§ 8.8 p.m.
§ Viscount Ullswaterrose to move, That the draft order laid before the House on 9th March be approved [13th Report from the Joint Committee].
§ The noble Viscount said: My Lords, I beg to move the Electricity Supply Industry (Rateable Values) (Amendment) Order 1995. It may be for the convenience of the House if I speak to all four draft orders in my name on the Order Paper. Two have effect for Scotland, the others for England and Wales; three are concerned with setting rateable values, the other corrects a defect in our earlier regulations for setting transitional bills.
§ Noble Lords may remember that I moved several rating orders last December. At that time I explained to noble Lords why rateable values are prescribed for certain of the former public utilities. I hope I need to cover that ground only briefly again. A revaluation of all non-domestic property in Great Britain takes effect on 1st April 1995. While the majority of properties have their values assessed by the Valuation Office Agency, or in Scotland by the assessors, some present very special valuation difficulties. These are, by and large, public sector or ex-public sector companies where the property is so large or so unique that ordinary valuation methods will not suffice.
§ To overcome this problem the Secretaries of State for the Environment and for Wales have powers under the Local Government Finance Act of 1988 to prescribe rateable values. Broadly similar powers are held by the Secretary of State for Scotland. Of the draft orders before the House today, the two orders for Scotland prescribe values for 1995 and subsequent years for the two national rail companies, British Rail and Railtrack; the other amends the 1995 English and Welsh order for electricity generators.
§ It is sometimes suggested that the prescription of rateable values in this way confers some kind of benefit on the ratepayers. That is a misunderstanding. The intention is to treat all ratepayers equally, regardless of whether their rateable values are determined by prescription or assessed by conventional valuation methods. The Secretaries of State seek the advice of the Valuation Office Agency and the Scottish Assessors' Association in reaching these values.1584
§ But prescription is not an ideal way to proceed and we have every intention of ending the practice as soon as possible. Whether we will be able to end it at the next revaluation, in the year 2000, for the industries which are the subject of our three orders today, is debatable. It is certainly our hope that the water supply industry, British Gas, the remaining statutory docks and harbours, the electricity distributors and the National Grid should proceed to conventional assessment by the VOA and the SAA in the year 2000. We have already started discussions with some of these bodies to that end. I can assure noble Lords, though, that we will consider very carefully the position of the electricity generators and the national rail network before concluding such a change would not be practicable for them at that time.
§ The two Scottish rateable values orders concern the railway network. These provide, for the next five years, for the determination of rateable values in relation to the British Railways Board and Railtrack operational lands and heritages. In the earlier debate, we approved equivalent provisions relating to England and Wales; these two orders make parallel provisions for Scotland as part of an aggregate Great Britain valuation. We have reviewed with the operators concerned the apportionment of the total value between the operators and among different rating areas. This now reflects the distribution of relevant properties and so we believe that the distribution of the rates burden is equitable. The orders have been agreed with those directly concerned.
§ The first English and Welsh draft order amends the Electricity Supply Industry (Rateable Values) Order which noble Lords approved last December. I must apologise to the House for bringing forward an amendment so soon. The rateable values for three electricity generating companies —National Power, PowerGen and Nuclear Electric—prescribed by the 1994 order, are in part based on those companies estimates of what their generating capacity will be on 31st March this year. Although those estimates were as good as they could be at the time, they may not be accurate. This amendment, therefore, allows for adjustments to be made should the estimates made at the time the 1994 order was laid before your Lordships differ from what will really be the case on 31st March.
§ Noble Lords might ask why we did not include the adjustment mechanism in the original order. The answer is that the need for the adjustment was suggested to us by the companies fairly late in the day, in the light of a number of uncertainties surrounding the estimates they were able to make at the time, and it has proved rather difficult to frame. Hence the late arrival before the House today. Perhaps I should explain what the rather perplexing formula in the draft order does.
§ The adjustment operates by multiplying the difference—expressed in megawatts—between the original estimate of end of year capacity and the actual figure, once that is known, by a sum drawn from the asset values of the rateable property of the companies themselves. The Nuclear Electric figure is higher than that for the two conventional generators because the asset value of nuclear plant is higher. The sums per megawatt arc the same sums as those used to make annual adjustments in rateable values in the 1989 1585 rateable values order. All the companies concerned in these three orders have been consulted about the content of the instruments. Indeed the change to the English and Welsh order is made at their prompting.
§ The fourth English and Welsh order corrects a defect in the Non-Domestic Rating (Chargeable Amounts) Regulations 1994—a defect discovered very late in the day. I am most grateful to noble Lords for allowing time for this instrument to be debated. The regulations which this amending instrument corrects make certain provisions for phasing in the effects of the 1995 revaluation, so as to prevent unmanageably large and disruptive year to year changes in rate bills. This is a complex subject, and the regulations inevitably reflect that complexity. It will take me a little time to explain what the provisions of the regulations we are correcting do.
§ Like the other three instruments before the House today, they concern properties which have their values set by prescription rather than by conventional assessment. It was our intention to have rules for all properties, whether assessed by valuers or determined by orders, which would phase in the effect of changes in rateable values caused by the revaluation. However, property itself can change in extent and rateable values are rightly altered by such changes. Transitional arrangements should not apply to increases or decreases in bills brought about by changes in property, as opposed to revaluations of property.
§ For properties where values are set by order, changes in the extent of property are calculated annually at the start of each year using a formula, which is different for each type of property. This is known as the recalculation factor. This will mean that rateable values will change on 1st April because of both the revaluation and changes in property which occurred in the year beginning 1st April 1994. Our transitional regulations were intended to remove that change in property from the calculation of transitional arrangements. Once transition has been calculated any change in value brought about by the annual change in property would then be added back in, or subtracted from, the base liability to get the final bill.
§ Unfortunately, we now find that the original regulations do not quite secure this intended effect. The amending regulations would put matters right. The recalculation factor provided for in the original instrument is a cumulative one, not an annual one. That is to say, whereas we intended to exclude from the calculation of the transitional bill only the change in property during the year 1994–95 we have accidentally excluded the entirety of the change over the period from April 1990 to April 1995. No ratepayers have so far been affected by this. The end result would have been that next year some ratepayers would pay more than they should, some less.
§ In order to correct this defect we have added another step in the calculation: that of subtracting the cumulative total of all changes in property from 1990 to 1994 from the cumulative total of all changes in property from 1990 to 1995. Changes have had to be made in every part of the regulations where the previous factor was 1586 used, hence the length of the amending instrument. I repeat that this affects only central list ratepayers. I commend the order to the House.
§ Moved, That the draft order laid before the House on 9th March be approved [13th Report from the Joint Committee]. —(Viscount Ullswater.)
§ Lord Graham of Edmonton
My Lords, my noble friend Lord Williams of Elvel has asked me to say that he does not wish to oppose the orders and that he recognises the manner in which the Minister has been fair enough to indicate that the orders are to put right matters which ought perhaps to have been taken care of at an earlier stage. That is understood and accepted.
Perhaps the Minister can help me on two points. He referred to the global, almost amorphous, nature of the bodies covered. He then went through a list of other bodies that were perhaps waiting in the pipeline. I take it that that was an exhaustive list of all the other comparable bodies that would receive comparable treatment. I should be glad to know whether that is the case in order to get an idea of the future legislation.
Looking at the orders and looking at the proceedings in another place, it needs someone who is specialised in understanding these matters. Algebra was not one of my strong suits at school, so that excludes me. Am I right in understanding that the basis, ratification and validity of these matters as being fair have been the product of professional bodies who understand the philosophy of rating and who, in effect, have assisted the Government in producing, in these exceptional circumstances, the basis on which a rate is arrived at?
The last point is this. Just as one deals with rates in a personal capacity, there is an appeals procedure for objections. Can the Minister help the House very quickly by saying whether, if these orders go through, that will be the end of the matter, or can some elements of the industry or even individuals who may believe that they are advantaged or disadvantaged by the size of the rate which is levied, have recourse to appeal? Industry will want to pay as little as possible and if it does so then the rest of the population will have to pay a little more. Is there a protest or objection mechanism which is easily understood and available? I do not intend to speak again and the Minister need not spend much time giving me a reply tonight. He may feel that a written reply, which would be appreciated by my noble friend Lord Williams, may be the answer.
§ Viscount Ullswater
My Lords, I shall do my best to seek to answer the questions that the noble Lord, Lord Graham of Edmonton, has put to me. First, I explained during the course of my remarks that some of the industries I mentioned will be conventionally assessed for the first time in 1995. We are dealing with public sector or ex-public sector industries. Others will have to remain in the prescribed assessment. These are the electricity supply companies, the water supply companies, British Gas and the national rail network including London Underground. They are bodies which I do not believe I mentioned. Also included are the larger ports.
1587 Industries moving towards conventional assessment in 1995 which were the subject of previous orders, are telecommunications, canals, Tyne and Wear Metro, the Docklands Light Railway and the medium-sized ports. Therefore, the noble Lord is quite right in that we are moving from the prescribed assessment to what one might call the more conventional form of assessment over a period of time. I indicated that there were some problems with the valuation of these large industries and that we would need to make a progression.
The noble Lord then asked me whether the Government had professional assistance in arriving at the valuations. It is done with the Valuation Office Agency and also with the Scottish Assessors' Association. I believe that gives the professional side of it. I have to say that it is done in agreement with the parties so that there is some consultation with them.
The noble Lord then asked me whether there was some form of appeal and objection to the assessments made. The answer to that is no. There is no appeal available to these industries once the matter has been set by Parliament. As I said before, there is the opportunity to discuss the rateable value with the department. As I indicated, that is done with the agreement of the parties. These orders are brought forward with their agreement. In that instance there is not the requirement for an appeal mechanism. All other industries which are not on the prescribed list procedure have a right of appeal, but in this particular instance they do not.
§ On Question, Motion agreed to.