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Question accordingly agreed to.

Mr. Deputy Speaker-- forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House applauds the improvements in performance in the electricity supply industry since privatisation; welcomes the benefits which customers are receiving in terms of lower prices and improved service; supports the continuing development of competition in the electricity market and the maintenance of effective regulation where this is necessary; and notes that the Director General of Electricity Supply will continue to promote competition and protect the interests of consumers.


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STATUTORY INSTRUMENTS, &c

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): With permission, I shall put together the motions relating to statutory instruments.

Hon. Members: Object.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.).

Defence Evaluation and Research Agency

That the draft Defence Evaluation and Research Agency Trading Fund Order 1995, which was laid before this House on 27th January, be approved.--[ Mr. Burns .]

Question agreed to.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.).

Betting, Gaming and Lotteries

That the draft Betting, Gaming and Lotteries Act 1963 (Schedule 4) (Amendment) Order 1995, which was laid before this House on 23rd January, be approved.--[ Mr. Burns .]

Question agreed to.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.).

Local Government (Northern Ireland)

That the draft Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1995, which was laid before this House on 9th February, be approved.-- [Mr. Burns.]

Question agreed to.

EUROPEAN COMMUNITY DOCUMENTS

Motion made, and Question put forthwith pursuant to Standing Order No. 102(9) (European Standing Committees).

Israel (Agreement)

That this House takes note of the unnumbered Explanatory Memorandum submitted by the Foreign and Commonwealth Office on 9th December 1994, relating to the conclusion of a Euro-Mediterranean Association Agreement with Israel; and supports the Government's view that this is a welcome development in relations between the European Union and Israel.-- [Mr. Burns.]

Question agreed to.

SCOTTISH AFFAIRS

Ordered,

That Mr. George Kynoch be discharged from the Scottish Affairs Committee and Mr. Allan Stewart be added to the Committee.--[ Sir Fergus Montgomery, on behalf of the Committee of Selection.]

ENVIRONMENT

Ordered,

That Mr. Roland Boyes be discharged from the Environment Committee and Mr. Bill Olner be added to the Committee.--[ Sir Fergus Montgomery, on behalf of the Committee of Selection.]


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Business Rates (West Suffolk)

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Burns.]

10.29 pm

Mr. Richard Spring (Bury St. Edmunds): I am most grateful to you, Mr. Deputy Speaker, for giving me the opportunity to speak this evening, and I should like to thank my hon. Friend the Minister for being here to reply.

About four weeks ago, many of my constituents who run businesses received an unwelcome notice from the district valuer. Although, of course, there were beneficiaries, overall there were increases in my constituency. In a number of instances, that caused alarm and consternation, with some increases of more than 40, 60 and even 70 per cent.

All non-domestic properties are revalued every five years. The next revaluation comes into effect this year on 1 April. Any judgment of rateable value has been based on the increase or decrease in assessed rental values in the five-year period from 1 April 1988 to 1 April 1993. In 1988, the economy was growing strongly. Obsession with the value of property was a characteristic of that period, as was a belief that the road to riches lay in bricks and mortar. Those were the heady days of boom.

In common with every industrialised country, by 1993 the position was different. Property prices and rentals had weakened, bankruptcies of both a personal and corporate nature had risen, unemployment had increased, and the atmosphere of business confidence had become considerably more negative.

During the boom years, the counties of Suffolk and Cambridgeshire enjoyed the highest levels both of economic growth and of population anywhere in Britain. It is only in the past 12 months that confidence in the business community in west Suffolk has resurfaced, and growth, albeit patchy, in the region is happily once again the highest in the nation.

With that perspective, there was widespread and firm confidence in my constituency that the district valuer would reflect that background in his rental assessments. I fear that, four weeks ago, we were to be disappointed. There are two district councils in my constituency: St. Edmundsbury and Forest Heath. Both fully share my concern at the effect of those revaluations on the business sector. Let me deal with what I regard as the most glaring aberration--the town of Mildenhall is suffering an average increase of nearly 18 per cent. With the adjacent villages, Mildenhall has 13,500 inhabitants. Unfortunately, it does not have a large supermarket to act as a magnet for shoppers. Forest Heath district council invited the district valuer to visit Mildenhall personally. Its members showed him the obvious number of empty properties. He saw what is perfectly clear to any objective observer: that the economic base for small shopkeepers in the town is, at best, fragile. In view of his visit, the increases proposed were an enormous and unexpected shock. Among dozens of letters, the secretary of the Mildenhall Retailers Association, Mrs. Barbara Coppeard, has written to me in these terms:

"You are aware that many shops have closed over the last few years. Some have tried to re-open with new owners, sadly failing


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again within a short time . . . indeed trading conditions have steadily declined, despite the efforts of hard working small retailers. The town centre is contracting.

If the proposed increases are imposed in April they will inevitably affect the viability of many businesses."

Bluntly, I believe that those increases will have a severe impact on the economy of the town. The district valuer, to whom I have spoken directly about this matter, has said that he will consider it sympathetically if information about vacant shops and rental levels is produced afresh. I trust that he will. As the town's Member of Parliament, I cannot stand idly by while the livelihoods of my constituents are put at risk.

I draw the attention of my hon. Friend the Minister to the situation of Lakenheath, which has a population of 5,500. It has a much smaller number of shops. The average increase of 23 per cent. cannot be justified. The chairman of Lakenheath parish council, Mr. Bruce Rutterford, wrote:

"With an almost universal decrease in takings, the proposed increases may well be the final straw and may well lead to closure of some shops. If these shops do close, it is most unlikely that they will ever open again, and it will be a bad day when we start losing more shops in the village. There is much concern and confusion as to just how the district valuer arrives at the figures that are provided, so there appear to be certain inconsistencies here."

The number of United States service personnel attached to RAF Mildenhall and RAF Lakenheath is steadily increasing. The direct and indirect economic contribution made by those bases to the area is enormous. However, there is a changing pattern of purchasing activity by the Americans. As they have expanded in numbers, so have base facilities. They include restaurants, sports facilities and shopping commissaries. The upshot is that the overwhelming bulk of consumer items are purchased on favourable terms on the bases, and paid for in dollars.

The overall impact is spelt out in a letter from E. Carter and Sons Ltd. of Mildenhall, a home furnishing, removal and storage business in the high street. Mr. Carter wrote:

"The proposed revaluation of my property shows an increase of 44.87 per cent. I consider this to be excessive as my shop has not had a material change since the last valuation, and indeed trading conditions in Mildenhall have declined. With my business suffering a 3.13 per cent. decrease in turnover and a net loss over the last three years, the true rentable value has in fact decreased as traders leave town. This increase places an unfair burden on my profitability and will affect my long-term viability."

My own inquiries and observations endorse Mr. Carter's comments. There is no objective basis for any general upward revaluation of properties in Mildenhall and in Lakenheath in particular, and I share my constituents' concern at the proposed increases, which will considerably damage the commercial life of those towns.

The largest town in my constituency is Bury St. Edmunds, where there is also considerable concern about a number of projected revaluations. The same sentiments have been expressed by shopkeepers in Newmarket and in a letter from Mr. Eddie Stewart, the chairman of Brandon chamber of trade, where the average increase is 13.5 per cent.

I appreciate that the overall increase in west Suffolk is modest compared with other parts of England, but I want to highlight the collection of data to assess rateable value. That process results in erratic assessments, some of which


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bear no reality to true rental values. With the best will in the world, the district valuer does not appear to have full information on base rental values.

In 1993, it was common for all sorts of incentives to be offered in conjunction with lettings. It may be that the district valuer was not aware of rent-free periods and even reverse premiums. Much of the district valuer's evidence comes from rent returns by individual occupiers. Local chartered surveyors informed me that some forms were inaccurately completed.

One solution would be to sub-contract the preparation of the valuation list to local estate agents, surveyors and valuers on a 100 per cent. basis or-- as with the council tax--the district valuer could undertake some valuation work, supported by local surveyors and valuers. That would have a dramatic effect on reducing excessive anomalies.

I shall now examine the appeals procedure. It is true that this is free, but many small business men seek professional advice. I need only add that there is a huge number of fly-by-night so-called professional advisers. The appeals procedure is unquestionably stressful. Given that, I applaud the help and guidance being given by Forest Heath district council to potential appellants in its area. What is particularly troublesome, however, is that the process can take a long time. In respect of the 1990 list, it took at least a year for appeals to be dealt with, and in many cases there were periods of two, three, four and even five years before appeals were considered. Such cases exist in my constituency. In practice, the district valuer is not predisposed to respond until the appeals are listed for hearing by the local valuation court.

Business ratepayers have to pay the new rates on their assessment when entered into the list, even if it is clearly incorrect, and they get a refund of overpaid rates only following negotiations with the district valuer's office. It is my understanding that the district valuer's office is paid per appeal. However, if the anomalies are substantially reduced in the first place, the considerable number of appeals will diminish too. If we can cut down on the unreasonable anomalies, we can time-limit appeals.

If patients are guaranteed national health service treatment within specific times, the principle should extend to business rate appeals. I suggest a maximum of one year. All council tax banding appeals were effectively dealt with in under one year. It can and should be done. I fully support the principle behind the Local Government Finance Act 1988, with the uniform national non-domestic rate and the formula of rateable value multiplied by a standard rate poundage. I make it clear that I recognise the substantial help of the £500 million of transitional relief. The increase on properties with a rateable value of £10,000 will be confined to 12.4 per cent., and below £10,000, the figure is 9.9 per cent. Of course, the limits will increase until full rates liabilities are met.

In a discussion document produced by the Association of Metropolitan Authorities, the Association of County Councils and the Association of District Councils, it was argued that business rates should be returned to local authority control. When I stood as a


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parliamentary candidate at Ashton-under- Lyne, I saw for myself the appalling consequences of this. Business rates were far too high, with the result that fledgling businesses could not prosper and would often have to move out of the area to survive at all.

That was the value that a Labour-controlled authority placed on the enterprises that created jobs in the area. What I saw was a disgrace, yet it was not as bad as the ruinous anti-business policies pursued by many other Labour-controlled authorities. I for one never wish to see whole areas of our country blighted again by such destructive policies.

Is there no way in which well-managed local councils can benefit from their own sensible policies? I have two excellent

Conservative-controlled district councils in my constituency. Neither St. Edmundsbury borough council nor Forest Heath district council is proposing any increase in council tax this year. Additionally, the former is debt- free. Is there not some way in which such local authorities can be rewarded, especially if they create an environment for business expansion and job creation? Is not some form of rates repatriation possible?

I very much applaud the viewpoint of my right hon. Friend the Secretary of State for the Environment who, being from Suffolk, is right in his desire to strengthen town centres as lively, prosperous and agreeable places in which to live and shop. At a minimum, therefore, could some part of the moneys collected in well-managed local authorities be ploughed back into town centre improvements? Better lighting and pedestrian precincts encourage people to live and shop in town centres. I believe that all the towns in my constituency--Bury St. Edmunds, Newmarket, Mildenhall, Brandon and Lakenheath--would benefit from that. Their attractiveness would be further enhanced. I believe that that course would be right and fair.

The small business sector is the engine of west Suffolk's local economy and of job creation. It is the very lifeblood of my constituency. The Government have brought forward a number of welcome measures to help the small and medium business sector. I mention in particular the substantial number of businesses which have been taken out of VAT altogether, the cut in corporation tax for small businesses, and the higher profit limits for the smaller companies' rate of 25 per cent. The abolition of inheritance tax and the abolition of capital transfer tax on lifetime gifts are to be greatly welcomed. I hope that the abolition of the statutory audit will be the first of a number of further deregulatory policy initiatives. However, while the principle of a national non-domestic rate is correct, in practice it produces too many specific anomalies, which cause stress and anxiety to smaller businesses which are finally beginning to put the recession behind them. The Government have made a number of important and useful concessions on business rates, but more needs to be done. I hope that my hon. Friend will reflect positively on the ideas that I have put forward, which would be greatly welcomed in west Suffolk and, indeed, throughout the country as a whole.


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10.45 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Robert B. Jones): My hon. Friend the Member for Bury St. Edmunds (Mr. Spring) has put the concerns of his constituents most eloquently, not only tonight but in a substantial number of representations that he has made to me and to other Ministers in recent weeks. Let me first say that the Government think it essential that rateable values keep pace with the property market to ensure that rates fall with relative fairness on businesses everywhere. That is why we have regular revaluations and, indeed, have tied ourselves to undertake them every five years through statute. Parliament has approved that.

Rates, of course, are based on rents. Data collected by the Valuation Office Agency--I shall turn to how that is done shortly--shows that in my hon. Friend's constituency, rents rose between 1988 and 1993, the dates on which the two recent valuations are based. That has resulted in a rise in rateable values of 11 per cent. in Forest Heath, and of 13 per cent. in St. Edmunsbury. With the transitional arrangements that we have introduced to cushion the effects of the revaluation, my latest information suggests that bills will rise in those areas by, on average, 5 per cent. and 4 per cent. respectively.

The effect of the transitional arrangements will be to limit rate rises for small businesses to no more than 7.5 per cent., after allowing for inflation. For property with a new rateable value of £10,000 or more-- or £15,000 or more in London--increases will be limited to a maximum of 10 per cent. after allowing for inflation. For small properties consisting of business and living accommodation, the corresponding limit will be 5 per cent. Those limits will continue to apply throughout the period up to the next revaluation in 2000. More than 3,000 properties in my hon. Friend's constituency, and 1.25 million in England as a whole, will benefit from the scheme. In East Anglia, that is worth almost £50 million to ratepayers. Part of the cost will be met by the Exchequer and part by limiting rate reductions. Of course, the revaluation will not affect the overall yield from business rates. Statute requires us to adjust the poundage to account for any changes in the total rateable value for England. As it happens, the 1995 revaluation will hardly change the total of rateable values. That is why, as my hon. Friend noted, we have only increased the poundage in line with inflation, from 42.3p in the pound to 43.2p. After allowing for the effects of future appeals and inflation, that ensures that the rates burden overall is unchanged. Moving on to how data are collected, broadly speaking, valuation officers are required to assess the market rent for properties using values from April 1993. The best evidence of a market rent is the actual rent on the property itself. That is why valuation officers ask all occupiers for details of the rents they are paying. They have been collecting that information since April 1993. That evidence is used to assess the open market rent, and then the rateable value of the property.


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It is quite possible that, when agreeing actual rents, occupiers will receive incentives such as a lump sum payment or a period when no rent is payable. That would, of course, alter the level of rent agreed. That is why valuation officers ask for full details on those incentives and adjust the rents accordingly. Indeed, some of the information may also be incorrect. However, the valuation officer will be able to examine the rental evidence on many similar properties, and will ignore those which appear out of line. However, I am pleased to hear that ratepayers in my hon. Friend's constituency have started to talk to the valuation officer. For the first time with this revaluation, the Valuation Office Agency has let ratepayers know their rateable values in advance of their rate bills. That notification, together with a booklet from my Department explaining the new arrangements, went to ratepayers so that they would have early notice of changes. If they think the valuation officer has not taken all the facts into account, they can provide him with more information and open a dialogue with him--the aim being to resolve matters more quickly.

I was interested to hear my hon. Friend's suggestion that there may be scope for contracting out to private firms some of the work on future revaluations. Ideas of that kind are timely, because the VOA is currently undergoing its first framework review as an agency. My hon. Friend referred to the use of private firms in the banding of dwellings for council tax. That was indeed a success, and a practical illustration of how the private sector can contribute to valuation work. We are examining other possibilities in the framework review. However, we need to recognise that the parallel between council tax banding and valuation for rating is not an exact one. The banding of domestic property, whatever its organisational challenges, was less difficult technically than the revaluation of non- domestic property. Information about the sale prices of houses and flats is relatively plentiful, accessible and easy to interpret. Because the task was to allocate properties to one of seven broad bands rather than to determine precise values, much of the work could be carried out at the desk, and internal inspections were not required.

Valuation for rating is different in all these respects. It requires a more specialised expertise, which normally takes a number of years of training and experience to develop. The rating profession is a small and fragmented one. Finally, detailed inspection of properties is often needed, and VOA officers have powers of entry. It would be, at least, quite a departure to give such powers to a private contractor.

I certainly do not want to suggest that there is no potential role for the private sector in future revaluations. There are, however, a number of difficulties to consider, which did not apply in the case of the council tax.

My hon. Friend suggested that there might be scope for restoring to local government, or at least to some authorities, a measure of control over the non-domestic rate. I am sure that my hon. Friend agrees that the logic of our 1990 reforms was extremely powerful, and remains so even now that memories of the worst


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excesses of local government under the earlier arrangements have started to fade. It continues, besides, to enjoy the support of the main business organisations. I take it, therefore, that he has in mind only some marginal adjustment to the new regime, rather than wholesale change.

I can well understand that authorities which had always made moderate and responsible use of their rating powers in the past may have felt frustrated by the 1990 changes. I do, however, see some difficulties with the idea of rewarding good past behaviour with some relaxation of the current regime.

First, there could be no question of simply rewarding those authorities of which my hon. Friend and I happened in our wisdom to approve, even though I join my hon. Friend in paying tribute to St Edmundsbury and Forest Heath councils: objective statistical criteria would be needed, and I doubt whether those would prove technically straightforward or uncontroversial, or could be guaranteed not to throw up perverse results.

We would need, too, to ponder rather carefully the nature of the reward. Would it, for example, consist of a power to raise a supplementary levy on the non-domestic rate to finance additional expenditure? That would seem on the face of it a rather illogical way of recognising previous restraint in budgeting. Offsetting measures would be required, too, to ensure that the selected authorities' use of their power did not add to the total of public expenditure. Clearly, the issue requires a great deal of thought, but I appreciate the spirit in which my hon. Friend has put his proposal forward, and new ideas in the area are always welcome.

My hon. Friend suggested that the appeals procedures are far from satisfactory. We would agree, which is why we have undertaken extensive consultation on the issue, and are to make changes to the system. The new procedures will allow ratepayers who disagree with their new value to appeal at any time up to 1 April 2001. In 1990, ratepayers had only six months to lodge an appeal.

After 1 April this year, if the valuation officer does not agree with the ratepayer's proposal for a new value, he must pass it to the local valuation tribunal as an appeal within three months of receiving it, not six months as is the case at present.

However, when he talks about his constituents with appeals still outstanding from 1990, my hon. Friend should bear in mind the fact that appeals can still be made against the 1990 list. If there is a change in the property, or a change in the locality, ratepayers can appeal up to six months after that change. Of the 1.25 million appeals received so far in England, nearly half have been made in the years since 1990. So it is not surprising that some cases have still to be heard.

By the end of December last year, my hon. Friend's constituents had made just over 3,000 appeals against the 1990 list. Over half of those were made after the initial appeal period. I understand that there are some 600 outstanding. Eighty per cent. have been settled--slightly better than the national average of 76 per cent. We expect that the vast majority of proposals received by the end of March 1995 will be cleared by the end of 1995-96.

We hope that our new procedures will speed the process for the next quinquennium. We also hope that the removal of time limits for initial appeals will make


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it less easy for fly-by-night operators to press the unsuspecting ratepayer into parting with money to make an appeal which never happens. I am very aware of the instances of fraudulent activities, and I am greatly concerned about them. My Department's information leaflets contain warnings to ratepayers to be on their guard against those companies. The professional bodies have also issued warnings, which have been picked up by the national press as well as the trade press.

I believe that businesses are considerably better off under the new system of uniform business rates. They can now be assured that local authorities cannot increase bills from year to year to finance extra expenditure. That compares with the 1980s, when poundages rose


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by 37.4 per cent. more than inflation. Since 1990, increases in the poundage have been restricted to the rate of inflation. In the past four Budgets, the Chancellor has committed a considerable amount of relief to ratepayers. That has ensured that, in real terms, ratepayers now pay less in rates than they did in 1989-90. I am grateful to my hon. Friend for this opportunity to air such important issues, and I hope that I have assured him that we are looking at other ways of doing things and, in the case of appeals, are taking immediate steps to change things.

Question put and agreed to.

Adjourned accordingly at four minutes to Eleven o'clock.


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