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Baroness Maddock: In view of the time, I shall not take long. My honourable friend the Member for Kingston and Surbiton in another place was very supportive of the thrust of the amendments when they were considered there. We wish to support the principles of flexibility and fairness, so we support the noble Earl.

Lord Rooker: In answer to one point raised by the noble Earl, I assure him that we are constantly trying to learn the lessons of the 1990s and not make the same mistakes. I shall do what he did and stick to my notes, which will then all be on the record and can be read over the next few days. Then it will be time to depart.

Clause 66 guarantees to ratepayers that there will be a transitional scheme to accompany any future revaluation. The current provision in the Local Government Finance Act 1988 simply confers a power to establish a scheme, but does not impose a duty to do so. Business, including the CBI, has stressed the necessity of transitional schemes accompanying future revaluations.

The details of future schemes—the maximum annual increase and decrease in bills—will be decided in the run-up to the revaluation concerned, when the revaluation's impact on individual rateable values will be known. But as stated in the White Paper, Strong Local Leadership—Quality Public Services, any future transitional scheme must be self-financing. There is no reason whatever why the general taxpayer, as opposed to the ratepayer, should meet the cost of transitional relief. Accordingly, Clause 66 requires that the total rate yield for any year is not to be affected by a transitional scheme.

The clause allows for flexibility in how schemes may be structured so as to be self-financing. The methods likely to be used include having a transitional scheme which balances the rates lost through phasing in increases in bills against the rates gained by phasing in decreases. Such phasing of decreases in bills as well as increases has been the feature of past schemes.

In addition to providing for a scheme that balances rate income lost through phasing in increases and rate income gained through phasing in decreases, the clause allows for an addition to rates bills generally as a means of making good the loss of rates resulting from phasing in increases in bills. The notes look a lot easier on paper than they are to say, by the way. That means that my speech will look all right in Hansard. The clause allows for a scheme which is funded by a

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combination of phasing in decreases and an addition to rates bills generally. That will allow us to put in place a fair and workable scheme.

It would be simplest if I addressed the amendments in reverse order. Amendment No. 140A is designed to ensure that if over the life of the transitional scheme it turns out that the scheme is in fact not revenue neutral, but is producing a loss in rates revenue, the losses cannot be made good by adjustments to the scheme. In effect, the general taxpayer would have to make good the shortfall in funding for local government.

However, if a scheme is not revenue neutral, in that it is producing too much in rate revenue, Amendment No. 140A would allow for the scheme to be adjusted to recompense ratepayers. The amendment would therefore produce a one-way street unfair to the general taxpayer. The Bill as drafted would allow for a transitional scheme to be adjusted if it was producing either too much or too little in rates revenue. The Bill is therefore fair to both the ratepayer and the general taxpayer.

Amendment No. 140 seems to exclude from the scope of a future transitional scheme all ratepayers whose rates bills are unaffected by a revaluation. That would rule out an addition to rates bills generally as a means of paying for the relief for those facing increased bills at the revaluation. The amendment could in practice conflict with Amendment No. 139 as, by ruling out the possibility of an addition to rates bills generally, there might be no realistic way of making a scheme self-financing even over a five-year period, as proposed by Amendment No. 139.

If, as proposed in Amendment No. 139, a scheme were to be revenue neutral over a five-year period, instead of year by year as set out in the Bill, there would have to be a way by which the Treasury recovered in later years what it had paid in the early years. The Exchequer would also need to recover interest on what had been paid out in the early years of the scheme, and would need to recover a sum to offset the effects of inflation between paying out sums concerned and recovering them. All that would make for a complicated calculation—I am pleased to say that I do not have to explain it—which would introduce an element of uncertainty for ratepayers.

A five-year revenue-neutral scheme would be much more complicated to operate, and far less intelligible to the ratepayer than a scheme that was revenue neutral year by year. Furthermore, it is difficult to see any reason for such a scheme. Why should the general taxpayer in effect give a loan to ratepayers at the start of each transitional scheme?

When prices rise the customer has to pay the new price. When rents are increased the new rental is payable in full on the day it comes into force. Transitional relief means that we are easing the burden on ratepayers. We do not believe that the general taxpayer should cover the cost of that. It seems fair that ratepayers in general should pick up the bill. We cannot have it both ways. We cannot have transitional relief and expect someone else to pay for it. Advocates of these amendments seem to want the increases

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phased in slowly, the decreases phased out quickly or immediately, and the general taxpayer to pick up the bill in some years' time. That does not sound fair.

Despite past intentions of making transition schemes revenue-neutral, significant cost has been borne by the general taxpayer. We are determined to end that. The clearest way to do so is to ensure that the scheme is revenue-neutral in each year. We do not see how that can be objectionable to anyone. An attempt to make a scheme revenue-neutral over the five-year life of the list would mean that, at each revaluation, complex estimates would need to be made in advance of announcing any transition scheme.

If, at the end of the fourth year, it were discovered that the Treasury had not recouped the money that it had contributed in the early years, rates bills would have to be increased to balance the scheme. That would create uncertainty for the lifetime.

In the light of what I have said—more to the point, in the light of what I have read—I ask the noble Earl to withdraw his amendment.

7.30 p.m.

The Earl of Caithness: I did warn the Committee that this was heavy pounding. It is good stuff; we are just getting into the meat of rating now. It is such fun, is it not?

Lord Bassam of Brighton: May I intervene briefly? I am a very generous person, and I was hoping in a moment to go to the Peers' Guestroom to celebrate my 50th birthday, to which everyone is welcome. If the noble Earl intended to digress at length, can I urge him to be at least slightly briefer than he planned?

The Earl of Caithness: I was going to be brief. I was also going to congratulate the noble Lord on his birthday. It is nice that, for a change, we have so many Ministers who are younger than me. The times were when I was the youngest.

I wish to read what the noble Lord has said. I also request the chance to talk to him before the next stage. What he is producing is unfair to businesses and complicated. I believe that we can produce a scheme that is much fairer to businesses, fair to the Treasury, fair to the taxpayer and less complicated for businesses to understand. Those are two different points of view

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that we will not resolve in Committee. But, if we could meet before the next stage, we might be able to find common ground so that we could retain some of the flexibility that, I believe, the Government will need. I speak not with a party hat on, but with some experience.

When I was a Minister I remember using the same arguments and asking why the taxpayer should contribute to business matters. We found that it had to happen at some stage. If you take away that flexibility, you will handcuff yourselves and make life extremely difficult for yourselves.

From a business point of view, there is a greater certainty and ability to plan if there is five-year self-financing transitional relief rather than a one-year period. I know that the Minister is keen to be helpful. I am sure that he will try to find time in his busy diary.

Lord Rooker: For the avoidance of any doubt, Ministers are always happy to see Members of both Houses. I am not the policy Minister for this Bill. I cannot undertake negotiations about the Bill. The Minister for Local Government and the Regions and his colleagues are the policy Ministers. I will draw their attention to what the noble Earl has said. There have been constant meetings about business improvement districts. I do not want the noble Earl to think that I am being discourteous.

The Earl of Caithness: I understand the point entirely. I am sure that the noble Baroness, Lady Maddock, would wish to attend any meeting, given her interest and support. Meanwhile, I beg leave to withdraw the amendment and wish the noble Lord a happy birthday.

Amendment, by leave, withdrawn.

[Amendments Nos. 140 and 140A not moved.]

Clause 66 agreed to.

Clause 67 agreed to.

Lord Rooker: This may be a convenient moment for the Committee to adjourn until Monday at 3.30 p.m.

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