§ 3.2 p.m.
§ Moved, That the Bill be further considered on Report.—(The Earl of Caithness.)
§ On Question, Motion agreed to.10
§ Clause 40 [Occupied hereditaments: liability]:
Lord Hesketh moved Amendment No. 154:
Page 25, line 18, leave out ("sub-paragraph") and insert ("paragraph").
§ On Question, amendment agreed to.
Lord Sandford moved Amendment No. 155:
Page 25, line 27, leave out from ("be") to end of line 29 and insert ("nil").
§ The noble Lord said: My Lords, this amendment stands in the names of my noble friends Lord Renton and Lady Faithfull and myself and of the noble Lord, Lord Hayter, to whom the House owes a debt of gratitude for having raised this matter at the Committee stage. I should like at the same time to speak to Amendments Nos. 160, 161 and 162.
§ I welcome the Bill for finally ending 15 years of prevarication over the financing of local government, 15 years of increasing damage to local government and of damage to the relationship between local government and central government. I congratulate the Government on at last grasping this nettle and on the radical approach they have chosen for it. However, at this point, at Clause 40(5) and (6), their nerve seems to have failed them.
§ Here was, and still is, an opportunity to stick to the clear and simple principle underlying Part III and the new national non-domestic rate and, by doing so, further to encourage the vitality and the growth of the whole charitable sector of our national life. That sector now has an annual turnover of something like £9 billion and releases an amount worth immeasurably more than that figure in voluntary drive, flair, skill and care.
§ I hope the House will allow me time to explain how these amendments would ensure that this opportunity will not be lost.
§ Under both the old and new regime for rating non-domestic properties, farms and churches are all fully exempt from the rate. The properties of registered charities are relieved of half of this rate—to put it in the jargon, they enjoy 50 per cent. mandatory rate relief. They may be relieved of some or all of the other 50 per cent. at the discretion of their local authority—that is, they have 50 per cent. discretionary rate relief. Our amendments are designed to cut out that discretion concerning the second 50 per cent. of relief and to give all registered charities the same 100 per cent. relief that farms and churches have enjoyed for decades. I doubt whether we shall hear many right reverend Prelates or noble farmers arguing that their churches or their farms deserve more certain and more generous treatment than registered charities. If we do not hear that, it will not be because these two groups are not well represented here.
§ I should like to say why we are now proposing this change and what we expect the effects of our amendments to be. Under the old régime the non-domestic rate was a local matter. The poundage was determined locally, the rate was raised locally, the money raised was spent locally, the relief, if any, was decided locally and its effect was felt locally. It was all local and it had a logical consistency. Under the new 11 régime the non-domestic rate poundage will be decided nationally. The local authority will collect it and put it straight into a national pool from which it will be redistributed back to the local authorities right across the country on a straight per capita national formula. The old concept of a local rate relief cuts right across the grain of this new national system. Noble Lords can see that it could be carried forward into it only by means of a corpus of complex and contrary regulations. However, this could be done if a strong case could still be made out for persevering with the 50 per cent. discretionary rate for charities, and if that system had worked well and consistently in the past.
§ I should like to touch briefly on the track record of this 50 per cent. discretionary rate relief. I ask noble Lords who are, for instance, church wardens, farmers or businessmen to reflect how odd and inconvenient it would strike them if each year, as they drew up their farm budget, or their PCC budgets or their company budgets, they had to wait to see whether their local council would continue to give them their 50 per cent. discretionary rate relief; how irritated they would be if their colleague down the road in another district received it and they did not; or, having had rate relief for the previous three or four years, they did not get it next year. Under the old régime all the national charities have to face this uncertainty with each year's budget. My noble friend Lord Renton will be able to enlarge on that with his long experience of MENCAP.
The views of the local authorities come into this matter. One can understand sensitive Ministers wanting to be cautious in removing from local authorities discretions they have had previously and perhaps enjoyed exercising. However, I doubt whether local authorities will want it in the future under the new national system. I have asked them and I have had a formal reply from the Association of Metropolitan Authorities, part of which I should like to read to your Lordships. It is from Sir Jack Layden, who is the chairman of that association, and reads,
I understand that you are seeking to give charities 100 per cent. relief from the new National Non-Domestic Rate. I am writing to you to let you know that I support the amendment you are proposing".
He then continues with a fairly long, and necessarily elaborate, paragraph to explain how the thing would strike individual authorities. He ends this paragraph by saying:
Local authorities will be faced with a dilemma—do they help charities or increase the poll tax. I fear that the result of the new NNDR and poll tax will be less help for charities".
In the final paragraph he says:
The best way forward is for the Government to recognise charitable relief as a national problem and for 100 per cent. to be granted and funded nationally".
§ So far, I have not received a formal reply from the Association of District Councils, and today I do not see in his place my noble friend Lord Rippon, who is now its president, who could pass one on. But I have received a telephone call from the association to say that its view corresponds with that of the AMA because of the awkward and inconvenient way in which the old discretion sits in the new régime.12
§ There is one argument for continuing the 50 per cent. discretionary rate relief by local authorities, but it is not an argument that I am sure my noble friend on the Front Bench will use because, with two years' experience as Minister of State in the Home Office, he will know how little substance it has. That argument runs to the effect that there are some fringe, but registered, charities whose activities fall far outside of what most people would regard as deserving any kind of relief—either from VAT, or tax or any other rate. The Moonies and the Scientologists are often quoted as examples of such charities. However, that is a matter which can best be—indeed, can only be—dealt with by tightening up the law of charity and by strengthening the supervisory role of the Charity Commission. That should be done without delay. Many of your Lordships know from the Woodfield Report, and the work following it up, that that is something we can now look forward to. Thus in respect of dubious and fringe charities we should be looking to the removal of all their tax and rate privileges nationwide; not hoping that it can be done in a piecemeal way here and there by the separate exercise of the discretions of about 400 individual local authorities.
§ A very proper question which we must ask ourselves is who will bear the cost of the relief that is given to charities. The extra 50 per cent. of mandatory rate relief involves a total sum of up to £80 million. Although some might think it is a little on the high side, I shall not disagree with that figure, which comes from a letter sent to me by my noble friend on the Front Bench since the Committee stage. If registered charities are not to pay rates under the new regime, then someone else will have to, so as to meet the cost of the same quantum of local authority services.
§ To suggest that the Treasury should pay would of course kill the amendment dead. Further, I am sure noble Lords will agree that to suggest that the community charge payer should stump up would sorely test the popularity of charities. So, what should happen?
§ The whole of the national non-domestic rate amounts to £8 billion. That sum is raised by and large from commerce, business and industry—but, of course, excluding the farmers. The full relief, amounting, as I say, to a sum of not more than £80 million, represents 1 per cent. of that £8 billion on business and industry. So obviously I had to seek their views on the matter. I understand from the Director General of the CBI that his members would be glad to be associated in that way and to that extent—that is, 1 per cent. on their bills—with the relief, the support and the encouragement of charities. I say: good for them.
§ Finally, and I must apologise for taking so long, your Lordships will have read and heard—indeed, we heard again this afternoon—of the recent ruling on VAT which came last month from the European Court. There is no appeal against that decision. One of its many painful effects is to increase the charities' liability to VAT by between £80 million and £100 million. For instance, I believe that it will cost Dr. Barnardo's a sum in the region of £500,000.13
§ However, my noble friend Lady Faithfull, with her links in this field, will confirm and enlarge upon that fact.
§ If there were no other good reasons for now giving registered charities 100 per cent. instead of 50 per cent. relief from rates, I suggest that this single reason would be enough. It commends itself as a way of making amends for this latest blow. I beg to move.
§ 3.15 p.m.
§ Lord Hayter
My Lords, I am most sincere in my thanks and congratulations to the Minister for the improvements in the Bill which have helped the voluntary organisations enormously—or rather the people that the voluntary organisations serve. However, that still leaves a need to ensure that the charities themselves have the necessary finance to provide support services that have become increasingly important today. To put it around the other way, I feel that it is our job in this House to ensure that this novel form of taxation—because that is what it is—does not have the effect of destroying some of the real voluntary bodies and very seriously harming others.
However, I have made it clear to some of those voluntary bodies that this is not a charity fundraising Bill; it is a local government finance Bill and must be treated as such. But the combination of a shift to nationally based non-domestic rating and the revaluation of non-domestic properties is set greatly to increase charity costs. While industrial premises will be least hard-hit by the revaluation, it is the offices and shops, especially the charity shops—precisely those premises upon which charities rely and which are in the greatest demand—that will consequently face the greatest rate rises under the revalued system.
The impact of such bias within the rating system is demonstrated by the public survey of the effects of the new system of which I gave notice to the House on the last occasion when this question was raised. The report suggested, for example, that the Children's Society will face an additional rate bill of £24,000 per year, if the Bill before us is not amended. Other charities of national prominence, for instance, Dr. Barnardo's, Oxfam and the Sue Ryder Fellowship will also face large cost increases. I have seen no suggestion from the Government that such figures are wrong and there is no public government survey—that I know of—to prove that they are wrong.
Therefore it is clear that something must be done. In Committee I suggested that the introduction of the 80 per cent. mandatory relief would be a step in the right direction. I now believe that it would be far better—for reasons of good public policy—to adopt the amendment standing in the name of the noble Lord, Lord Sandford, and place the charities in the same rate-free position as the Churches and, to my surprise, the farmers because I had forgotten about them. I say that for three reasons.
First, I have become more and more convinced that local authorities are simply not in a position to give the discretionary relief upon which the Government laid such stress in Committee. We 14 already know that three-quarters of the discretionary relief is not given. Moreover, contrary to the Government's assertions, I see no new incentives for local authorities to exercise their discretion in favour of charities—a view which I gather the local authorities share. What use is a discretionary power to grant rate relief to charities if the local authority cannot afford to give it? It will be of no use to the charities, which are the ones that will suffer. As the noble Baroness, Lady Faithfull, pointed out in Committee, some of those charities are more national than local—a point about which I hope we may hear from her later.
Secondly, the suggestion contained in the amendment is more in tune with the national basis of the new non-domestic rating system. Whatever noble Lords may feel about the shift to the nationally based rating of businesses, it has become a reality. I feel therefore that consistency must prevail and that if commercial businesses are to be rated nationally and uniformly, so should charitable organisations. Where a high street represents a council boundary, commercial shops of the same size on opposite sides of the street will pay the same rates under the new system even though they may not be placed in the same local authority area. However, under the Government's proposals, two charity premises in a similar situation would pay different rates. That seems to be illogical. It would be far better to give the uniformity to charity premises that business still, and will, enjoy.
Thirdly, the charities' financial position has been seriously changed by the new VAT rules which the noble Lord, Lord Sandford, has mentioned. A full move to mandatory rate relief would just about cover the increased costs involved.
Ministers argued in Committee that the higher levels of mandatory relief benefited some of those organisations that we are ashamed to find rated as charities. I do not think that that is an argument any more than did the noble Lord. Lord Sandford. It is no consolation to the thousands of worthwhile charities. There is little to be gained by penalising the majority for the perceived sins of the few. If the charity law needs amendment, let us do it through changes in charity law and not through punitive sanctions against the majority of charities.
If that point is uppermost in the Government's mind still, and if they still admit, as the Minister did in Committee, that some charity shops would face significant rate increases if they did not obtain the full discretionary rate relief, at the very least, if the amendment is not approved in its entirety, let us ensure that the charity shops are recognised nationally as having 100 per cent. relief.
There is no argument about whether those shops belong to genuine charities. They are the life blood of charities and there are a great many of them. If the amendment is not agreed to in its entirety, I would press the point about the charity shops in the hope that the Minister can do something about it. Meanwhile, I support the amendment.
§ Baroness Faithfull
My Lords, I support my noble friend Lord Sandford and the noble Lord, Lord Hayter. I wish to take up the point about the charity shops which has already been taken up by the noble Lord, Lord Hayter. First, there are 25,000 volunteers serving in Oxfam shops. Barnardo's, with which I am associated, has an enormous number of shops up and down the country. Those volunteers do a magnificent job. As has been said, they work for the people who need help from those societies.
I wonder how such organisations will react if they feel that they are subsidising local authorities instead of working for the people they intend to help. Perhaps I may take up a point made by the noble Lord, Lord Hayter. Barnardo's decided some years ago to concentrate its resources in the most needy areas of this country. Therefore there are few Barnardo projects in the South of England and perhaps the South-West. They have been concentrated on the North and areas of great need.
If the local authorities decide to withdraw subsidy, in the areas where there is a Barnardo's project—a home for physically or mentally handicapped children, intermediate treatment or delinquents—the local authorities will support shops in their areas. However, if the Barnardo shops are in an area where there are no projects, I fear that the local authorities will not help. That is perhaps understandable because they say that they are responsible to the ratepayers for the services in their areas. That point relates especially to Oxfam. I wonder whether some of its shops will cease to be kept going if the Government cannot concede that point.
The rates for Barnardo shops would rise from their current level of £230,000 to something like £375,000—just over £500 per shop. It is true that in some areas there might be a saving of 6 per cent. but in other areas there would be an increase of 140 per cent. If the money received by voluntary organisations, especially Barnado's, drops, there will be difficulties as between the local authorities and the voluntary organisations. Voluntary organisations now work in partnership with the local authorities. In many cases they subsidise the work of the local authorities. If their income drops, that expenditure will have to go on to the local authorities or the work, especially that with handicapped children, will not be done. It is a serious situation. I support the amendment.
§ 3.30 p.m.
Baroness Ryder of Warsaw
My Lords, there are many arguments of principle and logic to back up the amendment. I endorse them, but I am no expert in the field of local government finance and would not presume to trespass on the territory of noble Lords with wider experience in that field. Instead my perspective on the Bill, especially the provisions concerning charity shops, is influenced by the effect it will have on the foundation I represent and work for. The Sue Ryder Foundation exists solely for the relief of suffering. By that I mean we are for the sick and handicapped, from tiny babies to our eldest patient, 16 who is 102 years of age. It is no exaggeration to say that your Lordships today hold the key to the financial security of many other charities.
In Committee, when we first raised the issue and Ministers agreed to think again about the proposals, I said that the Sue Ryder Foundation cared for 2,000 people in this country alone, excluding those overseas. They are people who are dying of cancer and suffering from Huntington's chorea, motor neuron disease, Parkinson's disease and at least 17 other diseases and disabilities. Their families, if they have any, cannot cope, or the patients may be alone and have no support. We are dependent upon voluntary contributions from the public, which is aghast to think that we should be so penalised when not only do needs grow but, alas, costs increase.
I can give an illustration of one Sue Ryder home which receives £8,500 per year from two area health authorities towards the £700,000 which must be raised every year to cover the full nursing and caring costs. From just 1st January to 30th June 1988 in this particular home 109 patients attended a day care centre, staff made daily bereavement visits, 160 visits were made by a domiciliary nurse and 293 patients were cared for, of whom 104 died.
No other facilities are offered in an area with a population of over 800,000 except for 10 beds in a small hospice. So pressed are the local consultants and doctors that the cobalt unit in the local hospital—again paid for by local funds—only has 30 beds. It admits patients on Mondays for radiotherapy. They are discharged on Friday, and at the weekend patients are admitted for chemotherapy. As I have already said, there is also a shortage of nurses there.
The foundation, which tried to absorb some of the patients being discharged from the National Health Service hospitals as well as people from society in general, is faced with a vast and appalling increase in VAT and the sudden though belated 15 per cent. increase in nurses' salaries. No one knows how the foundation will cope, year in year out. It is not the practice of the foundation to turn sick people away. I ask the Minister and noble Lords how they think the foundation can cope.
We are always hearing that needy people depend upon the voluntary sector. But this is a blatant example of a situation where no help is given by the Government to the very people for whom it suggests that the voluntary sector should care. This work does not come cheap, either in terms of money or of human effort. An absolutely crucial and important element in the fund raising of the foundation, and the one we rely on most throughout Britain and elsewhere, is the work carried out through our gift shops up and down the country. We already have about 350 and we hope that by 1992 or sooner we shall have raised that number to 500 or more.
The gift shops are literally the financial lifeblood of the foundation. At the same time they use the talents of thousands of volunteers. Charity shops are of benefit to the community wherever they are sited, besides raising money for the needy people whom the foundation assists, locally or internationally. In many cases they occupy shop premises which would 17 otherwise stand empty for a period of time, perhaps attracting vandalism or allowing a deterioration of the property. Empty shops are detrimental to a shopping area and to society. Charity shops help bring trade to an area.
These same shops provide a service to people on low incomes. They offer a place where those people can purchase clothing, furniture, bric-a-brac or essential items at prices they can afford. The charity shops also provide a social centre for lonely people. Teenagers and children come to us for advice and help. Others who are lonely often come into our shops for company. Thousands of the helpers, too, are lonely or bereaved people for whom the shops are a lifeline. Retired people, men and women, are often glad to help as an occupation. Over the years many friendships have been forged in these shops.
Charity shops help to recycle goods and prevent waste. People's unwanted goods can be purchased by other people who want them, and the money raised thereby goes to the relief of suffering. If some of these goods were not sold in charity shops, local councils might find themselves responsible for disposing of them. Then there are those in society who do not necessarily want to give in the form of donations. They may not have a social conscience, but they may gradually become involved in the up-market gift shops which we also run. Thus they become aware, by giving and selling goods, of the poor and needy throughout the world.
This whole work is jeopardised by the provisions in this Bill. Whatever the kind words and arguments used by the Minister and noble Lords, I can only say that if noble Lords do not amend this Bill today they will be increasing the costs of just this foundation by a minimum of over £500,000 a year. Alas, it is no good the Government saying that discretionary relief is available. They do not have to undergo the daily hunt for premises and funds as I do. I know that in very many cases discretionary relief is not given now, and that in the future there is little hope of greater generosity on the part of hard pressed local authorities.
Of course, charities vary and this matter is now being properly looked into. But I can only plead for charities such as my foundation and others which rely upon the income of their gift shops for feeding the hungry, the destitute, the sick and the dying, of whom there are thousands every year. I am quite sure that Ministers in this House do not wish to punish either this foundation, Dr. Barnardo's, Oxfam or any other such charities because of the Moonies or because of some doubtful charities, which of course exist. But Ministers surely cannot believe it right that an extra burden of a quarter of a million pounds or more should be imposed on the foundation to make up for what they see as deficiencies in the Home Office charity law regulations.
In conclusion, I must say to the Government that two bad laws do not make a good one. Charitable work is trumpeted by this Government. Here is an excellent chance for them to show that they mean what they say in that regard. The removal of the rates burden will give us a greatly needed boost in a sphere 18 of public life long held in high regard in this House. I beg to support the amendment.
§ Lord Boyd-Carpenter
My Lords, I hope my noble friend the Minister will treat this amendment very seriously. I hope that he will either accept it as it stands—to my amateur eye its drafting looks impeccable—or, if with the aid of his experts the Minister finds some deficiency in the drafting, will be prepared to accept it in principle and bring forward a corrected version at the next stage of the Bill. Your Lordships have just heard an extremely moving speech from the noble Baroness opposite. I think very few of us were unaffected by it, spoken as it was with the immense experience of the noble Baroness in these matters and her record of wonderful service to unfortunate people.
However, one could perhaps look at the present position more coldly on the logic of the matter. Under the present rating law the possibility of a discretion on the part of local authorities to remit the remaining 50 per cent. makes some sense. After all, it was the local authorities' own finances which were directly affected by the decision to remit or not. But, as I understand the Bill, if now a local authority does not exercise its discretion in favour of a charity, the money simply goes into the general fund for the business rate and will then be distributed over the whole country as Her Majesty's Government may see fit. Therefore the point—which used to be a very valid point—that local authorities were being asked to forego revenues they would otherwise directly receive and that therefore it was right for them to have that discretion, does not now appear to stand up, as we are now concerned only—as I understand the Bill—with the general fund. In respect of that, if my noble friend Lord Sandford is right, the sum of £80 million is substantial but plainly not of decisive significance against the total.
It is curious that the amendment should come up so soon after what I regard as the unfortunate and foolish ruling of the European Court on VAT for charities. I confess that I have never had any respect for the European Court. It seems that there are few mistakes that it is unable to make. This mistake could do a great deal of damage to charities if some step were not taken to compensate them. Indeed, if the occasion had not arisen on this amendment, I think that some of us would have been putting questions to Her Majesty's Government to ask what they were going to do to help charities in the unfortunate position created for them by that unfortunate ruling. However, by happy coincidence, as I understand the figures the acceptance of this amendment would not make the charities any better off but would at least offset practically the whole of the loss which the VAT decision imposes on them.
Therefore, the Minister has been presented by my noble friend Lord Sandford with a convenient and easy opportunity to put the matter right without raising other and more difficult problems. On the merits of the matter, the noble Baroness has outlined the position of charities and their work so very effectively that there is no need to add anything, except that this debate added in my mind a reminiscence of another occasion when your 19 Lordships decided on a course designed to help a good cause. That was when the noble Lord, Lord Callaghan, to whom I believe all your Lordships want to wish a rapid recovery from his present illness, moved an amendment to the copyright legislation in order to continue help to the Great Ormond Street Hospital with which his distinguished wife has been so long concerned. On that occasion your Lordships took the view that, whatever the logic of the matter, that was so good a cause that it had to be met.
In this case the logic of the matter is perfectly clear. We are no longer concerned with local authorities dealing with money which otherwise would come directly to them. We are concerned simply with whether charities as such should pay rates.
I join with other noble Lords in saying that of course there are so-called charities which deserve no concession at all. Indeed, they do not deserve the 50 per cent. concession. That is another matter and it is up to the Government, if the Charity Commission will not move, to take steps to end the scandal of one or two of those organisations being classified as charities. However, their existence is certainly no reason for damaging the vast mass of genuine charities about which your Lordships are concerned. If we leave the matter as it is, with no amendment to the law of rates and no suggestion by the Government of any other way of helping those charities, the major charities in this country are in for a very difficult time.
Therefore, although I fully understand my noble friend's position—it is difficult at this stage of the Bill to agree to quite an important amendment—I think he will find that there is a great deal of opinion in the House that believes that that is what he should do. I for one would increase my already enormous admiration for my noble friend if he were to accept the amendment.
§ 3.45 p.m.
§ Lord McIntosh of Haringey
My Lords, all of us in this House must approach the amendments with the utmost respect for their movers—for their knowledge, experience and compassion—and for the work of the charities which they have described to us. Those charities are enormously valuable to our society. I cannot hope to compete with noble Lords who have already spoken in describing the work they do.
The threat to those charities is paradoxically most serious for those who choose to perform a socially worthwhile function while raising money. In other words, they do not choose to go round to doorsteps with envelopes to collect money or carry out appeals to the wealthy by asking them to send cheques to an office which could be very small and rated very low. They choose to provide a social function, particularly in dealing in second-hand goods for those most in need, at the same time as they raise money for their charities. They therefore do good in two ways. They choose to do it in a peculiarly effective way which, because it takes place in non-domestic premises, renders them vulnerable to the national non-domestic rate. For that reason alone, in making a 20 judgment between one charity and another I believe that what is proposed in the Bill is peculiarly unfair.
I confess that I had two reservations about the thrust of the amendments. Neither of them will commend themselves to noble Lords opposite. The first was that, as a dyed-in-the-wool local government man, I have always been against taking discretion away from local authorities. Where local authorities can reasonably express a discretion and make a judgment about financial matters, I believe that they should be left with the power to do so.
The second reservation I had concerned the nature of some charities. That has been referred to by other noble Lords. There are some organisations which have achieved charitable status in law which none of us would wish to support. I do not expect that many noble Lords opposite will feel, as I do, that public schools should have their charitable relief taken away from them. However, as the noble Lord, Lord Boyd-Carpenter, has said, that is a matter for charity law and not for a local government finance Bill.
It is neither good enough to seek to brush away amendments of this kind nor to seek to avoid all changes in charitable status simply because we have not got around to making a charity law which draws a proper distinction between worthy and unworthy causes. Therefore, my reservations, which I expressed at an earlier stage—the Minister taunted me at that time with appearing to support public schools—do not seem to me to be strong enough arguments to oppose the amendments.
What has finally convinced me that the amendments are right is the nature of the national domestic rate. If we have money being raised by local authorities which are responsible for the level at which the money is being raised, it is a proper exercise of responsibility to say, "We make the judgment that we must have a higher level of rates because we have a higher level of need", or whatever the argument may be, "but we recognise the value of the work of charities in our area and are prepared to use the discretionary rate relief provisions in order to protect them against the high rates which we feel we must levy". That is a judgment which can be made rationally. It is probable that it is sometimes made irrationally. However, we can see how that arises in the context of a proper consideration of local government finance.
The national non-domestic rate is not a local authority rate at all. It is a national tax, fixed at a national level. Therefore, the concept of discretionary rate relief given by local authorities, even if part of that relief is then reimbursed through the rate support grant, is simply no longer logical. If we have a national tax, the level of that tax, set by government, must take into account the needs of those charities which need business premises in order to do their work. It is a national responsibility and one which ought not to be put on local authorities in any way. I dread to think of the differences that might arise between one local authority and another if they had to make a direct choice between support for charities in their areas from a tax over which they have no control and an increase in the community charge which they may well feel is a particular burden 21 on the people in their area. In logic, in compassion and in reason I believe that we would be right to support these amendments and I urge my noble friends to do so.
§ Lord Renton
My Lords, before my noble friend rises to reply, perhaps I may briefly introduce one or two thoughts which have not so far been mentioned. In his strong and convincing arguments in moving the debate my noble friend Lord Sandford mentioned that from experience at MENCAP that one could demonstrate that the present system, which must be our starting point in all this, is not satisfactory.
There are thousands of different kinds of charity—small and local, large and national. If one has, as MENCAP has, a national organisation covering the whole of England and Wales—we do not cover Scotland and do not intend to make a takeover bid there—one has as many branches as there are local authorities. In fact we have more. We have to budget centrally for those branches although they are locally accountable and also have to do their own budgeting. The worst feature of the present system which the Government wish to perpetuate is the uncertainty about what will happen. That makes the financial arrangements for national bodies very difficult.
We have heard from my noble friend Lady Faithfull and the noble Baroness, Lady Ryder of Warsaw, about the difficulties in respect of the Barnardo shops and Lady Ryder's foundation shops. I would remind your Lordships that the problems concerning charity shops will occur over a very wide field—for example, all the British Legion shops—and we in MENCAP also have shops. Many other charities, both large and small, have shops which will be affected by the decision which your Lordships make this afternoon.
Of course it is right that we should be careful about committing either local authorities or the Treasury to expenditure which we would not wish to foist upon them. However, I hope that in replying to this debate my noble friend will not oversimplify the matter by referring to the fact, which has properly been mentioned, that the present mandatory relief costs £80 million. That is what the 50 per cent. amounts to. However, it would be a mistake to assume that either under the present arrangements and still less in future the non-mandatory relief would amount to an equivalent sum.
Even under the present system only about 20 per cent. of the potential costs to local authorities is given as relief to charities. Therefore it is not £80 million but something like £16 million, or at the most £20 million, which is involved. From that sum has to be deducted the local authority's administration costs, which it is impossible for us to estimate. I have not heard that any local authority organisation is able to say what that amount will be because it is included in the general administration of rates by local authorities.
What has to be considered, as my noble friend Lord Boyd-Carpenter put so admirably, is whether in altering or perpetuating a system which is 22 unsatisfactory at present one produces a system for the future which is just as bad or is better.
If it were a question of foisting £80 million of public expenditure on the Treasury I would not support the amendments. However, it is nothing like that sum. As has been pointed out, the local authorities will not suffer if they have no discretion in this matter because any potential costs will have been passed on to the centre. Therefore I warmly support what has been said.
§ The Earl of Radnor
My Lords, I wonder if I may have the temerity to oppose this set of amendments. My temerity is all the greater since I am a derated farmer, although I feel that the parallel drawn between charities, farmers and the church was not a correct one.
The subject is very emotive. I should very much like to support the amendments, and the speeches which have been made in favour of the amendments have been both able and very moving. However, like all questions I think that there is another side to the issue. I am thinking particularly of the question of charitable shops, which as we have heard from all sides of the Chamber have proliferated, and rightly so. They do a very good job. However, there are other shops which are not derated; they are small businesses and are in direct competition with the charitable shops.
Furthermore, there is a theme which runs through the Bill. As soon as someone is exonerated from rates somebody else picks up the bill. To me that seems to make worse the rather unequal competition that I see beginning to evolve. It is quite likely that the shop which is in competition with the charity shop will be among those that have to pay something more than they would otherwise have had to.
It seems to me also that on the whole charities—and I am intimately concerned with one—are quite well served so far as concerns taxation. Although I think that it is a very nice idea that they should be given this particular advantage of being exonerated from all rate burdens, I cannot see that it is absolutely right. I think that the Bill as written probably strikes a balance which is reasonable, although not perfect. I would not be happy about the discretionary part of it in any way. However, my temerity does not take me far enough to suggest that the provision should be abolished altogether. Therefore, I fear that, sadly, I shall not be able to support the amendment.
§ Lord Rochester
My Lords, in the rather lowly capacity of president of a youth club in Cheshire, where I live, which is a registered charity I should like very briefly but strongly to support the amendment from these Benches. I have nothing of substance to add to what has already been said so cogently by other noble Lords who have spoken in favour of the amendment. All I would say is that I think that it may well be that the fate of this amendment will determine whether or not the particular club of which I speak survives. I therefore join with other noble Lords in strongly urging the House to accept the amendment.
§ Lord Harmar-Nicholls
My Lords, I have no doubt that my noble friend will have recognised that this is one of those occasions when the strength of the debate may well decide how noble Lords will respond if the amendment is pushed to a vote.
One point which I should like to be made quite clear is whether the sum of money involved is £80 million or the £16 to £20 million mentioned by my noble friend. I think that that information will make a difference. If it is the higher figure, that will have to be taken into account and weighed against the very strong arguments that have been put so very well by the supporters of the amendment. I think that we ought to have the authority of words from the Dispatch Box to clear away any doubt. Would the new formula cost £80 million or would it be less than that? Would it be the £60 million mentioned by my noble friend?
§ 4 p.m.
§ Lord Ross of Newport
My Lords, perhaps I may speak very briefly on the situation in which many local authorities will find themselves if this amendment is not accepted by the House. Those of us who work in the arts or have anything to do with charities already know that there is great difficulty on the part of local authorities to fund the arts. In my part of the world we have an arts centre and it was faced with impending closure. In fact it still is. It is something that I believe most of the public would wish to see remain but in fact the local authority now finds itself in such a position that it cannot give it adequate funding. As a result, the Southern Arts says that it will withdraw its contribution and what is known as the Visual Arts Centre in Newport, Isle of Wight, will almost certainly close unless there is a change of mind.
We know that local authorities are having great difficulty in finding finance for citizens' advice bureaux; in fact ours was shut at one time when finance was withdrawn. For the moment it is going ahead and provides a wonderful service but its continued existence is in doubt. That is the answer to the noble Lord who spoke against this amendment. When it comes to the crunch I do not believe that local authorities will be able to fund the other 25 per cent. for which the charities will be looking. Surely it is wrong that they cannot budget. They should be able to budget and see ahead. They may know that there will be meetings in February, March and so on, but it may be well into the next financial year before they know whether or not they will receive additional funding from the local authority. I do not believe that they can possibly work on such a basis.
As I said when this matter came up at Committee stage, I am quite convinced that many charities and their shops will face very substantial rate rises if this concession is not granted. Therefore I hope that when the Minister responds he will not take the line that it is up to the local authorities. With the best will in the world most councils will want to give that concession but they also have the problem of keeping the rate within a reasonable increase, and they have the Secretary of State behind them threatening rate capping and so on. If we are to keep the community 24 charge within bounds, such things as the arts, citizens' advice bureaux and charity shops will be in front of the firing-line and it will be difficult for authorities to be able to maintain support and be generous in their regard. I think that that is the crucial issue and I hope that the Minister will not say that he will leave it to the local authorities. It is a government decision and should be taken today.
§ Lord Wolfson
My Lords, I rise to support this amendment. Whatever may be the theoretical niceties, I believe that the deeply moving speech of the noble Baroness, Lady Ryder, with her immense practical experience and tireless efforts on behalf of charity, must carry great weight in every part of this House. I do not think it necessary to add to what has already been said. I was very taken with the views of my noble friend Lord Boyd-Carpenter, and I hope that all parts of the House will support this amendment.
§ Baroness Blatch
My Lords, I rise to acknowledge that I share the concern about the wide-sweeping nature of the amendment and also to pose two questions. First, I should like to repeat a concern that has already been put. There now appears to be some confusion about the cost of the amendment in the minds of the noble Lords who may be required in a moment or two to record their vote. It is very important that we know more precisely what the cost is likely to be.
My second question relates to the definition of charitable status. I also have some difficulty with the problems which are faced by local authorities concerning the definition of charitable status and the relative needs of one charity to another. Tremendous examples have been given this afternoon of very needy causes about which we should find it very difficult to argue. But within this amendment are we to include, for example, recreation clubs which as part of their facilities now have the facility for dispensing drinks and which are in direct competition with local public houses and hotels? Are they to be included in this amendment? Are we also to include schools, universities and polytechnics? If so, and if we are speaking about anything upwards of £20 million to £80 million, I seriously ask whether we are to put that cost not on to CBI members who control relatively large businesses but on to the very small businessmen, about whom we shall spend some time later today arguing the case that we should not be putting any more of a burden on them.
I rise merely to put those questions. Are we speaking about substantial sums of money? Are we, with alacrity, simply putting that burden on to small businesses? It has been said not once but many times in this debate that it is not a cost that we would wish to put on the Treasury, and therefore quite knowingly we are putting this burden on to the business sector. It is therefore important that we should know precisely what is the burden, what is the definition of charitable status and what will go under the umbrella of this rather wide-ranging exemption.
The Earl of Caithness
My Lords, the rating of charities is an important subject. We discussed it at 25 length in Committee on 9th June and it comes as no surprise that we return to it today. Then, the amendment of the noble Lord, Lord Hayter, proposed 80 per cent. mandatory relief for charities instead of the 50 per cent. that applies at present and which has applied since 1961. Today, in his Amendment No. 155, the noble Lord, Lord Sandford, seeks to increase that to 100 per cent.
The Government are very much in favour of charitable endeavour. Most charities do valuable work that deserves public support. We think it is right that charities should receive substantial help from the state on behalf of the public at large by way of tax reliefs, and they do indeed receive such help. We do not, however, think that they should be totally exempt from all taxation. In particular, we do not accept that they should receive automatic full relief from rates.
Let me stress the word "automatic". The possibility of 100 per cent. relief exists, and many charities receive it. But before they can do so, a case-by-case judgment is applied by the local authority, and part of the cost falls to be borne locally. I shall come later to how large that part should be.
Let me summarise our reasons for believing that giving 100 per cent. mandatory relief for all charities is too blunt an instrument. They are: first, that not all charities merit or need such assistance; second, that this would create too sharp a dividing line between charities and the many worthy bodies which do not quite qualify as charities; third, that there should be a local as well as a national element in public support for charities; and fourth—and a poor fourth—cost.
I shall deal with those arguments in turn, and then come to what the Government propose. I might say that I approach this debate with all humility and trepidation, bearing in mind how hard it is to argue against any concession to charity. Better men than I have tried, and also failed. Mr. Gladstone, speaking in the other place on the 1863 Finance Bill, gave what was described by Mr. Disraeli as a "glittering oration" lasting 2½ hours advocating the withdrawal of income tax relief from charitable bequests. He lost. I do not aspire to match Mr. Gladstone for length, still less for glitter. My sole advantage over him is that the rating treatment of charities is today very much more favourable than in his day. In 1865, a hospital had its beds seized by the baliffs for non-payment of rates. Charities owe their better treatment today, as I owe my quotations, to the Pritchard Committee on the Rating of Charities and Kindred Bodies, whose recommendations for 50 per cent. mandatory and 50 per cent. discretionary relief were given effect by the Rating and Valuation Act 1961. I know that much has changed since 1961, but there is little in that report that does not hold good today.
Returning to the main point, I said at Committee that not all charities do merit 100 per cent. relief. When we think of charities, we normally think of the big national charities, such as Oxfam, or the Save the Children Fund, whose work commands almost universal support. But the definition of "charity" is a very broad one. It includes the universities, which are mainly publicly funded, and the fee-paying schools. In terms of rateable value for charities, these are 26 thought to account for approaching half the total. It includes all religious bodies, not just the mainstream denominations, but the minority and exclusive fringe sects. Perhaps most relevant of all, it includes some bodies which are charitable in name only. I quote from the 16th Report of the Public Accounts Committee:The Comptroller and Auditor General noted that … there was disturbing evidence of charity-related fraud and abuse".We may all feel warmly disposed towards Oxfam, and in particular towards the foundation of the noble Baroness, Lady Ryder. But is the right way to help them to give more public money to fringe religious cults? Is it not better to encourage local authorities to use their knowledge to increase the 50 per cent. mandatory relief to 100 per cent. for those charities that need and deserve it?
Secondly, as I have said, these amendments would differentiate much more sharply than now between charities and what I might call near-charities. Indeed, my noble friend Lady Blatch made this point for me. The definition of charities is broad in places, but narrow in others. It does not include non-profit-making research organisations. It does not include amateur sports clubs. These bodies get no mandatory rate relief. They have to seek discretionary rate relief from the local authority. I would find it hard to justify to these bodies that we were enhancing the already more privileged treatment of charities but doing nothing for them.
Thirdly, there is local discretion. As I said, the Government support charitable endeavour, but they do so on the basis of encouraging voluntary giving, not simply making charities into surrogates for the public sector. Requiring local authorities to consider case by case whether to give the extra 50 per cent. relief serves two purposes. It helps to weed out those charities which do not command wide support or which are ineffective in meeting their stated objectives; but it also recognises that a great many charities have a local character, and enables local people to play a part in deciding whether they should get relief.
Fourthly, I turn to cost. I said that this came a poor fourth because I want to stress that I am not resisting these amendments for Scrooge-like motives but the concession proposed by the amendment of my noble friend Lord Sandford is not cheap by any standards. Here I pick up the point of my noble friend Lord Harmar-Nicholls. We estimate that it would cost around £80 million a year. I cannot, with respect, follow the figures of my noble friend Lord Renton. I have had it confirmed now that the cost on this amendment will be £80 million. However, I should like to look at my noble friend's figures when they are printed in the Official Report.
§ Lord McIntosh of Haringey
My Lords, we must be grateful to the noble Earl for his confirmation of the cost. Perhaps he would be good enough to help the House further by telling us what percentage that is of the total national non-domestic rate.
§ Lord Renton
My Lords, in giving this figure my noble friend has made the assumption that the total non-mandatory relief to charities so far, and the relief 27 refused to charities although they might have been given it, is covered by £80 million. I had been given the figures for 1985–86. While mandatory relief was £80 million worth, the level of discretionary relief was only £20.4 million. It would seem that the figure that he is now giving us of £80 million, which would be the cost of this amendment, cannot therefore be right.
The Earl of Caithness
My Lords, no, I beg to differ from my noble friend. My figures show that in a full year, if there were no relief, charities would have had to pay about £190 million. Therefore the 50 per cent. of mandatory relief is £90 million; and the 50 per cent. of discretionary relief is a further £90 million or so. But the discretionary relief that they receive is about £15 million. That leaves the balance of £80 million, which is the sum about which we are talking as a result of this amendment.
§ 4.15 p.m.
§ Lord Boyd-Carpenter
My Lords, while my noble friend is referring to these figures, will he tell noble Lords how much money the Government are expecting to receive from charities as a result of the European Court decision? Surely that should be taken into account.
The Earl of Caithness
My Lords, I shall deal with that when I come towards the end of my speech.
We estimate that the cost of this £80 million would be an extra £2 on everyone's community charge, or 1 per cent. on the business rate. That answers the point raised by the noble Lord, Lord McIntosh of Haringey. Put like that, it may not sound much. I for one would be delighted if every adult in the country decided to give another £2 to the charity of their choice; but that is not a reason for giving that sum—as a compulsory donation—to all charities regardless of their effectiveness.
My noble friend Lord Sandford has said that the CBI has expressed itself happy to pay. That is very generous of the CBI. But it is one thing for the big manufacturers represented on the CBI to take that view: many of them are expecting to gain from the revaluation, and some from the NNDR as well. It is quite another thing for us to impose an extra burden on the small shopkeepers, many of whom are, as your Lordships know, already very worried about the results of revaluation and in particular about the competition for limited spaces in the high street.
I noted with care the point that my noble friend Lord Radnor made about the small businesses, to which some of your Lordships are seeking to give further aid later in our discussions this afternoon, but which indeed will be asked to pay more as a result of the amendment proposed by my noble friend Lord Sandford.
I explained in Committee why the Government did not consider 80 per cent. mandatory relief to charities to be justified; and I have now explained why, a fortiori, we take the same view of 100 per cent. mandatory relief. Before I risk surpassing Mr. Gladstone for length, if not for oratory, let me now turn to the positive side.
28 I explained in Committee that where a local authority uses its power to increase the relief from 50 per cent. to 100 per cent., half the cost of that second slice, as well as the whole of the first, would be met from the national pool, leaving only a quarter of the total to be met by local charge payers. That would roughly preserve the present position, whereby the cost of discretionary relief falls locally but, typically, half is met by businesses leaving only half to be paid by residents.
Since then we have looked at this issue again. Besides bringing forward amendments to meet your Lordships' concern I can announce a further concession now. In the light of the concern expressed by noble Lords, we have decided that it would be right to give them a rather greater incentive to use their powers to give relief. We have therefore decided that rather than 50 per cent. of the cost being met centrally the figure should be 70 per cent. That will leave only 15 per cent. of the total cost, including the mandatory element, to fall on local people. I hope that my noble friend Lord Boyd-Carpenter realises that the community charge payer will be contributing to this in a proportion which, up to the concession now, used to be 25 per cent., and will now be reduced, under the Government's proposal, to 15 per cent. That should give a substantial extra incentive for authorities to be forthcoming while retaining the local involvement which I have argued is essential. We can make this change without amendment to the Bill by way of regulations under Schedule 8, paragraph 4.
As I said in Committee, we also intend to issue new guidance to local authorities stressing that the power to give discretionary relief is there to be used. Charities and other bodies seeking relief will be able to cite the Government's guidance in support.
Still on a positive note, let me briefly mention the Government amendments, Amendments Nos. 157, 158 and 190 which we might take next. These are modest but helpful to charities. They provide for charities to get the same 50 per cent. mandatory relief from empty property rating as from ordinary rating, reducing rates in such cases to a quarter of the full amount.
Perhaps I may now turn to the three points that I believe need to be answered and which were raised during our discussions. My noble friends Lord Sandford and Lord Renton and the noble Lord, Lord Ross of Newport, said that there were problems for charities in budgeting. However, I should like to draw attention to Clause 44(7) which would enable us to require local authorities to give a minimum period of notice of withdrawal of relief. We plan to use this to require them to give a minimum of 12 months' notice expiring on 31st March. Contrary to having no time to budget, this gives charities the security they need to plan for the budgeting.
I turn next to VAT and charity relief, which was of particular concern to my noble friend Lord Boyd-Carpenter. Without being an expert on this, I found the figure of £80 million mentioned by my noble friend Lord Sandford quite difficult to justify. I am advised that the Economic Secretary to the Treasury announced a package of measures which would 29 reduce the cost to all taxpayers from a possible £425 million down to £160 million. Although I do not have full details at my fingertips, it does not seem plausible to me that half of that cost of £160 million—the £80 million to which my noble friend referred—would fall on charities, and charities alone.
§ Lord Somers
My Lords, is the noble Earl satisfied that all charities that the Government support are really deserving ones?
The Earl of Caithness
My Lords, I am not convinced that all the charities that have received relief are deserving ones. That is why we still believe that there should be an element of discretionary rating relief to those charities.
Before I conclude I turn to charity shops, which was a point raised by the noble Lord, Lord Hayter, and by the noble Baroness, Lady Ryder of Warsaw. It is true that there will be a tendency for rateable values of shops to increase relative to those of other premises such as offices and factories, but I do not believe that that is a reason for more favoured treatment of charities at large. We are aware that charities occupy an increasing number of shops and that is why the rate relief for charities—which previously excluded shops used purely for fund raising and was limited to charities' operational premises—was extended in 1976 to include charity shops. We believe that it would be a mistake, however, to allow a possibly temporary increase in the rateable value of shops resulting from the present market conditions to lead to a permanent restructuring of the law on rate relief for charities.
We have heard some very large figures quoted today on the cost of revaluation for charities. For example, one noble Lord quoted a 50 per cent. increase for Dr. Barnardo's. I suspect that some of those figures may be derived from figures quoted by some of the small business organisations which, for reasons I explained in Committee, are substantially overstated. We expect that many charities will face much smaller increases than they have been led to fear. I cannot give a figure on those rate increases because the rate revaluation, which is the key to it, has not yet been completed.
Returning to the main issue of the amendment of my noble friend Lord Sandford, I hope that I have persuaded the House that 100 per cent. automatic mandatory relief for charities really would be going much too far. We have offered two substantial steps towards helping charities through encouraging authorities to give rate relief by reducing the cost to taxpayers. Removing the local element altogether, though, I must at this stage continue to resist.
I am convinced that there is very strong feeling in your Lordships' House about this matter. Some figures are exaggerated, but nevertheless I should like to consider this again between now and another stage. I propose not to move the Government amendments shortly to come. I hope that my noble friend will withdraw his amendment so that we can look at this between now and a later stage. There is no doubt that it is the Government's intention to help charities. Your Lordships will know that charitable giving has doubled since 1979. That has been made 30 possible by what this Government have done. We shall not turn our backs on charities now. The proposals that I have enunciated already today are a great improvement on the present situation and on the proposed situation which was to translate the present position. I intend to withdraw those amendments to give myself, my noble friend and my right honourable friend the Secretary of State a chance to discuss the matter between now and another stage.
§ Baroness Faithfull
My Lords, before the noble Earl sits down, if he intends further to consider will he be discussing with his noble friend the Secretary of State in the Department of Health and Social Security what will happen perhaps not to so many now, but to the people who will not be able to be cared for by Lady Ryder's Foundation, Dr. Barnardo's and others, who will have to be looked after by the Department of Health and Social Security or the Social Services Department?
The Earl of Caithness
No, My Lords, I shall not be discussing it with my noble friend; I shall be discussing it with my right honourable friend.
§ Lord Sandford
My Lords, we have had a very thorough and comprehensive debate on this amendment. My first hope after the Committee stage was that my noble friend would have learnt enough from the opinions expressed then to have reconsidered this whole business of rate relief for charities and come back with the Government's own scheme for providing 100 per cent. mandatory rate relief. That would have been, and still will be, the best way to deal with this. I was disappointed that my noble friend with his Home Office experience—which points exactly in the opposite direction—argues that the existence of the Moonies, the scientologists and the fringe charities was a case for discretionary rate relief for the local authorities. He must know that that is quite unsound and that the remedy for that is a proper review of the law of charities and the enforcement powers of the Charity Commissioners. I do not believe that anybody in this House, and I do not believe my noble friend himself, is persuaded by the force of that argument, though it was, I suppose, inevitable that it would be deployed.
My noble friend argued for local discretion, but as I have told your Lordships and I must perhaps repeat it again, I have heard now from both the associations which will be involved with the collection of this rate that they do not want this discretion within the national framework that is now being devised. My noble friend Lord Boyd-Carpenter made that point so much better than I did. The shift from a 50–50 balance to a 70–30 balance does not make any difference to that view. I could not say so in my first speech because I had not then heard of this proposal from the Minister, although my colleagues in the associations knew that it was in the offing and they had examined it. However, they assure me that it does not make any difference to their view. It is merely tinkering with the system. The offer that my noble friend has made about empty properties is welcome too, but that also is tinkering.
31 There was some talk about the cost of all this. I rest my case on the fact that the sum involved might be anything up to £80 million. I agree with my noble friend Lord Renton that it is almost certain to be reduced by possibly £16 million or perhaps £20 million, but it is not more than £80 million. That is 1 per cent. on the rate bills of business, commerce and industry. Of course we do not want to impose new and extra burdens on small businesses and perhaps the CBI is not in a position to speak for all of them. But 1 per cent. is not a huge addition.
Equally, I agree that shifting £80 million about is not something which my noble friend—even though he is a Minister of State at the Department of the Environment—can do on his feet. Therefore, I welcome the undertaking that I understand he has given to the House that he will take this away to look at it. On the other hand, with the enormous measure of support all around the House—I do not remember any amendment that I have tried to move which has commanded so much support—he will have to go a little further than that. My noble friends Lord Caithness and Lord Belstead both knew that this subject would arise at this stage, because my noble friends and I in whose names this amendment stands have discussed it with them. I believe that my noble friend the Leader of the House will agree that the House deserves a rather firmer commitment to bring back something rather more positive than we have been given so far. We should like something more in the nature of an undertaking to consider what has been proposed and to see whether there really are any practical reasons why it should not be adopted. That would not be an undertaking to bring back precisely this amendment: it would be a promise to consider it carefully and to see whether it is possible for the Government to get somewhere much nearer to it.
I wonder whether my noble friend, with the leave of the House, could reinforce his undertakings to us before I decide what to do about this amendment.
The Earl of Caithness
My Lords, I believe it is right that I should respond to that. I gave the House the assurance that I would look at this again. As it stands I believe that my noble friend's amendment goes too far. I realise that the two major concessions offered by the Government did not go far enough to meet your Lordships concern. However, I believe it is right that we should consider it again between now and another stage.
§ Lord Sandford
My Lords, I believe that my noble friend knows the position he will be in if he fails to deliver. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 42 [Unoccupied hereditaments: liability]:
§ 4.30 p.m.
The Earl of Caithness moved Amendment No. 156:
Page 26, line 28, leave out ("sub-paragraph") and insert ("paragraph").
§ On Question, Amendment agreed to.
§ [Amendments Nos. 157 and 158 not moved].32
Lord Ezra moved Amendment No. 159:
After Clause 42, insert the following new clause:
§ ("Rating of machinery used for power generation.
. Schedule 3, Class 1, to the General Rate Act 1967 (c.9) (Classes of Machinery and Plant deemed to be part of Hereditament) shall be amended to read—
1. Machinery and plant (together with the shafting, pipes, cables, wires and other appliances and structures accessory thereto) which is used or intended to be used mainly or exclusively in connection with any of the following purposes, that is to say the heating, cooling, ventilating, lighting, draining or supplying of water to the land or buildings of which the hereditament consists, or the protecting of the hereditament from fire:
Provided that, in the case of machinery and plant which is in or on the hereditament for the purpose of manufacturing operations or trade processes, the fact that it is used in connection with those operations or processes for the purpose of heating, cooling, ventilating, lighting, draining, supplying of water, or protecting from fire shall not cause it to be treated as falling within the classes of machinery or plant specified in this Schedule.").
§ The noble Lord said: My Lords, the amendment that I propose relates to an anomaly in the existing non-domestic rating structure. The purpose of the amendment is to place plant, whether for the production of electricity or for any other form of energy or power which is to be either exported from the cycle or used on site for a manufacturing purpose, on the same basis for rating as any other manufacturing plant.
§ It is perfectly true that the Government have indicated that after the new rating arrangements come into effect on 1st April 1990 the electricity supply industry, which by then may be partly or wholly privatised, and the private generators of electricity will be rated on the same basis. The Secretary of State for the Environment has further indicated that it is the intention that power generators should be rated on the same basis as the rest of British industry. Formula rating working groups for all the formula rated industries have been set up, and those for electricity have been charged with suggesting how those aims can be met. However, the undertaking of the Secretary of State for Energy of 10th March 1988 excludes stand-alone private generators from fair rating. This seems to be a continuing anomaly.
§ There are other possible anomalies in the Government's intentions, quite part from the delay that there will be. For example, combined heat and power, which was meant to have been stimulated substantially by the 1983 Energy Act (in the debates in which I took part) has not in fact come about. As regards rating, there is still some doubt as to whether the various parts of combined heat and power installations such as the piping of the hot water or the steam will or will not be included in the rating concession.
§ The CEGB's generating stations already enjoy a preferentially low rating value (RV) compared with private generators. The CEGB's RV is just over £1 per kilowatt of installed capacity, but depending on the method of assessment chosen by the valuation officer RVs up to 40 times as much as that are being set for private generators. Rates of that order would absorb much of the money paid by the boards for electricity sold to them under the 1983 Energy Act.33
§ That is one reason why that Act has never really produced the results at which the Government appeared to be aiming at the time. If the passing of the amendment puts the CEGB at a disadvantage, the Secretary of State for the Environment has powers by order to put that right.
§ I should like to give your Lordships an example of the cost of the anomalous situation. Existing independent generators are spending time and money contesting valuations based on the present system. An industrial combined heat and power station in the North-West produces 128 million kilowatt hours per year of electricity from steam and diesel generators as well as further steam which is used in processing plant. As a result of recent re-equipment, a new RV of £147,000 has been set on the contractors' basis. This compares with an RV for a normal generating plant which would be of around £80,000 and on the CEGB's basis of £38,000. This indicates that the present system is totally anomalous. If the amendment which I am proposing were to be agreed that would be put right immediately.
§ I realise that the Government's intentions are to correct that anomaly, but as I have explained there are doubts about exactly how they will set about it, and there is a time lag. In this Bill we are presented with a unique opportunity of putting the matter right. I therefore commend the amendment to your Lordships' support, and I beg to move.
§ Lord Hesketh
My Lords, the Government are well aware of the body of opinion among private electricity generators which considers the methods used to assess the rateable value of these generating hereditaments as unfairly discriminating against the private supplier. They cite the rate burden as a factor that stifles fair competition and penalises the use of alternative energy sources.
However, I should like to emphasise that the Government are fully committed to introducing greater competition into electricity supply through privatisation. My right honourable friend the Secretary of State for Energy set out his plans in February in a White Paper which firmly sets the place of existing and potential private generators within the proposed new structure of the industry.
It is our intention that private generators exporting electricity to the grid should be rated on a comparable basis to the rest of the electricity supply industry from 1990. This matter will be given full consideration in the working group of officials, representatives of the Electricity Council, the local authority associations and the independent producers which has been set up to review the present rating arrangements for the electricity supply industry. This is one of a number of groups which are currently reviewing formula rating in parallel with the revaluation of non-domestic property. The outcome of those reviews will be incorporated in regulations under Schedule 6, paragraph 3, of the Bill and will come into effect on 1st April 1990. The remit of the electricity group requires them to look specifically at those issues.
Turning to Amendment No. 159, the amendment proposed to Schedule 3 of the General Rate Act 1967 34 would have the effect of removing from rating all electricity generating plant and machinery which is currently deemed to be part of the hereditament. It would take effect from the commencement of this Bill. It would apply not only to those private generators that have the capability of supplying electricity to the national supply network but also to the many private generating plants which supply electricity within or to industrial complexes.
The proposed amendment would not have any effect on the electricity supply industry formula rating. Given that the private generators are looking for comparable treatment with the generating board, it seems to us that this proposal introduces even more disparity of treatment. The effect extends beyond plant used for the production of electricity for supply to the national distribution network to include small on-site generators for which there is no intention of changing the basis of assessment, unlike those private generators in competition with the CEGB for which there may be a change.
The amendment does not provide for comparable treatment between the private electricity generators and the Central Electricity Generating Board. Comparable treatment is, however, being dealt with under the remit of the electricity formula rating working group. It is essential that it is developed in the light of the proposed privatisation of the industry. The amendment proposes a change to the provisions in the General Rate Act 1967. That Act will be repealed with effect from 1st April 1990. The short-term stop-gap solution proposed would only create further disparity and anomalies which would cause considerable difficulties in the introduction of longterm measures. The Government are committed to comparable treatment for all private generators exporting electricity to the supply distribution network. On that basis, I invite the noble Lord to withdraw his amendment.
§ Lord Ezra
My Lords, I thank the noble Lord for that reply. I am glad that he has restated the Government's firm commitment to put private generators on the same basis as the existing electricity supply industry. The Government cannot support the wording of the amendment, but I regret that they are not prepared to come forward with an alternative which can deal with the matter more quickly.
I hope that the various other anomalies to which I referred, and particularly my reference to combined heat and power, will be fully taken into account in this matter because there are a number of projects now being actively developed, and indeed some of them positively financed, on the expectation that they will be treated on all fours in all respects with what is at present the public generation of electricity.
§ On that basis, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 44 [Discretionary relief]:
Lord Hesketh moved Amendment No. 159A:
Page 27, line 12, leave out ("or (as the case may be) sections 42(4) and 43 above") and insert ("above, sections 42(4) to (4B) and 43 above, regulations under section 53 below or regulations under section 54 below (as the case may be)").
§ The noble Lord said: My Lords, in moving Amendment No. 159A, I should like to speak to Amendments Nos. 161A and 162B. The amendments go a little beyond being mere drafting amendments; they are very technical, and I shall not detain your Lordships for long. What they do is to regulate the relationship between the various grounds on which a person's liability to rates may differ from what I might call the basic rate bill calculated under Clause 40 for occupied property or Clause 42 for empty property.
§ There are three such grounds apart from mandatory relief for charities, which is dealt with in the body of Clauses 40 and 42. They are, first, transitional regulations under Clauses 53 and 54 in so far as they apply to the hereditament; secondly, any discretionary relief under Clause 44 from which the ratepayer benefits; and thirdly, any decision by the authority under Clause 46 to remit the rates on grounds of hardship. These three amendments taken together make clear that any transitional protection is calculated on the basis of the full basic rate bill. That adjusted amount may then be subject to discretionary relief, if the ratepayer qualifies and the authority so decides. Finally, the resulting rate bill may be reduced or remitted on grounds of hardship, again if the ratepayer qualifies and the authority so decides. Although it might be argued that authorities and the courts would have arrived at this result without the assistance of these amendments, it seemed to us that it was worth the expense of a few words to put the matter beyond doubt. I beg to move.
§ On Question, amendment agreed to.
§ [Amendments Nos. 160 and 161 not noved.]
§ Lord Hesketh moved Amendment No. 161A:
Page 27, line 38, at end insert—
("(4A) In deciding what the chargeable amount for the day would be apart from this section the effect of any regulations under section 53 or 54 below shall be taken into account but anything which has been done or could be done under section 46 below shall be ignored.").
§ On Question, amendment agreed to.
§ Clause 45 [Discretionary relief.. supplementary]:
§ [Amendment No. 162 not moved.]
§ 4.45 p.m.
§ Clause 46 [Reduction or remission of liability]:
Lord Hesketh moved Amendment No. 162B:
Page 28, line 29, at end insert—
("(2A) The amount as regards which a reduction or remittance may be made under subsection (1) above is the amount the person would be liable to pay (apart from this section) taking account of anything done under section 44 above and the effect of any regulations under section 53 or 54 below.").
§ On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 162C:
Page 28, line 31, at end insert ("and where such reduction or remission is granted the income foregone by the charging authority shall not be deemed to have been collected for the purposes of calculating the authority's contribution to the National Non-Domestic Rating Pool under section 56 and Schedules 7 and 8 below.").
§ The noble Lord said: My Lords, the opportunity for this amendment is given by the amendments to which the House has just agreed on the motion of the noble Lord, Lord Hesketh. The argument for it is greatly strengthened by the speech of the noble Earl, Lord Caithness, in response to Amendment No. 155.
§ In his definition of charities and his discussion of the definition of charity and the inadequacy of the definition, the Minister pointed out that there were a number of non-charitable organisations whose case for relief on grounds of hardship or of the public interest was greater than that of some charities. I agree with him. I think that many noble Lords who attended the debate also agreed with him that the case for those amendments was affected by, although in our view not fatally weakened by, the difficulties of the definition of charities.
§ The purpose of the amendment is to deal with non-charities, those non-domestic ratepayers who find themselves in a position of hardship that is recognised by the local authority to be a position of hardship. As the noble Lord, Lord Hesketh, said, we are dealing with occupied properties under Clause 40 and unoccupied properties under Clause 42(2). The effect of the amendment will be to see that the loss of income by the charging authority will be deemed to have been collected for the purpose of calculating the authority's contribution to the national non-domestic rating pool; in other words, it will be paid nationally rather than by the local charge payers.
§ I think that the argument is at least as strong for the businesses that the local authority recognises as being in a position of hardship as it is for many of the charities that we discussed at great length in a more fully attended Chamber a few moments ago. It does not seem fair for local charge payers to bear the costs of rates remitted on grounds of poverty, for example, when there is the problem of a business going into liquidation. In many local authorities, particularly those in areas of traditional industries—what one might still call sunset industries—it is difficult for them to survive, and their continued existence is important to the local economy. Their continued existence probably encourages the existence of other businesses dependent on them or trading with them in the local area, and a proper economic judgment is that they should be protected.
§ We say that the logic of that argument should be pursued through to the end and the cost should go to the national non-domestic rate pool rather than to the community charge payers in the area, who almost by definition will be in a particularly difficult situation and will find it hard to meet the extra charges.
§ The noble Lord, Lord Sandford, in his parting shot to the Minister, left him with a clear impression, I hope, that unless he came back with a proposal very much better than that offered in his last intervention, he would suffer defeat in the Division Lobbies on Third Reading. It would be a paradox if he were to resist the amendment now, which follows so closely the thinking of the earlier amendment, and then find that he had to make concessions or face defeat in the Lobbies on Third Reading. I hope that the Minister will see that in this case discretion is the better part of 37 valour. I hope that he will recognise the justice of the amendment and accept that it should be written on to the face of the Bill. I beg to move.
§ Lord Hesketh
My Lords, the noble Lord has explained that the amendment would require us, in calculating the contributions that local authorities are required to make into the national non-domestic rate pool, to give 100 per cent. allowance for any relief that authorities have given to ratepayers on the grounds of hardship. Your Lordships will recall that we have discussed the point briefly hitherto. The power to make full or partial allowance for such reliefs already exists in Schedule 8 paragraph 4(5)(a). That power extends the cost of discretionary relief given as well as that of remission on grounds of hardship. The purpose of the proposed amendment is to make the Government do what they already have power to do.
When we discussed the issue earlier, I explained that we shall consult the local authority associations on the rules that will be needed for calculating contributions into the pool. That is an important consultation exercise raising complicated issues and concerning large sums of money. We set it in motion early with the paper that we sent to the local authority associations in October last year. I do not think that the noble Lord could have expected us to complete it between Committee and Report.
Perhaps I may help the House by explaining what we shall by saying to the associations when we meet them. In considering the whole issue of the treatment of the possible causes of shortfall in non-domestic rate income, we need to strike a balance between, on the one hand, ensuring that the authorities remain accountable for their decisions and act diligently in collecting the rates in the interests of all the other authorities that will receive payments from the pool; and, on the other hand, ensuring that local community charge payers are not left to meet the costs outside local authority control where rate income is reduced for reasons over which the charging authority has no influence—for example, where a major ratepayer goes bankrupt or where rateable value is reduced on appeal.
It is obvious that full allowance must be made, but where there is an element of local discretion it is right that some part of the cost should fall locally. Without such a rule it would be easier for authorities to fall into the temptation of showing how generous they were to their own ratepayers, knowing that it was entirely at someone else's expense.
My noble friend Lord Caithness explained earlier, when we debated the treatment of charities, that where an authority gives a discretionary relief under Clause 44 we propose that 70 per cent. of the cost of that shall be met centrally, leaving 30 per cent. to fall locally. In the case of remission for hardship we have the power to treat the cost similarly; in other words, to bear some of it on the pool. We shall ask the local authority associations whether they similarly wish us to provide that cost possibility in excess of a de minimus threshold shall be split between the pool and local charge payers.
38 I cannot say yet whether 70 per cent. might be the right percentage. In this case I believe that it will be too high. We need to consult the local authority associations before deciding on that. I must remind the noble Lord opposite that for the associations we would regard it as a generous percentage and a high one. They will be aware that. with a high percentage, generosity by one authority will be at the cost of every other authority and that most authorities will receive much more out of the pool than they pay in. Therefore they will be more concerned with their position as beneficiaries than contributors. It is not sensible to go too far in encouraging authorities to play "beggar my neighbour" in this fashion. The power to remit rates on grounds of hardship is there to deal with hard cases, where a business will go under if it is forced to meet its rates bill. It is not there to enable authorities to give cover subsidies to businesses in their areas.
The noble Lord, Lord McIntosh, has argued that without a 100 per cent. allowance from the pool the provisions are unfair as between authorities because there are many more businesses in some areas than in others; therefore, even the same proportion of generosity in giving relief will cost far more in a major city than in a rural area. I am aware that that is a theoretical problem, but I believe that to worry about it is to exaggerate the scale with which the power to remit rates on the grounds of hardship is likely to be used. It is there to deal with extreme cases and I expect the cost falling on community charge payers to be very small indeed.
The right course here is for the Government to discuss the issue further with local authority associations which are well equipped to balance the interests of individual authorities against those of authorities collectively. On that basis, I hope that the noble Lord will withdraw his amendment.
§ Lord McIntosh of Haringey
My Lords, I listened most carefully to what the noble Earl, Lord Caithness, said in response to an earlier amendment, about the Government's regulating powers under Schedule 8. I also listened most carefully to what the noble Lord, Lord Hesketh, said about those regulating powers and the present consultations with local authorities. It is a pity that what he said was written before our previous debate. It has not taken into account the discussion that we had and the strength of feeling shown on all sides of the House about the inadequacy of the proposals to use the regulating powers under Schedule 8 for such purposes.
I do not believe that he can seriously expect me to be taken in by the bland obfuscation that he has proposed to serve out to the local authority associations. I am sure that the associations will not be satisfied with what was said, just as the House was patently not satisfied with what was said in relation to the previous amendment. The local authority associations are in favour of my amendment which will provide proper recognition of a number of very hard cases; not charities but businesses which, as the noble Lord said, will go under unless they are helped in this way.
39 It seems to me that the Minister has given ground even less on this matter—perhaps because the House is emptier than it was earlier—than did his noble friend in respect of an earlier amendment. I believe that logic requires me to seek the opinion of the House on this amendment. I beg to move.
§ 4.55 p.m.
§ On Question, Whether the said amendment (No. 162C) shall be agreed to?
§ Their Lordships divided: Contents, 85; Not-Contents, 128.40
|DIVISION NO. 1|
|Airedale, L.||Kilbracken, L.|
|Amherst, E.||Leatherland, L.|
|Ardwick, L.||Listowel, E.|
|Attlee, E.||Lovell-Davis, L.|
|Aylestone, L.||McIntosh of Haringey, L.|
|Banks, L.||McNair, L.|
|Beaumont of Whitley, L.||Mais, L.|
|Bonham-Carter, L.||Mason of Barnsley, L.|
|Boston of Faversham, L.||Molloy, L.|
|Bottomley, L.||Monson, L.|
|Briginshaw, L.||Morton of Shuna, L.|
|Bruce of Donington, L.||Mulley, L.|
|Cledwyn of Penrhos, L.||Nicol, B. [Teller.]|
|Cobbold, L.||Northfield, L.|
|Cocks of Hartcliffe, L.||O'Neill of the Maine, L.|
|David, B.||Pitt of Hampstead, L.|
|Davies of Penrhys, L.||Ponsonby of Shulbrede, L. [Teller.]|
|Donaldson of Kingsbridge, L.||Prys-Davies, L.|
|Elwyn-Jones, L.||Ritchie of Dundee, L.|
|Ennals, L.||Robson of Kiddington, B.|
|Ewart-Biggs, B.||Rochester, L.|
|Ezra, L.||Ross of Newport, L.|
|Falkender, B.||Scanlon, L.|
|Falkland, V.||Seear, B.|
|Fisher of Rednal, B.||Serota, B.|
|Gallacher, L.||Shepherd, L.|
|Galpern, L.||Stedman, B.|
|Gladwyn, L.||Stewart of Fulham, L.|
|Glenamara, L.||Taylor of Gryfe, L.|
|Graham of Edmonton, L.||Taylor of Mansfield, L.|
|Grey, E.||Tordoff, L.|
|Hampton, L.||Turner of Camden, B.|
|Hanworth, V.||Underhill, L.|
|Harris of Greenwich, L.||Vernon, L.|
|Hatch of Lusby, L.||Wallace of Coslany, L.|
|Hunt, L.||Walston, L.|
|Irvine of Lairg, L.||White, B.|
|Irving of Dartford, L.||Williams of Elvel, L.|
|Jacques, L.||Wilson of Rievaulx, L.|
|Jeger, B.||Winchilsea and Nottingham, E.|
|Jenkins of Hillhead, L.|
|Jenkins of Putney, L.||Winterbottom, L.|
|Alexander of Tunis, E.||Boyd-Carpenter, L.|
|Allerton, L.||Brabazon of Tara, L.|
|Ampthill, L.||Brougham and Vaux, L.|
|Arran, E.||Broxbourne, L.|
|Auckland, L.||Bruce-Gardyne, L.|
|Beaverbrook, L.||Caithness, E.|
|Belhaven and Stenton, L.||Cameron of Lochbroom, L.|
|Beloff, L.||Campbell of Croy, L.|
|Belstead, L.||Carnegy of Lour, B.|
|Birdwood, L.||Carnock, L.|
|Blatch, B.||Carr of Hadley, L.|
|Blyth, L.||Chelwood, L.|
|Borthwick, L.||Clitheroe, L.|
|Colnbrook, L.||Montgomery of Alamein, V.|
|Constantine of Stanmore, L.||Mowbray and Stourton, L.|
|Cottesloe, L.||Munster, E.|
|Cowley, E.||Murton of Lindisfarne, L.|
|Davidson, V. [Teller.]||Nelson, E.|
|Denham, L. [Teller.]||Nugent of Guildford, L.|
|Dundee, E.||O'Brien of Lothbury, L.|
|Eccles V.||Onslow, E.|
|Ellenborough, L.||Orkney, E.|
|Elliot of Harwood, B.||Orr-Ewing, L.|
|Erroll of Hale, L.||Oxfuird, V.|
|Faithfull, B.||Pender, L.|
|Fanshawe of Richmond, L.||Peyton of Yeovil, L.|
|Fortescue, E.||Porritt, L.|
|Fraser of Kilmorack, L.||Portland, D.|
|Gainford, L.||Pym, L.|
|Gibson-Watt, L.||Radnor, E.|
|Glenarthur, L.||Reigate, L.|
|Greenway, L.||Renton, L.|
|Gridley, L.||Rippon of Hexham, L.|
|Hailsham of Saint Marylebone, L.||Romney, E.|
|Russell of Liverpool, L.|
|Henley, L.||St. Davids, V.|
|Hesketh, L.||St. Germans, E.|
|Hives, L.||Saltoun of Abernethy, Ly.|
|Home of the Hirsel, L.||Sanderson of Bowden, L.|
|Hood, V.||Sandford, L.|
|Hooper, B.||Seebohm, L.|
|Hylton-Foster, B.||Sharples, B.|
|Ilchester, E.||Skelmersdale, L.|
|Jenkin of Roding, L.||Slim, V.|
|Johnston of Rockport, L.||Somers, L.|
|Killearn, L.||Stanley of Alderley, L.|
|Kimball, L.||Strathcona and Mount Royal, L.|
|Knutsford. V.||Strathspey, L.|
|Lauderdale, E.||Swansea, L.|
|Layton, L.||Terrington, L.|
|Long, V.||Teviot, L.|
|Lurgan, L.||Thomas of Gwydir, L.|
|Lyell, L.||Thomas of Swynnerton, L.|
|Lytton, E.||Thorneycroft, L.|
|Macleod of Borve, B.||Trafford, L.|
|Malmesbury, E.||Trefgarne, L.|
|Margadale, L.||Trumpington, B.|
|Marley, L.||Vaux of Harrowden, L.|
|Marsh, L.||Whitelaw, V.|
|Marshall of Leeds, L.||Wise, L.|
|Merrivale, L.||Wolfson, L.|
|Mersey, V.||Wyatt of Weeford, L.|
|Middleton, L.||Wynford, L.|
|Milverton, L.||Young, B.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 5.2 p.m.
Lord Hesketh moved Amendment No. 163:
After Clause 46, insert the following new clause:
§ ("Joint owners or occupiers.
§ .—(1) The Secretary of State may make such regulations as he sees fit to deal with any case where (apart from the regulations) there would be more than one owner or occupier of a heredatament or part or of land at a particular time.
§ (2) Nothing in the following provisions of this section shall prejudice the generality of subsection (1) above.
§ (3) The regulations may provide for the owner or occupier at the time concerned to be taken to be such one of the owners or occupiers as is identified in accordance with prescribed rules.
§ (4) The regulations may provide that—
- (a) as regards any time when there is only one owner or occupier, section 40 or 42 (as the case may be) shall apply;
- (b) as regards any time when there is more than one owner or occupier, the owners or occupiers shall be jointly and severally liable to pay a prescribed amount by way of non-domestic rate.
§ (5) The regulations may include provision that prescribed provisions shall apply instead of prescribed provisions of this Part, 41 or that prescribed provisions of this Part shall not apply or shall apply subject to prescribed amendments or adaptations.").
§ The noble Lord said: My Lords, this new clause deals which the position of people who own or occupy non-domestic property jointly with other people. It is designed to deal with a problem under Clauses 40 and 42. The problem arises because Clause 40 provides that a person is liable to pay non-domestic rates in respect of a hereditament if he occupies all or part of it. The clause goes on to provide that the amount of liability is the rateable value multiplied by the multiplier or poundage for all of the relevant part of the financial year.
§ Where there is just one occupier, this is all plain sailing, but where there are two or more it becomes more complicated. Two or more people cannot occupy a hereditament separately. Longstanding case law preserved by Clauses 59(1) and 60(2) provides that in such cases either there are two or more hereditaments or the person having control of the whole building is treated as occupying all of it. However, two or more people can occupy a hereditament jointly. The obvious example of this is a professional partnership.
§ The problem that arises is this. It would be possible to argue, by reading Clause 40(1) strictly that, in a case where two or more people occupy a hereditament jointly, each of them fulfils the prescribed conditions, and each of them is therefore separately liable for the full amount. We have therefore prepared this new clause, which empowers the Secretary of State to regularise the position if this seems necessary. He can do so in one of two ways. He can provide that one of the joint occupiers and not the other is liable in accordance with prescribed rules. For example, the rules could provide that the first partner in alphabetical order was liable; so that Mr. May would have to pay, but never Mr. Slaughter, as would Mr. Chinnock, but not Messrs Debenham and Tewson. Alternatively —and in our present view this is the better course —the regulations could provide that all the joint occupiers would be jointly and severally liable, but for an amount which was the same as if there was only one occupier.
§ Joint and several liability, as your Lordships will be aware, means that the bill will be sent first to the partnerships or other joint occupiers. If it is unpaid, the authority can then bring proceedings against any or all of the joint occupiers, but as soon as it has recovered the appropriate amount from one it cannot proceed further against the others.
§ I have said that joint and several liability is the preferred course, reflecting as it does both the present position and the normal way of treating other liabilities of partnerships. It does however bring a couple of drafting problems in its wake, which may have mystified your Lordships on reading the new clause. First, although liability is in respect of a year, the chargeable amount is calculated on a daily basis. It is therefore necessary to provide that joint liability relates only to the part of the chargeable amount relating to days when there was joint occupation. That is the purpose of subsection (4)(a), which at first sight appears to deal with a situation to which the clause does not apply.42
§ Secondly, in a few cases —most obviously where the occupier is a charity —the amount of liability is affected by the identity of the occupier. There is a very remote possibility that a charity might occupy a hereditament jointly with someone else. In this case, it may be necessary to make rules for determining how much each party is jointly and severally liable for. That is why subsection (4) (b) refers to "a prescribed amount" rather than simply the amount due in respect of the hereditament. In short, the new clause ties up what just might have been a loose end. I beg to move.
§ On Question, amendment agreed to.
§ Schedule 5 [Non-domestic rating.: exemption]:
Lord Hesketh moved Amendment No. 164:
Page 113, line 8, leave out ("kept or preserved") and insert ("used").
§ The noble Lord said: My Lords, I need not detain the House too long on these technical amendments. They are about unoccupied partially exempt hereditaments.
§ The Bill at present contains provision, in Clause 59(10), to ensure that, when a property is unoccupied but would be exempt if it was occupied, it should also be exempt while it is unoccupied. This is obviously sensible. Suppose a farmer has two barns, but his crop one year is only enough to fill one of them. It would be a nonsense if the other, because it was empty, became liable to rating. It is necessary to spell out this, perhaps rather obvious, point in legislation simply because a number of the exemptions are defined by reference to a building's use or occupation, so, without specific provision, the exemption would lapse if it were not occupied.
§ However, Clause 59(10) does not go quite far enough. Besides buildings that are wholly exempt, there are also those which are partly exempt. For example, a farm building may be used as a cowshed at one end and a farm shop at the other. It is desirable to provide that, when such a building is unused, the exempt part—which will of course not have been included in the rateable value —remains exempt. Amendment 169 achieves that, by providing that in all cases one looks at what the use or occupation would be if the building was occupied. Amendment 164 is consequential, and Amendment 188 removes the existing more limited provision. I beg to move.
§ On Question, amendment agreed to.
Lord Colnbrook moved Amendment No. 164A:
Page 113, line 30, after ("livestock") insert ("or the breeding or rearing of horses or ponies").
§ The noble Lord said: My Lords, this amendment is in precisely the same terms as the one which I put down for consideration by the Committee and which was moved by the noble Lord, Lord Mason of Barnsley. It is very simple and straightforward. It is designed to restore the law relating to the rating —or non-rating —of establishments where horses or ponies are bred or reared to what for a period of approximately 50 years everybody assumed it to be. Following the judgment of your Lordships' House on 10th December last, it was realised that the law was not what everybody had assumed it to be for all those 43 years. That does not alter the fact that, since 1933, breeders, valuation officers, government departments, Ministers, Parliaments, have all assumed that the law provided that breeders or rearers of horses or ponies should not pay rates. They were clearly content with that position because, in spite of the fact that between 1933 and 1981 there have been countless Ministers and no less than 13 successive Parliaments, no attempt has been made to alter the position, which has been generally accepted.
§ I do not intend to rehearse again all the arguments that were deployed so ably in the Committee by noble Lords because those arguments are the same today as they were three weeks ago. We had hoped, obviously, that those arguments would have convinced my noble friend the Minister to accept the amendments and to do what we were asking. Unfortunately, he was not convinced at that time, but he said three important things.
§ First, my noble friend said he acknowledged the strength of the feeling expressed during the debate. That was not altogether surprising because no less than nine noble Lords from all parts of the Committee spoke in the debate, all expressing the same view. The only dissenting voice was that of my noble friend the Minister. Secondly, perhaps because of the strength of feeling, my noble friend said that he was prepared to go some way to meet us, though he could not then say exactly how far nor how he could do it. Thirdly, he said that he would be happy to have further discussions before Report stage.
§ Well, my noble friend has had those discussions and I am grateful to him for the time that he spared and for the care and attention that he paid to the arguments advanced. I hoped, and still hope, that the arguments have led him to the conclusion that these amendments should be accepted.
§ I am not convinced, however, that we have persuaded my noble friend because I see that he has tabled his own Amendment No. 164B, about which I should like to say a few words. To a layman, Amendment No. 164B means simply that the Government want to do something, but they do not know precisely what; that they want to go away and think about it and then come back with a regulation. I do not think that is the best way to legislate. Ministers have delegated to them enormous powers to make regulations in all sorts of areas and Parliament has no power to alter them.
§ Yes, to be sure, regulations can be annulled by resolution, but they cannot be altered. I do not regard that as satisfactory. It is far better for governments to say what they want to do in a Bill and then discuss the details with Parliament. Times without number, when they do that, governments realise that the details are not quite right and they alter them —consider, for example, the number of government amendments to this Bill alone. Therefore, it would not be right for us to accept Amendment No. 164B. The Government would do much better to accept Amendment No. 164A, and I hope that my noble friend the Minister will do that. I beg to move.44
§ 5.15 p.m.
§ Lord Mason of Barnsley
My Lords, undoubtedly the Minister's reply to our amendment in Committee, reported at cols. 1565 –68 of the Official Report for 9th June, has caused a great deal of concern among all those bodies which were understandably expecting a more sympathetic and fulsome response to our plea that agricultural premises used for the breeding and rearing of horses and ponies should be exempt from rates.
I must stress, as I did on that occasion, that all the organisations involved —the British Horse Society, the Jockey Club, the Country Landowners' Association, the National Farmers' Union, the National Pony Society and the agricultural workers—are not seeking a new special concession. Indeed, by far the majority have enjoyed de-rating for many years. Historically they have been accepted and recognised as being part of the agricultural scene. Even the Minister admitted in Committee that, prior to becoming a Minister, as a surveyor he used to agree with the assertion that has been put forward that stud farms were indeed de-rated up to 1981 and he only disagrees now because, he says, he discovered that there was some uncertainty between the mid-1930s and the early 1980s. By accepting this amendment, the Minister will be removing that uncertainty. In doing so he will be restoring the de-rating position which practically everybody in the industry understood to be the position until the Whitsbury Manor Stud case.
It is also obvious that Parliament as a whole has always thought that de-rating of agricultural premises for the breeding of horses and ponies has been right and proper, so often has it had the opportunity to apply rating and has not done so. Moreover, it is not easy to understand why the Minister should be cutting across the general views held by the Ministry of Agriculture and ADAS, the agricultural advisory service, which would like to see this activity of breeding and rearing horses and ponies as a natural diversification for farmers to undertake. Surely that should be encouraged.
What of the breeding and rearing of horses for human consumption? I refer to agricultural land and buildings being used for the purposes of contributing to human subsistence. Should not they qualify for de-rating? Of course, one could go on questioning the Minister's reply and the de minimis proposal which he put before the Committee. I believe it will worsen matters and, what is more, it is quite unclear. The noble Lord, Lord Middleton, said in the last debate, that he did not know how one could differentiate between large and small breeding establishments. It was a question of how long was a piece of string? So it is. I believe that the Minister has in mind only those who keep on their farms one or two horses for their own enjoyment or for breeding on a small scale, as he said, largely as a hobby.
In view of the historically accepted position, covering about 50 years, that premises for breeding and rearing horses and ponies have been de-rated, this de minimis proposal would be ludicrous. It would be difficult to operate; it would be a major blow to many in the industry who have rightly benefited from 45 de-rating for so long, and it would fly in the face of Parliament, especially the general goodwill that Parliament has given in the past to this industry. Therefore, I sincerely hope the Minister will give further consideration to the main request contained in the amendment.
§ Lord Middleton
My Lords, it was agreed when the rating of buildings used for keeping and breeding horses was discussed in Committee that this was a complicated question. As we have just been reminded, the decision in the Whitsbury Manor Stud case last year has cast doubt on the principle that for rating and taxation purposes horse breeding is an agricultural activity.
Amendment No. I 64A removes that doubt in the simplest way possible. As noble Lords have reminded us, in Committee my noble friend the Minister said that the Government would provide an exemption from rates where there was a de minimis use of buildings for horses. As I see it, that is what would be done by Amendment No. 164B, which empowers the Secretary of State to lay down a minimum floor area for a relevant building. That could be a very restrictive area and not at all satisfactory for all the reasons that I and other Members gave in Committee.
Therefore, I very much hope that my noble friend will agree to Amendment No. 164A, which would remove the glaring inconsistency between taxation and rating practice, and that he will not seek to include the new paragraph 8A contained in Amendment No. 164B.
§ Lord Renton
My Lords, my noble friend resisted an earlier amendment because of the cost to public funds. Before resisting this amendment I suggest that he gives further thought to the effect on the balance of payments, to which our bloodstock industry contributes many millions of pounds a year.
It does so in two distinct ways: first, by the export of thoroughbred stock and, secondly, by attracting millions of pounds to this country which are spent here by breeders from Arabia and elsewhere who have established valuable stud farms. They are rich men, but if we cease to make it worth their while they will take their money and go elsewhere, to Eire or to France. Therefore, on broad national and economic grounds, the bloodstock industry should not be divided into rich and poor because each has a contribution to make.
I now turn to consider my noble friend's alternative, the so-called de minimis provision. As my noble friend has taken up part of the phrase, it is only fair that I remind your Lordships of the whole of the phrase in which it arises, and has arisen in our law for hundreds of years. The total phrase is de minimis non curat lex, which not too freely translated means "The law does not bother about trivialities". In his amendment my noble friend is dealing with this big and important subject in a somewhat trivial way. It does not seem to make sense. He is speaking on the principle that a particular floor area—we are not told whether it is to be large, medium or small —will be described in a regulation which we shall have no 46 chance to amend. If I understand the intention of the Government and that of my noble friend by what he said during the earlier debate at the Committee stage, it seems that the intention is to make the floor area no larger than that which will enable two brood mares to be kept in a stable.
I wonder whether the consequences have been thought through? For example, let us consider a person who has the good fortune to have a very large racing stable. On the face of it, it seems that he has only to keep two brood mares there and, though the place where the horses in training are kept would not be exempt, the rest of the curtilages of the stable would be because of the presence of the brood mares. I believe that my noble friend's amendment may not suit the circumstances. I am sure that my noble friend and the noble Lord, Lord Mason of Barnsley, who so effectively moved this amendment at the Committee stage, are right when they advocate that the law should be kept as it has been for 50 years, on the basis of which money has been invested by farmers and other people in this country. In addition, people have been employed on the basis of that law. There does not seem to be any good reason for change.
§ Lord McIntosh of Haringey
My Lords, when this matter was debated in Committee I held my peace. I took the view that this was a matter upon which there should not be a party Whip. I still take that view, and I would not have the temerity to advise my noble friend Lord Mason of Barnsley and still less attempt to instruct him, as to what he should do. We could take a relaxed point of view about it at the Committee stage and see what was the force of the arguments. I have never heard a longer succession of speeches of blatant special pleading as I did at the Committee stage in favour of the amendments put forward by my noble friend and others. As a Party we are not exactly lovers of agricultural derating and we are certainly not going to attempt to extend or reinstate it for what is clearly a money-making business. It does not differ in any social way from any other kind of industry which pays rates.
The noble Lord, Lord Renton, said that there are millions of pounds of foreign currency coming into the country as a result of the stud farm business. Surely, a small percentage of that is available to contribute to the national non-domestic rate. I still take the view that this is a personal matter and that my noble friend Lord Mason of Barnsley must do as he thinks fit. If it comes to a vote, on a personal basis I shall support the amendment tabled by the Government as opposed to this one.
§ Lord Gibson-Watt
My Lords, this is a matter which affects a number of people personally. I cannot confess to a personal interest in the matter but I confess to an interest because I am chairman of the Royal Welsh Show which has the largest showing of Welsh ponies and cobs in the world. The meeting will be held in a fortnight's time.
I largely agree with a good deal said by my noble friend Lord Renton about the bloodstock industry. I wish your Lordships to realise that many of the people who keep Welsh ponies or others, are women and many of them are in a very small way of business.
47 It is somewhat ridiculous that those of us who keep cattle should be rated in one way and those who keep ponies in another. I ask my noble friend to consider this matter very seriously.
§ Lord Peyton of Yeovil
My Lords, I wish to add a word or two to what has been said by noble Lords speaking in favour of this amendment. My noble friend Lord Colnbrook has moved an amendment which is simple, clear and easily understood. I readily appreciate why this should be regarded with horror by those who currently frame our laws, because anything approaching simplicity or comprehensibility is something which we regularly eschew at all costs. Instead of my noble friend's quite simple and comprehensible solution or suggestion, we have this hideous paragraph. Every now and again a phrase occurs which flashes at one. For example,The relevant floor area is the floor area of the building in question.With the exercise of the minimal intelligence that was given to me, I could have reached that conclusion without the aid of an Act of Parliament. I wonder what the parliamentary process is for? We are presented with an amendment and then we are told that the real guts of it will be decided after we have put in place a set of words which by themselves mean but little. I find this kind of legislation difficult to accept, or to accept with good grace, even though over many years I have tried to do so in another place.
I end my remarks by saying that I believe—I hope I may use the word without any pejorative sense —that the task of junior Ministers in your Lordships' House is extremely difficult in regard to making or accepting alteration in legislation which has succeeded in finding its way through that ghastly machine which the House of Commons provides in the framing of legislation. I accept that it very difficult for a junior Minister to impose his limited weight at a late stage and say that he has been unable to persuade your Lordships to accept some awful piece of codswallop. Nevertheless, my noble friend has had such a huge task placed upon him in recent months.
I hope that my noble friend will take to heart the fact that there is a good deal of sympathy behind him when we see him faced with the task of pushing through this kind of legislation. I hope that he will bring to the notice of his right honourable friend the fact that not all of us regard this mumbo jumbo with pleasure, pride or satisfaction. I listened with sympathy to the arguments of my noble friend on the Bench in front of me and of the noble Lord, Lord Mason, and, if only in the interests of decent, tidy and comprehensible legislation, I hope that my noble friend will take another look at this.
§ 5.30 p.m.
§ Baroness Blatch
My Lords, I rise not with a vested interest in the subject nor to support the notion of special pleading, because I do not believe that this is about special pleading. It is a matter of consistency. One government department treats this group of people for taxation purposes as part of the 48 agricultural community and regards this as an agricultural activity. Another government department proposes that for rating purposes it should not be part of the agricultural community. At present, farming is in some difficulty, although that may not be appreciated by the noble Lord, Lord McIntosh. Farmers are being asked to diversify and this is an area of activity in which farmers can diversify. It therefore seems inappropriate to choose this moment to treat this group differently for different purposes.
I wish to support the argument for and principle of consistency. If we are to consider the whole issue of whether or not the agricultural community should be brought into the rating system—this issue may be at the back of some noble Lords' minds—that is separate from taking one small part of the agricultural community and bringing it into rating in this way. On the principle of consistency, if for taxation purposes they are to be regarded as part of the agricultural community, then for the purposes of the issue before us they should also be regarded as part of the agricultural community.
§ Baroness Seear
My Lords, there is another argument about consistency. If, as the noble Lord, Lord Renton, said, an important part of the process is breeding for sale overseas, surely this is more akin to industry than to agriculture, and should be treated as an industrial and not an agricultural interest.
§ Lord Renton
My Lords, before the noble Baroness sits down, agriculture makes a contribution to our balance of payments by exporting overseas, and is therefore in a position no different from the bloodstock industry which does the same.
The Earl of Caithness
My Lords, I am grateful to noble Lords for so clearly putting the case for the exemption of stud farms from rating and for their comments on the government amendment which I gave a commitment in Committee we would table.
As I said in Committee, I accept there has been uncertainty about the status of stud farms over the past 50 years; but there is little to be gained from the historical position. The uncertainty that prevailed then has, as my noble friend recognised, been clarified by the ruling of your Lordships' House in the Whitsbury Farm and Stud Ltd. appeal case which has confirmed that the breeding and raising of horses is not an agricultural activity for the purposes of the General Rate Act exemption. That must provide the starting point for our consideration.
I have read the Official Report of the debate on this subject in Committee. I have had the further discussions which I promised then, and I have listened carefully to what has just been said. However, I am still not persuaded that buildings used for large scale commercial breeding of horses and ponies for sport or leisure use should be exempt from rates. I appreciate that for income tax, corporation tax and capital transfer tax the rules which relate to agriculture are applied to stud farms. Those rules do not, however, provide for the total exemption of horse breeding activities from those taxes, nor do they constitute a valid reason for horse breeding to be 49 agricultural for other purposes if those purposes do not require it.
Agricultural de-rating was introduced primarily as a subsidy to encourage the production of food for human consumption. I am of course aware that horse meat is exported for human consumption and is used as animal food but, with a few limited exemptions, horses are not specifically bred for that purpose. At the moment I cannot therefore see that there is a compelling case for exempting essentially commercial activities from rating.
However, when we considered a similar amendment in Committee, I conceded that where farmers kept one or two horses for their own enjoyment or for breeding on a small scale, largely as a hobby, rating could be an unwelcome additional burden as well as presenting some practical valuation problems. I gave a commitment that we would table an amendment to provide an exemption where there is a de minimis use of buildings for breeding and rearing of horses and ponies. The House has just heard my noble friend Lord Renton chide me for not using the full de minimis exemption. As my noble friend knows, my comprehension of Latin is very limited, and I thought I had done rather well to get two words out. I am sorry that I could go no further.
We have honoured that commitment in Amendments Nos. I 64B and 243CC, which cover England, Wales and Scotland. I have listened carefully to what has been said in your Lordships' House and elsewhere and I recognise that there may be better ways to approach the definition of a de minimis exemption. However, the particular anomaly to which my noble friend drew attention would not arise from our amendment. We have specifically left the floor area to be decided by regulation so that we can have further consultations with the industry. That seems to be a reasonable position. We have indicated a view of the size of breeding activity that we are prepared to exempt, but we are open to argument about how to define that. As the provisions of the Bill will not come into effect until 1st April 1990 that gives us time to look at the boundary question more fully and to legislate later.
In view of what noble Lords have said, I propose that we look further at the problems in conjunction with representatives of the horse breeding industry. If my noble friend is prepared to proceed on that basis and to withdraw Amendment No. 164A, I shall be quite willing to do likewise with Amendment No. 164B, and I am sure my noble friend Lord Sanderson will also agree to withdraw Amendment No. 243CC.
§ Lord Colnbrook
My Lords, that is an invitation which I cannot possibly refuse, and I shall not. The further discussions which my noble friend foreshadows will, I hope, persuade him that the way he is seeking to set about the matter is not the right way. One of the difficulties in the debate was that too much attention was paid to rich owners of very fast racehorses. There are some of those, but there are a good many other people who own rather small, slow horses, or ponies for that matter, and do not have large businesses and are not possessed of enormous fortunes. Nobody would wish to damage their 50 prospects. I am grateful to my noble friend for what he said, and I beg leave to withdraw my amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 164B not moved.]
The Earl of Caithness moved Amendment No. 165:
Page 115, line 25, at end insert —
§ 9A. A hereditament is exempt to the extent that it consists of a right of fishing exercisable in a fishery regulated by an order which —
- (a) is made under section 28(3) of the Salmon and Freshwater Fisheries Act 1975, and
- (b) contains such provision as is mentioned in paragraph I (a) of Schedule 3 to that Act (contributions imposed by water authorities).").
§ The noble Earl said: My Lords, I should like to speak also to Amendment No. 243CE in the name of my noble friend Lord Sanderson of Bowden. With these two amendments perhaps I may deal also with Amendments Nos. 166, 186, 187, 189, 244 and 245, in the names of my noble friends Lord Kimball and Lord Wynford and the noble Lord, Lord Brougham and Vaux.
§ The government amendments give effect to the undertaking given at Committee stage that we would bring forward an amendment to give effect to the proposals made then by the noble Lord, Lord Moran, that fisheries which are assessed for a contribution under the Salmon and Freshwater Fisheries Act should be exempt from non-domestic rates. In accepting that amendment in principle we accepted that the possibility of double rating which exists at present is undesirable, and that if there is to be only one rating charge it is more appropriate that it should be directed at the authority responsible for the maintenance of fishing. Amendment No. 165 will achieve that for England and Amendment No. 243CE will produce the comparable result for Scotland. I think there will be wide agreement that this is a satisfactory outcome.
§ I should say that the amendment is however unlikely to be the end of this matter. Although the powers to assess contributions under the 1975 Act exist they are very little used because of the reluctance to make a double charge. If these powers are to be more extensively used it will be appropriate to review the basis on which contributions are set. It may also be desirable to review the procedures by which orders under the 1975 Act come to be made. It may be that it will be appropriate to return to such matters in any future Bill.dealing with the privatisation of the water industry.
§ We also know from the speech made by the noble Lord, Lord Mason of Barnsley, in Committee, that there is wider concern about the charges made to fishermen. He made the case then for a national rod licence. However, such matters are not matters for the present Bill. The question of charges, in particular, will be a matter on which the National Rivers Authority will have an important view.
§ Nevertheless, the question of the rating of fishing rights is a matter for the present Bill and, without prejudice to the outcome of the other matters that I have mentioned, I am happy to give effect to the undertaking which was given earlier.51
§ There is one final matter in relation to this amendment. As your Lordships know, a part of the River Esk which runs in Scotland is dealt with under the 1975 Act, which applies principally to England and Wales. Similarly, part of the River Tweed which runs in England is dealt with under the equivalent Scottish Act. It is a minor matter but it is one which I give notice that we shall be tidying up on Third Reading.
§ I think it would be right to wait to hear what my noble friend Lord Kimball has to say with regard to the amendments tabled in his name before replying to them. In the meantime, I beg to move.
§ Lord Moran
My Lords, I should just like to say a brief word about this amendment. First, perhaps I may thank Her Majesty's Government, especially the noble Earl, Lord Caithness, and his right honourable friend, for bringing forward this amendment, which meets the substance of the case which I raised on Second Reading and in Committee. From what I have heard from many fishermen and from many fishing organisations since the Committee stage, it is clear that there is an enormous welcome among anglers all over the country for the change which is being brought about. We are all extremely grateful to the Government for making it so.
I am also glad that the noble Earl has told us that some of the consequential questions raised by the change will be reviewed. That seems to be most necessary. I hope that one particular point will be looked into. I think it would be equitable, if in the future contributions are to be made to the water authorities and in due course to the National Rivers Authority, that they should extend to all fisheries and not merely to those separated from land which at present pays rates. I hope that is a matter which will be considered between now and the time when the legislation introducing the National Rivers Authority is brought forward.
It will of course be necessary, as the noble Earl said, to consider how contributions will be assessed. Presumably, as fishing rates are now, they will be based largely upon the numbers of fish caught over a five-year period. But it would be interesting to know—if the noble Earl is unable to say now, perhaps he will write to me on the matter—what will be the machinery for making such assessments. For example, will the NRA in due course take over from the valuation officers who determine rates and what provision there will be for appeals—as there are at present against—rating assessments? There is of course a revaluation of non-domestic rates taking place at present and presumably that expertise will be transferred to the NRA in some form or other
I understand from what the noble Earl said in Committee —and now—that the issue of licences is a separate question which will be dealt with in due course by the NRA. I think it is important that, when the time comes from them to be reassessed, the cost should not be made so high that it drives people off the rivers or limits the right of fishing to the well-off. Of course in Scotland there are no licences at all because the Scots have some feeling that it would be 52 against nature to pay for licences to fish. However, the costs are at present disproportionately high in many regions for people who come to fish for one day, or perhaps for a weekend. That is something which ought to be looked at in due course by the NRA. Having said that, I am most grateful to the noble Earl for what he has done.
§ 5.45 p.m.
§ Lord Kimball
My Lords, perhaps I may address my remarks to Amendment No. 166, in so far as it affects England and Wales; and to Amendment No. 244, inasmuch as it affects Scotland. The amendments were specifically put down in order to try to find out what is the Government's intention about the rating of shooting.
I think that my noble friend must admit at this stage that the best way of describing the present system as regards the rating of shooting is as an unfair anachronism. If you shoot and farm your own land in England and Wales it is not rated. However, if you let it—I think the words are,if it is severed from the occupation",then you pay rates on it. So we have a situation where the same right is sometimes rated and at other times is not rated. Surely the shooting is actually taking the game crop from the land. We do not rate land which is producing other crops. Therefore it seems quite wrong to rate land which is producing a game crop. The excellent argument put forward by my noble friend Lady Blatch —which she advanced during the debate about the rating of horses and ponies—applies equally to the rating of shooting. I think if my noble friend the Minister were to take the view of the valuation officers he would find that most valuation officers with whom one comes into contact regard this rate as a bugbear which is riddled with technicalities.
I turn now to the second amendment, which deals with Scotland. I hope that, if the Government intend to do away with the rating of shooting in England and Wales, they will also bring Scotland into line. I suppose I should declare an interest here. I find myself as the owner of a vast area of land in Sutherland paying a shooting rate for purely mythical grouse which we never seem to find. There is no way, except for the quinquennial valuation, of getting the rate altered even if one has no grouse to shoot. If ever there was a natural crop from the ground, whether it be in England, Scotland or Wales, it is the red grouse of Great Britain.
The other side of the Scottish question is: what about the red deer—that is, the wild natural red deer of the hills of Scotland? Here again, they are the natural product of the land. Why should red deer in their wild state be rated, when their brothers the tame deer on a deer farm are not? I hope that my noble friend will be able to give a sympathetic reply to the two amendments.
§ On Question, Amendment No. 165 agreed to.53
Lord Kimball moved Amendment No. 166:
Page 115, line 25, at end insert —
§ ("Sporting rights.
§ 9A. A hereditament is exempt to the extent that it consists of any right of sporting (that is, any right of fowling, of shooting, or taking or killing game or rabbits, or of fishing).").
§ The noble Lord said: My Lords, I beg to move.
The Earl of Caithness
My Lords, before I respond to my noble friend Lord Kimball, perhaps I may say to the noble Lord, Lord Moran, in regard to the previous amendment that many of his concerns will be addressed in future legislation. However, where I can write to him to give some clarity regarding consequential difficulties that we must sort out, I shall of course do so.
I now turn to the amendments tabled in the name of my noble friend Lord Kimball. As he so cogently explained, these would exempt all forms of sporting rights from the payment of rates. I must tell him that this is a much harder case for the Government to accept. Some sporting rights are extremely valuable and are run on very commercial lines. They have been rateable for many years and the law in that respect is well settled. As my noble friend rightly said, in Scotland they tend to produce a significant amount of revenue, even if—sadly—there are no grouse or deer in many parts of the area.
However, in practice, particularly in England where the law is different, the rating of sporting rights leads to anomalies. Sporting rights are in any case unusual in being incorporeal hereditaments; in other words, there is nothing physical to be rated. They are also affected strongly by the existence of the agricultural exemption. Sporting rights over agricultural land are only rateable if they are severed from the land by deed. Since there are other ways of letting the benefit of the right, it takes on something in the nature of a voluntary tax. The result is that the incidence of the tax can be unfair. That can happen with fishing rights just as with shooting. Where fishing takes place on agricultural land, it is exempt; where the fishing is, say, domestic it is liable to rates.
One solution would be to exempt all sporting rights from rates, but we are convinced that there would be the right solution, especially when there is not, as there is with fishing, the possibility of alternative contribution on the shooting side. For that reason I must resist my noble friend's amendment, but I totally sympathise with him about the clear anomalies which exist with relation to sporting rights. It is something of which we are aware.
§ Lord McIntosh of Haringey
My Lords, I apologise for coming in after the Minister, but the debate has taken a slightly unusual form because the grouping did not quite work. I cannot let this matter go without expressing a deep sense of nausea at the idea that we should have to fight every inch of the way for the rights of the homeless, those in deep poverty, and those who go to Crisis at Christmas and to the Sue Ryder workshops, and over and over again have to plead a humanitarian case for those in real need while the noble Lord can stand up with a straight face and ask for the derating of sporting rights.
§ Lord Kimball
My Lords, in view of the indication which I read into my noble friend's reply that he may be prepared to have a look at the unfairness of this matter before Third Reading, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Hesketh moved Amendment No. 167:
Page 115, line 36, at end insert —
("(1A) A hereditament is exempt to the extent that it —
§ The noble Lord said: My Lords, in moving Amendment No. 167 I shall speak also to Amendment No. 168, and Amendment No. 243CD which unfortunately was omitted from the group of amendments. I must apologise to the House for the late inclusion of Amendment No. 243CD. As noble Lords will see, that amendment does for Scotland what Amendments Nos. 167 and 168 do for England and Wales. These three amendments give effect to three modest but, I hope, helpful extensions to the existing rate exemptions for churches.
§ Your Lordships will recall that on several occasions during our debates concern has been expressed about the effect that parts of this Bill might have on the churches. In particular, it has been argued that whereas at present clergymen's houses receive 50 per cent. rate relief, there will he no equivalent reduction in the community charge, and that in so far as the churches feel bound to compensate their ministers for this they will be using resources that could be spent in other ways, some of which are also of concern to my right honourable friend with his responsibility for our heritage.
§ I have explained to the House why we think that it would be inappropriate to treat clergymen differently from their parishioners for the purposes of the community charge, and indeed I doubt whether most clergymen would wish it. As was mentioned on Second Reading, however, we have looked at whether there are other ways in which we might assist the Churches. These amendments, as I hope the House will agree, are a welcome step in that direction.
§ The first of them, Amendment No. 167, exempts from rating what I would describe broadly as church administrative and ancillary buildings. At present there is an exemption for churches—that is, the actual place of worship—and for most church halls. Other church buildings are liable to rates, though they normally receive 50 per cent. mandatory relief as charities and may have the other 50 per cent. remitted by the local authority.
§ The amendment extends the full exemption to what are broadly described as buildings used for carrying out administrative or other activities relating to the conduct of public religious worship. That will include the national and local administrative headquarters of the various 55 denominations. It is also designed to include such buildings as seminaries for the training of ministers, since their existence is clearly an essential prerequisite to the conduct of religious worship.
§ I should perhaps stress that the exemption applies to all denominations, not just the established Church. The only limitation is contained in the reference to public religious worship, which may exclude some sects which confine admission to their services to initiates.
§ The exemption will not extend to, for example, social or welfare facilities provided by the Churches, nor to bookshops and other commercial activities. The reason for this is that such buildings are no different from equivalent facilities provided by charities and other organisations, and it seemed wrong to treat them more favourably. Such buildings will, however, continue to qualify for 50 per cent. mandatory and 50 per cent. discretionary relief.
§ The second amendment, Amendment No. 168, relates to church halls. At present these are generally exempt from rating. If, however, they are let for non-church purposes, and the income exceeds the expenditure attributable to the lettings, they become rateable with the rateable value being equal to the excess income. Besides other considerations, it seems to be a waste of valuation officers' time to have them ferreting about in the accounts of church halls to find out whether the amount that the local amateur dramatic society paid to hire a church hall for a week exceeded the extra cost of the caretaker's overtime. We have no evidence that church halls are used for large-scale commercial purposes which ought to be rated to avoid unfair competition. It therefore seems far more straightforward to provide that church halls should be wholly exempt. Amendment No. 168, by deleting sub-paragraphs (2) to (4) of Schedule 5, paragraph 10, achieves that result.
§ I am sure your Lordships will agree that we all wish well to the Churches collectively, whichever particular Church we as individuals belong to. The Churches do not seek subsidies from public funds, but it has long been accepted as right that they should benefit from favourable treatment under the rating system. These two amendments consolidate that position. I beg to move.
§ Lord McIntosh of Haringey
My Lords, as one who is not a member of any Church, I do not feel disposed to oppose the amendment. Since the amendments seem to be wide-ranging concessions, it would be helpful if the Minister could tell us what the cost of the exemptions is likely to be. That was considered to be an important matter when we were dealing with charities and it would be helpful to have those figures on this amendment as well.
§ Lord Hesketh
My Lords, the cost, which is the equivalent to the savings to the Churches, will be f1.5 million per annum.
§ On Question, amendment agreed to.
Lord Hesketh moved Amendment No. 168:
Page 115, line 37, leave out sub-paragraphs (2) to (4).
§ On Question, amendment agreed to.56
§ Lord Hesketh moved Amendment No. 169:
Page 118, line 28, leave out paragraph 20 and insert —
("20. —(1) This paragraph applies for the purposes of this Schedule.
(2) "Exempt" means exempt from local non-domestic rating.
(3) Any land, building or property not in use shall be treated as used in a particular way if it appears that when next in use it will be used in that way.
(4) Any land or building which is not occupied shall be treated as occupied in a particular way if it appears that when next occupied it will be occupied in that way.
(5) A person shall be treated as an occupier of any land or building which is not occupied if it appears that when it is next occupied he will be an occupier of it.").
§ On Question, amendment agreed to.
§ Clause 50 [Central rating: liability]:
Lord Hesketh moved Amendment No. 170:
Page 29, line 40, leave out ("sub-paragraph") and insert ("paragraph").
§ On Question, amendment agreed to. 6 p.m.
§ Clause 51 [Alteration of lists]:
The Earl of Lytton moved Amendment No. 170A:
Page 30, line 17, at end insert ("and notify any ratepayer affected by the alteration that he has done so").
§ The noble Earl said: My Lords, I apologise for returning to the fray on two amendments that stand in my name and that of the noble Lord, Lord Ross of Newport. Both amendments are somewhat technical but I feel strongly enough about them to want to investigate matters a little further. Amendment No. 170A deals with the right of a non-domestic ratepayer to be notified of any change in the entry on the local or central rating list.
§ In Committee I thought that I had extracted from the Minister a plausible answer, but upon reading it afterwards I continued to have some doubts. In particular, he said that the ratepayer is informed of the level of his valuation when he receives a rate demand, but of course that demand may come a long time after the alteration to the valuation list is made. It may be weeks or months. If it does not affect the valuation as such, and therefore does not come through in the form of a revised rate demand, it may not turn up until the following April. This is an important point: it may be too late for the ratepayer to make legally valid representations on the alteration.
§ There is no doubt in my mind that the Bill will produce a large number of changes and that there will be a great deal of fine tuning on the way. I contend very strongly that a non-domestic ratepayer is as much entitled to know of any changes in his entry in the valuation list that affect his property as a private taxpayer is entitled to know of changes in his PAYE code.
§ It is not enough to say that a copy of the list will be available for inspection at the local town hall, or that the matter will be apparent from a rate demand which, as I have said, may arrive some time after the event. I am seeking a categoric statement from the Minister that all changes in description and valuation will be notified to the ratepayer as at present and as 57 a matter of right. I do not feel that that is too much to ask.
§ Many noble Lords will wonder why I am so troubled by this particular point. However, I should point out that rateable values are used commercially for very many purposes which are not strictly related to the amount of rates payable as such. They may relate, for instance, to the apportionment of service charges. Under the landlord and tenant legislation there may be alterations to compensation receivable from a tenant arising out of an alteration in the rateable value.
§ So, quite apart from the total rates bill per se, these things can have a considerable impact on the occupier. In composite hereditaments particularly —an area which will, I feel, be something of a minefield for the future—the proportion charged to rates will be a particularly relevant criterion to the occupier, while the description for rating purposes of the premises may be of importance to landlord and tenants alike. I ask the Minister to reconsider and clarify his earlier response in respect of that particular item.
Amendment No. 170B is on a different point altogether. There is a misprint in the wording of that amendment. It should read:
rateable occupier of a hereditament",
Ratepayer occupier of a hereditament".
§ I can only apologise to the House that I did not pick up that error in time for it to be altered before today. That amendment is a distillation of several that I moved in Committee. In short, it sets out to give every occupier of a non-domestic rateable property the right on at least one occasion within the five-year currency of a valuation list to make a general proposal to alter his assessment on valuation grounds. There may, of course, be other occasions when alterations will be made and when a right of appeal will arise, such as changes in the physical nature of the hereditament, but I am not concerned with those in particular.
§ When I moved some similar amendments in Committee, the Minister confirmed that his earlier proposals had been modified. He said that he intended to provide for a right of appeal by a new occupier on any grounds provided—and this is the important point —that an appeal had not already been made against the valuation in question.
§ There are literally dozens of circumstances in which a previous appeal against a valuation by a ratepayer may not be in the least acceptable to another ratepayer moving into the premises. Quite apart from the unique circumstances of each occupant, the earlier appeal may have been withdrawn without it being pursued any further, or the ratepayer may not have been professionally represented, or the presentation of his case may have been related to some unconnected factor that was itself in turn related to the rateable value. A particular example of this may be matters to do with compensation under the landlord and tenant legislation. Therefore, I ask the Minister to reconsider. If his argument is still that the inland 58 revenue valuation office is likely to be swamped with appeals resulting from this small plea for the non-domestic ratepayer, I believe that such an argument would be misconceived. I suspect that non-domestic ratepayers will guard very jealously their one unrestricted general right of appeal.
§ I do not see any adverse knock-on effect of these amendments. But if there is a restricted right of appeal there may be a helter skelter flurry of activity while non-domestic ratepayers jockey for position between now and 1st April 1990. If the way in which the legislation operates after 1st April 1990 is slightly more liberal, that may have advantages in the short-term which the Minister may have overlooked.
§ There is one other knock-on effect which I wish to bring to the Minister's attention. I have already mentioned this to him. if there is an unduly restricted right of general appeal, I envisage a proliferation of appeals connected with alterations to the physical hereditament which will be as it were, attempts to get round the legislation. A typical example of this occurred under a piece of rating legislation, the Local Government Act 1974, and in particular Section 21 of that Act. That section provided that certain items in domestic properties should not be taken into account when valuing those properties for rating purposes. The result was that if they could see that it was going to be to their advantage to remove such things as garages and central heating plant from their houses, householders did so before making a proposal to reduce their assessment on the grounds that those facilities were no longer present. Subsequently valuation officers were debarred from making a proposal to bring the assessment back up to the level that it previously had been when those items were in due course reinstated.
§ I should hate to think that the Bill with which we are concerned at the moment would bring that kind of activity into play in the non-domestic sector. I strongly commend both these non-controversial amendments to your Lordships' House. I beg to move.
§ Lord Ross of Newport
My Lords, I rise in support of the amendments so ably spoken to by the noble Earl, Lord Lytton. Amendment No. 170A is only equitable because it relates to Clause 51(1) where a valuation officer:alters the list before it comes into force".The list covers the period between 31st December and 1st April. Surely it is only right that if there is to be an alteration to the list before it comes into force, the ratepayers should be notified of that fact. I should have thought that the Minister would agree with that.
I thank the Minister for writing to me about the matter of material change of circumstances. In Committee I made the point very strongly that I considered that owners were just as entitled as occupiers to be included in the right to make an appeal where there had been a change in the character of the property or in the rental value. The owner owns the freehold in a property and he has an interest in its value. If the owner's tenant does not appeal and the owner thinks there should be an appeal, surely that should apply to him also. I know that the 59 Minister did not turn down this proposal. He said that he would consider it further with the professionals involved. However, I wish to make the point again. I believe that the owner has just as much a right as the occupier to make proposals, if the occupier fails to do so and fails to look after the owner's interest. If the occupier fails to make a proposal he is not looking after the owner's interest.
I wish also to support Amendment No. 170B. I know what the Minister is getting at. He thinks that there will be far too many appeals and that the valuation courts will be inundated. Therefore, the appeals procedure has been restricted to the first six months. I think that many appeals will be lodged in those six months, but that many of them will probably be withdrawn after discussions with the valuation officer. But the courts will not handle the domestic side at all. There is a recipe for people who make unnecessary appeals. In the case of frivolous appeals, the courts can impose the sanction of costs if they believe that a case has been unnecessarily pursued.
I do not believe that people are going to submit proposals willy-nilly for the whole period of five years before there is a further review. Therefore, it is only right that there should be at least one opportunity for each separate occupier, where there has been a change, to make an appeal during the period of the list rather than restricting the right to the first six months. That seems equitable.
§ Lord Graham of Edmonton
My Lords, we on these Benches support the sense of the amendments. They have been reasonably moved. As we move towards implementation of the Bill, the Minister should bear in mind that the assessment and perception by the public of how fair the Government have been—even to the extent of falling over backwards—will have a great deal to do with how well the Bill works. If the amendments are not accepted, the operation of Clause 51 will be seen to be harsh, if not punitive, by many people. The noble Earl, Lord Lytton, and the noble Lord, Lord Ross, have provided the Minister with an opportunity to accept the amendments in principle as he has done three or four times at Report stage and to come back at the final stage of the Bill with other amendments.
The noble Lord, Lord Ross, is right in saying that there will be many people who will try to take advantage of any loophole to delay and procrastinate. However, we are talking about reasonable people who are affected personally and who are entitled not only to a fair crack of the whip but also to a second bite of the cherry.
§ 6.15 p.m.
The Earl of Caithness
My Lords, Amendment No. 170A repeats an amendment which was tabled by the noble Earl, Lord Lytton, in Committee and which I undertook to look at further. I have done so, but I am afraid I have not been persuaded that an amendment would be justified.
The amendment would require the regulations to include a requirement that the charging authority 60 inform the ratepayer if his entry on the list were altered during the period between the list being deposited with the local authority and its coming into effect. In our view such a provision is unecessary. The arrangments set out in the Bill seek to parallel those of the existing system. During this period, the list is provisional and must be treated as such. If ratepayers look at the list during that period to get a first indication of what they are likely to have to pay, they will know that it is still subject to amendment by the valuation officer in the light of new or more accurate information. For this reason there is no provision either in the Bill or in the present legislation for a right of appeal against a change in a ratepayer's entry in the list during the three-month period. There is no point in appealing against something that is provisional and still subject to amendment.
I can understand the noble Earl's argument that a ratepayer who has looked at the draft list may be taken by surprise if when he receives his rate bill in April, it is based on some substantially different figure. But this is likely to be a rare event, occuring only when there has been some substantial change in the building of which the ratepayer is just as well aware as the valuation officer. Most alterations to the draft list will be technical. It would be unduly time-consuming and costly to require ratepayers to be informed of every tiny change in description. Once the list comes into force the situation is of course different and we shall be providing by regulation for the valuation officer to be required to inform the ratepayer of any alteration to his entry and for a right of appeal.
In the light of what I have said I hope noble Lords will be able to agree that the Bill does no more than continue the present position. In that connection, perhaps I may say to the noble Lord, Lord Graham of Edmonton, that I think that position is very tenable. It is one that the public will understand because the rights of the ratepayer are adequately protected.
I turn to Amendment No. 170B, which would entitle a ratepayer to make one proposal on general grounds for the alteration of his entry on the list during the currency of the list. Noble Lords will recall that we have already had a discussion of appeal rights at Committee stage during which I fully explained the Government's conclusions on the recent consultation document and the rights we intend to provide for by regulation. I also explained the need for flexibility and adaptability which lies behind our wish to provide for appeal rights through regulations rather than primary legislation. I explained that there is to be wide consultation on the framing of these regulations.
Our proposals differ from the existing position solely in the way they deal with the right of appeal on general grounds; that is, against the value first entered in the new list. The right of appeal due to a material change in circumstances or against an alteration of the list by the valuation officer will remain the same as at present.
The present law provides for an unlimited right of appeal on general grounds throughout the duration of the list. Our intention is that the right to propose 61 an alteration in the rateable value entered in the new rating list at a general revaluation should have to be exercised within six months of the new list coming into force. The present unlimited right of appeal on general grounds gives rise to a problem of a continuous flow of often misconceived appeals, sometimes even regardless of whether an earlier appeal has been rejected.
I am aware that the noble Earl's amendment would close off that latter possibility by providing for an appeal only once on general grounds. But misconceived appeals may also result where, for example, a businessman is in financial difficulty and decides to take pot luck with the possibility of coming before a sympathetic tribunal. Such speculative appeals, even if they occasionally secure a small reduction in rateable value, place a disproportionate burden on valuation officers and the local valuation courts.
In his strong argument for the amendments, the noble Lord, Lord Ross of Newport, said that if there were frivolous appeals, there was a power to award costs. I beg to differ. I do know of a power to award costs on frivolous applications. Perhaps the noble Lord will be able to correct me on that point.
During our consultations it was put to us strongly by various representative bodies and professional organisations that responded to our consultation document that some occupiers simply do not bother to appeal and that a new occupier can come in and find that his rateable value is substantially out of line. It is for this reason that we have said that we also now intend to provide for a right of appeal by the occupier on general grounds throughout the duration of the list after a change of occupier provided the valuation in question had not already been appealed against. That final qualification is one we might be willing to reconsider. The point has been put by the noble Earl that sometimes occupiers enter appeals but do not pursue them actively and therefore fail to secure any reduction and that the subsequent occupier should not lose out in these circumstances. That is a good point and I am prepared to look again at it when we come to make the regulations.
A great deal of argument in this area seems to be postulated on the assumption that if a ratepayer does not appeal, he will be paying too much in rates. This is not so. Mostly valuation officers get it right. Sometimes they are wrong. It does not seem unreasonable to expect a ratepayer to decide within six months whether he considers his new rateable value to be fair, to take professional advice if necessary and to lodge an appeal.
In conclusion, perhaps I may say to the noble Lord, Lord Ross, that owners will have the same right of appeal as occupiers when the list first comes into force. They will have the same right as occupiers when the list is altered. The difference is that a new owner will not have the same special right of appeal as a new occupier. That provision is perhaps wider than the noble Lord suggested.
Our proposals ensure that the ratepayer remains fully protected, while at the same time reducing the flow of misconceived and speculative appeals that can clog the system at present and hold up genuinely 62 based appeals. I ask your Lordships to bear in mind that we are talking here about a power to make regulations, on which we shall consult further with the professional bodies and consider their views carefully. On several issues we have already been persuaded to change our proposals. On this one, despite listening carefully, we have not.
Perhaps I may make one final point to both the noble Lord and the noble Earl, who are as concerned with the industry, as I was and still am. I am sure that they will agree that it will have the benefit in future of the five-yearly review and that many of the problems which all surveyors have faced and which have been mentioned by the noble Earl and the noble Lord this afternoon will not need to be faced in future when we have a regular five-yearly review.
§ Lord Ross of Newport
My Lords, perhaps I may respond first. I apologise if I have misled the House on the question of costs in valuation courts. One would certainly award costs on frivolous planning appeals, from which I have suffered. If there is no provision regarding frivolous appeals on valuations, I suggest that is one way in which the Government could get round the problem. If I have misled the House, I apologise.
Perhaps I may also say that the noble Earl, being a practitioner, will know what will almost certainly happen as soon as the lists are published, Rating surveyors who have only six months in which to get going will undoubtedly advise their clients to slap in appeals. Therefore, valuation courts will have vast numbers of appeals, some of which may later be withdrawn after discussion with the valuation officer. I should have thought that the second amendment would have lightened the load of the valuation officer, which is something about which I know the Minister is concerned. After six months there would still be opportunities to submit that appeal, one of which would occur on change of occupier. I still think that a new owner who purchases a property half-way through the five-year period should also have that opportunity.
I shall leave that point and hope that it will be raised again in the noble Earl's deliberations and that he will give it some further thought. I do not think that we should be seen to be too restrictive in these matters. I do not believe that the courts will be inundated once they have got through the initial burst of appeals. They will undoubtedly receive appeals because people will be frightened to death at some of the assessments and will not know what the rate in the pound will be or will just be finding out. I think that many people will almost certainly submit appeals. After that I think, as the Minister rightly says, the situation will simmer down. Once there are five-yearly reviews that situation will not happen again and the role of the courts will be much less. So far as I know, valuation courts at the moment are hardly inundated with work. I leave it to the noble Earl, Lord Lytton, to decide what he wishes to do about this amendment.
§ The Earl of Lytton
My Lords, first of all perhaps I may thank the Minister for his very helpful replies to my two amendments. I should also like to thank 63 the noble Lords, Lord Ross of Newport and Lord Graham of Edmonton, for their support. I should particularly like to express my thanks to the Minister and his department for the very helpful way in which they have dealt with various queries that I have raised over the past weeks. That has certainly been of great assistance to me.
I note what the Minister said about Amendment No. 170A; namely, that it is unnecessary. I think that he has very fairly put the matter in sharp focus. I accept that in the relatively limited circumstances of the period between the deposit of a new list and its coming into force it would be an administrative headache to include a right of notification, especially having regard to the provisional nature of the list. Therefore, comforted by his assurances regarding what will happen once the list comes into force and the notification procedures that will be adopted after that date, I feel it unnecessary to press that amendment.
With regard to Amendment No. 170B, I was very gratified to hear the noble Earl say that he will reconsider the point as part and parcel of the consultations that he is to enter into in compiling the regulations which will form the administrative machinery of the Bill. I am grateful to him for that assurance. The position depends very heavily on the quality of the valuation list that will result from the present revaluation process. I am particularly grateful to the noble Lord the Secretary of State for Trade and Industry for replying to a query that I had relating to the funding of the Inland Revenue Valuation Office to ensure that that is dealt with satisfactorily.
I think also that it is fair to say that the five-yearly revaluations will be of great assistance. Of course a lot can happen in a period of five years. I am only concerned that in a rapidly changing property market—which will not change any less rapidly because of the revaluation and a national non-domestic rate—we shall not find that there are local hot spots or cold spots, as the case may be, in the property market which cannot be rectified for long periods; namely, until 1995. I have always said that I thought that that was a long time to wait for justice to be done. My only consolation is that the Minister has confirmed that there will be grounds for an appeal where there are physical changes in the locality.
All in all, I am considerably heartened by the response of the Government. Therefore, I beg leave to withdraw Amendment No. 170A.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 170B not moved.]
Lord Middleton moved Amendment No. 171:
Page 30, line 42, leave out from ("effect") to the end of line 43.
§ The noble Lord said: In moving Amendment No. 171 I should like to speak also to Amendments Nos. 172 and 191.
§ Subsections (6)(a) and (b) allow the Secretary of State to make regulations empowering alterations of the rating lists to be retrospective. That seems to be 64 contrary to the fundamental principal that the citizen should not be penalised by retrospective legislation. A breach of that principle is bad enough, but surely the provision in Clause 51 is worse. That provides for the regulations, which could not be amended by Parliament. Subsection (6) would give power to a valuation officer to increase the rateable value of business premises from some date in the past.
§ I should be grateful if my noble friend the Minister could say what possible reason there could be for including this apparently objectionable provision in the Bill. I beg to move.
§ Lord Peyton of Yeovil
My Lords, perhaps I may briefly support what my noble friend Lord Middleton has said. All the time I was a Member in another place the establishment persisted in its attempts from time to time under different governments to introduce retrospective provisions. If there is not some very good reason in this case—and it is certainly not apparent on the face of the Bill—I hope that my noble friend will look again at the matter. As my noble friend has pointed out, the whole principle of retrospective legislation, the details of which are not approved by Parliament, is odious.
§ Lord Dean of Beswick
My Lords, I rise briefly to support the amendments moved and fully explained by the noble Lord, Lord Middleton, and supported by the noble Lord, Lord Peyton. As the noble Lord, Lord Peyton, said, in the past we have seen governments of various political colours indulge in retrospective legislation. It is not a good thing.
While this measure is not in itself a financial measure, the end result is a financial charge. I think that to talk in terms of retrospection is more than a little unfair. On the day the Bill becomes an Act people will know where they stand and I think that it ought to be left at that and not subject to changes imposed retrospectively by the Secretary of State. On that basis, we support the amendment as moved. We think it is worthy of deep consideration and of acceptance.
The Earl of Caithness
My Lords, with respect to my noble friend, I have to say that I fear he may be under some misapprehension about the present situation. The present situation under Section 79 of the General Rate Act is that an alteration to the list following a proposal by the valuation officer or the ratepayer can be backdated to the start of the financial year in which it is made or the date of the relevant change of circumstances, whichever is the later. So any retrospective effect can never exceed 12 months from the date that the alteration is proposed. It can be more than that from the date when the alteration is made, which may not be until after appeal proceedings have been settled. I shall come back later to that point.
Broadly the Government's intention is to preserve the existing position. I should say that the thrust of my noble friend's amendment is one with which the Government have some sympathy. Indeed, in our July 1987 consultation paper, Amendments to the Rating Legislation in England and Wales, we proposed that there should be a time limit, possibly 65 of three months, on the period for which a proposal could be backdated.
Our object in making this proposal was to avoid the situation that sometimes arises at present whereby a ratepayer is notified in March that, as a result of an alteration to his premises nearly 12 months earlier, his rateable value and therefore his rate bill for the whole financial year would have to increase. We made it despite misgivings that it would encourage ratepayers to delay notifying local authorities of the completion of improvements.
The response to this proposal from private sector respondents to this part of the consultation paper was, I have to say, decidedly unenthusiastic. Most respondents focused not on the benefits of avoiding backdated increases through alterations proposed by the valuation office where a building had been improved or expanded, but rather on the possible cost to the ratepayer if his claim for a reduction where the amenities of the building had deteriorated could not be backdated by more than three months.
On the basis of that consultation exercise, the Government drew the conclusion that—and I think that this is the key point as regards my noble friend's amendments —the present arrangements on backdating of alterations to the list is not seen by ratepayers or by the profession as being to the disadvantage of the ratepayer. We decided to continue the present system.
I therefore suggest to my noble friend that not only would his proposal have the disadvantages of encouraging ratepayers to delay notifying local authorities of the completion of improvements to their property but it would also provoke strong opposition from those whom it seeks to help—the ratepayers.
I have to say that my noble friend's amendment as drafted would, I think, go much further than he intends. It would not only rule out alterations to the list being made retrospective to before the date a proposal is made (which is I think what concerned him and on which there are legitimate differences of opinion); it would also rule out the backdating of alterations which are made when a proposal is eventually settled after a tribunal hearing. I am sure my noble friend would agree that it would be unjust if, when a ratepayer succeeds in showing that his rateable value is too high, he could not have the reduction backdated at least to the date when he first sought to have it reduced. We have tested opinion on this issue and I have to tell my noble friend that it is opposed to his proposal.
§ 6.30 p.m.
§ Lord Middleton
My Lords, I am certainly reassured by my noble friend's statement that a revaluation could not be backdated more than 12 months except in certain circumstances. In view of that explanation and his technical criticism of the amendment, I beg leave to withdraw it.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 172 not moved.]66
§ Lord Hesketh moved Amendment No. 173:
Page 31, line 8, leave out paragraph (a) and insert —
("(a) provision requiring payments to be made,
(aa) provision requiring repayments to be made together with payments of interest at a prescribed rate, and").
§ The noble Lord said: My Lords, in moving this amendment I should also like to speak to Amendment No. 221. The purpose of Amendments Nos. 173 and 221 is to provide for payment of interest by the charging authority where a rateable value is reduced as a result of an appeal and a repayment is made to the ratepayer. The second amendment simply provides that such amounts shall be met in the first instance from the collection fund. We already have power to provide in regulations that such costs may be wholly or partly offset against authorities' contributions to the national pool.
§ The amendments discharge a commitment made at Committee stage when the noble Earl, Lord Lytton, tabled an amendment with the same intent but which we were unable to accept as it stood for drafting reasons. They provide for interest to be at a prescribed rate. We shall consider and consult further before deciding how that rate should be set.
§ It must be right that people who appeal successfully against their rating valuation, and have thus effectively paid too much in rates, should be reimbursed for the use of their money by the payment of interest, especially when they may have had to wait some time because of the period it can take before appeals to tribunals can be heard. I beg to move.
§ Lord Dean of Beswick
My Lords, I think that the Minister when giving part of his reasons for moving this amendment used the word "consult". Can be explain what he means by that—consult in what terms, with whom and when? It is simply a request for information.
§ Lord Graham of Edmonton
My Lords, can the noble Lord make it quite clear that the repayment of interest upon delay applies to individuals as well as to businesses? Is he saying that the impact of this amendment is to place the individual charge payer in the same position as the business charge payer? If so, we shall be satisfied. We should like the Minister to give some indication as to whether that is so, because that is the impression that he gave.
§ Lord Hesketh
My Lords, similar arrangements are not proposed in respect of overpayments on the community charge because that would generally involve much smaller amounts and local authorities would be unable to deal with the administative effort involved.
§ Lord Graham of Edmonton
My Lords, how does the noble Lord know that? Is he saying that the Government decided that the local authorities were not prepared to meet the demand?
It is amazing how an impression given by the noble Lord can be altered by asking a simple question. The impression that was given was that this was a fair business, that is to say that anyone who had paid and 67 then had to be repaid because he had been charged too much would get back that overpayment. It needed my question to ascertain that what was really meant was businesses and not individuals.
The noble Lord says that he is not bothered about this matter because the sums involved are small. To a person of small means a small amount is just as valuable as a big amount would perhaps be to someone else. I find it very unreasonable of the noble Lord glibly—or perhaps I should say tritely—to say that he knows that local authorities have said that the administrative burden is too great. I should be very surprised if any local authority were prepared to say to its ratepayers or charge payers, "In those instances where you have been overcharged, that is to say when we have had your money and have been using it in our funds, when we repay it you will not get interest". I should like to know the local authority that would say such things.
If the noble Lord is an individual who places great store on consultation, who listens and then puts that consultation into effect, I ask him to reflect and tell the House how he has formed the view that the administrative burden of this work would be too great for local authorities.
§ Lord Hesketh
My Lords, as the noble Lord will be aware, the community charge is paid in instalments and the situation is rather different from that of the NNDR, which of course is also payable by individuals as well as businesses.
§ Lord Graham of Edmonton
My Lords, the noble Lord has successfully wriggled a little way out of that difficulty. Of course I understand that the NNDR will be paid by individuals. However, I think that the noble Lord could have been much more helpful and sympathetic than he was in his original reply.
§ On Question, amendment agreed to.
§ Schedule 6 [Non-domestic rating: valuation]:
The Earl of Caithness moved Amendment No. 174.
Page 119, leave out line 22 and insert —
("(a) matters affecting the physical enjoyment of the hereditament,").
§ The noble Earl said: My Lords, in moving Amendment No. 174 I should like at the same time to speak to Amendments Nos. 175, 234, 235, 236 and 237. These are further amendments arising from the Addis and Cakebread cases which were the subject of new clauses adopted at Committee. As the House will recall, my right honourable friend the Secretary of State announced on 9th March his decision to amend both the present and the new rating systems in order to restore the law on the matters that can be taken into account on valuations made between general revaluations to what it previously had been understood to be.
§ When the House was in Committee, I moved a new clause, now Clause 133, which achieved that result for the present rating system for its remaining life. I explained that we were still considering the drafting of the amendments that would be needed to produce 68 the same results for the new non-domestic rating system and that we would table them at Report stage.
§ The first two amendments in this group, Amendments Nos. 174 and 175, fulfil that commitment. Broadly speaking, they do the same as those we discussed in Committee; that is, they provide that where a property is valued between general revaluations, for example because it has been altered, the valuer will take account of its actual physical state and the physical state of the neighbourhood as it now is but will take economic factors, including the general level of market rents, as they were at the time of the last general revaluation.
§ I wish to explain two points. The first is the reference to "matters which, though not affecting the physical state of the locality, are nonetheless physically manifest here". To cast a light on that, I would give the simple example of a bus service. A bus service is physically manifest in an area. What we are seeking to rule out are changes based on purely economic or market-related factors that have no effect on the value the occupier derives from his property. Thus, for example, it should not be possible for the valuation officer to argue for an increase in rateable values when office rents in the City of London went up before "Big Bang", nor for a ratepayer to seek a reduction if they fell when the stock market fell. Those are the sort of matters which we think can be sensibly dealt with only at a general revaluation.
§ In drafting these further amendments, we gave some more thought to their precise wording, and came up with something slightly different from the words we had used in Clause 133. There is no material difference in the meaning. However, in order to avoid any inference that, because different words were used, there must be some difference in meaning intended, we decided to carry our second thoughts about Schedule 6 back into Clause 133. This is done by the fourth and fifth amendments in group Amendments Nos. 235 and 236.
§ When we discussed the Addis and Cakebread cases in Committee, your Lordships will recall that concern was expressed over the amounts that local authorities are being required to repay to ratepayers where proposals to reduce or delete certain entries from the revaluation lists were made before the changes to the law in Clauses 133 and 134 take effect. However, in addition, some ratepayers affected by the Addis and Cakebread decisions have made applications under Section 9 of the General Rate Act for the refund of up to six years overpayments not covered by proposals. In doing this they may well have in mind the implications of your Lordships' recent decision arising from the case of Totter Hamlets v. Chetnik Developments, in which it was held that the discretion of an authority under Section 9 is limited when an overpayment of rates is made as a result of a mistake in law.
§ As I indicated when this issue arose at Commitee stage, we are doubtful that local authorities could be required to make Section 9 refunds as a result of the Addis and Cakebread cases. But nor do we believe that they should, and I promised at that time that we would be tabling an amendment to clarify that 69 position. Amendment No. 234 ensures that, where rates were duly paid on the basis of the law as it was generally understood at the time, no repayments under Section 9 are due even if the prevailing interpretation of the law is subsequently found to be incorrect.
§ As your Lordships will he aware from the debate in Committee, local authorities stand to lose some £120 million by way of proposals made, in the light of the Addis and Cakebread decisions, before the change in the law embodied in this Bill. This is the necessary consequence of those decisions. Were Section 9 refunds to be available in addition, this sum could more than double. Section 9 was never intended to be used in this way and it would be unreasonable to ask local authorities to bear the additional cost. This amendment ensures that they need not do so. I beg to move.
§ On Question, amendment agreed to.
§ 6.45 p.m.
§ The Earl of Caithness moved Amendment No. 175:
Page 119, leave Out lines 26 to 29 and insert —
("(d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and
(e) the use or occupation of other premises situated in the locality of the hereditament.").
§ On Question, amendment agreed to.
The Deputy Speaker (Lord Murton of Lindisfarne)
My Lords, if Amendment No. 175ZA is agreed to, it pre-empts Amendment No. 175ZB.
§ Schedule 7 [Non-domestic rating: multipliers]:
Lord Dean of Beswick moved Amendment No. 175ZA:
Page 120, line 38, leave out from ("concerned") to end of line 40.
§ The noble Lord said: My Lords, the first amendment, Amendment No. 175ZA, would remove the Treasury's power to increase the national non-domestic rate index by less than the increase in the retail prices index. The second amendment would allow the Treasury to increase the index by less or more than the RPI.
§ During the Committee stage, Opposition amendments were moved which would have replaced the RPI with a local authority cost index. This would have more accurately measured the cost to the non-domestic sector of the local authority services they consume. But the Government justify their proposals on the following grounds. There is buoyancy in the rate base which will increase the yield from non-domestic rates. The Government may wish to give back to the business community some of the extra revenue being generated. Business rates are now higher than the Government would like. They would like over the longer term to be able to reduce the business rate burden. Loading cost increases above the RPI on to poll tax payers will enhance accountability, thereby forcing authorities to reduce expenditure.
§ During the debate in Committee, the Minister emphasised the business rate. It is important to 70 remember that the non-domestic rate is borne in the following way: by the commercial sector 51 per cent., by industry 19 per cent., and "other"—including statutory undertakers, local authorities and so on —by 30 per cent. The Minister also referred to the need to protect business from excessive rate increases. A large amount of rate increases in recent years can be attributed to the Government's substantial reductions in rate support grant, from 66 per cent. to approximately 50 per cent.
§ It is true that local authority cost increases have been in excess of the RPI, but this is mainly because local authorities have had to follow market forces in negotiating pay increases for employees. This is across the board in local authority wage rates that are negotiated. Over the last few years there has always been a drift away from the authorities. The authorities have had to make up the difference from the general rate fund. I beg to move.
The Earl of Caithness
My Lords, as the noble Lord, Lord Dean of Beswick, has explained, the effect of the amendment would be to delete from the Bill the power for the Government to decide in any year to increase the national non-domestic rate poundage by less than the rate of inflation, subject to affirmative resolution in another place. It would thus mean that business rates automatically rose every year by the full amount of the increase in the retail prices index.
I explained in Committee that the Government intend that in a normal year—in the great majority of years—that is what will happen. We think it is right that businesses should go on paying broadly the same proportion of local government spending as they do now. Of course, if local authorities increase their spending, businesses will pay less in proportion, but they will go on paying the same amount in real terms. In any case, with the new disciplines of accountability through the community charge, we do not expect local authority spending to display the same endemic growth as it has done in the recent past. So the power to increase rates by less than inflation is decidedly not one that we expect to use routinely. Rather it is a power to have available for use if occasion requires.
When we debated the subject in Committee, I set out the grounds on which the Government might consider using the power. One would be to offset the natural buoyancy in the system, without which the yield from non-domestic rates will tend to rise by 1 or 2 per cent. a year as the stock of buildings rises. Another would be to give business a share of any efficiency savings that local authorities are able to make—and we know from the work of the Audit Commission that there is appreciable scope for such savings. A third would be if my right honourable friend the Chancellor of the Exchequer were to decide to adjust the balance of business taxation between business rates and some other tax on businesses. Some representatives of the business community have argued that we should use the power for this reason, on the grounds that taxes on profits pose less of a threat to businesses in difficulties. We have not accepted their arguments; but it is right that the power should be there for possible use. I come back to the point that in any particular year, none of these 71 reasons is likely to apply. Index-linking will be the norm, with under-indexation very much the exception.
Concern has been expressed that using this power would blur the accountability to community charge payers about which the Government are as concerned, because it could lead to increases in the community charges which did not result from increases in local authority spending. We agree that that is an objective devoutly to be avoided. That is why, as I have explained, the likeliest uses of the power would be in circumstances where the yield of business rates would otherwise increase, or where the reduction was offset by an increase in the proceeds of some other business tax which might be used to increase the amount available in Exchequer grant. When we come to the next amendment of the noble Lord opposite, which would allow the Government to raise business rates without any safeguard, we shall see the the real concern is not to protect community charge payers, but to allow local authorities to go on increasing their spending without fear of the consequences. The Government, on the other hand, are offering business the crucial guarantee that rates will rise by no more than inflation. This will give business the stability it needs to plan for the future. But we have also listened to the anxiety of business that rates are too high already. We think it is right that there should be the possibility of an occasional downward adjustment.
§ Lord Dean of Beswick
My Lords, I do not think that I have misunderstood the Minister, but I conclude from what he was saying was that if there are surpluses they would be made available in rebate form to the business sector, but that no such rebate would be available for the domestic sector. Have I understood the Minister correctly to say that rebates would be available? If he is saying that, it will appear overwhelmingly to the domestic poll tax payer and ratepayer that there is a privileged sector within the local community —that is, the commercial sector. If rebates are available to only one sector, that is a biased way in the extreme of looking at it. The Minister may shake his head and may think that I have misrepresented him, but I am putting myself in the position of the ratepayer who finds that somebody in commerce close to him receives a rebate because that sector has done rather well, but no rebates would be available to him as a domestic ratepayer. It may be good for the commercial sector and no doubt it would be welcomed. But I should have thought that a ratepayer in a local authority with a healthy bank balance at the end of the year is as much entitled to benefit as the commercial sector from that healthy balance. If I have misunderstood the Minister perhaps he will correct me.
The Earl of Caithness
My Lords, with leave of the House, I should perhaps clarify the situation. As I understand it, if there is a surplus both the domestic and the business community charge payers will benefit. We are considering an exceptional circumstance where it might be appropriate to give the benefit back to business by a slight reduction in 72 the increase. As I explained fully, we do not expect this to occur on a regular basis.
§ Lord Dean of Beswick
My Lords, it still shows an element of more favourable treatment to one sector. However, I have no desire to test the will of the House and I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 175ZB not moved.]
§ Clause 53 [Special provision for 1990 –95]:
§ The Earl of Caithness moved Amendment No. 175A:
Page 31, line 17, leave out subsections (2) to (4) and insert —
("(2) The regulations may contain such provisions as are mentioned in subsection (3) below as regards any case which falls within a prescribed description and where —
(3) The yprovisions are that —
(4) A chargeable amount found in accordance with rules prescribed under this section may be the same as or different from what it would be apart from the regulations.
(4A) Rules prescribed under this section may be framed by reference to such factors as the Secretary of State thinks fit.").
§ The noble Earl said: My Lords, I should also like to speak to Amendments Nos. 176, 176A, 176ZA, 176ZB, 177, 177A, 246A and 246B. This large group of amendments concerns the transitional protection that we shall be giving to those businesses which would otherwise face large rate increases in 1990.
§ The amendments in the names of the noble Lord, Lord Graham of Edmonton and my noble friend Lord Stanley of Alderley are grouped with the government amendments here for fairly technical reasons, but I do not want to anticipate what the noble Lords will say in moving their amendments, and for the present I shall speak only to the government amendments.
§ There are effectively two sets of government amendments here. The first set, Amendments Nos. 175A, 176A, 176B and 177A, are designed to improve the drafting of Clauses 53 and 54. I remind the House that the first of those two clauses deals with the transitional arrangements which will follow the revaluation and the move to the national non-domestic rate in 1990, and will last until 1995. The second of them provides the power to make further transitional arrangements in 1995 to continue the protection for those very few ratepayers facing large increases which will not have come through in full by then, and to take account at the same time of changes resulting from the 1995 and subsequent revaluations.
§ The drafting problem arises because the clauses as drafted referred to the transitional ceiling being based on the rate bill for the hereditament for the previous year. The problem with this is that rates are 73 calculated on a daily basis, and the rates bill for the whole of the previous year would not necessarily be the appropriate baseline if liability had changed in the course of the previous year. The amendments therefore take a rather simpler approach, leaving the detail to be filled out in regulations.
§ At the same time the opportunity has been taken, in Amendments Nos. 176A and 177A, to give an additional reassurance to the business community by providing that the transitional regulations cannot be used deliberately to increase—or for that matter reduce—the total amount payable in business rates in any year.
§ The two remaining government Amendments Nos. 246A and 246B, give effect to a commitment which my right honourable friend the Secretary of State gave in another place, to provide that the regulations containing the transitional arrangements shall not have effect until they have been approved in draft by a resolution of each House. I am sure that your Lordships will agree that that is justified, bearing in mind the way that concern among the business community has focused on this issue.
§ No doubt we shall have further debate on these issues when the noble Lord, Lord Graham, and my noble friend Lord Stanley of Alderley have moved their amendments, but meanwhile, I beg to move government Amendment No. 175A.
The Deputy Speaker
My Lords, I should remind your Lordships that if Amendment No. 175A is agreed to, I shall not be able to call Amendment No. 176 because it pre-empts it.
§ Lord Graham of Edmonton
My Lords, I rise to deal in this series of amendments with Amendment No. 176A. The noble Earl and those who follow these matters closely will have sifted through the formula contained in the amendment I am pleading by comparison for special treatment for small businesses. I am not asking that they be given advantages so that others will be disadvantaged, although I recognise that, by virtue of the nexus of the community charge, if somebody is eased in one way or another then somebody else will be disadvantaged. To that extent the Government are on a good thing because few people will voluntarily accept being disadvantaged although in equity somebody else will be advantaged.
The case for the small business—the small business is defined in the amendment—is very well put. I am not suggesting that other people are better able to pay, but I am asking the Minister to consider some of the salient facts that have been given to me by the National Federation of the Self-Employed and Small Businesses. The federation tells me that on average 15 to 25 per cent. of small firms' pre-tax profits are swallowed up in rate bills compared with only 1 to 5 per cent. of plc companies. If the impact of the rate bill on small business is disproportionately as high as that, we are asking the Government whether they are entitled to some special treatment. The small business community will experience a greater change in their 1990 rate bills than will the big business community. If that happens and the Government genuinely want 74 to help small businesses I am asking them to accept the thrust of this amendment. If they do not accept it, how will they help the small businesses?
Small businesses are less able than big businesses to increase prices and/or reduce costs to offset increases. I realise that I am making a number of assertions which can all be challenged, but I believe that those who have asked us to listen to their case and to provide the Government with an opportunity of taking that case into account deserve an answer. I am also told that small business shops in the high street are more at risk resulting in less good service and choice for customers. The Government may take the view that the marketplace is the marketplace, and if it is the will of consumers and shareholders that 100 shops are finally reduced to three shops, so be it. But the Government need to say something to satisfy the small businesses which feel they are to be sacrificed on the altar of efficiency in the marketplace.
The proposed amendment of a special small business rate of the NNDR of 70 per cent. of the standard rate is intended to redress the present injustice whereby small businesses pay disproportionately more in rates than large businesses. If the Government are looking for precedents, for equity, continuity or comparability, a precedent for a lower rate for small businesses has already been set by the present structure of corporation tax. If the Government find two levels of corporation tax to be acceptable, why not two levels of rates of the NNDR?
The bodies and businesses which have put their arguments to me feel very aggrieved. They are in business and they believe in enterprise. They recognise the nature of the jungle in which they operate, but they are asking for fair treatment which gives them a slight advantage because of their smallness. The smallness is spelt out in the amendment, in the amounts and in the formula. If the Government really mean what they are saying —that they support the small business nexus —the small businesses are asking the Government to put their money where their mouth is.
§ 7 p.m.
§ Lord Stanley of Alderley
My Lords, it would probably be for the convenience of the House if I spoke to Amendments Nos. 176 and 177, which really relate to village shops. This problem of village shops was discussed at Committee stage, in particular the disadvantages which they face economically from the large high street retail shop, as the noble Lord, Lord Graham, said. Under this Bill, these shops will be paying a business rate on the shop part of their house as well as having to pay a personal community charge; so they could be paying twice over.
I have carefully read what my noble friend Lord Caithness said at Committee stage about the relatively lenient way these shops should be dealt with on revaluation in relation to the high street shop. Since then, he has been kind enough to take note of our concerns, and he managed to find time this weekend to discuss the matter at length with me. I am most grateful to him for that. I know he understands that we are anxious not to make it more difficult for 75 the village shop to survive. I think he would agree with that philosophy.
However, I accept that the situation will vary from one rating area to another. I accept the technical difficulty in defining what is or is not a village shop. We have therefore tabled this amendment as a follow-up to the one that my noble friend tabled at Committee stage. It would allow the Secretary of State to take into account the specially disadvantaged position of certain village shops in certain areas.
The Earl of Caithness
My Lords, I turn to the amendments which have now been presented by the noble Lord, Lord Graham of Edmonton, and my noble friend Lord Stanley of Alderley. Amendments Nos. 176ZA, 176 and 177 are concerned with transitional arrangements for those relatively few businesses which will face large increases in their rate bills in 1990.
Amendment No. 176ZA, in the names of the noble Lords, Lord Graham of Edmonton and Lord Ross of Newport, is exactly the same as Amendment No. 117, tabled by the noble Lord, Lord Ross of Newport, in Committee, when it was fully discussed. The noble Lord's amendment would result in the anomalous position of there being separate transitional arrangements for 1990 and 1995 running simultaneously. This would be quite unnecessarily confusing both for the ratepayers and for the local authorities which will have to operate the system.
As your Lordships may recall, the transitional arrangements will take the form of a ceiling on the percentage year-on-year increase in rates for as long as is necessary. In addition, we have also taken power for a special lower ceiling for small businesses. We cannot yet take a final view on what is the right level for either ceiling. Some in the business community have argued that 15 per cent. is the right figure for the main ceiling, and that may not be too wide of the mark. However, as I said in Committee, we shall not know until the autumn.
If the purpose of the first part of the noble Lord's amendment is simply to draw attention to the need for the largest increases in 1990 to be spread over a period longer than the initial five-year duration of the 1990 transitional arrangements, then we are on common ground. Given that there is to be further general revaluation in 1995, it must be sensible, however, for there to be a fresh set of transitional arrangements in that year to take into account both the outstanding increases from 1990 and the effects of the 1995 revaluation. That is what we have provided for in Clause 54.
This brings me to the second strand of the noble Lord's amendment. The level of the small businesses ceiling depends on that of the main ceiling, but it is worth reminding your Lordships that my right honourable friend the Secretary of State said at Report stage in another place that it may be appropriate to set it at about 5 per cent. below the main ceiling.
Turning now to the third part of the amendment, the proposal for a 70 per cent. national non-domestic rate for non plcs occupying property with a rateable 76 value of less than £30,000 at 1990 levels, as I explained in Committee this would mean that any business wanting to expand would face a massive increase in its rate bill if its rateable value increased from £29,900 to £30,000. All other businesses would have to pay more to finance that concession because about half of all properties have rateable values below £30,000, even allowing for a proportion to have plc status; which still leads us to the conclusion that we may have to increase the rate bills of other businesses by possibly 12 per cent. to 15 per cent. That is something that would not be welcomed.
Even in retailing we expect some large rate increases to be confined mostly to those who have been most successful since the last revaluation 15 years ago; that is, retailers in prime high street sites mainly in the South of England. Your Lordships will appreciate that these are the areas where larger retailers predominate. Amendment No. 176ZA does not discriminate between those small businesses which will face large increases, those which will not, and indeed those which will gain, perhaps substantially. All are to enjoy subsidy from their competitors.
I have explained that the 1990 increases will be phased over as long a period as is necessary, and that we cannot make a sensible decision on the ceiling on year-on-year rate increases until the autumn. I have also explained that the proposal for a 70 per cent. national non-domestic rate for a section of business cannot be justified and would not achieve its purpose.
Amendments Nos. 176 and 177, in the names of my noble friends Lord Stanley of Alderley and Lord Radnor, and the noble Baroness, Lady Stedman, are concerned with the position under the transitional arrangements of those traders who live on the premises. As my noble friend has explained, they are designed to permit the Government, in setting the transitional ceilings, to make further, special provision for small shops where the owner lives on the premises by taking account of the likely community charge bill as well as the rate bills.
I have to say to my noble friend that I believe there is a misapprehension which lies behind his thoughts on this amendment. It is that in the case of the live-in shopkeeper the community charge will simply be an addition to the rates bill; that is, on top of any change to the bill resulting from revaluation and NNDR. That is not so. Whereas at present the rateable value of a shop with living accommodation takes account of the value of both parts, for the future it will relate to the shop part only. Those who live over the shop, like everyone else, will pay no rates on their living accommodation but will pay the personal community charge as individuals living in a particular local authority. Therefore, the community charge paid by a live-in shopkeeper should not be regarded as a completely new burden but should be compared with the rates previously charged on the domestic part of the property. If the community charge comes to more than that, it is entirely the result of our policy of breaking the link between personal liability and rateable value and nothing to do with non-domestic rates.
77 The trader who lives on the premises pays the community charge as an individual and non-domestic rates on the business part of his property. The trader who has a lock-up pays the community charge as an individual and pays non-domestic rates on his property. There is no difference. It does not matter whether one lives above the shop or a mile away: one will pay the community charge set by one's local authority and non-domestic rates dictated by the value of one's business property. If the rateable values of a shop with living accommodation and a lock-up shop are the same, the same will be paid in rates. If the shopkeeper lives in the same local authority, the same will be paid in the community charge.
I turn now to village shops, which I know are of particular concern to my noble friend. Your Lordships will recall that I said in discussion of an amendment in Committee that I doubted whether village shops as a group had a great deal to fear about the effects of the introduction of NNDR and revaluation. I said I expected the revaluation to follow the market and therefore to result in a relative decline in the rateable value of village shops at least when compared to high street shops and superstores. I have to say that that remains my view. if the competitive position of village shops is likely to benefit in this way, it is difficult to argue for them to be given special privileges under the rating system. On the other hand, if we are wrong about this, the powers in Clause 53 are broad enough to allow a special arrangement to be made.
I do not believe that the particular cushioning that my noble friend had in mind in tabling the amendments or the rate relief suggested in Committee could be properly focused on those who needed and deserved help. Both would create unfairness and distort competition.
To recap, Amendment No. 176ZA is unnecessary since its purpose—the protection of those relatively few businesses that face large increases—is already achieved by the Bill. I hope that I have already demonstrated that Amendments Nos. 176 and 177 may be based on a mistaken premise and would, if agreed, be arbitrary in their effect.
§ 7.15 p.m.
§ Lord Graham of Edmonton
My Lords, I am disappointed at the Minister's reply. He said more than once that relatively few small businesses would be detrimentally affected by the implementation of the Bill.
The National Federation of Self Employed and Small Businesses has told me of the results of a random survey of 263 small businesses. I emphasise that this is not put forward as being global, and some Members would shout down the random survey premise upon which the prognostications are made. In regard to 263 small businesses, these are the small increases that they will have to bear. A total of 75 will face increases of between 1 and 50 per cent.; 62, between 51 and 100 per cent.; 39, between 101 and 150 per cent.; 17, between 151 and 200 per cent.; and 17, between 201 and 250 per cent. and 29 —increases over 250 per cent. Only 8 per cent. of the 263 78 businesses, that is, 21, will have decreases between 1 and 15 per cent., based on the Government's uniform business rate poundage estimate of 45p. The average for the 263 businesses is over 250 per cent. The largest increase is 626 per cent.
§ Baroness Blatch
My Lords, I am fascinated by what seems to be a precise set of figures based on a revaluation that has not taken place. Therefore, the precision must at least he questionable.
§ Lord Graham of Edmonton
My Lords, the Minister has told the House fairly that he cannot be precise until the autumn. However, certain figures are being given. The Government have hinted at a uniform business rate poundage of 45p. Other organisations have brought forward similar figures in an endeavour to estimate. Based on a poundage of 45p, this is what has been said. If the poundage is less, the prognostications will have been alarmist. However, organisations like CIPFA and others estimate that the uniform business rate poundage may be 47p or 48p. I do not put this forward as global. I say that when the Minister attempts to tell the House and small businesses that a few people only will be affected in a small way, they will laugh all the way to their shops —as long as they are open.
§ Baroness Blatch
My Lords, to take my authority as an example, two years ago we put up the rate to all people including small businesses by eight times the rate of inflation. One year ago we put it up by twice the rate of inflation. Whatever the interregnum, in my view the difficulties arise in moving from the present postion to the situation when the Bill is enacted, that is, the transitional arrangements. Once that point is reached, the guarantee that the rate of increase will never be greater than the rate of inflation must surely be the prize for small businesses. I think that more damage has been done to small businesses under the present system than we can ever do under the proposed system.
§ Lord Graham of Edmonton
My Lords, the noble Baroness is taking advantage of Report, in which she ought not to have had the licence to do what she has done. All that she has done is to point to the dilemma of small businesses. They are fearful of the impact of the Bill. When they read what the Minister has said, I am satisfied that they will be no less fearful. As I understand the procedure, if the amendment is carried I shall be unable to move subsequent amendments. I am disappointed at the Minister's reply. I believe that he and his friends will hear from many small businesses in the country in the months ahead.
The Earl of Caithness
My Lords, with the leave of the House, I know that many figures have been banded about. There is no basis to the figures until the revaluation takes place. People are hypothesising about the increases. I am delighted that at long last the noble Lord and his party are taking small businesses as a serious body.
The Earl of Caithness
It is because of that concern of small businesses that we added the further transition provisions after 1995.
§ Lord Graham of Edmonton
My Lords, if the Minister seeks to make a party point, I ask him to consider the experience in Scotland. I have before me indications bearing out to good effect the prognostications for England based upon the Scottish position. There were 32 businesses in the sample. In Edinburgh there are increases of 416 per cent., in Callendar, of 415 per cent., in West Lothian, of 323 per cent., in Aberdeen, of 390 per cent. and in Glasgow, of 450 per cent. People in England are entitled to try to find out how this will occur. The noble Baroness and others are entitled to ask how one knows. If you want to read the book and not the crystal ball, the crystal ball is what the Minister said and the book is what has happened in Scotland. It is very bad.
The Earl of Caithness
My Lords, I have never denied that there would be increases, particularly in the South of England. The advantage that England and Wales will have over Scotland after revaluation will be in terms of the phasing provisions.
§ On Question, amendment agreed to.
§ [Amendment No. 176 not moved.]
§ The Earl of Caithness moved Amendment No. 176A:
Page 32, line 4, at end insert —
("(6A) In making regulations under this section the Secretary of State shall have regard to the object of securing (so far as practicable) that the aggregate amount payable to him and all charging authorities by way of non-domestic rates as regards the financial year concerned is the same as it would in his opinion be likely to be apart from the regulations.").
§ On Question, amendment agreed to.
§ [Amendment 176ZA not moved.]
§ Clause 54 [Special provision for 1995 onwards]:
§ The Earl of Caithness moved Amendment No. 176B:
Page 32, line 9, leave out subsections (2) and (3) and insert —
("(2) The regulations may contain such provisions as are mentioned in subsection (3) below as regards any case which falls within a prescribed description and where —
(3) The provisions are that —
(3A) A chargeable amount found in accordance with rules prescribed under this section may be the same as or different from what it would be apart from the regulations.
(3B) Rules prescribed under this section may be framed by reference to such factors as the Secretary of State thinks fit.").
§ On Question, amendment agreed to.
§ [Amendment No. 177 not moved.]80
§ The Earl of Caithness moved Amendment No. 177:
Page 32, line 40, at end insert —
("(6A) In making regulations under this section the Secretary of State shall have regard to the object of securing (so far as practicable) that the aggregate amount payable to him and all charging authorities by way of non-domestic rates as regards a particular financial year is the same as it would in his opinion be likely to be apart from the regulations.").
§ On Question, amendment agreed to.
§ Lord Hesketh
My Lords, I suggest that this is a suitable hour to break for supper and that we should return at 8.20 p.m. I beg to move that further consideration on Report be now adjourned.
§ Moved accordingly, and, on Question, Motion agreed to.