First Standing Committee on Delegated Legislation
Tuesday 16 March 1999
[Mrs. Marion Roe in the Chair]
Draft Railways (Rateable Values) (Amendment) Order 1999
4.30 pm
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Mr. Alan Meale): I beg to move,
That the Committee has considered the draft Railways (Rateable Values) (Amendment) Order 1999.
The order is concerned with the rateable value of the British Railways Board in England and Wales for the coming financial year. Most rateable values are assessed independently by the Valuation Office and are based on the market rent of the property. That is known as conventional assessment, and is usually done by comparing actual rents agreed on similar types of property so as to form a judgment on the market level.
The British Railways Board is one of a small group of ratepayers whose rateable values are not assessed by the valuation officer, but instead are prescribed by the Secretary of State. We prescribe these rateable values because conventional valuation has been far too difficult.
The board's rateable value was prescribed for 1 April 1995—which was the start of the 1995 rating list—at about £11 million. That was done under the Railways (Rateable Value) Order 1994. However, like other large businesses, the board occupies property that can change, and, in line with other ratepayers in conventional assessment, its rateable value should change to reflect that. The 1994 order, therefore, contains a mechanism that recalculates the rateable value of the board each year to account for changes in the property that it occupies.
The property that the board occupies has indeed changed. Since 1995, it has sold many of its assets, including its rail freight and maintenance operations. As a result, the recalculation mechanism in the 1994 order has gradually reduced the rateable value from £11 million in 1995 to about £7.5 million in the current financial year.
Unfortunately, the reductions in the rateable value made by the recalculation mechanism have not kept pace with changes to the British Railways Board's property, thereby leaving the rateable value too high. The Valuation Office has estimated that, as a result, the board has overpaid in excess of £3 million in rates since 1995, and that its rateable value should now be about £6.5 million.
The order will reduce the rateable value of the British Railways Board for the coming financial year to about £100,000. That reduction will correct its rateable value, and will compensate the board for the rates that it has overpaid since 1995.
The rateable value of Railtrack, which is in rateable occupation of most of the railway network, is not affected and remains set at its current level of about £216 million.
I apologise for the fact that the 1994 order has not worked as we had hoped, and that we have had to return to the Committee with such a technical order. However, I am sure that the Committee will agree with me that it is important to make this change to ensure that the board is not penalised for the 1994 order's failings.
4.33 pm
Mr. Bernard Jenkin (North Essex): I should be grateful if the Minister would answer a few brief questions. Is there a formula for evaluating the rateable value of Railtrack properties, which presumably comprises mostly stations and tracks? Will he explain how the rateable value of a shop within a station is valued for rating purposes compared with a shop outside a station? It would be unfair on a trader in a high street if a trader in the station had an unfair trading advantage because of a much lower rateable value.
Will the Minister also explain how car parking is dealt with in the order? Car parking is a considerable part of Railtrack's property at stations, and it is part of the Government's integrated transport policy. The Government presumably want more people to get to the station by car so that they use the train rather than their cars. There should be every incentive for Railtrack to improve car parking facilities at stations.
How has the increase in the value of Railtrack's properties been affected by privatisation? Previously, Railtrack's tracks were loss-making operations and rather difficult to value on a continuing basis. Will the Minister explain how that is dealt with now that they are profitable operations?
Is it the Government's intention to continue evaluating Railtrack's property on this basis for rateable value purposes? In the Sixth Standing Committee on Delegated Legislation in 1998, the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), speaking on the equivalent Scottish order, said:
``I can confirm that the Government intend to phase out this system. Under the previous Government, the Scottish Office—in which the hon. Member for North Essex had a role—decided to phase out this form of valuation and to replace it with a conventional system''.—[Official Report, Sixth Standing Committee on Delegated Legislation, 19th March 1998; c. 5.]
Does that mean that we shall see an end to such orders in the future? Perhaps we can look forward to a more modern—I know the Labour party likes that term—system of evaluating rateable value for the railway system.
4.36 pm
Mr. Meale: I hope that the hon. Gentleman will accept that we all strive to modernise management so as to deliver the service that is expected. On the calculations and how the overpayment has been estimated, as I explained, the board has disposed of a lot of property since 1995. By the financial year 1996-97, it had disposed of about 44 separate businesses, including several track maintenance operations on which it has continued to pay rates. A further 54 were disposed of by 1997-98.
The recalculation mechanism reduced the rateable value but not by enough. We estimate that about £1.5 million was overpaid in 1996-97, about £1 million in 1997-98 and a further £600,000 in the current financial year. That adds up to an overpayment in excess of £3 million.
The rating multiplier for the next year is 48.9 pence in the pound, so to compensate the board for the more than £3 million in overpaid rates, it is necessary to reduce its rateable value by more than £6 million. That is why the order will reduce the rateable value from £6.5 million to £100,000.
Those valuations were prepared by the Valuation Office and have been agreed by the British Railways Board.
Mr. Jenkin: A great many businesses would appreciate the opportunity, like the British Railways Board, to agree their rateable value with the Valuation Office, but even when they go through the appeal process they are usually overruled. What formula is used for the evaluation of such properties, or is it a conventional evaluation of the residual British Railways Board properties? In which case, why cannot we replace this system of evaluation with the ordinary evaluation procedure, so that the British Railways Board would have to negotiate and appeal its valuations along with everyone else?
Mr. Meale: I am reliably informed that the estimates for the valuations have been done by the Valuation Office and are based on ordinary rental values.
The hon. Member for North Essex (Mr. Jenkin) referred to shops on stations. They are separately assessed on local lists. The occupier pays rates in the usual way.
The hon. Gentleman also asked about Railtrack and about who now pays rates on the property that is sold. Some of the properties have been sold privately and now appear on local rating lists, so rates are paid in the usual way. The occupiers of the property, or the owners if they are empty, are liable to pay those rates. The rest of the properties have passed into the rateable occupation of Railtrack, which, like the board, appears on the central rating lists held by my Department and the Welsh Office.
I shall explain why we have not increased Railtrack's rateable value to reflect the increase in property. Since 1995, some of the board's property has quite rightly passed into the rateable occupation of Railtrack. However, Railtrack has also disposed of a number of properties since 1995, and overall our estimate is that the property from the board has been matched by Railtrack's disposals. Therefore, its rateable assets have remained broadly unchanged since 1995. We have kept its rateable value at the same level.
It may be helpful to the Committee to know that this is not the first time that the Government have had to amend rateable values in this way. In 1996, a Standing Committee considered the British Gas (Rateable Values) (Amendment) Order. The 1996 order reduced the rateable value of British Gas by £100 million with effect from 1 April 1997. That amendment was to reflect property that British Gas had disposed of between 1995 and 1997, and property that it expected to dispose of between then and 2000.
This order is similar but much smaller. Like the British Gas order, it deals with a ratepayer with a prescribed assessment who has disposed of property and should no longer pay rates on it. The main difference is the size of the reduction. In 1996, the reduction of British Gas was about £100 million in rateable value, whereas the reduction for the British Railways Board is only £6 million.
Mr. Norman Baker (Lewes): I listened with some interest to the hon. Member for North Essex, who raised a number of valid points, which I do not think have been answered in their entirety. I shall repeat them and add to them, and see whether we can do rather better. One of the matters raised is relevant to my constituency. The Minister did not answer the question about shops, and nor did he answer the question about car parking, which is also relevant.
This is a rather odd situation, because the matter is being dealt with by giving the British Railways Board preferential treatment. I accept that it is still in the public sector, but is it not more sensible for this rating arrangement to be dealt with on a more conventional basis, as would be the case with other bodies and organisations that want to have their rates change?
I think that I sat on the Committee considering the Scottish order. Will this system be phased out? If it is not to be phased out, the implication is that we shall be here again next time the British Railways Board has sold its assets. After all, it only exists these days to dispose of assets—that is its function. I know that the Deputy Prime Minister wants the board to be built up into the shadow rail authority. Will the preferential powers that are applied to the British Railways Board be inherited by the strategic rail authority when it is created? There may be an accumulation rather than a disposal of property.
These important questions should be sorted out, because they concern not only the relatively minor point about current rateable values, but the implications for the Government's transport policy and how they are dealing with organisations in the transport sector.
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