HL Deb 29 March 1990 vol 517 cc1041-3

The Earl of Strathmore and Kinghorne rose to move, That the draft orders laid before the House on 6th March be approved [13th Report from the Joint Committee].

The noble Earl said: My Lords, these 14 orders all relate to the revaluation of non-domestic property affected from 1st April. Twelve of the orders prescribe the level of rateable value to apply to the so-called formula valued industries with effect from 1st April. The remaining two orders continue the present de-rating, albeit at a lower level, for industrial and freight transport lands and heritages, and for mines and quarries.

The 12 formula valuation orders relate to certain public utilities most of which are currently valued by formula. The orders prescribe either the rateable values or the rules to be used in determining the rateable values for those undertakings with effect from 1st April, the effective date of general revaluation of non-domestic property.

Orders relating to the valuation of the corresponding undertakings in England and Wales have already been approved by your Lordships. In drafting the orders before you today the aim has been not only to arrive at levels of assessment consistent with those that might have been made by conventional means, but also to harmonise the approach with that adopted south of the Border.

Where the necessary information exists, a method similar to the contractors' basis of valuation has been adopted. This approach, which is used by the assessors in valuing properties for which no rental evidence is available— such as oil refineries and petrochemical complexes— starts with a net cost of building or replacing a property. That cost, after appropriate allowances, is converted to an annual sum by applying the decapitalisation rate.

For the gas and telecommunications industries it has been possible to use their net current cost accounts, suitably adjusted to derive a rateable value in this way. The water undertakings' rateable values have been derived from comparison with those set for the statutory water companies in England and Wales. In the case of the canals, ports and railways industries, no current cost accounts information is available. The rateable values of those industries have been determined by reference to that percentage of turnover which represents a fair assessment, taking account of the percentages applicable to other types of industry whose values have been set on a conventional basis.

Those rateable values imply significant changes in rates bills for some industries. Where appropriate, the values have been adjusted to provide the same level of protection as has been afforded to other ratepayers. With the exception of canals and statutory docks and harbours, the orders apply only in respect of 1990–91. Revised orders will be required for subsequent years. This is largely because the levels of industrial de-rating to apply in years subsequent to 1991 have yet to be decided.

The assessments and provisions contained in these orders have been worked out as a result of extensive discussions with the industries involved, with the Convention of Scottish Local Authorities and with the Scottish Assessors' Association. They have also been the subject of public consultation. We believe that they represent fair and reasonable assessments for these industries.

Turning to the two de-rating orders, I remind your Lordships that manufacturing industry in Scotland has benefited from de-rating for many years. The purpose of this de-rating is to equalise the rate burden on this sector north and south of the Border, thus avoiding any competitive disadvantage in Scotland resulting from the different valuation in rating systems.

It is clear that, as we move towards full harmonisation with England and Wales, the need for industrial de-rating will disappear. Over the interim period it is intended that reductions in the level of de-rating do not disadvantage Scottish industry. As a first step towards a national rate in Scotland, my right honourable and learned friend the Secretary of State has reduced poundages next year by 6.25 per cent.— equivalent to a reduction in rates paid by industry and commerce of £ 80 million. This allows for a reduction in the level of de-rating to 35 per cent. in 1990–91, and this will be reviewed for future years in the light of further progress towards harmonisation.

The Mines and Quarries (Rateable Values) (Scotland) Order 1990 provides for the same level of de-rating for these subjects and also contains certain provisions relating to their method of evaluation which also apply in England and Wales.

I beg to move that the 14 Motions standing in my name on the Order Paper be agreed to en bloc. I commend them to the House.

Moved, That the orders laid before the House on 6th March be approved [13th Report from the Joint Committee.] — (The Earl of Strathmore and Kinghorne.)

Lord Carmichael of Kelvingrove

My Lords, I again thank the Minister for his explanation and agree that it would be better to take the 14 Motions en bloc. I should like to read his statement with considerable care once it has been printed in the Official Report. It appeared to me as though, in some of the assessments, he was walking very close to what is derided as a "roof tax", when he spoke about capital value and construction value in certain cases as being the only way to make an evaluation.

I certainly understand the reason for the gradual phasing out of the de-rating system. In terms of the European Community it would be quite anomalous to have special rates for special industries in Scotland, although the original reason for de-rating was to compensate for some of the problems in heavy industrial areas. Those problems arise not only from distance, but because the standard of living in heavy industrial areas— the quality of life— tends to be lower as a result of the sheer size and the by-products of heavy industry.

I will certainly look at what the noble Earl has said. I understand that he said there would be a benefit to industry of £ 80 million. I may not have heard him clearly or perhaps I was thinking of something else, but I felt it would ultimately be a disbenefit to industry. However, I am sure that that is a point which can be sorted out later. In the meantime I am pleased with what he has said. I will read the Official Report with considerable interest and say that on this side of the House we have no objection at this stage to the orders going through. We may have something to say on a general question— we cannot do anything about the orders— or come back in general debate to some of the points that the noble Earl raised.

Lord Strathmore and Kinghorne

My Lords, I thank the noble Lord for his contribution. I confirm that I did say £ 80 million.

On Question, Motion agreed to.