§ 9.17 p.m.
§ LORD MOWBRAY AND STOURTON
My Lords, I beg to move, That the Docks and Harbours (Valuation) (Amendment) Order 1973, be approved. In commending this Order to the House, the first point I wish to emphasise is that it is an amending Order. In this Order we are not laying down for the first time a completely new method of rating docks and harbours. We did that in the Docks and Harbours (Valuation) Order, 1971, which Parliament approved a couple of years ago. That was the time when the major step was taken. I suggest therefore that there is no need at this stage to go over again the reason for making the change to a formula method for assessing docks and harbours for rates. But as this Order needs to be read with the 1971 Order I shall have to refer to some of the features of that Order.
What that 1971 Order did, in brief, was to substitute for assessments derived under ordinary rating law a percentage— 4 per cent.—of the gross receipts after receipts in respect of cargo handing have been deducted from the total. It is also appropriate to mention at this point that because the change was quite a radical one, there were transitional provisions which secured that ports whose rateable values would change substantially as a result of the formula would move to their new levels, either up or down, over a period of up to five years. At the time the 1971 Order was made it was apparent that the percentage would need to be reviewed in 1973 because of the revaluation; it was not possible to provide then for a different percentage to apply from 1973 because it was desirable that the figure should be fixed in relation to the most up-to-date information possible. And we undertook to carry out such a review. So the main purpose of this amending Order now before the House is to make the necessary change in the percentage to take account of revaluation. What we have done is to increase the percentage from 4 per cent. to 6 per cent. of what we call "relevant receipts". Anticipating a little, I might say here that relevant receipt will not mean quite the same thing in 1973–74 as it has done over the last 1314 couple of years, if Parliament approves the new Order.
The immediate question that might well be asked is why the percentage changes only from 4 per cent. to 6 per cent. In 1973 rateable values generally are moving on average to about 2½ times their previous figure. Should not, therefore, the 4 per cent. also be multiplied by 2½ to produce 10 per cent. instead of the 6 per cent. for which we have provided? The answer to this question lies within the technicalities of the rating system, but as it is such an important one, I hope the House will forgive me if I devote a few moments to it. Most properties provided they are not altered keep the same rateable value throughout the period of validity of a valuation list. A house which had a rateable value of £100 in 1963 will still have that rateable value in 1972. But from April 1, 1973 it will, typically, go up to £250. If we can assume an identical house in identical circumstances being built in 1970, it would also have been given a rateable value of £100, and whatever the rental value would have been in 1970, its rateable value would have been based on the level of values when the 1963 list was compiled—that is, in 1962 or there-abouts—even though it was not in existence at that time. That house would also go up to £250 from April 1. In the technical jargon of rating, we refer to this valuation of properties on the level of values obtaining just before the list comes into operation as valuation according to the "tone of the list".
But there is an important exception to this rule; it does not apply to assessments determined in accordance with what is called "the profits method"; and until 1971, statutory docks and harbours were valued according to the profits method. Properties subject to this method of valuation are rateable on the profits each year, with no allowance for movements in values, either of property or of money.
What this means in the present case is that when we changed over to a formula method of assessment of docks and harbours in 1971, the 4 per cent. was determined in relation to money values at that time and not on money values or on property values in 1963. This means that, other things being equal, a 1315 much smaller relative rise in assessments for ports would now be appropriate. And if the profits method had continued to apply to the ports the revaluation would have produced, other things being equal, a much smaller change than the 2½ multiplier for property in general.
Here, I must say that nobody to-day is in a position to give an exact percentage which would be appropriate. No objective measure of the appropriate liability for docks and harbours exists and, moreover, the exercises which have been done to arrive at the 6 per cent. have depended on estimates for the future which time may falsify. In this sort of situation one must accept that the 6 per cent. is a round figure. But I can say that it was arrived at after a thorough study of the estimates and other data put forward, and these were the subject of comments and discussion. In all the circumstances 6 per cent. seems to be about right. Another important provision in the Order also relates to the percentage of receipts. Although we have provided for 6 per cent. in 1973–74, we have provided that any receipts in excess of those in 1973–74 should carry a percentage of only 4.
The purpose of this provision is to give some measure of stability for clocks and harbours. This will mean that, where the money value of receipts goes up both on account of increased business and on account of inflation, an allowance will be made for the inflationary element, unlike the position at present. Of course, I accept that in practice the inflationary element might be more or less than this allows for and the situation will vary from port to port. But, bearing in mind the vigorous steps which the Government are taking to counter inflation, we do not think that a lower percentage for the excess would be appropriate.
The other provisions in the Order are of less importance. One consequential to revaluation and the alterations in the percentages, is that we have had to make appropriate changes in the transitional provisions. They look, and are, rather complicated, but I can assure the House that they have been devised so as to leave ports in the same position on the ladder as before the changes; but, of course, the rungs have become more 1316 widely spaced. So far as the remainder of the Order is concerned, we have thought it right to use the opportunity presented by the Order of making minor improvements to the formula which experience suggests are desirable. To make for greater fairness between ports there are some other exclusions from gross receipts, in addition, that is, from receipts for cargo handling. Investment income, receipts for pilotage and rents of let out properties (subject to a limit) are now to be excluded. And for the sake of greater convenience for a large number of ports, we have introduced a choice of accountancy year for the purpose of determining the amount of relevant receipts. My Lords, I have now covered, if only briefly, the points of substance in this rather technical Order. Accordingly, I beg to move.
§ Moved, That the Docks and Harbours (Valuation) (Amendment) Order 1973, be approved.—(Lord Mowbray and Stourton.)
§ 9.27 p.m.
§ BARONESS WHITE
My Lords, out of consideration for the noble Lords who are concerned with the next business, and also out of consideration for the noble Lord, Lord Mowbray and Stourton, who, I understand, is trying to catch a train to the North, I will endeavour to be brief, but I am afraid that we cannot let this Order go through without any discussion at all because we have received very emphatic objections to it in its present form from the local authority associations most closely concerned; namely, the Association of Municipal Corporations and the Urban District Councils Association. In the normal way, my noble friend Lord Champion would have been dealing with the matter, and I must admit that I am in no sense an expert on it, but my noble friend, unfortunately, is committed elsewhere and cannot be present.
I must say that we have had most emphatic objections on behalf of these associations to the form the Order has taken, and they have expressed their dissatisfaction with the outcome of the consultations they had with the Department. The burden of their dissatisfaction, or the main point—I will mention one or two minor points in a moment—is that in their opinion and according to their estimates the formula proposed in the 1317 Order will mean that the ports and harbours undertakings concerned, the statutory ports and harbours, will be paying a considerably lower sum in rates next year under the new formula compared with what they have been paying hitherto. According to these calculations, under the 1971 arrangements—and, as the noble Lord properly said, the Order we have before us is to amend that arrangement—the rates were based, in very round terms, on a total rateable value of something in excess of £3 million. If one takes the proposals in the Order, as I understand it the total rateable value on which the rates will be levied will be, in round terms, about £4½ million; whereas the local authority associations reckon that the rateable value should be in the region of £7 million. They say, giving their calculations (needless to say, my Lords, I do not pretend to have made these calculations myself) that there will be a reduction in the total rate burden on the ports and harbours of about 40 per cent. under the new dispensations. If these calculations are correct, then it requires some further explanation than that given to us so far by the noble Lord.
I gather that the proposals of the Government in relation to the new valuations means that in general terms the domestic hereditaments will have an average increase of rate burden in the coming period of around 1.8 per cent.—in other words, a quite inconsiderable figure; and one is well aware that averages conceal wide variations of rates between different properties—but that in the industrial and commercial field there will be some slight reduction on the average of about 1.9 per cent. Even within the averages, which, as I say, can cover wide variations as to actual figures for particular properties, I think one must agree that if there is any validity in this calculation of a reduction of some 40 per cent. under the new arrangements, this is quite remarkable. With great respect to the noble Lord, I do not feel that the explanation he has so far given to the House is adequate to explain away this difference. For that reason, I think we are entirely justified in raising the matter.
I am told by the spokesman for the local authority associations that in 1971 the local authorities were not entirely satis- 1318 fied with the formula of 4 per cent. then proposed, and that at that time they suggested that 6 per cent. would have been a more equitable one. It is partly for that reason that they are now saying, under the new arrangements, that it should be 10 per cent. rather than the 6 per cent. proposed by the Government. I do not pretend for one moment, because rating finance is not one of my subjects, that I can go into further detail on that, but I feel it is only right to put before the House the objections that we have received.
There are some other objections to the formula, in so far as the definition of relevant receipts is concerned. Frankly, I cannot judge on the merits of this, but again I think one should make public the objections which have been made. It is suggested that the complete omission of receipts from cargo handling, in particular, is not a fair basis for these computations, because with containerisation, roll on-roll off, and so on, there is a considerable effect on the revenues of some of the ports, and if one is doing this on a formula basis and not on the basis of the value of the property, then it appears to the Local Authorities Association that there are certain elements in the definition of relevant receipts which they would wish to contest.
We are in some difficulty because the Order before us now is due to come into force in three days' time. In other circumstances I think one would have asked the Government to withdraw the Order to-night and to bring it back to the House, possibly amended in some form. Well, we are not unreasonable about this at this late hour, and I do not propose to divide the House. I think we are fairly evenly matched, but I recognise that this would not be practicable. Nevertheless, I think it is unfortunate that where there is a matter of contention, and the Local Authority Associations were not satisfied with the consultations and made this plain, we should be put in a situation where we have an Order that is to come into force on April 1, and there is no margin of time for reconsideration. As the noble Lord rightly said, this formula method for the statutory docks and harbours came in fairly recently. It has not been working for long. It has not been regarded by the local authorities as entirely satisfactory. But, in particular, I 1319 think if there is any validity in the calculations which have been given of this 40 per cent. reduction in the likely payment of rates, we should have some explanation.
§ 9.35 p.m.
§ LORD MOWBRAY AND STOURTON
My Lords, it is very hard, as I think I said, to give an explanation, because what we are talking about—and I emphasised this—is what is in our opinion the best possible available information based on estimates. The various bodies involved took ten years before we could get the 1971 Order agreed to. These things are never easy, and one must accept that the Association of Municipal Corporations are a party with a vested interest in this matter, putting the best possible case for themselves. I understand that. Equally, the Ports and Harbour Authorities emphasise even now that they regard themselves as paying too much. We have to take into account what is going to be a balance. I made it clear that it would have been very unfair to use the multiplier of two and a half for the docks. If that had been based on 1962 figures, which all the rest of the country are based on, I would accept that the noble Baroness and the municipal corporations had a point.
§ BARONESS WHITE
My Lords, may I interrupt the noble Lord? He will appreciate that the 1971 arrangement, as I understand it, was not in any way for an increase of rates to be paid at that time; it was for a redistribution of responsibility for rates as between the various undertakings. By the previous method, the profit method, of computing the rateable value one had certain docks which had a nil assessment because they made no profits. It did not mean to say that they did not have considerable buildings and other installations. Therefore the basis of the 1971 arrangement was not that you increased the rates of the 1962 period, but you simply divided them out on a different basis between the various establishments concerned. That was, in a way, a device for a more equitable distribution of the total. It was not for an increase in the total at that time.
§ LORD MOWBRAY AND STOURTON
My Lords, the 1971 Order was based on receipts at that time. If you take the receipts as being the figure on which your rateable value is to be based, and inflation has gone on from 1962 to 1971, to that extent the rateable values of the ports and harbours were that amount higher than the rateable value of the rest of the country.
We are conscious that neither the ports nor the local authorities associations are satisfied with the effect of this amending Order. Both sides are dissatisfied, and both parties would agree that amendment is desirable. Suppose we did not move the Order, what would happen? The harbours and ports next year would pay only 4 per cent. There is no guarantee that another Order would be brought in. This is an Order to bring up to date what we feel is fair between the two parties.
§ BARONESS WHITE
My Lords, I am sorry to interrupt again. The poundage is going down all over the country because of the revaluation; therefore they are going to pay in total 40 per cent. less in actual rates.
§ LORD MOWBRAY AND STOURTON
My Lords, if the noble Baroness will read what I said, she will see that the re-rating was based on increased revenue in 1971 and she will see that there is a point there. The ports feel that they will be paying too much as a result; the local authorities associations believe, just as sincerely, that the ports will be making an inadequate contribution to local revenues. As I have tried to indicate, a final demonstration one way or the other is not possible on the information available. I am willing to give this undertaking: that if this experience or further information of any kind should subsequently indicate that the Order is producing too high or too low an assessment for docks and harbours generally, we shall be willing to undertake a further review of the formula. With those few words —and I think a fair attitude on behalf of Her Majesty's Government—I hope your Lordships will approve the Order.
§ On Question, Motion agreed to.