PARLIAMENTARY DEBATES

HOUSE OF COMMONS

OFFICIAL REPORT

Second Standing Committee on Delegated Legislation

DRAFT RATES (AMENDMENT) (NORTHERN IRELAND) ORDER 1996

Tuesday 19 November 1996

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The Committee consisted of the following Members:

Chairman: MR. BARRY JONES

Barnes, Mr. Harry (North East Derbyshire)

Butcher, Mr. John (Coventry, South West)

Canavan, Mr. Dennis (Falkirk, West)

Corbyn, Mr. Jeremy (Islington, North)

Elletson, Mr. Harold (Blackpool, North)

Fox, Sir Marcus (Shipley)

Gapes, Mr. Mike (Ilford, South)

Hood, Mr. Jimmy (Clydesdale)

Illsley, Mr. Eric (Barnsley, Central)

Livingstone, Mr. Ken (Brent, East)

Needham, Mr. Richard (North Wiltshire)

Peacock, Mrs. Elizabeth (Batley and Spen)

Speed, Sir Keith (Ashford)

Steen, Mr. Anthony (South Hams)

Walker, Mr. A. Cecil (Belfast, North)

Wheeler, Sir John (Minister of State, Northern Ireland Office)

Wood, Mr. Timothy (comptroller of Her Majesty's Household)

Yeo, Mr. Tim (South Suffolk)

Young, Mr. David (Bolton, South East)

Mr. J. D. W. Rhys, Committee Clerk.

2
3 Second Standing Committee on Delegated Legislation Tuesday 19 November 1996

[MR. BARRY JONES in the Chair]

Draft Rates (Amendment) (Northern Ireland) Order 1996

4.30 pm

The Minister of State, Northern Ireland Office (Sir John Wheeler): I beg to move, That the Committe has considered the draft Rates (Amendment) (Northern Ireland) Order 1996. The order was laid before the House on 24 October 1996. It proposes a number of changes to the Northern Ireland rating system through which householders and the non—domestic sector make an appropriate contribution to local authority—type services. The Government have no plans at present to replace the existing rating system. However, as long as Northern Ireland continues to operate a rating system, it is essential that legislation be kept fully up—to—date and the order is intended to do just that. A non—domestic revaluation is underway in the Province and a new valuation list will be published before the end of this year. Some of the provisions in the order are in preparation for that revaluation. Commercial properties are being updated to 1995 rental values, while domestic properties will continue to be valued at the levels that prevailed in the mid—1970s. At present, the principal rating legislation—the Rates (Northern Ireland) Order 1977—requires rate poundages to be fixed at a uniform amount in the pound. Clearly that will not be possible when domestic and non—domestic properties are on different valuation bases. Article 3 of the order will enable the Department of Finance and Personnel to make regulations providing for different rate poundages to apply to the domestic and non—domestic sectors. Article 4 removes an ambiguity in the law by providing a uniform method for determining the date of rate liability in a range of circumstances where property has been newly constructed or structurally altered or is affected by various events and circumstances set out in schedule 6 to the principal order. Article 5 is again related to the revaluation. It enables a transitional relief scheme to be considered which can be used subsequent to a revaluation to moderate the swings between ratepayers if those are judged to be too severe. That may involve the phasing of both increases and decreases in liability on a global or a selective basis. Information gathered during the revaluation is still being collated and it is too early to say if a relief scheme will be appropriate in Northern Ireland. A decision will be taken when we have a clearer picture of the extent of the rate shifts. 4 At present the valuation of utilities has to be determined by a prescribed formula specific to each industry. Article 6 provides a means to value utilities and former utilities in the same manner as other property, in other words by reference to an assessed market rent. That will bring Northern Ireland into line with Great Britain. Article 7 will enable different types of property occupied by the Department of the Environment Water Executive to be valued as a single item and entered as such in the valuation list. Article 8 deals with mixed domestic and industrial premises. The effect of the article will be to remove from the overall valuation, that part of the valuation attributable to a dwelling house before consideration is given to the primary use of the remainder of the premises and the applicability or otherwise of industrial derating to that part. Article 9 should be read in conjunction with article 12, paragraphs (c) and (d). Taken together, those will enable the definition of a railway to be revised and updated and the valuation of a railway to be specified in an order and for that valuation to be apportioned between the various district council areas. Article 10 is intended to clarify what is a difficult area of the law by distinguishing between a private dwelling, the owner of which takes in the occasional lodger, and a commercial enterprise specialising in rented accommodation. It rests on the concept of "primary use", which can be tested by reference to specified quantifiable factors. That will remove an ambiguity in the law and bring Northern Ireland into line with Great Britain. Article 11 provides for buildings associated with salmon and eel fishings, public parks and certain public recreation areas not to be hereditaments. That means they will be removed entirely from the valuation list. The article is, in part, a parity measure which brings the treatment of parks and other recreational areas broadly into line with Great Britain. I referred earlier to article 12 in connection with the valuation of railways. The article has three other purposes. First, it will enable a so-called "decapitalisation rate" to be prescribed in an order instead of being applied administratively as at present. That refers to a rate of interest employed in the valuation of specialist public sector buildings that are not usually rented, such as schools, hospitals and leisure centres. Secondly, the article will enable Northern Ireland's plant and machinery regulations to be brought back into line with those in Great Britain. Finally, the Committee will be relieved to learn that the article will enable detailed changes in the technical valuation rules set out in part 1 of schedule 12 to the principal order to be made without recourse each time to primary legislation. Future changes to those rules will be made by subordinate statutory rule. I should emphasise perhaps, that that refers to minor technical changes only. It will not affect the amount of rates which anyone pays. I hope the Committee will agree that the measures proposed in the order, as well as being essential to the effective operation of the non-domestic revaluation, 5 will improve the existing legislation by removing anomalies and simplifying and clarifying areas of rating law which, while technical in form, have practical and important consequences for ratepayers. I commend the order to the Committee.

4.37 pm

Mr. Eric Illsley (Barnsley, Central): In view of the technical nature of order and the fact that it is required for the revaluation to take place on 1 April the Opposition shall not oppose it, but I want to question the Minister on one or two matters. One of the first concerns to come to mind is the length of time since the previous revaluation. Domestic, industrial and commerical properties were previously revalued in the 1970s. I well recall the revaluations that took place in Great Britain as a result of the poll tax and, following that, the council tax, which led to considerable difficulties: some valuations of rateable properties were far in excess of the previous levels. There were great protests from the business community because of the burdens placed upon it by those revaluations. Will domestic rateable values also be reassessed? Valuation practice is supposedly being brought more into line with valuations in Great Britain, but the Minister will know that since the council tax was introduced some valuations of domestic properties have been rough and ready—they were completed quickly by estate agents according to a banding system. I appreciate that domestic and non-domestic poundages have been separated because only non-domestic properties are to be revalued, but what is the Government's view on the uniform business rate? The Minister said that there was no intention to change the rating system in Northern Ireland but in view of the separation of the rate poundages, there could be a suspicion that a form of the uniform business rate could be on the cards. I am sure that the Minister is aware that many people in the business community are somewhat dissatisfied with the system of UBR and I am also sure that an extension of it to Northern Ireland would not be welcomed there. The last revaluation in Great Britain gave rise to some fairly substantial increases in rates liability for the business community. As I mentioned, the Government have taken a power within the order to implement a transitional relief scheme. That suggests that the Government expects some large increases in rateable values. The prospects for the improvements in the Northern Ireland economy could well be affected by such huge rises unless a transitional relief scheme is in place. Although the Government have taken the power to implement such a scheme, we have no details at the moment. The Minister said that there is currently insufficient information available to draw up that scheme, but I ought to flag up the time scale. The transitional scheme—if one were required—would have to be published some time between now and next April, when the new evaluation list is to be put in place. It seems that the Government are giving themselves a 6 very short period within which to implement a transitional scheme. Many people who might be expecting an increase in their rates from April next year could worry that such a transitional scheme will not be in place. I also want to press the Minister on a statement in the explanatory document which says that a transitional relief scheme could be on a "global or selective basis". Given that it is some 20 years since the last revaluation, the chances are that the rateable value of a substantial number of properties will be increased. Do the words "selective basis" mean that the Government will consider certain areas where the increases are heaviest, or will there be a percentage rate across the board? If, say, Belfast were hit with extremely high rate rises while other areas had lesser rises, would the schemes apply on a geographically selective basis rather than across the board? In view of the time, I urge the Government to consider implementing the scheme sooner rathar than later. I am grateful for the Minister's explanation of article 12. I was going to ask a question about schools and hospitals, but he has covered my point. Does article 7, which concerns water and sewerage properties where aggregated amounts can be allocated to district councils, bear any relation to the proposed privatisation of water and sewerage services in Northen Ireland? Under the new regime as set out in the order, it might be easier for the rates to be allocated if those services were put into the hands of private companies. The water companies in Great Britain now have profitable enterprises outside the supply of water and sewerage services. Will the properties in Northern Ireland that are to be aggregated have different values, and will district councils lose out if they have a more profitable service that is being carried out by a proposed water company? Article 9 gives the Government carte blanche to alter the schedule relating to the rating of railways, but there is no indication as to what amendments the Government might have in mind. Is the article designed to make the ratings system more amenable to a privatised railway system in Northern Ireland? That would give us cause for concern. As I said, the Opposition do not intend to oppose the order and, subject to some answers from the Minister, we hope to give it a fair passage.

4.44 pm

Mr. Anthony Steen (South Hams): Thank you for calling me to speak in this important debate, Mr. Jones. It is always a privilege and an honour to serve on a Standing Committee, especially when my right hon. Friend the Minister replies to the debate. I am a little puzzled as to why we are considering another statutory instrument. Northern Ireland has managed perfectly well without a rates revision for many years. What has suddenly prompted the Government to produce a statutory instrument? Some 8,150 statutory instruments have been introduced in the two years since January 1994, and we are now adding another. I know that the Minister does not 7 favour increasing legislation, which makes the introduction of this document mildly puzzling. It would be useful if the Government could tell us why they have suddenly introduced a change in the rates when Northern Ireland has got on merrily without one. We should be told the statutory instrument's likely results. Will the money that is generated from local government increase enormously? This is a key opportunity to raise considerable sums from the private sector. What funds is the measure likely to unlock for the Exchequer? It is also important to know how many rules and regulations might result from the statutory instrument. I was worried to see the words "Regulations may provide that in prescribed cases—" in article 6, which suggests that more regulations might result from the measure. Members of the Committee should know whether we are likely to open the floodgates to a tide of rules and regulations—this time from Northern Ireland, not Whitehall—if we pass the statutory instrument. We should, therefore, know several things. First, how much money will the measure unlock? Secondly, how many rules and regulations will result from it? Thirdly, why has it been introduced? I know that the Minister has brainwaves, but was this one of them? Finally, I am puzzled as to why eel fishing has been picked out in such a statutory instrument. Is it one of the Minister's hobbies or is it a particularly important item that should be excluded? I would be relieved if the Minister could tell me why we are debating the measure. I would not want to endure more than the minimum of statutory instruments, which I abhor.

4.47 pm

Sir John Wheeler: I am delighted to be able to reply to the points that have been raised. I particularly thank the hon. Member for Barnsley, Central (Mr. Illsley) for his general support for the measure and for the questions that he raised. I shall seek to reply briefly and succinctly. The hon. Gentleman asked about the value shifts that have taken place in the domestic sector since the 1970s and wondered why revaluation had taken so long. Northern Ireland has avoided the delights of the community charge—known otherwise as the "poll tax"—and does not have the council tax. It believes in waiting to see whether such measures work before deciding to apply them. Northern Ireland is still thinking and watching. Our experience of the domestic rating system here, however, has made it necessary to bring Northern Ireland up to date. That has taken some time because we wanted to establish the rental values of houses in relative terms. They have moved much less than their capital values and the rental values of commercial properties in Northern Ireland. There is not, therefore, the same compelling need to revalue domestic properties and to address inequalities in that sector as there is in the commercial property 8 sector, where there has been a much more substantial change. We keep these matters under review, but we are reluctant unnecessarily to trouble the Committee with legislation, a point which I know greatly appeals to my hon. Friend the Member for South Hams (Mr. Steen). The hon. Member for Barnsley, Central asked whether there is time to put the transitional relief scheme into place. Yes, there is time and I can assure the hon. Gentleman and the Committee that if it should prove necessary, such a scheme will be introduced. The hon. Gentleman also asked about the separation of domestic and non-domestic rate poundages and whether that means that a uniform business rate is on the horizon. This is a technical measure to cope with the fact that the domestic and non-domestic rate bases will be at a different date—1976 and 1995, as I have previously told the Committee—so it will no longer be possible to strike a single rate in those circumstances. There is no dark cloud on the horizon for Northern Ireland about a different system there. The hon. Gentleman asked whether the provisions are paving the way for the privatisation of the water services. Again, I can say emphatically no, they have no relevance to privatisation. He asked what specific effects the articles will have. Separate properties occupied by the Water Service such as reservoirs, treatment plants, pipelines and offices will be valued as a single unit and the aggregate valuation will be prescribed in an order. The article simply provides a statutory basis for what is already an administrative practice, so it is bringing that within the ambit of the law. The hon. Gentleman asked about the basis for the value of railways being changed. Every class of rateable property is being reassessed at 1995 rental values and clearly it would be wrong to continue to value railways on the basis of valuations current in 1914 at the outbreak of the first world war and in 1932. There are no proposals for the privatisation of railways in Northern Ireland, so there is no secret agenda hidden in this modest measure.

Mr. Illsley: Will the Minister tell the Committee when the information will be available to make decisions relating to transitional relief, in particular the information that the Minister is obtaining as part of the review? That would give some indication of the severity of the rate increases or decreases, as the case may be.

Sir John Wheeler: The information is not at present at hand and it will not be available for some time—it will probably be at the end of this year or early in the new year. We will then have a clearer idea whether there is such a wide spread of values that we would have to consider a transitional relief scheme. The hon. Member for Barnsley, Central asked also whether such a scheme would be global or selective. The targeting will not be geographical, but focused on types of hereditaments—those with valuations below a threshold or facing increases above some level. 9 My hon. Friend the Member for South Hams is right to draw attention to the quantity of subsidiary and minor legislation which the House is invited to consider in Committee and I can assure him that I maintain an enormous enthusiasm for reducing it. When I am invited by my officials to consider a proposal, I am rigid in questioning whether it is necessary or desirable and whether I should burden my hon. Friend with the rigour of examining it. I am as keen as he is to reduce as much unwanted legislation as possible. He will understand that if we maintain the rating system arrangement in Northern Ireland, we are obliged on this occasion to update it to ensure that it is an up-to-date, modern and fair system. In that regard, the rate value increase, as part of a revaluation, is one of our considerations. There will be no overall increase in rate liability resulting from this revaluation. For the most part, higher valuations are offset by lower rate poundages. These are old phrases, which my hon. Friend will remember from the previous system in England and Wales.

Mr. Steen: If that is the case, what is the point of the statutory instrument if it will not result in any increases?

Sir John Wheeler: There has been a considerable shift across the commercial property values in Northern Ireland as against domestic property values, which have been consistent. It is necessary to bring that harmonisation into place. Some unfairnesses can 10 certainly be identified in different parts of Northern Ireland—especially Belfast—and we would be wrong to let them continue. That is the reason for it. Why introduce the measure at this stage, asks my hon. Friend the Member for South Hams. It is a technical measure which is needed to bring the current valuation into line with, broadly speaking, the practices that prevail in the rest of Great Britain. As I understand it, about 10 statutory instruments might arise from the order. If we can manage with fewer, we shall. My hon. Friend also asks about my interest—if, indeed, there is any—in salmon and eel fishing. Salmon I rather enjoy, eels I do not. So it is not ministerial interest in the eel fisheries that promoted an aspect of the order, but a provision in the Rates (Amendment) (Northern Ireland) Order 1994 that removed salmon fishings and eel fishings from the valuation list. It was considered that these fisheries should be treated as analogous to agricultural land which itself was not valued. This article ensures that the whole fishery, including buildings, is removed from the valuation list. Anything to do with salmon and eels will no longer be rated. I hope that that helps my hon. Friend.

Question put and agreed to.

Resolved, That the Committee has considered the draft Rates (Amendment) (Northern Ireland) Order 1996.

Committee rose at three minutes to Five o'clock.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

Jones, Mr. Barry (Chairman)

Butcher, Mr.

Elletson, Mr.

Fox, Sir Marcus

Gapes, Mr.

Illsley, Mr.

Steen, Mr.

Wheeler, Sir John

Wood, Mr.

Yeo, Mr.

The following also attended, pursuant to Standing Order No. 101(2):

Lady Olga Maitland (Sutton and Cheam)