Clause 3. — (Rating Liability of Area Gas Boards.)

Orders of the Day — Rating and Valuation Bill – in the House of Commons at 12:00 am on 20th February 1957.

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Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering 12:00 am, 20th February 1957

I beg to move, in page 3, line 15, to leave out from "there-under" to the end of the Clause and to add: (2) For any rate period as aforesaid the said section, the said Schedule and the last foregoing subsection shall have effect as if references to the manufacture of gas in the said section and the said Schedule included references to the purification of gas:Provided that for the purposes of apportionment and allocation under sub-paragraph (3) of paragraph 4 of the said Schedule a therm purified shall be treated as one-half (or such other fraction as the Minister may generally or in any particular case direct) of a therm manufactured. This is an Amendment which, as far as I can see, will not affect the total liability of an area gas board, but it will have some effect upon the distribution of the rate result among the local authorities concerned. The liability of an area gas board to pay rates to a rating authority is based, first, on the sale of gas in the area and, secondly, if there is any manufacture of gas in the area, on that manufacture.

For the present purpose, I need not trouble the Committee with the details of the rather complicated Schedule which lays this down. That is the position, and, therefore, an authority which not only has, as is usual, gas being sold in its area but also gas manufactured in its area does better out of the area gas board than an authority which only has gas sold. There is a formula for combining the two forms of liability and arriving at a total.

The difficulty which arose when the 1953 Valuation for Rating Act was being discussed was this. There was a provision in the Act for manufacture, but, of course, rateable property, perhaps of considerable area so far as the actual shell of the buildings is concerned and of considerable value, may be occupied by an area gas board for purposes which are neither sale nor manufacture in the narrow sense of the words.

One particular sort of case is becoming increasingly common. I understand that in Port Talbot there is property of very considerable rateable value occupied by the gas board for the purpose of purifying industrial gas from a steel company. There is almost exactly the same sort of thing in my own constituency, where part of the former Kettering gas works is occupied by a plant which, to a very large extent at any rate, uses industrial gas from the steel works at Corby.

There is no reason to doubt that this practice has been growing with the increasing use of industrial gas for domestic lighting, heating, and so forth. So far as there is any question of general policy in it, I should have thought that there is every reason to encourage that use of a product which would otherwise be wasted. Even so, in my constituency there blazes up every week-end a quantity of industrial gas which has not been used and could not be used, known locally as the "Corby candle." I dare say that there is a "Port Talbot candle," too.

This matter was raised during the discussion of the Rating and Valuation Bill, as it then was, in July, 1955. With it there was raised another question which I will mention only to make clear what I am going to quote in a moment, the question of the storage of gas. Besides being purified, gas has to be stored; obviously, one cannot send it all out at once down the pipes. Therefore, the business of a gas producer involves manufacture; it involves, or may involve purification in the sense I have given it; and it certainly involves storage. My hon. Friend the Member for Stalybridge and Hyde (Mr. Blackburn) has on the Notice Paper an Amendment to this Amendment about that, and no doubt he will develop any particular local point he wishes to introduce.

Both these matters were raised in 1955. The first reference was to the storage point, reported in column 240 of volume 543 of the OFFICIAL REPORT. My hon. Friend the Member for Stalybridge and Hyde moved to insert "or stored" after "manufactured." I need not repeat the cogent arguments adduced by him and others in the discussion. All I wish to do at the moment is to refer to what was said by the then Parliamentary Secretary, who is now Financial Secretary to the Treasury. He said how difficult it was to include storage with manufacture on the basis of the existing formula and he gave his reasons. He expressed great sympathy with the object behind the Amendment. That was in Committee.

On Report, as will be seen from c. 1217, my hon. Friend the Member for Aberavon (Mr. Cove) moved a somewhat similar Amendment about purification. There must have been a change in the Parliamentary Secretary at the time. The then Parliamentary Secretary said that he could give an assurance that the question of purification was considered when the formula was under discussion"— that is, the formula for determining liability— and it did not take the formula-making party by surprise. The hon. Gentleman declined to commit himself one way or another and then he continued: For the reasons I have stated, I hope that the hon. Member for Aberavon will not press this Amendment. There will be a general review of the pool payments. when the question of gas showrooms"— that had been raised by the hon. Member for Kidderminster (Mr. Nabarro) on the same Amendment— and other aspects of this business will be discussed. That will provide a better opportunity for dealing with this matter than attempting to tinker with the formula now. My hon. Friend the Member for Aberavon then said: On the basis that there will be pooling arrangements"— I think he meant a review of the pooling arrangements— I beg to ask leave to withdraw the Amendment."—[OFFICIAL, REPORT, 6th July, 1955; Vol. 543. c. 1219–20.] On that, I submit, the Government quite clearly undertook at least to review the matter and, if I may refer to the earlier discussion, to do so sympathetically. They recognised that it was a serious point and the occasion upon which they wished to look at it was the review of the pool payments. This provision, unlike Clause 1 of the Bill, is a permanent one and the Clause follows the review of the pool payments.

It did not escape my attention, or that of others of my hon. Friends, that when this Bill was brought forward by the Government nothing whatever was said about this point. I earnestly hope that the Parliamentary Secretary will be able to assure us not merely that the matter has been reviewed and turned down, but that attention will be given to it. We have been told that the Bill cannot be amended—it is what the gas formula was said to be in the previous debate, the "sacred cow". We cannot get this change into the Bill, but will the hon. Gentleman give an undertaking that legislation will be produced with the same misguided urgency as induced the introduction of this Bill to deal with the matter?

It is no small matter. I cannot claim, in respect of my own constituency, that it is quite as serious as all that, but I have with me the figures, with which I shall not trouble the Committee, about the position in Port Talbot, where there is a very big steel works concerned and where local finances are being made extremely difficult and matters will be made worse, because this process is to be developed further, more use is to be made of this industrial gas and what is already a quite considerable piece of unfairness to these local authorities will become even more so.

6.45 p.m.

The point is that in the distribution of the rate liability in the area of a gas board, a local authority is unfairly treated. There are within its area these considerable premises from which it gets no advantage. The only distinction between such an area and an area where gas is manufactured is that part of the process, and only part, is included in the former area. There is, in fact, a provision in the same Schedule for cases where a single gas works overlaps, as it were, from one rating authority's area into another; and this, although it is not that case, is the same sort of principle.

We have done our best to be wholly reasonable in what we have put forward. We would not claim that a therm of gas purified ought to have the same weight given to it for the purpose of assessing liability as a therm of gas manufactured. We have suggested that a proportion of one-half is about right; it ought to be treated as half. There is no practical difficulty about this—it is a question of simple arithmetic; but we have left the matter open and allowed the Minister, either now or in the future, to prescribe the proper fraction. I have not checked completely, but I think that that figure would apply to the suggestion made on behalf of the stored gas liability, if I may so term it, by the Amendment of my hon. Friend the Member for Stalybridge.

I hope I have not taken up too much of the time of the Committee on this rather tedious matter, but it represents something that ought to have been put right in the Bill or, at least, should have been clearly explained in the Bill, in accordance with what was said in July, 1955, on the 1955 Bill.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

There is on the Notice Paper, in my name, an Amendment to the proposed Amendment which has been moved by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). My Amendment, like that moved by my hon. and learned Friend, calls attention to the position where the formula under the Rating and Valuation (Miscellaneous Provisions) Act, 1955, shows an injustice to some of the local authorities.

On the 1955 Bill, both in Committee and on Report, I moved Amendments to deal with this point about the storage of gas. Unfortunately, we were defeated in the Division Lobbies and all that I could get from the Minister was sympathy and a promise. The promise I will deal with later. As for the sympathy, as my hon. Friend the Member for Ince (Mr. T. Brown) knows, we have a saying in Lancashire that "Sympathy without relief is like mustard without beef."

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

I am hoping, therefore, that we shall get a little more from the Minister today in carrying out the promise given in 1955.

Members of the Committee will be aware that the gas industry is concentrating production in a number of units, and of course, nobody would quarrel with that. Provided that there is more efficient production we are all in favour of it. The position, however, is that works which were previously used for production are now being used for storage purposes. They occupy exactly the same area of land as they occupied when they were manufacturing units.

Before the 1955 Act, the rateable value of the works, whether used for manufacturing or not, accrued to the area in which they were situated. In 1955, a new formula was brought forward for the allocation of the money which was contributed by the area gas boards. After setting out the methods of determining the aggregate value of the undertakings, that Act provides for the apportionment of that value among the rating authorities covered by the Board.

The formula sounds rather complicated. Actually, it is not. It is this: the money is apportioned in the proportion that the number of therms supplied by the board in a rating area plus nine-tenths of the number of therms, if any, manufactured in that area bears to the total number of therms supplied by the board to the consumers in the whole area plus nine-tenths of the total number of therms manufactured in the whole of the area of the board.

Therefore, it will be seen that it is only the number of therms supplied and the number of therms manufactured which are taken into account, and there is no provision at all to cover hereditaments which formerly manufactured gas but which now are used either for ancillary purposes or for the storage of gas, coke and other residuals.

The Amendments which I moved to the Measure of 1955 were rejected by the Minister, though that rejection was accompanied by the promise to which I have referred. An Amendment was accepted, however, covering a somewhat similar principle for the London area—for the Beckton gas works. The Minister at that time adopted the very unfortunate and dangerous precedent of one law for London and another for the provinces. Despite all I could do at that time, I could not obtain the acceptance of my Amendments.

The then Parliamentary Secretary, the hon. Member for Ashford (Mr. Deedes), said that my Amendment would involve a reorganisation of the formula. I had no objection to a reorganisation of the formula, but the hon. Gentleman seemed to think it was a major task and that the Government could not, therefore, possibly undertake it. However, he did promise that the formula would be reconsidered in the general review of local government finance which was to be made by the Government.

In answering the case for another and rather wider Amendment during the consideration of the 1955 Measure in Committee, the then Parliamentary Secretary, referring to the proposal of the Government, said: The proposal is that the pool arrangements, which involve the Transport Commission and electricity, and which, as I said at the time, do not preclude gas and would, obviously, include gas, shall be reviewed immediately after revaluation comes into force. That would be in the autumn of 1956. I am not in a position now to say whether that will involve legislation, but if it does involve legislation it will get legislation. The object would be that the revised arrangements should be operating by April, 1957."—[OFFICIAL REPORT, 28th June, 1955; Vol. 543, c. 245.] We have got as far as February, 1957, and there is no prospect of the revised arrangements either with or without a review of the formula in the 1955 Act being carried out.

On Report of the 1955 Measure I moved a further Amendment, as I said. By the ingenuity of my hon. and learned Friend the Member for Kettering we tried a fresh definition of gas works on a geographical basis. The Amendment was rejected, but the hon. Member for Ashford, trying, I think, to give a word of comfort to us, said: In many of these details the formula cannot be regarded as the final solution."—[OFFICIAL REPORT, 6th July, 1955; Vol. 543, c. 1219.] My next quotation from the Government is also from the then Parliamentary Secretary, the hon. Member for Ashford, who, also on Report of that 1955 Measure, said: I hope that the hon. Gentleman"— he meant me— to whom I gave an undertaking at an earlier stage of the proceedings, will not now press his Amendment."—[OFFICIAL REPORT, 6th July, 1955; Vol. 543, c. 1229.] I stress this because I want to make it quite clear to the Minister that an undertaking was given that the formula would be reviewed, and that that would be done as part of any general review of local government finance.

Last week the Minister made his long awaited statement on the general question of local government finance. It was in very, very general terms and it is difficult to know exactly what he means. He could say, "Oh, this question is covered by the general terms of my statement." This is what he said: In addition, further changes will be made in the system of pool payments to local authorities by the nationalised industries"— he could say that that, of course, includes the formula for the gas industry— including the direct rating of electricity properties"— and I hope that that means that those authorities which have electric power stations in their areas will get an increased amount, though I shall not pursue that matter now, lest perhaps the Chancellor should have to say to me that it is out of order to talk about electricity undertakings on a Clause which deals with gas— and the separate assessment of electricity and gas showrooms …"—[OFFICIAL REPORT, 12th February, 1957; Vol. 564, c. 1083.] Thus the statement does mention gas showrooms, but whether the question of the review of the 1955 formula is contained in those very general words about the pool payments to local authorities by the nationalised industries". I do not know. Perhaps the Parliamentary Secretary will be able to tell me when he replies to the debate.

Many people in local government will have been very disappointed by the extremely general terms of the Minister's statement. It would have been helpful if it had been more definite, and I hope that the Parliamentary Secretary will be able to say the Government will carry oat the promise which was given in 1955, and that it is included in the Minister's general statement.

Photo of Mr William Cove Mr William Cove , Aberavon

I understand that we are rather pressed for time, so I shall be very brief.

I want wholeheartedly to support the exhaustive and accurate case made by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). As time passes, the area which I represent here will find itself increasingly penalised because the purification of gas and the storage of gas are not included in the formula for rateable values.

However, I leave the case as it has been presented and ask this one question. Will the Minister accept a deputation from my authority to thrash out this matter in more detail? I do not wish to go into the details now, but if there is to be a major rearrangement what opportunities will authorities like mine have for presenting their case? I hope that I may have a favourable answer to that question.

7.0 p.m.

Photo of Mr Reginald Bevins Mr Reginald Bevins , Liverpool Toxteth

I hope that I may be able to help the Committee a little on this rather technical Amendment. Although a relatively unimportant proposal is embodied in the Amendment and also in the Amendment to the proposed Amendment, I am, nevertheless, aware that many local authorities, and not all of them big authorities, are very sensitive to any financial deprivations, however they arise. That is one such case.

As the hon. and learned Member for Kettering (Mr. Mitchison) quite rightly said, it is the practice for gas boards to pay their rates direct to the local authorities. In that respect, they are unlike the British Transport Commission and the Central Electricity Authority. The factors which determine the rateable value in any one area are the amount of gas made and sold in that area during the penultimate year. It is perfectly true that in some cases it is the practice for the gas boards to buy gas from other bodies and purify it, that is to say, they do not engage in the process of manufacture themselves.

The aim of the Amendment is that gas which is purified, as opposed to being manufactured, should be taken into account in the formula, the idea being that every therm purified should be treated as equivalent to half a therm manufactured. It is perfectly true that in some areas purification only may take place and that in existing circumstances those rating areas are likely to suffer on that account.

Again it is true, as the hon. Member for Stalybridge and Hyde (Mr. Blackburn) pointed out, that there is an increasing tendency in some parts of the country to concentrate 'production, and, as storage in itself is not a factor which comes into the formula, certain local authorities are penalised.

Reference has been made to the proceedings on the Rating and Valuation (Miscellaneous Provisions) Bill in June, 1955. I have looked up the reference to what was said by one of my predecessors at the Ministry. It is true that the impression was given to the Committee, at that time that it was the intention that these two suggestions should be considered in due course, when the Ministry had its discussions with the local authorities but, with great respect to the hon. Member for Kettering, I must recall what I said in moving the Second Reading of this Bill.

I was speaking of the contribution made by nationalised industries to local authorities, and I said that Clauses 2 and 3 of the Bill deal exclusively with the consequences of recent revaluation, for these are the really urgent issues on which action could not wait until the completion of the more general review."—[OFFICIAL REPORT. 7th February, 1957; Vol. 564, c. 631.] Hon. Members will recall that when my right hon. Friend made his announcement to the House, on the reform of local government finance, about a week ago, he also made it plain that further consultations were to take place with both the nationalised industries and the local authorities on the future of pool payments by the nationalised industries to the local authorities.

I want to be perfectly frank with the Committee and say that before these interim proposals were embodied in the present Bill quite obviously discussions took place with representatives of nationalised industries and local authorities. But those conversations were not with the local authority associations as such. They were merely with certain gentlemen who were deputed to attend conversations with the Ministry and the nationalised industries.

We have not yet begun our full negotiations and talks with the local authority associations and the nationalised industries, and I assure the hon. and learned Member for Kettering that when we start to do that—and we shall be doing it very soon indeed—the ideas embodied in these two Amendments will be put to them. I do not know what their reaction will be. It may be that they will be prepared to accept these ideas. I can go no further than that. I reiterate that we are fully sensitive to the claims of local authorities who feel that they have had a raw deal because of a formula which is rather too hidebound, as this may be.

The hon. Member for Aberavon (Mr. Cove) asked whether my right hon. Friend would be prepared to see a deputation on this point. I am sure that I speak for my right hon. Friend when I say that we shall be only too happy, at any time, to have the fullest information possible on this topic.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

We appreciate the Parliamentary Secretary's frankness, but he did not go quite far enough in his statement, because we had a promise in 1955 that, in the consideration which the Government were prepared to give, a new formula would be agreed upon. The local authorities have been placed in a very difficult position because of the great change that has occurred in methods of gas production and distribution. Many of the local authorities who possessed productive units, before nationalisation of the gas industry, now have only storage units. They are compelled by the rearrangement to store gas which has been produced in another part of the district or county. I am sure that the hon. Gentleman will see the disadvantage in which they are placed by the non-fulfilment of the promise made by his predecessor.

I do not think that we desire to divide the Committee on this question, but we should like to have a categorical promise from the Parliamentary Secretary that this matter will be seriously considered when the Government begin to overhaul local government finance. We hope that there will not be, as we say in Lancashire, any "shenanigan," any "passing the buck," any statement that the old formula worked very well. I hope that the hon. Gentleman can give us an assurance now, remembering the words of a great man who said that it is better not to promise than to promise and not pay. The hon. Gentleman's predecessor made a promise and he is still owing.

The Parliamentary Secretary has been frank so far. We hope that that frankness will go further and that he will assure us that this matter will be overhauled when the Government reorganise local government finance.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

We are not really very much further than we were in 1955. We have now had exactly the same promise as was given then. This is a very important matter to many small urban authorities. There are two in my constituency which previously manufactured gas, but whose undertakings are now used only for storage purposes. Those undertakings occupy exactly the same area as before and occupy land which otherwise could be used for other rate-bearing hereditaments. This is a serious matter and I hope that the Government will consider it carefully.

My final point is that whatever suggestions ultimately come forward will have to be embodied in a Bill. May I appeal to the Minister not to draw the Financial Resolution on that occasion so tightly that he prevents us from moving Amendments which we think ought to be moved?

Photo of Mr Reginald Bevins Mr Reginald Bevins , Liverpool Toxteth

I made it clear when I spoke a few moments ago that I was very sensitive to the claims of some of the local authorities which were being deprived in this way. I am sure that that is true also of my right hon. Friend, so the hon. Gentleman need have no qualms on that score.

On the question asked by the hon. Member for Ince (Mr. T. Brown), I cannot give a categorical assurance that this will be incorporated in the legislation on local government finance which will come to the House in due course. I can assure him, however, that when we have our talks with the nationalised industries and the local authority associations, this proposal will be put to them in a positive form.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

It was because the hon. Gentleman is not prepared to give such an assurance that I asked for one about the Financial Resolution.

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

Considering what I think of right hon. and hon. Gentlemen opposite and what they really think of me, we may be too trusting in saying that we will not divide the Committee. I may tell the hon. Gentleman at once that we had every intention of doing so unless we received a satisfactory assurance. His position is somewhat marginal, but perhaps that is as far as he can go.

This does not really concern the area gas boards very much. Their total liability is the same, and it is not really a matter of the local authority associations taking it much further. Probably the majority might be against it because they might themselves suffer a small reduction. It is really a matter, I suggest, where the responsible Minister has to make up his mind as to what is fair.

Hand on heart, without making any point about it—and it is not my own constituency interest, which is very small in this matter—I honestly say that I feel that the manufacturers of gas are getting away with a bit more than they deserve, as against the purifiers and the storers of gas, and that it would be fair, and, on the whole, right in the public interest, because of the development in gas manufacture, to give the purifiers and storers "summat", as they say in Lancashire.

On what has been said by the hon. Gentleman, and on a faith in the rectitude of the right hon. Gentleman, which, I assure him, is temporary, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.