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the genuine protection the scheme offers them. Equally, some will be disappointed that the reduction they were expecting has been delayed. However, most, if not all, of those ratepayers will have faced increases in 1990. Many will have benefited from the 1990 transitional arrangements which were funded by limits on reductions to other ratepayers' bills. Now it is their turn to contribute. The limits on increases will continue to apply until the next revaluation in 2000. Rateable values will then be updated again, probably to reflect the market in 1998. Of course, many ratepayers will not be paying their full bill by that time. We will not penalise them for that. If market rents for their property then fall relative to rents for other types of property, their rateable values will also fall. As such, they may never reach the full rates bill on their 1995 rateable value.

I know that my hon. Friend is also concerned that the revaluation will affect caravan parks in his constituency. He is not alone. Caravan parks in England and Wales are facing large, often very large, increases in rateable values. That is because valuation officers have changed the basis from which they derive rateable values. However, as I have said, I cannot intervene in those assessments. There may have to be test cases. Like all ratepayers, caravan park owners will benefit from the transitional relief scheme and may therefore never reach their full bill.

Turning to more general points, my hon. Friend has said that rates do not reflect the ability to pay the bill. I think that that is an over- simplification. Rates reflect the rentals that properties command and businesses would not occupy property if they could not afford those rentals. So there must be a link of a kind between rates and overall business profitability. Of course, the rental value of property will not always reflect the profitability of a particular business, but rates are a tax on property rather than on individual businesses.

The transitional arrangements will target relief on smaller businesses by reference to the value of their property. Services have to be supplied by local authorities regardless of whether a business is in profit. I am sure that most businesses prefer the present system to the increase in corporation tax which would otherwise be required.

If, despite that, my hon. Friend would still prefer to end non-domestic rates, he should read the research commissioned by my Department on the impact of rates on businesses. The key finding is that rates are not, in most cases, a significant burden on businesses. In fact, for the majority of principal trading companies, rates accounted for no more than 2 per cent. of turnover. The figures tended to be higher for small businesses, particularly retailers, but we have recognised that by treating the lowest value properties more favourably in our transitional relief scheme.

The report also showed that the 1990 transitional arrangements had been a success in mitigating the impact of the 1990 revaluation. The 1995 scheme is even more generous to those facing increases and I am sure that it will be equally successful. I hope that this opportunity to comment on my hon. Friend's points will be helpful to him. Question put and agreed to.

Adjourned accordingly at four minutes to Three o'clock.

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