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2.11 pm
Angela Browning (Tiverton and Honiton) (Con): Devon is at its most glorious at the moment. The woodland floors are covered with an abundance of primroses, the tall Devon banks are still covered in daffodils, and the hedgerows are just starting to turn that wonderful pale green. I thoroughly recommend glorious Devon to anyone who has not yet made arrangements for the Easter break: it is looking absolutely wonderful, and I am looking forward to going home tomorrow.
Despite the rural idyll of glorious Devon, however, we have lower than average wages, higher than average house prices and a large retired population. However good the view from the window, the quality of life for my constituents in Tiverton and Honiton is under
increasing pressure from numerous directions, not least as a result of the council tax. But today I shall focus on what is becoming another real financial burden, which we have borne for a long time but for which there seems to be no relief. I refer to the charges imposed by South West Water.
The peninsula of the south-west features a third of the nation’s beaches that have had to be cleaned and brought up to standard. Those of us who live in the south-west fully understand the requirement to do something about the old Victorian sewerage system, because the way in which sewage was being discharged into the sea was clearly a serious health hazard. A great deal of money has been invested in raising the standard of those discharges to an acceptable level, at a cost to those of us in the south-west who pay water charges, particularly those on lower incomes or in retirement.
In the coming financial year, water charges will rise by 12.5 per cent. for those with meters and by 16 per cent. for the rest of the population. That is a massive hike. I know from my postbag and from discussions with those who seek to represent water charge payers how disappointed people are that neither the regulator nor those officially appointed to speak for the water charge payer have been able to use their influence to ensure that the prices are brought under control. As we know, many people on low incomes qualify for tapered council tax relief. I feel we must now consider a similar arrangement for water charges, because I cannot see the present position improving.
On 21 March I met the new chief executive of South West Water to discuss the issue with him. Sympathetic as he was, it was clear to me that there was little he could do about it, for two reasons. First, South West Water faces the “clean sweep” programme. Ours is a tourist area, and we want clean beaches. We want to be able to say to the holidaymaker “Come and bathe in the water—it is all very clean”. Many people come to the south-west to surf. It must be said, however, that although it is not my pensioner constituents who are out on their surf boards on Saturdays—not too many of them, anyway—it is they who are paying for the surfing.
Secondly, the chief executive told me that South West Water faces a five-year programme to refurbish a third of the drinking water mains. Just as one programme starts to tail off and we think there might be a bit of relief in the future, another comes along. The reason for this particular clean-up is a mystery to me. When I go into supermarkets I see people loading bottled water into their trolleys. They stagger under the weight: they can hardly carry the load. We seem to have become a nation that drinks only bottled water, although we have invested enormous amounts in improving the quality and safety of the drinking water that comes out of the tap. For some extraordinary reason people feel that they must buy bottled water, yet regulation upon regulation comes down from on high requiring South West Water to spend more and more on cleaning up the drinking water mains.
There is a serious point that I want the Deputy Leader of the House to convey to his colleagues. Most of the regulations dealing with the costs applying to South West Water originate from Europe. I should like the Deputy Leader of the House to do two things. First, I should like him to ask whether we really need
higher and higher quality. There needs to be a standard—we should all feel relatively certain that drinking water is safe and clean—but how far does it have to go? Why, when standards are higher than they have ever been, must we face a five-year programme?
I understand that the Department for Environment, Food and Rural Affairs has launched a consultation process. The privatised water companies are having to consider taking on financial responsibility for all the unadopted sewers in the country, of which we have a great many in the west country. Who will pay for that? It looks like even more expenditure for the water rate payer in the south-west, and when that is added to the other costs that I have identified, it becomes unbearable and unacceptable.
We have engaged in many cross-party debates about the issue, and there is complete consensus among the parties in the south-west about the unfair burden that is being imposed on water rate payers. We have also had many debates in the Chamber. Now is the time for the Government to do something. I believe that without Government intervention of some kind and some mitigation of the problem, at least for those on lower incomes, there will be a huge impact not only on people’s quality of life but on their incomes.
Mr. Heath: I do not know whether the hon. Lady was present earlier during Treasury questions, when my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) made exactly the same point about South West Water to prove the point that this was an all-party issue. I am afraid that the Economic Secretary’s response was simply to talk about tax credits. That does not do a great deal for those who have been penalised by South West Water bills.
Angela Browning: That is exactly right. Often things such as water rates do not appear in the retail prices index and the other formulae used by the Government. I ask the Minister to relay to his DEFRA and Treasury ministerial colleagues that this issue is causing a great deal of hardship, and it looks like it will get worse.
Bob Spink (Castle Point) (Con): Given the relative quality of tap water—a very good product of which we can be proud—is it not curious, or perhaps even obscene, that people are paying more for a bottle of water at their supermarket than they pay for a bottle of milk?
Angela Browning: It is bizarre. We all sit down in restaurants and order a bottle of wine and a bottle of water. It is almost second nature—
Shona McIsaac (Cleethorpes) (Lab): I order a jug.
Angela Browning: A jug of tap water; very good. One can get a jug of tap water here in the House but some restaurants look askance when one asks for a jug of water. The hon. Lady’s point is extremely good.
The hon. Member for Somerton and Frome (Mr. Heath) rather wisely stopped discussing the question of who has the best cheese. If we were asked what the worst cheese was, I would say those large pale
things with big holes in them; nothing produced in this country, I can assure the hon. Gentleman. Bottled water is another of those continental habits that we have adopted, when we could simply turn on the tap to get a glass of safe, high-quality water for which we have paid an enormous amount.
On that very subject, I come to the issue of how small businesses pay their water rates. The chairman of Tiverton chamber of commerce Mr. David Westwood wrote to me to say:
“Our own offices in Tiverton share our office building with other businesses. The Ground Floor and the first floor are paying in excess of £3,000 a year in water rates. It is more extraordinary that the ground floor has no inlet or outlet water supply. The previous tenants...may also have paid unnecessary rates.”
I had not realised, but it transpires that business rates are assessed based on the old rateable value, whether or not there is a water supply. Of course there will be a communal washroom that is shared with other businesses, so at some point there is a mains inlet and a shared waste disposal system. But that has no relevance to the amount of rates that different businesses in the same building might pay, purely because there are differentials in their traditional rateable values.
This is grossly unfair. Nobody minds paying for the service; if those mainly small businesses share the services that the water company provides, nobody is suggesting that they do not pay. However, this is a licence to print money on the part of the water company. The chamber of commerce has taken the matter up. Water companies have confirmed that the Government have allowed all water companies to continue raising charges based on rateable increases. So every year when the rates go up, businesses pay more and more for their water, irrespective of the number of people in the office; it may be a sole occupancy or they may be only a couple of people. However, they will pay an increasing charge for a restricted service.
In the example given to me, a bill charging £549.91 was calculated by multiplying the rateable value by £99.12 for water and £223.58 for sewerage despite the fact that in the office concerned there is no water or sewerage service. I know that the Minister will write to his ministerial colleagues about my concern about the domestic ratepayers. Will he also pick up on this matter? Small businesses are under pressure.
The Budget’s changes in the burden on small businesses as a result of the rise in the small companies’ rate from 20 per cent. to 22 per cent. will mean that the Treasury brings in £820 million of additional revenue. If the Chancellor is looking for a way to bring some relief to those small businesses that are paying excessive amounts for water services because of the formula, that would be a good place to start.
I come now to another small business case, in which I will refer to a constituent as Mr. E. The case could go into the legal domain; in fact, that is now being seriously considered. I do not want in any way to prejudice a case that may at some point be considered in a court. The case concerns the way in which HMRC has interpreted the Taxation of Chargeable Gains Act 1992. Mr. E and his wife ran a shop in the high street of one of my market towns for many years as a family business. They lived above the shop in a flat. On his retirement three years ago, he disposed of the shop
and the flat at the same time. His accountant prepared the final accounts for the Revenue, and they were agreed and paid.
Two years later, the Revenue revisited those accounts and decided to challenge the apportionment of capital gains tax that Mr. E had paid and that the Revenue had agreed on the disposal. The reason was that although the flat was his prime home, and had been for 20 years, because he had disposed of the shop and the flat at the same time on retirement, the Revenue regarded that as a single asset. In looking at it as such, the Revenue argued that although he was of course able to offset the CGT liability on the flat—none of us has CGT liability on our prime residence—the taper relief that would have applied to the disposal of the business premises was affected. Therefore, the higher rate of CGT was applied to the business disposal, rather than the tapered relief that had previously been calculated. Without wanting to disclose too much about my constituent's personal details, the differential was in excess of £30,000 liability.
I have had correspondence with my constituent, his accountant and Treasury Ministers on the matter. I am astonished that the Revenue should be interpreting the Taxation of Chargeable Gains Act in that way. It is quite clear that, for all other purposes of taxation, when a person lives above a shop in that way, the two items—the flat and the shop—are treated separately for taxation. They are separate assets for council tax and business rates purposes.
The question has been put to me: was that what Parliament intended at the time? I have done research into the case and I am absolutely sure that it was not what Parliament intended at the time.
I sought some explanation from the Paymaster General, and I got a rather strange reply:
“the rate of taper relief is assessed by looking at the use to which the whole asset has been put.”
That is pretty clear. It is a domestic flat with its own entrance and a garden at the back. She goes on:
“This rule might at first glance appear to produce an anomalous result”—
“However, it is the whole of the asset that is being disposed of, even if part of the gain on it is exempt.”
Mr. Deputy Speaker, if you owned a shop but had a domestic dwelling somewhere else, or if you let out the flat over the shop as a business proposition, the measure would not apply. As we all understand, different tax rules would then apply.
We are getting very close to this being a test case. I and small business organisations will be assisting my constituent to pursue the matter as far as he needs to pursue it to get the right result. There are big implications throughout the country for every shopkeeper who lives above the shop and has an anticipation of what the tax liability may be.
If hon. Members—we are, after all, the legislators—look at the detail of the case, as I did, I am sure that they will agree that that is not what Parliament intended when that legislation came on to the statute book. In anyone's language, it is pretty clear how the measure should be applied to ensure fairness of the tax system.
It is to small business and the water rates that I have particularly addressed myself this afternoon. I add to colleagues’ comments about the Minister. I know that he will take the matters that we raise today seriously and convey them to colleagues. In a previous existence of my own, he and I shared many an end-of-term Adjournment debate across the Dispatch Box. He was extremely diligent in the way he listened to Members' concerns, particularly when they related to their constituency.
I wish everyone—Members and the staff of the House—a very happy Easter, and do come and visit us in God's own county.
2.32 pm
Mr. David Amess (Southend, West) (Con): Before the House adjourns for the Easter recess, there are a number of points that I wish to raise. I thank the right hon. Member for Leicester, East (Keith Vaz), who is not in his place at the moment, for his best wishes for my birthday on Monday. I am not a national figure, so it was hardly a significant event, unlike his 50th birthday celebrations.
Just to show the Deputy Leader of the House how things have changed, when I first became a Member, mine was the only birthday of an hon. Member on 26 March. I note that we are now into double figures with parliamentarians who had their birthday on Monday. In addition, when I entered the House, my Christian name, David, was unusual, but now it seems, certainly in the Conservative party, that it is a requirement if one is to be successful.
Is it really six years since the Deputy Leader of the House occupied that position? As he can see, I am still here. His predecessor, the hon. Member for Edinburgh, South (Nigel Griffiths), did a splendid job. The whole House respects and understands his decision to resign from the Government, but, like my hon. Friend the Member for Tiverton and Honiton (Angela Browning) and my right hon. Friend the Member for West Derbyshire (Mr. McLoughlin), we all welcome back the hon. Member for Sherwood (Paddy Tipping). When we were a little more pressed than we appear to be this afternoon to cover all the subjects, he diligently used to write to us to give us some real responses to the issues that we raised. May I gently say to him, and through him to his officials, that they need not faint at the number of issues that I intend to raise today. I will raise them quickly and perhaps in due course he could write to me about them.
This is the first occasion on which I am able to address the House as a member of the Westminster Lions club. Last night, there was an historic dinner and the Palace of Westminster Lions club was formed. It is the first parliamentary Lions club to be formed in the northern hemisphere. We have 22 members so far, and Mr. Speaker will be given an illuminated address. I hope that other colleagues will join, and we intend to have a charity event.
Angela Browning: I am pleased to hear that, but can my hon. Friend enlighten me on this point: what about the lionesses?
Mr. Amess:
My hon. Friend makes a good case. There are a number of lady members of the Lions, but
we might look into that. I will refer the issue to my hon. Friend the Member for Rayleigh (Mr. Francois), who has been installed as the president of the organisation. [Interruption.] Madam Deputy Speaker also appears to be keen on the idea.
The parliamentary period between Christmas and now has been overshadowed—it is a very long shadow—by the terrible mistake we made by engaging in a war with Iraq. Every Wednesday, the Prime Minister has to give sympathy to the relatives of loved ones. I voted for the war, which I will always regret, and I feel increasingly strongly that those lives have been lost in vain in one respect.
However, I and a small group of others have consistently spoken up about the threat from Iran, and we now find ourselves in an impossible situation in respect of that country. The last thing anyone in our country wants is to be involved in a war with Iran, but we are in a terrible situation. I say gently that the British Government’s policy of appeasement has got us into a bit of a mess; sadly, the Government’s current opinion of the President of Iran is not the same as it was a few years ago. It is a disgrace that the POMI—the People’s Mujaheddin Organisation of Iran—is still a proscribed organisation, despite what has been decided in Europe. I hope that the Deputy Leader of the House reflects on that matter and responds on it.
Mr. Stewart Jackson (Peterborough) (Con): Does my hon. Friend agree that the disastrous catastrophe that Iraq has become, and our involvement in that, have grievously undermined the case for liberal democracy all the way from Morocco to Indonesia, and that that has therefore put us in a weaker position as a world power to deal with rogue states, such as Iran, that are a serious risk to stability?
Mr. Amess: Sadly, my hon. Friend is right. One of the tragedies of the current situation is that our country’s significance on the world stage is diminished. Other countries do not listen to us as they used to.
Before I move on to the specific subjects of my speech, let me say something about the Budget. I remember being present in the House when Conservative Chancellors, perhaps thinking that they were being rather clever, produced Budget flourishes. When the current Chancellor came out with the big wheeze at the end of his speech that 2p would be knocked off income tax—despite always saying, “We would never bribe the electorate with tax cuts”—I was not looking at Members of my party, but at the Labour Benches. Labour Members were cock-a-hoop; they were thrilled to bits and were waving their Order Papers. They had probably been a little nervous because the opinion polls had not been good, but yesterday’s opinion polls appear to offer encouragement to the Government’s supporters. However, the Chancellor—who is soon to be Prime Minister—will regret that Budget. I shall be the first to say that, just as the current Prime Minister’s nemesis has been the war with Iraq, this Budget will be the downfall of the next Prime Minister.
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