Tenth Standing Committee on Delegated Legislation
Thursday 16 March 2000
[Mr. Bill Olner in the Chair]
Draft Water Undertakers (Rateable Values) (England) Order 2000
Draft Railways (Rateable Values) (England) Order 2000
Draft Non-Domestic Rating (Chargeable Amounts) (Amendment) (England) Regulations 2000
Draft Gas Industry (Rateable Values) (England) Order 2000
Draft Energy From Waste Plants (Rateable Values) (England) Order 2000
Draft Docks and Harbours (Rateable Values) (England) Order 2000
Draft Electricity Supply Industry (Rateable Values) Order 2000
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): I beg to move,
That the Committee has considered the draft Water Undertakers (Rateable Values) (England) Order 2000.
The Chairman: With this it will be convenient to consider the draft Railways (Rateable Values) (England) Order 2000, the draft Non-Domestic Rating (Chargeable Amounts) (Amendment) (England) Regulations 2000, the draft Gas Industry (Rateable Values) (England) Order 2000, the draft Energy from Waste Plants (Rateable Values) (England) Order 2000, the draft Docks and Harbours (Rateable Values) (England) 2000 and the draft Electricity Supply Industry (Rateable Values) Order 2000.
Ms Hughes: We are considering orders that will determine the rateable values of most of the former public utilities, and regulations making some technical amendments to the transitional relief scheme for ratepayers generally. The orders will apply for the life of the 2000 rating list.
The rateable value orders cover the following industries: the electricity industry, including large energy from waste plants; the water supply industry; BG Transco, which runs the gas pipeline network; Railtrack and London Underground and large docks and harbours.
Hon. Members will be aware that only a few of the 1.6 million rating assessments in England need to be considered in this way by the House. Most properties are assessed for rates independently by the Valuation Office Agency. Their rateable values broadly represent the annual market rent of the properties. However, such assessments depend on the existence of a market for the type of property concerned, or at least on the existence of competition in the industry involved, in order for the value to be assessed.
In the case of publicly owned utilities, it was difficult to estimate how much a tenant would pay in rent to occupy a railway, a water supply network or a power station. This is less of a problem following the privatisation of the public utilities, and the policy of the previous Government and this Government has been to end prescription—the prescribing of rateable values—and to move the industries concerned into conventional valuation as soon as possible.
Originally, the Government intended to end prescription at the time of the current revaluation. However, we decided a year ago that, although great progress had been made with the valuations since the last revaluation in 1995, full conventional assessment of these industries would still produce too much uncertainty for them. So, although we have made considerable progress, the time is not yet right to end prescription. Therefore, we decided to continue the existing practice of prescribing by order the rateable value of the industries, while continuing to work towards ending prescribed assessment in the future, for the next valuation.
Since the spring of last year the Department, assisted by the Valuation Office Agency, has been engaged in detailed discussions with the industries concerned regarding their rateable values, or formulae for reaching their rateable values. For the 2000 valuation, the Valuation Office Agency has made good estimates of the rateable value of these industries using conventional rating methods. That is a step towards leaving prescription, because of the application of conventional methods. The orders are the result of those discussions, our deliberations on them and subsequent consultation with the industries concerned. They will apply from 1 April.
The starting point for the rateable values before the Committee has been the valuations performed by the utilities rating team of the Valuation Office Agency. The team has worked closely with the industries for several years, and they have considered the valuations together line by line. I can, therefore, assure hon. Members that all the concerns raised by the industries have been carefully considered by the utilities rating team and by officials in my Department. That is not to say that all the industries concerned are pleased with the outcome, but we had to make a decision on the best advice available. As far as possible a high level of consensus has been reached between the industry and the Valuation Office Agency.
Hon. Members will see that the orders contain a mixture of actual rateable values and formulae for reaching rateable values. Recalculation factors are included for all the industries, with the exception of the gas industry, as a proxy for subsequent changes to the properties. Those factors are needed, because reflecting changes as and when they occur would require a large-scale valuation exercise and new orders each year. I am sure that members of the Committee can see why we would not want to go down that route.
The railways order sets the rateable values of Railtrack and London Underground at £156 million and £42 million respectively for 2000–01. Those figures represent decreases of 24 per cent. and 7 per cent. respectively. Thereafter, the values can simply be adjusted to reflect changes in the track length of the networks.
The docks and harbours order prescribes a formula that will calculate rateable values for large ports by comparing the port's income with its expenditure. Broadly speaking, a port's rateable value will be 27.5 per cent. of the balance between its income and its expenditure. This formula will operate within a range, with caps at both ends, to ensure that the rateable value is no more than 13 per cent. and no less than 5 per cent. of the port's income.
The exact figures for each port have not been calculated, but we estimate that the effect on the overall rateable value for large docks and harbours is neutral. As for water and electricity companies there will be winners and losers. Overall, there is a fairer distribution of the rates burden on the ports affected.
The water undertakers order will prescribe rateable values for all water supply companies for 2000–01. Those are the values in the schedule to the order. The overall change to the water industry is an increase in rateable values of 10.3 per cent. For subsequent years, each rateable value may be adjusted broadly in line with changes to the amount of water being put into the supply by the company concerned.
The gas industry order sets the rateable value of BT Transco, which runs the pipeline network, at £430 million for the life of the rating list. The percentage increase in value is 8.9 per cent. No adjustment is required, because we do not expect any significant changes to the pipeline network.
The electricity supply industry order sets the rateable values for National Grid and the regional electricity companies for 2000–01. The increase in rateable value across all the regional electricity companies is 10.1 per cent. Those values can be found in the schedule and may be adjusted for subsequent years in line with changes to main transmission line or transformer capacity.
Article 6 of the electricity supply industry order also sets the rateable value of power stations by a formula based on the plant's generating capacity. The different values of the different types of power station are intended to reflect the differences in rateable value that we would expect if the ratepayers were in conventional rating.
Finally, the energy from waste order will prescribe by formula the rateable value of energy from waste plants with a generating capacity in excess of 25 MW. Only a few plants fall within the order. The majority have a smaller generating capacity than 25 MW and are already assessed for rates in the normal way by the Valuation Office Agency. We do not propose to change that.
The power stations, large energy from waste plants and the docks and harbours will all appear on local rating lists held by billing authorities. The other properties that I have mentioned will be shown on a central rating list held by the Department.
Overall, the orders will prescribe more than £2 billion of rateable value, which represents about 6 per cent. of all rateable value in England. That is a slight reduction in the rateable value prescribed for the 1995 rating list, but within that general picture individual companies will experience increases and reductions.
I stress that the changes will not feed directly into rate bills. In April, the rating multiplier will fall from 48.9p in the pound to 41.6p, so that in practice only properties with an increase of more than 17.5 per cent. in their rateable value will face an increase in their rates bill. Furthermore, the transitional relief scheme will apply to those ratepayers, as to others. Next year, through the transitional scheme, all the industries concerned will have their increases capped at 12.5 per cent. and reductions limited to 2.5 per cent., before allowing for inflation.
I turn to the regulations on chargeable amounts, which amend the regulations on transitional relief that we debated in Committee on 8 December 1999. As I said during that debate, the transitional relief scheme has been widely welcomed by business. The regulations now need to be amended to bring them into line with subsequent developments. Those amendments are contained in the Non-Domestic Rating (Chargeable Amounts) (Amendment) (England) Regulations 2000. The most important provision is to be found in regulation 8, which brings the transitional relief scheme into line with changes to the rules on the backdating of successful appeals by ratepayers against their rateable values. My right hon. Friend the Minister for Local Government and the Regions announced those changes on 2 February, following extensive consultation with interested bodies.
Under the new rules, a successful appeal against a new rateable value will have effect from 1 April 2000 only if the appeal is made by 30 September 2000. Where an appeal is made after 30 September 2000 and before 31 March 2001, the alteration to the value in the rating list will not be backdated before 1 October 2000. Appeals made in subsequent financial years will not be backdated beyond the start of that year. Those new limits on the backdating of successful appeals form part of a wider package of administrative measures to try to improve the appeals system, including the publication of a programme for considering appeals.
The changes on effective dates are intended to encourage appeals to be made early, which will in turn make it easier to devise a comprehensive programme for considering appeals. Details of the changes to the appeals system are covered in a leaflet that we have asked local authorities to send to all ratepayers with their new bills. Regulation 8 provides that where a change in rateable value is backdated to 1 October 2000 or later, any adjustment to the transitional relief applying to the rate bill will have effect from the same date. That will ensure that a ratepayer who is affected by the transitional scheme is in the same position as one who is not. Both will secure any benefits of a reduction in their rateable value from the date of the alteration of the rating list, whether that is 1 April 2000 or later.