Non-Domestic Rating Bill

HL Deb 08 February 1994 vol 551 cc1512-28

3.46 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Arran)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee. —(The Earl of Arran.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 1 [Limit on increase in non-domestic rates for 1994 financial year]:

Lord Williams of Elvel moved Amendment No. 1: Page 1, line 24, leave out subsection (4).

The noble Lord said: The amendment is designed to remove special treatment that certain utilities receive under orders established mainly at the time of privatisation. Members of the Committee will be aware that the privatised utility companies—gas, electricity, water and, to come, rail—receive special treatment with regard to the business rate. That special treatment is granted to the first three by orders which were made at the time of privatisation and continued in the Non-Domestic Rating Acts of 1992 and 1993. In particular, the special treatment conferred by Article 9 of the British Gas plc (Rateable Values) Order 1989, Article 9(3) of the Electricity Supply Industry (Rateable Values) Order 1989 and Article 9(3) of the Water Undertakers (Rateable Values) Order 1989 are relevant.

The sum total of what happens is that privatised utilities, which are not known for lack of profit and whose chairmen and directors are not known for modesty in rewarding themselves with remuneration, are given special treatment under the business rate; they are not treated in a conventional manner. While it may be perfectly reasonable for such businesses to be given a short transitional period to allow them to adjust to being ordinary plc companies like every other plc in the country, there must come a time when that transitional relief ceases. We believe that it should cease now, for two reasons.

First, the profits of these organisations are growing exponentially. In the year 1992–93 British Gas made a profit of £1,054 million and its chairman, Mr. Evans, received £379,000 in remuneration for that. Its profits are still, as judged by the Office of Fair Trading, monopoly profits. There is a proposal that British Gas should be split up. The same proposition is generally. true of the power generating side of the electricity industry and also of the distributing companies, all of which made substantial profits in the past year and all of which paid their chairmen substantial sums of money. The same is true of the water undertakers. Therefore, the first result of my amendment would be to bring those companies onto the same footing as other companies. They would have to earn the profits they make and the remuneration they pay their senior executives and directors rather than being subsidised by the British taxpayer or, in this case, by other businesses.

The second result of my amendment would be to increase the amount of money going into the pool that local authorities have at their disposal in order to help businesses which approach local authorities to obtain support through Section 49 of the 1989 Act. That can do nothing but good. We support the principle that businesses should be given such relief by local authorities, not least because, under the legislation, we have to face quite properly the step of a revaluation every so often. It is therefore reasonable that local authorities—when we come to them, we shall be discussing small businesses—should be able and willing to give relief to businesses in their area. As a result of the amendment the pool would be increased.

That is the purpose of my amendment. I do not believe that utilities have not grown up. They are now privatised companies operating, as large companies should, alongside other large companies in the market place. These companies, at least in large measure, should be treated in terms of local taxation exactly like any other company with which they are competing. I beg to move.

Baroness Hamwee

I support the amendment. I was waiting for the noble Lord, Lord Williams, to mention the market place. I am glad that he did so at the end of his speech. That, after all, must be the rationale of his amendment. If the Minister seeks to justify the provisions of the Bill, as I suspect he may, I hope that he will be able to assist the Committee as to why the provisions of the market place, to which the Government call on so many other sectors of our society to pay attention, should not apply in this situation.

The Earl of Arran

I listened carefully to what the noble Lord, Lord Williams, and the noble Baroness, Lady Hamwee, said, but I still find it very hard to see what Members of the Committee opposite think industry or the public would gain from the changes in the amendment. Having studied it carefully the Government urge the Committee to reject it.

Clause 1(4) of the Bill repeats for property with prescribed rateable values the changes made for the generality of ratepayers in Clause 1(2). Some of the industries with prescribed values had substantial increases in their rates bills in 1990 as a result of the reforms. So separate transitional arrangements were introduced for them which mirrored those applying to other ratepayers. Members of the Committee opposite wish to delete Clause 1(4) which would mean that some of the utilities could face increases of up to 20 per cent. in their bills under the transitional arrangements.

Because the industries involved are all utility services, that could have a knock-on effect to some household bills. The Government see no merit in that. The extra burden on the utilities' customers could be significant in some cases. For instance, the rates bill of the national grid company in Wales next year would be nearly £1.75 million higher if the amendment were made.

Lord Williams of Elvel

Is the noble Earl saying that by raising the rates bill for utilities our proposal would raise electricity prices? Is he therefore saying that the Government in this measure are subsidising electricity prices?

The Earl of Arran

I am not saying that the Government are subsidising electricity prices. I am stating that in Wales next year the rates bill of the national grid company would be nearly £1.75 million higher if the amendment were made. Equality suggests that everyone should be treated in the same way. On those grounds the Government urge the Committee to reject the amendment.

Lord Williams of Elvel

I am very disappointed by the noble Earl's reply. The argument is as follows. There is special treatment for privatised utilities. That is contained in orders which are continued in the Bill. Privatised utilities have to operate, as they are privatised, in the market place with all other companies which pay their business rates on a conventional basis. Those utilities are exempt from that procedure. As the noble Earl rightly pointed out, if the procedure were applied, their business rate would go up. He mentioned the figure of 20 per cent. in the case of South Wales electricity. How can he then deny that the Welsh electricity consumer is being subsidised by the measures contained in the Bill? If the price would go up if they were rated in the normal manner like any other large company, then clearly, by this measure, the Government are asking other businesses to subsidise the utilities.

The Earl of Arran

The noble Lord should understand just a few points. First, why should we punish the utility companies unfairly? Secondly, as I said, there could be a knock-on effect on costs in the form of higher bills. Thirdly, if utility firms, why not commercial firms as well? I said that equality must reign.

Lord Williams of Elvel

Why punish other firms unfairly? They are paying the business rate; they are subsidising the utilities. Money does not grow on trees. Someone has to pay in order to provide the pool for local authorities to give the relief.

The noble Earl has not grasped the point that I and the noble Baroness, Lady Hamwee, were trying to make. These companies are now meant to be grown up. They have to operate in the market place alongside all other major companies which are rated on a conventional basis. By derogating from that procedure in the Bill the Government are forcing other businesses to subsidise the utilities. That is the problem. If the noble Earl says that prices will go up because the business rate for the utilities has increased, I invite him to try to introduce some competition into the electricity industry and so ensure that prices find their own market level. I had thought that that was what privatisation was all about.

The Earl of Arran

There is a fundamental difference between the noble Lord, Lord Williams, and the Government. I cannot agree with what he says. Equality must be the prevalent consideration in these circumstances. I urge the Committee to reject the amendment.

Baroness Hamwee

Can the noble Earl help us as to whether any utilities are not included in the list? Are any to operate in the market place in the way in which the noble Lord, Lord Williams, has been calling for? The noble Earl may not be able to answer that question at this moment but it might add to our understanding of the issue if we were to know the answer before the next stage of the Bill.

4 p.m.

The Earl of Arran

Perhaps I may just add to the comments made by the noble Baroness, Lady Hamwee, and the noble Lord, Lord Williams of Elvel. We are not particularly subsidising electricity companies. We are subsidising the rates bills of all ratepayers facing increases. The money comes from general taxation and not other businesses. As I have already said, it would be wrong to single out the utilities for worse treatment than others.

Lord Williams of Elvel

I was not aware that I was singling out the utilities for worse treatment, I was trying to get equal treatment for them operating as private companies in the private market. That is what I thought privatisation was all about. I was also trying to get greater competition and increased productivity, which would occur as a result of proper costs being charged as opposed to subsidised costs—that is to say, costs which are subsidised by businesses. If the noble Earl is absolutely resolute in saying that there is nothing he can do to change things and that the Government have decided what they are going to do, then there is not much point in having an argument in Committee. We can simply stand here and throw bricks at each other. However, that does not contribute to our understanding of what the Government are trying to do in this Bill. I say to the noble Earl that I am not at all satisfied that the Government have listened to the argument or that they have concentrated on the issue. I do not even believe that they have understood it. I should like to return to this issue at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Baroness Hollis of Heigham moved Amendment No. 2: After Clause 1, insert the following new clause: ("Transitional relief It shall be the duty of the Secretary of State to ensure that the transitional relief for non-domestic ratepayers provided by this Act, the 1988 Act, the 1992 Act and regulations made under those Acts shall, so far as possible, be targeted upon businesses employing fewer than 10 people.").

The noble Baroness said: This is a probing amendment which we shall not press, but will use to explore the pattern of redistribution as supported by this Bill. As the noble Earl, Lord Arran, made clear at Second Reading, the Bill is necessary because business faced in 1990 both a move to UBR and on to new rateable values. The combination of both meant very substantial changes in firms' rateable bills: two-fifths of all businesses faced either increases or reductions of over 50 per cent. The changes had to be phased in. As we said at Second Reading, we did not object to that, but even the transitional arrangements of phasing in—that is, 20 per cent. of the increase plus inflation —have proved too much for business; so the Government are having to phase in the phasing in or, if one likes, give transitional relief to the transitional arrangements.

This amendment seeks to ask questions about who should be helped in this way and at what cost, and therefore picks up the theme explored by my noble friend Lord Williams in the previous amendment. At Second Reading it was pointed out that in the 1970s there were about 10,000 business failures a year; in the 1980s, there were about 20,000 and in the 1990s so far there have been about 50,000 business failures a year.

As we know, revaluation is not a matter directly for central or local government, but for the Inland Revenue. The readjustment of the relativity between properties since 1990 has moved in several directions. The revaluation of shops and offices has gone up much more sharply than for factories. Under the 1990 revaluation on average the increase for shops went up by 9.6 times and for factories by only 6.1 times. However modestly, that helps manufacturing as opposed to services and retailing, which I believe most of us would consider to be sensible.

It also altered regional relativity, again in ways which I believe most of us would think was fair. It raised rateable values in the South as against the North, in more prosperous cities as against declining inner city areas. Therefore, the North and North-West had the average of their rateable values fall by about 30 per cent.; in the South-West and East Anglia they were up 10 per cent.; in the South-East they were up 14 per cent. and in inner London and the City the values were up 39 per cent. where there are, of course, heavily rated offices.

But the Government delayed moving on to these new rateable values—again we understand why—by offering transitional relief: with those who stood to gain from the new rateable values complaining bitterly that they were continuing to pay over-inflated rateable values while those facing the increases in UBR were complaining equally bitterly that they could not afford to meet them. So, last year the Government promised that the gainers would gain all and the losers would be protected.

The transitional relief costs for 1992–93, which come in consequence of there no longer being a self-balancing fund in which the losers were offset by the gainers and vice versa, I understand will be £1.3 billion; additional transitional relief for 1993–94 will be a further £550 million and with this Bill there will be a further £100 million. That is a total of nearly £2 billion in revenue foregone by the Exchequer at a time when the UBR raises about £14 billion a year.

We want to know who is benefiting from these huge sums of money. There is a vast public subsidy of £2 billion which is going to business. Who needs it as we enter the next round with the looming revaluation of 1995?

What seems clear in 1995 is that the revaluation then will reverse some of the trends of the 1990 revaluation. It seems that London, the South-West, the South-East and East Anglia will benefit; but Newcastle, Manchester and Sheffield will now see their revaluations going up. We shall also see the other reversal, which will show that offices and retailing will benefit and the rateable values for industrial and business premises and factories will go up.

This Bill both limits the increase facing businesses in 1994–95 by halving the transitional increase for larger businesses from 20 per cent. to 10 per cent., and for smaller properties it will be down from 15 per cent. to 7.5 per cent., as well as empowering the Secretary of State to make regulations for 1995 onwards. That means yet again that winners will take all and the losers will be protected. Effectively, it means that all will gain whether they need to or not and at huge public expense.

In other words, the criticism which we have of transitional relief is not that it is not necessary, but that it is being thrown indiscriminately at the size of the increase and not at the need of a company to receive it. As the Government remind us so often when we are talking about social security, as we did yesterday, and as my noble friend said just a few minutes ago, it is not Treasury money which is being given away but taxpayers' money—our money. I believe that we are entitled to see that money targeted when dealing with relief to business in the same way as the Government claim it is necessary to target it when dealing with destitute and impoverished individuals receiving social security.

Hence this probing amendment on the back of which we are trying to argue that relief should be targeted. In this amendment—we may come up with variants of it at later stages—we are saying that, as a rough and ready test of need, we are talking about small businesses. We could have referred to turnover, but we are speaking here of small businesses as shorthand for an attempt to target. Why? It is because, as we all know, small businesses have been the most vulnerable during the recession. The rate of large company failures has, proportionately, been much smaller than that for small businesses. We also know, as the Forum for Small Businesses has informed us on many occasions, small businesses are relatively unfairly rated when it comes to UBR. Small workshops of 1,000 square feet, pay nearly twice as much per square foot in rates as do businesses and factories with over 10,000 square feet.

The zoning system, used for valuing retail premises, favours supermarkets (the large bodies) at the expense of corner shops. As it stands, a healthy chain of multiples with perhaps 500 stores across the country, will get both a full reduction and protection against increased costs, while immediately gaining in other areas, with no evidence of need. So transitional relief is costly—it will be £2 billion in all—and indiscriminate.

The noble Earl, Lord Arran, may come back on this. We do accept that a small business with less than 10 employees is not a perfect guide to the need for transitional relief, but we believe that that, as far as is practicable, is better than throwing money at all businesses whether they need it or not, and many of them do not. After all, the equivalent rebates for houses in the council sector were targeted at individuals. We believe that the same principle of targeting public money at need should apply here. We should not throw money at companies indiscriminately. That is why we have tabled this probing amendment. I beg to move.

The Earl of Arran

As the noble Baroness, Lady Hollis, said, this may be a probing amendment but at the same time we find it a muddled amendment. I shall try to explain why. It would not only require any future transitional relief to be targeted on businesses employing fewer than 10 people but would appear to require us to rewrite history by ensuring that the current transitional arrangements are targeted in that way as well. The details of those arrangements, including the way in which relief must be targeted, are already set out in the Local Government Finance Act 1988. They have therefore already been considered and approved by Parliament. That Act cannot be altered except by specific amendment in fresh primary legislation. This amendment would require the Secretary of State to target existing reliefs in a way which would conflict with the previous rules.

We would have great difficulty in accepting this amendment even if it applied only to future transitional schemes. Targeting help according to the number of employees in a business would be quite impracticable. Neither local authorities nor valuation officers have access to this data and would need powers to collect it. A limit of 10 employees seems somewhat arbitrary. Employers might reduce or understate the number of their employees if they saw some financial advantage in doing so. And it is not clear what would happen if the number of employees later changed.

Rates are a tax on property rather than on individual businesses. Our current transitional arrangements target relief on smaller businesses by reference to the value of their property. This value is shown in the local rating list so is readily available to billing authorities. Properties with a rateable value of less than £15,000 in London or £10,000 elsewhere have lower annual increases in bills than larger properties.

There is scope for argument about where the threshold should lie and about the amount of the differential between the limits on increases for different sizes of property. These are matters which we shall certainly consider when we come to make any regulations governing future transitional schemes. But we do not start from the premise that help should be targeted only on the smallest businesses. If rate bills change significantly as a result of revaluation, there is no evidence to suggest that larger businesses will necessarily be able to absorb the full impact of the changes overnight. A duty to target only the smallest businesses would remove our ability to help larger ones. It is for those reasons that I urge the Committee not to accept the amendment.

Baroness Hollis of Heigham

Before the Minister sits down, may I ask him whether he accepts the principle that public subsidy should go only to those who need it?

The Earl of Arran

Perhaps I may advise the noble Baroness that there is a wide range of ratepayers and that those who are facing the biggest increase in bills since 1990 have been concentrated mainly in London and the South East. As the noble Baroness said, the provisions have favoured shops and offices. I repeat that rates are a tax on property, not on profits.

Baroness Hollis of Heigham

With the leave of the Committee, I do not think that the Minister answered my question. Does he believe that public subsidy—that is, Exchequer income forgone—should be targeted at those who most need it or should it be indiscriminate?

The Earl of Arran

It should be very carefully selected, depending on the circumstances in question.

Baroness Hollis of Heigham

If the Minister agrees that it should be carefully selected, would he care to tell me the difference between "carefully selected" and "targeted"?

The Earl of Arran

The noble Baroness is pressing me on semantics. I think that I made my case quite clear when I replied to the amendment.

Baroness Hollis of Heigham

It is easy for the Minister to say that this is a matter of semantics. I asked for targeting, which the Minister said was unreasonable, but he believes that public money should go to carefully selected companies, principals, businesses or whatever. I think that it is important to know whether the Minister accepts the principle behind this probing amendment which is that public subsidy should go to those who deserve or who need it. If so, we can come back on Report with what I would call a second-level amendment which could consider how best to deliver that targeting. Therefore, I still need to know from the Minister whether he accepts the principle that "targeting" means the same as "carefully selected", in which case we can work together to ensure that we can deliver that more effectively, or whether he does not.

4.15 p.m.

The Earl of Arran

The point that the noble Baroness cannot quite grasp is that it would be completely impracticable to do as she suggests and to target those with fewer than 10 people in their company.

Lord Williams of Elvel

Do you carefully select them?

Baroness Hollis of Heigham

I am having difficulty in engaging the noble Earl to give a straight answer to what I thought was a straight question. If I may speak to the amendment more generally, I have made it clear that this is a probing amendment. We were seeking to use it to advance the argument that public aid should be discriminating. We decided to do that by choosing small companies, their size being reflected by the fact that they have fewer than 10 employees. I accept the practical difficulties which the noble Earl has enunciated on that. We could have related the provisions to the physical size of the small company, turnover or even profitability. There are many ways in which we could have done it. After all, there are well-established principles for determining hardship relief for business rates. That is not difficult.

What I was trying to extract from the Minister was whether the Government are sympathetic in principle to the targeting of public money. If they are, we can come back to this on Report, perhaps with his support, with an amendment that would more effectively deliver the targeting that we would both like to see for the benefit of all taxpayers. If he does not accept that principle, we are in a different situation. I invite the noble Earl to comment.

The Earl of Arran

Yes, as I have already said, depending on the circumstances we are, of course, sympathetic to the principle that public money should be targeted, but we would have to decide the correct procedure, what the targets are and at whom they are aimed.

Baroness Hollis of Heigham

I thank the Minister for that extremely helpful reply. We look forward to working with him and to ensuring that we can deliver our common objectives. I shall return to this on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3 [Non-domestic rating: transitional pooling]:

The Deputy Chairman of Committees (Viscount Allenby of Megiddo)

Before I call Amendment No. 3, it may be for the convenience of the Committee if I say that if Amendment No. 3 is agreed to, I cannot call Amendment No. 4.

Baroness Hollis of Heigham moved Amendment No. 3: Page 2, line 38, leave out subsection (3).

The noble Baroness said: Amendment No. 3, which stands in the name of my noble friend Lord Williams of Elvel and myself, relates to some extent to the previous amendment. As I tried to show in relation to the previous amendment, transitional relief is very costly, but until this year the phasing in of the protection for the losers was offset by the phasing in of the gains—that is, the reduced rate bills—for the winners. It was self-balancing. Therefore, no additional costs fell on either central or local government. As I said, however, in relation to the previous amendment, winners in the hard-pressed North wanted to enjoy their benefits quickly while businesses in the South and East, where the recession was beginning to be felt, wanted their increased rate bills to be phased in more slowly. Therefore, the Government agreed that winners would move to full gains while losers would be protected and that the cost of those changes would be met by central government. That was only equitable given that local authorities faced the capping of their expenditure and problems of gearing.

Now, however, in this Bill the requirement that the Secretary of State "shall" balance funds where necessary is to be replaced by the word "may", leaving open the key questions of whether, if, when and who will pick up any deficit funding if winners are to gain immediately and losers are to be protected. On Second Reading the Minister gave this place an assurance which I am happy to quote. He said: I am happy to repeat the commitment given in another place by my honourable friend the Minister for Local Government and Planning that if we use our powers to reduce the burden on businesses in that way we will make up any shortfall using the pool rather than any other mechanism… We are seeking a power rather than a statutory duty because the need to top up any shortfall will occur only if the transitional arrangements are not self-financing. So that it is clear beyond doubt, let me assure the House that if a shortfall to the pool should occur after 1995 because transition was not self-financing, the pool will see that shortfall made up".—[Official Report, 27/1/94; col. 1090.] I accept the Minister's integrity. Why then alter the wording of the Bill when his statement on Second Reading was consistent with the previous Act's formulation of "shall" and inconsistent with the new clause replacing "shall" with "may"?

I may be accused of cynicism but I remember when GREAs were introduced. Several years ago the Secretary of State assured the other place that such GREAs would merely be a formula for distributing grant and would never be a target for what should be spent or a basis for capping what could be spent. Two years later, that assurance notwithstanding, GREAs became a target for what could be spent, and two years after that a version of GREAs became the basis of capping.

With such a track record of undertakings in relation to local government finance given in all honour and then not honoured, the Minister can hardly be surprised that we should like to see his assurances on the face of the Bill. Indeed, given the commitment he made on Second Reading, the obligation is upon him to say why they cannot be. The Minister will say that it is a power and not a duty because it may not happen. If it does not happen, the duty will not be required. We need it on the face of the Bill. So do local authorities which fear that government would reduce, for example, the revenue grant to local authorities shortly before the announcement of transitional relief—it has, after all, been reduced from some 60 per cent. to 47 per cent. in the past few years—and then raise it to what it would have been, alleging that that was repayment of transitional relief.

An ingenious government will seek to export the future costs of balancing transitional relief outwards, if they can, while simultaneously claiming that they have done what they have promised. Parliament's job is not just to receive Minister's undertakings and promises, although we were given them on Second Reading; where possible, it should put those promises and undertakings on the face of the Bill, where they are transparent and where they provide a firm basis for local authorities' and businesses' future financial planning. If the Minister means what he said on Second Reading —and I am sure that he does—he can have no objection to the amendment. I beg to move.

Baroness Hamwee

It may be appropriate if I speak to this amendment, as the amendment in my name—I accept the point about pre-emption —is directed at the same issue. The noble Baroness, Lady Hollis, has quoted the Minister's words on Second Reading. On Second Reading I said that I did not understand the need for the provision in the Bill changing the mandatory provision of the 1988 Act that such and such "shall" happen to a permissive provision that it "may" happen.

I tabled the amendment to delete that change so that I could ask the Minister to explain further the reasons for the word's inclusion in the Bill. I would go further than the noble Baroness, who said that it is proper that the commitment should be on the face of the Bill, and say that since the commitment exists already under the 1988 Act, there is an obligation upon the Government to explain why in the Bill they are changing the 1988 Act.

The Earl of Arran

Again I am a little surprised by the amendment. The noble Baroness, Lady Hollis, made it clear on Second Reading that if we introduced non-self-financing transitional arrangements after 1995, she wanted any shortfall in the non-domestic rating pool made up. Clause 3(3) would enable us to do so, and we have said that we always would. But the amendment would remove that power. We would therefore be unable to make good any reduction in the amount of non-domestic rate revenue available from the pool for redistribution to authorities. We do not believe that authorities would welcome that.

I would add further to the points taken up by the noble Baroness, Lady Hamwee, that there is an important distinction between the character of the provisions we are seeking for 1994–95 and for future years. For 1994–95, a specific scheme of relief has been drawn up in detail. To ensure its implementation in time we must spell out all the detail on the face of the Bill. For years beyond that we do not know yet whether transitional relief arrangements will be required, although there is a strong possibility that we shall need a scheme following the 1995 revaluation, and still less what form or variety of forms any future schemes would need to take. We are therefore seeking broad powers. The details of any scheme would be set out in regulations which would require an affirmative resolution of both Houses and which would therefore be subject to full parliamentary scrutiny at the time. I hope that I have explained satisfactorily the reasons for urging the Committee to reject the amendment.

Baroness Hollis of Heigham

I thank the Minister for that reply which we shall obviously read with some care. It is similar to the reply given in another place which is equally baffling to the local authority people who have advised me. Perhaps I may therefore press the Minister, as I tried to do on a previous amendment: if he accepts that government will make good any shortfall in any future transitional arrangements that may be introduced—that is what I understood him to accept today and on Second Reading, and he is nodding—we invite the Government to bring back an amendment which would make that clear on the face of the Bill. That would then allay all our fears.

The Earl of Arran

Despite what the noble Baroness said, and I understand clearly what she said, I have given the assurance that she seeks. But we do not regard it as necessary to put it on the face of the Bill.

Baroness Hollis of Heigham

Why not, given that on previous occasions we have had similar cast-iron guarantees which have not been honoured? I am sure that the Minister intends his assurance to be honoured. I do not in the least impugn his integrity, but other Ministers will take his place in the future. If that is the Government's intention, why should it not be made transparent and stated publicly on the face of the Bill? In other words, why should legislation not embody government's intention?

The Earl of Arran

I hope and believe that I have made clear in my answer to the noble Baroness, Lady Hamwee, why we believe that the matter should not be on the face of the Bill. I can add no more other than to say that we do not feel that it should be on the face of the Bill. The noble Baroness, Lady Hollis, has generously said that she trusts me; she must trust what the Government say in this instance.

Lord Williams of Elvel

Does the Minister accept that if the Bill as drafted is challenged in the courts, the courts will have regard to the text of the Bill? That is what Parliament will be deemed to have intended. The courts will probably not have any regard whatsoever to ministerial assurances. That is the tradition of our courts. I know that that has varied a little in the past few years, but the tradition of our courts is that Parliament intends what is on the face of the Bill, and ministerial assurances are worth nothing when it comes to the courts. That is why we are so emphatic that this provision should be on the face of the Bill, because when the matter comes to the courts they have only one avenue to take.

4.30 p.m.

Lord Campbell of Alloway

Perhaps I may intervene, with great respect to the noble Lord, Lord Williams of Elvel. Since the decision in Pepper v. Hart, the argument is not quite right. The courts will have regard to the assurance given by my noble friend on the Front Bench.

Lord Williams of Elvel

I am grateful to the noble Lord. He reminds me of the case and he is right about it. However, the question remains: why not have it on the face of the Bill?

Lord Mishcon

I hesitate to rise on a point of law when there is in some ways a contradiction to what was said by the noble Lord, Lord Campbell of Alloway. It is true that the case to which he referred in the House of Lords stated that Hansard can be referred to in order to interpret the words of the Bill and to see whether the Government had a certain intention in regard to the wording. However, nowhere have I seen in the judgment of that case that the courts will enforce an undertaking which appears in Hansard. In view of the noble Lord's serious statement, I ask him to point that out for me. If the noble Lord can quote the paragraph to which he refers I shall be grateful.

Lord Mulley

When I read the report of that case I noted the statement that exceptional circumstances had led to their Lordships' decision.

Lord Campbell of Alloway

Perhaps I may answer briefly the noble Lord, Lord Mishcon. Of course, it is to interpret the words of the Bill, and the assurance that has been given may be referred to in order to interpret the words of the Bill. I cannot see that there is very much more to be said.

Baroness Hollis of Heigham

I am grateful to noble Lords who have taken part in the debate. The point has been made for us very well. If, on the one hand, any commitment given by the Minister in Hansard is to be understood by judges as effectively binding —as indicated by the noble Lord, Lord Campbell—there can be no reason for that commitment to be on the face of the Bill. However, if on the other hand the hesitations raised by my noble friend Lord Mishcon are right—that the courts would not necessarily regard any commitment as binding but merely an interpretive framework within which to understand the clause of the Bill—it is even more important that the Minister's commitment should be on the face of the Bill. If the Minister means what he says—that this is a firm and honourable commitment—and I am sure that he does, I invite him to come back with a more satisfactory amendment. He has the resources to draft an amendment in the technical terms that would deliver his commitment into legislation, so that we may all see it for what it is.

The Earl of Arran

I have gone as far as I can. As the noble Baroness says, I have given a firm and honourable commitment in these circumstances. The Government stick to that commitment. With regard to putting it on the face of the Bill, the noble Baroness would be pressing her case too far if she were to try to insist upon that.

Baroness Hamwee

Perhaps I may return to a point that I made on Second Reading. It is helpful for Members of the Committee—certainly for me—and for those in the world outside if legislation were to state clearly what it meant. Today we had other examples of hypotheses with commitments attached to them. I accept entirely what the Minister said about there being a need for a new provision in the Bill because the commitment to make good the shortfall out of the pool applies to circumstances which are not covered by existing legislation. However, perhaps he will take away a request to spell out clearly that new commitment in order to reproduce in the new circumstances the obligation contained in the existing legislation.

The Earl of Arran

I have given that commitment. I listened carefully to what was said by the noble Baroness, Lady Hamwee, and I shall examine carefully the commitment that I have already given.

Baroness Hollis of Heigham

We are still baffled about why the Minister is not willing to turn his commitment, which we respect, into an amendment to the Bill. He has simply said that he does not see it as necessary. We have said that it is necessary. The Minister has not explained why he does not believe that it is necessary and why it cannot be done. If the provision is as harmless as he says it is surely an inoffensive way of making the legislation more clear, available and get-at-able to all the parties concerned. Surely local government finance is complicated enough, as many of us know to our cost and to our peril, without making it even more opaque by having to be understood in the context of statements made in obscure references to Second Reading debates. If the provision were on the face of the Bill, matters would be simplified for all concerned.

We shall withdraw the amendment and come back on Report. We hope that the Minister and his advisers will take on board the point that if the continuing obligation is not enshrined on the face of the Bill he is adding to the opacity of local government finance rather than to its clarity. Surely that is to be regretted.

Amendment, by leave, withdrawn.

[Amendment No. 4 not moved.]

Clause 3 agreed to.

Lord Williams of Elvel moved Amendment No. 5: After Clause 3, insert the following new clause: ("Special authority report .—(1) The Secretary of State shall by 31st March in any year lay before both Houses of Parliament a report (to be called the special authority report) on the operation of the provisions of Part II of Schedule 7 to the 1988 Act in the following financial year. (2) The report shall consider the following matters—

1. (a) the effect of the provisions on businesses in the area of any special authority where the special authority's multiplier is greater than the non-domestic multiplier; and
2. (b) the effect on the expenditure of a special authority of any income produced by a special authority multiplier.

(3) Before making a report the Secretary of State shall consult the Corporation of the City of London and any other authority as appear to him to be concerned.").

The noble Lord said: The amendment introduces a new clause which seeks to ensure that the Secretary of State lays before both Houses of Parliament a report to be called the "special authority report" on what I call special authorities. They are authorities which, under certain provisions in the 1988 Act, are not treated in the same way as other authorities. Subsection (3) of the new clause makes it clear that the relevant authority is the Corporation of the City of London.

The corporation has been singled out regularly for special treatment by the Government and some remarkable figures appear. For instance, it is the only local authority in the country which can still levy a local business rate. That came about in 1990 when the Government realised that the introduction of the poll tax could lead to an annual poll tax of some £1,400 per resident in the City and that was felt to be excessive. That levy continued under the council tax in order to avoid a similar situation; that is, a burdensome council tax for the residents of the City of London.

In terms of the revenue support grant, the Government plan in 1994–95 to pay the corporation of the City £1,300 for each local resident. The equivalent figure in Camden is £718, in Southwark £800 and in Barking £498. Therefore, the City is considered to be infinitely more important per resident than Camden, Southwark and Barking. Furthermore, most of the corporation's housing is in neighbouring boroughs such as Islington, Southwark and Lewisham. Yet, while they receive from the Government per home £1,538, £1,611, and £1,290 per annum respectively to manage and maintain their own housing, the City corporation receives per home £2,448 per annum to manage its housing, which often stands right alongside that from the host borough. I do not believe, in any sense, that that is a fair disposition of resources. Of course, I recognise that the City has particular expenses to meet. After all, there are 132 councilmen and women.

A similar level of representation achieved by fewer than 5,000 residents and 18,000 business voters would result in 31,000 councillors in Birmingham. I am sure that my noble friend Lord Howell, is interested in that figure. There are just 18 non-residential electors in the City's Lime Street ward who elect four members. Alperton ward in Brent has 6,311 electors for just two councillors.

I recognise that the City has special expenses to bear with the number of councilmen and women. There is also the procedure for electing the Lord Mayor and the associated ceremonial activities. All that is very expensive. Nevertheless, as the noble Earl will understand, I am not trying to cut it down; I simply seek to introduce an amendment which would require the Secretary of State to make a report. Such a report would state exactly what is happening. It would also state the purpose of the funds and how they are used. Finally, before the Secretary of State makes the report, he would be required to, consult the Corporation of the City of London and any other authority as appear to him to be concerned". The amendment seems to me perfectly reasonable. I hope very much that the noble Earl will accept it as such. I beg to move.

Lord Finsberg

I suppose that the speech to which we have just listened might have gone down well when the late Bernard Miles opened the Mermaid Theatre. But to adduce in support of the amendment a fatuous argument about the number of councilmen in the City merely shows that the proposal is really a front for what I have heard over the past 25 years; namely, attempts by the party opposite to abolish the City of London. It would have been much more honourable if that had been put on the face of the amendment. The speech speaks for itself.

The only special authority under the 1988 Act was the City of London. There were very special reasons for that. The City ratepayer, business or domestic, is very well served by the City, as are the inhabitants of Greater London. The noble Lord, Lord Williams of Elvel, made no mention of what is done for the open spaces in London; for example, Epping Forest, Burnham Beeches and Hampstead Heath.

The noble Lord compared the number of councilmen and the population in the City with the situation in Birmingham and said that he understood why the City needed special treatment. The City does not need special treatment for that; it needs special treatment because, as the noble Lord also said, the drafting of legislation for a generality would have produced an impossible situation in the City. The Government recognised that fact in what became the 1988 Act. I hope that my noble friend the Minister will not spend too much time demolishing the argument put forward. It was an argument of straw.

4.45 p.m.

The Earl of Arran

I listened to the argument put by the noble Lord, Lord Williams. I listened with additional care to the points made by my noble friend Lord Finsberg. The amendment would require the Secretary of State to report to Parliament each year on the operation of special financial arrangements which apply to the City of London. The arrangements were introduced under the Local Government Finance Act 1988 for a very specific reason. The City of London has a very high daytime population and large expenditure needs but only a very small resident population. Unlike other authorities, it has so few domestic dwellings that, without special funding arrangements, even a small change in its spending could have a dramatic effect on the level of its council tax. Because of that, Parliament accepted in 1988 that the normal rules for equalising resources could not take account of the City's unique position. The 1988 Act therefore enabled the City to continue to set its own local business rate and to keep part of the proceeds in support of its local spending. If, within the limits imposed through the normal capping rules, the City decided to spend more than the amount supported by the special arrangements, it would have to set a local rate higher than the uniform business rate.

The City is a responsible authority and appears to have exercised sound control over its finances. Although it has the power to charge a higher business rate, it has never done so. However, like other local authorities, the City is answerable to its local electorate, not the Secretary of State, for its spending decisions. In that respect the City is again unique among authorities. Although the City has the power to levy its own business rate, City businesses retain the right to vote in local elections. The City Corporation is therefore directly accountable both to its council tax payers and to its local businesses for its expenditure decisions.

For those reasons, we believe that it would be inappropriate for the Secretary of State to have to account to Parliament for the City's decision on the level of its multiplier or the way in which it spends its income. I trust that Members of the Committee will feel able to reject the amendment.

Lord Williams of Elvel

I am grateful to the noble Earl for his response. He has, at least, addressed the amendment and not talked about irrelevancies. The noble Earl said that it was not the job of the Secretary of State to be accountable for the City. I agree. Under the amendment, it is proposed that the Secretary of State should consider certain matters and report upon them. That does not seem a very onerous proposition for the Secretary of State and it does not leave him open to criticism as regards accountability.

Of course, the City Corporation has a very special role in life which has been preserved historically. The Secretary of State may well say that he is not interested in the City Corporation. I believe that that would be a mistake. I am sure that the Secretary of State would probably say that he was interested. I am not asking for the abolition of the City or any such rubbish; I am asking the Secretary of State to put down in writing to both Houses of Parliament what has happened in any particular year and to consider certain matters. That is all.

However, the noble Earl seems determined to fight against it. As always, if I may say so, we have not had a very positive response to any of the amendments which we put forward in a reasonable manner. We hoped very much that the noble Earl might concede on one or two of our amendments. Nevertheless, despite the noble Earl's blank refusal to consider any of our amendments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Remaining clauses agreed to.

House resumed: Bill reported without amendment.