§ Mr. Diamond
I beg to move Amendment No. 188, Clause 62, in page 129, line 31, at the end to insert:; and this subsection shall apply to a local authority association as it applies to a local authority.".Perhaps it would be convenient to consider, at the same time, Mr. Speaker, Amendment No. 189, Clause 62, in the name of my right hon. Friend, page 130, line 21, at end insert:(4) In this section "local authority association" means any incorporated or unincorporated association of which all the constituent members are local authorities, groups of local authorities or local authority associations and which has for its object or primary object the 117 protection and furtherance of the interests in general of local authorities or any description of local authorities; and for this purpose, if a member of an association is a representative of or appointed by any authority, group of authorities or association, that authority, group or association (and not he) is to be treated as a constituent member of the association.
§ Mr. Diamond
These two Amendments implement a promise, made during the Committee stage, that we would introduce Amendments on Report to extend to local authority associations the exemption from Capital Gains Tax, Corporation Tax and, as from 1966–67, Income Tax, which Clause 62 confers on the local authorities themselves.
The first Amendment is the substantive Amendment. It gives local authority associations the same exemption from Corporation Tax, Capital Gains Tax and as from 1966–67, Income Tax as Clause 62 confers on local authorities. The following Amendment defines local authority associations for the purposes of the exemption. The definition includes incorporated associations as well as unincorporated ones and excludes associations which are not composed exclusively of local authorities.
§ Sir E. Boyle
I recall that, when the excess profits levy was introduced in 1952, the position of local authorities under that levy was rather a muddle—and, as a back bencher at the time, I admit that. Whatever our criticisms of the operation of the Corporation Tax, it is clear that considerably more trouble has been taken over the position of the local authorities under the tax than has sometimes occurred in bringing in new taxes in the past. This is more important than perhaps we sometimes realise because the operations of local authorities are of a much bigger scale than ever before. Obviously, considerable attention has been paid to this part of the scheme.
§ Amendment agreed to.
§ Mr. Diamond
I beg to move Amendment No. 186, Clause 62, in page 129, line 38, to leave out from "council" to end of line 40 and to insert:and any statutory authority, commissioners or trustees".Perhaps we could discuss, at the same time, the following Amendment, also in the name of my right hon. Friend, No. 118 287, Clause 62, in page 129, line 42, leave out "that Act", and insert:the Local Government (Scotland) Act 1947, or to issue a requisition for payment of money to be raised out of such a rate".
§ Mr. Diamond
These are drafting Amendments to the definition in Clause 62(2,b) of a local authority in relation to Scotland. In Committee, my hon. Friend the Minister without Portfolio undertook that the Government would ensure that the wording of the definition was reconsidered. It now appears that there should be a further Amendment to ensure that bodies which are not joint bodies or joint Committees and which have no power to levy a rate in the ordinary sense but which requisition for payment of money to be raised out of a rate should be within the definition. Such bodies are not common but at least one is thought to be affected. The Amendments are needed to bring within the definition any such bodies that there may be.
§ 7.45 p.m.
§ Mr. Edward M. Taylor (Glasgow, Cathcart)
I appreciate that a change has been made to meet certain points put to the Government in Committee. Nevertheless, the Amendment does not go far enough to achieve our objectives. A similar Amendment was discussed early on 16th June. At that time we thought that the Clause as it stood, together with the Amendment then put forward by the Government, created rather a confusing situation in so far as it referred to Section 270 of the Local Government (Scotland) Act, 1947.
Section 270 defines a rate in a way quite different from the definition of a rate contained in a later section of the 1947 Act. Section 270 includes authorities with electricity, gas or water undertakings whereas in the later definition there is no question but that this is a levy on property, land and hereditaments.
The Minister without Portfolio said that the Government were seeking to ensure an appropriate definition of a local authority or public authority which would be exempt from Corporation Tax and bodies which were not public authorities would not have such exemption. This Amendment does not achieve that objective so far as a certain body associated 119 with the corporation of my own city is concerned.
It is sensible to exclude any reference to Section 270 and to note that certain of the joint local authority ventures which have the right to a requisition are included in the new definition. But what worries me is that in the case of a local authority trading department engaged in providing a monopoly public service, there appears to be no exemption at all.
It is not our wish that trading organisations under the guise of local authorities should be excluded from the tax. We have pointed out that there were certain fears as to whether the newly-formed Highland Development Board would have exemption under the Clause as it stood. We were anxious that it should not be excluded because it will have the right to engage in trade. It is not our intention to encourage local authorities to engage in trading and to get exemption from tax which would give them an advantage over private traders but there are certain cases of local authorities which, for their own purposes, regard as trading departments departments which, in other authorities, might well be regarded as rating departments.
For example, Glasgow Corporation transport department is not a rating department but a trading department. That department, if it so desired, could change itself over to being a rating department and I think that it might well do so if no further Amendment were made or clarification given. In this situation, there would be real dangers for the people of Glasgow and it would appear to be in conflict with the Government's own policy, because it could only lead to subsidised municipal transport and a further burden on the ratepayers.
Under the definition that we now have of a local authority, it is my impression that the Glasgow transport department would not be given exemption from the Corporation Tax. If we could have clarification of that point at once it would be an advantage. The department has no power to levy a rate nor power to requisition money from rates of any sort. It is entirely a trading department and any profits made by it are transferred to the common good fund of the city, which can only be used to provide services or 120 amenities for the benefit of all the ratepayers.
It is not entirely a unique organisation. I understand the same applies in Edinburgh, where the transport undertaking is a trading department and not a rating department. In other cities, such undertakings are, however, rating departments. The same applies in other areas served entirely by a transport organisation of a not dissimilar nature.
I am concerned to ensure that the Glasgow department has this exemption. It is a public service provided by the local authority. It is not the intention to make profits and it is not competing with private organisations. It is providing a monopoly public service and if exemption is not given, and the transport department does make profits, I fear that there will only be two courses to take.
Either they will have to raise fares, which could have a disastrous effect, particularly bearing in mind the special assistance which the Minister of Transport has recently offered in the case of London, or as a second alternative the department could be turned into a rating department. So far as I am aware, it is not a difficult thing for the transport department in Glasgow to become a rating department, but if they did this it could mean a complete change in the transport department of the city, and this could lead to a reluctance on the part of members of the corporation to raise transport fares when this proved necessary. In other words, it could become a further burden on the ratepayers.
I would ask the Government to bear in mind that at present in the City of Glasgow our rates per head of population are about the highest in Great Britain. Therefore, I would like clarification on this point.
§ Mr. Diamond
I am following what the hon. Gentleman has to say with all the care I can, but I have lost his argument. Would he mind making clear the connection between the present rates in Glasgow, which he has gone to considerable trouble to explain, and the Amendment which we are discussing, because I cannot see it myself?
§ Mr. Taylor
I am sorry if I am unable to get this point clearly across to the Government. It is a very vital point. In the City of Glasgow at present, the 121 average rate burden per head of population is over £27, which means that the average family in the city, directly or indirectly, is paying about £100 in local rates. It is clearly the case that if the City of Glasgow transport undertaking was to become the rating department and if, in the circumstances, an additional burden were placed on the rates by way of a subsidy from the Corporation's general funds, this could have the effect of raising what is already a very excessive charge.
If the right hon. Gentleman would like further clarification on this point I could instance a recent survey when it was found that in the City of Glasgow, where there is this burden of about £27 per head of population, when compared with towns in England, where there is a concentration of heavy industry—
§ Mr. Diamond
I hope that it will be in order for me, in replying to this discussion on the rates of various towns in Scotland, to continue with the rates of various towns in England and Wales and Northern Ireland, all of which are exempt in the Bill, but none of which have anything to do with this particular Amendment.
§ Mr. Deputy-Speaker (Sir Samuel Storey)
I think that the hon. Gentleman is getting very wide of the Amendment. He must concentrate on the Amendment.
§ Mr. Taylor
It was my intention to do so, Mr. Deputy-Speaker, but since the right hon. Gentleman interrupted me on this point I felt that it was only fair to clarify what I had in mind.
The essential point is that the rate burden is high in Glasgow and this could make it worse. When we are granting a general exemption to local authorities, we should also include bodies which are providing a municipal public service and I hope it can be made clear that the Clause, as it now stands, or the Clause as amended, will grant exemption from Corporation Tax for a transport department similar to that which we have in the City of Glasgow.
The other point, which is I think a vital one, deals with joint cemetery undertakings which are trading departments and in no sense of the word rating departments. There are several local authorities in Scotland which have come 122 together to promote a joint cemetery undertaking. They have no power to levy rates or requisition money. They are entirely a trading organisation. This point was put forward by my hon. Friend the Member for Aberdeenshire, West (Mr. Forbes Hendry) in Committee and no doubt the Government will have gone to some trouble to find out the application of this Clause in connection with such an organisation.
I hope that we can obtain clarification on these points, and I hope that we can have the assurance that in particular, the City of Glasgow transport undertaking, will be covered by this general exemption from Corporation Tax.
§ Mr. J. Bruce-Gardyne (South Augus)
I wish to obtain final clarification from the Chief Secretary on one point which arose in the Committee stage of the discussion in relation to this particular subsection. I am very glad to see that on this occasion, at least, we have the pleasure of the representative of the Scottish Department.
The Under-Secretary of State for Scotland (Dr. J. Dickson Mahon)
The hon. Gentleman had that pleasure before.
§ Mr. Bruce-Gardyne
As far as I recollect, it was rather belated.
The point is that when we were discussing this particular subsection in Committee the Minister without Portfolio considerably alarmed a number of us by suggesting that the application of this Clause, the exemption from Corporation Tax and Capital Gains Tax, might be extended and might be applicable to bodies such as the Highland Development Board, which engage in commercial operations in areas like the Highlands. Many of us on this side of the House felt that this was a highly undesirable extension of these exemptions and that it would give bodies such as the Highland Development Board an extremely undesirable competitive advantage over normal, established commercial undertakings in the Highlands or other areas of Scotland.
All I want from the Chief Secretary, and I am sure he can give it to us, is a clear assurance that the subsection, as redrafted, does not cover such bodies as the Highland Development Board.
§ Mr. Diamond
If I can answer the last question first, this matter was referred to in the discussion on the Highlands and Islands Development (Scotland) Bill which took place on the 17th June and reported in HANSARD at column 977. It was made clear that the Board would be treated for tax purposes, like any other corporate body. A statement was made by my hon. Friend the Minister of State, Scottish Office, the very same day that it was raised in Committee.
If I can now reply to the earlier questions—
§ Mr. Bruce-Gardyne
What was said by his hon. Friend the Minister of State was that this was a discussion more appropriate to the Finance Bill. This did not produce an answer on that occasion.
§ Mr. Diamond
Would the hon. Gentleman be good enough to look at column 977? He has the advantage over me in having the column, but I am advised that in column 977 he will read that the Board would be treated for tax purposes like any other corporate body, or words to that effect.
In reply to the question asked by the hon. Gentleman the Member for Glasgow, Cathcart (Mr. Edward M. Taylor), about the undertaker's undertaking, the answer is that that is a joint committee and is, therefore, included in the definition.
§ Mr. Deputy-Speaker
The hon. Gentleman has exhausted his right to speak. He must ask the leave of the House to speak again.
§ Mr. Taylor
May I have the right to speak again on a point upon which I concentrated for five minutes, namely, the situation of the Glasgow transport department? It is a very vital question and it could involve a great deal of money.
§ Mr. Diamond
If the hon. Gentleman is seeking to ask me a question about a particular organisation, and not seeking to amend a law, he can write to me and put his question before me, and I will be only to glad to give him a detailed, authoritative answer. I have already told him that so far as the undertaking of the kind he described is concerned, it is a joint board and would be included in the definition.
§ Amendment agreed to.124
Further Amendments made: In page 129, line 42, leave out "that Act", and insert:
the Local Government (Scotland) Act 1947, or to issue a requisition for payment of money to be raised out of such a rate".
In page 130, line 21, at end insert:
(4) In this section "local authority association" means any incorporated or unincorporated association of which all the constituent members are local authorities, groups of local authorities or local authority associations and which has for its object or primary object the protection and furtherance of the interests in general of local authorities or any description of local authorities; and for this purpose, if a member of an association is a representative of or appointed by any authority, group of authorities or association, that authority, group or association (and not he) is to be treated as a constituent member of the association.—[Mr. Diamond.]