' A rating authority may by resolution operate within its area such financial schemes other than the levying of taxes which may be approved by the Secretary of State and in particular may derive revenue from the purchase, sale, letting and management of property for any purpose.'—[ Mr. Denis Howell.)

Brought up, and read the First time.

New Clause 7 takes the matter only a little way, as the hon. Member for Small Heath made clear in his advocacy of the new clause. If I read it correctly and if I understand his argument correctly, he wanted to give the local authorities, first, the power to enter into the property business further than they do at present, and, second, to increase their power of municipal trading.

Concerning the property business, I should have thought that local authorities are well in it at present, and many local authorities are using their powers very effectively not only in housing developments but in comprehensive developments of town centres, both on their own and in conjunction with private enterprise.

When further opportunity arises in legislation we shall certainly look to see whether the powers of local authorities are sufficient, and particularly when joining with private enterprise on a company basis, or co-operating in partnership, and so on, we shall look to see whether their powers are sufficient to enable them to do that without too much hindrance.

There is no general power under legislation at present for municipal trading, but there are many specific powers in both public Acts and local Acts. One would have to go very carefully in giving a general power to trade in everything and anything. If we want to expand the powers in this respect, it would be preferable to be very specific about them and to say exactly in what direction we want them to expand.

The hon. Member for Gloucestershire, West (Mr. Loughlin) went beyond new Clause 7, very rightly, in his criticism of the rating system, in saying that local authorities should be enabled to raise revenue not just through property transactions or municipal trading, as suggested in the new clause, but particularly by relating their collection of revenue to the income of the ratepayer or the income of the contributor to a local authority's fund. That matter was considered in the Green Paper, from the point of view both of a local income tax and a surcharge on earning householders who were not the direct ratepayers. In both cases the administration is extremely difficult. I do not say that it is impossible. We may still be able to work out a system at least to supplement rates, but it would impose considerable administrative difficulties on local authorities.

10.45 p.m.

The new authorities will be taking over on 1st April, with new boundaries and new functions and they will be reduced in number from 1,400 to 400. When those new authorities settle down, I am sure that the House will wish to look again at the system of providing them with funds. In trying this year to apply fairly the rate support grant—and my right hon. and learned Friend the Secretary of State announced this afternoon the formula for distribution, the amount of the grant and how the relevant expenditure should be calculated—I almost despaired of getting a fair system. The number of times the calculations went in and out of the computer was astonishing. I now have no faith at all in computers. I am certain that if the House would let me have a helicopter in which to fly round and throw out the money to the local authorities—£10 million here and £20 million there—I should do much better than the computer. I should know who deserved the money.

importance for local goverment finances for a considerable time to come. The clause gives to local authorities some local options on municipal trading and in particular on property development, because such development within a local authority area is by and large a profit to the community—and that should be so in view of what that community has put into the area.

There are many different forms of scheme, other than taxation, of which a local authority could take advantage, not only in respect of trading, but in acquiring property, using it, letting it for commercial reasons, and indeed in acquiring property for many purposes which the present law does not allow them to do. We are saying that local authorities would have the power to do this in the clause, subject to the Secretary of State's approval.

The clause now before the House is a most modest one. We must remember that local authorities face severe financial difficulties. Even to carry on their statutory duties they will need alternative sources of finance. The clause gives local initiative a chance to provide those alternative sources of finance. I am sorry that the Government will not accept the principle of this clause, and I must ask my right hon. and hon. Friends to divide the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 123, Noes 137.

Question accordingly negatived.

' No proposal may be made in the case of hereditament which is a dwellinghouse or mixed hereditament within the meaning of section 48 of the principal Act for an increase in the gross value by reason of the making of structural alterations on or after 1st April 1974 which are necessary only for the purpose of installing a system of providing heating in two or more rooms in the hereditament '.—[ Mr. Denis Howell.]

Brought up, and read the First time.

In Clause 20 the Government are saying, "We do not want to impose an additional rating burden upon those who have installed and paid for central heating at this stage. We will do it later." But, by virtue of that clause, they are creating an extremely privileged position for those who go in for central heating as a new venture on or after 1st April this year. I do not think that in equity that can be defended or justified.

If it is wrong for householders who newly install central heating to suffer an additional tax burden by increasing their rateable values, it must be wrong for those who have already installed and paid for central heating. We seek to remedy that situation in the new clause.

I am not sure that we have got it right. The Minister appears to indicate some doubt about it. We thought that we had it right in this intricate matter, but on re-reading and with the benefit of further advice it would appear that we have not succeeded in achieving our aim. Nevertheless, the new clause provides the House with an opportunity to consider the principles involved.

There are different forms of central heating. It seems extraordinary—this is at the heart of the unfairness of the system—that if someone installs a gas hot-air system which requires a structural alteration in his house—I have such a system in my house—his rateable value is adjusted and increased. However, if he installs a form of central heating which requires only the addition of electric plugs in bedrooms into which a night storage heating system can be plugged, that does not bring him within the ambit of increased rateable value and taxation.

Not only is it unfair that central heating should be taken into account but it is doubly unfair for the people who are penalised because they have purchased one form of central heating as distinct from another. People should be encouraged to go in for central heating because it is in the country's interest that they should. It could probably be argued that many diseases such as asthma, bronchitis and so on would be reduced if central heating was more widespread. I have heard bronchitis described as a typically British disease, and many medical men think that the introduction of more central heating would be a service to health. Central heating should be totally removed from any calculation of the valuation of a house. It is only there because of the archaic valuation laws. They base the rateable value on the notional or hypothetical rent which a house could fetch if let on the open market and it is argued that if a house has central heating that rent will be higher.

That adds up to the ludicrous situation we now have and the best answer is to instruct the Inland Revenue totally to disregard central heating in determining the rateable value of domestic properties. We hope that is what our clause will achieve. We shall listen with interest to what the Minister says. However, whether the clause is properly drafted or not, the important thing is that we should carry the Government with us in our broad intentions. If the amendment is not quite right I hope that the Government will take it over and produce a form of wording which achieves what I am sure we all want.

Amendment No. 72 relates to the garaging of private vehicles. It is for an environmental reason that I ask that garages attached to domestic hereditaments should be excluded from rating valuation. It is a good thing for a person, when possible, to build a totally enclosed garage for the garaging of a private vehicle. We need only to look around council or private housing estates to see how the environment can be adversely affected by the rows of cars which are left on the roads or in the byways.

If we can improve the environmental scene by encouraging people to build garages where practicable, it is surely wrong to penalise those people by uprating the valuation of their properties. The Under-Secretary of State for the Environment, my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths), mentioned what the Government have done in Clause 20 when speaking in Committee on the motion "That the Clause stand part of the Bill." He said that when minor alterations are effected to domestic or mixed hereditaments there will be no revaluation of the property, at least between valuations. My hon. Friend instanced specifically a garage. If under the proposed Bill somebody extends a house by building a garage on to it, his rating valuation will not increase until the next general valuation.

That is appreciated, but, with great respect, it is unfair that the property should be valued upwards at any time and in any case I make the plea to my hon. Friend the Under-Secretary of State for the Environment, the hon. Member for Hornsey (Mr. Rossi), who I very much welcome in his new capacity, that the Government should keep an open mind on this matter. As the hon. Member for Small Heath said, it is inequitable and it causes a lot of bitterness among millions of domestic ratepayers.

However precise the Bill may be from a legal or technical viewpoint, surely it is right that we should try to amend legislation in this House so as to make it to be seen to be fair to all the people. I believe these new clauses and amendments would help to do that.

Clause 20 is meant to stop that happening between valuations. When the revaluation occurs the district valuer has to carry out his duty and value the property as it is. The criteria is: what is the notional rental value of that property? That criteria is of value in as much as it differentiates between the owner of one property and another, determining the amount of rates one occupier shall pay upon the amenities and facilities he is enjoying. For example, a house with two bedrooms is worth less than a house with three. The person with a larger house has a higher rateable value. By the same criteria the house with central heating is worth more than a house which does not have it.

In so far as one has to have means of determining how this form of tax shall be related to the value of the property the district valuer has to take into account the various amenities that one house has against another when determining rateable values. It is being suggested by the hon. Member for Small Heath that we should breach that. He says that specifically for central heating.

The moment that it is done for one thing, where does one draw the line? Is there any reason why one should not say that, having allowed it for central heating, it should not be done for the installation of a bathroom, or for the installation of an inside toilet where previously the toilet was outside, or for building an additonal bedroom or a garage, as my hon. Friend the Member for Birmingham, Handsworth (Mr. Sydney Chapman) said? That is the consideration that has to be borne in mind, and for that reason, with the rating system as it is, it is difficult, if not impossible, to accept a breach of a principle that can be continued in all directions without limit once that is accepted.

The new clauses do not do what the hon. Member for Small Heath said they do. First, new Clause 8 says that "No proposal may be made". Unfortunately for the hon. Gentleman, the term "proposal" is a term of art relating to an alteration to a valuation list in between general valuations. All that the hon. Gentleman is saying is what Clause 20 says, namely, that for the future the installation of central heating cannot bring about an alteration in the valuation in between general valuations.

If, however, one were to take the hon. Gentleman's proposition to its logical conclusion, one would find difficulty in seeing why he should have in the new clause the words "after 1st April 1974", because if the hon. Gentleman is arguing that central heating should be disregarded altogether at a general valuation, why should those who have carried out all these alterations at some time in the past be penalised because of a given date? The hon. Gentleman is repeating the words of Clause 20 and is merely positing what that clause says. The new clause carries the House not one whit further. It is superfluous, and for that reason I must invite the House to reject it.

11.30 p.m.

Motion and clause, by leave withdrawn.

Further consideration of the Bill, as amended, adjourned.—[ Mr. Graham Page.]

Bill, as amended (in the Standing Committee), to be further considered tomorrow.

Motion made and Question proposed, That this House do now adjourn.—[ Mr. Jopling.]