paying rates directly. Under a community charge it is recognised that there will be a pretty substantial evasion. I have heard some experts say that it might 1370 even be as much as 10 per cent. When we take this into account and those who one way or another when the time comes will have to be exempted through some form of rebate, there may well not be very much in it as to the number of people paying a community charge.
Several noble Lords have mentioned this afternoon the Tory Reform Group. I am not a member of it myself but I am sure that it is a very august body. I have read most of its views and it comes to the conclusion—it is all set out and is probably right—that at the end of the day perhaps only something like 53 per cent. would pay the community charge in full.
It is perhaps a matter of some regret that the Government decided against the transfer of the cost of education to the national exchequer. If this had been done, the cost of remaining services to be partly financed from a local tax would then have been so small that the total amount to be found from a community charge would have been reduced by something like 60 per cent. Consequently, the impact of a community charge on lower income groups would have been fairly minimal. It would perhaps have been equivalent to a TV licence or car tax but it probably would have been acceptable.
In the absence of any proposal to that effect, the amount to be found from a community charge is likely to be far too great for acceptance on grounds of fairness. It is doubtful whether the implications have yet been fully realised. Several noble Lords have mentioned the plight of the elderly. I also mention the younger members of the public. According to the Green Paper, the younger members of the community will be those most seriously affected. Most young people, although with comparatively slender means, should be able and willing to pay something equivalent to the cost of the combined TV licence and car tax, for example. There is the important difference that even today not everyone must have a car or TV. They are not absolutely essential. However, a community charge will be compulsory and there will be no "ifs" and "buts" about the matter, although there will be a good deal of evasion.
The difficulty is that no one expects that a community charge will be £150 or £200. Already figures are creeping up, and the charge for Glasgow City is estimated at £314 according to the tables set out in the booklet published by the Convention of Scottish Local Authorities. By the time the proposals are effective in England and Wales—if they ever are—the community charge could easily be £500, and I believe that was the sum mentioned at the time of the Green Paper a year ago. It would mean that we are talking in terms of £1,000 for a young married couple. I do not think that that would be acceptable when the penny drops.
A person with an income of £10,000 will be paying no less than someone with an income of £30,000, for example. It is not good enough to say that higher income groups pay more national income tax. Of course they do, but in this instance they will be benefiting from not paying large rates bills. I fear that the Government may be underestimating the reaction of younger people, who will be much more vocal than the frail, elderly widow, living alone and at present contending with unjustified rates bills.
1371 I believe that the Government would be wise to think again. If then the replacement of rates is to be carried out without endless friction and rancour, it must be based on the ability to pay and some form of local income tax will be required. Many countries have such a system.
Most organisations, such as the National Union of Ratepayers, are not asking for a tax which, as in the case of national income tax, is graded upwards so that more highly paid people pay an increasing proportion of their income in tax. We are asking only for a single percentage rate of local income tax, to be applied by a local authority against an individual's net taxable income as determined by the Inland Revenue. Moreover, the National Union of Ratepayers, and I believe other organisations, would be quite prepared to see the maximum amount of local income tax to be levied limited to that applicable to a net taxable income of, say, £30,000 per annum so as to prevent any attempts to soak the rich, or anything of that kind.
I emphasise that any such form of local income tax would be perceived as quite separate from national income tax. The Government deserve all credit, and rightly so, for their considerable achievements in relation to reductions in national income tax. If brought in by the Government after the next general election, a local income tax would not be a disgrace. It would be seen as an essential and a fair means of replacing the present rating system. Of course it will not be popular, but most people are sufficiently adult to know that something must replace the revenue from rates. Whatever that is, it must be paid from net income, whether it is a community charge or something else.
Therefore, on the grounds of fairness and practicality, I have considerable misgivings about the Bill. If it is not too late for Scotland, but especially as regards England and Wales, I hope that the Government will think again.
§ 7.5 p.m.
§ Lord Taylor of Gryfe
My Lords, I should first like to thank the noble Lord, Lord Ellenborough, and if he can spare a moment he might even accept the compliment. We are indebted to him for his courageous speech in which he invited the Government to think again as regards this very contentious piece of legislation. It was courageous because the noble Lord is sitting on these Benches but he is also speaking on behalf of the National Association of Ratepayers. They are not exactly the Militant Tendency. On the whole they tend to be rather sober, sensible and even conservative people.
We heard a suggestion made to the Government—and I regret that the Minister was not present to hear the speech—from someone on the Conservative Benches with vast experience in this field. We have had an all round condemnation of this legislation. I particularly welcome the attachment of the noble Lord, Lord Ellenborough, to the idea of a local income tax in part financing local government. I warmed to him especially, because it is the policy of the Alliance, in the same way that I warmed to the conversion of the noble Lord, Lord Morton of Shuna, to the idea of a local income tax.
1372 I warmed to those ideas especially because when I was a young man I was elected to the Glasgow City Council. I believe that I am the youngest city councillor on record in that distinguished local authority. The first thing that I did on being elected was to ask what is wrong with local government. Fifty years ago I presented a motion to the Glasgow City Council saying that it should petition the government for the abolition of the present rating system and for the institution of a local income tax. I am delighted to be reasonably consistent in this area of my political career, because tonight I once more declare my attachment to the idea of a local income tax.
I am worried in respect of one matter, apart from the detail of the Bill, which has been discussed so competently and thoroughly in this House today, and that is the political impact of using Scotland as a guinea-pig in this situation. I tell the House quite seriously, as one who lives in Scotland and who is close to political thinking there, that there is great danger to the unity of the United Kingdom in some of the policies which this Government are pursuing. We discussed the North-South divide and its implications not so long ago. Today we are discussing what is obviously an unpopular measure which is to be imposed on Scotland by a British Government and against which there will be very considerable resentment. That is not good for the unity of the United Kingdom.
I very much welcomed the conversion of the noble Lord, Lord Sanderson, to proportional representation and I hope that he will pursue that matter within the Conservative Party. There are many converts to the Alliance here today. However, if the noble Lord looks at the latest MORI opinion polls in Scotland. no less than 80 per cent. of the people voted against the Government, whether they be Labour (they are substantially Labour), part Alliance, part Scottish Nationalist and so on. More than 80 per cent. of the people of Scotland have in the latest opinion polls declared that they are against this Government.
One of the most dangerous signs is that the Scottish Nationalists have risen in the polls from 1 1 per cent. at the last election to I 8 per cent., and that is a separatist party. It is a completely separatist party which wants to break up the United Kingdom. I say seriously to this Government that if they go on with this policy of imposing unpopular legislation from Westminster against the wishes of the Scottish people, they will create an extremely dangerous situation. There is no doubt from the evidence that we have heard this afternoon and from the representations that all of us have received that this is an unpopular piece of legislation.
I shall not quote from all the documents we have received and the lobbying that we have received in this connection, but perhaps I may mention one or two. The Scottish Council for Development and Industry is concerned about industrial rates. It is a broadly-based body on which there are local authorities, trade unions, political parties, and business and big business. It says that it finds the scheme unsatisfactory because,it offered no immediate prospect of comparable valuations throughout the United Kingdom; it promised restraint on increases in rates paid but only undertook to restrain rate poundages; it seemed to favour central government funding of local government expenditure in more prosperous areas".1373 The Scottish Association of Citizens' Advice Bureaux have written:The Association believes that the problems of collection and enforcement will be unsurmountable",despite the evidence of one finance director from one remote local authority, with due respect to the noble Lord, Lord Sanderson.The likely combined effect of these problems is that Local Authorities will be unable to collect the Personal Charge in a considerable number of cases and the level of the Personal Charge will be pushed upwards.".The Social Security Consortium, which is concerned about social welfare, has stated:We are in principle opposed to a flat-rate tax which requires the same contributions from those just above rebate level as from the very richest people.".The Strathclyde Poverty Alliance deals with the problems of debt collection within Strathclyde, which has been substantially illustrated by the noble Lord, Lord Morton of Shuna, and with the cost of collection generally, making the measure an inefficient one.
The Convention of Scottish Local Authorities—and they are not all Labour-controlled local authorities in Scotland, as the noble Lord, Lord Ellenborough, has discovered—says:The three local authority associations for England and Wales, the AMA, ACC and ADC, have rejected the proposals".Then they say:the intention to create a uniform business rate throughout the United Kingdom will have serious repercussions for the distribution of industrial developments",and will lead towards a greater centralisation of government. If there is one thing that we can do without in this country for the survival of democracy it is a greater centralisation of power in government hands.
I was delighted to hear the noble Baroness, Lady Elliot, announce her support and affiliation to the Scottish Consumer Council, and I know her commitment to consumer affairs, but I would suggest to the noble Baroness that she might have read the whole piece. Their letter goes on to say that they have,expressed our concern that the Government had not considered the practicalities of collecting the community charge. The publication of the Bill did nothing to allay our fears".They add:we also believe that many people will find it easy to evade. There is a risk that the tax could become the very worst sort of tax—a voluntary tax, paid by householders and the scrupulous, but evaded by the others".That is the voice of the Scottish Consumer Council.
I could go on quoting from the self-employed, the small business people, the Forum for Private Trade and Industry but I cannot find a single responsible organisation in Scotland, apart from the Conservative Party, that supports this.
§ Lord Taylor of Gryfe
My Lords, it is not responsible, but it is a legitimate one anyway. I cannot find any existing Scottish institution of any kind—be it the small traders, the private traders, the trade unions, the Citizens' Advice Bureaux, the social workers—that supports this proposal.
1374 I ask the Minister, why does he not listen to the voice of Scotland? It has been said of course that the Conservative Party regard Scotland as expendable. They will not collect many seats anyway. But that is no justification for imposing this kind of legislation on the Scottish people.
I want to say a word about the business rate and the immense anomalies that have been created. I have a great deal of sympathy with the Minister—he may be surprised to know that, but I have—having listened to so many powerful speeches condemning the piece of legislation for which he is now responsible. I beg him to think again in the light of the representations that have been made in this House today.
I have a great deal of sympathy because the issue he is handling is not an easy one. The question of financing local government is not a simple matter. The noble Lord, Lord Ross of Marnock, has gone back over the years on the various attempts to examine it, but there is still time to examine it again before imposing this pattern on us on the eve of an election. I do not think that Government are entitled to do that. You may have a referendum if you like, but to impose this kind of contentious legislation when there is such universal opposition to it is not sensible, is not democratic, and is not wise.
Perhaps I may say a word about some of the anomalies that exist, particularly in business rates. I have already spoken to the Minister in this regard. The inequalities in the rating system in Scotland as compared to England are extreme. I have already mentioned the case of the Exxon Corporation, who were good enough to build a £400 million plant in Fife, an area of high unemployment. They are paying now to the Fife County Council £9 million per annum in rates. If they had moved 100 miles south of the Border to Newcastle or Carlisle, provided it was just over the Border, the rating bill would be £1,200,000. Exxon is an American company. They cannot quite understand why this anomaly should exist.
The whole rating system is full of anomalies. I do not think that any of them will be solved by the existing legislation, and there is surely time to think again before imposing this legislation on an unwelcoming Scotland.
§ 7.18 p.m.
§ Lord Stodart of Leaston
My Lords, there can hardly be a more controversial subject, which has, as usual in your Lordships' House, inspired an interesting and extremely thoughtful debate, than the subject before us. One thing I enjoyed was that we had a sample of what I would describe as "vintage Ross". It takes me back to days some 20 or 25 years ago. He will not mind my saying that of course there are good vintages and bad vintages. I did not think today's vintage was quite so good as I have known.
Perhaps he was encumbered by the absence of his former colleague—a name which used to strike terror into the hearts of Scottish Tories—George Willis. I am bound to say that when Messrs. Ross and Willis entered the Chamber the hearts of the Scottish Tories—and I think many English Tories—sank. I used to think that I could best only describe them as arsenic and old lace.
1375 As the noble Lord, Lord Ross, suggested, I have an interest which I think I must declare. I live in a house which, in the year 1983–84 was valued at £751, on which I paid £894 in rates. With revaluation, it has gone up from £751 to £2,124 on which in 1984–85 I paid £1,284 in rates, and in 1985–86 I paid £1,313. Therefore on that property there is no question but that I am on the winning side.
On the other hand, I have three tied cottages on the farm with an average valuation of £821 each and the rates paid amount to £468. I have absolutely no doubt that I shall feel obliged to refund to the farm workers occupying them the community charge which they will have to pay. Therefore it will reduce my liability because, as I understand it, that refund will not be allowed against tax. Therefore, I am not quite as big a winner as some people might think.
Having said that, I think nobody will quarrel with the fact that there is a great lack of equity about the present system. One has had complaints about it for years. I thought that the letter which my noble friend Lady Elliot wrote brought to mind literally hundreds that I had from constituents along those lines in the course of 15 years as the Member for Edinburgh, West in another place. That raises a question, as the noble Lord, Lord Taylor of Gryfe, so eloquently declaimed, whether the proposed measure is as unpopular in Scotland as he says. One should not forget the figures that my noble friend Lord Sanderson quoted of the numbers of people, as opposed to the seats won, who voted Conservative last time. If the lady quoted by my noble friend is typical of them, I would have suggested that to say that something is being imposed of extreme unpopularity on Scotland is at least arguable.
The inequity that was complained about 10 or 15 years ago increases as the valuations increase, so does the gap become wider with the increase in the actual valuation. This is a point that has not been made much of this afternoon. To my mind almost the major objection of the present system is that any improvements done to one's property are not only discouraged but actively penalised. Therefore one seeks another system.
The one that I think is immediately attractive—I say this without hesitation—is local income tax because it would seem to be the simplest of the lot until one starts looking at it when one begins to find, as I understand it, that it would be ineffective. It surprises me that only just over half the adult population in Scotland pays tax direct to the Revenue. Everybody pays indirect taxation, but if there is to be a local income tax presumably it will be geared in to the pay-as-you-earn system, under Schedule E or one of the other schedules that operate. If over half the people are not paying that direct tax then local income tax would seem to me to be gravely defective.
§ Lord Mackie of Benshie
My Lords, can the noble Lord tell me whether that includes husbands and wives as half of the people?
§ Lord Stodart of Leaston
My Lords, that I am afraid is the sort of question to which the noble Lord could get a better answer from the Minister than he would from me because I do not know.
1376 The second thing about local income tax is that one of the few virtues of our taxation system is the confidentiality that exists between the Revenue and its clients. I would not take the best of views of confidential information having to be disclosed to a third party; namely, local government. Therefore we have the present plan for everyone over 18 to pay what is called a community charge. Nearly all of them—this is an important point—will have an interest in at least one, or maybe all, local government services. We can pick out only two that most people of all ages use: the use of roads and recreation facilities provided by local authorities. Under the scheme there is a rebate system as well as some total exemptions. I think that 100 per cent. of fairness is beyond reach. As I have said, if the charge is to be in the vicinity of £250 a head, I shall undoubtedly benefit. The reverse will be true of many others.
I have felt that many of the criticisms that have been made about the unfairness, on the face of it, of everyone paying the same sum forget the contributions that are made to central government which are fairly considerable levellers. I know that they do not go all the way, but one should not forget that they exist. I agree with my noble friend Lady Elliot that payments by everyone who uses local services is a desirable facet. There are no other positive proposals and I support the Bill in principle.
Having said that, like everyone else I have reservations. I do not want to get involved in committee points; but on Clause 17 the matter that has been raised by the noble Lady, Lady Saltoun, is that of tied cottages. Clause 17(6) states that the "responsible person" is the person to whom the register will apply. I am not quite sure whether the occupier of a tied cottage is a tenant, as existing statutes define that word. Subsection (6) seems to allow the registration officer to designate either the owner or the occupier as the responsible person. I should not take the least exception and I see no other way—
§ Lord Stodart of Leaston
With the greatest of respect, my Lords, I do not think that the noble Lord has quite cottoned on to what I was trying to get at. The Bill as I read it says quite clearly that it may be either the owner or the occupier who is the "responsible person". It is to either of those that the registration officer may go. I may be wrong about this, and the noble Lord has a much better reputation for filleting statutes than I ever had. I would think it entirely reasonable that when the register is being compiled in the first instance if the registration officer should look at the valuation roll, that does not show the name of the occupant of the tied cottage. The tied cottages are in my name on the valuation roll.
It would seem perfectly reasonable therefore that the registration officer writes to me and asks: "Who is in Leaston Farm Cottages 4, 5 and 6?" I would then supply him with names, and that is perfectly legitimate. However, I would take very strong exception to being made responsible thereafter for, say, telling the registration officer that a son or daughter had reached the age of 18 or that a mother- 1377 in-law had come to live in the house. I think that once the register is drawn up it will have to be the person who is registered in the cottage who is the responsible person.
There are two other things I should like to mention. So far as I can see, the payments have got to be made in 12 monthly instalments. There seems to be no flexibility in Schedule 2 about this. At the moment of course we have a system in which one can either pay one's rates in one 12 months' payment or, if one opts otherwise, one can pay them by instalments. I would certainly hope that the same system could apply in the new set-up.
Finally, in all honesty I cannot but agree with what has been said by the noble Lord, Lord Hughes and Lord Morton of Shuna. I believe the difficulties of tracing people who move are going to be gigantic. I could give an example. With considerably bad judgment, some two years ago I engaged a tractorman; and within 10 days I was served with an arrestment notice on his wages. Within another three weeks, four different gentlemen arrived, all wanting to know where they could get hold of him because he had obtained credits from the companies which they represented and they were very keen to track him down. Overnight he disappeared and, so far as I know, he disappeared into the Newtongrange or Dalkeith area, which is heavily populated. I cannot for one moment visualise that gentleman—and there are others like him—going to the registration officer for Dalkeith and Newtongrange and saying, "Please put me on your list." Therefore I am inclined to think that when the registration officer knocks on the door of many houses, the room under all the beds will rapidly become overcrowded as people dive for cover.
§ Lord Hughes
My Lords, before the noble Lord sits down, may I say this to him? He said that less than 50 per cent. of the people of Scotland paid income tax. I do not know his source of that information, but if it is correct it means that 2p off income tax is then meaningless to half the people in Scotland.
§ Lord Stodart of Leaston
My Lords, not having the knowledge of the noble Lord, I would not in the least know what he is talking about.
§ 7.34 p.m.
§ Lord Monkswell
My Lords, one of the problems that we have in Parliament is that the Trades Descriptions Act does not apply. In this connection the correct title of this Bill would be the "Poll Tax Bill", and its longer title would be, "The Legalisation of Tax Evasion by the Rich". The Bill results from a problem which was created by Her Majesty's Government, and we can only look at a couple of the other problems also created by the Government to see where it might lead us. I refer to two specific cases—the miners' dispute and the current teachers' dispute—both of which were created by Her Majesty's Government.
The principal result of this poll tax Bill will be to reduce the tax bill for the wealthy and to increase the tax bill for the poor. I suspect that the principal aim of this Bill is to attack democracy. The Bill introduces an inefficient method of tax collection and gets rid of an efficient method of tax collection. Tax evasion will be 1378 encouraged and a reduction in the electoral roll will result. One estimate has it that the electoral roll will go down by 10 per cent. That is an amazing suggestion, and I suspect it would be even higher than that in some areas.
History is littered with the relics of unpopular and stupid taxes. We look at the salt tax: that led to riots in Scotland, England and India. We can still see in parts of Scotland the relics of the roof tax, when a tax was levied on the area of the roof of a house. The result of that was that the owners of some houses literally took the roof off to avoid paying tax. The imposition of the window tax resulted in no windows—I was going to say it resulted in architectural monstrosities.
The rich always tend to be more successful in tax evasion. We need only look at the current situation of the noble Duke, the Duke of Westminster, to realise that. The poor people who are subject to unfair taxes have different ways of objecting, and violence will result from this. The noble Lord, Lord Morton of Shuna, suggested one avenue of violence that will result: the violence that will come to the collectors of information. I think there will be other aspects of violence, and I will touch on them later. Again, we must recognise that this Bill effectively is the legalisation of tax evasion by the rich.
Taxes should be seen to be fair and they should relate to people's ability to pay. The poll tax this Bill would bring in would tax those with no income and no wealth; it would foster an underclass of non-citizens. Rates in fact are a progressive tax, taxing those with greater wealth more than those with little wealth. Rates also encourage the sensible use of wealth. For example, they encourage the sensible and productive use of commercial and industrial property. One has only to think back to what happened when there was a threat to levy rates on Centre Point in London to realise how effective the threat was. A building which had stood empty and idle for years was suddenly brought into use. It also encourages individuals to use property more sensibly.
We have the example of the little old lady living in a large house, subject to the so-called unfair penalty of rates. But when one thinks of it the other way round, the little old lady may be suffering far heavier penalties in having to cope with the cleaning and heating of such a large house. It may be a service to her to demonstrate, through the economics of the rates system, that it would be far more sensible for her to move to a smaller house and make room in the large house for a bigger family who would make more effective use of it.
The main problems with rates are, on the one hand, a lack of sensible valuation and the need for regular and frequent revaluations based on capital value and not rentable value. On the other hand, there are the steep increases in recent years to make up for the reduction in support from other taxes for essential local provision, democratically arrived at and necessary for a civilised society. The Government are responsible for that.
Perhaps I may quickly list some of the bad effects of the poll tax. It will demand money from people who are unable to pay; it will reduce taxes for the rich; it will increase taxes for the poor; it will encourage 1379 people to evade taxes; it will encourage people to give up their voting rights; it will exclude people from society; it will encourage violence and a lack of care for community property; and also—I think this is something that people have not mentioned so far in the debate—it will encourage local rights at the expense of general rights.
We have heard some mention of a threat of poll tax evasion. One of the results of that will be the need to try to reduce tax evasion. In fact, the Chancellor this afternoon has mentioned more measures to cut down the evasion of VAT. It is the instinctive reaction of the tax gatherer to try to prevent tax evasion. I suspect that with the poll tax the methods used to counter evasion will result in an erosion of civil liberty in this country. The poll tax will also encourage disregard for the law. If we pass this Bill into an Act, we will effectively be saying to some citizens of our country: "Parliament and the law feel that you are unworthy of support and consideration. We are asking you for money when you do not have any". It is the impossible question. People of that sort will turn round and say, "The law is impossible and I will live outside the law".
To come to the bad effects of this Bill, it will subject the people of Scotland to all the bad effects of a poll tax, but it will do other things as well. It will deny the democratic will of the people of Scotland and encourage an attitude that Scotland is somehow different from the rest of the United Kingdom. It will prevent and delay revaluation of rateable values for England and Wales and will therefore perpetuate the present unfairnesses of rates in England and Wales. It will perpetuate Her Majesty's Government's control of local authority spending and the provision of democratically determined local services. Effectively the Bill will give the knife to the Government Minister to make the cuts. It will also force some Scots citizens to leave the country of their birth to escape its provisions.
Finally, I should like to come to the alternatives that are before us. The first and most sensible alternative is not to proceed with the Bill at all. The Government should increase the rate support grant and reduce the burden of rates; revalue rateable values in England and Wales as speedily as possible; allow the payment by weekly or monthly instalments of rates and, in the longer term, levy both national and local rates and local and national income tax. I fear that that suggestion will not fall on sympathetic ears in the Government.
The next alternative that we have is to ensure that the poll tax applies to the whole of the United Kingdom and not just Scotland. A number of speakers in this debate have shown how the Bill, as it is presently worded, just applying to Scotland will have very serious effects on and distort the society that we presently see. The way to prevent those apparent anomalies is to ask: if the Government consider that this poll tax is so good and so beneficial compared with rates, why is it not applied to the whole of the United Kingdom? Lastly, we cannot allow to go forward a situation where effectively we are asking people with no wealth to pay a tax of any sort. We must pursue the possibility that all those who are below the income tax 1380 threshold should be exempt altogether from this poll tax.
§ 7.47 p.m.
§ Baroness Strange
My Lords, may I first declare an interest? I am a Scottish ratepayer. Your Lordships will be very glad to hear that in a debate with so many distinguished and knowledgeable speakers, many of whom have said—and better than I could—what I was going to say, I shall speak only very briefly, almost subliminally.
May I tell your Lordships the old pantomime joke of the two Morningside ladies standing in a queue? One asked the other,What do you think of the Edinburgh rates?and the other one replied,Oh, the rates are no sae bad. It's the maice that are appalling.The rates may be no sae bad, but we small band of 1.9 million Scottish ratepayers certainly think they are appalling. I should therefore like to welcome this Bill, whose purpose is to create a fairer system of payment for local services, because that is what rates are for. They are to pay for our pavements, our street lighting, our water, our sewerage, our libraries and our schools. The list is endless. They are also to pay for the expenses of the councillors and others who administer this money.
In principle—and I am certainly not going into the nitty-gritty of 50 pages of closely written clauses and subsections—this new Bill is to spread the payment for these services over everyone who uses them. This is very important, because it gives everyone in the community a chance of belonging to that community and seeing how his or her money is being spent. It is also very important in a caring society that there should be a safety net. I support everything that the noble Lady, Lady Saltoun, has said on that matter. No one should be asked to pay more than he or she can afford.
I have heard it asked, "Why should we in Scotland be guinea pigs for this new system?" May I say, without being unreasonably chauvinistic, that the reason is that we in Scotland are naturally in the van of progress. What we do in Scotland today, the world will do tomorrow.
This may not be an easy Bill to administer. Nothing worthwhile is easy. However, it is a Bill of principle, thought, care and fairness. I believe we should all welcome it.
§ 7.50 p.m.
§ Lord Taylor of Blackburn
My Lords, I will not detain your Lordships for very long. I feel a bit of an intruder in joining in a debate with my Scottish colleagues on what is basically a Scottish matter. However, I am very pleased today that I am an Englishman and that this experiment—if it is an experiment—is being tried in Scotland. After listening to the debate so far, I am certain that this experiment will finish in Scotland. I do not think for a moment that it will be extended or that any Government will dare to extend it to England.
I feel that the Second Reading of this Bill has been very interesting and enlightening. No doubt I shall have an opportunity of talking to my English and 1381 Welsh colleagues at a later stage and reporting to them what has been said in this Chamber today. I shall tell them that we are not having it under any circumstances. After listening to this debate, I feel sure that the Bill will be very much altered at Committee stage. if many of the things which noble Lords have mentioned come to pass, it very much deserves to be altered. I have said my piece, and I shall look forward to listening and to participating at Committee stage if I feel it is necessary.
§ 7.52 p.m.
§ Lord Strathclyde
My Lords, at this stage of the evening I shall keep my remarks as brief as possible. In the same way that I have been waiting to speak, most people in Scotland have been waiting a long time for this Bill. At least they will see the light at the end of the tunnel which will free them from the built-in iniquities of the existing domestic rating system.
Every year too many ratepayers await the Ides of March with fear of the perverse justice which brings their rate demand. Incidentally, I must declare an interest in that I am one of those Scottish ratepayers. I, with them, welcome this Bill in that it will mean a fairer, more equitable and ultimately more meaningful system for raising the proportion of local government funding which comes from private citizens.
Surprisingly, there are many people and local authorities who are against the Bill in principle. I find that difficult to understand. Surely the community charge will mean a greater democratic accountability and greater individual responsibility towards local services, as well as greater involvement by local payers, who will take a greater interest in where their money is being spent. Surely those are things that people should welcome. But it appears not.
Some of the reasons which opponents put forward include the idea that the community charge will be more difficult and expensive to administer. It is also said that local authorities will not be able to forecast as exactly as they can at the moment the amount which they will be able to raise for the coming year. To me, that smells rather of sour grapes on the part of local authorities which are unwilling to be progressive and to change from an outmoded tax on property—a tax which suffers from the vagaries of the rating officer and is a disincentive to improving property with extra bathrooms, bedrooms, garages, and so on, because ratepayers know that they will have to pay additional rates for no additional benefit.
Systems of taxation, like anything else, must evolve and move forward. Local authorities should react to the voice of the ratepayers. I think that in the future they will see that the community charge has been a tremendous innovation. Many noble Lords, and especially the noble Lord, Lord Dean of Beswick, have said that the collective voice of Scotland is against the Bill. However, I am sure that few Scots genuinely support the existing arrangements.
Some local authorities also argue that more people will avoid the community charge. I cannot believe that the amount of payment avoided will be much greater than the existing avoidance of rates with people putting up garages in their back gardens, fixing up 1382 central heating or generally improving properties without notifying authorities.
Perhaps the biggest argument that is put forward against the community charge is that it will be charged across the board. Many noble Lords have mentioned that point, and it has been mentioned especially by noble Lords opposite, who seem to feel rather guilty about saving money on their rates. The community charge will be charged across the board to anyone over the age of 18. It is said that that goes against the principle of the rich paying more for the privilege of living in a particular area. It is therefore felt to be fair that people who live in a certain type of house and who are deemed to be wealthy pay more for the same services than those living in a different type of accommodation and who are deemed to be poor. I use the word "deemed" carefully, because it seems to me that there is no rule to say that the wealthy cannot live in a small or low-rated house.
On the point that in this country we already have a well-defined system of taxation which takes care of paying more if you have more, I cannot entirely agree with the views of my noble friend Lord Ellenborough. Income tax, value added tax, capital gains tax, inheritance tax and other such taxes are the existing methods of wealth distribution on a national scale. On the other hand, we also have a system of paying for set services with a fixed charge. Examples of such charges are those made for television licences, the road tax licence and the fact that we all pay the same amount per unit for electricity, gas or the telephone. We all pay the same standing charge for such services, no matter how wealthy we are. I do not feel that there is any difference in paying a set charge for such services and paying a set community charge for local authority services. The only difference is that we may choose if we want a car or a television and we can decide how much electricity or gas we use, but we cannot get round a standing charge for local authority services which everyone uses to one extent or another. To my mind, the community charge is similar to a standing charge. Everyone will thus be contributing to the community in which they live.
This new system of local government finance should also stop the temptation on the part of some local authorities (although this is perhaps more relevant in England) of squeezing ratepayers to improve the standing of some councillors with certain sections of voters. I think that my noble friend Lady Carnegy of Lour mentioned that matter. To put it crudely, they buy votes at the expense of the ratepayer and especially at the expense of the private home-owning ratepayer. The community charge will remove that temptation almost completely. It will allow councillors to concentrate on running their areas in the most prudent ways possible.
At this stage I should like to make some very brief suggestions for the improvement of the Bill. First, since there is a general fear that people moving from one community charge area to another may not register, will the Government not consider making it incumbent on the solicitor or the estate agent handling the sale or purchase of a property to notify the registration officer that a change has taken place? The process of registration could then be put into effect the moment that the move is made.
1383 Secondly—my noble friend Lord Burton and the noble Baroness, Lady Elliot of Harwood, mentioned this point—the Government have considered abolishing the rates on sporting activities such as shooting and fishing. This seems to be an anomaly in Scotland and cannot raise very much money. Fishing is the number one outdoor sport in the country and, especially where I come from in Ayrshire, is controlled to a large extent by a number of small local clubs for which paying rates is a substantial burden. However, I shall not go into detail on this as it is an area that can be looked at in Committee.
Finally, I should like to congratulate the Government on introducing the Bill and on having the courage and the vision necessary to change a most unpopular tax which will possibly affect more people in Scotland—in my opinion for the better—than any previous Act since the Government were first elected in 1979. I hope that its passage through the next stages will run smoothly, with only minor modifications. I support the Second Reading of the Bill.
§ 8 p.m.
§ Lord Mackie of Benshie
My Lords, I shall genuinely not take up the time of the House because by now the Minister must be reeling under the attack unless he is even more complacent than I think he is.
I shall of course make a number of remarks. First, the tax is demonstrably unfair. Every noble Lord who has spoken has disclosed that from the point of paying rates his own position will be much improved by the poll tax. The noble Lord, Lord Ross, started the ball rolling by saying that he would be £700 better off and other noble Lords mentioned their positions. That in itself should make the Minister think. A tax has not only to be fair but must be seen to be fair. This one must be seen to be totally unfair.
Some examples have been given but one can give many others. Dukes have been much mentioned today. If a Duke has a number of shooting lodges, according to the formula the rates on them will be paid on two poll taxes. I should like to know from the Minister when he replies whether that is correct. That would save a number of people a great deal of money. To call this a community charge and to introduce it in this way indicates, as many noble Lords on this side of the House and indeed some on the other side have said, that it is a poll tax. It will be a tax on people who register.
We have heard many amusing examples, from the noble Lords, Lord Morton of Shuna and Lord Stodart of Leaston, of the kind of thing that will happen when you try to register people for this tax. It will be evaded by enormous numbers of people. They will be breaking the law. I do not want to give too many examples but there is no question that parents with sons living at home will be under severe pressure not to disclose the fact because it means that they will be paying large sums—to them it will be large sums—of money. It is as straight forward as that. The Government say that they will confer on the assessor the duty of collecting the information, but it seems to be an honour that he would rather not have conferred on him. It will take a good many more people to do it 1384 and at the end of the day it will not be done properly. For that reason alone it appears to me that the proposal should be abandoned.
I turn now to industrial and commercial rates. It will be extremely difficult for industry and business at large if eventually we move to a uniform rate and a uniform method of valuation. I do not know how you value something in the middle of Mayfair as against something in the middle of Aberdeenshire. A uniform system of valuation, whether it be for a factory or a shop, will be extremely difficult. It has to be local. It cannot be uniform. It will be much more difficult for local councils to encourage people to set up business and stay in business.
It is very difficult to say a good word for the community charge or poll tax. I notice that the heat has gone off asking the Alliance what it is going to do about it. We have heard a good deal of evidence from both this side of the House and the other side—from the noble Lord, Lord Ellenborough—that as an alternative local income tax proposed by the Alliance appears to be the best alternative to the system we have at the moment. Indeed, the Layfield Committee suggested that it should be used in addition to a more reasonable level of rates. This sounds much more sensible than the method we have at the moment. It would tax people fairly. It is reasonable that those who are unable to pay tax should not pay it and that those who are should pay it. I should have thought that when prosperity in Scotland rises, as we are continually assured it will, more people may come into the income bracket. That would be a very good thing for Scotland as a whole if it is true that only half the people pay.
Logical arguments have been produced from this side of the House. The arguments from the other side have been more loyal than logical. I think that the Minister will have a difficult job to make a credible reply. In other words, he had better be good because it appears to me that he has a very bad case.
§ 8.7 p.m.
§ Lord Underhill
My Lords, the noble Lord, Lord Mackie of Benshie, started his speech by commiserating with the Minister on having to reply to a number of devastating speeches that have been made against the Bill. It must be agreed that my noble friend Lord Ross made a devastating speech. That was followed by a large number of strongly critical speeches. I declare my own interest as a resident and ratepayer of England. I do not want to see this Bill repeated in England and Wales. In fact, in the interests of the Scottish people I should like to see the Government abandon it. If that cannot be done then the House will at least do the best it can to mitigate the more serious parts of the Bill.
If there are any doubts among English and Welsh Peers about the intentions of the Government, perhaps I may remind your Lordships about what the Secretary of State for Scotland said at the Second Reading of the Bill in another place on 9th December:My right honourable friend the Secretary of State for the Environment and the rest of the Government are as enthusiastic about the proposals for England and Wales as they are about those for Scotland".—[0fficial Report,Commons, 9th December 1986; col. 202.]1385 This so much alarmed the Conservative Member for Hornchurch that he said that because it was realised this was a pilot Bill for later action in England and Wales he and others would not support the Bill. Despite the massive majority of the Conservative Party in another place, at Second Reading the Government had a majority of only 54 votes. The 1986 Green Paper was signed by all three Secretaries of State. Therefore the intentions of the Government, if they can possibly get their own way, are quite clear. English and Welsh Peers should take the maximum possible interest in the progress of this Bill through the House.
The Government cannot claim, as they have done on some other measures, that they have a mandate for the Bill. It is not in the 1983 election manifesto. The Minister will not find it there. There is no reference at all to the introduction of this Bill or anything similar for the whole of Great Britain. Some of the Minister's noble friends behind him seem to share the Government's conversion to the present proposals. I say "conversion" because I am certain that the Minister will not deny the history of events as outlined by my noble friend Lord Ross of Marnock. The history of events is that the Government were opposed to these proposals. They regarded them as impossible, ineffective and costly. Yet now we have this Bill before us. It would be interesting to know whether the Minister accepts the outline of events as explained by my noble friend.
Reference has been made to the Layfield Report. If the Government wanted to look at other alternatives and reforms, they had an opportunity. On 9th April 1984 there was a Motion in this House for the Second Reading of the Rates Bill. When that was before the House the Opposition moved an amendment which called for a thorough review of local government finance. The Government did not grasp that and say, "Yes, this is what we need". They voted against that suggestion for review of local government finance because at that time they held a view opposed to proposals which were later outlined in the 1986 Green Paper.
Some noble Lords have asked what the attitude of the Labour Party is. I do not intend to deal with the Labour Party's policy tonight but would merely say that it is set out in a recently issued document on local government in which the question of domestic rates and non-domestic rates is clearly elaborated. That can be dealt with at the appropriate time.
The Leader of the House in another place, Mr. John Biffen, in a debate on the allocation of time—that was a guillotine Motion—on llth February, said:Proposals so far-reaching and fundamental in nature do, of course, require consultation and careful consideration".—[0fficial Report,Commons, I1/2/87; col. 323.]These proposals have received both, but I note that the Convention of Scottish Local Authorities said in paragraph 1.12 of its response to the Green Paper:The Convention regrets that neither the conclusions which the Green Paper reaches nor the manner in which these were reached have been the subject of any consultation or discussion with the Convention or any other organisations within or representing local government.".There is no doubt that local government in Scotland vigorously opposes the Bill. Not only has CoSLA 1386 opposed it but noble Lords will have received a document from some 30 local authorities in Scotland which are not Labour-controlled, all of which either oppose the Bill entirely or are strongly critical of certain features. That is in addition to the Labour-controlled authorities which some people suggest dominate CoSLA. So once again we find that local government in Scotland has been ignored. As other members have reminded the House, the three local authority associations in England representing the metropolitan authorities, the county councils and the district councils, all violently opposed the proposals in the 1986 Green Paper. So once again we find the Government saying there will be consultation and then completely ignoring the united views of local government.
The Scottish Office Ministers have claimed that careful account was taken of comments by many organisations on the 1986 Green Paper. Apart from what I have said about the reaction of local government not only in Scotland but in England and Wales, various noble Lords have referred to organisations which have sent critical views. I will not repeat them, but there is a very impressive list of professional and voluntary organisations which have opposed the basic principles of this Bill.
Various noble Lords have suggested that this is a panic measure. If the Government are suggesting it is not a panic measure but one that is well thought out, I should be interested to learn from the Minister which influential organisations in Scotland, England and Wales have supported the principles of the Green Paper and this Bill on which the Government are relying. As other noble Lords have said, they certainly cannot rely upon the support of their own Tory Reform Group, which has said that the Bill is misconceived and will undermine local self-government.
The Bill was included in the Queen's Speech of 12th November, hurriedly cobbled together, with its First Reading on 27th November and Second Reading on 9th December, I imagine before many Members of the other place had had an opportunity to digest its contents.
The Minister spoke of giving more accountability. I think my noble friend Lord Kirkhill dealt effectively with the question of accountability. Therefore, I will not go over it again. With the possible national determination of the amount of non-domestic rate together with the rate support grant (which is now going to be called revenue support grant), only the community charge will be left for decision by local government. Various noble Lords have reminded us that that means that some 86 per cent. of local government income will be controlled directly by central government. The accountability is with the central government if that is the amount which they will be controlling.
The Government's arguments for eventual nationalisation—for that is what it means—of non-domestic rates are thoroughly unsound. I would remind the House of a £50,000 study, commissioned by the Government and carried out by Cambridge University, which reported in 1985. That study concerned only districts in England and Wales but it must be closely related to the problems of Scotland. It 1387 concluded that rate levels do not affect location of jobs, nor do they have a harmful effect on local employment; that company profits are not seriously affected by level of rates and that in the United Kingdom rates represent only 1 per cent. of manufacturing industries' costs. The study showed that in areas where rates are low non-domestic ratepayers will pay more under the Bill, and that in areas of high rates, which are generally the deprived areas, the local authorities will suffer loss of revenue.
Those were statements made in a study commissioned by the Government which reported in 1985. Despite that, the Government issued their Green Paper in 1986. A uniform non-domestic rate would take no account of the services that are provided or need to be provided for industry, or for infrastructure. How did the Government react in the Green Paper to that study report which they had commissioned? On page 13 of the Green Paper there is reference to the study, which the DoE had itself commissioned. In paragraph 2.10 one finds the following:How far business rate increases do affect the location and viability of businesses in particular areas must therefore be a matter for conjecture. For most firms the burden of rates is not so significant that a change in its level would be likely to have a major inpact on location decisions".I am sorry that noble Baroness, Lady Gardner of Parkes, is not here. I can well remember the debate we had in March last year on the question of rates, when she pointed out with considerable alarm the problem that Westminster City Council would face in the event of any nationalisation of the position on non-domestic rates. If I may quote her, she said:I do not find that the proposals in the Green Paper are fairer …I consider the suggestions impracticable and expensive to implement". [Official Report,26/3/87; col. 1436.]As various noble Lords have reminded us, in the last year of the Labour Government the proportion of relevant expenditure from the central government grant was 68.5 per cent. At present it is only 56 per cent. Obviously that has had a considerable effect on rating in Scotland, as has the reduction in the rate support grant in England and Wales on the position of rates in England and Wales.
It must be emphasised that should there be any further cut in rate support grant, or what is now to be called the revenue support grant, or anything further like teachers' pay increases, the obtaining of increased revenue will fall solely upon people who will be paying community charges. The important question is not whether we are going to change the name of RSG to revenue support grant but what will be the future allocation by central government to rate revenue support in Scotland.
Despite all possible arguments to the contrary, it must be generally accepted that the community charge is, in effect, a poll tax. Polls have shown that 86 per cent. of the people of Scotland believe that local taxation should be related to the ability to pay. I am not going further into those arguments because I believe that sufficient points have been made to show the unfair effect that this will have on many households in Scotland. We must challenge the Government to deny the effect that this will have on 1388 many families. Figures have been given by my noble friend Lord Hughes and we had the opening attack from my noble friend Lord Ross of Marnock. Arguments were put forward by many other noble Lords on the effects this Bill will have.
When the Minister was out of the Chamber—I do not criticise him, because during this five-hour debate I also slipped out for a quick cup of coffee—he missed the speech of his noble friend Lord Ellenborough. Although he was not speaking on behalf of the National Union of Ratepayers, he can represent the views of that union. He believes that the proposals in the Bill will not be acceptable when the penny drops. He felt that the Government may have underestimated the opposition to the proposals for a community charge and that they would be well advised to think again.
That reminded me of what the noble Lord, Lord Ellenborough, said during the same rates debate to which I have referred. On that occasion—I quote from Hansardof 26th March 1986 at col. 1430—he said:It is difficult to see how it could possibly be fair for a 24 year-old just married and earning, say, £8,000 per annum, to pay exactly the same as someone aged 48 earning £40,000".I am certain that the noble Lord does not mind my quoting him, because he said almost the same thing again tonight.
I should like to say a few words regarding the register. I think it is acknowledged that I know a little about the problems of keeping an election register up to date. In a Response to the Commons Home Affairs Committee in 1984 the Government referred to a survey commissioned by the Home Office and the Scottish Home and Health Department which showed that 6.5 per cent. of those eligible for inclusion in the 1981 register of electors were not registered where resident. It showed that 7 per cent. were not eligible at the address on the register. Non-registration in inner city areas was particularly high. It referred in particular to Scotland where non-registration was 5.3 per cent.
It has been mentioned that the annual changeover on the electoral register varies between 15 per cent. and 20 per cent. but my noble friend Lord Morton of Shuna believes that it is nearer 25 per cent. We certainly know the results of the register when we are canvassing. All who have done that know the results of the register.
Paragraph 1.3 of the Government's Response to the Commons committee states:The Select Committee also refer to a 'rolling register' of this kind. but both they and the Working Party ruled out the major change such a system would constitute on grounds of cost".However, we now have proposals in the Bill for a rolling register of residents—not electoral registers.
We should like to know further what proposals there are for safety nets for local authorities. What proposals are there for rebate schemes? What proposals are there for social security grants to help to compensate for the 20 per cent. that everyone will have to pay? We require more details in all those respects.
Noble Lords referred to the problems of the cost of collection. CIPFA believes that there will be considerable evasion. It estimates that under this new proposal 10 per cent. of the rates will not be collected 1389 as against only 1 per cent. at present. I ask one question. Let us say there is a family of five adults all aged 18 years upwards. Four of them pay but the fifth moves away. What then happens? Does the sheriffs officer just go in and take property to the required amount? The whole proposal is a complicated, bureaucratic and costly mess.
If noble Lords disbelieve what I have said, I suggest that they read the Explanatory and Financial Memorandum. It states that,the total additional cost to local authorities in a full year will be in the range of £17–22 million. Expenditure of up to £9 million is expected in 1988–89 on the establishment of the register and preparation of new billing and collection systems".The memorandum goes on to say:The wider scope on the community charge will mean an increase in the total cost of rebates".The memorandum refers to the increased manpower which will be necessary to assist in the sheriff courts and the additional staffing for Scottish local authorities.
The Opposition have been criticised sometimes for the fact that our plans for employment are merely putting extra staff into local government. We have endeavoured to deny that. However, here we have a Bill which very few people in Scotland want and which will add considerably to expenditure, the bureaucratic set-up and staffing. I hope that even at this late hour the Government will decide not to proceed with this Bill.
In conclusion, the Convention of Scottish Local Authorities says:The Government's proposals are unjustified, unwelcome and unacceptable. They would seriously weaken local control and further centralise decision-making".On those grounds alone we should do our best to see that this Bill is not carried through in the form now before us.
§ 8.28 p.m.
§ Lord Glenarthur
My Lords, we have had an interesting debate which has ranged widely over the proposals contained in this Bill and indeed some other proposals such as those suggested by members of your Lordships' House who feel that there are other, perhaps more suitable, arrangements which could be made. I should like to deal with a number of the important themes which have emerged during the debate and I shall answer as many questions as I can.
I think we are on common ground in stating that something must be done about domestic rating systems. Having said that, and having listened to the speeches of the noble Lord, Lord Ross of Marnock, and indeed the noble and learned Lord, Lord Wilson of Langside, which I found particularly negative, I must confess it was rather difficult to tell whether they thought that something ought to be done about the domestic rating system. My opening remarks explained why the Government believe that this is a discredited system, and there is widespread support for that view. Where we clearly depart from common ground is in deciding what should be done. I am afraid we have heard little to justify the claim that there are many credible alternatives to the scheme set out in the Bill.
1390 The noble and learned Lord, Lord Wilson of Langside, the noble Lord, Lord Hughes, and others suggested that in some way Scotland was a kind of guinea-pig or a test-bed of some sort for this Bill. There is no question of trying out the new system in Scotland before it is introduced in England and Wales. My right honourable friend the Secretary of State for the Environment has made quite clear the Government's commitment to introducing legislation to establish the new system in England and Wales no later than the first Session of a new Parliament. That means that the new system will be well on its way to introduction before there is any real experience of the operation in Scotland. So logically there can be no question of Scotland being a test-bed. I do not think that ultimately in England we shall disappoint the noble Lord, Lord Hughes, or indeed the noble Lords, Lord Taylor of Blackburn and Lord Underhill. I can assure all those noble Lords that England's time will come.
I have only just started to speak and I have a lot of material to get through, so I hope that the noble Lord who started to rise will forgive me if I do not sit down at this moment.
As for the suggestion of the noble Lords, Lord Kirkhill and Lord Hooson, that national taxation was not linked to accountability and therefore that what is proposed in this Bill should not be linked to accountability, surely nobody is insulated from the effects of national taxation, which comprises not just income tax but also VAT, excise duties and a host of other demands which everyone must pay. It is not true to take the line that was taken by those noble Lords.
So far as we can tell, it is the policy of the Official Opposition—indeed, the noble Lord, Lord Underhill, referred to it just now—to retain the rating system, basing it on capital values. I shall say a few words about that. Capital values are far from being the simple and straightforward improvement to the rating system that many claim them to be. The Layfield Report, which has been quoted many times this afternoon, drew attention to the fact that capital values are more volatile than rental values, so that regular revaluations would be essential.
A move to capital values would do nothing to tackle the fundamental criticisms of the rating system. We should still have a system of property taxation whereby the amount paid by individuals was unrelated to that individual's ability to pay and to his use of local services. The widow in a large house would still pay the same amount as a family of four working adults in a comparable house and the number of those who pay would be no greater than at present under the rating system, providing no increase at all in the essential element of accountability. No doubt we shall return to that theme in the later stages of the Bill.
As for the question of a local income tax, which I shall cover briefly also because it was a matter that was raised by my noble friend Lord Ellenborough and the noble Lord, Lord Taylor of Gryfe, as well as being referred to by the noble Lord, Lord Mackie of Benshie, perhaps the main weakness of a local income tax would be its failure to provide a sufficient increase in local accountability. As my noble friend Lady Carnegy said, at present there are approximately 1.9 million 1391 domestic ratepayers in Scotland. Local income tax would be payable by around 2.5 million people; and to answer my noble friend Lord Stodart of Leaston, that represents about 60 per cent. of the adult population. It provides nothing like the increase in accountability that the community charge would achieve.
I should like to add, in reply to the criticisms of my noble friend Lady Carnegy of Lour, that it is doubtful whether local income tax would be sufficiently perceptible. The forms of administration which its advocates seem to favour would mean that it would be very hard for individuals to distinguish it from their overall tax payments. Most people are concerned only with the bottom line; that is to say, the total deductions from their pay. Notices of coding at the best of times are not the easiest things to understand and it is asking too much of people to expect them to disentangle the effects of tax changes at central and local levels.
In all, there are many weaknesses in local income tax. It is not self-evidently fair; it does not sufficiently increase accountability; its administration would be far from straightforward, and it certainly would not be painless for many individuals. Those who support it will have to counter these arguments, as no doubt they will try to do later on, if they are to convince the people of Scotland.
Much has been said about students, and in this connection I refer particularly to the remarks of the noble Lords, Lord Hughes and Lord Carmichael. The noble Lady, Lady Saltoun, also mentioned this matter. So far as concerns assistance for students who are liable to pay the personal community charge, we propose that this will be available to students undertaking courses which meet the criteria for the award of grants by the Scottish education departments, by English local authorities and by various other award-making bodies such as the research councils. In broad terms, such students will be undertaking courses of further or higher education for at least 26 weeks of the year and 21 hours per week. That is the basis on which the DHSS judges whether a person is a student for its purposes and it is obviously right that we should keep in line with its definitions.
The question of not applying the community charge until it is UK-wide, as suggested by the noble Lord, Lord Carmichael, is a point which I understand, but the Government's view is that there can be no question of exempting students from the community charge when it is introduced in Scotland in 1989. Students use local services and vote in local elections and there is no reason why they should not be liable to pay the charge like all other adults, including others in their own age group who may be employed or on low wages.
I know that there has recently been correspondence about this matter and that some of it fails to take into account the Government's commitment, which we placed very clearly on the record, to provide students with extra support to enable them to pay the charge. There will be a flat rate addition to grant based on the Scottish average charge and having regard to the level of assistance available under the community charge rebate scheme. This will be payable to all students eligible for grant including those who, because of 1392 parental income, receive no grant at present. I believe that that very much accords with the views of my noble friend Lady Elliot of Harwood.
My noble friends Lord Burton and Lord Stodart of Leaston, and the noble Lady, Lady Saltoun, referred to tied houses. Arguments have been put forward in support of some form of special arrangement to meet the position where agricultural workers living in tied houses, who at present have their accommodation provided rent and rates free, will be faced with liability for the personal community charge. Of course it is not only agricultural workers who will be in that position. Others, such as ministers of religion—and I shall return later to the remarks about manses made by the right reverend Prelate the Bishop of Ripon—and policemen will have similar arrangements for meeting their rent and rate liabilities and the same principles will apply to them also.
So far as concerns the tax position, the personal community charge will not be directly connected with the occupation of a particular property. It will be the same for everyone, subject of course to the availability of a system of rebates for those on low incomes. If a tax concession were allowed on payments made by employers in respect of the personal community charge, it would be very difficult to deny similar concessions in respect of other payments, whether in cash or kind, that employers might choose to make as a supplement to basic wages. I think therefore that it is highly unlikely that my right honourable friend the Chancellor of the Exchequer would be willing to consider a tax concession of the kind that has been proposed. Nevertheless I shall ensure that my right honourable friend is made aware of what has been suggested.
Among the observations made by the noble Lord, Lord Morton of Shuna, was one that suggested that the rebate scheme was based on average community charges. Perhaps I can explain to the noble Lord that that is not the case. The rebate scheme will be based on the actual charge, as some of the examples that we have given in many of the press notices that have come out have already made clear. However, I should like to dwell a little longer on community charge rebates because the noble Lords, Lord Ross of Marnock and Lord Hughes, and other noble Lords, as well as my noble friend Lord Sanderson referred to them. However, the noble Lord, Lord Monkswell, seemed to forget that the opportunity for rebates of many sorts was allowed for in the Bill.
It has been suggested that because the details of the scheme are not set out in the Bill there is doubt about the Government's intentions and about the effects of the scheme. I can assure your Lordships that nothing could be further from the truth. We have made it crystal clear that the rebate scheme will follow closely the reformed housing benefit scheme for rates that is to be introduced on 1st April 1988. This is not a new idea; it is the very basis on which we produce the extensive illustrations of the effects of introducing the community charge which were given in the Green Paper. There could be no question of setting out the details of that scheme on the face of the Bill. That would quite simply be putting the cart before the horse.
1393 The details of the reformed scheme of housing benefit have been the subject of considerable consultation with local authorities over the past year, leading to the draft regulations which were sent to local authorities for comment just before the turn of the year. Once those regulations are made by my right honourable friend the Secretary of State for Social Services, which on present plans we expect to happen round about April, there will be a firm basis on which to work out the details of the community charge rebate scheme.
In practice of course most of the details are already firm and I can give your Lordships some information. First of all, let me explain the general shape of the scheme. Its starting point will be a system of income thresholds which will take account of personal and family circumstances such as age, number of children and any permanent disability. These income thresholds will be closely linked to the income support levels which include personal allowances designed to give special help to vulnerable groups such as single parents and the disabled.
Having established the income threshold, the operation of a rebate scheme means that someone whose income is equal to or below the threshold for his own circumstances will be entitled to the maximum rebate, and for illustrative purposes the Government have set a figure of 80 per cent. for that rebate. A formal decision on this will not be taken until the regulations are made, hut as your Lordships have forecast, 80 per cent. is likely to be the figure.
For those whose income exceeds the threshold for their own personal circumstances there will be a downward taper. The proposed figure in the scheme of housing benefit for rates will be 20 per cent. and that is therefore the figure we envisage including in the community charge rebate scheme. As I have said, these arrangements represent a clear framework for the rebate scheme and I think that they give the lie to any suggestion that the matter has not been thought fully through.
Following on from rebates, I think it is important to mention reliefs and exemptions, a point perhaps particularly touched on by the noble Lord, Lord Kirkhill, and others as well, in particular my noble friend Lady Carnegy and the noble Lady, Lady Saltoun, respectively for the mentally handicapped and the disabled. In principle, the Government have decided that there should only be the minimum number of exemptions from the personal community charge. The pattern of exemptions and reliefs which has grown up as part of the rating system simply adds to its complexity. As we have made clear, a scheme of rebates through the social security system will be available for those on low incomes who might otherwise have difficulty in meeting the full cost of the personal community charge.
We therefore only propose two limited categories of exemption. These are for prisoners in custody and patients whose stay in hospital is long enough for the hospital to be considered, as a matter of fact, their sole or main residence. In both cases, people in these categories are by definition removed for the time being from contact with the local democratic process, and we have decided that it would be neither appropriate 1394 nor practicable to seek to extend liability for the community charge to them.
I recognise the force of the arguments which have been put forward in relation to the mentally handicapped. I shall carefully take note of those, and no doubt other representations will be made during Committee. But I must reiterate the principle that in order to maximise the improvements in accountability which the Bill embodies, the exemptions and reliefs from the personal community charge must be kept to an absolute minimum.
My noble friend Lady Carnegy referred particularly to the disabled. It would not be appropriate, even if it were possible, to make any direct carry-over into the new system of this form of relief from the old. But relief is also available under the rating system for institutions housing the disabled. We have taken the view that this relief should not be carried over into the new system, which is of course a system of personal taxes rather than taxes dependent on the occupation of a particular property.
However, the position of disabled people will he specifically recognised in arrangements for community charge rebates. The thresholds for the determination of income support will have built into them an element to take account of disablement. Disabled people will therefore be eligible for income support and hence for community charge rebates up to a higher level of income than people who are not disabled. This will, I think, he a fair recognition of the special position of disabled people, whatever their personal circumstances and regardless of where they live.
I now turn to the right reverend Prelate the Bishop of Ripon, who raised the question of the charge on manses. Perhaps I may say to him that the community charge system will not relate, as I think he understands, to the occupation of property as such, and the amounts payable will not vary in relation to the size or assessed value of the property occupied. We have therefore taken the view that there can be no question of a direct carry-over into the new system of the reliefs at present available to the churches and others in respect of rates payable on domestic properties.
Further consideration of the scope of the collective community charge has led to the conclusion that it should only be applied in a small number of cases where residents at a particular address are very transient. We recognise, however, that there is a need to ensure that the community charge is not an unacceptable burden for those on low incomes. I accept that what I have to say in relation to the generality of this particular point may he disappointing to church organisations. But by the nature of the charges proposed it would not be possible or appropriate to carry over into the new system any exact equivalent of the pattern of reliefs now available in respect of domestic rates.
The noble Lord, Lord Ross of Marnock, and the noble Lord, Lord Hughes, referred to a shortfall in collection. The noble Lord said that it was the opinion of experts that we would be lucky to collect 80 per cent. of the community charge, of the amount due. I think this misrepresents the opinion of the experts. For 1395 example, there are reports in today's papers which the noble Lord has no doubt seen quoting an expert as saying that losses would be anything between 5 per cent. and 20 per cent. So in other words 20 per cent. is the worst case suggested and not the best, and to that extent I agree with my noble friend Lord Strathclyde.
As to the estimate of the accuracy of registration as 90 per cent., which was referred to by the noble Lord, Lord Hughes, I must tell him that a survey by the Office of Population Censuses and Surveys in 1981 discovered that the electoral register in Scotland was more than 95 per cent, accurate when it was drawn up. We do not expect that registration for the community charge will be any less accurate than the electoral register. The provisions for the rolling register will of course allow for continual updating so that it should be more accurate.
On the question of the cost of collection, which was raised by my noble friend Lady Carnegy, we have no details of the CoSLA calculations. The figures in the financial memorandum, as has been mentioned suggest an additional cost of £17 million to £22 million, which is roughly a doubling of the total cost consistent with roughly doubling the number of those paying towards local taxation.
The noble Lord, Lord Hooson, raised an important point about confidentiality of information. Registration officers will only be able to have access to information held by other local authority departments for the purposes of making up the register and certain categories of information may be prescribed as not available to the registration officer. Clause 1 7(4) refers to this. We intend to use that power to ensure that personally sensitive information such as that held by social work departments and the police should not be available.
My noble friend Lord Burton was concerned about administrative costs and, with my noble friend Lord Stodart of Leaston, about paying by instalments. In regard to administrative costs, we cannot give forecasts of extra local authority manpower until there have been full and proper consultations with CoSLA. The cost estimates given in the Bill reflect the revenue in case load from doubling the tax base.
So far as concerns inflexibility of 12-month instalments, perhaps I may reassure both my noble friends by saying that Schedule 2, paragraph 4(10), allows a person to agree with a levying authority that he will pay his community charge in some other way, not necessarily the way that my noble friend believes to be the case. It may be more convenient, for example, for someone to pay in one lump or quarterly or as allowed by that section. So I do not think my noble friend's concerns are valid.
In regard to private water and sewerage supplies, perhaps I may reassure my noble friend Lord Burton on this point also. Paragraphs 7 and 8 of Schedule 5 provide that those who pay the community charges will also be liable to pay community water charges only if they meet the qualifying conditions, including the condition that the water supply will come from the water authority. Thus, only those adults who enjoy a public water supply will have to pay. That maintains the principle established by present legislation. I hope that that reassures my noble friend.
1396 Shooting rights were mentioned by my noble friends Lady Elliot of Harwood, Lord Burton and Lord Strathclyde. The Government have asked the technical working party of the Scottish Assessors' Association and the Inland Revenue Valuation Office to examine present Scottish and English law and practice on the valuation of shooting rights and to make recommendations for any necessary changes in legislation to ensure equitable treatment north and south of the Border. I hope that that is some comfort to my noble friends.
My noble friend Lord Strathclyde also suggested that solicitors should be required to notify the registration officer when clients buy or sell. The Government hope that certain information on changes in the use and occupation of property at present made available to assessors informally will continue to be made available to registration officers. In particular, the Secretary of State will consult the Law Society of Scotland with a view to considering arrangements whereby solicitors would remind their clients of the need to register and to inform the registration officer of any necessary changes in the register when property changes hands. I should stress that it may be voluntary and not necessarily compulsory.
My noble friend Lady Elliot of Harwood mentioned information being obtained from responsible persons. She suggested that it should come instead from individuals. There is one telling argument against the proposition that registration should be based entirely or even primarily on information collected from individual residents. That proposition is essentially a circular one, since if a registration officer is required to seek information from residents as to their residence, how does he know where to start or whom to approach? Even if, for instance, a registration officer delivered a number of registration forms to each address for completion by individual residents, how would he know that all the residents had returned the forms? For that reason, we consider it essential that one person should be required to provide information in response to canvasses and other inquiries in respect of each address. That is the approach embodied in Clause 17.
As for the suggestion that people might be asked to register twice, I can assure my noble friend and the noble Lord, Lord Mackie of Benshie, who seemed to be getting on to that subject when he talked about Dukes with shooting lodges, that Clause 16(7) provides that where there is a possibility of double registration, the individual will be required to pay only once, pending settlement of any appeal. That is set out in the Bill.
The noble Lord, Lord Ross, and other noble Lords opposite mentioned the impact of rate support grant reductions on rates. That is an important point. It has been suggested that a contributory factor to rate rises has been reductions in the central government contribution to local government in recent years. It is obviously arithmetically true that the larger the central government contribution to a given sum, the lower is that from the ratepayers. But the leap in logic which is then made is to assert that if the grant had been higher, local authority expenditure would have been the same. The evidence suggests the opposite.
1397 Over the four years 1977–78 to 1980–81, when grant was held steady at 68.5 per cent., expenditure rose in real terms by £260 million. In that period, rates rose by 79 per cent. in cash terms or 17 per cent. in real terms. In the six years that we have reduced the grant, expenditure has fallen slightly in real terms. If grant had not been cut, local authorities would have spent more and ratepayers and taxpayers would have had to pay more.
I turn to the setting of income support levels, which was mentioned by the noble Lady, Lady Saltoun. She asked what account would be taken of the 20 per cent. in setting those levels. I am afraid I have nothing to add to the statement made by my noble friend Lord Trefgarne which the noble Lady quoted. I cannot give her the assurance she seeks, because many factors will influence the setting of income support levels, but I take note of the point that she made.
Practicability was a point concentrated upon by the noble Lord, Lord Morton of Shuna. He suggested that people moving from one place to another—for example, old people living with different family members—might make it impossible on practical grounds to raise the community charge. The basic criterion will be sole or main residence. In some cases, people in the position which he described may move their sole or main residence each time they move, and the register will reflect that. In others, their main residence may remain in one place and their registration will not change if they move elsewhere for a while. It will be for the registration officer, or the sheriff on appeal, to determine the circumstances of each case. The examples quoted by the noble Lord serve to demonstrate how impractical it would be to attempt to set out detailed criteria in the Bill.
The noble Lord, Lord Hughes, made various comparisons relating to Comrie, the community charge and present ratepayers. Again, those examples merely illustrate what is wrong with the present system where rateable values bear no relationship to the use of local services. His examples did nothing to show me that what the Bill proposes perpetuates existing anomalies. As far as I can sec, the anomalies will be perpetuated by the Labour Party's proposals on capital value.
My noble friend Lord Sanderson talked about the important matter, which was referred to by others, of the charges in relation to business. That is dealt with in Clause 3. The use of our powers to enforce selective reductions in rates and our system of grant penalties, which will again apply to overspending authorities in the coming year and which can be effective in persuading them to reduce expenditure as the year proceeds, are available to help keep rate levels under control until 1989. With regard to the non-domestic rate after that, the Secretary of State has power to prescribe the base rate in relation to a particular authority from which further annual increases in the non-domestic rate will be controlled.
It is envisaged that that power will be used for example, where the rate level has been artificially increased in the preceding year. I must take issue with the noble Lord. Lord Underhill, who suggested that 1398 rate increases had no effect on businesses. That is a summary of what he said. He quoted some examples. I shall give him another quote from some research commissioned by the Department of the Environment which was published after the Green Paper. It showed that rates can have the effect which business knows that they have. The report was entitled The Impact of: Von-domestic Rates on Profitability and Investment.It was published in February 1986. One paragraph states:However, in the remainder of this section each argument is considered in turn and it is concluded that there is a strong case that business rates are a significant and increasing burden on businesses which affect profits and investment and which may affect survival in the short term or employment in the long term … Rates are a small proportion of total business costs but this effect can have a major impact on profitability if rates arc more highly variable between locations or if they are increasing more rapidy than other costs".I can let the noble Lord have details of that if he would like.
I think I have covered the main points raised by the Bill. I have galloped over a great deal of ground. To summarise, I re-emphasise—
§ Lord Wilson of Langside
My Lords, before the noble Lord turns to this peroration, some of us tried to intervene earlier but he was understandably reluctant to give way. He took up the point some of us have raised, that Scotland is being used as a guinea-pig in this strange exercise. Is the House to take it from his reply that the Government are firmly committed to similar legislation for England and Wales, and, if so, why the delay and why not United Kingdom legislation?
§ Lord Glenarthur
My Lords, the noble and learned Lord knows full well that this has been announced by my right honourable friend the Secretary of State for the Environment. Once the next Session of Parliament starts, no doubt the noble and learned Lord will have a chance to speak on that Bill.
I close by re-emphasising the main thrust of the proposals embodied in this Bill. They aim for a system where those who take decisions about local government expenditure in Scotland will be much more accountable to those who meet the costs. The unfairness of the present system will be ended, with relief at last for many who are bearing a quite intoler-able burden at present. No longer will the business ratepayer be the victim of ever-increasing rate demands from high spending local authorities.
The noble Lord, Lord Taylor of Gryfe, among others, stated that no organisation supports the proposals in the Bill. Indeed, the noble Lord, Lord Underhill, joined in this theme. The one group that both noble Lords failed to consider was the ratepayers. He will find that groups representing Scottish ratepayers have expressed strong support for these reforms. The measures contained in the Bill will be good for local democracy, good for local government and good for Scotland. I commend it to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.