Lords Sitting of 9 June 1988

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chelmsford.

Message from the Queen
The Earl of Airlie: My Lords, I have the honour to present to your Lordships a message from Her Majesty the Queen signed by her own hand. The message is as follows:
"I have received your Address praying that the Summer Time Order 1988 be made in the form of the draft laid before your House.
"I will comply with your request."

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, before the commencement of business, I take the opportunity to inform the House that with the approval of Her Majesty the Queen, I have accepted an invitation to attend the Conference of European Ministers of Justice in Lisbon and the European Speakers' Conference in Berne between 20th and 24th June. Accordingly, I trust that the House will agree to grant me leave of absence for the relevant period.

Palace of Westminster: Telecommunications
3.7 p.m
Lord Orr-Ewing Lord Orr-Ewing asked the Leader of the House:
What is the total annual expenditure on telephones for the Palace of Westminster and when Mercury Communications Ltd. will be allowed to tender for some of this business.
The Lord Privy Seal (Lord Belstead): My Lords, the total expenditure on telecommunications in the Palace of Westminster and in those other buildings occupied by the two Houses of Parliament in the financial year 1987–88 was £1,919,162. Mercury Communications have approached the authorities in both Houses. Before any possible changes to the existing circuits linking the Palace of Westminster to the public telephone network are considered by the appropriate committees of the two Houses, the Central Computer and Telecommunications Agency has been asked to advise the House authorities on the results of a three-month evaluation of the use of Mercury circuits within the Department of Trade and Industry. In the meantime, Mercury has been asked to prepare detailed costings for the possible provision of its services to the Palace of Westminster.
Lord Orr-Ewing: My Lords, I thank my noble friend for his full and courteous reply. Is he aware that in areas where Mercury can offer services there
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could be savings of 30 per cent. on local calls, 20 per cent. on national long distance calls and about 17 per cent. on international calls? As the Palace of Westminster is paying some £2 million a year, the taxpayer and parliamentarians might gain considerably if Mercury facilities, now on order for the Press Association, were more widely available in the Palace of Westminster.
Lord Belstead: My Lords, I am grateful to my noble friend for giving me notice of possible savings to be made by the use of Mercury services, some of which my noble friend has put before me. As I have said, in the light of the advice from the CCTA and once detailed proposals have been put forward by Mercury, the appropriate committees of the two Houses will be able to consider the matter. I am su they will need to give particular attention to the cost implications.
Lord Cledwyn of Penrhos: My Lords, in the meantime, will the Leader of the House not agree that the system has given an increasingly first-class service since 1972, when the present system came into existence, with a number of benefits to Members of both Houses which any outside company would find very difficult to match? Secondly, will the noble Lord tell us how many incoming calls are handled by our telephone system on any given sitting day?
Lord Belstead: My Lords, I have to admit to the Leader of the Opposition that I do not know the number of incoming calls. I have all the details of the expenditure, but not the number of incoming calls. Perhaps I could try to find that out and let the noble Lord know.
Perhaps I may make one point in answer to the first supplementary question which the noble Lord asked me. The noble Lord referred to the satisfactory nature of the present system and the fact that it had been in place since 1972. I entirely agree with the noble Lord, Lord Cledwyn, that it is a sophisticated system and, so far as I know, serves both Houses well. But it has not actually been in place, as we have it at the moment, since 1972. The system was changed to what was called an Octara exchange system, which consisted of a number of mini-systems, and many new handsets were put in place, as your Lordships know, about two and a half years ago.
The question has arisen today because Mercury did not tender at that time, because the Mercury service of lines was not available when the change was made in 1985–86. Indeed, Mercury approached the authorities of the two Houses after the new system had been installed. Nonetheless, the question is now being considered again. Pursuant to the reply which I gave to my noble friend Lord Orr-Ewing, I know that the committees of both Houses are very much aware that Mercury is interested in providing its services within the Palace of Westminster.
Lord Dean of Beswick: My Lords, will the Minister break down the nearly £2 million between your Lordships' House and another place? Which portion is being used by which House?
Lord Belstead: My Lords, of the nearly £2 million over £1 million is telephone usage, in other words the making of calls. Then there are other items such as telephonists' charges of £½ million, and other amounts as well. I do not have the total amounts for the House of Lords and the House of Commons. However, I can say that of the total telephone expenditure the House of Commons accounted for 86·1 per cent. and the House of Lords 9·8 per cent.
Noble Lords: Hear, hear.
Lord Dean of Beswick: My Lords, do not those figures convey that Members of your Lordships' House are behaving with admirable restraint?
Lord Belstead: My Lords, as always.
Baroness Seear: My Lords, does the Minister agree that Members of your Lordships' House do not have constituents whom they must telephone?
Lord Belstead: My Lords, that is also true.
Lord Taylor of Gryfe: My Lords, can the Minister say whether, in addition to the Palace of Westminster and the DTI, Mercury Services are being given the opportunity to quote for other Civil Service departments?
Lord Belstead: My Lords, I believe that other government departments are taking a similar attitude, as are the committees of both Houses. For approximately three months an evaluation has been taking place in the department of my noble friend Lord Young of Graffham and it is reaching a conclusion. The House might like to know that this week officials of the Central Computer and Telecommunications Agency will hold initial discussions with the authorities in another place about the DTI experiment.
Lord Hailsham of Saint Marylebone: My Lords, as a matter of legal and constitutional machinery, will my noble friend tell the House the process by which an ultimate decision will be arrived at when the two committees have considered the matter? Will both Houses have to pass a resolution?
Lord Belstead: My Lords, as far as I am aware the Services Committee of another place will refer the matter through to the House of Commons Commission. The Administration Committee of your Lordships' House will refer the matter to the Offices Committee of your Lordships' House. The Chairman of Committees is the chairman of both the Administration Committee and the Offices Committee. I should like to refer to him before giving a final answer to my noble and learned friend. However, as I understand the matter, the Offices Committee could then take a decision without making a reference to your Lordships' House.
Lord John-Mackie: My Lords, can the Minister help with the technicalities of the matter? The noble Lord's Question states:
"to tender for some of this business".
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Does that mean that probably there will be two sets of telephones, two sets of lines and Heaven knows what?
Lord Belstead: My Lords, the simple answer, which I also needed to know, is that we would not need two sets of lines.
Lord Harmar-Nicholls: My Lords, do I understand from my noble friend's answer to my noble and learned friend that it could be that the two Houses may come to different conclusions and, as with television, we shall have a different view?
Lord Belstead: My Lords, no. It is most important that I should say to my noble friend that that could not be the case. As your Lordships will appreciate, the Palace has a single exchange and a single unified telecommunications system. It would not be practical for the two Houses to proceed independently of each other.
Lord Orr-Ewing: My Lords, will my noble friend allow me to say that the existing staff provided by BT are most helpful, courteous and efficient in handling our calls? However, that does not mean that a whiff of competitive grapeshot would not make matters even better were Mercury allowed to provide an alternative service.
Lord Belstead: My Lords, this has been a useful exchange. Perhaps it will be the more useful if, before we conclude, I say that I was wrong in replying to my noble and learned friend Lord Hailsham. As he probably apprehended (but he was kind enough not to take me up on it) the Offices Committee of your Lordships' House would have to report to the House and that report must be agreed by your Lordships' House. That would be the constitutional position.
Lord Harmar-Nicholls: My Lords, in that case, would it not—
Noble Lords: Order!
Lord Harmar-Nicholls: My Lords, no. Is the Minister saying that if, when the matter is reported to the House, the House comes to a different conclusion, it could be a separate decision? If that is so, his answer to me does not appear to stand.
Lord Belstead: My Lords, it is perfectly true that technically that could be the case. However, constitutionally the two Houses have co-operated together for many years in administering the joint system and they have devised benefit from such co-operation. I like to believe that the two Houses will wish to continue with that system.

Manufactured Goods: Balance of Trade
3.17 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What is the latest balance of trade in manufactured goods.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, in the first four months of 1988 there was an estimated deficit on trade in manufactures of £3·9 billion.
Lord Dormand of Easington: My Lords, is the Secretary of State aware that the present horrific deficit in the trade of manufactured goods represents a loss of probably 1 million jobs as compared with 1979? What are the Government doing about that situation?
Lord Young of Graffham: My Lords, I fail to follow the noble Lord's logic as to how that would show a loss of 1 million jobs as compared with 1979. I am aware that productivity in the manufacturing industry has risen by 50 per cent. as compared with that year and that would account for a proportion of the loss. I am also aware that we have created 1·7 million jobs since 1983. The fact does not appear to lie easily with the noble Lord's contention.
Lord Peston: My Lords, bearing in mind the Minister's answer to the supplementary question, can he enlighten the House as to Her Majesty's Government's view of why the trade deficit and the current account deficit are as large as they are? In particular, does he believe that it has any connection with the exchange rate?
Lord Young of Graffham: My Lords, the exchange rate is entirely another matter, but I believe that we should look into this issue. In considering a deficit in manufactured goods of £3·9 billion I fear that noble Lords opposite are still living in yester-year, for today wealth creation is carried out in many ways and manufactured goods is only one of them. Secondly, I should say to noble Lords opposite that the United Kingdom's gross assets overseas at the end of 1986 were £730 billion. That compares with a current account deficit today of £2·4 billion. Therefore, there is a great deal of difference between the two figures.
Lord Bruce-Gardyne: My Lords, is the crucial point not the balance of trade in manufactured goods but the need to ensure that, whatever the balance of trade generally may be in goods and services, there is a countervailing inflow of capital and that interest rates are maintained at the level required to ensure that that countervailing inflow occurs?
Lord Young of Graffham: My Lords, interest rates and exchange rates are another matter from the particular Question which the noble Lord, Lord Dormand of Easington, put to me. At the present time we have a deficit on manufactured goods. We have a smaller deficit overall if we take in invisible earnings. However, we are also at a stage in the economy in which we are investing substantially in new plant and equipment and much of that has an effect on the import figures.
Lord Williams of Elvel: My Lords, if the noble Lord believes that the exchange rate and interest rates are irrelevant to the manufacturing trade balance, will he give the Government's view on what is the relationship between the deterioration in the
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manufacturing trade balance and the growing mountain of consumer debt?
Lord Young of Graffham: My Lords, I assure the noble Lord that I did not say that those figures were irrelevant. I did not comment on them at all.
Lord Campbell of Alloway: My Lords, does the Minister not agree that it is a wholly false equation to seek to equate productivity in a manufacturing industry with employment? Has this not been clearly demonstrated even since the days of the Tolpuddle Martyrs?
Lord Young of Graffham: My Lords, at a time when we are creating more jobs than the rest of the European Community put together, I believe that we have a record of which we are proud in the way in which British industry and commerce is becoming competitive in today's world.
Lord Hatch of Lusby: My Lords, is the noble Lord aware, when he talks about noble Lords on this side speaking from yester-year, that we are speaking from the year when there were not 2½ million people unemployed, as the Government admit, but probably over 3 million unemployed? Has he read the report of the Select Committee on Overseas Trade and noted that section of it which points out that one of the deterrents to the increase in manufacturing exports from this country is the low purchasing power of third world countries, which are a market to which British exporters could turn their attention?
Lord Young of Graffham: My Lords, the latest figures for unemployment show it standing at 2,450,000 and not a figure of 3 million, which the noble Lord alleges.
Lord Molloy: My Lords, the noble Lord has acknowledged that there is a deficit which may not be terribly disturbing but nevertheless exists, and if it continues it will inevitably have some deleterious effect on employment. Can he say what may be undertaken to prevent that happening?
Lord Young of Graffham: My Lords, I am not sure that I follow the noble Lord that if the deficit were to continue for some time it would have any effect on employment at all. We are in a position where our economy is growing stronger than any other economy. There are stages during that growth in which we import substantially in order to refit industry, which is happening at present. We have to look at all these figures and deficits in the light of the assets of the United Kingdom. I repeat that gross assets overseas of the UK are some £730 billion. That should be compared with a current deficit this year of some £2·4 billion.
Lord Hatch of Lusby: My Lords, I asked the noble Lord two questions but he did not answer the second one. Will he have the courtesy to do so?
Lord Young of Graffham: My Lords, I understand that it is my privilege to answer only one question at a time. I agree with the noble Lord that I have read

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that part of the report of your Lordships' Select Committee. I am not sure that I necessarily agree with it since some two or three years have now passed since that committee reported to your Lordships.
Lord Dormand of Easington: My Lords, the Secretary of State said that he failed to see the logic of my question. Is not the main cause of the deficit the fact that the manufacturing base of this country is still smaller than it was in 1979 and there has been a failure to invest in the manufacturing goods industry?
Lord Young of Graffham: My Lords, in each of the past four years we have seen the record of investment in manufactured goods broken as each year we invest more and more. I suggest to the noble Lord, Lord Dormand of Easington, that he should travel overseas and there inquire about the reputation of British manufactured goods. Compared with 10 years ago he will find that we are today recovering our reputation to deliver on time, to provide quality goods and to restore the reputation of which we used to be proud but which, alas, we lost in the 1970s.

Overseas Aid: EC Statistics
3.25 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
What proportion of the gross national product of each member state in the European Community is devoted to official overseas aid.
The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur): My Lords, precise figures are only available for the eight European Community countries that belong to the Development Assistance Committee of the Organisation for Economic Co-operation and Development. The figures, which show net official development assistance for 1986 as a percentage of GNP, are as follows: Belgium, 0·49; Denmark, 0·89; France, 0·72; Germany, 0·43; Ireland, 0·28; Italy, 0·40; Netherlands, 1·01; and the United Kingdom 0·31.
Lord Hatch of Lusby: My Lords, I am afraid that the noble Lord is not up to date with his figures. The latest figure officially given for United Kingdom development assistance is 0·28, not 0·32; that is for 1987. Those are the figures for which I asked. Is the Minister not ashamed at that Answer when, according to his own Answer, only one country in the DAC spends less of its GNP on overseas aid than this country, that country being Ireland? Is that not something of which to be ashamed, and how does it equate with the Prime Minister's statement two weeks ago in Scotland that as the British people become better off so they share the fruits of their work with others?
Lord Glenarthur: My Lords, the noble Lord is quite right when he says that the figures that I gave refer to a particular year and that others are to come. The figure which the noble Lord, Lord Hatch of Lusby,
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quotes has not yet been published, though the figure he gives is likely to be the case; I stress: likely to be the case.
The noble Lord suggests that the United Kingdom figure is shamefully low. It is not as simple as that. One reason is that GNP is half of the equation. That has gone up dramatically and I can quote figures on that. The net official development assistance figure for the calendar year 1987 compares with a net public expenditure provision for overseas aid of £1,247 million in the financial year 1987–88. Perhaps the noble Lord will realise that, when we take into account GNP as well as the actual figure and the fact that future real growth in aid will be 1 per cent. or more, matters are not nearly as bad as he says.
Lord Boyd-Carpenter: My Lords, is not my noble friend aware that the official aid figure is not the only figure that matters? Is it not a fact that investment by the public and the private sector of this country in the developing world is at a highly creditable level and is at least as important as official aid?
Lord Glenarthur: My Lords, my noble friend is quite right. There are all sorts of other factors which have to be taken into account. Indeed, the figures which I quoted just now could be misleading. There is official development assistance and there is the net aid programme; there are calendar years and financial years; there are different UN targets for different categories of assistance. Together with factors outside our control, including statistical freaks, which was the case in 1987–88, all these factors can make it difficult to draw meaningful comparisons from year to year.
Baroness Ewart-Biggs: My Lords, is the Minister aware that it was reported in the Observer in particular on 29th May that Britain's aid is now more than £1,100 million less each year than it would have been had the previous Labour Government's programme continued? Will the Minister confirm that that is so? If it is true, why have the British Government decided to slash their overseas aid programme at a time when third world countries are clearly suffering greatly in economic terms?
Lord Glenarthur: My Lords, one other thing may also have been the case if the party opposite had still been in power—we would not have had growth in 1987 provisionally estimated at 4·5 per cent., which is faster than that of any other industrial country. We are about to enter our eighth successive year of growth and that is what enables us now to produce an aid programme which is increasing in real terms.
The Earl of Onslow: My Lords, when is aid going to end? Are we to have the third world perpetually holding out the begging bowl to the more successful countries? Has aid actually done any good to Tanzania, for example, which has had £3,000 million of aid but has seen its agricultural production fall by 3 per cent. a year? The amount of aid which has been given to Ethiopia is enormous but that country has managed to make a mess of its own economy. Should we continue subsidising crooked, third world

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countries just to salve the consciences of the party opposite?
Lord Glenarthur: My Lords, I am afraid I do not wholly agree with my noble friend. The fact is that we have much to be grateful for ourselves, as do many overseas countries. Not only have we done much in the way of aid, and will continue to do so, but we have also done a great deal under the debt initiative of my right honourable friend the Chancellor of the Exchequer.
Lord Oram: My Lords, the Minister said that the figure of 0·28 quoted by my noble friend Lord Hatch has not been published. Is he not aware that it was given in a Written Answer in another place just before the Recess?
Lord Glenarthur: My Lords, I am afraid I was not. My information is that the figure for 1987 quoted by the noble Lord, Lord Hatch, was likely to be the case but that it had not been published. If it has been published, I apologise.
Lord Renton: My Lords, is my noble friend aware that the indebtedness of overseas governments in third world countries to Her Majesty's Government is also an important factor? When the President of France announced yesterday that one-third of the indebtedness to France was being remitted, he was merely following the excellent precedent set by Her Majesty's Government who, moreover, have reduced interest rates.
Lord Glenarthur: My Lords, my noble friend is right. My right honourable friend the Prime Minister received a letter from President Mitterrand yesterday setting out his proposals. Indeed, the Prime Minister expects to discuss them further when she meets the President tomorrow. At least one of the French alternative proposals, that creditors should lower interest rates on rescheduled debts, is close to the initiative already taken.
Baroness Macleod of Borve: My Lords, does my noble friend agree that not only do we give financial help to countries that are less well off than ourselves but we also send abroad people of particularly high quality to help such countries? Those countries much appreciate that.
Lord Glenarthur: My Lords, my noble friend is right. I have seen those people at work and I know the valuable input that they make.
Lord Hughes: My Lords, the Minister said that he did not wholly agree with the extraordinary views put forward by his noble friend. Can he perhaps tell us with which part of that supplementary question he did agree?
Lord Glenarthur: My Lords, my noble friend to some extent rightly pointed out that aid was an expensive item. I said to my noble friend—or words to this effect—that there are endless examples of where aid was extremely successful.
Lord Kennet: My Lords, rather than putting up the smokescreen of other figures and comparisons than those mentioned in the Question, would not the Government be better occupied in explaining why being second from bottom in the league table is an acceptable place for this country?
Lord Glenarthur: My Lords, the noble Lord fails to take into account the fact that GNP has increased. That is why the proportion appears to be lower than it is. The noble Lord should be under no illusions. We have a substantial aid programme amounting to £1,305 million in the current financial year. That is planned to grow by £70 million in 1989–90 and £115 million in 1990–91. That is an increase in real terms of 1 per cent. over the figure for 1987–88.
Lord Diamond: My Lords, the Government are putting forward the extraordinary argument that the richer we are (unexpectedly so) the less we are capable of giving a share of our GNP to countries that need it. Is that the latest example of Conservative morality?
Lord Glenarthur: My Lords, the noble Lord is misquoting me. Growth has not been unexpected. If GNP increases—and it has—then naturally the proportions of it devoted to any particular sector may be difficult to keep up. As I have said, the fact is that the aid programme is presently increasing.
Lord Hatch of Lusby: My Lords, is the noble Lord aware that he cannot have it both ways? When the overseas aid budget was cut four times as heavily as other public expenditure the Government said that they reluctantly did so because of the depression in the country. The Minister who answered an earlier Question this afternoon claimed that there has been growth for the past eight years. How is it that that coincides with a fall in overseas aid? Is the Minister aware that in a poll taken last year 62 per cent. of those polled said they were prepared to pay higher taxes if those taxes were to be allocated to helping the poorer countries?
Lord Glenarthur: My Lords, the noble Lord must get the position into perspective. The fact is that in 1986 the amount of aid we gave was the sixth largest among Western donors and was geared to the needs of the poorest countries. I have described how the aid programme is now planned to grow in real terms. The noble Lord should not always look back but should endeavour to look forward as well.
Lord Mackie of Benshie: My Lords, would it not therefore be better to have an aid programme on the same basis as the poll tax where the rich and the poor countries pay the same?
Lord Glenarthur: My Lords, I think I have said enough on the community charge.

Housing Costs: Calculation Policy
3.37 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
Whether they will remove the rent and mortgage components from the retail prices index and substitute the Building Societies Association's figures reflecting the rise in house prices.
Lord Young of Graffham: My Lords, we have no plans to change the treatment of housing costs in the retail prices index. The present treatment follows recommendations made by the RPI Advisory Committee, most recently in 1986.
Lord Bruce of Donington: My Lords, I fully appreciate that the use of the RPI in its existing form has certain influences that are statutorily in the income tax Acts of 1970, but is it not the case that the annual rate of inflation as published by the Government is itself derived from the RPI? In view of the terrific rise in house prices, would it not be better if the annual rate of inflation figures, as published, were derived from an amended RPI so that an accurate figure of the annual rate of inflation could be ascertained?
Is the noble Lord aware that at present the annual rate of inflation, taking into account the gross rise in house prices and all property prices, is running not at 3·9 per cent.—which is the published figure for the rate of inflation—but at nearer 7·3 per cent?
Lord Young of Graffham: My Lords, I do not know where the noble Lord, Lord Bruce of Donington, obtains his information. The make-up of the RPI is, of course, changed from time to time. An independent RPI Advisory Committee advises the Government and I came to your Lordships' House two years ago to announce the then deliberations of that committee.
No country in the world includes the capital cost of housing in its calculation of RPI figures. However, the mortgage payments are included. Each year, as the average for mortgages rises, the amount of interest paid is included in the RPI figures. I believe that the present system is about the best we could have.
Lord Bruce-Gardyne: My Lords, notwithstanding the source from which this suggestion came, does not my noble friend agree that there is some argument for looking again at the treatment of housing costs in the RPI? The unsatisfactory nature of the impact of the mortgage component in the RPI is a factor which could be looked at again.
Lord Young of Graffham: My Lords, I am very grateful to my noble friend. I am not sure where the unsatisfactory nature lies because within the index there is the cost of mortgage interest. It is not just the rate of interest; it is based upon the average amount of mortgages. As house prices increase so that amount increases and therefore the effect is contained within the RPI. It is not the average increase in house
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prices which affects the cost of living; it is the price paid for a house when one either buys or sells. I believe that after full advice this figure reflects the current cost of living.
Lord Grimond: My Lords, does the Minister agree that increases or decreases in the retail prices index affect different parts of the community quite differently? To pretend that one index reflects the effect for all is totally misleading. Is there not a strong case for taking into account the suggestion of the noble Lord, Lord Bruce of Donington, at least for certain kinds of indices as they affect the treatment of certain elements in the community?
Lord Young of Graffham: My Lords, the RPI Advisory Committee is composed of those representing consumers, retailers, employers, employees, the financial community, government departments and academics. It looks at all elements of the cost of living. It sat and deliberated long and hard as to how the cost of living should best be calculated. In looking at the cost of rents and mortgages it is quite difficult to produce a different RPI for different parts of the country.
For example, we might well find the RPI increase in Scotland rather lower than that in the South-East of England. I believe that it would be impossible to construct separate cost of living indices for each and every part of our country.
Lord Monson: My Lords, does the Minister agree that one of the main factors pushing up the price of houses is the tax relief on mortgage interest? This relief is totally counter-productive.
Lord Young of Graffham: My Lords, the tax relief on mortgage interest is limited to a mortgage of £30,000. In some areas of the country that is a substantial part of the cost of a house, but in others where the shortage is greatest, it is not. I suspect that local government has a great deal to do because it is planning permissions that determine the cost of land. That is a matter that is very much for local government.
Lord Bruce of Donington: My Lords, is the Minister aware that the real matter at issue is the Government's statement on the annual rate of inflation, which at the present time is derived from the existing RPI? Any announcement as regards the annual rate of inflation as such must take into account the real rate of inflation.
The noble Lord asked for the origin of my figures. They were published in the house journal of the party opposite, the Daily Telegraph, on 21st May last, as being the calculations of Shearson Lehman, the well-known stockbrokers.
Lord Young of Graffham: My Lords, I believe the noble Lord is suggesting that we should ask the RPI Advisory Committee not to recommend any future changes; that we should ask the Department of Employment to cease doing work, and that we should put it out to Shearson Lehman. I find that a very curious suggestion. We have an RPI committee and

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a procedure that has long been recommending this figure. It is the rate of inflation. I do not believe that it does a great service to those who work on the advisory committee and the statisticians of the Government to continue to question their work.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Local Government Finance Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Committee stage of the Consumer Arbitration Agreements Bill will be discharged and the Lord Chancellor's Salary Order 1988 will be taken.

Local Government Finance Bill
3.45 p.m.
Lord Hesketh: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Hesketh.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 39 [Occupied hereditaments: liability]:
Lord Hesketh Lord Hesketh moved Amendment No. 102D:
Page 23, leave out line 15 and insert ("the following conditions are fulfilled in respect of any day in the year—").
The noble Lord said: In moving Amendment No. 102D, for the convenience of the Committee I propose to speak also to Amendments Nos. 102E, 102F, 102G, 125A, 125B, 125C, 125D, 125E, 125F, 125H, 126A, 126C, 186A and 187A.
Clause 39 replaces the present yearly liability to rating with a daily liability. The reason for this is simple. While the present yearly liability works well at the moment, without the body of precedent and usage that attaches to the present system there could be scope for misinterpretation of the method of calculation, where a ratepayer had occupied a property for part of a year. The change is therefore necessary in the interests of greater precision. I might add that the results arrived at by the two methods for the amount due for part of a year should be the same, subject to any differences in the treatment of part days.
Clause 38(1) and Clause 66(1), which make provision for local non-domestic rating lists and residual rating lists, are drafted in terms that the list must show for each day in a chargeable financial year each hereditament which fulfils various conditions. This expression is chosen to reflect the fact that there can be retrospective corrections to an entry on a list. Therefore on the day in question there might not be an entry but, because of a later correction to the list for that day, an entry may have been made. These
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drafting amendments do nothing more than ensure that there is a consistent approach and use of language in the liability clauses which follow the clauses providing for the contents of the retrospective lists.
It is convenient to take with the amendments to Clause 39 the correspondig set which apply to Clauses 60 to 63, Clause 67 and Schedule 13, which cover the provisions for residual domestic rating and eligibility for community charge benefit. Liability in all these cases is calculated on a daily basis, and it is appropriate to clarify the meaning correspondingly. I therefore commend these amendments to the Committee. I beg to move.
Lord McIntosh of Haringey: We are prepared to accept that these are drafting amendments. My only complaint and the only reason I am speaking at all is that the noble Lord read out at high speed a large number of amendments which, according to the groupings, are not as agreed. This is a point which my noble friend Lord Underhill has just picked up. Perhaps the noble Lord will not read them out again at dictation speed but arrange that we are informed what amendments are being spoken to now.
Lord Hesketh: I read them out in their entirety, whereas they are in briefer form on the list.
Lord Underhill: As my noble friend said, I have just picked up this list from the Printed Paper Office. It contains only Amendments Nos. 102D to G, 125A to F, 125H, 126A and 126E. There is no mention of the other amendments to which the noble Lord referred.
Lord Hesketh: I quite accept that. I have just spotted that Amendments Nos. 186A and 187A are not on the list, as the noble Lord, Lord Underhill, has pointed out.
Lord Boyd-Carpenter: I understand that the list of groupings as originally placed in the Printed Paper Office has been withdrawn and a subsequent amended one put into issue. Perhaps my noble friend can arrange for amended copies to be made available to the Committee in the Chamber.
Lord Mason of Barnsley: It is a bit late now that the debate has started.
Lord Hesketh: I shall endeavour to do that as soon as possible for my noble friend.
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendments Nos. 102E to 102G:
Page 23, line 16, at beginning insert ("on the day").
Page 23, line 18, after ("shown") insert ("for the day").
Page 23, line 24, leave out ("on") and insert ("in respect of").
On Question, amendments agreed to.
Lord Hayter Lord Hayter moved Amendment No. 103:
Page 23, line 33, leave out ("2") and insert ("5").
The noble Lord said: We have strayed on to the question of the groupings of amendments. So far as I am concerned, they can be torn up. I was not

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consulted about the grouping of my amendment with others, of which there is quite a galaxy, including one on fisheries and sporting rights in fisheries. I cannot imagine how one can have a sporting right in fishery, but I presume that there is such a thing. I am talking about charitable rate relief, and I shall confine my remarks to that subject.
The amendment tabled by my noble friends and I must strike most people as being curious. It seeks to strike out the figure 2 and insert 5. What does it mean? In Clause 39(5) one finds a mathematical formula in which there is the figure 2. We want to take that out and replace it with the figure 5. So far, so unclear. The Government propose that charities should receive a mandatory rate relief of half their rates—in other words, the rates payable will be the rates bill divided by two. Our amendment seeks to restrict the liability of these charities to one-fifth of the rates—in other words, the increase to relief will be 80 per cent. of the bill. Our amendment would leave to local authorities discretion whether to grant a further relief on the remaining 20 per cent.
Why on earth do we suggest that? I was reflecting only yesterday on the element of guesswork that is inherent in connection with the Bill. For instance, as the public approaches the next election, will it really want to see the homeless clobbered or a wife or husband put into prison because a spouse will not pay up? Will the charities (which undertake more and more of the services that used to be provided by government) still be in the position they are today? It may be argued that from the Opposition's point of view—and in this respect I am speaking from the Cross-Benches, so to speak—it would be good tactics if they are sure that they are right on some of these subjects to let the Government get on with the Bill as it stands and let the heavens fall on them. However, on the subject of charity, as I have said before, there is no monopoly in any part of the Chamber, and the Opposition are joining with us in this effort to ensure that charities are given the compassion that they deserve.
The amendment relates to charities and the rates they pay. It seeks to protect them from the cost increases that are likely to arise from the Government's present proposals for non-domestic rates. It would be no exaggeration to say that in our opinion we are now discussing the viability of many charitable organisations after 1990 when the proposals come into effect. The charitable sector in Britain is burgeoning, no doubt encouraged by the Prime Minister's promptings. More than 50 new charities are registered every week, adding to the 150,000 already in existence. Some are very large and some are very small. In many spheres charitable organisations have become household words—Shelter, Dr. Barnardo, Oxfam, and so on. What is more they are enthusiastically supported by the general public. Someone has reckoned that more than half the population participates in some voluntary activity or another, and nine out of 10—and I am sure this figure is about right—give money to charities. They will not want to see it dissipated unnecessarily. They want to see it well-used.
These organisations are heavily reliant on the partnership with central and local government—which is why we have become involved in this Bill—as well as the public at large. A major element of this co-operation is the rate relief given to charitable premises—charity offices, shops, sports centres and village halls. One set of such premises are the care homes catering for the elderly and the disabled. They are granted full relief from the rates and this practice is to be continued under the new arrangements. Let us be glad of that. For the rest, however, a different prospect looms.
The current arrangements provide for remission of 50 per cent. of rate payments for charities on a mandatory basis, with a further 50 per cent. relief granted at the discretion of the local authority. One does not know whether one will get that. However, the Government have also set in train a revaluation of rateable values. This subject cropped up during earlier discussions on the Bill. Combined with the introduction of the new uniform rate of businesses, which will affect these charitable organisations, it seems that the charity premises will face severe absolute cost increases even though the proportion of relief will remain the same.
In the new revalued system, offices and shops will face particularly severe rate increases as opposed to industrial premises which will fare better. For example, it is estimated that the rates bill for Oxfam's shop in Kensington High Street will rise from £2,551 to £9,635. Examination of the effect of these rates seems to have been minimal. In fact, I know of only one survey. It was done not by the Government but by the National Council for Voluntary Organisations, which as I have explained before is the national representative body for voluntary organisations and all the charities in England. It published a report this week focusing on the position of charity shops. I do not need to emphasise how very dependent many charities are on the efforts made in the charity shops and the results which they get from them.
The report shows that very large rate rises are in the pipeline. The Children's Society is expecting a rise of £24,000. It runs 108 shops. Help the Aged is expecting a rise of more than 100 per cent. on current costs for its 21 shops. I know that the noble Baroness, Lady Ryder of Warsaw, is in the Chamber behind me and I know of the grave concerns she has about the effect of the proposals on her foundation. She will be able to tell the Committee about that later on.
These figures are alarming but they are not alarmist. They are based on conservative estimates of the impact of the new system. They affect groups in society whose work is regularly praised in this Chamber. Those are not sectional groups about which we hear little. Throughout the charitable world there is a great unease about the wisdom of these proposals. Our amendment sets out to ensure that such worries are allayed. By increasing the level of the Government's mandatory relief, we can ensure that the valuable charity effort does not become an unintended casualty of what may be a hastily-prepared clause of the Bill. If that was to happen the nation would never forgive the government in charge.

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At the same time, by restricting the level of mandatory relief to only 80 per cent., we have allowed for local authorities to have some discretion. That is fair enough and was a point made by the Minister in another place. Those local authorities can favour the particular charities that they feel perform valuable services locally.
I said in my Second Reading speech that in drawing up the Bill the Government seem to have failed to take sufficient account of the role of the charities and the voluntary sector as a whole. The issue of charitable rate relief is a major example of the effect of this approach. Whatever the verbal protestations of good intentions by Ministers may be, we fear that severe damage will occur. The Government are therefore presented with a clear opportunity to put into practice their oft-quoted commitment to charitable endeavour, and I hope that they will seize this chance. It may be that they have not had the opportunity of studying the report to which I have referred, although I know that it has been sent to the department. It may well be that we shall be calmed by the assertions of the Minister in relation to this amendment. Meanwhile, I beg to move.
Baroness Faithfull: Knowing the Government's support of the charitable and voluntary sector in our society, I have put my name to this amendment. I think it would be wise for all of us to hear what the Minister has to say, as I cannot believe that great thought has not been given to the matter.
I should like to make a few comments on the role of charities, and especially that of charity shops. It is absolutely essential in this day and age that money is raised for charities and that we are not entirely dependent upon trusts. Everyone is calling for money from trusts, and it is extraordinarily difficult for such trusts to meet the needs of the voluntary sector. Therefore, one way in which the community can really help the voluntary organisations is by helping in their shops so as to make money for the charities. For example, we have 25,000 volunteers serving in the Oxfam shops. I think that a by-product of such shops, and the volunteers who serve in them, is that people begin to know about the work being done by the voluntary organisations.
I am concerned with the shops of Dr. Barnardo's, Oxfam, The Richmond Fellowship and others. I must also say that it is essential that the voluntary organisations raise money for themselves because there must be a partnership between the statutory social services, the statutory health services, education and the voluntary services. Without such a partnership the community will not receive the good service which it deserves.
I must also point out that with rate-capping in the statutory services more people are relying on the voluntary services. I ask the Minister whether full account has been taken in the Bill of the fact that charity shops are rated as shops and offices and not as industrial projects. We know that revaluation is taking place with a view to implementation in 1990. However, will charity shops not face rate rises despite the Government's intention to continue a mandatory
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grant as laid down, and which has been referred to by the noble Lord, Lord Hayter? Further, will Her Majesty's Government consider raising the rate to a mandatory 80 per cent., instead of the present 50 per cent? It is important that this debate takes place so that we can all understand the Government's point of view with regard to charities, and especially with regard to charity shops.
4 p.m.
Baroness Ryder of Warsaw: The Committee's decision on this amendment will have a profound effect on the Sue Ryder Foundation which I, as founder, represent. It is an international charity which works day and night for people of all age groups who are dying and others, who are handicapped. In this country alone the foundation cares for over 2,000 people who are severely ill. It costs over £300 per day to care for those with cancer, motor neurone disease and Huntingdon's chorea—to quote but three.
At present there are 347 Sue Ryder shops in this country, all of which pay rates. However, by 1992 we hope to have 550 shops or more to serve the community; to raise interest in the relief of suffering; to raise desperately needed funds and to bring more people together from all walks of life, especially the lonely. Indeed, the Ryder shops are the lifeblood of the whole foundation.
However, this lifeline could be most seriously affected by the Government's current proposals. Such proposals would cost us a staggering £250,000. I am absolutely shocked to hear that our rates will increase from £1·25 million to £1·5 million per annum. That is absolutely dreadful, especially when we look to the Government for support and compassion. The Government always say that they mean to help and encourage charitable work. Nevertheless, it would seem that they have not thought sufficiently about charities when drafting the Bill.
The amendment would relieve a great and unwanted extra burden from all charities, including the Sue Ryder Foundation. The struggle for funds is so hard each day and, further, the number of children and people in need increases daily. I beg the Committee to support the amendment and urge others, with all my heart, to do likewise.
Lord Renton: It is well known that charities are able to obtain rebates of income tax which has been paid by donors of covenants. It was originally thought that charities could obtain a rebate of rates from local authorities. Indeed, power is given to local authorities to grant such rebates at their discretion. However, over the country as a whole that power has been used most unevenly. The Bill therefore provides an opportunity for the position to be rationalised. I should have thought that this amendment gives us the opportunity to raise that point.
Therefore, I hope that when the Government consider the matter they will deem it desirable to ensure that there is uniformity of practice, and that charities receive the exemption from rateable liability which they need. Indeed, the matter has already been pointed out by other Members of the Committee.
The Minister of State, Department of the Environment (The Earl of Caithness): The amendment of the noble Lord, Lord Hayter, deals with rate relief for charities and other non-profit making bodies. I think perhaps it would assist the Committee if I were to outline the Government's policy on the whole subject of rate relief for such organisations.
First, I should explain that the Bill as it stands does not fully reflect the Government's policy. For that reason we have tabled the amendments which appear in the next group. They give effect to our long-standing policy of retaining the full range of mandatory and discretionary release currently available. Of course, it is quite right that charities should not have to pay the full rates and that there should be scope for reducing the rates bill of other non-profit making bodies.
The provisions now contained in Section 40 of the General Rate Act 1967, which have been developed over many years, command widespread public support and generally seem to work well. I am most happy to confirm that the Government's policy is to replicate the existing provisions as closely as the change to the new system will permit. The Bill already contains provision in Clause 39(5) and (6) whereby charities will have their rate bills automatically rebated by 50 per cent. That is the function of the factor "2" shown in the bottom line of the formula in subsection (5). It is that provision which the noble Lord, Lord Hayter, seeks to amend by substituting a factor of "5" to give the 80 per cent. relief.
The provisions we now intend to introduce will permit charging authorities to increase the rebate for charities up to 100 per cent. They will also give relief of up to 100 per cent., at their discretion, to other bodies which, in the words introduced by Amendment No. 107ZC, are:
"charitable or … philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts",
or those who occupy premises
"wholly or mainly used for … recreation",
subject, in both cases, to the requirement that the body concerned must not be conducted for profit. Thus, I can confirm to the noble Baroness, Lady Ryder of Warsaw, that her shops would be included in that definition. Therefore, not only those organisations meeting the definition of a charity, but also other bodies established to benefit the community, including non profit-making amateur sports clubs, will qualify for relief.
The Government believe that local authorities should make full legitimate use of their powers to give discretionary relief. We therefore intend to ensure that the full cost of giving relief to charities and other non-profit making bodies does not fall on community charge payers.
For mandatory relief, the position is simple: local authorities will be obliged to give this relief, so of course this will be deducted in calculating their contributions to the national non-domestic rate pool. For discretionary relief, it is a little more complicated. At present, the whole cost of any discretionary relief that local authorities give is borne locally. But, of course, that cost is spread across local business as well as domestic ratepayers. If we did
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nothing further, under the new system the entire cost would fall on local community charge payers. That might make authorities less keen to give relief than they are now, which is certainly not the result we want. We have therefore proposed that authorities should be allowed to offset half the cost of any relief they give against their payments into the national non-domestic rate pool. Regulations under Schedule 8 will deal with that. This will roughly mirror the present situation, since at present just under half the total rate bill—and thus half the cost of relief given—comes from domestic ratepayers.
I turn to the detail of Amendment No. 103, in the name of the noble Lord, Lord Hayter. The amendment would, as he has said, increase the level of mandatory relief for charities from 50 per cent. to 80 per cent. It is fair to say that the noble Lord, Lord Hayter, is not attacking any new government proposals in the Bill. He is trying to change the existing system, which has worked well and which we will replicate. I remain not only unconvinced by the noble Lord's arguments, but wonder whether charities have taken fully on hoard the advantages of our new proposals to alleviate the worst excesses of the present rating system.
First, not every body which in law is a charity, would be generally agreed to be operating wholly in the public interest. This subject received some public attention in response to the 16th Report of the Public Accounts Committee published earlier this year. I need only refer to some of the more fringe religious cults, which meet the relevant definitions of a charity, but which I think most of the Committee would not wish to see supported with additional public funds.
I am also surprised, but delighted, by the conversion of the Opposition. It is noteworthy to see Opposition spokesmen putting their names to an amendment which would mean additional support from the taxpayer for public schools. I mention that only to remind the Committee just how wide is the definition of a charity. I commend the noble Lord, Lord McIntosh of Haringey, for taking that positive step forward.
Secondly, it is only right to draw attention to the cost of the noble Lord's amendment. Last year, charitable relief cost £80 million, so these amendments would increase that cost to some £130 million. Depending on how that was dealt with, it would mean nearly £5 for every community charge payer, or 2 per cent. on the business rate. There is of course no particular magic about 50 per cent. However, since the Pritchard Report on the rating of charities in 1959 (cmnd. 831), it has been accepted that 50 per cent. rate relief for charities, with the possibility of topping this up to 100 per cent. if the local authority thinks fit, strikes the right balance between the charity's interests and the ratepayers. Charities benefit from very many other tax reliefs. It is right that they should pay something towards local government services if the local authority decides not to use its full discretion. There will be nothing to stop local authorities from giving 80 per cent., 90 per cent. of even 100 per cent. rate relief to charities if they think that is justified. If they give 100 per cent. relief—as many do, selectively, at present—then 75 per cent. of the cost will be borne by the national

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non-domestic rating pool; that is, the whole cost of the first 50 per cent. and half the second 50 per cent. Only 25 per cent will be left to be borne locally by community charge payers. That seems to me to strike the right balance, and I hope will go towards meeting the concerns of the noble Lord, Lord Hayter.
I turn now to the core of the noble Lord's amendment. As he said, recently the National Council for Voluntary Organisations sent out a paper which centred mainly on charity shops. I gather it argued that if they do not receive full rate relief they could face large rate increases resulting from the revaluation in 1990. It is true that some charity shops will face significant rate increases if they do not obtain the full discretionary rate relief. I sympathise with any charity shop in that position, but I do not think that the way to deal with it would be to raise the percentage of mandatory relief. My reason for saying that is that the Government are fully aware of the concerns of charities and businesses, not only in respect of the current annual rates assessment but of the effects of the revaluation. That is why we have proposed improvements to the present system and, I hope with the Committee's agreement, will strengthen those improvements later today.
As the noble Lord, Lord Hayter, is aware, charity shops, which at the moment do not receive the full 50 per cent. discretionary relief, are entirely at the whim of the local authority when facing the next year's rate increase. I know that charities, along with other businesses, are delighted that in future their rate increases will be an amount equal to the retail prices index or even less. At last, there will be no more substantial increases at short notice, which have plagued our system. On revaluation we will be introducing for the first time transitional provisions to phase in the increases, if and when they occur. Furthermore, I would draw the Committee's attention to Amendment No. 117E which is in my name and which will be discussed with Amendment No. 105. That extends the transitional provision to include the next revaluation. I look to the noble Lord, Lord Hayter, and to my noble friend Lady Faithfull for support for the Government on that proposal.
I have to say to the noble Lord, Lord Hayter, and the noble Baroness, Lady Ryder of Warsaw, that even if we were not to proceed with the Bill, a revaluation of business rates—that means charity rates—would inevitably happen. The cost then to the charities would be considerably more than under the proposals contained in the Bill.
Perhaps I may sum up. There is no new system. What there is is extra relief to businesses and charities, not only in the transition but in the amount of rate increase that they might have to face in the future. Those are the additional safeguards that the Government propose. I am sure that the noble Lord, Lord Hayter, will not argue against them.
The effects of the revaluation will be to reduce rates in the North and Midlands by some £700 million. I am sure that the noble Baroness has shops in the North and Midlands which will be longing for the revaluation so as to receive some of that benefit, and which will be saddened if we did not proceed with the revaluation and the assistance we give in it.
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Lastly, I can assure the Committee that we shall be asking local authorities to look on a more comprehensive and a less piecemeal basis at the use of their discretionary 50 per cent. so that in some areas the noble Baroness's shops receive 100 per cent. relief and in others they do not receive any of the 50 per cent. relief. We have thought about charities. We have given the matter a great deal of thought. I believe that we have gone a long way towards enhancing the present system which is the one we replicate in the Bill.
Lord Sandford: Has not my noble friend just explained that, by leaving the discretion with the local authorities, he and the Treasury are prepared to contemplate that the cost of the relief might rise from £80 million to the full amount of £130 million? I should have thought that that objection does not carry much weight. In dealing with non-domestic rates, are we not now dealing with rates which will be collected locally and then re-distributed on a national formula? Does it not follow from that that any discretion that local authorities exercise is almost entirely watered down and diluted so that it has practically no local effect at all? Would it not therefore be better to take this opportunity to give all charities the same full relief as is enjoyed by the Churches? Where would be the harm in doing that?
Lord Renton: Before my noble friend answers that question perhaps I may just add that it is quite clear from what he said that when the Bill comes into operation, the treatment of charities by local authorities, will be an improvement on the present system. However, we shall still be left with the disparity of treatment in different parts of the country by different local authorities from which charities suffer now. I give the example of MENCAP with which I have been associated for many years. We have premises in various parts of England and Wales. Those premises have to be budgeted for centrally as well as accounted for locally. A difficulty which we have always had is that we just do not know, from year to year, how our charitable premises in different parts of the country will be treated by different local authorities. As my noble friend has pointed out, the Government have been very generous; but I should have thought that in order to get the full treatment which noble Lords have argued charities should receive, and in order to get a more consistent system, the Government might have gone a stage further and said that the relief which they intend should still be discretionary shall be mandatory, like the other relief which they mentioned.
Lord Sandford: Perhaps I may intervene again. I should have thought that the right thing at this stage is for my noble friend on the Front Bench to look at the arguments which have been put and see whether there would not be a great advantage. We are now moving to a much simpler system, and it could be made even simpler still if we used this opportunity to give not only the Churches but all the charities the full rating relief, not just 80 per cent but the whole amount. This is something to which we could come back at the next stage, after my noble friend has thought about it.
Lord McIntosh of Haringey: We reached Part III of the Bill (which deals with non-domestic rating) well after midnight on Tuesday night, or in other words in the early hours of Wednesday morning. Then was not the appropriate time for us to open a general debate about the merits or de-merits of centralised business rating. I do not think that the Committee wish me to make a Second Reading speech on this matter, particularly since it was referred to at some length on Second Reading. In summary, I think the position that we take about non-business, centralised non-domestic rating is that the very fact that it takes away another quarter of local government spending from the decision-making powers of local authorities, and local authorities are now left in control of only a quarter of their expenditure, must be a bad thing. It must be a centralising tendency which we can only deplore.
When we come to the practical impact of it, I must say frankly that most of the speculation which has taken place about the impact on particular areas of particular types of business on non-domestic rating is pure fantasy. The existence of a unified business rate, a national business tax, will in itself—to take the regional example first—have a very severely damaging effect on areas which are at present lowly rated; in other words, rural areas, small towns, the North of England, Scotland and so on. But the Government argue that that will be more than offset by the revaluation which will put up the rateable values in the South, in London and the South-East of England. That is pure speculation. In general terms, it may be true; but nobody knows what the net effect will be on any particular type of property, any region, town or city in this country. Therefore when we talk about the effects of a unified business rate, we are talking almost entirely in the dark.
That applies with much greater force to the Government's justifications of their position than it does to the calculations made by the noble Baroness, Lady Ryder, who may well be wrong in detail, although I am sure that the thrust of her argument is sound when she talks about the effect on the Sue Ryder shops.
We now come to the specific issue of charitable relief. In general, I think that we on these Benches wish, if it is possible, to see a continuing degree of discretion on the part of local authorities. In that context, I thought that the Minister slipped below his normal standard of debate when he accused us of supporting the public schools. He knows perfectly well that for several years many of us have opposed charitable relief for what he calls the "public schools"—what I call "fee paying schools for the wealthy". We shall certainly not withhold our support for the real charities just because, by a quirk of legislation of long standing, public schools have achieved charitable status which they ought not to have. Thus I pay very little attention and very little respect to that argument.
In the amendments which the Minister has put clown for discussion in the next group, he has certainly given effect to the undertakings given by his honourable friend in another place on 21st April. So much so that he read out, virtually word for word, the statement of his honourable friend, at cols. 1030 and
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1031 of Hansard. I give credit to him and the Government for the Government having been as good as their word.
I have one remaining concern about this: that in order to achieve the result that the authority should be allowed to offset half the cost, it is proposed to offset their payments into the national non-domestic rate pool. I do not think it is good enough for that to be done by the regulation under Schedule 8. I think that the Government ought to do more than say that it ought to be done by regulation. There is no reason why this should not be introduced as an amendment to the Bill. I hope that the Government will look again at that aspect of the matter.
In general, I think that the amendment moved by the noble Lord, Lord Hayter, and supported by other noble Lords from the Cross-Benches has been a very valuable opportunity to debate the whole question of charities. The noble Earl would do well to listen to the advice given to him by his noble friends Lord Sandford and Lord Renton. Despite the Government's intention to continue the existing system, there are quite serious anomalies which remain and which deserve further attention. I hope that the noble Earl will be able to go further in that respect than he has done so far.
Lord Ross of Newport: I shall speak very briefly because I intend to speak in rather greater detail on the next amendments. I think that the document which I received at lunch-time from the NCVO, which gives on its back pages some of the figures which they fear they will face from the increase in rates which will descend upon them, is fully justified. I hope to show this when I speak the next time, if I am called in the next debate.
The amendment is right to go for the full 80 per cent. I concede that the Minister has made a concession when he says that 50 per cent. will remain and that the local authority will be reimbursed for a further 25 per cent. However there is the final 25 per cent. I am not sure whether all Members of the Committee or even the Minister or the Secretary of State fully appreciate what has been going on in our high streets, and not just in our high streets but in secondary shop positions throughout the country, in the South of England, the West of England and the Midlands. I cannot speak for the North. People have been paying huge sums for premiums just to get leases. These are not multiples but quite small shop owners who want to get away from the rat race. They sell a property for a lot of money and buy up small businesses, stores and the rest of it.
I am wondering what will happen when the lists are finally published because there has been a huge increase over the past 18 months. It may well be that the valuation officers have been basing their returns on figures given to them which were supplied six or nine months ago and which are now totally out of date. I can certainly give examples in my part of the country where they are out of date already. I think that those lists will have to be amended right up to the date when this provision comes into force. If valuation officers do assess on current rentals, even an 80 per cent. relief is going to mean a sizeable

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increase in payments from charities. I am quite sure that I shall be proved correct on that point.
I also wish to make the point about water rates. We are now experiencing in a trial area the metering system. That is already showing double charges. The Minister will agree that there is no compensation for that. So charities are facing increases in that area too. Privatisation will mean that they will not come off that system at the moment. I honestly think that charities have a real case, and I hope very much that that case will be pressed.
4.30 p.m.
Baroness Blatch: I rise to support the concessions made by the Government, but I want in particular to refer to the comments of the noble Lord, Lord McIntosh of Haringey. I think that there have been some crocodile tears shed this afternoon as regards concern for small businesses. The noble Lord will know that his colleagues in council chambers up and down the land have said that rates are not an issue for business and commerce, that they are a small percentage of turnover—
Lord McIntosh of Haringey: If the noble Baroness will forgive me, I should like to remind her that we are debating charities rather than small businesses.
Baroness Blatch: I am referring to the precise comments that were made by the noble Lord, Lord McIntosh, when he commented on a centrally collected uniform business rate. I simply want to say that I have long argued that the health and wealth of business and commerce to the country as a whole is too important to be left to the vagaries of local government, and it seems to me that where there have been rate increases in the London area of up to 60 per cent. and in my own county of one-third, that that cannot continue either for charities or for local businesses and our shops in the high street. To refer specifically to the concessions that are now being suggested for charities, I think we have the best compromise of the uniform business rate being a national concern, but giving local authorities the particular discretion to know the local charities in their areas and to suggest rebates right up to 100 per cent. I support that process.
Baroness Gardner of Parkes: When the Minister replies will he please clarify this point? As I have listened to the debate, it seems to me that some Members of the Committee are implying that local authorities will no longer have the discretion to waive the rates for charities. At least that was the way that I interpreted the comments of my noble friend Lady Blatch just now. But perhaps I misunderstood, and that is why I ask for clarification.
There is no doubt that if local authorities have the right to waive the rates for charities, areas such as Westminster, which at present collects £460 million in business rates, will get back from the Government something like £17 million in business rates. There will be no incentive whatsoever to encourage any business to continue and we in Westminster shall be delighted to be able to relieve charities because it will not be costing us a penny. That will be the first time
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that we have not had to be provident and careful and to really think about every penny and where charity really first began—in relation to our ratepayers. Now that policy will not help our community charge payers one bit. It will not help them for us to be thinking of anything else, and we may see quite remarkable differences coming about because of this provision.
Baroness Faithfull: I should like to take up a point made by my noble friend Lord Renton. I am sure that local authorities will certainly support charity shops if they serve the people of the area in which that shop is located. But there are many charities, for instance Oxfam, that do not directly help people of a particular area, but help people in an overall global area. I know that the noble Baroness, Lady Ryder of Warsaw, has shops in places where she does not have a home, but that nevertheless those shops do support homes in other areas. I fear that local authorities will help those charities that are helping their own ratepayers, but that they will find it a little difficult to help those charities which are global. Therefore, I take up the point made by the noble Lord, Lord Renton, and support it.
Baroness Carnegy of Lour: I have listened very carefully to what the noble Lord, Lord Hayter, said. I have not had the privilege of seeing the NCVO brief or its figures, but I see the point of it very much because it is an area in which I myself am involved north of the Border. Recollecting as I do the process within a local authority of going through applications for 50 per cent. discretionary relief to be given by the local authority on top of 50 per cent. mandatory relief, such as we have at the moment, I realise that charities do vary enormously. The staff on local authorities find this as regards the applications that come before them from charities. Some really do not merit 80 per cent. relief because they have ways of raising funds for themselves within the organisation. They do not necessarily have ways of making a profit, but they can raise funds which partly meet the rates that they have to pay.
I think it is satisfactory to continue with the system of the mandatory 50 per cent. and the local authority deciding on the other 50 per cent. My noble friend Lady Gardner of Parkes said that a local authority would happily sit there granting rate relief because it would not suffer from it. My understanding of what my noble friend on the Front Bench said was that 25 per cent. of the amount that had to be met through the local authority's decision would be met by the community charge payer. Therefore I do not think that my noble friend Lady Gardner is quite correct.
The decision taken by the local authority as regards relief will be a very responsible decision. That is important. If it were not for that aspect of the decision I would not be inclined to agree to it because I think that the decision would not be correctly made by the local authority.
It sounds to me as if the Government are getting as near as they can, within the new arrangements, to carrying on the existing system. Because this matter has cropped up and been dealt with only within the past few weeks, I think I am right in saying that it

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does not appear in the Scottish Bill at all. I should like my noble friend the Minister to tell us whether it is intended that a similar arrangement to that which Parliament decides will be carried into Scotland. It may be that he cannot find that out, but it would be very comforting for those of us who live north of the Border to know about that.
I did not fully grasp what my noble friend Lord Renton was proposing, but it sounded as if he was putting his finger on something which could be a refinement of the existing system but might well be looked at by the Government in relation to the smaller organisations. However, on the whole, I would say to the noble Lord, Lord Hayter, that from the point of view of the way in which a local authority has to take its discretionary decisions, it should have the ability to go from 50 per cent. rates to nil—that is what it can do at the moment. To say that local authorities can go from 80 per cent. to nil is not enough because many organisations which are registered as charities do not merit an 80 per cent. rate rebate.
Lord Renton: I should like quickly to help my noble friend Lady Carnegy of Lour. I was merely suggesting that the relief given by local authorities to charities should be mandatory instead of being discretionary.
The Earl of Caithness: We have had a useful addition to our discussion. It appears that my noble friends Lord Renton and Lord Sandford do not like the existing system and would like it to be changed. That is interesting and obviously something that I should like to look at and read about in detail. I found some points a little hard to follow as regards what my noble friend Lord Renton was saying. But when I read the Official Report I shall of course be able to take note of what he says.
What is interesting is how the debate has continued on the question of whether there should be discretion. The noble Lord, Lord Hayter, does not want local authorities to have discretion, but the noble Lord, Lord McIntosh of Haringey, who has also put his name to the amendment, does want local authorities to have discretion. Similarly, my noble friend Lord Renton does not want discretion, but my noble friend Lady Carnegy of Lour does want discretion. So the argument is an interesting one and I should like to look at those points again.
As regards the rates revaluations, I have not seen the report of the NCVO. It arrived in the office only yesterday and it is something that I should like to look at. However, perhaps I may suggest to the noble Lord, Lord Ross of Newport, that he should have a word with the noble Baroness, Lady Seear. At an earlier stage she said, "Don't worry about the revaluation; if the rates go up, the rate poundage goes down". I contradicted her at the time. However, I believe that there is a slight discrepancy on that Bench as usual.
Lord McIntosh of Haringey: The noble Baroness will speak for herself. However, if the rate poundage is set nationally, as it is for the business rate, then that
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is untrue. What the noble Baroness said previously about rate poundage going up when rates go down is correct for domestic rates. In other words, the noble Lord is wrong twice.
The Earl of Caithness: If I am wrong twice, perhaps I am right! Perhaps I may say to my noble friend Lady Carnegy that the provision will of course apply to Scotland. I believe that it will be beneficial for all of us to look at what has been said in the Official Report. There have been new arguments and much debate.
I should have mentioned earlier to the noble Baroness, Lady Ryder of Warsaw, that we do not know what the effect of the revaluation will be. Some figures have been bandied about. The work is being undertaken at the moment. We shall take as representative a sample as possible out of that work, analyse it and publish the results, we hope in the autumn. Until that groundwork is done, the figures mentioned are fairly hypothetical and they need to be firmed up. I am sure that some of the worst fears of businesses and charities will not be realised. However, I cannot say anything for certain at this stage and the matter must be looked at in detail. The rate poundage is an important factor to be taken into account. Perhaps we should all read the Official Report and look at the matter again.
Baroness Seear: Perhaps I may say to the noble Lord, before he says too much about disagreements on these Benches—I find them hard to identify—that he should take note of the number of occasions during recent weeks when very distinguished members of his party, including eight Secretaries of State, put down amendments criticising the Government's proposed legislation.
The Earl of Caithness: We are a broad church and welcome healthy debate.
Lord Hayter: I am sure that the Minister speaks wisely when he suggests that we should digest what has been said. We should all look carefully at the Official Report. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.45 p.m.
Lord Moran Lord Moran moved Amendment No. 104:
Page 23, line 37, at end insert (" or where on the day concerned the hereditament is occupied for the purposes of a club, society or other organisation not established or conducted for profit and is wholly or mainly used for purposes of recreation")
The noble Lord said: In speaking to Amendment No. 104 I should like to speak also to my Amendment No. 106 and to No. 108 standing in my name and that of the noble Lord, Lord Mason of Barnsley. To explain in a nutshell what I am seeking to do, I can do no better than to quote the resolution passed by the National Anglers' Council, which represents some 3½ million anglers in this country, at their annual general meeting on 21st May. It reads:
"To call on Her Majesty's Government in reforming the rating system by the Local Government Finance Bill to include in the Bill—

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(1) a means of directing to the bodies having the statutory duty to maintain, improve and develop fisheries (and in future the National Rivers Authority), the rates levied on fisheries and fishing rights;

(2) the retention of the power of rating authorities to reduce or remit the payment of rates by reacreational clubs, societies and other organisations not established or conducted for profit, presently in the General Rate Act, 1967, s, 40;

(3) the introduction of mandatory 50% reduction of rates payable by such clubs, societies and organisations".

The objectives of the resolution are supported by the Country Landowners' Association. I acknowledge the help of its chief legal adviser in drafting the amendments more efficiently than I could have hoped to do. They are also supported by the Salmon and Trout Association and by the British Field Sports Society.
Perhaps I may deal first with the question of recreational clubs, including angling clubs, covered by Amendments Nos. 104 and 106. At present, under Section 40(5)(c) of the General Rate Act 1967, local authorities have discretion to reduce or remit rates to angling or other sporting organisations, provided that they are not established or conducted for profit. That discretion is quite widely used and is valuable to many of those clubs. I do not have to tell Members of the Committee how important such clubs often are in enabling those without substantial means to fish and take part in other sports. But at the moment that discretion is not written into the Bill. It was, I think, being left to regulations to be made after the Bill becomes law. Such regulations might or might not be made and in any case could not be amended by the House.
In my view, it would be better to retain the present discretionary reliefs for recreational clubs in the Bill. That is what my Amendment No. 106 seeks to do. It may be that this is now taken care of by the amendments which the Government have tabled. I have only recently seen those amendments and I confess that I have some difficulty in following the wording. However, if they achieve the retention of discretionary rating for such clubs, I welcome them.
However, one defect in the present arrangements is that rate relief for these recreational clubs operates capriciously. Some local authorities remit rates for them entirely; some give partial relief; some give no relief at all. The object of my Amendment No. 104 is to reduce this element of caprice by giving a mandatory 50 per cent. relief to all eligible clubs, so that they would get at least that reduction and under my Amendment No. 106 possible further relief at the discretion of local authorities. This would be a great help to these clubs, and I hope that the Government will be prepared to amend the Bill on these lines.
I now turn to Amendment No. 108, which deals with the destination of fishery rates. I must first declare an interest as part owner of a short stretch on the upper Wye on which we pay rates on the right bank to the Brecknock District Council and on the left bank to the Radnor District Council, and a small fishery contribution to the Welsh Water Authority. At present rates are payable to local authorities on all fisheries in England and Wales which are severed from the occupation of the land. In addition, some fisheries, for what I believe are historic reasons, pay
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a fishery contribution to a water authority. In Wales that applies to the Rivers Usk, Wye, Teifi and Towy. Those fisheries are double rated. However, no one has made a fuss as the fishery contribution is at present very small, though it could always be increased.
More generally, under Section 28(3) of the Salmon and Freshwater Fisheries Act 1975 the Minister of Agriculture or the Welsh Secretary can make an order for the levying of a fishery contribution. In practice, such orders have not been made, perhaps because of the reasonable objections of principle to double rating. An application for such an order was made by the Welsh Water Authority, alone among water authorities. However, no order was forthcoming.
At Second Reading I pointed out that fishery rates are often substantial and, unlike domestic rates, no services are received for them. I said that we had a unique opportunity, which might never recur, for the Government were bringing in legislation abolishing most rates and establishing a National Rivers Authority. The noble Lord the Lord Privy Seal was good enough to say that my argument was interesting and would be considered by his right honourable friend.
Under the proposals for privatising the water industry, the NRA will have the statutory duty to maintain, improve and develop fisheries at present exercised by the water authorities, and the power to impose the 1975 Act levies. Anglers have long regarded it as thoroughly unsatisfactory that their rates go to local authorities who have no duties to or interest in fisheries. It would be far more sensible, and would I believe be welcomed by all anglers in England and Wales, if fishery rates now payable to local authorities were to be replaced by an equivalent contribution to the NRA. That would be beneficial and logical. It would give the NRA an increased income, thus reducing by the amount of those rates the need for Exchequer grant to the NRA and the burden on the taxpayer.
In Wales, for example, at present about £1½ million is spent by the Welsh Water Authority on fisheries, £½ million of which comes from licence fees. If a contribution in place of rates could be added it would probably provide them with another £300,000 to £500,000. The Wye itself produces something like £112,000 in rates. That would mean that in Wales the NRA would be two-thirds self-sufficient.
Riparian owners who now pay rates would pay no less but they would see their money spent on maintaining and improving the fisheries. I am sure that the vast majority would like to contribute in that way to the care of the rivers they fish. Through the advisory committees they would have more say in how the money should be spent and they would be encouraged to co-operate more effectively with the NRA in its important work.
I believe that all that would be achieved very simply by Amendment No. 108 standing in my name and that of the noble Lord, Lord Mason. It would remove the possibility of double rating and encourage the levying of a contribution in place of fishery rates to help fund the fishery services of the NRA. I beg to move.
Lord Mason of Barnsley: I rise to speak specifically to Amendment No. 108 concerning fishery rights and to support Amendments Nos. 104 and 106 in the name of the noble Lord, Lord Moran. I believe that the amendment could work in practice, although I guess that the Minister may regard it as exploratory.
It is anomalous that there can be double rating of fisheries; namely, local authority rating and a levy imposed by the water authorities under the Salmon and Freshwater Fisheries Act 1975. In fact levies are not made under the 1975 Act because of the double-rating objections, leaving the odd and indeed farcical position that all rates on fisheries go to local authorities which have no duties towards fisheries. That has always been wrong and most local authorities do not pay any respect to fisheries in return for the rates. Some do, and quite honourably, but they are in a minority.
Therefore, the amendment's first aim is to iron out the anomaly of possible double-rating. Its second aim is to remove rating by local authorities. They are obviously not the bodies which should deal with the maintenance, improvement and development of fisheries in their areas. The amendment would also pave the way for all rates or levies under the 1975 Act to be paid to the projected National Rivers Authority under the proposed privatisation of water resources.
The national angling bodies—the National Anglers Council, the Salmon and Trout Association, the Anglers Co-operative Association and the Country Landowners' Association—have urged that fishery rates should be payable to the NRA when it is formed and not to local authorities.
There is concern that the NRA may well have insufficient Exchequer finances to fund its services and that the fisheries and rivers will suffer. Obviously if there were to be a switch of rates to the NRA it would be logical and beneficial to the fisheries and to fishing, the sport and the environment.
So, in brief, the effect of the amendment of the noble Lord, Lord Moran, would be to remove the possibility of double-rating of fisheries and so help or encourage the levying of fishery rates to help fund the fishery services of the NRA. It would exempt fisheries or fishing rights from rating under the Bill if and when a contribution is levied on them under the Salmon and Freshwater Fisheries Act 1975.
The noble Lord, Lord Moran, has already mentioned the annual general meeting of the National Anglers Council. It represents 3 million anglers, and has placed on record that that is its desire.
The present duty of water authorities is to maintain, improve and develop the fisheries in their areas. They are supposed to establish and consult fishery advisory committees in their respective areas. Their fishery function is paid for by the income from fishing licences, rod licences and net licences. The shortfall is made up from the environmental services charge which is recovered from ratepayers by the water rate. I have already mentioned that Her Majesty's Government may prefer the NRA to have a new form of income; namely, the fishery contribution under the Salmon and Freshwater Fisheries Act 1975 and be less dependent upon the
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Treasury. I also suggest a change which may now be seriously considered especially to assist the finances of the projected NRA—that is, a national rod licence.
The Salmon and Trout Association Sub-Committee on Still Waters—of which I am a member—researched this matter. I must say as a still-water trout fly fisherman who travels all over the country I am aware of most of the problems. I believe that this is the appropriate time to plant the seed in the minds of those preparing the Bill for water privatisation and the setting up of the NRA. The Department of the Environment will be involved and that is why I have raised the point today.
The present system of rod licensing in England and Wales is chaotic. It causes great annoyance to anglers, and to one who fishes in many areas of the country it is ridiculously expensive. Each water authority has its own licensing and prices. There are 10 water authorities and they are all different. There are far too many different classes of licence—adult, junior, pensioner's, disabled, one-day, one-week, two-week tickets, and season licences—each of which varies from one to another of the 10 water authorities.
I often buy trout licences from the Yorkshire Water Authority, the Severn and Trent Water Authority, the Thames and Southern Water Authorities and even in Cumbria. The licences cost between £5 and £7 each permitting me to fish. My annual licence therefore for those five areas would be almost £30, and it would be much more if I go to any of the other water authorities. In addition, my licence for salmon and trout in Northumbria alone costs me £41·25.
When I travel to different still waters and reservoirs to fish—and I may have travelled many miles to do so—if no licence is immediately available at the bailiff's lodge I am tempted to fish without a licence. It is obvious that hundreds do so in a season, resulting in huge losses to the water authorities. A working party of the Salmon and Trout Association, at the request of the Water Authorities Association, undertook a survey of 1,500 anglers in eight water authority areas. The results revealed that there was a considerable amount of licence dodging, mainly due to the complexities of the rod licensing system. The survey indicated that 974 fishermen should have bought 2,140 licences to fish outside their areas. They actually bought 1,297 licences. There were more than 700 people fishing without a licence and about £2,500 was lost. I must also stress that many are not dodging paying. The problem often is that licences are not readily available. A national rod licence is necessary to eliminate such fishing without a regional licence and to produce a saving of thousands of pounds in licence fees.
The water authorities have often turned down such a scheme as impractical but the establishment of a National Rivers Authority creates the perfect opportunity to introduce a national rod licence. The Post Office would be an ideal means of issuing licences—and I guess it would be agreeable to doing so—which could also be checked nationally year by year. The introduction of a well-designed plastic card licence would assist control.

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Such a scheme could provide additional financing for the National River Authority's fisheries management. It would be in the interests of fishery managers, of owners and lessees to ensure that the fishing public paid their share through the purchase of a national rod licence. At the moment fisheries and fishermen have good cause for concern as to what percentage of licence revenue actually goes to the maintenance, improvement and development of fisheries. If the entire income from a national rod licence were to go to the NRA there would be some guarantee of the right and appropriate use of the licence money so generated. A national licence is obviously required. It would be a great step forward and I recommend the idea to the Minister and to the Committee. In doing so I give my total support to Amendment No. 108.
5 p.m.
The Earl of Radnor: Perhaps I may intervene, declaring my interest as a fish farmer, to support the broad principles of the amendment. Perhaps I should also issue a word or two of warning about the idea so eloquently put forward by the noble Lord, Lord Mason, of uniformity throughout the country.
Perhaps I may first deal with rod licences. Uniformity is a nice idea, with everybody paying the same for their fishing; but the fishing itself is not uniform. Therefore, I am not sure that that hat fits quite so nicely as the noble Lord would like to think.
The other point is that it seems eminently reasonable that money from fishermen should go to the sport of fishing. The obvious vehicle that presents itself for this will be the National Rivers Authority. I wanted to take the opportunity to voice a small fear here on the part of fish-farm owners, who of course ply a trade which often provides fish to stock rivers and lakes, and indeed many artificial and natural areas of water. I sense from conversations all round the place that the National Rivers Authority, when it arrives, will be keen to enter this commercial field. I am not sure whether it is right that they should enter that commercial field, held up by large funds from fishermen, to the detriment of those doing it already in competition with each other. I agree with the broad principle of the amendment.
Lord Kimball: Before my noble friend replies may I ask him whether, in his reply, he would look particularly at the point on Scottish fisheries which is covered by Schedule 15 to the Bill, and to which there is an amendment down, 194ZA. It is only a probing amendment. Exactly the same arguments apply north of the Border as south of the Border where a fishery board north of the Border is making an assessment under the Section 15(2) of the 1986 Act. I should be grateful if my noble friend, in his reply, could give some indication of whether or not the district fishery boards in Scotland, where they levy a rate, will be able to retain that rate for the benefit of the fisheries they look after.
Lord Gibson-Watt: Before my noble friend replies, may I support this amendment. I shall not repeat the arguments put so well by the noble Lord, Lord Moran, whose knowledge of this subject is immense.
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I would only add that there has been a deterioration in our fisheries in many rivers. I do not put this down entirely to the responsibility of the water authorities. I think in many cases they have been short of funds to deal with the fishery aspect. However, I believe that we ought to be aware of the contribution that fisheries can and do make to the tourist industry of this country. It is often overlooked. Without further ado, I support both the amendments to which the noble Lord, Lord Moran, has spoken.
Lord Gisborough: I should like to support the amendment. I should particularly like to support the words of the noble Lord, Lord Mason, about the national rod licence. For people to pay for two licences to fish on two rivers not very far apart is absurd.
The Earl of Caithness: May I remind the Committee that the main purpose of the Government's amendments, to which I spoke on the last amendment, is to preserve the existing rules which empower local authorities to increase the rate relief for charities from 50 per cent. to 100 per cent., and to give up to 100 per cent. relief to other non-profit-making bodies, including sports clubs.
Lord McIntosh of Haringey: I wonder whether we could be clear as to what amendments we are talking to? The noble Lord, Lord Moran, in moving Amendment No. 104, said that he was speaking to Amendments Nos. 106 and 108. He did not indicate that he was speaking to any other amendment. Since Amendment No. 103 had been taken separately, it would be as well if these three, which are not like any of the others, could be disposed of before going on to the Government's amendments.
The Earl of Caithness: They cannot be, for the simple reason that I spoke to the government amendments on the last amendment. I did not move them because one cannot move them, but there is nothing to stop anybody talking to amendments subsequent to the one being discussed. Indeed, I had to do that in order to set the picture for the Committee.
It is the new clause brought in by Amendment No. 107ZC, which I hope to move shortly, that does precisely what I have just said, with the supplementary provisions in Amendment No. 107ZD. I have to say to the noble Lord, Lord McIntosh, that of course these are very relevant to the arguments in Lord Moran's amendment.
I should also like to mention briefly the other government amendments to which we shall be coming and which are also connected with this. Amendment No. 123ZC is an important technical provision which clarifies that charity shops are to be treated as occupied for the purpose of a charity and can therefore benefit from rate relief, and Amendment No. 123CA is a further technical amendment. Amendment No. 123E clarifies the point that to be a charity for rate relief purposes a body does not have to be a registered charity provided that its objects are exclusively charitable.

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Turning to Amendments No. 104 and 106 in the name of the noble Lord, Lord Moran, who has spoken to them primarily in relation to fishing clubs, I should point out that if implemented these amendments would apply to all sporting clubs. That is precisely the point that ties up with the government amendments to which I have just referred. The first of these amendments would extend to 50 per cent. mandatory relief for charities to sports clubs. The second more briefly, and without the supporting detail, would do very much the same as the government amendments; that is, to allow local authorities to give discretionary relief.
First, I see no reason why sports and recreational clubs should receive more favoured treatment than the other cultural or other worthy bodies which qualify only for discretionary relief, though I am aware that not all sports clubs see it in this way. The reason we think that local discretion and not mandatory provision is the right course for non-profit-making bodies in general is that this allows the authority to tailor the level of relief to the benefits that the local community derives from the facilities. It recognises that not all non-profit-making bodies are equally deserving of relief, and that the best people to make local decisions on particular cases are local authorities.
In the case of sports and physical recreation clubs in particular, I appreciate the tremendous contribution that the majority of these organisations provide towards the health and well-being of the local community. I am particularly aware of the value put on the facilities provided by these clubs by young people who wish to further develop and practise their sporting skills beyond the level provided in schools. There are, however, a number of such clubs where sport takes second place to drinking and other social activities, and other clubs which are socially exclusive and which local people may be unable to afford to join. There is no reason at all why ratepayers or community charge payers should subsidise such clubs. We therefore think it is right to allow authorities to go on making a case-by-case judgment of the benefits conferred on their area.
I have no indication that local authorities in general are failing to discharge their duties properly in the exercise of that discretion. It is inevitable that some bodies will be disappointed in the level of relief granted. That does not necessarily mean that authorities have failed to give proper regard to their application. Many authorities do in practice make extensive use of the existing powers. I believe that local authorities should continue to be allowed to develop their own policies and make decisions in the light of local circumstances.
What I can say is that we propose to take steps to remind authorities of their powers and to exhort them to make the most constructive use of them. We intend that there should be guidance issued centrally to which non-profit-making bodies can point if particular local authorities adopt unduly restrictive policies.
The noble Lord, Lord Moran, in Amendment No. 108, also raised the matter of rates paid on fisheries and fishing rights. He has argued that anglers receive
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little or no benefit from the services provided by local authorities and that the rate income from fisheries and fishing rights should be diverted to water authorities or, in the future, the proposed National Rivers Authority, to fund the maintenance and improvement of fisheries.
Rates are not a direct payment for services. They are a tax on the beneficial occupation of property used to fund a wide range of local services. I appreciate that, in the case of fishing, it is an incorporeal right rather than the occupation of a physical asset which is taxed; but, as with all taxes, not everyone benefits from all the services they help to fund all the time. However, I am aware of a very strong body of opinion in favour of transferring the rate income from fishing rights to a body that is more directly concerned with fishery activities. I have to say that I have some sympathy with that point of view.
The noble Lord's amendment has much to commend it in that it does not seek to exempt fishing rights across the board but only if a payment is to be made to a water authority under the powers in the Salmon and Freshwater Fisheries Act 1975. Those powers have been used only to a very limited extent. Part of the reason is that it would in effect impose double taxation on anglers. The problem would be overcome if exemption from local authority rates were given in exhange for a contribution to the water authority or in future the National Rivers authority. I therefore accept in principle the substance of Amendment No. 108. However, I should like to consider further the detailed drafting with a view to bringing forward at Report stage an amendment which has a similar effect.
I should like to say now to my noble friend Lord Kimball, who has tabled Amendment No. 194ZA, which has a similar effect in Scotland, that the Government also accept the principles of his amendment.
The noble Lord, Lord Mason of Barnsley, raised the issue of a national rod licence. I was interested in what he said but, as he knows, the responsibility for rod licences will ultimately be transferred to the National Rivers Authority. I have no doubt that that body will wish to consider the matter in due course and that the noble Lord will soon be raising the matter with that authority when it takes over its responsibilities.
I hope that the noble Lord, Lord Moran, will now agree with our view that his Amendment No. 104 would go too far and that his Amendment No. 106 is dealt with by the Government's amendments—which I intend to move—and accept that we have promised to consider Amendment No. 108. On that basis, I hope that he will agree to withdraw his amendment.
Lord Moran: I should like first to say that I am very grateful to all Members of the Committee who have supported my amendments. I am very much encouraged by the reply which the Minister gave on Amendment No. 108. All anglers in England and Wales will be delighted to know that the Government accept the substance of our proposals. Of course the Government know better than I what the precise wording should be but I think that it will be very good

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news for all anglers that the Government will consider seriously diverting fishery rates to those who have the responsibility for looking after the rivers and the fisheries.
On the question of clubs, I am very glad to learn that the Government's amendment, as I understand it, preserves the discretion in the present legislation. As for the mandatory relief that I was proposing by Amendment No. 104, I am disappointed to learn that the Government are not prepared to accept that suggestion. I hold no brief for unsatisfactory clubs, such as the drinking clubs and so on that the Minister has mentioned, but I believe that there is a wide difference up and down the country between different local authorities, some of which support fishing and other recreational clubs and are anxious to help them while others are much less keen to do so. I am pleased that the Government propose to remind local authorities of their responsibilities but I hope that in the future, if things do not work out well, they will not exclude the possibility of making some change on the lines that I have suggested. Having said that, I am grateful for the Minister's remarks and I shall withdraw the three amendments, Amendments Nos. 104, 106 and 108. I beg leave to withdraw Amendment No. 104.
Amendment, by leave, withdrawn.
5.15 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 105:
Page 23, line 37, at end insert—
("(6A) (a) Where paragraph (b) below applies the chargeable amount for a chargeable day as calculated in accordance with section 39(2), (3) and (4) shall be reduced by an amount of up to 100% of the sum due on a basis to be determined by regulations made by the Secretary of State.
(b) This paragraph applies where a hereditament is occupied by a ratepayer wholly or mainly for small business.
(c) "Small business" is to be defined in Regulations and in defining the term regard shall be had to—

(i) whether or not the business is in the forming a plc;

(ii) the taxable profit of a business;

(iii) the business's asset base; and

(iv) the number of employees of the business.").

The noble Lord said: I am moving this amendment, which has been tabled in the name of my noble friend Lord McIntosh of Haringey. The Committee will appreciate that once again we seek to pursue what these Benches consider to be inequity and injustice in the Bill and in the manner in which this section bears unduly heavily upon the business community.
I see the noble Baroness, Lady Blatch, in her place, as she normally is. A few moments ago she reminded the Committee of the injustice of certain increases in rate levels imposed by some authorities in recent times. I shall shortly indicate to her what the National Chamber of Trade has forecast will be the increase in rates to be borne by both small and large local businesses as a result of this provision in the Bill. This amendment seeks to test and probe. It appeals to the Government to take note not of what they say they intend to do but of what the business community has told us this measure will do to business. The
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Minister is on record in the Financial Times of 3rd June as saying:
"I have lots of sympathy with small businesses but this time they are asking for too much".
The extract continues:
"However, he stressed that their worst fears of rate increases would not be realised".
The Minister must know more about this matter than does the newspaper even though he is not prepared to say very much more than that until the autumn in respect of certain easements and major impacts of the unified business rate on the businesses that have been in touch with us.
We hope by this amendment to enable the Minister to reduce the charge under Section 39—that is the liability—by up to 100 per cent. That is a global figure and we do not remotely think that it should be that percentage. However that figure is offered in order to avoid getting caught by stating a more precise figure. We urge the Minister to take account of the catastrophic situation that will face many businesses. It is hard to believe that the impact of the Bill will be seen by small and large businesses as anything other than catastrophic. Briefs have been sent to me by many of the large organisations which are household names in this and other countries. They all confirm that the Government's present intentions are unfair and unjust. Among the large bodies which have drawn their problems to our attention are: the Association of British Chambers of Commerce, the Association of Independent Businesses, the Confederation of British Industry, the Forum of Private Business, the National Chamber of Trade, the National Federation of Self-Employed and Small Businesses, the Union of Independent Companies and the Retail Consortium.
We recognise that the difficulties are compounded by the long delay in revaluation, which will certainly make a very large impact upon businesses, and perhaps the Minister intends to make a political point when offering reasons for it.
I simply want to remind the Minister of the effects of revaluation in sector terms. In 1985 the effect of the revaluation in Scotland was that the rates to be paid by the retail sector went up by 2·5 times, the service sector by 2·2 times and the manufacturing sector by 1·5 times. One might say, "So what?" but the Minister knows, because he is in touch with these matters, about the impact of rate increases and local payments. As the Committee is well aware, there has been controversy over what they are supposed to pay for, but the fact is that the element of the business rate that will be borne by local businesses, small businesses as well as large ones, is of major and increasingly vital concern. Local rates—this is leaving aside wages—have a great impact on the amount of money that businesses have to find just to keep going.
I should like to quote some of the consequences that will arise throughout the country that have been drawn to my attention by the National Chamber of Trade. Even taking into account anything that the Minister might say by way of relief or limit on the impact to be borne, members of the National Chamber of Trade have said that the rate bill of 100

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of their members has been estimated in 1990 by comparison with 1988. In Bury St. Edmunds members of the National Chamber of Trade are faced with an increase of 240 per cent. That is in line with the estimate of two and a half times for the retail trade. In Colchester the figure is 240 per cent.; in Eastbourne, 145 per cent.; in Epsom, 386 per cent.; in Henley-on-Thames, 240 per cent.; and in Loughborough, 110 per cent. Members of the Committee who know their geography well will say that those are substantially in the southern part of the country. That is correct. My noble friend Lord Mason of Barnsley will be interested to know that members of the National Chamber of Trade in Barnsley have estimated that in 1990 by comparison with 1988 their rate bill will decrease by 18 per cent.; in Doncaster there will be a decrease of 30 per cent.; and in South Yorkshire of 31 per cent.
The Minister is entitled to tell us that we are in the game of losers and gainers. We have had arguments of that kind in respect of social changes in particular and other changes. Those who benefit will take their benefit and smile. The losers are expected to say, "Hard lines, we are among the losers and we have cheerfully to lose so that the gainers may have some equity". In this instance, however, we are speaking of catastrophes that can face not only individual businesses but the high streets of our towns and commerce in general. It is no good the Minister telling us that if the North benefits by the decreases, the South must have increases. Those who have far more experience of running a retail business than I have will know that situations can develop whereby the increase in rates will be so great that large businesses will decide to pull out of the high street. This will not be the result of a decision of a local council of any particular colour but because of the imposition of the NNDR.
I want the Minister to face up to the argument that whatever happens there will be no net cost upon the Treasury in regard to this aspect of the Bill. We say that it is not unreasonable in a revolution of this kind for there to be gainers—so be it. However, if there are losers, the cost of the loss should not be borne by those businesses that will have to face the cost of subsidising the gains of the gainers. This is not a political point; it is a point of equity. It is not even a vested interest point. If the Minister so wished, I could quote instances that have been given to us by respected organisations—not that in which I am mainly interested, the Co-operative Movement—that will be affected in general as well as by other organisations. These are small and large businesses in the North and the South, big household names that are pointing out the detrimental impact upon them of the business rate.
My name is associated with Amendment No. 117, which the Committee will consider later. I have no doubt that the noble Lord, Lord Ross of Newport, will speak to it and argue the case for the small businessman. In Amendment No. 105 we argue that it is the responsibility of the Minister to take on board the serious impact on the small business. The Minister in his speech last week, which I quoted, spoke of the small business. One needs to know his definition of "small business"—whether it is in terms
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of employees, turnover, profit or square footage. The business community wants to know.
The Minister must also recognise that business decisions by the business community are being held up because of the failure of the Minister's parliamentary colleague to do what he promised last December. It was said that a statement would be made "very soon" in regard to the increase on an annual basis, whether it be 15 per cent. or something less. The Minister has carefully not given the figure. The autumn is the magic period that has been quoted more than once as the time when the decision will be made. Meantime, however, both big and small businesses must live and make their decisions this year for next year and the year after that. It cannot wait until the autumn.
The Minister has a major responsibility, even if he is unable to accept the amendment. If he asks me to withdraw it, he should do so with the intention of coming forward later with some proposal after consultation with both big and small businesses to meet the pressing points that have been raised.
Lord Somers: I wholeheartedly support the amendment. The noble Lord, Lord Graham of Edmonton, has given some convincing financial statistics.
I speak from personal experience. I live in a town where, because of the policy of the local government, small shops have been closing one by one. It is therefore very difficult to get anything that one wants or any kind of personal service. It must be remembered that large business may be a very good thing from its point of view—it is probably very profitable to itself and to its shareholders—but it is no use to the general public. As a rule, there is no personal service. The workers in such a business have no personal interest in their customers and no personal desire to ensure that their customers get what they want. They do not know their customers' requirements, and they do not care. This is becoming an urgent matter in some of the smaller towns. An amendment such as this is essential if we are to maintain the standards of what I may call day-to-day shopping.
5.30 p.m.
Lord Rippon of Hexham: I share to a considerable extent the concerns expressed by the noble Lord, Lord Graham of Edmonton, in relation to this matter. I believe that the Government have been courageous, imaginative, and to a large extent have shown immense ingenuity in bringing forward the Bill. But as I said on Second Reading, I think there remains real anxiety about the way in which the proposals in the Bill will in effect turn non-domestic rates into a national tax with the revenue assigned to local government on a per-adult basis in perhaps a rather arbitrary way.
So far as concerns the effect on business generally, the Government have gone a considerable way towards meeting the anxieties expressed by the Confederation of British Industry and others,. However, there still remains, as the noble Lord Graham, has pointed out, real anxieties and doubts

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about the effects of the proposals on re-development and expansion of businesses. It is difficult that so much will remain unknown until October, until the Bill has long left this Chamber and that so much will be determined by regulations. The introduction of the uniform business rate at the same time as the community charge has involved such a fundamental change that the Government have found it necessary to repeal the whole of the General Rate Act 1967 and all the subsequent amending legislation. That means that the law on rating has been condensed to a considerable extent. As a result, the primary legislation is, even more than is now almost customary, in even more of a skeletal form leaving the main detail—the vital detail in many cases—to be prescribed in secondary legislation.
I do not wish to go into great detail in a general discussion of this kind or to quote many of the examples which have been brought to the attention of many noble Lords. But the combined effect of the introduction of a centrally determined poundage and, at the same time, the coming into force of a revaluation will have a substantial effect on the size of the individual's rate bill, particularly the individual business rate bill. Of course the Government have accepted the need for transitional arrangements in a situation of considerable uncertainty about what will happen. I hope therefore that my noble friend the Minister will make it perfectly clear—there is another amendment on the subject later—that there will be continued discussion with the CBI, the local authority associations, with the bodies which are expert in these matters and which will have to administer the law and make it work, such as the Rating and Valuation Association. There is a great deal of expertise at the Government's disposal. It is accepted that the policy in the Bill has been determined in another place. However, giving effect to the Bill, making it acceptable, making it workable and making it as equitable as possible is a very difficult task. It can be successfully accomplished only if the Government will work with the local authority associations and the other bodies who are so vitally concerned.
I hope that the Government will have regard to further changes which, according to the CBI and others, may be necessary, and that they will in particular ensure that there will be transitional provisions to limit individual rate bills and that those transitional provisions shall not be financed by a charge on other businesses which have suffered from high rates and distorted revaluations.
Secondly, I hope that consideration will be given to limiting in some way the business rate. It is possible that it should be limited to no more than 3 per cent. of RPI in any one year, assuming that the RPI is the right basis, and not everyone accepts that.
When the Government talk about flexibility in subsequent regulations, I do not believe that that is a good enough assurance for Parliament in passing primary legislation involving such fundamental changes in the law. I am sure that the Committee will agree that it is absolutely necessary to avoid sudden and significant changes in the rate burden on
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businesses, whether they be large or small, although it may be necessary to make the distinction between the two.
As the noble Lord, Lord Graham, indicated, I believe many of us have received an enormous volume of correspondence about this matter, all of it from people who are deeply concerned that the measure should be able to work.
For example, perhaps I have had a valuable and useful memorandum from 10 of Britain's largest retailers. Perhaps other noble Lords have had the same experience. The point they make is valid. They have suggested a maximum percentage increase in the rates bill of 10 per cent. plus inflation with a maximum of 15 per cent. I do not suggest that those are the right figures; but I believe that before the Bill leaves this Chamber, the Government should give some indication of the way in which they intend to approach problems which are of great concern to businesses throughout the country.
Baroness Stedman: I speak to my Amendments Nos. 106ZA and 106ZC, which narrows the field somewhat for me. We are still within the small business area but concerned with village shops and post offices. I raised this matter with the noble Earl at Second Reading. He assured me then (and I believe he hoped to allay my fears) that only the business part of those premises would be revalued. He implied that it might not make very much difference. I have been making some inquiries and I find that within my own village the community charge is likely to approximate the present rates and the shop keepers will still have the business rate to pay on that part of their property which is used as a shop.
Following that intervention, I was given the copy of a resolution from some 250 local councils that had been sent to the Secretary of State by the Cambridgeshire Association. They urged the Government to introduce measures to ease the situation for village shops and village shops and post offices. In small villages there is often only one shop and it often doubles as the post office. The incomes from both these operations usually produce enough to support the shop owner; but few of those shops support enough on their own to produce very large profits. Any substantial increases in their expenses could lead to the closure of the shop and possibly the consequent loss to the village of the village post office. That would be a real calamity in many of our villages where public transport is not easily available and not everyone has his own car to get into town. It would also create difficulty for the elderly and those in receipt of benefit which they now draw at village post offices. If the shop and post office had to close they would not be able to do that.
We have to remember that there is also a cloud hanging over many of those sub-post offices at present because of the pressure on their viability from the new community sub-post office policy, where a sub-office can be downgraded to become part-time with a reduction in salary if enough business is not transacted. That will tend to reduce the smaller post offices attached to the only shop and the shop itself may be closed. The post office would therefore go as well.

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The rating of village shops is being altered, like all other rating, as a result of this new legislation. There is to be a change in rateable values as a result of the revaluation and a change in rate poundage as a result of the fixing of the poundage at the same figure throughout the country. That is instead of it being locally fixed, relating to the requirements of the district council rates situation in the area where the shop or post office is.
I suspect that revaluations are likely to produce higher than average increases in values in rural areas because of the increased popularity of property within our villages since the last revaluation in 1973. That would not have happened too much in the past because generally the increased rateable values were compensated by a reduction in the local rate poundage. In 1990 the change in the values will put pressures on the village shops because of the proportionately higher increases than the towns alone may have absorbed. In villages price increases may occur as a result of the increased valuation and that could mean that shops are no longer competitive with their counterparts in the urban districts.
The effect of the standard rate poundage over the whole country will be to increase the poundage in the rural areas disproportionately. At present the urban poundages are higher and it is the Government's intention in 1990 to fix a national poundage which will raise the same total nationally from businesses as at present, and leave a business paying the same sum in rates wherever it is.
The combination as seen by the National Association of Local Councils and those connected with it is one of disproportionately higher values and disproportionately higher poundage leading to substantial actual increases in rate payments for village shops even though the businesses in total will pay the same.
At this stage the two amendments are only probing in order to provide the Minister with an opportunity to comment on our suggestions. However, they attempt to give similar relief to village shops as may be given to charities. The total payable could be reduced by a percentage whereas the reduction is already prescribed in respect of charities. We suggest that such relief would apply only to the retail goods businesses which are carried on at only one set of premises. The whole case is that it is the risk in which a particular shop in a village finds itself which must be met. The factors which could be taken into account in calculating relief are turnover, expenses and proximity of other premises, and anything else which the Secretary of State wishes to consider. Shops which can no longer trade at a profit, but which are the only shops available, need to be protected to the extent which our amendments would provide.
It would be only such a percentage as emerged from calculations carried out as prescribed by ministerial regulations. Therefore the percentage would differ from shop to shop according to the circumstances. The use of Z in the formula we have suggested in Clause 39(6)(a) enables that flexibility because Z is worked out through the regulations already provided for in Clause 40(8).
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I hope that the Minister will give the Committee his views on the matter. At the moment they are only probing amendments but I believe that this section of our small businesses needs to have special consideration.
5.45 p.m.
Lord Jenkin of Roding: I should like to make one or two brief points. I listened to the noble Lord, Lord Graham of Edmonton, with growing surprise. In his argument, which concentrated upon the effect of the national non-domestic rate coupled with revaluation on the businesses which wil find themselves paying more, he did not appear to recognise at all that those which will face the largest increases over the years (there are to be transitional provisions to which I shall refer in a moment) are those which, by definition, have benefited the most from the absence of revaluation since 1973.
Massive changes have taken place, particularly in many retail areas. But what has happened since 1973? One listens to surveyors and valuers seeking to establish an appropriate 1973 rateable value on the assumption that the large shopping areas which were not then in existence are not in existence now and cannot be taken into account in fixing the value of a small shop or whatever. One then realises how far into the relams of fantasy the rating system has gone because of the failure of governments to revalue.
I remind the Committee of a point that I made at Second Reading. I believe that it is true to say that in its entire history in government the Labour Party has never had the courage to introduce a revaluation in England and Wales. Therefore, we shall not hear arguments from that party. Those who point to themselves as the biggest losers in the move to the national non-domestic rate from the current rateable values, are those who, by definition, have over many years enjoyed the privilege of paying a substantially lower rate than many of their competitors who have been in different circumstances.
My second point is that that does not meet the argument of the small businessman in particular who will find himself facing a substantial increase in his local taxation. However, that is essentially a transitional problem. I hope that the Committee will not be tempted to accept amendments which seek to build in some kind of permanent bias in favour of the small business or small shop. That would be to distort the pattern of competition and to raise all kinds of arguments about government interference in the retail trade of this country.
Of course there must be transitional provisons. It is right to mitigate the effect of change. I was greatly relieved when I read that in another place the Secretary of State, the right honourable Nicholas Ridley, had announced that in addition to the transitional provisions already provided for in the Bill—and we await the details for reasons which everyone at least on this side of the Committee will understand—there is to be a special transitional provision for small firms. I believe that that goes a long way towards meeting the anxieties that have been voiced on both sides of the Committee about this matter.

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I make my final point in enormous deference to my noble friend Lord Rippon. He suggested that possibly the maximum increase in the non-domestic rate might be lower than the retail prices index. I may have misunderstood but he suggested a figure as low as 2 per cent. or 3 per cent.—
Lord Rippon: It was the CBI.
Lord Jenkin of Roding: If that is a CBI figure it would totally undermine the whole construction of this reform. It would mean that one would be building into the community charge an increase charged on individuals, because that is the residual. The proportion of the local expenditure met by the distribution of the national non-domestic rate would reduce annually. The only consequence of that would be that the community charge would rise annually faster than the retail prices index. I believe that the retail price index is a very fair measure of the increased costs of local government. Some local government costs rise more than that and some less but it is not a bad target at which to aim.
The Government have indicated that they are prepared to have transitional provisions—perhaps even, generous transitional provisions—to ease the change during the few years after the introduction. However, I hope that they will not be tempted to try to build-in any particular bias in favour of this or that group because by then one will have up to date rateable values, revalued at regular intervals by whichever government may be in power.
There will be a national figure so that businesses will no longer be, as they have been in a good many areas, the milch cow of extravagant councils with no vote and very little say as to what should happen to them. That is the great prize for business and, subject to the transitional provisions, I believe that many in the business world recognise that this is a substantial advance.
Lord Ross of Newport: I hope that the noble Lord, Lord Jenkin, is here in two years' time if there are not adequate transitional arrangements for small businessmen, because I believe we shall be facing a situation here that faced us in 1974 at the time of the last revaluation which of course is the reason why the Mayhew Committee was set up. There were indignation meetings attended by many thousands in places like Manchester and elsewhere.
I go along with the noble Lord entirely when he asks for particularly favourable treatment towards the smaller businesses. I have some confidence that we may get rather more out of the Minister when he replies because in a letter to me recently, which no doubt went to other Members, he inferred that there would be provision for a lower ceiling for small firms although he says that while there is no evidence that small firms will face disproportionately large increases, the Government recognise that small firms are less capable than large ones of absorbing them. I hope to show that small firms are in danger of facing exceptional increases. A letter from the Minister's colleague in another place to the Retail Consortium also said that the Government would look closely at
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the question of a lower ceiling for small businesses on the grounds that they may find it more difficult to accommodate substantial increases quickly.
I think those have to be phased over a much longer period. I take heart that we are now going above the figures of five years but the 15 per cent., if that is what is suggested, is too high. I shall indicate why I think that. Of course, the idea of a rate the index of which is tied to a cost of living index is appealing but it is the base from which one starts that matters most. The Minister criticised the noble Baroness, Lady Seear, for her comment that when the rating revaluation takes place the rating power comes down. However, that is what will happen. At the moment the Government are saying that the average will be about 224p and most people are predicting—although I have not seen the Government's prediction—that when the new lists are published we shall have to look at something like 50p.
For the last 12 years I have been trying to sell to the citizens of Newport the products of Doulton, Wedgwood and a few others. I am just about to leave that because I am retiring. I have employed a manageress and I can promise this Committee that I have not taken a penny out of the till for myself. This is a business which has been run totally honestly and has increased its turnover from year to year from a base of about £12,000 to something like £35,000 per year. I wish to quote a few figures from that and to translate them into what I think will happen if we have a 50p rate. I want to show how it would affect me.
I want to make a point about water rates because we do not receive any relief on water rates and they are increasing fast. The Isle of Wight is one of those areas which was a test case for putting in meters. A small business on the south coast of the Isle of Wight reported to me this morning that its water rate bill last year was £120 and this year it is £264. That business is only open for a few days and weekends in the summer, and mostly closed throughout the winter except on Sundays because it is a restaurant business. Therefore, that shows what some of us may face when metering is adopted throughout the country. I do not say that it is not a fair way to pay for water but it will bring another increase.
I paid £592 for water and general rates in 1986; I paid £695 in 1987 and I was paying around £800 in the current year. My landlord charges me £2,600 for rent and I believe that that is virtually what the rateable value will be because that falls in line with the definition of rateable value. If the DV puts a valuation of £2,600 on me, 50 per cent. of that will be something like £1,300 plus water rates. That is a fairly substantial increase.
I have just sold the lease of my business to someone else coming in for £4,500 plus a substantial premium which is over £10,000. He will not sell ceramics to anybody. He will clear it out and sell clothes, but he is in a secondary trading position. I think the valuation officer—and I suppose I am a mug to put this on record but if someone else is going to have to pay the rates then it is not my responsibility any more—would be perfectly justified to say that the

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rent has suddenly leapt up in the last six to nine months and that he wants to base it on £4,500. That means a very large increase of more than 100 per cent.
For the last 12 months I have been concentrating on trying to sell commercial and industrial property. From my own knowledge of the business all over the South of England, West of England and the Midlands the property market has not just been in a huge "hype" in domestic properties but also in secondary shops, stalls, post offices and so on. People have been paying much larger sums. Quite frankly they have not asked about rates because they do not regard rates in our part of the country as being extremely high. They may ask about them in Cambridge with a 30 per cent. "hype" this time. They probably do so in Camden but they do not in most parts of the country. Extraordinary sums are being paid as "key money", just to get into secondary shops. There may be no hope of surviving for very long but perhaps it is done solely to get into the living accommodation that goes with those shops.
I say that because I believe, rightly or wrongly—and of course it is due to the fact that we did not have a revaluation—that people have done these things and I am quite convinced that when these new lists are published and the rating assessments come out people will face grave difficulties. That is why we tabled the amendments on behalf of the Small Business Association and that is why I am speaking to those amendments. I do not say they are the right answer, although the Minister has looked at figures about possible rateable value cut offs. Although he may criticise, we already do that with corporation tax and on rateable values with regard to housing legislation. Therefore, perhaps the figure of £30,000 is rather high.
In the past 12 months when the "multiples" have been coming into Newport on the Isle of Wight, the rental base for what we call Zone A which is a main trading area, has suddenly shot up from something like £25 per foot to £45 a foot. It is an enormous "hype". Whether or not we like it, to say that you are going to stand firm and not give too many concessions is really running in the face of what these people will be told by their bank managers and pressure will be put on them to pay off the mortgages, overdrafts and so on. Of course it will help them because houses have gone up very very substantially. One hardly sees anything priced under £200,000 in The Sunday Times these days and I wonder how my own children and the younger generation will ever be able to afford to buy a house. Others more fortunate are selling their homes and getting away from London and the crowds so as to be able to do their own thing. Who can blame them for doing that? However, if we are not careful and do not give real concessions then those people will certainly be at the doors of these two Houses of Parliament in 12 to 18 months' time and they will have every right to do that.
Baroness Carnegy of Lour: Is it not this side's turn?
6 p.m.
Lord Dean of Beswick: I wanted to follow the noble Lord, Lord Jenkin. I listened to the noble Lord, Lord
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Jenkin, who is a former Secretary of State—and I listened to him with care—but I was listening to him as a former leader in local government. The noble Lord, Lord Jenkin, gave the quite definite view that people in England and Wales had been protected over the years because there had been no revaluation of rateable values and that had there been such a revaluation, there would have been substantial increases in the rates that they would have had to pay.
I was on Manchester City Council at the time of the last rate revaluation in England and Wales. I believe that on a rough calculation rateable values were almost doubled by the Inland Revenue. It did not follow automatically in Manchester that the rate which people had to pay the next year doubled. What happened was that as the rateable values increased, the rate poundages plummeted so that it was still possible for someone to have a tremendous rate increase but it was based on prolific spending and not to do with rating revaluation. In Manchester, for example, if it was necessary to collect £100 million from the ratepayers, the poundage might be £1 in the pound to raise that amount—these are hypothetical figures, but I am seeking to make a case. If the rateable value doubled and you were budgeting for a nil increase, then the charge would be 50p in the pound, not £1 in the pound.
It is misleading for the noble Lord, Lord Jenkin, to say that re-rating in England and Wales would automatically mean substantial increases in what ratepayers pay to local authorities. That is a completely false premise unless a council overspends prolifically; but that would have nothing to do with revaluation because the council would have to charge a higher poundage had the revaluation not taken place. The record should be put right. I am saying this with my ex-local authority hat on, having had to operate the system. The former Secretary of State has never had to do that.
Lord Jenkin of Roding: I intervene just to say that I hold myself entirely responsible if the noble Lord has been so sadly misled on the point I was seeking to make. I was endeavouring to say that since 1973 there have been massive differential changes in land values, and that the people who will have the largest increases are those who would have had increases over those years but who have not had them and therefore have been paying rates on much lower levels. That is the point I seek to make. The noble Lord was right to say that if rateable values go up the poundage should come down. However, it is the differentials which have become so out of kilter, and that is where the losers come in.
Lord Dean of Beswick: If one considers this matter in areas, over 40 per cent. of the population are in the urban areas. In my opinion, they would not be affected as the noble Lord predicts. From the way in which he put his case the only conclusion that can be drawn is that revaluation would automatically explode rates upwards. That is nonsense; it would not.
Baroness Carnegy of Lour: Following that exchange, I should like briefly to refer to what happened in Scotland because it is important to understand that. In the region in which I was operating as a councillor, when we had revaluation the total rate base of the region stayed the same; that is, the total valuation of properties in the region stayed the same. However, for some of the commercial properties in the town where I live the rateable value increased enormously. In other places it dropped.
Over and above that, there was a rate increase that year of, I believe, 18 per cent. so that the distortion was brought about by the high increase in the rate as well as by a changing differential within the area. Therefore, some small shops in Forfar were having to pay four times as much in rates, while some small shops in Dundee, 15 miles away, were paying half as much in rates.
There had to be swift remedial action. The message is two-fold. First, the rate is not going to increase by 18 per cent. It will be predictable, and therefore will lessen the distortion. Secondly, the distortion will be greater in the rateable value because the time since the previous revaluation is much longer—ours was only seven years and it is now 15 years. There will be much greater distortion in the actual valuations.
That means that the people who are living in an area which has become much more attractive since the last valuation—I imagine that Bury St. Edmunds is probably one of them—can look forward, I am afraid, to greatly increased valuations. There is no question about that. If, in addition, they are paying less than the average rate for the country because they are in a low rated area, that will distort the position in the wrong way for those people. However, people at present in a high rated area, and also in an area which is becoming less attractive, will benefit enormously.
No government can calculate now what is going to happen. The Government will not be so surprised as they were for Scotland. I do not think they knew anything of what was to happen in Scotland until it happened. That was part of the problem that triggered the whole thing off. The Government cannot estimate, and nor can the shopkeepers, exactly what those figures will be because they do not know what the valuations will be. It is therefore absolutely essential that the transitional arrangements should include the flexibility to cater for what will happen; particularly in those places which will suffer most. However, there cannot be a blanket flexibility. My noble friend Lord Rippon, with all his experience, I am sure appreciates that if one keeps the whole thing down for everyone the people who benefit will simply benefit much more. That is not what is required. One must even out differentials.
The message for my noble friend on the Front Bench, therefore, from this extremely interesting and informative debate is that there must be flexibility to cope with such situations when the time comes.
Lord Taylor of Gryfe: I am glad that the Scottish experience is being aired in Committee. Listening to
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the debate in general, I have had the feeling that I have been round this course before. In fact, two years ago we had this argument when the Scottish Bill was dealt with. We have now had two years' experience in getting nearer its operation.
I am delighted that in this Bill there has been some recognition of anomalies and some promise of transitional arrangements and special considerations in relation to small businesses. The Minister will be aware, of course, that since the Scottish legislation passed through this Chamber and became law a general election has taken place. The Scottish people gave their judgment in relation to that legislation. The Government managed to win 10 seats out of 72 and moved into third place behind the Scottish Nationalists. That is some indication of the strength of feeling on this legislation.
That applied not simply to the domestic rating provisions but also to business rates. When the Bill was going through this Chamber I was asked by the National Federation of Self-Employed and Small Businesses, the Federation of Private Businesses and the Forum of Private Business to draw the attention of this place to the different structure of retail trading and the importance of rating in the total costing of small businesses. I can speak more freely since my good friend and colleague, my noble friend Lord Sainsbury, has left the Chamber. If one considers Sainsburys and the large public limited companies, about 1 per cent. of costs relates to rates. It is an insignificant amount. However, for small businesses the cost of rates could be 15 per cent. It is the third largest overhead after wages and rents. Therefore, it is significant that if there is a change in the basis, and if there is not to be more consideration for the small business community, the burden will be too great for many of them to carry.
For all the reasons expressed by the noble Baroness, Lady Stedman, about the village post offices and small stores, it would be wrong and socially undesirable to place burdens on small traders that would mean their elimination from the provision of a decent service in the smaller communities. I ask the Minister to look at that aspect because small businesses are not in a position to increase prices to recover costs in the way that some of the larger businesses can do with their greater volume of trade. Therefore, I make a special plea in that respect. My name is attached to Amendments Nos. 117C and 117E which deal specifically with that point.
In view of the concessions which are now being made in the Bill and which are very welcome, I shall welcome advice from the Minister as to how he will deal with these concessions in relation to Scotland, and whether transitional arrangements and other benefits are to be applied there. If not, then the glaring anomalies which exist between rating in Scotland and in England will be further exaggerated. I shall welcome the comments of the Minister on these points.
The Earl of Caithness: The noble Lord, Lord Graham of Edmonton, moved Amendment No. 105. Since then the noble Baroness, Lady Stedman, has spoken to her two amendments, Nos. 106ZA and 106ZC; the noble Lords, Lord Ross of Newport and

1537
Lord Taylor of Gryfe, have also spoken to Amendments Nos. 106ZB and 117D. I, too, shall speak to all those amendments and include in my remarks the Government's amendments, Nos. 117A, 117B, 117C, 117BA and 117E. The reason for doing that is that the amendments in this group are all concerned with cushioning the impact of revaluation and the introduction of the national non-domestic rate on small businesses. As such they cover ground that has already been thoroughly discussed in another place.
We are extremely grateful for the very constructive and helpful debate that we have had today. The Government amendments are concerned with transitional arrangements for all businesses, but include special provision for transitional arrangements for small businesses. The non-government amendments all seek to provide special treatment for small businesses. In all cases what is proposed would be a permanent benefit, though the large increases some small businesses will face in 1990 are strictly temporary problems.
Amendment No. 105 moved by the noble Lord, Lord Graham of Edmonton, is drafted in similar terms to that moved in another place. It would place a duty on the Secretary of State to reduce the non-domestic rate for small businesses permanently, by up to 100 per cent. on a basis to be defined in regulations. The definition of small business will also be in regulations, but will take account of a business's profits, assets, number of employees, and whether it was a plc. I doubt that the noble Lord is absolutely serious about giving my right honourable friend such a wide-ranging discretionary power, but his amendment has served a very useful purpose in allowing him to make the points on small businesses. This new-found concern from the Labour Party about the rates burden on small businesses is a little confusing in view of the record of many Labour authorities in increasing rates under the present system. The 60 per cent increases in Waltham Forest and Ealing last year or the 20 per cent. plus increases in Humberside this year, give perhaps a more practical demonstration of their true concern.
Amendments Nos. 106ZA and 106ZC moved by the noble Baroness, Lady Stedman, provide for a similar duty to set a lower rate that would apply only where the ratepayer was a retailer operating from a single property. In calculating the factor by which rates for a qualifying property shall be reduced, the Secretary of State would be required to take into account the turnover and gross operating expenses of the business or businesses operating from the property, and the proximity of similar businesses. Oddly, my right honourable friend would not be required to take into account profit or whether the rate bill in question had gone up or down.
I ask the Committee at this point to pause to consider the amount of work and extra costs that these two amendments would cause local authorities, who at present have access to none of the information about turnover or profit or the company status as proposed. They would have to collect that information or arrangements would have to be made to breach the strict rules of confidentiality of information of the revenue department, to pass over
1538
information which many companies would regard as commercially sensitive. I wonder how far small businesses would really welcome that information being in the hands of their local authority. The proposers of the amendment have not explained how their scheme would apply to businesses with more than one property, perhaps in more than one local authority. As all Members of the Committee appreciate, a business does not have to be a large one to be in that position.
Amendment No. 106ZB, in the name of the noble Lord, Lord Ross of Newport, is also similar to one considered in another place and would abate the first £1,000 of any rates due on a hereditament by 50 per cent. In other words, it would mean that everyone would pay £500 less, permanently, except, of course, that someone would have to pay more to make up for this. The amendment does not indicate whether this should be other businesses, the community charge payer, or the national taxpayer. Its effect would be to benefit very small businesses most, but if the cost was met by other businesses—some quite small businesses; namely, those with rate bills over £4,000—they would end up paying more to subsidise their competitors.
Amendment No. 117D moved by the noble Lord, Lord Ross of Newport, provides for the ceiling on year-on-year rates increases to continue indefinitely until the increase had been absorbed. It would also provide for non-plcs, occupying property with a 1990 rateable value of less than £30,000, to be subject to a 10 per cent. ceiling on annual rates increases and a special national non-domestic rate set at 70 per cent. of the standard NNDR.
These proposals would mean that the branches of quite large organisations would benefit from the concession. Building societies, Unwins Wines, K Shoe Shops, and many other non-chains owned by non-plc companies or friendly societies operating from a large number of small outlets would benefit at the expense of their competitors. 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 pay more to finance this concession. The National Federation of Self-Employed and Small Businesses and the Forum of Private Business claim that this would be a small addition. I say to the Committee that it would not. We have done our best to estimate the cost. However, because we expect 55 per cent. of all properties to have rateable values below £30,000, even allowing for a proportion to have plc status, that still leads us to the conclusion that we might have to increase the rate bills of other businesses by about 14 per cent. Like the noble Lord, Lord Taylor of Gryfe, I too am sorry that the noble Lord, Lord Sainsbury, is not in his place to hear that comment. I do not believe that he would be particularly pleased.
The theme that runs through all these amendments is the false idea that small businesses as a group will be badly hit by revaluation and the introduction of NNDR. This is a distorted view of what is likely to happen in 1990. I must therefore answer the arguments. The first point to make is that we believe that the great majority of small businesses will not in fact face the kind of large rates increases in 1990 that

1539
the small business organisations have been predicting because relatively few will. Away from retailing, large rates increases will be rare and small businesses in industry will generally stand to gain.
As I have said, the full details will not be available until the revaluation is complete. As soon as the sample survey is available the results will be made known and at that stage we shall know much more what is the position.
6.15 p.m.
Lord Ross of Newport: I am grateful to the noble Earl for giving way. Can the Minister give some authoritative indication of when that might be? One hears that there are problems within the revaluation office, such as a shortage of staff and the rest. Can the Minister give some idea when information will be available?
The Earl of Caithness: I hope it will be in the autumn. However, I cannot give the noble Lord a clear indication at the moment. Having been a surveyor and a small business man, I appreciate the need to get out the figures as soon as possible, because it is in the interregnum period, when we are not sure what the figures will be, that all the worries surface and the most extreme examples are naturally put forward.
The second and perhaps key point, is that even in retailing we expect very large rates increases to be confined mostly to those who have been most successful since the last revaluation 15 years' ago. That relates to retailers in prime high street sites, mainly in the South of England. The Committee will appreciate that these are the areas where larger retailers predominate. Secondary shopping centres and neighbourhood shops—the location of the vast majority of small retailers—are much less likely to face large increases. Some, particularly in the North, will even gain. Many will see a relative fall in their rates when compared with their large high street or out-of-town competitors.
So let us be clear: neither small businesses as a whole nor small retailers as a group are more likely to face high rates increases than their larger competitors. This is not to deny that there will be some businesses in particular locations that will face large increases. But we must keep the problem in perspective.
My noble friend Lord Rippon of Hexham said that Amendment No. 105 failed to discriminate between businesses. The amendments do not seek to discriminate between those small businesses that will face large increases, those that will not and indeed those that will gain or even gain substantially. All are to enjoy a subsidy from their competitors.
Who is to pay for this permanent blanket subsidy? Well, it can only be either other businesses or the national or local taxpayer. The amendment of the noble Lord, Lord Ross of Newport, Amendment No. 117D, makes it clear that this unjustifiable permanent subsidy—a subsidy of 30 per cent. seems to be the preferred figure—is to be paid for by what he described as a small addition to the NNDR for
1540
medium and large businesses, some of which will of course themselves already be facing large rates increases as a result of the revaluation and the introduction of NNDR. Such a subsidy would, as I have already said, put up their rates by around 14 per cent. I question whether this is either small or fair.
I am aware that rates form a higher proportion of costs for small businesses. But rates are a tax on property values. Why should small businesses pay less in proportion to the value of their property than their larger competitors? If small units command higher rents in the market than large, that must reflect a greater demand for small units.
Perhaps the greatest weakness of the case for a permanent subsidy, and of the amendments before us today, is that such a subsidy would be largely self-defeating in the long run. We cannot escape the fact that rates per square foot are higher for small businesses because they reflect a greater demand. A relative reduction in rates for small business premises would serve only to increase that demand. It would not take the large chains long to work out the advantages of operating via wholly-owned private subsidiary companies in smaller units. Rents would then rise further which in turn would, in due course, push up rateable values and hence rates. The proposals would in the long run tend to benefit no one but the landlords of small business premises. That seeks to reinforce the argument made by my noble friend Lord Jenkin of Roding in regard to the comments and worries of my noble friend Lord Rippon of Hexham.
Another major point that these amendments fail to grasp is the fact that, with the rise in the NNDR limited to the rise in the RPI, business rates will in future rise by much less than they have in recent years, or indeed would have if the present system had continued. If the NNDR had been in place now, this year's business rate rise everywhere could have been no more than 4 per cent compared with actual rises averaging 7 per cent., but were far higher in many parts of the country, as I have already pointed out. I ask the Committee to accept therefore that these amendments, however well intentioned, are misguided, unjustifiable, largely impractical, and would give rise to great unfairness. They are also unnecessary.
They are unnecessary because, as my noble friend Lord Jenkin of Roding said, the Government are already completely committed to ensuring that those relatively few businesses which will face large rates increases in 1990 should be cushioned against their effects. We fully accept that businesses in that position—large or small—must be given time to adjust. We are therefore committed to generous transitional arrangements which will take the form of a ceiling on year-on-year rates increases as I have said earlier—for so long as is necessary. The amendments are unnecessary because, in addition, we accept that those relatively few small businesses that face large rates increases will find it more difficult than large ones to absorb the increases quickly. That is why we are committed to taking power to set a special lower ceiling for small businesses while we are against a permanent subsidy. We have also made it clear that

1541
we will take power to have continuing transitional arrangements in the period after the 1995 revaluation if that is still necessary.
The whole Committee was grateful for the contributions of the noble Lord, Lord Taylor of Gryfe, and my noble friend Lady Carnegy of Lour. Both said that the experience of Scotland showed the need for flexibility. The Government amendments, Amendments Nos. 117A, 117B, 117C, 117BA and 117E, deliver what we have promised. They will give the Secretary of State power to provide through regulations for the transitional arrangements to take the form of a ceiling on year-on-year rates increases, to be paid for by a limitation on year-on-year rates reductions; and a special lower ceiling for small business premises, to operate for properties with a rateable value below a threshold to be defined by regulation. We shall consult widely on the level at which this small businesses threshold should be set. They will provide for fresh transitional arrangements to accompany the 1995 and subsequent evaluations. This will enable us to set the ceilings on rate increases at a level lower than would otherwise have been possible.
One of my final comments covers the point raised by the noble Lord, Lord Graham of Edmonton, about how a small business is to be defined. It is to be on rateable value, and it is on that that we wish to consult. I do not exaggerate when I say that this Government are more actively and favourably disposed to small businesses than any in living memory. I do not resist the amendments of the Opposition because of a hostility to small businesses but because we believe the amendments are not justified. They are unnecessary and ultimately self-defeating. The Government are very aware of the concerns and worries of business, and so we have brought in for the very first time substantial transitional provisions not only to cover this valuation but the next one and to take special care of small businesses.
Lord Rippon of Hexham: My noble friend referred to me. Perhaps I may say that I do not wholly recognise his comment on my observations. I do not in any way doubt the good intentions of the Government or the general merit of what he said. However, I should like some assurance, for which I ask definitely, that the CBI, the local authority associations, and others, will continue to be consulted about what will go into the regulations.
The Earl of Caithness: Yes, I give that firm assurance to my noble friend.
Lord Taylor of Gryfe: What will be the impact on Scotland if we pass the arrangements contained in the subsequent amendments in the Minister's name which give effect to the transitional arrangements? What will this do to the existing Scottish legislation?
The Earl of Caithness: It is good news for Scotland which I am sure the noble Lord will welcome. I can assure him that there will be powers for transitional arrangements in Scotland. Perhaps I may refer him to Clause 127.
Lord Graham of Edmonton: We have had a useful and constructive debate. I would not want to detract from anything the Minister said about what the Government have done for small businesses. They have created more small businesses than many other governments. The simple fact is that when the Government came to power those small businesses were large businesses.
The Government ask those outside the Chamber to believe that relatively few small businesses will feel themselves badly affected and unjustly dealt with by the Bill. They will listen carefully to what the Minister has said. Of course we on this side of the Committee have our political imperatives; but all that I have said and all that others have said has been put to us by representatives of the business community. Of course, they may have got it wrong; of course they have a vested interest, and of course they will see things on the black side. However, when the day dawns and they are in business with the changed circumstances—the Minister says that relatively few small businesses will find that the impact is unduly large or unfair—they will have to open their shops and try to trade and then succeed in business.
Increases will be rare, said the Minister, in respect of small businesses. We are puzzled that the Minister is not prepared to accept the burden and the pain of the change. The Minister is putting forward a revolution. He is entitled to take credit for courage and enterprise in the change. However, it is nonsense to say that it will be painless or relatively painless to the business community. They see it in a different way.
The Minister makes some play about the terms of our amendment. He was careful to say to the Committee that it is similar to an amendment moved in another place. His briefing note did not include the fact that it was moved by Sir Hugh Rossi, who spoke from his experience as a Minister in local government in a previous Administration. Sir Hugh Rossi is the Conservative Member for Hornsey and Wood Green and served as a Minister in the department. He may have got it wrong. Before he came to the House Sir Hugh Rossi was a long-serving and successful member of a local authority. Therefore he spoke with the advantage of two relevant experiences. In my view, the Minister has failed to answer the charge. Our argument is that it is unfair that in order for one element of the business community to gain an advantage, another element must bear the cost and thereby be disadvantaged.
The Government are telling the country that the economy is booming and indeed the Chancellor was able to distribute billions of pounds to certain sectors of the community in the last Budget. However, we are arguing the issue in order to get the matter as smooth as possible. I can tell the Minister that I accept the Government have moved a long way in the transitional arrangements and have generously conceded many points. However, he has certainly failed to satisfy me, and I intend to press the amendment to a Division.
6.31 p.m.
On Question, Whether the said amendment (No. 105) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 120.

DIVISION NO. 1

CONTENTS

Addington, L.

Listowel, E.

Airedale, L.

Lloyd of Hampstead, L.

Attlee, E.

Longford, E.

Aylestone, L.

Lovell-Davis, L.

Basnett, L.

McIntosh of Haringey, L.

Blackstone, B.

Mackie of Benshie, L.

Broadbridge, L.

McNair, L.

Bruce of Donington, L.

Mason of Barnsley, L.

Carmichael of Kelvingrove, L.

Meston, L.

Carter, L.

Monson, L.

Cledwyn of Penrhos, L.

Nicol, B.

Cocks of Hartcliffe, L.

Northfield, L.

David, B.

Oram, L.

Dean of Beswick, L.

Peston, L.

Diamond, L.

Pitt of Hampstead, L.

Donaldson of Kingsbridge, L.

Ponsonby of Shulbrede, L. [Teller.]

Dormand of Easington, L.

Elwyn-Jones, L.

Prys-Davies, L.

Ewart-Biggs, B.

Rea, L.

Falkender, B.

Rochester, L.

Fitt, L.

Ross of Newport, L.

Gallacher, L.

Russell, E.

Galpern, L.

Seear, B.

Graham of Edmonton, L.

Serota, B.

Grey, E.

Somers, L.

Hampton, L.

Stallard, L.

Harris of Greenwich, L.

Stedman, B.

Hart of South Lanark, B.

Stewart of Fulham, L.

Hatch of Lusby, L.

Stoddart of Swindon, L.

Hooson, L.

Taylor of Blackburn, L.

Houghton of Sowerby, L.

Taylor of Gryfe, L.

Hughes, L.

Tordoff, L. [Teller.]

Hunt, L.

Underhill, L.

Irvine of Lairg, L.

Wallace of Coslany, L.

Irving of Dartford, L.

Wells-Pestell, L.

Jay, L.

White, B.

Jeger, B.

Willis, L.

Kilbracken, L.

Winchilsea and Nottingham, E.

Kilmarnock, L.

Lawrence, L.

NOT-CONTENTS

Abinger, L.

Cottesloe, L.

Ailesbury, M.

Craigmyle, L.

Alport, L.

Croft, L.

Arran, E.

Cullen of Ashbourne, L.

Ashbourne, L.

Dacre of Glanton, L.

Auckland, L.

Davidson, V. [Teller.]

Balfour, E.

Denham, L. [Teller.]

Belhaven and Stenton, L.

Dundee, E.

Beloff, L.

Eden of Winton, L.

Belstead, L.

Erroll, E.

Benson, L.

Fairhaven, L.

Bessborough, E.

Faithfull, B.

Blatch, B.

Ferrers, E.

Boyd-Carpenter, L.

Foley, L.

Brabazon of Tara, L.

Fortescue, E.

Brougham and Vaux, L.

Fraser of Kilmorack, L.

Bruce-Gardyne, L.

Gardner of Parkes, B.

Butterworth, L.

Gibson-Watt, L.

Caithness, E.

Gisborough, L.

Cameron of Lochbroom, L.

Glenarthur, L.

Campbell of Alloway, L.

Goold, L.

Campbell of Croy, L.

Hailsham of Saint Marylebone, L.

Carlisle of Bucklow, L.

Carnarvon, E.

Hanson, L.

Carnegy of Lour, B.

Harmar-Nicholls, L.

Carnock, L.

Havers, L.

Carr of Hadley, L.

Hayter, L.

Cathcart, E.

Henley, L.

Chelmer, L.

Hesketh, L.

Clitheroe, L.

Hives, L.

Coleraine, L.

Hood, V.

Constantine of Stanmore, L.

Hooper, B.

1544

Hylton-Foster, B.

Prior, L.

Ingrow, L.

Radnor, E.

Jenkin of Roding, L.

Rankeillour, L.

Johnston of Rockport, L.

Reay, L.

Kimball, L.

Renton, L.

Kinnoull, E.

Rippon of Hexham, L.

Lauderdale, E.

Saltoun of Abernethy, Ly.

Layton, L.

Sanderson of Bowden, L.

Long, V.

Sandford, L.

McAlpine of West Green, L.

Seebohm, L.

Mackay of Clashfern, L.

Skelmersdale, L.

Macleod of Borve, B.

Stanley of Alderley, L.

Manton, L.

Stodart of Leaston, L.

Marley, L.

Strathcona and Mount Royal, L.

Merrivale, L.

Middleton, L.

Swinfen, L.

Mottistone, L.

Teviot, L.

Munster, E.

Thomas of Gwydir, L.

Murton of Lindisfarne, L.

Trafford, L.

Napier and Ettrick, L.

Trumpington, B.

Nelson, E.

Ullswater, V.

Nelson of Stafford, L.

Vaux of Harrowden, L.

Newall, L.

Ward of Witley, V.

Norrie, L.

Weinstock, L.

Nugent of Guildford, L.

Windlesham, L.

Onslow, E.

Wise, L.

Orkney, E.

Wyatt of Weeford, L.

Orr-Ewing, L.

Wynford, L.

Oxfuird, V.

Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.38 p.m.
[Amendment No. 106 not moved.]
[Amendments Nos. 106ZA and 106ZB not moved.]
Clause 39, as amended, agreed to.
Clause 40 [Occupied hereditaments: supplementary]:
[Amendment No. 106ZC not moved.]
Clause 40 agreed to.
Lord Stanley of Alderley Lord Stanley of Alderley moved Amendment No. 106A:
After Clause 40, insert the following new clause:
("Protection for rural services.
Where a charging authority considers it desirable in the interests of maintaining or encouraging the provision of services to residents in rural areas, it may specify such hereditaments or classes of hereditaments as it considers appropriate where the non-domestic rate chargeable shall be reduced by an amount equivalent to the personal community charge of that authority in that chargeable financial year.").
The noble Lord said: The noble Baroness, Lady Stedman on a previous amendment, posed our concern over the need to protect the village shop. In supporting her by moving this amendment, I make two points. First, I hope that my noble friend will make an uncompromising and categorical statement that the Government appreciate the importance of the village shop in the rural scene. Now that the Church has, much to my regret, temporarily declined in influence, the village shop is the village's social centre and, as such, plays a more important role than dishing out icecreams and lollies to the children and pensions and social security payments to many of us.
I therefore disagree with some of the remarks made by my noble friend Lord Jenkin on the previous amendment. The high street shop does not provide that social service. I hope that my noble friend the

1545
Minister will see the need to bend over backwards financially to prevent further closures of such shops. Provided that my noble friend agrees with that first point, it is merely a question of how we achieve what I call the especially favoured rating of the village shop. My noble friend was kind enough to write to me saying that there is no question of village shops paying twice on the non-domestic part of the house. I am concerned that when the rating officer does his valuation of the shop part of the house he should use a criterion that deals much more leniently than in the case of a high street shop. Will my noble friend give me some idea of what guidelines will be used when the shop part of the house is revalued?
I was not, I am sorry to say, reassured by my noble friend's remarks on this matter when he referred to it on the previous amendment. In particular, what evidence can he give me to support the words of his helpful letter, in which he wrote:
"We would expect to see a relative decrease in the rateable values of many village shops"?
I suspect that that phrase sounds a bit "Yes, Ministerish" and that the words upon which he will rely are "rateable value" rather than actual value.
Will my noble friend assure me that the village shop will be no worse off under the Bill than under existing conditions? Our amendment would ensure that by releasing the shop from one community charge. We leave the decision as to which shops are to receive that concession to the discretion of the local authority, so avoiding the long-term problems described by my noble friend on the previous amendment. I beg to move.
The Earl of Radnor: I put my name to the amendment, first, because it was a matter of rural business; and, secondly, because this is not so much a question of the intricacies of the Bill or past or future rating regimes, but more of the decline of important parts of country life.
I should cast my net a little wider than merely the village shop. The amendment in fact casts its net wider. I have in mind the small engineering works which serve the countryside so well, to which the farmer goes and upon which he relies because it may not always be practical to go to larger concerns in the nearest town.
It has already been said by the noble Baroness, Lady Stedman, that the shop is under tremendous pressure. It is. I think that commercial reasons—the supermarket and the hypermarket—and ease of transport into the local town make it difficult for shops to survive in relatively small villages; but they are still terribly important, because there are always people in every village who do not want or cannot go to the supermarket.
The village shop is vital because some villages are far away from towns. I feel that this form of subsidy—if I may so describe it—arrived at by taking off one personal community charge may be a good way to ensure that such businesses go on into the future and serve the people who live in the countryside, who will not be well served otherwise. I support the amendment.
6.45 p.m.
Lord Jay: In the case of the village shop, should we not also take into account the fact that in the common case of a village shop run by a husband and wife who live on the premises, when the Bill becomes law they will presumably by paying not merely the non-domestic rate but also the ordinary domestic rate—the poll tax, as it is commonly called—in each case? That will be an additional tax in their case. As a result of the Bill, they will have to pay both imposts. Surely, that is something that should be taken into account when we consider the case of the village shop.
The Earl of Caithness: As my noble friend Lord Stanley has made clear, the principal motive behind the amendment is the fear for rural services, especially village shops and post offices, many of which, as customer mobility increases, face increased competition from town supermarkets. The amendment gives me an opportunity to expand upon points that the noble Baroness, Lady Stedman, raised on the previous amendment.
Coupled with my noble friend's concern is fear about the effects of the introduction of NNDR and revaluation on the position of village shops and fear that where a trader lives on the premises, the combined burden of community charge and NN DR may be such that he can no longer compete with the urban supermarkets and may be forced out of business. I understand those concerns and having considered them I find that there are several points to make in response. The first is to correct a misapprehension which is commonly held, that where a trader lives on the premises he will pay both NNDR on the premises and a community charge. Let me make it clear that, while a community charge will be payable, rates will only be charged on that part of the premises used for business purposes, so any community charge should be compared with the rates previously charged on the domestic part of the property.
My noble friend Lord Stanley asked about the guidelines as to how shops will be valued. The guidelines will be as now. Shops will be valued on a rental basis which will be considered in relation to the square footage of the shop which is allocated for retail or commercial purposes.
Secondly, contrary to the impression given by some village small traders—some of the Committee may have received some of the more unrealistic forecasts given by them—I doubt whether village shops, as a group, will have a great deal to fear from the effects of the introduction of NNDR and revaluation. We are all well aware of the problems that village shops face as a result of competition from supermarkets and new urban shopping centres. That is where the revaluation will in all probability help, because the revaluation will follow the market. If the trading position of village shops has been undermined by supermarkets, one would expect that to be reflected in the rents that they are paying.
There is therefore no reason for us to expect the rates for village shops to increase substantially in real terms. It is too early to make detailed forecasts, but

1547
we would expect to see a relative decline in the rateable values of village shops, at least when compared with those of high street shops in the main shopping centres and out-of-town superstores, which are likely to increase substantially. That will go some way to redress the competitive balance to the small rural shops' benefit.
My noble friend Lord Stanley of Alderley asked me whether village shops would be any worse off than they are at present. I cannot say categorically as regards each rate for each village shop because I do not know the particular circumstances. But I can say to the noble Lord generally that of course they will be much better off. Not only will they have transitional provisions following the revaluation of which they never had the benefit before, but there will be special transitional provisions for small businesses. In addition to that, their rates can only be increased in future by the retail prices index and will no longer be subject to the whims of the local authority giving them substantial rate rises, totally unrelated to the retail prices index. So I hope that my noble friend will be comforted by that.
Let us nevertheless take the hypothetical situation where costs increase. Is it right that rate relief should be used to help these properties? Rates are a tax, the proceeds of which are a major element in the financing of local government. Granting relief from rates to one sector of business would create a shortfall in the yield which could only be made good by increasing the rates of other ratepayers or by increasing the burden on the national taxpayer. It would be difficult to explain to the many other small shopkeepers, many of whom might be facing significant increases, that they should face a further burden to assist shopkeepers in other areas, regardless of whether their rates were higher or lower or had gone up less than their own.
However, we have considered how help can best be given. I should also remind the Committee that should any particular rural business face a large increase in its rates bill, not only could it benefit from both the transitional arrangements that I have just mentioned, but it could also benefit from any special scheme for a longer transitional period for small businesses on which I look for support from my noble friend in due course. The rural businesses about which my noble friend is concerned are most likely to be beneficiaries of such a scheme, should they be in need of it.
As I have said, we understand the concerns of the small rural businesses. That is precisely why we have allowed for the transitional provisions which do not apply under the present rating system.
Lord Mackie of Benshie: I should like to ask the Minister this question. As the Minister knows, we have had the experience of revaluation in Scotland. It was a fact that the valuers did not take into account the situation in every case. In other words, it was rather uneven; there were cases of small rural businesses which suffered enormous increases in valuation, as the Conservative Party found out at their conference in Perth. Those increases came as the result of odd things like a whole lot of building
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societies coming into a small town, thereby upping the value. In many cases the assessors certainly did not take enough account of the difference between the town and the small country businesses.
I cannot really see the Minister's objection to putting in some guideline to the assessors which would say precisely what this amendment says. The Government have stated often enough that they have a rural policy to maintain the rural population.
Baroness Stedman: The point which the noble Lord, Lord Mackie of Benshie, has raised is worrying the rural village shopkeepers. What the Government do not seem to have grasped at the moment is that the rural rate poundage on the whole has been lower than that in the urban area. Therefore it will be a burden on those who have village shops, particularly those in the more remote rural areas. They will now be faced with paying their community charge on the domestic part of their property; having their shop valued and paying the national business rate at the same level of rateable poundage as those people in the city. We want some concession or some guidelines so that the valuers are able to take account of the fact that in our remote rural areas there are not the same services nor the same facilities provided for the ordinary residents and particularly for the village shopkeepers as there are in our conurbations and bigger areas.
Lord McIntosh of Haringey: As I was in considerable sympathy with the amendment, although I did not feel that I had anything very much to add at the beginning, I listened very carefully to what the Minister said in reply. It was when he used the phrase:
"I doubt whether village shops, as a group, will have a great deal to fear",
that I realised that there was a great deal to fear. When Ministers have a brief which puts their views in those words, then we know that there is something quite badly wrong.
The fact of the matter is that we are not just considering the case of the non-domestic rate. Village shops tend to be run by a husband and wife; it is very difficult for one person alone to do it. The husband and wife running a village shop will pay two personal community charges and the business rate set at the national level. I think that is the thrust of the argument and that is why, even if this amendment is not right, the Government must find some way of protecting village shops.
The Earl of Caithness: The reason why I said the words which the noble Lord, Lord McIntosh of Haringey, repeated, about village shops as a group, was as a result of my knowledge of rural village shops and of rating and valuation. I do not think that as a group those shopkeepers have the concerns that are being expressed. Undoubtedly there will be some who, because of the changes in circumstances, will face rate increases. That has not been denied.
However, that is precisely why we have already built in the transitional provisions together with the extension that I propose to move later on this evening for a further transitional provision for as long as necessary, to make sure that the small businesses and

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indeed large businesses adapt to the new system that we propose of regular five-yearly revaluations. I suggest to the Committee that, combined with the linking of rates to the retail prices index in the future, is a considerable benefit to the small business.
Lord McIntosh of Haringey: That does not even attempt to answer the point I made; namely, that it is a combination of the burden of two personal community charges with the business rate on the shop which will be the difficulty.
Lord Stanley of Alderley: I should like to thank noble Lords for the contributions which they have made, and particularly the noble Lord, Lord McIntosh. Village shops have much to fear. I shall keep my powder dry now because I have some fairly nasty figures which will come up at the next stage but I do not think my noble friend understands the vital social role which these shops play in the village. That must be brought clearly home to the Government who time and time again say that they are worried about this. Meanwhile I shall reserve my position to come back at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 41 [Unoccupied hereditaments: liability]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 106B:
Page 24, line 20, leave out from beginning to end of line 26 and insert ("the following conditions are fulfilled in respect of any day in the year—

(a) on the day none of the hereditament is occupied,

(b) on the day the ratepayer is the owner of the whole of the hereditament,

(c) the hereditament is shown for the day in a local non-domestic rating list in force for the year, and

(d) on the day the hereditament falls within a description prescribed by the Secretary of State by regulations.").

The noble Earl said: I beg to move Amendment No. 106B and at the same time to speak to Amendment No. 107ZB. These two government amendments replace the present yearly liability to rating with a daily liability. The reason for this is simple. In the view of parliamentary counsel, while the present yearly liability works well at the moment, without the body of precedent and usage that attaches to the present system there could be scope for the misinterpretation of the method of calculation where a ratepayer had occupied a property for that part of a year. The change is therefore necessary in the interests of greater precision. I commend these amendments to the Committee. I beg to move.
The Deputy Chairman of Committees (Lord Alport): I have to advise Members of the Committee that if this amendment is agreed to, I shall not be able to call Amendment No. 106C or Amendment No. 107.
Lord McIntosh of Haringey: I think we shall have to do something about the grouping arrangements on this Bill. The noble Earl has moved two amendments which I am the first to agree are mainly drafting amendments. However, partly because of reasons of
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pre-emption to which the noble Lord, the Deputy Chairman of Committees, has referred and partly because the grouping covers it as well, I wish to speak now, and I think it is proper that I should speak now to Amendment No. 107 which is by no means a drafting amendment.
The Earl of Caithness: I quite agree with the noble Lord, Lord McIntosh, that it is right for him to speak to Amendment No. 107 and to some other amendments grouped with it. The reason I did not speak to them before is that the noble Lord has not spoken to them and I thought it would be discourteous.
Lord McIntosh of Haringey: I am grateful to the noble Earl. Amendment No. 107 which will fall if Amendment No. 106B were agreed to, is on a very major matter. We are discussing the whole issue of the rating of empty properties. As proposed by the Government, decisions about the rating of empty properties will be taken by the Secretary of State in the form of regulations. I put it to the Committee that rating of empty properties has historically been a very sensitive issue in local government. It has been one on which there have been disagreements between different residents in particular areas, and strong differences of view between one local authority and another.
This is a matter where really the local knowledge of local authorities—the circumstances under which they find themselves, the extent to which there are empty properties being kept empty deliberately in hope of a capital or rental gain, and the extent to which empty properties are empty for no discreditable reason—enables them to consider the situation very much better than the Secretary of State. I am not making a party point here. This has been a matter of great concern to Westminster City Council which wanted to take action on empty properties in its area, in my view rightly.
There are many things which the Secretary of State has to provide for by regulation—although nothing like as many as there are in this Bill. But this is a very clear example of something which should be dealt with by the local authority with full knowledge of local circumstances and in accordance with the wishes of the electorate. I hope very much that before the noble Earl moves Amendment No. 106B, which would pre-empt my amendment, he will indicate sufficient sympathy with this amendment to enable me to bear its loss under pre-emption without saying, as I would otherwise have to do, that this must be dealt with at a later stage of the Bill.
7 p.m.
Lord Rippon of Hexham: I hope that the Minister will give consideration to this question of the rating of empty properties, either now or at some subsequent stage. As the noble Lord, Lord McIntosh, said, there is a history of discussion about the rating of empty properties. I hope that it will never happen to my noble friend the Minister that he will follow what increasingly has become a practice, namely, that of former Ministers getting up subsequently and declaring, "I am afraid I got it all wrong."

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In this instance I can say mea culpa, because I recall how I was caught by an undertaking of a predecessor that the Government would rate empty property if the developer of Centre Point did not either let it or sell it. The poor man could do neither, but such was the pressure of public opinion at a time when property values were rising and he was thought to be gaining an unearned increment, that we rated empty property.
I am not sure that that is always the right thing to do, especially in regard to new development. A developer may start off in a boom period, but after a year or two he may find himself in the middle of a slump. Therefore he is unable to let his property. I think that at least some provision should be made whereby a ratepayer could demonstrate that he has made his best endeavours to let or sell the property concerned. Otherwise it might result in an unfair penalty being superimposed on a developer who is already incurring a financial loss. There should be some discretion built into this.
My own view is that it is right that the local authority, which after all can assess the problem, given that there is a suitable right of appeal for the ratepayer to show that he has used his best endeavours to let or to sell the property, should be given this discretion. I hope that the Government will be willing to give consideration to this matter. It may be that if empty rate provision is to continue, it should not apply to newly constructed property, or at least not for a period of time. That indeed is already the case in the City of London which acts under local powers. In Tower Hamlets, where a great deal of redevelopment is going on, in practice what is now happening is that an extended period is given when no rates are payable. I hope that, as regards some of the points that the noble Lord, Lord McIntosh, has made, the Government will be sympathetic in looking at this matter, either now or in the future.
Lord McIntosh of Haringey: I am grateful for the support of the noble Lord in general terms. I was amused to find Harry Hyams described as a poor man.
Lord Weinstock: The Members of the Committee have been mostly concerned in what they have been saying with office property and residential property in urban areas. I hope that they will remember that there are industrial sites where there are many factories and where sometimes it becomes necessary to close a part of a site—a factory. If there were no discretion to allow a rebate of rates for that part of the site, perhaps a firm would decide to move away entirely. That would not necessarily be desirable. The local authority would be the best judge of such a situation.
Lord Ross of Newport: The noble Lords, Lord Rippon of Hexham and Lord Weinstock, have spoken to Amendments Nos. 107 and 107ZA. The latter appears under my name. I am very glad to have the support of the noble Lords. I think they are right, and I totally support the words of the noble Lord who has just sat down. In the past ten years or so the rating of empty properties has led to necessary
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demolition or taking the roofs off industrial premises, particularly in the West Midlands. It is perfectly true too, although it is hard to imagine now, that in 1975 to 1976 occupiers of shop properties could not sell them. They found that they literally could not sell them, but they were paying substantial rates on empty properties.
On the other hand, I have tried to show in the amendment which I gather I cannot move, that there is a middle passage, and that perhaps after six months a local authority would be entitled to levy a rate or could levy a rate where it was shown that the owner was not using his best endeavours to let or sell that hereditament.
I wish the Government would go further. If we are to have regulations, I wish to put to the Government the question of land or property which is totally without a roof over it, and therefore incapable of occupation. I think that those types of properties sometimes should be rated. I should like to move on to that matter later.
It seems to me that we are falling between two stools. On the one hand, if we are not careful, we shall rate people who should not be rated and who are genuinely trying to sell. On the other hand, there are people who are sitting on land and who have been sitting on land for many years which should be developed and which is zoned for development. Such land is causing a blight in many parts of our towns, but we do nothing to those people at all. I wish we could get this right.
Lord Monson: I wish to support the words of the noble Lord, Lord Ross of Newport. The Government are proposing to give relief from the community charge where domestic properties are vacant for three months. Logically speaking therefore they should apply the same formula to industrial and similar properties.
The Earl of Caithness: The effect of Amendments Nos. 106C and 107ZA would be to exclude from rating, by primary legislation, all non-domestic property unoccupied for less than six months. The effect of Amendent No. 107 of the noble Lord, Lord McIntosh, is slightly different and would be to restore local authority discretion over the categories of property to be subject to unoccupied property rating, and over the level of that rating.
In dealing with these amendments it might be helpful if I deal with the background to the rating of unoccupied property and our policy. Under the present system rates are not payable on empty non-domestic property for up to three months. After that, local authorities may decide to rate such property, up to a maximum of 50 per cent. of full rates—and with the exception of empty factories and warehouses which are excluded from rating altogether by order of the Secretary of State, and various other categories such as listed buildings which are excluded by main legislation.
Historically, the purpose of empty property rating has been partly to reflect the fact that empty properties do benefit from some local authority services—police, fire and so forth—and partly to encourage owners to bring empty property back into

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use. Authorities have had a discretion whether to levy empty rates to enable them to take account of local market conditions, which will affect the speed with which owners can reasonably be expected to let or sell their empty properties. However, when types of property have been in excess supply in many parts of the country, as with factories and warehouses, the Government have stepped in to exclude them from empty rating.
About half of the local authorities in England exercise their discretion to levy rates on unoccupied property. But these include almost all the London boroughs and the majority of metropolitan districts. The proportion of empty properties subject to rates at the moment is therefore substantially over half, and some £40 million of income is generated.
In considering the treatment of unoccupied non-domestic property under the new system, we face a choice between three options. We can continue with something like the present system under which authorities can exercise discretion within limits over whether to rate unoccupied domestic property; we can go for a standardised approach under which the Secretary of State has power to prescribe categories of empty property to be rated; or we can simply exempt unoccupied non-domestic property from rating altogether.
The option of continued local authority discretion which would be allowed by the amendment of the noble Lord, Lord McIntosh of Haringey, must be seen in the context of the national non-domestic rate pool. We have heeded the representations of the local authority associations which have made it clear to us that it would be unrealistic to expect authorities to exercise a discretion on the matter which offers few direct benefits to their areas if community charge payers are to be expected to make good lost revenue in whole or in part. On the other hand, if the costs were to be borne by the national pool it is clear that local authorities would have no incentive to exercise the discretion sensibly, particularly in view of the difficulties often associated with enforcing empty property rates. We feel that following that approach would, over time, lead to a situation where empty property rating would fade away altogether with a short-fall of some £40 million in the national non-domestic rate yield which could only be met by increasing the poundage on occupied non-domestic property or by placing the burden on the community charge payer or the national taxpayer.
In view of the benefits enjoyed by even empty business properties and the case for providing some clear incentives not to keep property empty unnecessarily, we believe that some empty property rate is appropriate. We accept the logic that under the national non-domestic pool arrangements the matter should fall to be determined by the Secretary of State in the regulations. Under Clause 41 it will fall to the Secretary of State to decide which categories of hereditament should be subject to the standard 50 per cent. empty property rate. The cost of that relief will then be borne by the national pool under separate regulations.
We believe that for England and Wales the Bill represents the best approach. In those areas where
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empty property rating is not practised presently it will lead to some new burdens. We hope to use the regulation-making powers so that the scope of empty property rating reflects general market conditions. So, for example, we would not at present wish to bring empty factory and warehouse premises within the scope of the provision. We shall also retain the present exclusions for listed buildings. It will be possible to make separate regulations for England and Wales to reflect differences in market conditions in the two countries.
We accept part of the argument which lies behind the amendments of the noble Lord, Lord Ross of Newport. We wish to allow a reasonable period during which property may remain unoccupied following a change of owner or tenant without becoming liable to rating. I cannot follow him in the period of exemption in whole or in part. I have listened to what has been said, and I can give an assurance that we shall consider and consult on the length of the period of grace before empty property rating is to apply. From my own experience as a surveyor I believe that the use of primary legislation to define and fix the exemption period would be inappropriate and unduly restrictive. That is what it has proved to be.
The regulations, however unpalatable they are to the noble Lord, Lord McIntosh, give the necessary flexibility. I am sure that the noble Lord, Lord Ross of Newport, will understand that. I therefore hope that Members of the Committee who have taken part in our useful discussions will read and consider what I have said when it is printed in the Official Report.
On Question, amendment agreed to.
[Amendments Nos. 106C, 107 and 107ZA not moved.]
The Earl of Caithness The Earl of Caithness moved amendment No. 107ZB:
Page 24, line 31, leave out ("on") and insert ("in respect of").
On Question, amendment agreed to.
Clause 41, as amended, agreed to.
Clause 42 agreed to.
Lord Hesketh: I suggest that this is a suitable hour to break for dinner and that we should resume the Committee stage of the Bill at 8.15. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Consumer Arbitration Agreements Bill
7.15 p.m.
Lord Lucas of Chilworth: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

Lord Chancellor's Salary Order 1988
Viscount Davidson Viscount Davidson rose to move, That the draft order laid before the House on 5th May be approved [25th Report from the Joint Committee].
The noble Viscount said: My Lords, the need for this order arises out of the link between the salaries of the Lord Chancellor and the Lord Chief Justice. The independent Top Salaries Review Body recommended in 1983 that the Lord Chancellor should be paid more than the Lord Chief Justice in recognition of his position as the head of the judiciary and of his wider responsibilities. The House accepted the principle of the TSRB recommendation and has successively re-affirmed this with the approval of the Lord Chancellor's Salary Orders for the years 1984 to 1987.
An annual Lord Chancellor's Salary Order is necessary because the Lord Chief Justice's salary is set annually following the recommendations of the Top Salaries Review Body. This year the TSRB recommended a salary of £85,250 for the Lord Chief Justice—a 5·3 per cent. increase. The Government accepted this figure but decided to stage all the TSRB recommended salaries so that a 4·0 per cent. increase was paid from 1st April with the balance from 1st October. For the Lord Chief Justice this meant a salary of £84,240 from 1st April to 30th September, and £85,250 from 1st October.
The Lord Chancellor has a salary lead of £2,000. The House accepted this figure in 1983, and it has remained at that level since. Its real value has eroded since it was first established, but this of itself is not a valid reason for changing it. The lead exists because the Lord Chancellor is head of the judiciary and this makes it right that an appropriate differential should exist between him and the Lord Chief Justice. A lead of £2,000 fulfills such a requirement.
The order establishes the Lord Chancellor's salary at £86,240 for the period between the date when it comes into force—it cannot be made retrospective—and 30th September. From 1st October it is established at £87,250.
These salary levels derive directly from the TSRB report and embody a principle established five years ago and accepted by the House on five previous occasions. I hope that once again it will commend itself to the House this year. I commend the order to the House.
Moved, That the draft order laid before the House on 5th May be approved [25th Report from the Joint Committee].—(Viscount Davidson.)
Lord Bruce of Donington: My Lords, the relationship between your Lordships' House and another place is obviously most harmonious, and happily so, since I observe that the order went through the other place "on the nod" on 26th May.
Under the provisions of the draft order, the noble and learned Lord the Lord Chancellor will receive a gross raise per annum on a full year of some £4,250. Your Lordships will perhaps note that owing to the provisions of the last Budget, and in terms of a net pay increase, which, after all, the noble and learned Lord will be sufficiently human to regard as his extra
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reward in the matter, he will receive in a full year some £13,000 a year more than he received in what may euphemistically be termed take-home pay during the preceding full year.
Perhaps it may be of interest for your Lordships to recall that in 1979 the Lord Chancellor—at that time the noble and learned Lord, Lord Elwyn-Jones—received some £20,000 a year gross. It is quite clear that matters have marched on considerably since that time. Whether that is due to the activities of the review body or to the rate of inflation is immaterial.
It is interesting to observe that the take-home pay of the Lord Chancellor in the next full year will be many times a multiple of the gross income received by some of the poorer sections of our community. That indicates that, in the march to a rather greater degree of fairness than exists at the present time, we still have a long way to go.
On the other hand, if one considers relativity it should perhaps be borne in mind that the new salary of the Lord Chancellor will be very much less than is at the moment fashionable among the leading captains of industry, who have been known to award themselves £1 million a year, or even more, as what are euphemistically called the nation's creators of wealth. We on this side of the House have not the slightest hesitation in saying that on a value for money basis—a term which I am sure is very close to the hearts of Her Majesty's Government—the noble and learned Lord the Lord Chancellor represents infinitely better value for money than some of those so-called captains of industry. For that reason we are very happy indeed to concur with the terms of the order.
The noble and learned Lord has always shown himself—as have his predecessors—most accessible to Members of your Lordships' House, and is always very co-operative in any inquiries that are made of him. He has a formidable task before him and he should be sustained in that task by remuneration of the kind proposed in the order.
There is a long way to go before all the subjects of Her Majesty are equal before the law. The recent review which is being considered by the noble and learned Lord marks some endeavour to ensure that the myth of all Her Majesty's subjects being equal before the law ultimately becomes a fact. That endeavour will need many labours by the noble and learned Lord in bringing to your Lordships' House those measures of which he is so conspicuously capable. Those measures are necessary in order to ensure that there is a greater measure of fairness and justice, not only in the administration of the law itself but also in its availability to those citizens who are unfortunately unable to amass the kind of resources that would enable them to combat cases brought by very large commercial enterprises or to bring cases against such enterprises, which are able to afford vast fees for legal advice and for the employment of counsel. We shall observe with interest and indeed give every possible encouragement to the noble and learned Lord in those endeavours, which we sincerely hope he will undertake.
We on this side of the House welcome the order laid before your Lordships. We welcome also its

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pensions implications, although we trust that, subject to the harsh arbitrament of political arithmetic, his retirement may be long deferred. We support the Motion.
Viscount Davidson: My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for his reception of the order. I was interested to hear his accountant's view of various matters. I am sure that my noble and learned friend will also be most grateful.
On Question, Motion agreed to.
The Earl of Arran: My Lords, I beg to move that the House do now adjourn during pleasure until 8.15 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.25 to 8.15 p.m.]

Local Government Finance Bill
House again in Committee.
The Earl of Caithness The Earl of Caithness moved Amendment No. 107ZC:
After Clause 42 insert the following new clause:
("Discretionary relief
.—(1) Where the first and second conditions mentioned in subsections (1) and (2) below are fulfilled for a day which is a chargeable day within the meaning of section 39 or 41 above (as the case may be)—

(a) the chargeable amount for the day shall be such as is determined by, or found in accordance with rules determined by, the charging authority concerned, and

(b) sections 39(4) to (6) and 40 or (as the case may be) sections 41(4) and 42 above shall not apply as regards the day.

(2) The first condition is that one or more of the following applies on the chargeable day—

(a) the ratepayer is a charity or trustees for a charity, and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities);

(b) the hereditament is not an excepted hereditament, and all or part of it is occupied for the purposes of one or more institutions or other organisations none of which is established or conducted for profit and each of whose main objects are charitable or are otherwise philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts;

(c) the hereditament is not an excepted hereditament, it is wholly or mainly used for puposes of recreation, and all or part of it is occupied for the purposes of a club, society or other organisation not established or conducted for profit.

(3) The second condition is that, during a period which consists of or includes the chargeable day, a decision of the charging authority concerned operates to the effect that this section applies as regards the hereditament concerned.
(4) A determination under subsection(1)(a) above—

(a) must be such that the chargeable amount for the day is less than the amount it would be apart from this section;

(b) may be such that the chargeable amount for the day is 0;

(c) may be varied by a further determination of the authority under subsection (1)(a) above.

(5) A decision under subsection (3) above may be revoked by a further decision of the authority.
(6) A decision under subsection (3) above is invalid as regards a day if made after the end of the financial year in which the day falls.
(7) The Secretary of State may make regulations containing provision—

(a) requiring notice to be given of any determination or decision;

(b) limiting the power to revoke a decision or vary a determination;

(c) as to other matters incidental to this section.

(8) A hereditament is an excepted hereditament if all or part of it is occupied (otherwise than as trustee) by a charging authority or a precepting authority falling within section 142(2)(a) to (f) or (h) to (k) below.").
On Question, amendment agreed to.
The Earl of Caithness The Earl of Caithness moved Amendment No. 107ZD:
After Clause 42, insert the following new clause:
("Discretionary relief: supplementary
.—(1) This section applies for the purposes of section (Discretionary relief) above.
(2) A hereditament not in use shall be treated as wholly or mainly used for charitable purposes if it appears that when next in use it will be wholly or mainly used for charitable purposes.
(3) A hereditament not in use shall be treated as wholly or mainly used for purposes of recreation if it appears that when next in use it will be wholly or mainly used for purposes of recreation.
(4) A hereditament which is wholly unoccupied shall be treated as an excepted hereditament if it appears that when any of it is next occupied the hereditament will be an excepted hereditament.
(5) If a hereditament is wholly unoccupied but it appears that it or any part of it when next occupied will be occupied for particular purposes, the hereditament or part concerned (as the case may be) shall be treated as occupied for those purposes.").
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendment No. 107ZE:
After Clause 42, insert the following new clause:
("Reduction or remission of liability.
.—(1) A charging authority may—

(a) reduce any amount a person is liable to pay to it under section 39 or 41 above, or

(b) remit payment of the whole of any amount a person would otherwise be liable to pay to it under section 39 or 41 above.

(2) But an authority may not act under this section unless it is satisfied that—

(a) the ratepayer would sustain hardship if the authority did not do so, and

(b) it is reasonable for the authority to do so, having regard to the interests of persons subject to its community charges.

(3) Where an authority acts under this section, section 39 or 41 above shall be construed accordingly as regards the case concerned.").
The noble Lord said: A charging authority is implicitly required by its general fiduciary duty to collect rates as diligently as may be and to refrain from enforcing debts only when to pursue a debtor further would not be cost effective. This new clause gives authorities a discretionary power to refrain from enforcing a debt for unpaid non-domestic rates where this would cause hardship to the ratepayer.
There are provisions in current rating legislation which allow an authority to remit rates on the grounds of poverty or hardship. But it was not thought that the provision was designed for use in the non-domestic sector. As a consequence the Government's "yellow paper" on Amendments to rating legislation in England and Wales proposed that the provision should not be retained. The responses from local authorities, professional and business organisations all argued strongly that there were circumstances where the reduction or remission of

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rates can make the difference between survival or bankruptcy of a business.
The Government accepted the force of these arguments and gave an assurance in another place that an amendment to the Bill would be tabled. The new clause provides authorities with the power to reduce or remit the payment of rates, but only where the authority is satisfied, first, that the ratepayer would sustain hardship if it did not do so and, secondly, it is reasonable to do so having regard to the wider interests of the people in the area, on whom some or all of the cost will fall as community charge payers. I therefore commend this new clause to the Committee. I beg to move.
Lord McIntosh of Haringey: We on these Benches are in general sympathy with the amendment but we are rather worried by the phrase "having regard to the interests of persons subject to the community charges", if that phrase means that the revenue that will be forgone by these provisions comes from the general community charge pool.
As the noble Lord will be aware, the present situation is that it is discretionary rate relief. What we would prefer to see is that the revenue foregone should come from the national non-domestic rate pool. I understand that in another place the Minister responsible indicated that this is what would be done, but we do not see an appropriate amendment in the appropriate schedule. I should like to have some assurance from the noble Lord that this is the intention, and I should like him to tell us how it will be given effect to.
Lord Renton: When we were discussing Amendment No. 103 in the name of the noble Lord, Lord Hayter, and my noble friend Lord Caithness gave a welcome assurance that he would consider this question of discretionary and mandatory relief being given to charity, I assumed that the undertaking he gave was an undertaking to consider this new clause in the light of all that was said in that debate. I should be very disappointed if I found that in passing this new clause we were doing it in a way which was not covered by that undertaking.
Lord Hesketh: In answer to the question of the noble Lord, Lord McIntosh, the fact is that part of that charge will come from the national pool but that is a matter which is still under discussion so I cannot give him a specific answer this evening. If I may, I shall write to the noble Lord, Lord Renton, about his point concerning charity.
Lord McIntosh of Haringey: I do not think that either of those answers is entirely satisfactory. Having willed the end, the Government must have thought about the means and should be able to reply to the noble Lord, Lord Renton. As regards my question, will the Minister give an assurance that we shall receive an answer on this point before we reach Report stage?
Lord Hesketh: I do not think I can go further—
Lord McIntosh of Haringey: Does the noble Lord wish me to speak for a few minutes longer? If so, I
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should be happy to do that. This is not the first occasion on which I have been required to play the role of cover for the messenger. It seems to me to be rather like covering the back when a loving cup is passed at a City banquet. I am becoming quite used to the role. Perhaps I have now carried on speaking for long enough to permit the noble Lord to answer.
Lord Hesketh: As I was just about to say before being so ably assisted by the noble Lord, Lord McIntosh, we hope very much that the consultations that are taking place will have been completed before the Report stage, in which case we shall be able to give a specific answer. Obviously I cannot give him an undertaking that they will have been completed at that time.
On Question, amendment agreed to.
Clause 43 agreed to.
Schedule 5 [Non-domestic rating: exemption]:
Lord Mason of Barnsley Lord Mason of Barnsley moved Amendment No. 107A:
Page 100, line 45, after ("livestock") insert ("or the breeding or rearing of horses or ponies").
The noble Lord said: I apologise for the absence of my noble friend Lord Colnbrook, who unfortunately is unable to be present as he has to chair a meeting abroad. To be quite honest, we mistimed the arrival of this amendment on the floor of the Chamber. It therefore falls to me to move Amendment No. 107A and I hope that the Committee will bear with me as I attempt to persuade the Minister that, although it is not the Government's fault, they have been thrust into a taxation muddle and this amendment is designed to help them in the awkward and difficult predicament in which they find themselves, particularly in view of the court case of last December.
This amendment seeks to extend exemption from rates in respect of agricultural premises to include buildings which are used in the breeding and rearing of horses and ponies. Because of the decision that emanated from the Whitsbury Manor Stud case, it seems that the present legislation does not exempt from rates the buildings that are used for the breeding and rearing of horses and ponies. That decision caused a major disturbance in the industry. Prior to the decision, rates had not been levied on buildings used for the breeding and rearing of horses and ponies on farms. Every section or organisation within that vitally important industry believes that the previous position should be restored. Those organisations include the National Light Horse Breeding Society, the British Horse Society, the Jockey Club, the Country Landowners' Association, the Horse Racing Advisory Council, the National Farmers Union, the National Pony Society and the Thoroughbred Breeders' Association; and of course one must not forget the agricultural workers who can readily see some of their jobs put at risk. That is quite an important and formidable Lobby.
All those people wish to see the previous position restored and ensure that in this legislation it is made clear that the breeding and rearing of horses and

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ponies is regarded for rating purposes as an agricultural activity, as it has been for nearly 50 years until quite recently and as it still is for purposes of income tax, corporation tax and capital taxation.
If the position is not restored, not only will it be a deterrent and curb breeding, but it will also be much to the detriment of the racing industry and affect our exports of horses and horsemeat. I believe it to be Parliament's will that the previous position should be restored. During the 50 years of exemption Parliament had ample opportunity to change the situation but chose not to do so. Obviously Parliament was satisfied. It could have removed the exemption if it so desired when tax relief was enlarged to include fish farms and broiler houses, or when agricultural relief for estate duty purposes was debated in Parliament. It did not do so. There was never any suggestion that horse and pony breeders should not qualify for rate exemption on their agricultural buildings.
Again in 1984 Parliament confirmed the importance of horse breeding and stud farms. The then Financial Secretary to the Treasury stressed the role of the bloodstock industry and said, during the course of a speech in the other place which I shall paraphrase, that it was an important part of our national heritage and a valuable part of our economy. Exports of well bred horses exceed f100 million a year and the industry employs 150,000 to 200,000 people. The racing industry also gives pleasure to millions and the Government appreciate the sizeable sum contributed to the Exchequer by the racing industry in the form of the betting levy. Time after time Parliament has understood and fully appreciated the importance of the industry and the assistance that should be given to it. What is more, the Treasury has concurred.
The Government are actively encouraging farmers to engage in making alternative uses of their land. For that purpose grants towards the capital cost of buildings are available. That makes sense. Accordingly, farmers are being advised to diversify by MAFF and ADAS (the Ministry of Agriculture and the Agricultural Advisory Service), especially in the light of falling returns from food production. Horse and pony breeding and rearing is a natural diversification for a farmer. Therefore exemption from rates on buildings used for that purpose is simply common sense and in line with the Ministry's general objectives.
Also both thoroughbred and non-thoroughbred horse breeders supply national hunt horses, point-to-point horses and event horses and the breeders of those types of animal find it difficult to be certain of trading profitably because of the length of the breeding cycle to the point of sale and the high risk nature of the exercise. There is also always the possibility that horse and pony breeding is judged wrongly as just for the rich. That is not so. I draw the attention of the Committee to a speech delivered in the House of Commons in 1984 by the then Financial Secretary to the Treasury in the course of the debate on the Finance (No. 2) Bill, when he said:
"the industry, like many others, undoubtedly includes some very wealthy individuals, but its bedrock comprises the many small
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breeders countrywide with a few acres and a handful of mares". [Official Report, Commons, 11/7/84; col. 1071.]
So the vast majority of all horses and ponies come at the bottom end of the market where production costs are critical. Most of the small breeders are incorporated in mixed farming enterprises, and their activities are an integral part of their farming business. The rating imposition could be quite important to them and adversely affect them, especially as the United Kingdom breeders have suffered some disadvantage in the treatment of VAT within the European Economic Community. In this respect, we must note that much business is done selling horsemeat and the United Kingdom is the largest producer of horsemeat for human consumption in Europe.
It is a useful diversification for farmers that should be encouraged and rating exemption will help. Just as the Treasury through the Financial Secretary stressed the importance of the bloodstock industry, I believe that this activity of breeding and rearing horses and ponies equally should receive recognition by the derating of buildings used for this purpose. I emphasise that horse and pony breeders are seeking not a special concession in the Bill but merely a restatement of the exemption that prevailed in practice for nearly 50 years.
In brief, the Ministry of Agriculture, Fisheries and Food desires it; ADAS, the advisory service, advises it; the Treasury has said it, and Parliament has not disagreed. I hope that the Committee will agree with the amendment and support it accordingly.
8.30 p.m.
Lord Middleton: I support the noble Lord, Lord Mason of Barnsley, and endorse his statement that what we are asking for is a confirmation of the pattern of taxation affecting the breeding and rearing of horses that, up to last year, was accepted and agreed by successive governments for nearly half a century. We are asking the Government to put sense into a situation where at present there is no sense. This implies no criticism—indeed, I would not dare so to criticize—of the decision in the Whitsbury stud case only last December. There was then a doubt as to how the law stood. Because of the way the case was resolved on appeal, there is this anomaly, to which the noble Lord, Lord Mason, has referred. The amendment would remove any doubt as to whether horse breeding is an agricultural activity.
Perhaps I may illustrate how nonsensical and illogical the present situation is. If on one's farm one has a brood mare or a pony turned out by day in a field, it is agricultural. When one brings it in at night for shelter in a loose box, as one will do in winter, it is non-agricultural and the loose box is rateable. If, as is so often the case, the loose box is part of a complex of farm buildings, it will be the only part of that complex that is rateable. It must make sense either to treat horse breeding as an agricultural activity for all fiscal purposes, including rating, or to regard horse breeding as non-agricultural for fiscal purposes, including all taxation purposes.
However, if one did that, not only would it require elaborate amendments in a Finance Bill but, as the noble Lord, Lord Mason, pointed out, it would not

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be in line with government policy. He has reminded us of the passage of the 1984 Finance Act, in which it was confirmed that for tax purposes the breeding and rearing of horses and ponies and the land, houses and ancillary buildings used in connection with those activities shall be taken as agricultural. The Financial Secretary in that debate in another place said:
"This is not a concession; it is a confirmation of the pattern of taxation".
The noble Lord, Lord Mason, referred to the implications for United Kingdom agriculture and the need for diversification. One of the measures agreed by the European Council of Ministers this year, designed to bring the CAP under much stricter budgetary control along with the so-called stabilisers that will lower guaranteed prices as production exceeds an agreed level, is that member states shall adopt a plan for what is called set-aside of agricultural land. It is highly probably that under the United Kingdom scheme, which has to be finalised by the end of next month, farmers will be encouraged to put a proportion of their cornland down to grass. That would make good sense, providing that it does not lead to a rapid increase in our livestock numbers leading to yet more surpluses. This may very well provide encouragement for farmers to turn to breeding and raising horses and ponies on this set-aside land, but they would surely hesitate if they are to be penalised through the rating system.
It would be wrong to penalise our bloodstock industry, as the noble Lord, Lord Mason, said, which is acknowledged by the Government to play an important role in the economy, especially if it is to be put at a disadvantage in comparison with its competitors on the Continent and in Ireland. The rearing of horses is labour-intensive. It would be a great pity if the money and employment generated by the breeders of thoroughbreds were to be transferred abroad. There is a danger that it will be unless we can get the Bill right. I am sure that the development commission will have strong views on this.
The noble Lord, Lord Mason, referred to the lower end of the market. He said that some 3 million people who now use horses for recreation need to be supplied with animals to ride. Here surely is an alternative crop for British farmers that should be encouraged and not penalised. All that is needed is for horse breeding to be treated once more as an agricultural activity for all fiscal purposes, including rating.
I hope that my noble friend the Minister will consider this modest proposal carefully. It has a great bearing on the well-being of our rural community.
The Earl of Balfour: Heavy horses are being used more in agricultural work now than they have been for many years. There is a steady increase in the use of heavy horses in place of the tractor. On land that can take that kind of animal, it is kinder to the land and of great benefit to the farmer.
The Earl of Radnor: I wholeheartedly support the amendment if only because it is so irregular that horses should be left out of the farming scene in this way. So far as I know, every single form of livestock
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is included. There has been the recent addition, in which I myself have to play a part, of fishes. If fishes could be added in, horses surely should be for the reasons so well given, particularly when farmers are in for a harder time probably than they have been used to. Times have been getting gradually worse over the past few years. It is ridiculous to say that diversification should take place and then to penalise that diversification but not the crops from which one wishes to diversify. It is wrong in every way. I hope that my noble friend will agree to tidy up the situation once and for all and make horses part of the farm regardless of whether they are smart racehorses or Shetland ponies bred for the amusement of children and suchlike.
Lord Renton: I wish to refer to a matter that has not so far been mentioned. There has historically been exemption of agricultural land and buildings for a number of reasons. In modern times I think the strongest is the contribution that agriculture makes to the balance of payments.
If I may, I shall take the Committee back rather a long time to 1960 when Lord Butler of Saffron Walden was Home Secretary. He charged me with the responsibility of some rather tough negotiations with the bookmakers. We then prepared and piloted through another place the Horserace Betting Levy Act, which has undoubtedly been of great benefit to racing. At that time it was acknowledged that the bloodstock industry also had a valuable contribution to make to the balance of payments. Also at that time the bloodstock industry had the exemption—through the definition of "agricultural land and buildings"—that it had until this recent case.
All that I am suggesting is that what held good in 1960 about the value of that industry in contributing to the balance of payments is just as valid today, in fact perhaps more so. One could elaborate, but I hope that this is a point of which my noble friends will not lose sight. I strongly support the amendment.
The Earl of Carnarvon: I should declare a vested interest to the extent that I am president of the Thoroughbred Breeders' Association and I am a breeder. However, I should like to help the Committee by giving a few statistics in support of the excellent proposition suggested by the noble Lord, Lord Mason. On the thoroughbred breeding side, there are about 6,500 breeders: 4,500 own one mare; 1,000 own two mares and 1,000 own more than two mares. Of that last 1,000, only 50 thoroughbred breeders own 15 mares or more. I believe that those 50 breeders provide an enormous amount of employment within the industry. They provide an enormous amount of foreign currency and retain very important blood lines in the stallions in this country.
I felt that it was important to explain to the Committee that although they may be wealthy people, they benefit the bloodstock scene in a very big way. I fully support the proposition made by the noble Lord, Lord Mason.
Baroness Blatch: I feel that most of the speakers tonight are speaking for the amendment. I believe it behoves someone not to speak against it—I do not

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intend to do that—but to broach rather sensitively the area of thinking behind the possibility that somebody may wish to tax this group of people in a new way under the proposed reform.
If we are to take the amendment and all the points made by the noble Lord, Lord Mason, seriously, this is an argument for consistency. It is not special pleading on behalf of these people; it is asking the Government to make very clear in all their determinations on this subject whether or not this group of people should come under the umbrella of agriculture. The temptation is to confuse this with the other subject which needs mentioning which concerns whether or not agriculture should be brought into the rating system.
That however is a different subject which should be tackled quite separately and distinctly from the proposition made by the amendment. The amendment is asking for the status quo. It is suggesting that while the Bill is being discussed the status quo should prevail, that agriculture should subsume the horse and pony breeding businesses. If anybody is tempted to think—and this point was made by the previous speaker—that this group of people is disproportionately affluent in the community, evidence has been given to the contrary. If they are tempted to believe that these people should be brought into the rating system, I would seriously suggest that that should be the subject for another day and another debate. We must concentrate on the point that the noble Lord, Lord Mason, made so well and which was reinforced by the comments of my noble friend Lord Renton; namely, that historically such people have been accepted as being part of the agricultural scene. That today is more significant than ever when enormous efforts are being made to pursuade farmers to diversify. Many of them will diversify into this line of business and I believe that the argument for consistency is very great. I support the amendment.
Lord Boardman: I follow my noble friend in support of the argument for consistency. Whatever mental aberrations the court had in deciding that horses and ponies were not livestock I know not, for I have not read the judgment. Surely the consistent argument is that horses and ponies are just as much livestock as Hereford bulls and all the other kinds of animals that farmers breed. I very strongly support the amendment put forward by the noble Lord, Lord Mason.
Lord Borthwick: I should like to support the amendment as well. There is another matter that I have not heard mentioned since I came here this evening and that is forestry. In Scotland much of the hill country presents a very difficult situation when planted up. How the timber will be extracted when the trees are only half grown and when thinning has to take place, I am not quite sure. It will be rather difficult. Therefore I suggect that in the future when these trees require thinning and felling, horses will be required for extraction. I support the amendment.
8.45 p.m.
The Earl of Caithness: There have been many cases about whether particular types of buildings should
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enjoy agricultural exemption. The question as to whether buildings used for the breeding and rearing of horses and ponies should qualify has a long and convoluted history. Some noble Lords assert that the ruling of your Lordships' House in the appeal case of Whitsbury Farm and Stud Ltd. has introduced a new interpretation of the present law which has overturned a practice that has existed for nearly 50 years.
I must admit to the Committee that even when I was a surveyor I used to agree with the assertion that has been put forward tonight that it was clear that stud farms were derated up to 1981. I cannot agree with that assertion any more because I have discovered that there was some uncertainty between the mid-1930s and the early 1980s. Although it is agreed that many stud farms did not pay rates, I understand however that some 40 to 50 stud farms were assessed for and accepted rating during that time.
But, Lands Tribunal decisions in 1981 and 1984, the Court of Appeal's affirmation two years later, and the ruling of your Lordships' House all provide clear evidence that all stud farms should, in fact, have been rated throughout the period. The basis for claiming that they had originally been derated as a matter of law rests on the Special Commissioners for Income Tax acceptance in 1933, in a different context, that stud farm activities are "husbandry". It is also asserted that this was backed up by the decision of the Newmarket Assessment Committee in 1936 that the principle in the 1933 case could be applied in a rating context. Decisions of assessment committees are not, however, binding precedents in law, and if stud farms were not assessed as a result, that practice grew up on a misunderstanding of the earlier decisions.
I move now to the area of tax and the link with tax and rating which my noble friend Lord Middleton mentioned. There is no inconsistency here. If the breeding of horses is taken to be agricultural for capital transfer tax purposes—because there are particular reasons connected with that activity and that tax—it does not constitute a valid reason for it to be agricultural for other purposes if those purposes do not require it. If horse breeding were to be treated as agricultural for rating purposes it would be wholly exceptional.
I shall now answer the point of my noble friend Lord Boardman. The horse would be the only mammal, or indeed bird, within the definition of "agricultural" that was not kept for food or wool or for its use in farming the land.
The Earl of Radnor: We have heard this evening that the meat of the horse is used for food.
The Earl of Caithness: I am just coming to that point. The dictum of Lord Justice Lawson on the appeal of the Whitsbury Farm and Stud Ltd. pointed out that under the Local Government Act 1929—which I know my noble friend is fully conversant with—agricultural land meant land used for the purposes of contributing to human subsistence. That did not include breeding thoroughbred racing stock. Despite the fact that horsemeat is exported for consumption, we are not considering the breeding of horses specifically for that purpose tonight.

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I cannot accept assertions that there is an inconsistency in Government policy over the initiative, on the one hand, to find alternative uses for surplus agricultural land and current rating practice. The boundaries for any exemption or relief from the payment of rates have to be drawn as tightly as possible. Any shift of the line invites new pressures and perhaps I can give an example. While I appreciate that we are considering the breeding and rearing of horses and ponies, it would in practice be very difficult to resist pressure for extending exemption to other establishments using horses including racing and livery stables, pony trekking centres and even to other animal breeding establishments. The potential loss of rate income could therefore be considerable and would have to be met by other ratepayers and eventually community charge payers. I hope that my noble friend Lord Middleton will give consideration to that matter.
The Government are of course aware of the contribution that the various activities concerned with breeding, rearing and keeping horses make to the economy. To encourage these activities further, my right honourable friend the Minister for Agriculture, Fisheries and Food has recently announced the availability of grants under the alternative land use proposals for livery and pony trekking. This, together with the considerable increase in leisure riding generally, will help to stimulate greater demand for horses and ponies and provide a further impetus for breeding.
But the fact remains that, unless horses are used in the farming of the land—and that covers the point raised by my noble friend Lord Balfour—they are not agricultural animals and for rating purposes the breeding of horses and ponies is not an agricultural operation. There have been assertions, so far unsubstantiated, that the imposition of rates will deter farmers from breeding and even force some breeders out of business. I cannot conceive that the typical rateable value of £20 to £25 for each purpose-built loosebox is likely to have such drastic effect on those solely or mainly engaged in horse and pony breeding as a commercial activity. I am able to accept however that a rate burden of that size could be a significant blow for the large numbers who keep on their farms—and I stress "on their farms"—one or two horses for their own enjoyment or for breeding on a small scale, largely as a hobby. Such cases also cause some practical valuation difficulties where buildings are shared for different purposes. In such cases this activity probably does not detract materially from the agricultural use of the farm. The Government are therefore prepared to provide an exemption from rates where there is a de minimis use of buildings for breeding and rearing of horses and ponies and will table an appropriate amendment at Report.
Having covered the ground fairly fully, and having removed some of the assertions that have been made in good faith but which have been proved in law to be incorrect, I should like to say that I understand the Committee's feeling about this matter. I should like to take the matter away for consideration between now and another stage, notwithstanding the
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concession that I have already announced. I hope that Members will read what I have said about the difficulties that are imposed. I also ask the Committee to consider that the land must be agricultural. Some of the people mentioned by the noble Earl, Lord Carnarvon, will find that they will not benefit because their land is not agricultural but merely a paddock adjacent to the house or a couple of looseboxes at the end of the garden. As I understand the matter they will not be covered because in most cases their land will not be agricultural. There are many complications and the more one looks at the issue the more difficult it becomes. I suggest to the noble Lord, Lord Mason, that we all go away and have another think. I shall be happy to meet the noble Lord between now and another stage to discuss the matter.
Lord Rippon: I am surprised by the Minister's answer. It seems to be totally against the weight of the views expressed in the Committee. It has confirmed me in a view that I have long heard and believed. It is that surveyors are awfully good on law but not so good on values, they are best left to the lawyers.
I do not believe that anyone is disputing the fact that there have been doubts about the state of the law and that a certain judgment has now been made which is no doubt correct. However, it is not the judgment that Parliament intended. I believe that it has taken everybody by surprise. Therefore, the Government should accept the amendment. I am bound to say that merely inserting a de minimis provision adds to the difficulties and uncertainties. I hope that the amendment will be pressed and the de minimis answer not accepted.
Lord Middleton: I do not know what the noble Lord, Lord Mason, will say. However, I agree with the noble Lord, Lord Rippon. I am glad that the Government are willing to look at the matter; it is excellent. My noble friend Lord Caithness referred to the fact that there is no intention of asking for the exclusion from rating of such establishments as training stables, riding schools and so on. As the noble Lord, Lord Mason, has said, we are very much concerned with the agricultural side of the horsebreeding enterprise.
The noble Earl referred to the complications; of course there are complications. The uncertainties to which he referred gave rise to the case which has been resolved in the way that we have described. I believe that the beauty of the amendment tabled by the noble Lord, Lord Mason, is that it removes all the uncertainty and makes the issue so much simpler. I hope that between now and Report stage we can persuade the noble Earl that this is a simple matter to resolve. I wonder what he means by the de minimis proposal. I do not know how one can differentiate between large and small breeding establishments. It is a question of, how long is a piece of string? I am encouraged by the noble Earl's reaction but I do not know what the noble Lord, Lord Mason, will say.
Lord Renton: In view of the fact that my noble friend has said that any exemption must relate to agriculture, I should like to emphasise the fact that the amendment is so drawn that if accepted it would relate only to agriculture.
The Earl of Caithness: I should be sad if the advice which my noble friend Lord Rippon gave to the noble Lord, Lord Mason, were accepted. If one makes a suggestion in good faith that we can discuss the matter between now and another stage one hopes that that will be accepted.
I stress the difference between agricultural and non-agricultural land to put it firmly on the record in case some people who believe that they might benefit from the de minimis provision, which we have already said we shall bring forward, find that ultimately they do not. I believed that it would be clearer if I spelled it out now.
Lord Mason of Barnsley: Of course the Minister will recognise the fact that the thrust of the argument was based on the reinstatement of the previous position which was held for 50 years until last December. However, we are obliged to him for his reply.
He was partly supportive and we appreciate that, but I am sorry that he has not gone as far as we should like. I do not think that at this stage it would be wise to exchange views with the Minister on the degree of ministerial support that we have received. I do not want to press the matter to a Division at this stage. However, I must remind the Minister that every contribution that was made supported the amendment. First he offered to consider fresh words at the Report stage. Secondly, he said that he would be prepared to meet Members who have prepared the amendment and spoken during the course of the debate. In the hope that we shall make further progress and have further discussions at the Report stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108 not moved.]
9 p.m.
Lord Stallard Lord Stallard moved Amendment No. 108ZA:
Page 105, line 3, at end insert—
("Property used for homeless persons without means of support
15A. A hereditament is exempt to the extent that it consists of a charitable property which, on a voluntary basis, caters for homeless persons without means of support or persons receiving supplementary benefit or the equivalent thereof.").
The noble Lord said: I beg to move Amendment No. 108ZA standing in my name on the Marshalled List. Schedule 5 outlines a number of exemptions. The amendment adds one more exemption to that list. It deals with the exemption of property used for homeless persons without means of support. I know that many Members of the Committee are involved with organisations that might fit into this category. So far this evening we have dealt with big businesses and small businesses; we have dealt with sporting premises; we have dealt with social club premises; we have dealt with horses, ponies, salmon and trout. I want to deal with the Simon Community and its properties.
The Simon Community is a registered charity catering for people who are often referred to as "down and outs": people who have severe problems stemming from alcohol dependency, drug dependency and abuse and, in many cases, illiteracy often accounted for by mental illness and various
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physical and psychiatric ailments. It is that that forced me to put this amendment into this area because there are other amendments which seem to hint at the same problems.
Perhaps I may mention Clause 15(1)(a), which could be interpreted as an exemption for this community, to the extent that it refers to property used for keeping suitably occupied people who have been suffering from illness—and "illness" is defined as being something in the National Health Act 1977. I even looked up what "illness" meant in that Act, and it simply said that it includes mental disorder within the meaning of the Mental Health Act 1959.
Sadly, many of the people I have met recently among the homeless are people who are being moved into community care from the big mental institutions, but are finding themselves on the streets because of all sorts of problems in finding places to live and so on. I have found a number of people who within weeks, have been in the predicament of so many of the people who are looked after by the Simon Community because they have been released from psychiatric institutions into community care, which is very often not there. They then gravitate towards being homeless with all the problems which that brings. Therefore, I believe that it could be argued that the Simon Community could come within that category.
I had doubts, but I gave myself the benefit of the doubts and left the amendment to stand. As matters stood when I tabled the amendment—and I have heard nothing this afternoon that would change that—then the future looks financially bleak for the Simon Community. I shall not give all the reasons, but I shall outline one or two of them. At the moment the Simon Community pays a maximum of 50 per cent. of its rates because it is a charity. Under this Bill that situation will disappear and there will be no such exemption unless some alterations have been made by way of the amendments of the Minister this afternoon. I have heard all the amendments, but I have not cleared my mind as to what they all mean in relation to this amendment.
In the case of the Simon Community the Government intend to levy a collective community charge on properties where people come and go frequently. A local government official will estimate a likely occupancy rate on each of the Simon Community properties and will make it pay a collective charge on the basis of that assessment. One does not have to be a genius to understand the problem that that will cause to an outfit like Simon. In order to recoup the money the community will be expected to levy a nightly charge on each and every occupant, even those who are invited in for just a few hours overnight. In inner London that charge has been estimated to be at least £1·50 per person per night. The Simon Community would normally have about 50 members in the community each night, both workers and resident members. That would mean paying £75 each night or £27,375 a year to the local authority, and sometimes there are more than 50 people there.
Of course, that is out of the question for an organisation which relies solely on donations from supporters and sponsors. There is no government

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money or funding involved in this organisation at all. It depends entirely on its own resources. Therefore, I believe that we should look at the question of this community because it deals with people with whom no one else wishes to deal. These people are sometimes extremely difficult to cope with. They cannot be fitted into any of the excellent structured programmes that we know exist—and we are grateful that they do exist—which are operated by many admirable voluntary organisations. However, these unfortunate homeless people that I am discussing are taken in by the Simon Community and are usually without means of support. There are a number of reasons for that. They are taken into one of the four properties managed by the community, staffed by voluntary workers and maintained by donations from supporters with no outside grant.
When I say that they are taken in by the Simon Community, they are picked up on what is a "street run". I do not know whether the Committee is familiar with that, but I should like to take one or two of the Committee on this street run, when volunteers tour the streets of London and find these people in street doorways, on the pavements or on the main line stations. They are people who are obviously very ill, who are immobile and suffering from something in addition to their dependency. They are offered assistance. Very often the only assistance that can be given is for them to be taken back in the van, given a blanket to cover themselves and a cup of tea and something to eat, if they can manage it. For that assistance and service they will have to go through this paraphernalia of charging £1·50. I do not know from where they will get it. How can you charge these people £1·50 before they go away in the morning? How can you recoup your losses? How can they keep these registers? It is absolutely impossible to structure these people into the tidy little slots into which we should like these organisations to fit, according to a clause in this Bill.
I am really pleading a special case here as regards the Simon Community. These people do not receive any benefits. The other night when I went on the street run to see what the latest situation was I met a person who does not really exist. He is unable to obtain benefit because he has no identification papers. He does not know where his birth certificate is and has no recollection of either his identity or his age. How can you charge such people who have no benefits from any source?
It might be a useful exercise if Members of the Committee on their way home this evening passed through one of the main line stations or walked up one of the roads concerned to see these people because, sadly, they are there. In doing so, one should ponder for a moment on where they will be tonight if the Simon Community does not pick them up and give them shelter for the night, or refer them to somewhere suitable. From there, one should ponder further and ask how could one get £1·50 per night from those people. If they cannot pay, how can the Simon Community foot the bill for all of them? It would be ludicrous to allow the Bill to remain as it stands without special treatment and consideration being given to the Simon Community.
I should have hoped that we would be discussing not so much how to get this money from these people in the circumstances I have tried briefly to describe, but how to recompense organisations such as the Simon Community which are providing services no one else can provide, including us. One way, I suggest, we could perhaps help is to agree to this amendment, and perhaps go further and discuss the whole predicament of the Simon Community to see whether we can be of further assistance. I beg to move.
Baroness Faithfull: I am involved in a large Simon Community and also a Church Army hostel for the homeless where people come in for a night, sometimes for only half a day and perhaps for two days. As the noble Lord, Lord Stallard, said, assessment of such people is extraordinarily difficult.
I should like to make a further point. These people are what we used to call tramps. There is no question of them knowing to which local authority they are responsible. On one day they will be in, say, Banbury and the next day in Oxford; then moving on to Salisbury, or wherever it may be. The local authority, its charge, and the accounts of the authority mean absolutely nothing to them.
The running and administration of hostels is extremely difficult. At the same time, I have to say that the hostels save many men from getting into trouble with the police. As the noble Lord, Lord Stallard, said, they are saved from sleeping rough—though too many people are still sleeping rough. The whole administration is an absolute nightmare without having further complications. Perhaps my noble friend the Minister will take up the matter of accountability to local authorities, which simply cannot exist in these circumstances.
Lord Dean of Beswick: I am delighted to support this amendment because my colleague and noble friend Lord Stallard, as he has done throughout his political career, has again chosen to champion people at the lower end of the social scale. The Committee may recall earlier in our proceedings on this Bill that I referred to what happened in tramp wards in the old days. They were given a night's lodgings, even if in a low standard bed, and a frugal breakfast in the morning of perhaps a slice of toast and cocoa on which they were expected to do a day's work; but they rapidly disappeared.
The case has been expertly put by my noble friend. I was interested also in the point forcefully made by the noble Baroness, Lady Faithfull, regarding identification with an authority. In London, both inner and outer, the borough boundaries merge and tramps can have no concept of which borough they are in. The same situation can exist in Manchester where there are 10 metropolitan districts which, in a geographical sense, are closely related to one another. While I suspect that the biggest problem will be in the centre of Manchester, there is no doubt it will exist on the edge of town. People like myself, who lived on the outskirts of Manchester, have seen these people of no abode, with no identification, passing through daily. One could see them going to and returning from various places, sleeping rough in the park, and so on.

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It is a fact that the organisation to which my noble friend Lord Stallard referred has taken to itself what is, in some respects, a very unpleasant job on behalf of the community and which, if we had the time and resources, we should be doing ourselves. It is incumbent upon the Government, on behalf of society, to do their best to help that type of organisation. Are they to be asked to fund, collect and pay the community charge on behalf of these people? There is no doubt that they will have to pay if they are legally obliged to, but whether they will ever collect it is another matter. This will mean that the meagre resources they are able as a charity to collect from generous people and organisations who are prepared to fund them will be further dissipated.
I hope that in his reply to my noble friend this evening the Minister will be able to give as sympathetic a reply in response to this amendment as he did to the previous one. I do not carp at Members, but it seems strange to me that while nine or 10 Members of the Committee can speak with conviction on an amendment concerning horses, there is a diminishing interest when we are talking about people at the bottom end of the scale. I have a great respect for the noble Lord, Lord Rippon of Hexham, who unfortunately has left the Chamber. He made the point as though the whole of the Committee was speaking in favour of the previous amendment. In fact we know it was special pleading by a particular lobby. No one is grumbling over it because that is what politics is about.
As I said previously, throughout the whole of the political life of my colleague who sits behind me, both in another place and here, he has been recognised and identified as a champion for the homeless, the deprived and for people—we are talking about the inner London area in the widest sense—who cannot look after themselves. His voice has been almost a lone one, with the support of myself and of the noble Baroness, Lady Faithfull. I hope that the Minister will not take the number of speakers as a criterion for what society shoud be doing. I have pleasure in supporting the amendment.
9.15 p.m.
The Earl of Caithness: The noble Lord, Lord Stallard, referred yet again to the very important subject of charitable hostels for the homeless and similar institutions. He has proposed that they should be exempt for non-domestic rating From what the noble Lord said, I believe that the establishments about which he is concerned are predominantly residential, providing living accommodation for longer or shorter periods to people who would otherwise be homeless. If so, they would fall within the definition of domestic property in Clause 56. They will not be subject to non-domestic rating and so there can be no question of specifically exempting them.
The exclusion of domestic property from rating will encompass facilities which are normally provided along with living accommodation, such as dining and recreation rooms. There are issues concerned with the application of the community charge to residents in such institutions. As the Committee will recall, there
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was a thorough debate on these issues when we were dealing with Part I of the Bill. We all recognised that we would need to return to them at Report stage. Now is not the time to anticipate that further debate. This is absolutely no discourtesy to the noble Lord, Lord Stallard, or to my noble friend Lady Faithfull; it is that we are considering further the situation raised by the noble Lord this evening.
I said that most of the premises with which the noble Lord is concerned will be domestic under the terms of the Bill. His amendment would also apply to some which would be treated as non-domestic. For example, there may be day centres for homeless people, and a few hostels may provide facilities that go beyond what can reasonably he described as domestic; for example, in-house medical facilities. In such cases non-domestic rates will he payable. However, as we discussed on an earlier amendment, when an establishment is run by a charity the rates will be automatically reduced by a half and the local authority will have power to remit them entirely.
I believe that it would be misguided to single out the category of establishment referred to here, worthy as it is, for more favourable treatment than other charitable property. This has been a useful opportunity for the noble Lord, Lord Stallard, with his very considerable experience in this field, to add to the arguments he used in the debate on Part I of the Bill. I can give the noble Lord the assurance that my right honourable friend the Secretary of State and I will bear in mind very carefully what he said. I am grateful to all Members of the Committee who have taken part in this debate tonight.
Lord Sandford: Before my noble friend sits down and the noble Lord responds, can my noble friend on the Front Bench confirm that this, being a charity, will be included in the reconsideration that he has already promised to undertake?
The Earl of Caithness: If it is a non-domestic property run by a charity, then of course.
Earl Russell: As the Minister said, we have been here before. Last time, during the debate on the first part of the Bill, the noble Earl said, at the third time of asking, a little more than he said just now. He used the magic words, "I will take this back and think about it". Once again, we are up against the idea that these hostels are residential.
Not to put too fine a point on it, the noble Baroness, Lady Faithfull, said that we are here dealing with tramps. The concept of residential accommodation for a tramp comes close to a contradiction in terms. We have here people who are proverbially of no fixed address, which is why, as the noble Baroness, Lady Faithfull, said, the concept of accountability does not and cannot be made to apply to them. They have to go somewhere. The Minister might consider whether there is a distinct risk that if they are turned away from hostels that are able and willing to receive them they might go to places where people will make them a great deal less welcome. This is not practical. I hope the Government will take it away and think about it.
The Earl of Caithness: The noble Earl will, I hope, know by now that, when I say I shall take it away, I shall take it away.
Lord Stallard: I am grateful to those who have contributed to this short debate and I thank the Minister for replying in such a constructive way. I readily admit that I had reservations when I put down the amendment. I am grateful for the way in which he dealt with it. I am grateful too for the consideration which he said will be given to the amendment and I look forward to something helpful being proposed between now and Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Schedule 5 shall stand part of the Bill?
Lord Monson: The Minister will be aware that English vineyard owners, who produce increasingly well made and drinkable wine against all the climatic odds, have for many years complained about the unfavourable treatment they receive in terms of tax, rates and subsidies in comparison with their Continental counterparts. As the Bill stands, not only their land—that is, their vineyards—but the buildings used in their business are to be treated as wholly agricultural, bringing them into line with all other agricultural enterprises. If that is not the case, should this not be put right at a later stage of the Bill?
The Earl of Caithness: I am grateful to the noble Lord, Lord Monson, for giving me a little notice that he might ask me this question. Although, like many noble Lords, I am quite keen on wine, I am not too knowledgeable about vineyards. However, I am able to tell him that vineyards are exempt by virtue of the agricultural exemption in Schedule 5(2) and (1)(d), since they are treated as market gardens. Also exempt are the fermenting and bottling facilities. Only the retail premises, if any, are rateable, in the same way as farm shops. Complications arise, however, where the vineyard also imports wine from elsewhere. Then the ancillary buildings may have a value attached to them reflecting the proportion of their use attributable to the bottling and handling of the imported wine.
Lord Monson: That is on the whole a satisfactory answer.
Schedule 5 agreed to.
Clause 44 agreed to.
Clause 45 [Contents of central lists]:
Lord Hesketh Lord Hesketh moved Amendment No. 108A:
Page 25, line 36, leave out from ("require") to first ("the") in line 38 and insert (", a central non-domestic rating list must show, for each day in each chargeable financial year for which it is in force,").
The noble Lord said: In moving Amendment No. 108A, I should like to speak also to Amendments Nos. 108B, 108C, and 108D. I have already explained to the Committee, when introducing Amendments Nos. 102D to 102G relating to the local rating lists in
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Clause 39, that the present yearly liability to rating is being replaced with a daily liability. We now come to a similar group of technical amendments to Clauses 45 and 46, which relate to the central rating list.
Amendment No. 108A removes an implication in the present drafting that a central list might not be in force. Amendment No. 108B corrects an erroneous cross-reference. The amendments to Clause 46 simply tighten up the precision of drafting by making it clear that what matters for liability purposes is what the list shows for a day, not on a day. This is because the list could be adjusted retrospectively—for example, where a ratepayer successfully appeals against rateable value. I beg to move.
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendment No. 108B:
Page 26, line 2, leave out ("(3)") and insert ("(1)").
On Question, amendment agreed to.
Clause 45, as amended, agreed to.
Clause 46 [Central rating: liability]:
Lord Hesketh Lord Hesketh moved Amendments Nos. 108C and 108D:
Page 26, line 8, leave out ("on") and insert ("for").
Page 26, line 14, leave out ("on") and insert ("for").
On Question, amendments agreed to.
Clause 46, as amended, agreed to.
Clause 47 [Alteration of lists]:
[Amendments Nos. 108E and 108F not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 108G:
Page 27, line 5, at end insert—
("(bb) as to the period within which a proposal must be made,").
On Question, amendment agreed to.
Lord Ross of Newport Lord Ross of Newport moved Amendment No. 108GA:
Page 27, line 9, leave out subsection (5) and insert—
("(5) Where there is disagreement about the accuracy of a list between a valuation officer and another person making a proposal for its alteration, or between a valuation officer who has made a proposal and another person, an appeal may be made to a valuation and community charge tribunal established under Schedule 14 below. In any appeal the onus of proof for an alteration in the valuaton list shall lie with the person who made the proposal.").
The noble Lord said: This amendment is tabled in the names of the noble Earl, Lord Lytton, and myself. As is already known, the noble Earl is unavoidably detained on business somewhere in the West Country, so I shall speak on his behalf.
The amendment deals with the situation where there is disagreement about the accuracy of a valuation list. We seek to obtain from the Government an undertaking that the onus of proof in a dispute should lie with whoever has made the proposal to change the list, and that the Bill should clearly specify that he/she is responsible for justifying it—as is the present position. We should like an answer to that question.
The Earl of Caithness: The noble Lord's amendment would have two effects. First, whereas the existing Clause 47(5), which the noble Lord wishes to delete, merely empowers the Secretary of State to make regulations providing for disputes about rateable values to be referred to valuation and community charge tribunals, the amendment would write into the Bill that they should be so referred. I have to say that this is a distinction without a difference. There is no serious possibility of the Secretary of State not making such regulations without which there would be no right of appeal against rateable values. For all practical purposes the word "may" in this context means "shall", so there is no need for the amendment to ensure that a right of appeal exists. However, I can give the Committee an undertaking that there will be such a right. Moreover, the amendment would not avoid the need to make regulations dealing with the form of appeals, the time for making them, and so on.
Secondly, the amendment would provide that when the tribunal came to hear such an appeal the burden of proof would lie on the person seeking to have the rating list altered. Thus, if the occupier was proposing a reduction he would have to justify it; whereas if the valuation officer was seeking an increase—which normally he does only when there is a material change of circumstances—the burden would fall on him.
I have to say that the valuation process does not work like a criminal or a civil trial. When the valuation officer first values a property he assembles all the evidence, especially about market rents from comparable properties in the area, and forms a professional judgment about the rent that the property could be let for on the statutory terms to that well-known figure in rating law; namely, the hypothetical tenant.
When there is an appeal the local valuation court—now to be called the valuation and community charge tribunal—goes through the same process. It listens to the arguments from both sides and forms its own judgment of the appropriate value, subject to one limitation which I shall come to shortly. There is no question of proof because one cannot prove anything about what a hypothetical tenant would pay and it is therefore a matter of judgment.
That being so, I must say that if the noble Lord's amendment were to be incorporated into the Bill I am not at all sure what effect it would have on tribunal practice. To the extent that it did have an effect, this could well be to the disadvantage of the ratepayer. In the early years, after a revaluation, there will be far more appeals by ratepayers against the new rateable values than there will be by valuation officers who will have set those rateable values and will, as I said, normally alter them only if the state of the property changes.
Given the worries that many ratepayers have about changes in rateable value they might face on revaluation, despite the generous transitional measures we have proposed, I do not think that it would be right to erect a new hurdle for them to leap in order to succeed on appeal. As I explained to the Committee on Tuesday, we are taking some steps to
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discourage misconceived appeals, but we do not want to make life any more difficult for the appellant in a genuine case. I hope that that covers the point raised by the noble Lord and has set his fears at rest.
Lord Ross of Newport: I am grateful to the Minister for that response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108H not moved.]
Clause 47, as amended, agreed to.
Clause 48 agreed to.
Schedule 6 [Non-domestic rating: valuation]:
[Amendments Nos. 108J and 108K not moved.]
9.30 p.m.
Lord Ross of Newport Lord Ross of Newport moved Amendment No. 108L:
Page 107, line 5, at end insert—
("The decapitalisation rate levied on hereditaments rated under the contractors test method shall be determined by the formula:
A=B+1½
where A=decapitalisation rate, per cent.
B=interest rate on 20 year index-linked government securities, per cent.")
The noble Lord said: The amendment deals with capitalisation. Many Members of the Committee will have received a somewhat complicated document from the Chemical Industries Association. There are problems—I intend to be brief—about the rating of industrial premises in Scotland, and the object of the amendment is to try to bring Scotland and England into line.
The rateable value of heavy industrial plant such as oil refineries is calculated by applying a decapitalisation rate to a capital value. It is believed by most of the industry and by the CBI that the rate should be specified in the legislation and should relate to long-term interest rates.
The Chemical Industries Association, which I suspect has written to many Members of the Committee, says that underlying all its thoughts is the belief that it is vital that the decapitalisation rate should be set centrally on a uniform and logical basis by the Secretary of State by calculation with reference to external financial bases. Anything less would undermine the long-term benefits of any adjustments. It has recently submitted proposals setting out how that might be done. It is apparently becoming concerned that there may be moves towards setting the rate arbitrarily and somehow by agreement. Any tendency to compromise between the position in Scotland and England would not ameliorate the Scottish position sufficiently and would worsen the English position to no good purpose and for no logical reason.
This is highly specialised material dealt with by rating specialists upon which I am not competent to comment from personal knowledge. I am sure that the Minister will have some answer for us and I look forward to hearing from him. I beg to move.
The Earl of Caithness: Over the years, valuers in England and Wales on the one hand and Scotland on

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the other have adopted different approaches to working out the capital value, bearing in mind the fact that such properties are not often sold, and deciding what is the appropriate rate of interest to use. That has resulted in some odd anomalies—most notoriously the pipeline whose owners have to pay more than twice the rates per mile for the stretch north of the Border than for that in England.
The Committee will be aware that the Government hope to move towards a uniform poundage throughout Great Britain in the longer term. Clearly though, that makes sense only if there is also a common basis for assessing rateable value. We have therefore taken power in Schedule 6 to prescribe the interest rate to be used on contractor's tests valuation. An equivalent power is being taken for Scotland.
It is too soon, however, to say whether the Government will use this power to impose a common decapitalisation rate by statute. It may be possible to arrive at a common percentage by agreement between the Inland Revenue valuation office and the Scottish Assessors' Association which will then be the subject of review by the courts. This is a thorny issue. We are giving it very great consideration but I have to say to the Committee that Amendment No. 108L is premature until we can take the matter further.
Lord Tordoff: As someone who has been involved in the industry for a number of years, perhaps I may say that that answer will be less than satisfactory to the industry. The industry had hoped that the noble Earl would give some encouragement to the view that the Secretary of State might be prepared to take this into his hands, to produce some form of equalisation. One recognises that different parts of the chemical industry in this country use different feedstocks, therefore one can get a certain situation where there are curious competitive anomalies arising out of this kind of legislation.
I still hope that the Secretary of State may find it possible to take it unto himself to make the final decision and not leave it to some local arbitration, because this is an industry which contributes an enormous amount to the balance of payments of the UK. Perhaps the Minister could give some indication that the Government are prepared to rethink the matter without my necessarily pressing the amendment to a conclusion.
The Earl of Caithness: I can assure the noble Lord, Lord Tordoff, that we attach very great importance to the speedy achievement of harmonisation in this difficult area. As I am sure the noble Lord will be aware, we have listened carefully to the representations of the CBI, the Chemical Industries Association and the Petroleum Industries Association on this subject and sympathise with their concerns. I can assure the noble Lord that we have given priority to work on this issue and will shortly be receiving the formal recommendations of the Inland Revenue valuation office and the Scottish Assessors' Association. We shall then consult with the rating profession and the industry on the way in which harmonisation is to be achieved; the level at which the
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common decapitalisation rate is to be set; and whether it is necessary to impose that by statute. I think the situation is perhaps more active than the noble Lord, Lord Tordoff, thought.
Lord Ross of Newport: I think that that response satisfies my colleague on this Bench who has much more knowledge of the oil industry than I. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 6 agreed to.
Schedule 7 [Non-domestic rating: multipliers]:
Baroness Stedman Baroness Stedman moved Amendment No. 109:
Page 108, line 14, leave out ("retail") and insert ("local authority").
The noble Baroness said: We come now to a fairly large group of amendments. I wish to move Amendment No. 109 and speak to Amendments Nos. 111,112,114 and 116. No doubt the noble Lord, Lord McIntosh, will be speaking to the others. I do not think there is a lot of difference between us; it is just a question of wording.
As I see it, one of the major problems of the Bill is that it is linking the national non-domestic rating multiplier to the movements in the retail price index. However, those of us who have been, and still are, in local government know that local government costs tend to be dominated by the employees' costs, and in recent years these costs have moved much faster than prices. So it would seem sensible to take note of this fact when varying the national non-domestic rating multiplier.
There is considerable concern to ensure that proper account is taken in future of such increases in pay and prices which are actually incurred by local government. These have to be fully and fairly recognised in the future indexation of the grants and the business rates. That is why I propose the use of a local authority index rather than the retail price index which takes no account of the teachers', the police, the fire service and the manual workers' pay awards which are not included in the retail price index but which bear especially heavily on local authorities. They cause an increasing proportion of local authority costs to have to fall on the taxpayer.
It is essential that central government, who now determine the level of the teachers' pay awards and the police pay, are tied to increases in what is known as the upper quartile of male manual workers. Therefore local authorities and their associations have no control at all these days over the pay of about one-third, which represents about half the total pay costs of local authority employees. It would surely be unfair if the real local taxpayers—the ones who are paying the community charge—have to bear a disproportionate share of local government costs in order to protect non-domestic ratepayers.
CIPFA has done a lot of work on this which shows that if the new system of local government finance had been introduced in 1986–87, and the size of the national non-domestic rate pool were calculated initially on the basis of actual rate poundages in 1986–87, and in subsequent years on the basis of

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index-linked non-domestic rate poundages, after only two years of index-linking the pool would be some £650 million smaller than might reasonably have been expected. That means that the community charge would have to have risen by £18 for every adult in the country to make good that deficiency.
The Association of County Councils obviously takes an interest in this as well. On the local authority side, Lincolnshire County Concil has been preparing annual repricing factors for local authority measures of the inflation facing local authorities which are used in the various official returns and publications. There are quite a lot of facts and figures about that, but in fact over a full nine-year period of local authority inflation which Lincolnshire has measured, it exceeded both the government sponsored inflation indices—the gross domestic product and the retail prices index.
In the most recent three years, local authority inflation has been relatively stable at around 6 per cent. per annum, and it has been rising at roughly 1·5 per cent. ahead of both the retail prices index and the GDP deflator. So it is straightforward to assess what the effect on the community charge would be nationally if this situation were to continue for a further three years after the introduction of the proposed system of local government grant and finance. It would show that an inadequate increase in the national non-domestic rate over that period could mean a 19 per cent. increase in spending which, of itself, would result in a 30 per cent. increase in the community charge. To put it another way, if one takes as a base year a community charge at £225, in the first year after that it would have to increase to £245; in the second year it would be £267, and in the third year, £291.
What this really means is that if the price indices used are not the ones which reflect the actual costs of local government, one has to consider this in terms of the shift in burden from business ratepayers and government grant to community charge payers. Even if local authority inflation were only to exceed the increase in the retail prices index by the observed nine year average of 0·7 per cent. in each year, after 10 years there would have been a shift of over £1·25 billion from business ratepayers to community charge payers. I do not think that is fair; I think that the index that should be used should be one which is geared to local authorities' actual costs. I beg to move.
9.45 p.m.
Lord McIntosh of Haringey: I wish to speak to Amendments Nos. 110, 111, 113, 115 and 117. My amendments perform an elegant dance around the amendments of the noble Baroness, Lady Stedman, in the Marshalled List. We come together very happily at Amendment No. 111, which is in both our names. Unfortunately there is an intrusion of some vulgar amendments with the letters A and B appearing after them which come in the middle, standing in the name of the noble Earl, Lord Caithness.
There are three important points in these amendments. I very much support what the noble
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Baroness, Lady Stedman, has said. The first point (on which she rightly placed the most emphasis) is that everyone who knows about local authority costs knows that they are heavily influenced by wages and labour costs. Those are not labour costs in general but a specific kind of labour costs. History has shown, as the noble Baroness has said, that over a period of years the inevitable costs—often imposed by central government; teachers' salaries are a good example—are ahead of the retail prices index. To that extent, the risk of the revenue available to the local authority from sources other than the community charge declining in real cost terms is very considerable.
The second point, raised in Amendment No. 111, refers specifically to the potential for increases in the national non-domestic rate. As the Bill is drafted, there is a possibility that the national non-domestic rate poundage could be increased by a figure which is even less than the retail price index. That is entirely in the hands of the central government. The inevitable effect of such an increase would be to shift the burden from the national non-domestic rate to the community charge. Although one might think that that would have the desirable effect of increasing the proportion of a local authority's expenditure which is under its control, it would be a proportion of a smaller figure and it would be a thoroughly undesirable way of achieving those objectives.
The third point, which is perhaps of less significance, is raised in Amendment No. 117. I believe that the Minister will be very familiar with the point that there should be appropriate consultation procedures between the Secretary of State, representatives of local government and representatives of non-domestic ratepayers. The significance of that is not simply that there should be consultation but that there should be consultation before the non-domestic rating multiplier for a chargeable financial year is calculated.
We shall come to that matter later in the Bill. However, there is a serious danger that the Secretary of State can intervene virtually at any stage in the financial year to change the boundaries of the financial resources of local authorities. I shall refer to that in connection with rate capping when we come to it. However, it also applies to the non-domestic rate and I hope that the Minister feels able not only to agree to consultation but to agree that it should take place before the figure is calculated so that we do not have the shifts in ministerial diktat which have tended to occur in recent years, particularly when we look at rate support grant.
Lord Boyd-Carpenter: The speech and the amendment of the noble Baroness, Lady Stedman, are obviously inspired from the point of view of local authorities. Looked at solely from their point of view, there is plainly a good deal of logic in what she has said. However, the Committee must also consider the non-domestic ratepayer. His income may well not be rising any faster than the retail prices index. Indeed, in some cases it may be rising more slowly. The Committee should be careful in going all the way with the interests of the local authorities and ignoring the

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ratepayers. One of the major objectives of the Bill is to give the ratepayer a better deal than he has been getting in recent years.
I take the point made by the noble Baroness that some items of local expenditure—teachers' salaries, for example—are fixed not by the local authorities but by the central government. On the other hand, I think that very few noble Lords with any experience of local government would dispute the fact that local government, if it has to, can make economies in its administration. I would suggest to the Committee that if the local authority index, as the noble Baroness
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describes it—that is, the way in which local authority costs are rising—is rising faster than the retail price index, surely it raises the question whether or not local authority expenditure requires looking into. If, indeed, one important item of local authority expenditure—to wit, teachers' salaries—rises for reasons beyond the control of the local authority, surely it is up to the local authority to reduce expenditure in one direction or another so as to keep its total rise in line with the retail price index. If we have to choose between the interests of the local authorities and the interests of the ratepayers, I am on the side of the ratepayers.
Lord Monson: Before the noble Lord sits down, I should like to ask whether or not he is aware that Lincolnshire County Council, to which the noble Baroness, Lady Stedman, referred—which is a Conservative controlled council—is run as an extremely tight ship. I think that if there had been any economies which it could have made, it would have done so.
Lord Boyd-Carpenter: I admire the noble Lord's simple faith in any local authority. Simply to say that if any economies could have been made it would have made them, argues a credulity which I am not prepared to share.
The Earl of Caithness: The simple effect of Amendments Nos. 109 to 117 would be to force business rates up by more than the rate of inflation. By contrast, the Government wish to provide at least the possibility that they might be reduced. I hope that the business organisations which have expressed concern about the possible effects of revaluation and the national non-domestic rate are taking note of the real attitude to the business community of both parties opposite. As my noble friend Lord Boyd-Carpenter has suggested in his helpful intervention, it is with these amendments that we hear the true voice of the Labour and SDP parties who are concerned to go on subsidising the high-spending policies of some local authorities at the expense of precisely those small businesses they seemed so anxious to protect earlier.
The Government on the other hand seek to limit the tax burden on businesses. We have provided that business rates cannot rise faster than general inflation. In another place we allowed for the possibility that they may rise a little less by taking power to trim the increase resulting from the RPI link in any year. Our basic position is that business rates should rise in line with general inflation. That will give businesses the protection they need against the excessive rate increases that many local authorities have been prepared to impose on them year after year. It will mean that business rates should go on making the same contribution towards keeping community charges at a reasonable level.
There are, however, several reasons why we might from time to time want to consider abating some of the inflationary increase in business rates in any one year. First, the total yield from business rates tends to rise in real terms over time by about 1 per cent. to 2 per cent. a year. In a normal year we would propose to leave the benefit of that buoyancy with local authorities to reflect the extra cost of providing services to the new buildings. Occasionally it may be right to stop and think whether some of that benefit might be given back to the business community which is generating the extra revenue.
Secondly, business rates have increased excessively in recent years and are now higher than we should like. There may be a case over the longer term for shifting some of the burden on to some other tax, the benefit of which could be fed back into the system
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through grant. That incidentally is one of the reasons why the power is conferred on my right honourable friend the Chancellor of the Exchequer rather than on my right honourable friend the Secretary of State.
Thirdly, we all know that authorities can make savings from greater efficiency. The pressure of proper accountability through the community charge should make them look much harder at where the fat can be trimmed. If and when they succeed there may be a case for giving some of that benefit back to business. Again, those powers—which the amendment of the noble Baroness would remove—would permit us to give business a share of any savings that authorities were able to make, though I do not expect the power to increase business rates by less than the RPI to be used often.
Turning in detail to the amendments before the Committee, in different ways these would replace the RPI in the formula for uprating the poundage by a local government cost index to be maintained by the Secretary of State. Behind these amendments lies the concern, possibly even the hope, of the noble Lord, Lord McIntosh of Haringey, and the noble Baroness, Lady Stedman, that local authority spending will continue to rise faster than the retail prices index, as it has done for many years past despite the Government's best efforts.
For the future, if authorities increase their spending faster than inflation they will no longer be able to obtain a share of the cost of the increase from the non-domestic ratepayer. The full cost of increases in spending will therefore fall on the community charge payers who will have the chance to make their own judgment about whether their authority's high spending is justified.
In other words, under our proposals the full cost of irresponsible, profligate local government spending is going to be brought home to all the voters who can express their views at the ballot box. That surely is as it should be. These amendments are therefore trying to link the non-domestic rate to the actual cost of local government by means of a local government cost index in order to help hide spending increases from the voters.
Underlying this is the view that because a high proportion of local government spending goes on wages and salaries it is reasonable that local government spending should increase in line with wages rather than prices. This is a view that we unequivocably reject. In the private sector the pressure of competition means that wages can rise faster than prices only if a firm can make productivity improvements—making the same number of goods with a reduced workforce, or more goods with the same workforce. There is no reason why this principle should not apply to local authorities too.
We know that there is scope for productivity improvements in local government. The Audit Commission has identified many areas where costs could be saved without cutting services—indeed, while improving them. But authorities show a

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remarkable reluctance to realise these savings. Instead they just accept that costs should go on rising year after year. It is perhaps only in the world of local government that some of the bad old attitudes survive, where authorities decide first on the services they want and only then think how they are going to pay for them.
These amendments would serve to reinforce that attitude. If local authorities decided to pay all their staff more, then up would go this local authority cost index and up would go the business rate. Businesses would have no say in what was going to be well hidden from the community charge payer. We see no reason why local government spending should rise by more than the RPI. We in fact believe that there is plenty of scope for it to rise by less. But even if it rises by more there is no reason for businesses to be forced to pay. As I have said, there is an arguable case that they pay too much now. It is for the community charge payers, the electors, to consider whether they want more services at higher cost. They can only take a balanced view if that cost would fall on them.
Perhaps I may answer one point of the noble Lord, Lord McIntosh. I think he worked from a misapprehension when he said that my right honourable friend the Secretary of State could intervene at any time during the year. The Secretary of State cannot intervene in the course of the year. Local authorities will know the income that they will get from grant and non-domestic rates from before the start of the year, and there will be no—and I repeat "no"—scope for changing this after 1st April.
Lord Monson: I do not think that the noble Earl has answered the pertinent point made by the noble Lord, Lord McIntosh, which was also on my mind, about teachers' salaries and other centrally-imposed price rises.
The Earl of Caithness: I covered the point of wages and salaries. I admit that some are done from the centre, but I think, as the Audit Commission said in its recent report, that there are considerable savings to be made in the way that local authorities conduct their business. We do not see why the extra costs above RPI should fall on the business community.
Lord McIntosh of Haringey: The Minister makes the same tired old cracks about the irresponsible and profligate expenditure of local authorities. He ought to look at the balance between those parts of his script that come from Conservative Central Office and those that come from the department. It seems to me that the former is taking over in quite a large part of the speeches he is given to read.
When he is talking about local authority expenditure the noble Earl ought to remember that central government expenditure has been going up faster than local government expenditure in the course of this decade.
Noble Lords: Control it!
10 p.m.
Lord Ross of Newport: I must make a protest about the Minister's comments concerning local government. It really does not help when the Government constantly criticise local authorities that are trying desperately to comply with the Government's diktat. God knows, they are implementing any number of things at the moment to try to save money, particularly cutting back on the arts and that sort of thing which I think, quite frankly, is proving disastrous for the country. It is not clever to stand at the Box and constantly gripe about local authorities—and incidentally, some of the local authorities in which the Alliance party has some interest have actually had a lower rate increase this year than those that are controlled by Conservatives. Let us have that put on the record, although I do not want to make party political points on this subject. The breakdown of the relationship between central and local government in this country is an absolute disaster. Why do not the Government abolish local government altogether? That is what they really want to do.
Baroness Stedman: I am very disappointed with the Minister's reply and, like my colleagues on the other Benches, I am becoming fed up with the continual disparagement of local government that we hear from the Benches opposite. I should like to see us return to the day when local and central government consulted each other and worked together in the same frame of mind as they enjoyed 15, 20 or 25 years ago. That will not happen if all the time central government are picking on local government and making them the scapegoat for everything. Salaries comprise the biggest part of most local authorities' budgets. When central government fix the salaries of a very high proportion of people, then local authorities have very little money left in the kitty with which to fund projects. I see that the noble Lord wishes to say something.
Lord Dean of Beswick: I am grateful to the noble Baroness for giving way. Perhaps she remembers that only a few years ago the police forces received from the Government, or at least by government negotiation, a very substantial increase in salary to which the local authorities objected because of the proportion of that increase that they would have to meet. Nevertheless, they were completely ignored.
Baroness Blatch: Before the noble Baroness continues, perhaps I may say something that has not been mentioned by any Member of the Committee today; namely, that the Government meet 51 per cent. of the actual costs of police pay. That has not been mentioned at all. They pay 51 per cent. of the actual cost to the local authority, whatever it is. We are talking about having a kind of blank cheque in advance of funding local government. We are trying to get away from that blank cheque policy. It is not an attack on local government. Local government still has a very real input into negotiating bodies, as it did into what was the Burnham Committee. It is for the local authorities to go to the negotiating bodies with sums that people can afford to pay, whether they

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are national or local taxpayers, and to take a realistic attitude towards funding. They should be able to talk to whoever it is on whatever pay settlement is being negotiated and not have on the negotiating table in advance the knowledge that whatever the bill comes to the Government will pick it up.
Lord McIntosh of Haringey: I think it is rather unwise of the noble Baroness to refer from those Benches to the Burnham Committee, when it was her party's Government that only last year abolished that body and took the entire control of teachers' salaries into the hands of the Secretary of State for Education and Science.
Baroness Blatch: Considering the record of the Burnham Committee, it was a good thing too!
Baroness Stedman: Perhaps after four interventions I may continue. The noble Lord, Lord Monson, is quite right. Many of the counties are running very tight ships. I was in local government before I came to this Chamber 14 years ago. In Cambridgeshire, which is the county of the noble Baroness, Lady Blatch, we were even then making considerable savings and beginning to reduce our expenditure. That has gone on year after year. I think that it is very unwise and unfair of the Government Benches—and perhaps the Minister will listen to what is being said—
The Earl of Caithness: I am listening.
Baroness Stedman: I think it is very unwise and unfair of the Government continually to blame local government as a whole for what a few authorities have done, and done badly. All we are asking in this group of amendments is for the Government to base their returns on the real, practical considerations of local government. Local authorities are given statutory duties to do a job but there is not enough money left in the kitty to do that job without considerably putting up charges to the community charge payers.
Yes, we have consideration for business and, yes, we know that when the costs of business rise too high they are likely to make business non-competitive. But we are also concerned about the people who pay the rates in the local authority areas. We should like to see them granted some salvation and receive some consideration when the Government are working out how the grant should be effected.
I am very disappointed. However, I am not prepared to press my amendments at this hour, but I hope that the Government will take note of what has been said and will at least try to work with local government and not continually go against it.
Lord Ross of Newport: Would the noble Baroness agree that one of the biggest growths in the costs of bureaucracy to local government will come from implementing this very Bill?
Baroness Stedman: It will indeed put up the costs tremendously, and we do not know who will met them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 110:
Page 108, line 14, leave out ("retail prices") and insert ("prescribed").
The noble Lord said: I have already spoken to the amendment. I beg to move.
10.6 p.m.
On Question, Whether the said amendment (No. 110) shall be agreed to?
Their Lordships divided: Contents, 18; Not-Contents, 45.

DIVISION NO. 2

CONTENTS

Airedale, L.

Pitt of Hampstead, L.

Dean of Beswick, L.

Ponsonby of Shulbrede, L [Teller.]

Graham of Edmonton, L.

Hacking, L.

Ross of Newport, L.

Hayter, L.

Russell, E.

Hughes, L.

Seear, B.

McIntosh of Haringey, L.

Stedman, B. [Teller.]

McNair, L.

Tordoff, L.

Monson, L.

Underhill, L.

Mountevans, L.

NOT-CONTENTS

Abinger, L.

Glenarthur, L.

Arran, E.

Henley, L.

Balfour, E.

Hesketh, L.

Beaverbrook, L.

Hives, L.

Belstead, L.

Lindsay, E.

Blatch, B.

Long, V. [Teller.]

Boardman, L.

Mackay of Clashfern, L.

Borthwick, L.

Munster, E.

Boyd-Carpenter, L.

Radnor, E.

Brabazon of Tara, L.

Rankeillour, L.

Caithness, E.

Renton, L.

Cameron of Lochbroom, L.

Rippon of Hexham, L.

Carlisle of Bucklow, L.

Saltoun of Abernethy, Ly.

Carnock, L.

Sanderson of Bowden, L.

Carr of Hadley, L.

Sandford, L.

Craigmyle, L.

Skelmersdale, L.

Croft, L.

Stanley of Alderley, L.

Denham, L. [Teller]

Teviot, L.

Dundee, E.

Thomas of Gwydir, L.

Elliot of Harwood, B.

Trafford, L.

Faithfull, B.

Trumpington, B.

Ferrers, E.

Wynford, L.

Gardner of Parkes, B.

Resolved in the negative, and amendment disagreed to accordingly.
10.13 p.m.
[Amendments Nos. 112 and 113 not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 113A:
Page 108, line 19, at end insert—
("(4A) But where the base month for the retail prices index for September of the financial year which precedes that preceding the year concerned (the first year) differs from that for the index for September of the year which precedes the year concerned (the second year), C is the figure which the Secretary of State calculates would have been the retail prices index for September of the first year if the base month for that index had been the same as the base month for the index for September of the second year.").
The noble Lord said: In moving Amendment No. 113A, I shall speak also to Amendments Nos. 114A, 115A, 115B and 116A. These are straightforward technical amendments, the purpose of which is to plug a gap in the drafting of the Bill. I beg to move.
Lord McIntosh of Haringey: I accept that this is a drafting amendment but I cannot help observing that, if attention had been paid earlier to the wise words of the noble Baroness, Lady Stedman, and my own wise words, we should not have needed it. The RPI is an unsatisfactory means of measuring local authority expenditure. It is particularly unsatisfactory because the index is recalibrated so often.
On Question, amendment agreed to.
The Deputy Chairman of Committees (Lord Renton): Before calling Amendment No. 114, I must point out that, if it is agreed to, I cannot call Amendments Nos. 114A, 115 or 115A.
[Amendment No. 114 not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 114A:
Page 108, line 32, leave out ("and (4)") and insert ("to (4A)").
On Question, amendment agreed to.
[Amendment No. 115 not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 115A:
Page 108, line 35, leave out ("either") and insert ("any").
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendment No. 115B:
Page 108, line 37, at end insert—
("(7A) For the purposes of sub-paragraph (4A) above the base month for the retail prices index for September of a particular year is the month for which the retail prices index is taken to be 100 and by reference to which the index for the September in question is calculated.").
On Question, amendment agreed to.
[Amendment No. 116 not moved.]
Lord Hesketh Lord Hesketh moved Amendment No. 116A:
Page 109, line 9, at end insert—
("(1A) Where the financial year is one for which the Secretary of State has calculated a figure for C under paragraph 5(4A) above, the notice must contain the figure he has calculated.").
On Question, amendment agreed to.
[Amendment No. 117 not moved.]
Schedule 7, as amended, agreed to.
Clause 49 [Special provision for 1990–95]:
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 117A, 117B, 117BA and 117C:
Page 27, line 35, leave out ("before the beginning of the year").
Page 27, line 39, leave out from ("be") to end of line 42 and insert ("an amount found in accordance with prescribed rules (which may be the same as or different from the amount he would be liable to pay apart from the regulations).").
Page 28, line 13, at end insert—
("(3A) In relation to a hereditament or hereditaments in the area of the Common Council, subsection (3) above shall have effect as if the reference to a general rate included references to a rate in the nature of a general rate, the poor rate and the St. Botolph tithe rate.").
Page 28, line 13, at end insert—
("(3A) Without prejudice to section 141(1) below, regulations under this section may contain different provision in relation to locally listed hereditaments whose rateable value exceeds, and those
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whose rateable value does not exceed, a prescribed figure; and a locally listed hereditament is a hereditament for the time being shown in a local non-domestic rating list.
(3B) Regulations under this section in their application to a particular financial year (including regulations amending or revoking others) shall not be effective unless they come into force before 8 March in the preceding financial year.").
The noble Earl said: I beg to move Amendments Nos. 117A, 117B, 117BA and 117C en bloc. I have already spoken to these amendments.
On Question, amendments agreed to.
[Amendment No. 117D not moved.]
Clause 49, as amended, agreed to.
The Earl of Caithness The Earl of Caithness moved Amendment No. 117E:
After Clause 49, insert the following new clause:
("Special provision for 1995 onwards.
.—(1) In relation to any relevant period the Secretary of State may make regulations under this section.
(2) The regulations may provide that, in any case falling within a prescribed description, the amount a person is liable to pay in respect of a relevant financial year under section 39 or 41 above as regards a hereditament, or under section 46 above as regards hereditaments, shall be an amount found in accordance with prescribed rules (which may be the same as or different from the amount he would be liable to pay apart from the regulations).
(3) The rules prescribed under subsection (2) above may be framed by reference to—

(a) the amount (or a prescribed proportion of the amount) payable by way of a non-domestic rate under this Part as regards the hereditament or hereditaments in respect of the financial year preceding that for which the amount is to be found.

(b) the amount (or a prescribed proportion of the amount) which would have been so payable by the person mentioned in subsection (2) above if facts identified under prescribed rules had been the same in that preceding year as in that for which the amount is to be found, or

(c) such other factors as the Secretary of State thinks fit.

(4) Without prejudice to section 141(1) below, regulations under this section relating to a relevant period may contain different provision for different relevant financial years.
(5) Without prejudice to section 141(1) below, regulations under this section may contain different provision in relation to locally listed hereditaments whose rateable value exceeds, and those whose rateable value does not exceed, a prescribed figure; and a locally listed hereditament is a hereditament for the time being shown in a local non-domestic rating list.
(6) Regulations under this section in their application to a particular relevant period shall not be effective unless they come into force before 1 January immediately preceding the period; but this is without prejudice to the power to amend or revoke.
(7) For the purposes of this section—

(a) a relevant period is a period of five years beginning on any 1 April (other than 1 April 1990) on which lists must be compiled;

(b) a relevant financial year, as regards regulations relating to a relevant period, is a financial year falling within the period.").

On Question, amendment agreed to.
Clauses 50 and 51 agreed to.
Schedule 8 [Non-domestic rating: pooling]:
Lord Hesketh Lord Hesketh moved Amendment No. 117F:
Page 112, line 10, at end insert—
("(4A) The Secretary of State may incorporate in the rules provision for deductions (of such extent as he thinks fit) as regards—

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(a) the operation of sections (Discretionary relief) and (Reduction or remission of liability) above;

(b) costs of collection and recovery;

(c) such other matters (if any) as he thinks fit;

and sub-paragraphs (2) and (3) above shall have effect subject to this.").
The noble Lord said: Amendment No. 117F is little more than a drafting amendment. It deals with the amounts the charging authorities will, under rules that the Secretary of State will make, be required to pay into the national non-domestic rate pool. Clearly the amount that an authority has to pay in cannot be just the amount it actually manages to collect. That would mean that authorities would be under no pressure to pursue defrauding ratepayers to collect the money on behalf of all the other authorities which will be sharing in the pool. On the other hand, it is equally important that authorities should not have to pay in money which they could not reasonably have collected; for example, because a ratepayer has gone bankrupt.
There will need to be rules for calculating the amount authorities are deemed to have collected and are required to pay in, taking account of the various causes of shortfall in collection. We have already discussed with the local authority associations what the rules are to provide and we shall consult them further before the regulations are actually made. In particular, we intend that the rules should allow authorities in calculating their payments into the pool to offset a standard allowance for the cost of rate collection. We also intend that the pool should bear part of the cost of any discretionary relief which authorities choose to give to charities and other nonprofit making bodies under the new clauses which we discussed earlier. There may be other cases of variation in income for which allowance needs to be made.
Paragraph 4 of Schedule 8, as drafted, refers to the rules being framed so that the amount calculated under them would be broadly the same as the amount which the authority was able to collect if it acted diligently; in other words, if it made all reasonable efforts to collect the full amount owing to it. We believe that as they stand the words would have allowed us to provide for allowances for cost of collection, discretionary relief and so forth. However, to make that assurance doubly sure the amendment spells out in unambiguous words that such allowances can be made. For that reason, I would expect it to be welcomed by the charging authorities as giving them the assurance that the power is there to make the allowances as we have promised. I beg to move.
Lord McIntosh of Haringey: We welcome the amendment, but I cannot help thinking that if the Deputy Chairman had been in his place on the Benches he would have been suspicious of the phrase "little more than a drafting amendment".
On Question, amendment agreed to.
Lord Hesketh Lord Hesketh moved Amendments Nos. 117G to 117J:
Page 112, line 35, leave out ("by its auditor") and insert ("under arrangements made by the Audit Commission for Local Authorities in England and Wales").
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Page 112, line 37, leave out paragraph (c) and insert—
("(c) notify the amount to the Secretary of State, and send to him a copy of the certification of the calculation and the amount.").
Page 113, line 29, leave out sub-paragraph (6).
The noble Lord said: In moving Amendment No. 117G, I should also like to speak to Amendments Nos. 117H and 117J. These are technical drafting amendments concerned with the arrangements for auditing the accounts of local authorities' contributions into the national domestic rate pool. I beg to move.
On Question, amendments agreed to.
The Deputy Chairman of Committees (Lord Renton): Before calling Amendment No. 118, I have to point out that if it is agreed to I cannot call Amendments Nos. 119, 119A or 120.
Baroness Stedman Baroness Stedman moved Amendment No. 118:
Page 114, leave out lines 9 to 39.
The noble Baroness said: Again, we have a rather lengthy list of amendments which have been grouped together, and I wish to move Amendment No. 118 and speak to Amendments Nos. 122, 134, 142, 143, 145A, 149, 150A, 158A, 159A, 160A, 161A and 162ZA. Having said all that and knowing that this group of amendments is also in support of county councils, I rise with a somewhat heavy heart in view of the treatment we had from the Benches opposite in the last set of amendments.
The county councils feel that there is a need to bring into being the same system for dealing with the collection and allocation of the new rates in England in line with the system proposed for Wales. What is being done at present is proposed to be done in Wales. Under the system that is proposed for Wales, the grant and non-domestic rate redistribution is made direct to counties and that means that the county levy will represent the amount that the community charge payer actually has to pay and that must enhance their accountability.
As the Bill stands, the counties in England will be obliged to precept on districts rather than raise their poll tax separately. Those registered to pay should be able to see what individual districts are spending. They should be able to see how much they are paying towards the expenditure of the county services and of the district services.
However, the revenue support grant and the non-domestic rate is to be paid into the district collection fund and counties and other precepting authorities will then precept on the collection fund for their total expenditure net of any specific grants, fees and charges. The bill received by the community charge payer will only show one community charge for the area as a whole. That means there is no direct link between an authority' spending and the composite community charge which is being levied. Therefore, the charge payers cannot see how much they are paying towards the authority's services and an authority cannot measure the impact of its budget decisions on the community charge payers in its area.
As the bill is sent out by the district councils in the shire areas, the responsibility for explaining what is to be paid lies with the district treasurers; and the link

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of accountability between an authority and its local residents is substantially weakened.
The Bill itself recognises the unsatisfactory nature of these arrangements. In order to cope with the possible need for additional grant to be paid to recognise exceptional circumstances arising during the year, the Secretary of State may direct that additional grant can be paid to specific local authorities.
In Wales different arrangements will apply. The grant and the non-domestic rates will be paid direct to the relevant authorities; those authorities only precepting on the collection fund for their net community charge. Therefore, the Welsh districts and counties will have their own separate community charges.
My understanding is that the Government's main argument for the collection fund approach is that it will remove the need for what they deem to be disaggregation of grant between tiers of authority—that is, the counties and the districts—and so reduce the complexity of the grant. However, neither of those ought to be an issue. The violent swings in the current grant system have been the product of the grant penalties, of rate-capping, of safety nets and high grant recycling followed later by its abolition. The intention, as I understand it, is that the new grant system will be simpler and more stable, with grant entitlements being fixed in advance of the year, a much simpler needs assessment system and the presumption against any annual changes in the methodology.
This group of amendments would introduce arrangements for England similar to those which will apply in Wales. The grant and the non-domestic rate would be paid direct into all the main precepting authorities—at this stage excluding parishes—with the collection fund remaining purely for the collection and distribution of the community charge.
I have been supplied with a couple of what are believed to be the pro formas which the authorities will send out. If they send them out from the district collection fund, as proposed in the Bill, they will have all the details of the county councils' spending, the district councils, parish councils and the collection fund, with the government assessment of spending on the other side. From the actual spending they will take away the government grant and the contribution from the non-domestic ratepayers, which will leave the community charge for the area.
On the other side, when those same items have been deducted it will leave what is estimated will be the community charge if the authorities had calculated it according to their grant-related expenditure. On the bottom of the form will be stated what is the registered population and the government assessment of population. In the example I have, there is a difference between 55,860 as the registered population and the government assessment of 58,800.
If one adopted the form which these amendments propose, and we had the same system as in England, one would have, again, the community charge bill and set out under community charges the county
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council community charge, the district council community charge and the parish council precept so that the persons receiving the bill could see exactly what they are being asked for together with an amount for collection fund expenses. One would then know the total community charge payable and on the other side have the government assessment which, in this case, is on the same population and shows the same deficit. At least people are able to see what each authority is precepting and it enables members of county councils and district councils to argue properly and fairly who is responsible for the rise or fall in the expenditure. If the English system can be brought into line with the Welsh proposals then the grant and the non-domestic rate redistribution will be made through the counties. The county levy will represent the amount that the community charge payer actually had to pay. I think that this will greatly enhance accountability at all levels of authority. I beg to move.
10.30 p.m.
Baroness Blatch: This is a point with which I have always had enormous sympathy. The noble Baroness, Lady Stedman, and I have attended the same meetings and we have been well briefed by one highly-regarded local government officer from my own authority. Since those meetings I have done a great deal of thinking about the problem.
I have a view about both the present system and the new one. It is that too little regard is paid to the spending levels of authorities. I am not saying this as a criticism of any local government authority, but we are terribly preoccupied with the level of rates and all kinds of comparative tables. In the present system the actual level of spending is very often masked by the complexity of the system.
One of the advantages of the new system, I believe, is that it is more simple and that it exposes absolutely everything. It exposes the spending level of the local authority, whether district or county, and it rightly exposes the involvement of government with local authorities. For example, it will expose the national government when they make a determination about the RPI and their contribution to local authorities. The proposed pro forma referred to by the noble Baroness ensures that the spending levels of the county councils are set out clearly, as also are the spending levels of the district councils. The Government's own assessment of what the spending levels should be is also set out alongside. The resultant consequential community charge is there as a figure at the end of the day.
I believe that if we return to splitting up those figures and talking about two community charges, we shall be returning to the difficulty the public anyway have in understanding local government. More than that, I believe we shall start to fuel an already attractive thought in the minds of many in the community as regards dividing and ruling between county and district authorities, which I consider to be an unhealthy step to take.
Having talked it through with officials and having gone back to my own director of finance, I am convinced in my mind that the information required

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by those who will pay the community charge is clearly set out in the forms, which separate district from county councils. I shall be supporting that, because I believe it is clear, although I understand the point made by the noble Baroness that it would be desirable for the counties to be treated separately. I do not honestly believe that it is going to resolve some of the problems set out. Anything that brings home accountability between the people who have to pay for the services and the spending authorities is important. This pro forma does not preclude the most important part of all, which I believe was referred to towards the end of the presentation by the noble Baroness. It does not preclude both the county and the district councils from setting out the breakdown of their spending, which will be very important.
An enormous amount of progress has been made by all local authorities in giving their electorate proper information about spending.
Indeed, they are now required to give such information. It will be for the county council to set out not only in clinical form in this pro forma what its total spending will be, but to break it down to make comparisons with what happened last year and what is to happen next year. The districts will do the same. I believe that all the information is there and the simpler it can be kept the better. I am convinced that this pro forma provides all the information in a relatively simple form.
Lord McIntosh of Haringey: I rise to speak to Amendments Nos. 119, 121, 146, 149, 151, 155 and 157 and to the amendments already spoken to by the noble Baroness. Like the noble Baroness, Lady Blatch, I have been having second thoughts. There is a real difficulty in that the Government are proposing a system whereby for Wales the grants go separately to the district councils and to the county councils, and for England they go to the district councils which set up a collection fund which is then allocated to the county councils. Clearly, whichever view one adopts as being correct, what one cannot do is to have one system for Wales and another system for England. I know that the Government will have a complex and no doubt Jesuitical series of reasons to explain that Wales is totally different from England in this respect. I do not think that we need spend too much time on them. Either the argument for accountability works better with a collection fund or it works better with the grant being separately allocated to each of the two tiers of local authority.
The argument for having a collection fund would have to stand on the basis that the allocation of grant between the two tiers was in some way artificial. I have not heard that convincingly argued so far. It may well be that there are arguments on that basis and that in consequence the community charge payers would be misled by a division of charges. I am bound to say that, having thought about my amendments, having thought about the amendments of the noble Baroness, Lady Stedman, and having thought about the objective which we must all have of achieving the greatest level of simplicity of explanation to the ratepayers, I have come to the conclusion that she is right, that I was wrong and that we in England ought to adopt the Welsh system of a
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separate grant rather than adopt in Wales the English system of a collection fund. For those reasons I shall not be moving the amendments standing in my name.
I appreciate that this is a difficult matter. I appreciate that it divides local authorities. For example, the Welsh members of the Association of District Councils are in conflict about this with the English members of the association. Nothing we do will please all local authority associations. The conclusion we have to draw is that perhaps it is not so important to please local authority associations. What is important is to produce the best result for community charge payers and to increase accountability. I do not think that the Government proposals do that. The Government must come down on one side of the fence or the other. I suggest that they would be well advised to accept the amendments in the name of the noble Baroness, Lady Stedman.
The Earl of Caithness: As we have heard, these amendments would change the basis of payment of the revenue support grant. There are those who would have the English system like the Welsh and those who feel that the Welsh system should be brought in line with what we have proposed for England.
I am interested that the noble Lord, Lord McIntosh of Haringey, is now changing ground on this matter. The arguments, which continue outside the Chamber as well as inside it, convince me that we have it right and I hope to persuade the Committee that what we propose for both England and Wales has been well thought out and is workable and appropriate in each case. We have proposed different systems for each of the two countries for very good reasons. The fact that we have before us amendments in favour of both the Welsh and English systems demonstrates that there are arguments for both courses.
In England there are three main problems with the present system. First, it is complicated. Very few people can understand the link between council spending, grant and rate bills, so reducing the accountability of authorities to their ratepayers and voters. Secondly, the present system is unstable. Authorities' entitlements to grant can change markedly from year to year and even within a year, often for reasons beyond their immediate control. One of the reasons for grant shifts has been any change in the priority given to services, as reflected in differential increases in spending provision. We just cannot do away with these grant shifts even though they have little effect on ratepayers. Such shifts are a by-product of our decisions about spending need and overall distribution of grant across the country.
Thirdly, the grant system provides a hidden and little understood subsidy to some regions through the present system of resource equalisation which gives more grant to authorities with low rateable value. Resource equalisation puts up the rate bills of some, entirely independent of the spending decisions of their own councils and gives equally randomly uncovenanted benefit to others. This serves to confuse accountability even further.

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To overcome such difficulties we concluded that amending the present system would not be enough. We would have to make radical changes and make the grant system simpler. The key simplification is that grant will depend only on assessed need and not spending. An authority's entitlement in a year will not vary with its spending that year and certainly not with any other authority's spending. By not basing the whole local government finance system on rateable values, we do away with resource equalisation through the grant system.
Those two elements taken together mean that it will be quite clear that the size of the community charge in an area depends upon what the authorities in that area spend compared with what, in total, they need to spend. However, those elements will not alone overcome the difficulties of dividing grant between tiers. When we came to consider this, we realised that there is another simpler way of looking at grant and that is to consider it as a payment in support of the local domestic taxpayers of an area. If there were no grant and no business rates, local domestic taxpayers would have to finance all of the expenditure of the authorities providing services in their area. That would be a heavy burden which would fall unfairly as between areas of high and low need.
So grant and business rates are paid not so much to help authorities as to support local community charge payers and so reduce the amount they personally have to contribute. The relationship between the taxpayer, as provider of revenue support grant, business, and the charge payer is embodied in the concept of the collection fund.
As my noble friend Lord Glenarthur explained when we were considering Part II, a collection fund will be established for each area. The fund will receive revenue support grant and community charges and the non-domestic rates for the area. Local authorities will make demands for their revenues on the collection fund. Such demands represent the costs of the services that the authority is providing; costs which will have to be met by the charge payers supported by the taxpayer through grant, and business, through NNDR. This arrangement means that charge payers will be able to see clearly the full cost of local services. I know that my noble friend Lady Blatch believes that to be an important consideration. Indeed, I was most grateful for her contribution to the debate.
While it would be possible to achieve some of this with a system which paid grant and NNDR to each tier of authority, we would nevertheless be faced with the technical problems of dividing up every stream of income which under our proposals goes into the collection fund—that is grant, NNDR and the charge—between all the authorities in an area. That would at once begin to complicate the system all over again.
It has been suggested that the system would encourage greater accountability if each authority set its own charge, taking account of its spending and its own share of grant and NNDR. I disagree. Not only would we have the technical problems that I have just
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described, but it would mean that each tier of authority would spend as much time worrying about whether it was getting its fair share of grant as about its actual spending and the level of services it provides. This happens under the present system. All it does is generate a lot of misplaced effort by authorities trying to show that the district, or the county as the case may be, is getting too much and they are getting too little.
Under the collection fund arrangement, income will not be hypothecated. It will all flow into one big purse and each authority will draw what it needs without having to worry about whether the money comes from the taxpayer, the charge payer or business. What that does is put the major focus where it belongs—on the actual level of spending compared with need—because it is spending which will determine the final level of the charge. If charge payers see that the charge they are being asked to pay is £20 more then the national norm for spending at need, they will be able to see that this is not due to the level of business rates or whether the district is getting more or less grant, but because the authorities in that area are spending £20 per adult more than they need to. We intend that on the charge demand note the charge payer will be able to see which authorities are responsible for that £20 and how much each contributes to it.
So far I have spoken chiefly about grant, but many of the amendments we are considering relate to NNDR. Similar issues arise here. Once we had decided that grant should not be divided between tiers but put into the collection fund it was clearly right that NNDR should be treated in the same way. Paying NNDR and grant into a collection fund avoids the majority of the problems which have plagued the present grant system in England. More importantly, it forces the debate to focus on spending as the real issue underlying questions about the level of community charge.
That outlines the system which will apply in England, but we do not think such radical change is needed for Wales. The noble Lord, Lord McIntosh of Haringey, has proposed that NNDR should be paid into a collection fund in both England and Wales rather than to counties and districts in Wales. We have proposed a different arrangement for Wales because the position there is in our view quite different. In most respects, the new grant system in Wales will be the same as that for England. There will be a separate distribution report in Wales, and each year a separate revenue support grant report; but in Wales NNDR and grant will be paid separately to county and district councils.
Wales has a less complex system of local government, and has its own separate and different grant arrangements at the moment. I do not see the logic of the noble Lord, Lord McIntosh, when he says that they should be the same. By and large these have worked very well in the Principality. A system of needs distribution has evolved in discussion with the local authority associations there, which is simpler and more stable than the equivalent one in England. In addition, there is in Wales a closer relationship between local authority spending and assessed need.

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There have not been the year-to-year fluctuations of grant between tiers, partly because in Wales grant is split between districts and county councils on a tier basis rather than a service basis, as happens in England. Nor has there been the acrimony between districts and counties about shares between tiers which has at times characterised the English scene. So, in Wales, the system has worked well up to now on the basis of splitting grant between district and county councils and there seems little reason to change those arrangements.
Disaggregating grant and NNDR allows the charge payer to see how much of the community charge which he or she pays goes to each tier of local authority; but in Wales, as in England, it is important that charge payers should also be made aware of actual spending per head compared with assessed need, and that information will also be provided in Wales with the charge demand.
Despite the conviction with which the noble Baroness and the noble Lord have argued their case this evening they have not made me doubt that we are correct to propose two different solutions for the two different sets of problems in England and Wales.
There have been two sets of amendments backing each of the different arrangements, which shows that this place recognises that each arrangement has its merits, although, as he said, the noble Lord is shifting on that point. From outside government there has also been recognition of the benefits of both systems. The Association of District Councils has welcomed the proposal not to pay grant to two tiers and has asked why the Welsh system cannot be like the English. The Association of County Councils has asked why the English system cannot be like the Welsh. We believe that this is very much a case of horses for courses and we have drawn up these different arrangements to tackle different problems.
Baroness Stedman: I thank the Minister for giving us such a comprehensive reply so late in the day. It was rather much to take in. I should like to read what the Minister said to see whether we can come back to the matter at a later stage.
Can the Minister now say whether there will be a standard way in which the charge will be sent out? Will it be obvious from that how much of the costs are attributable to county services and how much to district services? If not—if it is to be a general bill on the whole of the services—I can see a great deal of passing of the buck between one authority and another, either placing the blame or taking the praise for whatever they have done.
Whatever system finally evolves—it looks as though it will be the one already in the Bill—I hope there will be a standard form when it is sent out to the charge payer, and that it will be obvious from that form which expenses go to which authority and for which services those authorities are responsible.
The Earl of Caithness: The noble Baroness and I are on common ground; that is exactly what we seek to achieve.
Baroness Stedman: In the interests of saving time I shall withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 119 not moved.]
The Deputy Chairman of Committees: Before calling Amendment No. 119A, I must point out that if it is agreed to I cannot call Amendment No. 120.
The Earl of Caithness The Earl of Caithness moved Amendment No. 119A:
Page 114, line 21, leave out sub-paragraph (6) and insert—
("(6) The relevant population in relation to an authority shall be calculated by—

(a) taking the number of those members of the population of the authority's area who fall within such description as is specified in regulations made by the Secretary of State, and

(b) making such adjustments (if any) by way of addition or subtraction (or both) as are specified in, or calculated in a manner specified in, the regulations.").

The noble Earl said: I beg to move Amendment No. 119A and at the same time speak to Amendments Nos. 122A and 130A. Doubtless my noble friend Lady Gardner of Parkes will move Amendment No. 120 and I shall therefore respond to her after she has moved it. Our aim is so to define "relevant population"—
Lord Sandford: Perhaps I may interrupt my noble friend. I think the noble Lord the Lord Chairman said just now that if Amendment No. 119A was carried—and I imagine my noble friend Lady Gardner intends to move her amendment, No. 120—it will pre-empt Amendment No. 120. I should have thought that it would be for my noble friend Lady Gardner to speak to her amendment in the discussion on the noble Earl's amendment.
The Deputy Chairman of Committees: The noble Lord is quite right.
The Earl of Caithness: I am sorry, I think I said that my noble friend would move her amendment. What I meant was that she would speak to it. My noble friend is absolutely right.
Our aim is to so define "relevant population" that it is a fair representation of the tax base for community charges. These government amendments are to ensure that we have the powers to make regulations that allow us to fulfil that aim. Our amendments will allow my right honourable friend to make regulations which will enable the definition of "relevant population" to reflect for example that students pay 20 per cent. of the community charge. I am sure that Members of the Committee will agree that it is appropriate to reflect these in the definition of "relevant population". We shall in due course be talking to the local authority associations about the fine-tuning of the definition in the regulations.
We intend that the same definition of "relevant population", broadly reflecting the taxable capacity of the area concerned, should be the same for all aspects of the new system of local government finance. "Relevant population" will therefore be the basis on which a precepting authority apportions its precepts among the charging authorities in its area.

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This is provided for in Clause 76 and Amendment No. 130A relates to this matter. Likewise "relevant population" will be the basis on which contributions from the NNDR pool are distributed and Amendments Nos. 119A and 122A relate to this. "Relevant population" will also be the basis on which we distribute revenue support grant and this will be specified in the distribution reports we shall be making under Part VI of the Bill.
These amendments will give us the powers we need if we are to define "relevant population" in the way I have described and I commend them to the Committee. I beg to move.
Baroness Gardner of Parkes: Is this the appropriate moment for me to speak to Amendment No. 120? I listened to the Minister's comments on Amendment No. 119A, but I am not sure that they really make any difference to my own view and to my wish to see my amendment agreed to rather than that of my noble friend. I am somewhat concerned that although this amendment gives all sorts of powers according to the regulations, nothing is spelt out or in any way made clear as to what that means. As those regulations are not before us and nothing is known about them, it makes it very difficult to comment on that point at this stage.
The Minister, in speaking to his amendment, asked me to declare an interest in Westminster. I do this without hesitation. I have just recently finished my year as Lady Mayoress of Westminster. My husband is an elected councillor. I am a resident of Westminster and one of those poor unfortunates who will pay a very high community charge by comparison with other areas after this Bill comes into force. I think the situation of Westminster is very different from that of anywhere else in the whole country save the City of London.
The Government have recognised that the City of London is a special case, but they have made no recognition whatsoever of the particular problems which will face the City of Westminster under this Bill. The City of Westminster is not opposed to this Bill, but it does believe that there should be fairness to its ratepayers and to those who will meet its community charge. Westminster has an adult resident population of 150,000 people. It has a daily commuter population—a working population—of an additional 400,000 people. Even the City of London has a working population of only 300,000.
I see that the Chief Whip has come into the Chamber. I should say that not only do I wish to speak but a number of others do, too. This is an important amendment and I should like to clarify the position as regards whether we are going to deal with the whole amendment tonight. We certainly do not want to hear just half of the speakers. I know that there are at least 10 or 12 other speakers who want to speak and who will be happier to be here on Monday. Perhaps the Chief Whip would prefer that. I defer to the wishes of the Committee on this matter. It seems that I am to continue.
Lord Denham: As my noble friend has particularly mentioned me, I should say that the agreement is that
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we do not go beyond 11 o'clock tonight. If we can get this through by 11 o'clock we shall of course do it.
Lord Ponsonby of Shulbrede: The position of course is that we have already started to debate Amendment No. 119A in the name of the noble Earl, Lord Caithness, and we must finish our debate on that amendment.
Baroness Gardner of Parkes: I thank the Members of the Committee for their comments. The latest figures that are available are the 1981 figures from the Office of Population Censuses and Surveys. That means that even the figures I am quoting will be almost 10 years out of date by the time the Bill comes into force. But it is clearly very unjust for 150,000 people, through their community charge, to bear the very heavy expenses of the services that have to be provided not only for themselves but for the additional 400,000 people a day. Westminster City Council gets no rate support grant, and indeed it pays an equalisation levy to help poorer boroughs in London of £77 million. But there is an assessment for—
Lord Denham: Will my noble friend give way just for a minute? We are actually discussing Amendment No. 119A. I think that my noble friend is discussing a later amendment which is grouped with that.
Lord Ponsonby of Shulbrede: The position is quite clear. We are discussing the amendment standing in the name of the noble Earl, Lord Caithness. If this amendment is carried, then Amendment No. 120 cannot be called.
Lord Denham: I have a guarantee from the Members opposite that the Committee will not sit later than 11 o'clock tonight. If we can get somewhere near 11 o'clock, or well before a quarter past, that is fair enough. But if not, I think we shall have to adjourn at this moment.
Lord Carr of Hadley: There are very important issues to be raised here. I certainly wish to support—not oppose—the Government's amendment; but before I support it, and certainly before one is prepared to be satisfied by it, we need to get answers to questions which can only be raised by a proper discussion of Amendment No. 120. It would not be satisfactory to be cut short. I say that particularly as those of us concerned with this amendment made it clear (in ways it is possible to make clear) that this is a probing amendment that we did not wish to force to a Division, if only we could have the opportunity to raise the questions and get answers to them.
Lord Denham: Perhaps I may say that when the House is sitting on a Friday, we cannot sit much beyond eleven o'clock on a Thursday night.

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Obviously, if we had known that the amendment was going to take this amount of time, we would not have begun our discussions on it. If we adjourn the House now, the amendment can be considered afresh when we are next in Committee on the Bill. I apologise to my noble friend and other noble Lords who have already spoken on the amendment. However, I believe that we should start afresh when we next consider the Bill. I beg to move that the House now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at eleven o'clock.