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New Clause 8

Volume 24: debated on Monday 17 May 1982

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Section 2 Of The Local Government (Miscellaneous Provisions) (Scotland) Act 1981

`No power conferred by section 2 of the Local Government (Miscellaneous Provisions) (Scotland) Act 1981 shall be used in connection with the valuation or revaluation of lands and heritages which takes place, or is due to take place in the year 1983.'.— [Mr. Dewar.]

Brought up, and read the First time.

With this it will be convenient to take the following amendments: No. 10, in page 4, line 24, leave out clause 4.

No. 11, in clause 4, page 4, line 35 at end insert—

'(1A) In an order under subsection (1) above different provision may be in respect of a class or classes of machinery, machines or plant in different rating articles.'.

No. 12, in clause 4, page 4, line 35 at end insert—

'(1A) In any alteration which the Secretary of State may make in section 42 of the Lands Valuation (Scotland) Act 1854, the Secretary of State will make good the loss in real income to the appropriate local authority by additional resources element'.

This is an extremely complicated matter, although the new clause is deceptively simple. I do not expect that the Government will be in favour of the new clause in principle, or in any other way, because they have made it plain that they intend to apply section 2 to the 1983 revaluation and that exempted from that revaluation in the quinquennial review will be domestic property. We had a debate on the matter when we discussed the Valuation (Scotland) Order 1982 in the Sixth Report from the Select Committee on Statutory Instruments on Wednesday 31 March.

On that occasion, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who once again darkens our door, made it clear that the reason for the partial revaluation rather than for the revaluation was the publication of Cmnd. No. 8449, which deals with the alternatives to the rating system. I regard that as a dreek and drear document. It seems to analyse with gloomy relish the difficulties, but comes up with no helpful solution. If they postpone the revaluation of domestic properties on the basis of what is in that discussion document, the Government will be making a mistake. It will be a long time before any workable alternative is evolved.

The alternative with the most popular support is that of some form of local income tax. In terms of the Government's discussion paper, that would not be implemented before the 1990s. Postponement of the revaluation is bad because, as I have explained before, it means that distortions between domestic ratepayers remain. For example, someone living in a house that has suffered from a change of environment and therefore a change of property and rentable value, and is over valued, will, because there is no revaluation, have no way in which his rateable value can be adjusted as against other domestic properties in the section. The distortions and the ambiguities of the system will become more perceptible.

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It will be argued and feared that the whole thing may have been mounted for this whole reason. It will be argued that some people will imagine that the postponement of revaluation of domestic property will be in some way a help to domestic property owners as a whole. That is not true because, as we know, the percentage of the total money raised by rates that comes from domestic properties will have to remain the same. There is no way, as a result of this manoeuvre, that domestic ratepayers will pay a smaller percentage of the total rates.

I fear that in the domestic sector there will be a number of anomalies and inflexibilities, and a number of, perhaps minor but still irritating, injustices that cannot be put right as they would have been by the regular quinquennial revaluation. The Scottish assessors in local government have kept to these regularly. There was one small gap because of the reorganisation in 1975 and our record is infinitely better than that south of the border.

Would the hon. Gentleman say from his experience that the result of revaluation, on average, is to bring down or raise valuations? That is a salient point.

I do not think that that is a salient point. What frightens one is the amount of money that has to be raised from rates, which is a question of rate poundage.

At the moment the domestic ratepayer provides about 30 per cent. of the total rateable value and the non-domestic about 65 per cent. If we accept the premise that often comes from Conservative circles that the domestic ratepayer is paying too high a percentage at the moment, there is nothing in the proposals made by the Government that will help that. Exactly the same percentage will have to be raised from the domestic ratepayer as was raised last time. Therefore, that premise is fraudulent. The Under-Secretary of State for Scotland might not wish to do this, but some of his colleagues are less careful. It would be fraudulent to give the impression that in some way this will help the domestic ratepayer.

I wish to ask the Minister one or two simple questions. They are simple in that they are easy to ask but perhaps they are not so easy to answer. The Under-Secretary will have to introduce, following on the Valuation (Scotland) Order 1980, a further order. There will have to be a chance to discuss the machinery because we shall have to know the method by which the next annual value of specified land is to be adjusted and also the method by which the net values of unspecified lands and heritages are to be adjusted. That is a matter of a great deal of speculation and interest.

It will be helpful if the Minister will say a few words about how his thoughts are tending in this matter. It is mysterious and obscure. We know that the Scottish Valuation Advisory Council has already been consulted and that COSLA is being consulted now, although I am not sure whether that has been concluded. I hope that the Minister can give us some updating on that and explain how matters stand at the moment.

Perhaps the Minister can also tell us whether he is thinking about applying a multiplier to domestic values or a divider to non-domestic values. That is a simple proposition. There might be a combination of both, but the way in which this is done is a matter of real importance. It would also be helpful if the Minister could give us some indication in principle. There is also an important argument in which I am interested, and on which the House may be interested to hear the Minister's thoughts about the unit in which the ratio between non-domestic and domestic is to be preserved.

I understood—looking back on the previous debates I think that I am on good grounds—that as the statute had been drawn, the unit was based on the assessor's area. In Scotland this is usually the region, but the hon. Member for Pentlands poured some scorn on me for that. He suggested, during the statutory instrument debate, that he could not understand how I had got that idea and said that it could not be done on the basis of the responsibilities of the assessor and the area for which he is responsible, but might be done on a district basis alone.

It would be useful if the Minister would tell us whether he is going for the smaller unit or whether he would do it on the assessor's area—that is, on a regional basis. I should have thought that there was a case for going for the smaller area to avoid distortion. One can easily construct models, for example if one goes for the whole of Strathclyde, where the inflexibilities might become apparent and people might be victimised as a result. It will be important for the Minister to say a word or two about that.

Will the Minister also say a word about how the domestic element in the rate support grant will be affected? That will have a knock-on effect on the resources element. It will help if the Minister will say something on that subject.

I hope, too, that the Minister will give us a quick resume of the advice that is emerging at present and how his thoughts are crystallising—that is, if they are crystallising. What happens, for example, if new properties are built, or have been built since the last revaluation, or will appear on the roll for the first time? If properties previously on the roll had been demolished, how do we handle that in maintaining the ratio between domestic and non-domestic property?

Perhaps the Minister will also say something about the time scale. It is getting short. We all know that 1983 is close in terms of the amount of work that has to be done by assessors in preparing the new valuation roll. Appeals are still grinding on from the last quinquennial revaluation, and the time limit is constantly having to be extended on appeals. There is considerable anxiety about the time scale.

I am conscious of the enormous amount of business that we have to get through tonight. I realise that this is not an area of great interest and that we may soon see a specific order in this connection. However, if the Minister can help us, it will enable us to have a better informed discussion of the options and leave us better prepared to face the further orders when they ultimately materialise.

On a point of order, Mr. Deputy Speaker. Am I correct in saying that with new clause 8 we are also discussing amendments Nos. 10, 11 and 12 relating to clause 4?

I apologise to my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) and others who have a constituency interest. I think that my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill) hopes to speak on that point.

I wish to return to the powers granted under the Bill to the Secretary of State to make orders de-rating outdoor plant and machinery. I have read the Committee proceedings, and I am convinced by the Government's own words that it is apparent that this power is unnecessary, pointless and damaging.

In Committee the hon. Member for Aberdeenshire, East (Mr. McQuarrie), speaking on behalf of himself, on my behalf and on behalf of my constituents, for which we are most grateful, asked that Orkney and Shetland should be omitted. To that, the well-known oracle, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), in his previous incarnation at that time, replied for the Government:
"That cannot seriously be considered for the obvious reason that Orkney and Shetland are the two areas where the anomaly is most apparent. The sums involved arise because of the high degree of external plant in those areas. If they are excluded from any such change, there will be little point in making that change".—[Official Report, First Scottish Standing Committee, 11 February 1982; c. 413.]
I repeat what the Minister said, that, apart from Orkney and Shetland, there is little point in making the change. It was clearly stated that the only part of Scotland to which this would make any significant difference was Orkney and Shetland. That is true. If the Government made an order now, over half of the total rateable value lost would be in Orkney and Shetland. They would lose about £17 million, and the whole of the rest of Scotland would lose only about £14 million.

What will the effect be? If Orkney and Shetland were large and rich areas with a substantial population and industry, it would, of course, be of considerable benefit to the industry that is derated—in this case, the oil industry—and the burden would be spread over a large rateable value and thus not be severely felt. In other parts of Scotland the effects will be felt to some extent, but to nothing like the same extent as in Orkney and Shetland, as the Government themselves say. Of course Orkney and Shetland are not large and rich rateable areas, and the effect will be the exact opposite of what it should be. The oil industries are the biggest contributors to the rates, and they themselves will have to make up a large percentage of the increase in rate poundage when necessary from the derating of their external plant and machinery. They are the only big ratepayers.

The remainder of the extra burden will be shared by the wretched Shetlanders and Orcadians who, by normal standards, are poor and few in numbers. The result will be a comparatively small benefit to the oil industry, which is not interested in the type of relief, which is small compared with their general revenue, but it will be a serious blow to the other industries and inhabitants of Orkney and Shetland. Unless remedial measures were taken the rates will rise by 141 per cent. in Orkney, or 97p in the pound, and by 45p in the pound in Shetland.

These areas have undertaken a lot of extra expenditure, not for the benefit of the Orkneys and Shetlands, but for the benefit of the British economy as a whole. The position would be intolerable. The Government now propose a scheme which will do something to offset the effect of their own legislation. We are, of course, grateful for that, but it is a strange way to govern the country to amend legislation that will have a significant effect in only one part of the country, and then bring in complicated measures to offset its effects in that particular part of the country.

I realise that the argument is that it brings it into line with England, but it is a highly bureaucratic and theoretical approach to legislation to bring in an extremely complicated scheme to offset a difficulty of the Government's own creation, which will have almost no beneficial effects on anyone and which will be very damaging to the people of Orkney and Shetland. Unfortunately, it is typical of the way in which much of our government is carried out.

I do not propose tonight to go into the Government's proposals in the discussion document. As I said, we are grateful that they are to discuss the matter, but there will have to be substantial help, or it will be a great blow to Orkney and Shetland at a time when employment there is declining and the outlook, as in the rest of Britain, is far from good.

The whole exercise appears pointless. The oil industry is not very interested. In other parts of Scotland, on the Government's own showing, it will have virtually no effect. In the one part of Scotland where it will be effective, the effect will be damaging, and so damaging that there will have to be a complicated scheme to set it right.

This is not the time to go into the proposals. I thank the Government for having sent me a copy of them. I emphasise that this is a very strange form of government, and I beseech the Government, when they implement the proposals, to take into account the extremely damaging effect that they will have on my constituency. In my view, it would be better to accept amendment No. 10 and withdraw the clause.

I wish to say a word or two about the postponement of revaluation for domestic properties. The Government owe the House an explanation of when the revaluation will take place and what their proposals are on rating reform. Several years ago the Government promised that the rating system would be abolished, yet we now have this postponement of the revaluation of domestic properties.

I agree with the hon. Member for Glasgow, Garscadden (Mr. Dewar) that the postponement of domestic revaluation will lead to distortions within the system. The whole object of regular revaluation is to iron out differences that may have appeared and to take into account changes that may have occurred in housing standards or in the environmental surroundings and to get equality between ratepayers. It serves no useful purpose to freeze valuations at a certain level and not change them after a period. One might just as well get rid of domestic rating altogether; otherwise one is perpetuating distortions in a system that benefits some ratepayers and has an adverse effect on others.

7.30 pm

Does the hon. Gentleman think that perhaps a political calculation was made at the time of postponement because it was assumed that a general election would follow shortly after the revaluation? Revaluation is never popular.

It is true that revaluation can be unpopular. Valuation should not be confused with rate poundage, but many householders get a fright when they receive revaluation notices, although in relative terms some may be better off than others. We all know that some local authorities take advantage of new valuations to increase their rates, but give the impression of making reductions. If that happens, presumably they figure on the Government's hit list, because, as I see it, most of these gaps have already, in many cases unfortunately, been closed.

My understanding is that the Government are seeking to freeze values at certain rates. They will not allow for any difference in weight to be placed on commercial and industrial properties vis-a-vis domestic properties. En each quinquennial revaluation there are shifts within the overall values between one class of property and another, so it makes no sense for the Government to take that view. I assume that they have deliberately done so because of the proximity of the revaluation date to a general election, as the hon. Member for Glasgow, Maryhill (Mr. Craigen) said.

The report of the Public Expenditure Committee and the public expenditure White Paper show that the Secretary of State's share of public expenditure in the United Kingdom will drop from the 1980 figure of 5·65 per cent. to 5·05 per cent. by 1985. Whatever other complicated calculations the Government have in mind, there will be less money available at central level for the unfortunate councils, who will have to bear much of the blame for the rate increases. However, that is an argument separate from what the Government intend to do.

Therefore, I put this simple question to the Government: when do they propose to resume the revaluation of domestic properties? If they do not propose to do so, when do they expect to come forward with a more equitable alternative to the rating system for bearing the appropriate proportion of public expenditure incurred by local authorities?

I speak to amendment No. 10. The right hon. Member for Orkney and Shetland (Mr. Grimond) was not correct in assuming that his constituency would be the only part of Scotland to be affected by clause 4. Central region and the Falkirk district will be affected. The state of the economy in Falkirk is a great deal more parlous than the relatively buoyant situation that prevails in Orkney and Shetland.

The Minister kindly circulated the consultative document just in time for our previous debate, which was so rudely interrupted. The document covers most of the points that were raised in Committee. It provides a useful outline for discussion. The provisions for derating are clearly stated and the compensation for loss of rate income is covered in a manner that I believe will be intelligible to those who wish to take the time to read it.

However, we must recognise that the derating of plant and machinery will cause considerable headaches in the local authorities concerned. The Minister gives options for local authorities and the CBI. As regards the 11·3 per cent. drop for Falkirk district, the 57 per cent. drop for Shetland and the 141 per cent. drop for Orkney, I hasten to add that in some respects these figures mask a slightly different reality. None of the three authorities concerned—the islands authority, Falkirk district and Central region—will be very happy with any of the options open to them. Tapering arrangements, similar to past arrangements where there have been major readjustments, would depend on the length of taper—the length of time that the transitional arrangements take to be carried through.

The option of rerating would create considerable problems for existing ratepayers and is, perhaps, the option that has been least well documented as regards its impact. I know that in Central region, on a simple basis of comparison between one side of the Forth and the other, it was suggested that there would be difficulties for people who are not at present affected. Rerating might well create difficulties of a kind that the present anomaly already creates. I am not too happy about that.

Raising funds by means of a taper, perhaps by redistribution within the whole of Scotland, would not commend itself too much to the other authorities and ratepayers who will be affected. It would in some respects disadvantage areas that already have problems and that would not take kindly to rate increases.

The Minister has not raised an increase in rate support grant as an option. I should have thought that that would be considered somewhere along the line. There should have been at least a mention of the possibility of an increase in rate support grant to meet this anomaly. The Labour Party's position has always been clear. We are not opposed to correcting the anomaly. We recognise that some industrial enterprises are at a disadvantage. However, if there is no increase in rate support grant, someone else will have to pay. The Government are apparently anxious to help the firms involved and I freely concede that in many instances the total area of operation of those firms is not great.

Indeed, the Minister has been heavily lobbied in the past by the organisations concerned and there has been a campaign to have the anomaly removed.

The Minister should look again at the last, missing, option from his paper. The paper goes a long way towards covering most of the points raised in Committee, but the last option, of increases in the rate support grant, has not been considered. It would go some way towards allaying the fears of Scottish local authorities and at the same satisfy the firms concerned. Until the Minister is prepared to consider that option, I would not wish to prejudge the outcome of the consultative processes. We are not happy about the gap. The appropriate step would be to vote against any order that arises. Therefore, we shall not press the amendment to a vote.

We are grateful to the Minister for having produced the document. If the amendment had not been tabled the Minister might not have been so quick to publish it. However, I might be doing him an injustice. I know that this is the fourth or fifth time that we have had an opportunity to discuss the matter. If the issue is of such great concern to the right hon. Member for Orkney and Shetland he could have tabled amendments accordingly. We shall not press our amendment to a Division, but we hope that the Minister will not lose sight of the point that if the anomaly is to be corrected, the Government must consider the last option—which they have chosen to ignore so far—of compensating local authorities that suffer a reduction in rate income by an increase in rate support grant, that is not made at the expense of any other local authority in Scotland. Until the Minister is prepared to consider and accept that, we shall not be prepared to support the correction of the anomaly as outlined in the paper.

Many of us realised that my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill) was moving to the right, but it caused great alarm when he moved an amendment calling on us to leave out clause 4. However, the penny has now dropped and we realise that he is seeking not to water down the basic principles of Socialism, but to avoid giving any additional power to the Secretary of State. Clause 4 gives the Secretary of State further powers to place orders before the House concerning the definition of "lands and heritages" in respect of fixed machinery for rating purposes in Scotland.

Far be it from me to defend any aspect of the rating system. It is a fairly ludicrous way of raising revenue. However, the rating system is the only independent source of revenue for local authorities in Scotland. Therefore, all industries, individuals and businesses should be liable to contribute towards that revenue. I speak on behalf of an area that is largely concerned with agriculture. The derating of agriculture puts a considerable additional burden on other ratepayers in the area. It stands to reason that the derating of one industry throws an additional burden on other ratepayers in the area.

If the clause is accepted, any further exemption would presumably impose further burdens on other ratepayers. We know that the oil industry is very rich. A couple of weeks ago we received the report of BNOC, which stated that the operating profit in 1981 was £465·2 million. Much of that went to the Government in the form of petroleum revenue tax and so on, but it is surely only fair that local authorities that have to deal with some of the burdens imposed should receive some share of that revenue. Offshore installations are already exempted. I think that Fife tried to collect rates for offshore installations, but discovered that for some legal reason or other they were exempt.

We are given to understand that the Secretary of State for Scotland intends to extend exemption from rating to fixed equipment and pipework outside buildings. What sort of precedent are we setting? We recognise that the Government want to reduce the level of rates charged on BP at Grangemouth for external plant and machinery. However, external plant and machinery are not the exclusive preserve of the oil industry. All hon. Members can think of industries that have external plant and machinery. I think immediately of mines, quarries and breweries, where there is a great deal of external plant and machinery. How will the orders that the Secretary of State proposes to lay in pursuance of clause 4 be drafted? Will there be a whole series of exemptions for umpteen factories all over the place? What impact will that have on the rating resources of local authorities that have many factories or businesses within their boundaries with significant amounts of external plant and machinery? If the Secretary of State does not intend to increase rate support grant for areas affected in that way, I doubt whether we should accept the clause or any of the consequential orders.

7.45 pm

I shall deal first with the points raised on new clause 8. As the hon. Member for Glasgow, Garscadden (Mr. Dewar) said, the background to the partial revaluation proposals is the Government's wish to reform domestic rates. It would not be sensible to go ahead with the revaluation of domestic rates if the system is likely to be reformed in the near future. However, I entirely accept his general point about the advantages and desirability of regular revaluations. I agree with the tribute that he paid to the work done in Scotland.

I should like to pick up a point made by the hon. Member for Dundee, East (Mr. Wilson) about what the Conservative Party said before the last election. It was before the 1974 election that the Conservative Party had a clear commitment to abolish the domestic rating system in the following Parliament. As the hon. Gentleman will recall, the Conservative Party did not win that election. Before the last election, we made it clear that reform of domestic rates had to take second place to the need to improve incentives and to reduce direct taxation—[Interruption.]—during the period of a Parliament.

Will my hon. Friend give an assurance that his remarks do not in any way diminish the intention of the Conservative Party and the Government to find a way of reforming rates to make them more equitable?

I am happy to give my hon. Friend that assurance. I sought to make clear to the hon. Member for Dundee, East what the Conservative Party said before the last election and what it said before the 1974 election.

Technically, new clause 8 would create a nonsensical situation, because a partial revaluation in 1983 has been prescribed in the Valuation (Scotland) Order 1982. If the provision were approved, my right hon. Friend the Secretary of State could not revoke the present order or deal with matters consequential to it. Obviously, that would be an unsatisfactory state of affairs. It seems to have been suggested that new clause 8 will not be pressed to a Division and that the purpose of moving it was to discover the position on several technical matters and the position on timing for the partial revaluation.

The question asked by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and me was about the timetable for the changes. in view of the interesting discourse between the Minister and the chairman of his party, what is the Government's programme for making those changes and how long will the frozen revaluation system last?

The hon. Member for Dundee, East is referring to the decisions on the alternatives to the domestic rating system. The position on that is clear. We issued a Green Paper setting out the facts, figures and options and the arguments for and against. A period of consultation has just been completed and we are now considering the many responses to the Green Paper. Obviously, the Government wish to reach conclusions as soon as they reasonably can.

It would be helpful to the House, although we know that the Minister cannot predict what the Government will say, if he could tell us whether, in all the representations that have been received about the Green Paper, any new suggestions or ideas have been submitted that were not included in the evidence to Layfield.

I have not recently read all the evidence to the Layfield committee, but I can tell the hon. Member for South Ayrshire (Mr. Foulkes) that a wide variety of proposals were put forward by those who responded to the Green Paper.

The hon. Member for Garscadden asked me where we were on some technical points in relation to partial revaluation. He asked me about the region or district basis and the multiplier on domestic values or the divisor on non-domestic values as the appropriate method of adjusting net annual values to preserve the balance between domestic and non-domestic values. My right hon. Friend and I recently consulted the convention on that matter. The convention asked the Government to reconsider the decision to hold a partial revaluation and postpone it to a later date, when a complete revaluation should be held. I cannot answer the hon. Gentleman's question on the details. They were put to the convention.

That information is extremely interesting. According to the Minister, CoSLA asked that the partial revaluation should be abandoned in favour of postponement. Is the Minister considering that option? If he is not, I do not see why the fact that that point of view was raised should have delayed consideration of the practical matters that I raised with him.

It has not delayed consideration of the practical matters because I put the paper to the statutory meeting of the convention on 23 April. There seem to be strong arguments for the divisor as being less disruptive than the multiplier for domestic values.

Amendment No. 10 was tabled by the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill). May I say to the right hon. Member for Orkney and Shetland (Mr. Grimond) that there is a clear anomaly in the rating of plant and machinery, whereby external plant in Scotland carries a heavy rate burden that is not carried by similar indoor plant in Scotland or outdoor plant in England. It is widely accepted that that anomaly is serious. The right hon. Gentleman rightly talked about the position in Orkney and Shetland, but the point also applies to Moss Morran. As the hon. Member for Berwick and East Lothian (Mr. Home Robertson) said, it does not apply solely to the petrochemical industry. The hon. Member for Dunbartonshire, East (Mr. Hogg) will confirm that there is a firm in his constituency whose problems he drew to the attention of the Committee during discussions on local government legislation last year. In fairness to industry, there is a clear anomaly that could discourage investment in Scotland as against investment in England. We must try to remove that anomaly. This enabling clause would give the Secretary of State the right to bring forward an order to do that.

We are not only discussing an enabling order. As soon as an order comes forward, the House can discuss the details. We are now consulting the convention, the CBI and the assessors about the complex questions of the definition of plant to be derated. However, I can tell the hon. Member for Berwick and East Lothian that a draft definition has been put forward in the consultative document by the Scottish Assessors Association to meet the anomaly, which is purely historic.

The special position of Orkney and Shetland is recognised in the consultative document and is dealt with in paragraph 5.7. Certainly the Government recognise the position in that area and we are anxious to achieve a generally acceptable solution to the problem. However, the problem is not unique to Orkney and Shetland. That area would have the highest value of such plant and machinery of any local authority in Scotland, but the point applies to Moss Morran and many other places. It also applies to potential investment that might take place anywhere in Scotland.

The hon. Member for Clackmannan and East Stirlingshire suggested that any loss of rate income suffered by a local authority should be made good by an increase in the rate support grant. The loss of rating resources from derating plant and machinery cannot be considered in isolation. We must consider many factors, to some of which he referred in his constructive remarks.

The first point is that the rating resources available to authorities are already taken into consideration in fixing the level of rate support grant annually. The calculation includes the normal annual growth of rateable value due to new developments, which is the same as the prospective loss of rateable value from derating external plant. Secondly, derating of external plant may logically result in some rerating of internal plant, much of which is at present exempt from valuation. The hon. Gentleman made that point and we are anxious to receive the views of those concerned.

Thirdly, by the use of industrial derating the rate burden on Scottish industry is kept in balance with that of industry in England and Wales. If the rate burden on Scottish industry were to rise or fall significantly relative to England and Wales, the Secretary of State must take that into consideration when fixing the level of derating. It is possible that the derating of external plant and machinery would not result in a net loss of rated income but in a redistribution of the same rate burden in the industrial sector.

The Minister said that there may not be a reduction in rate income. Does he know what the reaction of the Scottish CBI to that would be, because its support has always been conditional on the fact that some of its members would receive a reduction while others would be left untouched? That would add a dimension of which I am sure that it was not aware.

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The matter is clear in the consultation document. We have not yet received the CBI's response to that document. The CBI is one of the main bodies that we are consulting. I cannot anticipate what it will say.

It is likely that a few local authorities in areas with much plant and machinery may not qualify for the resources element of the rate support grant. They may suffer a significant drop in rate income from derating external plant. For that reason we shall discuss possible transitional arrangements with the convention to ensure that no authority suffers unduly from sudden change.

We have circulated the consultation document to which the hon. Member for Clackmannan and East Stirlingshire referred. The matter is complex and has been considered a number of times. We now await the reactions of the convention and the CBI to the complex issues before we take a further step by introducing a specific order to deal with the important problem.

Question put and negatived.