VALUATION FOR RATING BILL

HC Deb 21 May 1953 vol 515 cc2273-389

Order for Second Reading read.

Mr. Speaker

Mr. Marples.

Mr. Aneurin Bevan (Ebbw Vale)

On a point of order, Mr. Speaker. I want to raise with you a matter which seems to me of very great substance. I understand that the Minister is about to move the Second Reading of this Bill. I understand also that the Minister, through the Inland Revenue Office, has already been spending large sums of public money in anticipation of legislation. The valuation under the previous Measure, which is proposed to be amended today, was stopped, and for that the Minister made an Order, which he was perfectly entitled to do. It might also be said that he was entitled to take certain administrative action in order to acquire certain information.

I understand, however, that for almost nine months to a year officers who were appointed for this purpose—that is to say, for the purpose of valuation, and valuation only—have been making lists in all parts of the country on the basis of the amended and intended legislation. It might be desirable for Ministers to have power to do this because if they could chance their arm first and find out how legislation looked in practice before the House had passed it, then indeed legislation would be much easier. In this case the Minister has actually been spending money on a considerable scale, and I should like to know from the Minister at once whether he is able to inform the House of the extent to which he has done it and for how long it has been going on.

Mr. Speaker

I do not think there is a point of order here for me. The object of this Bill is: to amend the law for the ascertainment of the gross value for the purposes of new valuation lists of dwelling-houses. … As to how the Department has spent its money in conducting investigations, that is a matter over which Parliament has absolute control, not through this Bill but through the ordinary machinery of Supply, the Public Accounts Committee, and so on. It does not prevent us from going on with the Bill.

Mr. Bevan

But if a Minister has in the past incurred expenditure for which he has not been authorised, he usually asks the forgiveness of Parliament for doing so and Parliament passes a Bill exempting him and indemnifying him against any action. Here, however, he has apparently done this not inadvertently but deliberately. Are not we entitled to know, before we proceed to consider this legislation, to what extent the Minister has been spending the taxpayers' money without the authority of Parliament?

The Minister of Housing and Local Government (Mr. Harold Macmillan)

I waited until I had heard your Ruling on the point of order, Mr. Speaker, and as you have ruled that it is not a point of order, I feel called upon only as a matter of courtesy to reply to the question, of which the right hon. Gentleman gave me no notice.

Mr. Bevan

Why should I?

Mr. Macmillan

Because it is ordinary courtesy between Members of the House that one hon. Member should be given notice that another intends to raise a certain matter. However, I am not in the least surprised. In the course of the debate I shall certainly be willing and ready to deal with the point which the right hon. Gentleman has raised. If it were not impertinent for me to do so, I should say that this clearly cannot be a point of order, whatever else it may be. I shall deal with the matter in the course of my speech. At this point, perhaps I may be allowed to say that to make certain experimental tests might improve legislation in the future rather than make it worse.

Mr. Bevan

That makes the matter even more serious. A serious constitutional issue is involved. Do we now understand that Ministers are entitled to recruit officials, on the basis of contemplated legislation, to try out the principles of that legislation and to see how it works in practice before Parliament has actually approved of the legislation? If that be the case, it is a new constitutional situation. It would make legislation much easier if we could start by seeing how it works and then asking Parliament to pass it. Do we understand that to be the situation?

Mr. Macmillan

It would not only be much easier but it might make it much better.

Mr. Speaker

Order. This Bill alters the definition and the law for ascertaining the gross value for new valuation lists. In itself it does not provide the authorisation for any expenditure of money; it merely says that instead of premises being valued in one way they are to be valued in another. The control over the money that is spent is quite a different matter and it does not arise on this Bill.

It is for the House to say whether or not they agree to take the estimated 1939 rent as the basis of value in the future. That is the question which is posed by the Order of the Day which has now been read. The question whether the Minister has spent money—wrongfully or otherwise—is quite a separate issue, which must be followed up through the ordinary financial control of the House.

4.13 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Ernest Marples)

I beg to move, "That the Bill be now read a Second time."

My right hon. Friend has asked me to move the Second Reading of this Bill because it is quite likely that hon. Members may wish to speak not only on the proposals in the Bill but on the very much wider issues of rating generally, and on this particular occasion my right hon. Friend thinks it would be more convenient, and possibly more courteous to the House, if he answered the points raised during this debate. I shall accordingly confine myself to explaining the proposals of the Bill and shall not touch on such things as derating and the wider issues of rating generally.

The method laid down by the right hon. Member for Ebbw Vale (Mr. Bevan) in the Local Government Act, 1948, for valuing dwelling houses for rating purposes has proved quite unsatisfactory. The sole purpose of this Bill is to provide a new basis for valuing houses. On the 1948 Bill, I remember the right hon. Member for Ebbw Vale saying that rating was non-political, but technical and complicated. I quite agree, and if the House will bear with me I shall try to make my explanation simple and short, so as to increase the time available to hon. Members on both back benches and give them an opportunity to contribute to the debate.

First, I shall show that the main structure of the valuation provisions of the 1948 Act remains unchanged. This Measure proposes to try to make one facet of that Act work. Secondly, I shall seek to explain the methods laid down by the right hon. Gentleman in the 1948 Act, and then show why they have failed to work. Finally, I shall examine possible remedies and explain why the Government have decided on the method laid down in this Bill.

The Local Government Act, 1948, had four main elements in its rating provisions. First, it transferred responsibility for rating valuation from the local authority to the central Government. That was a cardinal principle of that Act. The main reason was to get uniformity in valuation. Uniformity means equity, because the equalisation grant, of which we have heard so much in this House from time to time, is mainly, though not wholly, distributed on the basis of valuation. This Bill does not change that principle, but there are many people including many of my hon. Friends—who think that the local authorities and not a central authority should value properties for rating purposes. There are powerful arguments to be adduced both for and against this point of view, but I shall not deal with them.

Secondly, the 1948 Act abolished the rating of electricity undertakings and railways, and substituted lump sum payments in lieu of rates. This Bill does not alter that principle. In fact, in the opinion of the Government, it is necessary to apply a similar principle to gas undertakings as soon as possible, and discussions are now proceeding between the gas boards, the local authorities and the Department.

The third main element of the 1948 Act was the valuation of all properties other than dwelling-houses. That Act left the valuation of this type of property to be carried out under the provisions of the 1925 Act. Under that Act such property is valued at the current value at the time of valuation. This Bill does not change that principle.

The fourth main element in the 1948 Act was the provision of a new basis for the valuation of dwelling-houses. The 1948 Act had two objectives. First, it provided that houses should be valued at the 1939 levels instead of at current values, as in the case of all other properties. We do not depart from that objective. The second point regarding the valuation of dwelling-houses was that comparable houses should have the same rating valuation. We do not propose to depart from that objective. Our object is to get equity and fairness as between comparable houses.

In practice, the two formulae laid down by the 1948 Act did not achieve that fairness and equity, and I shall seek to show why. We propose to introduce another method to achieve the object of valuing dwelling-houses in a uniform and fair manner and, at the same time, at 1939 levels. The method adopted in the 1948 Act was to divide houses into two main groups. First, there were the older houses—numbering about 7½ million— built before 1919. This group also included private flats, whenever built, and the larger modern houses. The second group consisted of the newer houses— numbering some 4½ million—built after 1918. The dividing line in the 1948 Act between those two main groups was the year 1918. Throughout my speech, for the purposes of convenience, I should like to refer to the pre-1919 houses as the older houses and the post-1918 houses as the newer houses.

How was the valuation carried out? The older houses were to be valued by reference to the actual rents for comparable houses in the locality on 31st August, 1939. The newer houses, however, had a different basis; they had the hypothetical cost of construction in 1938. That had to be calculated. Five per cent. of the sum was to be added to 5 per cent. of the site value or, in some cases, of the site cost, and the total produced the value for rating. So we had two different systems: one, the hypothetical cost, and the other based upon the actual rents paid.

To find the hypothetical cost, a long and complicated form was used. I think that the hon. Member for Sowerby (Mr. Houghton) referred to it in a previous debate on another Bill; that is, the form which used the hypothetical cost of construction. To interpret that form would baffle most people.

Mr. Douglas Houghton (Sowerby)

I think the hon. Member is mistaken. It was my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) who claimed that this monstrosity had been invented by the Inland Revenue Valuation Office. Actually, it was the Ministry of Health.

Mr. Marples

The right hon. Member for Ebbw Vale (Mr. Bevan) signed the form about which he subsequently complained—a not unusual occurrence. In 1948, the right hon. Member for Ebbw Vale, who, unfortunately, is not at the moment in his place, in that modest manner which we all associate with him, claimed to have killed the hypothetical tenant; but, again in characteristic, if not convenient, fashion, the right hon. Gentleman forgot to say that he had given birth to a hypothetical builder.

What were the results of these two methods? Whatever may be said in theory for the two methods—and a great deal was said in theory in 1948—in practice they failed to achieve the result that we all wanted: that was, uniformity as between comparable houses. Over 30,000 representative samples were taken from 73 towns or districts all over the country, and during the last week I have looked at a great number of them. They produced differing assessments for closely comparable houses. The gap was wide in some areas and narrow in others, but always there was a gap. Sometimes the new houses were higher than the old, and sometimes the old were higher than the new. In fact, there was a difference between house and house in each area, and a difference also between area and area.

Let me give three examples to prove my general thesis. My first example is in London, and then I will come to the provinces. In London, there were two houses with comparable accommodation in the same locality. Both had an existing rateable value of £22. Under the 1948 Act the newer house would remain at £22, while the older house would be increased by £13 to a total of £35, an increase of almost 60 per cent. on a house which did not really have the same amenities as the other house.

Mr. F. J. Bellenger (Bassetlaw)

How was it originally rated? Presumably it was on the quinquennial valuation—on the rent?

Mr. Marples

Yes. But on the 1948 Act basis, introduced by the right hon. Member for Ebbw Vale, instead of both houses being level at £22, the old, and, presumably, the inferior, house jumped to £35.

Mr. 3. A. Sparks (Acton)

So it will in this new formula.

Mr. Marples

No, I do not think so.

Mr. John Edwards (Brighouse and Spenborough)

The hon. Gentleman has quoted two houses. Under the old list each had the same rateable value. One remained at that level and one went to £35. The important things is to know precisely the character of the two houses, the degree of amenity, the size and all that, if we are to form any judgment. Can the hon. Gentleman give details?

Mr. Marples

I could, but in fact the two houses were as nearly comparable as can be got in such a large habitation as a house. It is not always easy to say that one house is precisely the same as another, but these two samples were strictly comparable.

I turn now to the provinces, and I thought that for this purpose I would take Sunderland, which seems to be representative at the moment of the country as a whole. It has great political sagacity and I think it represents the political feeling of the country as a whole.

Mr. M. Turner-Samuels (Gloucester)

One section of Sunderland only.

Mr. Marples

In Sunderland there were two comparable houses in the same locality. The new house retained its existing rateable value, but the old house, under the rent basis, rose from £16 to £25. Take another case in the provinces —Plymouth. Here we have two pre-1919 houses, one of them having been destroyed during the recent war and rebuilt on similar lines but with modern amenities, and the other not being damaged. Under the cost of construction formula of the 1948 Act, the new modern house falls from £21 to £17 in its rateable value. The old house, which does not have the modern amenities, increases from £21 to £36, because it is valued by actual rents in the locality in 1939.

Mr. F. Blackburn (Stalybridge and Hyde)

Does that mean that too high a rent was paid in 1918?

Mr. Marples

No. It merely means that under the new method of valuing which was introduced, the new house would go down and the old house would be increased. The basis of valuation which the right hon. Gentleman introduced in 1948 was his own invention. I am merely pointing out what happened when that principle was applied to houses throughout the country.

Mr. Ernest Popplewell (Newcastle-upon-Tyne, West)

Will the Parliamentary Secretary say whether the rents governing that type of house were controlled rents or were not subject to rent control?

Mr. Marples

If the hon. Member reads the 1948 Act, he will see that it was actual rents paid in the locality. Therefore, it is actual rents which pass from the tenant to the landlord, irrespective of any other qualifying factors.

Several Hon. Members

rose—

Mr. Speaker

Order. I must call the attention of hon. Members to the fact that this is a Second Reading debate on a difficult subject, and that too much interruption is rather against the interests of the House.

Mr. Popplewell

This is important and I should like to ask this question. Are we to assume that the rents of the houses in question, which the hon. Gentleman quotes as comparable, are rents that were not subject to rent control? If we are to follow his argument, it is necessary to know that. I can understand inequalities arising, but let us see where we are.

Mr. Marples

What happens is that the rents paid in a locality are aggregated. Under the 1948 Act it is the actual rent, whether the house is let to one's grandmother at 1s. a week or on scarcity value at £3 a week, or is or is not rent controlled. I am not justifying the basis. All I am showing is what happened when that basis was applied to the rating valuation of houses. I am merely trying to give an exposition of the effects of the formula laid down in the 1948 Act.

Take the case of the two houses in Plymouth, both pre-1919 houses, where the one which was rebuilt falls in value from £21 to £17 under the 1948 Act, and the old house, which, presumably, will not be structually as sound or have amenities as agreeable, increases from £21 to £36. The new and the old houses started with the same existing rateable value, but under the 1948 Act the assessment of the new house is reduced by 20 per cent. and that of the old house is increased by 76 per cent. This simply will not do. People always measure fairness in rating assessments by reference to the assessments of their neighbours, and in practice the 1948 Act would produce a burning sense of injustice between neighbours.

Having quoted examples to show that the 1948 Act failed, I should like to explain why it failed. The examples that I have quoted are representative and not specially selected. They show that the 1948 method failed in practice. It failed simply because in practice we found that the actual 1939 rents varied widely between comparable houses, and between comparable districts also. As under the 1948 Act these rents strictly and rigidly —I emphasise "strictly and rigidly"— governed the assessments of the older houses, it was quite obvious that rateable value would also fluctuate. The reason for that was that rents in 1939 fell into two classes—controlled rents and free rents—and there was little logic in either of them.

Most of the smaller houses—and by smaller houses I mean those of £20 and less rateable value in the provinces and £35 and less in London—had been continuously controlled since 1918 and they were still running at the 1914 rent plus 40 per cent. When the house fell vacant the rent came out of control and generally went up quite a lot. Therefore, even among smaller houses that had as a group been subjected continuously to rent control there were wide variations in rent, and those variations were quite fortuitous. They resulted simply from the accident of a house becoming vacant, and under the 1948 Act formula this unevenness in rent, although it does not reflect the true letting value of the house, at once reacts on the rateable value.

Let me give some illustrations of that. Take the case of 36 comparable houses in two different localities assuming that in one locality 10 houses were controlled at 10s. a week and 26 were free at, let us say, 15s.. and that in the other locality the figures were reversed, with 26 of the houses controlled at 10s. a week and 10 free at 15s. In the first case the rateable value would be £26 or a little more and in the other £23, yet all the houses were alike. That is the sort of thing we found when the 1948 Act was applied.

Meantime larger houses, of over £20 rateable value in the provinces and £35 in London, were subject to mass decontrol in the 'thirties. The general level tended in 1939 to be disproportionately higher than the general level of rents of the smaller houses. That was because the smaller houses, or most of the smaller houses, were still mainly, though not wholly, controlled. There was still disparity between the smaller and the larger houses. Again, under the 1948 Act formula inequity resulted.

Now we come to the new method which was adopted by the right hon. Gentleman, and that was the cost of construction basis. The hypothetical builder introduced by the right hon. Gentleman in 1948 did give reasonable uniformity within its own group, but basically the reason for inequity is that whereas the cost of construction basis produces a general uniformity of assessment within its own group, the rental basis produces within its own group widely different results, and if 4,500,000 reasonably uniform valuations are, as it were, superimposed on 7,500,000 which are not uniform the result can never be uniform, because of the varying assessments in the 7,500,000 on the rental basis.

Before I explain the Government's proposals to overcome this difficulty, I should like to deal with various remedies that have been suggested. As far as I can see, there are three main suggestions. I speak without having had the advantage of listening to hon. Members in this debate. But yesterday the first suggestion was made in "The Times." It asked, in effect, why not alter the percentage of the hypothetical cost of construction? That would give equity. That is what "The Times" said in effect. It would still leave untouched the 7,500,000 houses valued under the 1948 Act on the basis of actual rent without any regard for uniformity at all. So merely to add a percentage which is uniform to something which is not uniform does not in itself produce uniformity. We still do not get fairness over the whole field. We shall never get fairness by combining formulae which are completely unrelated to each other. Like oil and water, they do not mix.

The second suggestion is this: that as the cost method produces fairness, why not apply it to all houses be they old or be they new? The answer is that it is technically impossible so to do. The cost basis laid down in the 1948 Act rested on the building costs of the local authorities' own houses, and they have scarcely any records before 1919.

The third suggestion is that even if local authorities do not themselves have records of building costs, some records can be ascertained. But if we go back too far into history the whole cost basis must break down. It would produce fantastic results to start estimating what it would have cost in 1939 to build an old house originally built in, say, 1830. For example, what would one do with two rooms and perhaps a kitchen in a Victorian mansion let off as a separate hereditament? It would be quite impossible to arrive at equity in that way.

Having dealt with the three principal suggestions made, I come to the Government's proposals. I should like first to deal with the principle which underlies the Governments' proposals. The Government's proposals are based on the principle of getting equality of valuation for comparable houses. So there is nothing sinister in what the Government propose. All we are seeking to do is to get equality of valuation for comparable houses. We hope to get nearer uniformity by having one basis for all houses, and not, as in the 1948 Act, two separate bases for two main groups of houses. The basis chosen is the 1939 rental value for all dwellings, but with what I call fancy rents, whether high or low, disregarded. This should give fairness, in the opinion of the Government.

Let me illustrate the principle I have just mentioned. Suppose that in 1939 there was a group of houses which had a letting value of 12s. per week in a free market. Some of those houses might, for one reason or another, have been let at sympathetic rents of only a few shillings a week. That actually often happened in the case of a house let by a person to a relative. Under the 1948 Act these subnormal rents would be taken into account in finding the general rent level in the locality for the purpose of fixing the rateable value. I am sure that hon. Members on both sides of the House will agree that if we were to let a reasonably good modern house at 1s. or 2s. a week it would be totally unfair to include that in the valuation of rateable values in the locality.

Mr. Bellenger

Was that the case? Surely rating valuations were not done on sympathetic rents? It was done in London under the 1869 Act and the hypothetical tenant.

Mr. Marples

I am talking of what happened under the 1948 Act.

Mr. Sparks

Is the hon. Gentleman referring to what he called old houses, pre-1919, or to houses subsequent to 1919?

Mr. Marples

Pre-1919 houses on a rental basis. The actual rent payable, whatever the reason for the rent, was the basis in the 1948 Act. Suppose I were to let, as I well might, a house in Kensington to the hon. Gentleman at 1s. a week. That would be the actual rent payable, and that would be taken into account in assessing the rateable value in the locality. The right hon. Gentleman the Member for Ebbw Vale should know, because the 1948 Act was his Measure. The basis was the actual rents paid.

In another area where a similar group of houses also had a letting value of 12s. a week there might have been a number of higher rents at, say, 20s. a week where the houses had come out of control and had been re-let at, perhaps, a time of great scarcity in the particular area. Again, those would be taken into account under the 1948 Act. I ask the right hon. Member for Ebbw Vale, what would happen? We wish to be governed by neither abnormally high nor abnormally low rents.

The year 1939 was chosen because the market in houses was reasonably free. Even "The Times" in its leader agreed about that yesterday. The rents paid had some clear relationship to the house value obtained. The year 1939 is, then, our base year. It is the last available year when there was something like a free market. We have provided an escape clause so that if a house today is valued at less than the 1939 value we take the current value figure, that is, the lower one. There was not an escape clause in the 1948 Act. The reason we have included it is that values will change from time to time, and the old Victorian houses may come down in value because of the newer houses being built. It would be wrong to maintain such a house at the 1939 value in 1955 or 1960 if the current value was lower than that in 1939.

One question hon. Gentlemen will ask me is whether it is practicable to find the free market level as it existed in 1939? That is a question which it is right and proper to ask. All this was considered in 1937 during the discussions which led in 1938 to the appointment of the FitzGerald Committee. It was generally believed that the evidence of free market rents was inadequate. But in the last two years before the war thousands and thousands of new houses were built, many for letting. In the late 'thirties as well, the mass de-control of the larger houses began to pile up the evidence.

Further, at that time the local authorities were responsible for valuation for rating purposes, and they had only a narrow field which they could survey. That was the point made by the hon. Member for Leeds, West (Mr. Pannell) on the Second Reading of the Postponement of Valuation Bill, that in Kent it was possible to get nearer to a uniform valuation because of the spread over a wider area than a purely local authority area.

Now, under these proposals, instead of a local authority we have a central authority which can examine the evidence over a wider field than was possible in the case of the local authorities. We are satisfied that there is sufficient evidence to establish the rental value of all houses in 1939. So much for the main provisions in the Bill. They are in Clauses 1 and 2.

Mr. J. Edwards

When the hon. Gentleman talks of establishing rental values, is he thinking in terms of rental values regardless of the influence of rent control? That is an important point which I wish he would make clear.

Mr. Marples

If the hon. Gentleman will look at Clause 2 (2), he will see that it says: The said rent is that at which the hereditament in question might reasonably have been expected … to let from year to year if the tenant had undertaken to pay all usual tenant's rates and taxes and if the landlord had undertaken to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent. In practice, we propose to take the rents in an area, provided that the area is free from scarcity value. There must be a market where supply equals demand. The main point is that it must be a free market.

Mr. Turner-Samuels

Does that exclude houses which now come within the Rent Restriction Acts or not, because that is important?

Mr. Marples

It includes all houses, whether within rent restriction or not.

Mr. Bellenger

What is a free market if there is rent restriction?

Mr. Marples

The right hon. Gentleman should not fall into the error which "The Times" fell into of confusing free market rent with an uncontrolled rent. A free market rent is not necessarily an uncontrolled rent. Supposing that of a 1,000 houses 999 were controlled and one de-controlled, and suppose there were 300 people after the one which was decontrolled: that house would have a scarcity value. Is the right hon. Gentleman arguing that that would be a free market value when it is a scarcity value?

Mr. Bellenger

What is it, then?

Mr. Marples

It is a free market value when it is free from scarcity value. The right hon. Member for Ebbw Vale must get this right. May I use his words? The new method of assessment which will come into use in 1952 or 1953 "— these are his words and we are keeping to this principle— still adheres fundamentally to the conception that rent is the proper guide to gross value,"— those are the words of the right hon. Gentleman, not mine— but it is based on a rent free from scarcity value—i.e. the rent which would have been obtainable in conditions where supply equalled demand.

Mr. Bellenger

But it is not a free market.

Mr. Marples

The right hon. Gentleman must not confuse uncontrolled rent with free market rent. There are other factors which come into consideration— the number of houses available and the number of tenants after them. I have given one example which shows how an uncontrolled rent would not be a free market rent.

Mr. Turner-Samuels

rose—

Mr. Marples

No, I must go on. The hon. and learned Member will in fairness admit that I have given way a number of times on a complex and complicated subject. The last time I gave way frequently I was told by his own side of the House that I was weak.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

The hon. and learned Member is hoping to catch my eye. He is going the wrong way about it.

Mr. Marples

We are satisfied that there is sufficient evidence to establish the rental value of all houses in 1939; that is, a rent free from scarcity value.

We have taken the opportunity of correcting some anomalies and injustices. Clause 3, for example, helps people whose garage is outside the curtilage of their houses. Under the 1948 Act, such a garage would be rated on the basis of current value, like offices and shops, etc. Under Clause 3, if the garage is used as a private garage, it will be valued just like a house, that is, on 1939 values.

Clause 4 puts right another anomaly, this time in the case of a building which is partially a dwelling-house and partially a shop. Under the 1948 Act, if 51 per cent. of the building was a shop and 49 per cent. a dwelling-house, the whole building, including the house, would be valued at current values. Under Clause 4 of the Bill, the part used as a shop will be valued at current values, which is right and proper; but the part used as a dwelling-house will be treated like any other dwelling-house and valued at 1939 values.

Clause 5 is designed to benefit the agricultural worker. It re-enacts a concession which was contained in the 1948 Act and was first given to the agricultural industry in 1929. Houses occupied by agricultural workers are to be valued on the assumption that they can only be occupied by those workers and not by anyone else. The idea is to give them lower assessments. There is no alteration in principle from the corresponding provisions of the 1948 Act. The Clause is needed only in order to apply the concession to the new method under the Bill.

Clause 6 provides for adjustment of the rents which are used as evidence of rental value, for example, in cases where the landlord provides services such as cleaning of stairs, lifts and constant hot water. The 1948 Act made no allowance for the landlord's profit in providing those services.

I have confined myself to the proposals actually in the Bill. I have not dealt with derating or the wider issues of rating. I have no doubt that hon. Gentlemen will have something to say on a matter which is in order but which is outside the scope of the Bill. They will, I hope, forgive me, however, if I have dealt only with what is in the Bill.

I wish to make one general observation. My right hon. Friend welcomes any constructive criticisms on this technical, complex and non-political question. We hope that critics will not be destructive. The onus is on the critics to propose a system which will produce fairness between comparable houses—the Government's object is to obtain a solution which will give justice and equity. We have examined almost every method but we came to the conclusion that no method other than the one in this Bill provided justice and equality between houses. It is because the Bill should give that justice, fairness and equality that my right hon. Friend commends the Bill to the House.

Mr. S. S. Awbery (Bristol, Central)

The hon. Gentleman has not dealt with Clause 7. In the Explanatory and Financial Memorandum, it is stated, in relation to Clause 7: The Bill may also involve an increase in the Exchequer Equalisation Grants payable under Part I of the Act of 1948. Could the Parliamentary Secretary say a word about that Clause?

Mr. Marples

It is in common form, and whether there will be an increase cannot be seen until the revaluation has been completed.

4.49 p.m.

Mr. John Edwards

(Brighouse and Spenborough: I propose to follow the example of the Parliamentary Secretary, and confine myself entirely to the points which arise directly out of the Bill. I would say to the Minister that I hope he will not think the worse of me because I have not given him notice of the points I propose to make. I have done a considerable job of what I think is called exegesis on the speeches made at the time of the 1948 Act both in Committee and in the House. When I had done that I looked up the debate in May, 1925, when Mr. Neville Chamberlain, the then Minister of Health, introduced that very important Measure which in some regards had very beneficial results.

Mr. Chamberlain began his speech on that occasion by saying: The main purposes of this Bill are to simplify the methods of making and collecting rates and to promote uniformity in valuation."— [OFFICIAL REPORT, 13th May, 1925; Vol. 183, c. 1873.] Here we are, 28 years afterwards, saying exactly the same thing. I think that it should be recognised by the House that the Government's case rests negatively on the shortcomings of Part IV of the provisions of the 1948 Act as they had been found in practice. It rests positively on the merits of the proposal to return to what is very much the old legal position, except that the 1939 values are to be used instead of the current values, except in the case where the current values are lower.

We have, in fact, here a complete rehabilitation of the hypothetical tenant and the additional complication of the hypothetical house because we now have houses to be assessed, actual houses to be assessed, on the hypothesis that they were in 1939 as they are now in every regard. If it were felt that the Government had produced evidence to justify the shortcomings of Part IV of the old Act, it would be wrong for us automatically to jump to the conclusion that their proposals were right. I therefore want to begin by asking some questions about the evidence.

When my right hon. Friend and I were involved in the preliminary work of the 1948 Act we did not feel able to do a large part of the work in advance to find out what the position would be, and we freely admit that we put our proposals forward, having made such estimates as we could, but without anything that could really be regarded as a sample investigation. I freely admit that.

Now, the hon. Gentleman says that he has information of some 30,000 cases—I suppose he means 30,000 houses—in 73 areas which, I heard him say, is a representative sample. The first thing I want to say is this. If the Ministry of Local Government and Housing have conducted a really representative sample, and I take that to mean a statistically representative sample, it is not good enough for the hon. Gentleman to come along and give three examples. That will not do, especially when examples are put out in this way.

What we want to know, if this is a statistical representative sample, is what the range is, and we also want to know not only about houses classified as between old and new, but also about houses classified between smaller and larger. The first requirement, if we are to do justice to this Bill, is that we should be given a statistical summary of this representative sample of 30,000 houses. We know that the Department did this, and the hon. Gentleman assures us that he has gone over it all, but it is a simple matter for this to be put in a form which would satisfy a statistician, and to give to the House the information which it really needs if it is to form a judgment on the shortcomings of Part IV of the 1948 Act.

Quite frankly, the way in which the information has been given, if it springs from this vast sample, is really quite inadequate, and the hon. Gentleman ought to have done better by the House than to take three cases without any attempt to give us a general picture. If this is a real sample, it is the easiest thing in the world for the Department to produce a series of generalisations, and these generalisations, based on the samples, would help us enormously. I do not want to prejudge the issue, and all I would say is that nothing that the hon. Gentleman has said today would justify a single Member of this House accepting the statement that the 1948 Part IV provisions had failed.

They may have failed—that may be true. All I say is that the hon. Gentleman has given us no evidence that they have failed. He did give us these cases, but we really want to know what the effect of the 1948 Act provisions would have been. The old Latin tag cui bono arises here. We want to know who would have benefited and who would not have bene- fited under the 1948 provisions. Is it true that the broad effect of the 1948 Act would have been that the smaller houses would have benefited as compared with the larger houses?—I do not know. I should like to know.

Remember, when we are talking about valuation differentiations we are talking about how much burden should be placed on this or that person, and unless the Minister will give us all the story—I do not mean that we need every case but generalisations that can scientifically and properly be adduced from these 30,000 cases—we are in no position to pass judgment on the major point which is at issue at the moment.

The hon. Gentleman talked about the question of whether any way could have been found within the general formula of Part IV to preserve this method of valuation which, I think, he conceded does produce a high degree of uniformity for the dwelling houses that are covered by the new principle. "The Times" yesterday asked about that, as did my right hon. Friend the Member for Ebbw Vale (Mr. Bevan), in the debate which we had last year on the question of the postponement of the valuation. I am not altogether convinced that it would not have been possible by a combination of measures to make some changes in the Part IV formula and possibly by some modification of the definitions about the houses not covered by our new cost principle to have found a way of marrying these two principles.

After all, it was not just sheer cussed-ness and perverseness that led my right hon. Friend and myself to take the view that we would value some houses in one way and some in another. We wanted to do what we thought was the most practical thing, and we wanted to do what could be done on the information which we believed would be most readily ascer-tainable; and that is why we adopted different principles, and only for that reason. I am not convinced that it would not be possible to do something of that kind.

I turn from that to the question of the proposals that are made by the Government. I would say in passing that I think that it is a pity if we use the word "uniformity" as though it means equity. These are separate principles. It happens that we do know an enormous amount about the situation as it was in the years immediately prior to the beginning of the Second World War. We know the situation as it was in 1938-39 in very great detail. The hon. Gentleman referred to the Fitzgerald Report. May I read a little from the Report? It may be remembered that this was the Report of the Departmental Committee on Valuation for Rates, set up by a pre-war Conservative Government at the time they were running away from the third valuation. This Committee was asked to inquire into the allegation that a strict application of the existing law would cause undue hardships. This is what the Committee had to say in Section 19: … the determination of the gross value of a dwelling house was, before the war, a comparatively simple matter, since most dwelling houses were let at rents which were not only static but were reasonably related to the general amenities and accommodation of the houses. As against this there are at the present time four varieties of rent, namely, rents of (i) pre-war controlled houses, (ii) pre-war non-controlled houses, (iii) post-war privately-owned houses and (iv) post-war council houses and the differences between these various rents are not usually commensurate with the differences of size or amenity as between the various classes of houses. The Report goes on to say: The position has been further complicated by the fact that at one time nearly all the post-war privately-owned houses were in occupation of their owners and the number of houses actually let at rents was comparatively small, though it has been largely increased in many areas in the last few years. That is an unbiased account of the situation as it was. As I said when I spoke on this matter in 1947, there is no doubt that under-assessment was widespread. It varied greatly from one area to another and from one class of hereditament to another. Only recently I have been reading the Report of the Treasurers of County Borough Councils who are not receiving the Exchequer equalisation grant. In the case of temporary bungalows it shows a spread of rateable value of from £7 to £21. I am not one of those who say that every identical temporary bungalow in the country should be rated at exactly the same amount, but I know beyond doubt that to have a spread of from £7 to £21 rateable value is to indicate no real principle in application.

I said that we knew a good deal about the situation as it existed. There was published in 1944 a monograph, the work of Mr. and Mrs. Hicks and Mr. Leser under the title of "The Problem of Valuation for Rating." These three people were able to make an elaborate analysis of all the material that had been available to the Fitzgerald Committee. I want to take a little of the time of the House to tell hon. Members what was their main conclusion. If hon. Members ask why, it is because the right hon. Gentleman is virtually proposing to restore the law in respect of dwelling houses on the basis of 1939 values. These conclusions are about what the authors thought would have happened in 1938 if the law had been applied. They say: If we classify houses into small and large according as their 1938 gross value was less or greater than £40, we can set out the results we get in the following way. That is, for all practical purposes, the kind of thing now proposed in this Bill. Dealing first with small pre-war houses, they say these would be affected very variously: In a few cases their rate burden would be actually reduced; usually it would rise, but not considerably—10 per cent. is fairly normal. As regards large pre-war houses they say that these are houses which are going down in the world and that it is not surprising to find that they are overvalued relatively to others, and that they would usually gain from revaluation. In regard to small post-war houses I quote their actual words: This is the serious case. An increase of 30 per cent. in rate burden would be quite normal. It is only in a few relatively overvalued areas that it would be as low as 20 per cent. And there appear to be some (probably freak) cases where the rise would be much more than 30 per cent. In respect of large post-war houses they say: These would also experience a general rise, but it would be proportionately less than with the small post-war houses. This is their conclusion: This is what would have happened if a drastic revaluation had been carried through in 1938, and no concession had been made to any class of house. Although such a revaluation would have removed a number of anomalies—some of them scandalous anomalies—its general effects must surely be judged to be extremely unsatisfactory. It would have hit the small house more than the large house, the new house more than the old house, the owner-occupier more than the landlord; and it would have benefited the owner of commercial property at the expense of the owner of house property. Industrial property would in fact have enjoyed a second (this time unintentional) derating; and since the derating would have taken place amid a general reduction in nominal poundages, it is perhaps improbable that the pill would have been gilded by a block grant from the Treasury! I am well aware that the last sentence does not apply in this case because all non-dwellinghouse property will be valued on current values, but all the rest applies.

If I understand them aright, and if interpret aright the evidence that is there for everybody to see, the proposals of the Government will hit the small house more than the large house, the new house, more than the old house, the owner-occupier more than the landlord. Therefore, again one asks the question, who is to benefit? I hope that when the Minister replies, he will give us evidence on that point.

The hon. Gentleman has not told us what he thinks the result will be. We know that the officials of the right hon. Gentleman have been at work on this for a long time. Perhaps he will tell us how many cases they have examined, not in regard to the failures of the 1948 Act but as to the likely effects of this legislation which is before us. Will the right hon. Gentleman confirm or deny broadly the picture I have presented, not from my own estimate but from the estimate of competent people who went into this matter thoroughly in the early years of the war?

The right hon. Gentleman cannot say he does not know although he may say he does not care to say. There can be no doubt that he knows because his officials for months past have been conducting valuations on the principle of this Bill. Again, cannot we have the whole picture? Cannot we be told how many cases have been valued, what is the range of change? Cannot we have a breakdown between the small and the large, the pre-war and post-war? Then we would be in a position to judge; otherwise we are not in a proper position to do so. If I understood the hon. Gentleman aright, and if I may paraphrase his words, he was saying, "Your scheme will not work. Let us go back to the scheme which it was thought would not work in 1938 and let us see if we cannot make sense of the rental evidence which at the time was regarded as not making sense."

In respect of the Bill itself, what is the intention of the Government about the definition? I interrupted the hon. Gentleman to ask him about the phrase in Clause 2 (2)— The said rent is that at which the hereditament in question might reasonably have been expected on or about the thirtieth day of June, nineteen hundred and thirty-nine, to let from year to year … There is no mention here of the Rent Restriction Acts. Is it intended to disregard the results of rent control? Would it not be as well to make that clear in the Bill? Some of us remember the postwar difficulties, we remember the arguments that took place in professional valuation circles and in local government circles. Hon. Members who have been on assessment and rating committees know that sometimes the device of physical measurement is used to overcome the difficulties presented. I submit that we do not need to leave this point to litigation. Some of us remember the case of the Poplar Assessment Committee v. Roberts in 1922, when it was held that the gross values of houses subject to the Rent Restriction Acts were not limited to the maximum rents permitted by those Acts. But we ought not to leave this in the air because it is extremely important.

I was perplexed by what the hon. Gentleman had to say about the free market. As an economist I always find it difficult to apprehend what is meant by supply not equalling demand in a free market. In a free market, supply equals the demand at a price in any circumstances, but if there is no scarcity value to be imputed in making these calculations, what value is to be imputed? Are we to assume that houses are plentiful, or what are we assuming?

Quite frankly, I felt that what the Parliamentary Secretary said on this matter made the position more difficult than when the old ideas of the hypothetical tenant as we have known them through the years prevail. In any event, I hope that we can try to get into this part of the Bill a definition which, as far as possible, will really show the full intentions of the Government in ways that ordinary people can understand.

I have already expressed doubts about the possibility of ascertaining all the market values that are needed for the provisions under this Bill. I should also like to ask about the subsequent lists. In Clause 2 (1), it says: For the purposes of making or altering the first valuation lists after the passing of this Act and subsequent lists … When we considered this matter in 1948 my right hon. Friend gave an undertaking that he would review the matter after the first valuation had been made. My own opinion is that it will be even more difficult to chase these elusive and ghostly values of 1939 if we ever get to the point of a second valuation.

May I then ask the Minister some specific questions to which I hope he will endeavour to give us an answer? First of all, will he publish all the evidence that he has got about the valuations made under Part IV of the 1948 Act and also in respect of all the valuations that he has made already on the basis of the legislation here proposed? Will he give us a White Paper which will supply all the information that is available in summary form, and which will help not only us but the local authorities and the other people who will have to consider the matter?

Secondly, is it his intention to disregard the fact of rent control and, if he says "Yes" to that, will he see that that intention is really carried into the context of the Bill? Thirdly—and this raises a somewhat wider issue—can he give an estimate on the basis of the work he has done of the total increase in rateable value that he expects from the new valuation, breaking it down as between dwelling houses and other hereditaments? Can he further say what increase he expects in the total valuation of dwelling house property? This is important, and I hope the Minister will not say he cannot do it, because I am certain with his resources, which are a good deal better than mine, he should be able to make an estimate much better than we can on the basis of such information as is available to everyone.

That leads me to the fourth point, which is this. What is the effect of this increased total valuation going to have, first of all, on education grants, secondly, on Exchequer equalisation grants, and, thirdly, on the payments made by the British Transport Commission and the British Electricity Authority in lieu of rates? These are all highly important matters which flow directly from this proposal.

The rating system is again under discussion. This is a system which began, as I understand it, as a means of coercing those whose springs of private charity did not flow towards the poor as freely as the authorities thought desirable. We have gone on with it, but I must say that the difficulties which I think we all recognise are in this situation make me more and more inclined to the view that the time has come for a review of the whole financial relationship between central and local authorities. I do not want this afternoon to go into all the interesting things that arise under that head, but I just want to put it on the record.

Let no one minimise the importance of this Bill. I remember the right hon. and gallant Gentleman the Member for Kelvingrove (Lieut.-Colonel Elliot) speaking to us in these terms in 1947: I have had some experience of the coining into practice of new assessments, and I warn the right hon. Gentleman, or whoever is sitting in his place at the time, that he will have some very anxious moments before he determines the day on which to bring into effect a new valuation covering the whole of the country." —[OFFICIAL REPORT, 18th November, 1947; Vol. 444, c. 1014.] I would say to the right hon. Gentleman the Minister of Housing and Local Government that he may not always be sitting in that place; but before this thing really come home there is going to be a lot of trouble. After all, valuation differentials are like wage differentials; one disturbs them at one's peril.

This Bill is not the small, slight inoffensive thing that it appears; it is political dynamite. If we alter the valuation it means altering the spread of the burden and then the fun begins, as we shall see in due course whatever system we adopt and whatever Government is in office. Let no one think that this is not important. It is important because we are altering the burden, and my complaint against the Government is that they are altering the burden in this particular matter of dwelling houses against the smaller and poorer. That I believe to be wrong.

May I quote the conclusion of an article on this Bill in the "Local Government Chronicle" as follows: The Valuation for Rating Bill contains no rating provisions, it does not envisage any change in valuation procedure, and it cannot be said that it will improve the rating system. It does not allow rating valuations to keep pace with secular changes in rental values or really solve the valuation problem. The valuation base will still be too small to carry the burden of local expenditure without rate poundages soaring well above 20s. in the £. A radical solution is still awaited. I hope that when the right hon. Gentleman comes to reply he will let us into his mind on some of the wider aspects of this matter on which I have not cared to speculate because I do not want to take up too much time.

In conclusion, I shall return to the Bill itself. When I was speaking in 1947 on the Second Reading of our Bill, I said: Value, for rating purposes, is a matter of what is defined, as valued by law, and how it is interpreted by the courts. If we are to have proper standards, they must be objective and ascertainable, and they must as far as possible, be fair as between all the interested parties."—[OFFICIAL REPORT, 19th November, 1947; Vol. 444, c. 1217–18.] I am opposed to this Bill because I do not believe that we are presented with objective and ascertainable standards, and as far as I can see at the moment the final result will not be fair as between all interested parties. I would not seek to suggest that the 1948 Act may not need some alteration, but I do not think that this Measure gets us any further along this difficult road of valuation practice.

5.19 p.m.

Lieut.-Colonel Walter Elliot (Glasgow, Kelvingrove)

We find ourselves on familiar ground and opposite familiar faces. The hon. Member for Brighouse and Spenborough (Mr. J. Edwards) and I spent many months in examination of this problem in conjunction with his right hon. Friend the Member for Ebbw Vale (Mr. Bevan). I fully agree with the hon. Gentleman's concluding words, that this is not a small or unimportant subject. It is a subject which will confront any Administration seeking actually to take executive steps—and that is an important point—with a very great problem indeed.

This afternoon we are not seeking to take executive steps, and when the right hon. Gentleman the Member for Ebbw Vale and the hon. Member for Brighouse and Spenborough were putting through their Bill they were not seeking to take executive steps. We warned them at the time what they were doing. It was perfectly clear to all of us that they were producing exactly the situation which has arisen. That point was made not merely from our side of the House but also from their side. It was clear that this oil-and-water proposal would not work, and it did not work. We are now faced with a position in which we are trying not to bring forward an ideal solution but to deal with an actual situation which has got out of hand.

The hon. Member for Brighouss and Spenborough ended by putting a series of questions to my right hon. Friend. I well remember putting exactly the same sort of questions to the right hon. Gentleman the Member for Ebbw Vale. Did he answer any of them? Not one. We asked him what would be the effect, and we asked him to give us the results of his valuation. "All these are hypothetical questions," said the right hon. Gentleman, rolling it out in a fervour of imagery. "How can I be expected to prophesy all these things?" We did not ask the right hon. Gentleman to prophesy so far ahead as the hon. Member for Brighouse and Spenborough has asked my right hon. Friend to do. He has asked my right hon. Friend to prophesy unto us what the effect of the valuation will be on the amount demanded from the transport industry five years hence. If that were attempted in the astrological columns of the Sunday Press it would be going a little far. The right hon. Gentleman the Member for Ebbw Vale had some very useful forms of answer which I have no doubt my right hon. Friend will find not inconvenient when he comes to wind up.

Mr. J. Edwards

The circumstances are not the same. We are talking about circumstances in which the Minister has carried out two very considerable investigations. I am asking him to give us the benefit of his investigations. As to the estimates of the overall effect, I can only suppose that the officials of the Ministry are just as able as are eminent valuation people to make estimates of this kind, which, if the right hon. and gallant Gentleman has read the literature, he knows exist.

Lieut.-Colonel Elliot

The hon. Member said that he had been engaged in extensive work of exegesis before he came to the House, but I cannot compliment him on his results. We gave all the figures to the right hon. Member for Ebbw Vale. We were able to make the analyses from the ordinary contacts that we had with local authorities. We gave the figures in considerable detail. The hon. Member for Brighouse and Spenborough has not dared to quote them from the past or apparently to carry out any investigation of his own. We challenged the right hon Member for Ebbw Vale with chapter and verse and with statistics.

On the Third Reading of the Bill in 1948 I said: …our figures seem to show that a small pre-1918 house, with a gross value of £32, is likely to go up to a gross value of £50, which is an increase of 56 per cent. That is not at all dissimilar to the example given by the Parliamentary Secretary. I went on: As for a small post-1918 house, valued under another system altogether, it is likely to go up from £32 to £40, which is an increase of 25 per cent."—[OFFICIAL REPORT, 24th February, 1948; Vol. 447, c. 1801.] Again, that closely parallels the other figures. The hon. Member for Brighouse and Spenborough could have got all these figures if he had taken the trouble to make notes during his exegesis. Reading the Scriptures is not enough; they must be read, marked, learnt, and inwardly digested. The average for all the post-1918 houses—we were able to give this figure—was likely to be a 23 per cent. increase, and for the pre-1918 houses 38 per cent. We were able to give the right hon. Member for Ebbw Vale chapter and verse, and analysis and a breakdown, the sort of things that the hon. Member for Brighouse and Spenborough was asking my right hon. Friend.

Those figures have been proved true by the facts. Our opposition to the proposals at that time was that two citizens living side by side in two comparable houses would have different rate burdens placed on them merely according to the date of construction of their dwellings, and for that reason we divided the House against the Bill. This is the sort of evidence that hon. Members opposite should bring before the House if they are challenging our proposals. It is not enough for them to say, "Minister, live for ever! Tell us the figures." We got out the figures for ourselves and were able to challenge the right hon. Member for Ebbw Vale with them. It would be possible for the hon. Member for Brighouse and Spenborough to get the figures and they would show him what everybody knows will happen under the system.

Our figures were the gravamen of our charge against the previous Act, and they are the gravamen of our support for the present proposals. Under the previous proposals the man who lived in the older house could have a more swingeing burden laid on him. We said that would happen if the proposals were put into law and we were opposed to that. Is the hon. Member in favour of it? He asked a lot of questions of my right hon. Friend. This is a simple one for him. Is he in favour of it?

Mr. Edwards

I have not overlooked the words of the right hon. and gallant Gentleman, and I have them all here on a piece of paper. As I said in my speech, it seems to me that if we are to pass judgment on this matter we must have all the facts put in front of us and it is unreasonable to come to the House, give just three examples and, on the basis of that, say, "Accept our word for it."

Lieut.-Colonel Elliot

I asked the hon. Member a question which he has very skilfully refused to answer. Is he in favour of retaining in force an Act under which the man who lives in the worse house will pay higher rates for the benefit of the man who lives in the better house? That was my question. That is the effect of his Act.

Mr. Edwards

If it could be demonstrated that that would be the result, my answer to it is the unequivocal one that I could not support it, but I have not yet had it demonstrated by anybody that that would be the effect of the 1948 Act.

Lieut.-Colonel Elliot

All I can say is that we gave the hon. Member chapter and verse for it in 1947–48. He did not disprove one of our calculations or one of our examples, and it comes ill from him now to say that he does not know the facts until the Minister gives them to him. His party was in power for six years watching the working out of the Act. Surely they must have had some idea of what was likely to be the effect of the scheme which they were proposing to put forward.

I go further. We said that we doubted whether it was a good proposal. I said: The most doubtful feature, and to our mind still the major feature, of this Bill—the long-distance feature—is the proposal for the revaluation of the small dwellinghouse."— [OFFICIAL REPORT, 24fh February, 1948; Vol. 447, c. 1800.] On that, the right hon. Member for Bbbw Vale said: Part IV provides a new system for the valuation of dwellinghouses. …We believe that we have found a formula which will enable small dwellinghouses to be valued, and yet maintain equitable conditions as between one ratepayer and another."—[OFFICIAL REPORT, 24th February, 1948; Vol. 447, c. 1788–9.] We say that the right hon. Gentleman's forecast has been disproved and that our criticism has been justified.

I will go further than that. The right hon. Member for Ebbw Vale can take credit, and did take credit, for the fact that there was a more or less uniform result for the 4½ million houses which had been built since 1918. However, when he looked at the machinery by which this had been brought about, he was greatly upset. He spoke of the form as "a monstrosity" and attributed it to the Inland Revenue, but the hon. Member for Sowerby (Mr. Houghton) rightly rushed to the defence of his Department and said that it was not the Inland Revenue but the Ministry of Health. The Parliamentary Secretary said today that the right hon. Member for Ebbw Vale had signed the form. I was interested in that. I took pains to get hold of a copy of it when I heard the reference to "monstrosity." Here it is.

Let the House look at the way in which this information was obtained. Let us consider whether this is the sort of form which we could possibly apply to pre-1939 houses. It has six separate columns downwards and 11 separate categories in each of the six columns. Of course, one can certainly get uniformity with that sort of form. Let us take the third category, specification (C), which comes under the heading, "Very Fair." Perhaps I may inform the House that "Very Fair" comes between "Fair" and "Good." Let us consider the bath- room. Specification (C) is one with "plaster generally. Glazed tile dado in bathroom." Let us compare that with specification (F) which is "Excellent." That includes the definition glazed files with embellishments in bathrooms and kitchen or scullery. We have to sum up all these factors before we reach this uniformity of valuation upon which the right hon. Gentleman prides himself. If we go before 1939, how do we calculate the respective value? What about a house built in 1860 or 1870? Of course, if we go deeply into the costs of construction we get a case such as my own. I live in a house built in the reign of Queen Anne—a house which has many inconveniences. The water supply is in the yard and the lavatory is outside. I do not know whether it would come under specification (A) "Minimum" or specification (F) "Excellent"— "style with embellishments."

Mr. Houghton

As the house was built before 1918 it does not come under these specifications.

Lieut.-Colonel Elliot

Sometimes, in defence of his Department, the hon. Member for Sowerby (Mr. Houghton) rushes to the most unjustified conclusions. We have just admitted that oil and water will not mix. We cannot have both rents and construction costs as a basis. We cannot have rents as the basis in one class of house and construction costs as the basis in the other.

If we take construction costs, that includes the construction of the house in which I live just as much as it includes the construction of the latest council house or villa in the suburbs. If it is to be done on the basis of construction then the valuer must go round my house and see whether the tiles in the bathrooms have or have not embellishments on them, for the purpose of this valuation.

Mr. Houghton

No one has suggested that the cost of construction basis should apply to houses built in the reign of Queen Anne. The specification with which the right hon. and gallant Gentleman was having such fun was one which applies to post-1918 houses. If it does not apply to pre-1918 houses, then it does not apply to his house at all and he need not trouble the House with the difficulty of applying this specification to a house built in the reign of Queen Anne.

Lieut.-Colonel Elliot

I repeat the elementary proposition which I put earlier, because the hon. Member does not seem to have grasped it. People have suggested—it has been suggested this afternoon—that this is the only alternative; either we have to go on the basis of rents or we have to go on the basis of construction. The basis of a mixture of rents and construction has broken down. There must be some basis of valuation of a Queen Anne house. If it is not the basis of rent it must be the construction. It must be one or the other. I suggest that we must take the commonsense way of determining the value of a house, which is what the people think is its value—the figure at which a willing buyer will buy and a willing seller will sell.

Mr. Sparks

Was this argument put forward by the right hon. Gentleman or his hon. Friends during the Committee stage of the Act? They certainly did not argue those alternatives but argued for something totally different from what is in the Bill.

Lieut.-Colonel Elliot

We have enough to do if we go over the debate on this Bill. If we also go over the debate on the 1947 Act, which ran across two years and had 17 sittings in Committee upstairs, quite apart from two days' general debate on the Floor of the House on Second Reading, we shall never get away for our Whitsun Recess at all and we shall run into grave danger of encroaching upon the Coronation.

We say that the Government have proposed a basis of rent because it has been found that the basis of construction, first, requires the collection of an infinite number of statistics even to get the 1939 values correct and, secondly, is so detailed that it would be impossible to apply it to houses before that date. Very well: we come to the simple examination of the question of rents as a basis of valuation and how we are to handle it. There we come to a very practical and immediate question, because we are now trying to discuss on what basis, from now onwards, the valuation of the people's 44 as a whole, is to be carried out in this country. It will not affect this House because it will not come into force for years ahead. It is most unlikely to affect this Minister, but it is not the less important for that. Only one Minister dared to carry out his valuation and then go to the country on it. That was Mr. Neville Chamberlain, a man of very great courage. His fate was a lesson which has not been lost upon others in examining this problem since.

The proposal of the Government, as far as I see it, is that we should have a basis of rent but not the basis which was criticised—and rightly criticised—in the Fitzgerald Report. An analysis of the Fitzgerald Report was quoted by the hon. Member for Brighouse and Spenborough. But that Report was going on the basis of the famine values. It indicated what would happen if those drastic laws had been applied "and no concessions made."

I think we shall be driven back to the word which is so very difficult to define accurately but which, on the whole, works better than any other word in our whole system of legislation—the word "reasonable." There is no escape from it. We must apply this on a reasonable basis, and the reasonable basis is not the famine basis. As the Highlander said to a friend who told him that something was fetching a high price, "If you had Loch Lomond in Hell you could sell it at a guinea a cupful." That is scarcity value. And, of course, that applies when people are looking for accommodation, somewhere to get into, off the street and out of the rain.

Nor must it be the economist's figure of a free market based on a 100 per cent. correspondence between supply and demand. It must be based on an easy fit. It must be as easy as a pair of shoes, which an hon. Member intends to wear for an all-night Sitting. Hon. Members do not come to the House in their most accurately fitting and best pair of shoes to tramp through the Lobbies until 8 o'clock or 9 o'clock the next morning. They put on an old, easy-fitting pair of shoes, and if they are a little slipshod they are all the better for that. The basis of rent will need to be applied in that way. It may well be that the Minister will need to put further definitions into the Bill. I do not deny that. We are in fact in a relatively happy position; for we are legislating about what people are going to have to do five years from now. Therefore we can afford to take a more detached view than if it were to happen immediately. Let us get a clearer definition if we can in that subsection of Clause 2 of the Bill— The said rent is that at which the hereditament in question might reasonably have been expected on or about the thirtieth day of June, nineten hundred and thirty-nine, to let from year to year". The 30th June must be taken not merely as a date but must be considered as referring to an area in which there was a reasonable amount of choice, where there was a certain surplus of houses and room for the population to move around.

Mr. Turner-Samuels

Would the right hon. and gallant Member explain what he has in mind as a definition?

Lieut.-Colonel Elliot

I have done my utmost to say that my definition is "reasonableness" and that cannot be written into an Act of Parliament. We know of it in practice, but we cannot write it into an Act. The courts are capable of interpreting it and "alternative accommodation" is a phrase which the hon. and learned Member knows is used in the courts. We could not write it into an Act of Parliament to cover the position in which the tenant is offered alternative accommodation and says, "I do not regard this as reasonable accommodation," or the view of a judge who says, "You are being unreasonable and I will give the owner vacant possession." It cannot be accurately written in, but we can go as far as possible. I am sure we shall all do our best to try to find Amendments which can be accepted by the Minister further to define the views expressed by the Parliamentary Secretary.

There was a lot of rent restricted property in 1939. There was also a lot of free property. The proof of the pudding was that people were willing to build large numbers of houses for their own use and occupation. This indicated that in their view they could build a house for about the same rent, more or less, taking all things into account as that at which they could obtain one of the rent controlled houses.

Mr. J. Edwards

rose—

Lieut.-Colonel Elliot

I am willing to give way, but I ask Mr. Deputy-Speaker to note that I am not trespassing on the time of the House unduly.

Mr. Edwards

The right hon. and gallant Member has raised the very important matter. If I understood him aright it was that the proposal in this Bill was different from the law with which the Fitzgerald Committee were concerned. If I understood him aright he said that this was something different. How can it be different if the definition of gross value is exactly the same? The definition of the gross value for the purposes of the Fitzgerald Report is in essence, and indeed in words, exactly the same. If the right hon. and gallant Gentleman is saying that the matter has to be differently interpreted, he is not developing an argument which is logical. The law as here proposed has the same words as the Fitzgerald Report were considering.

Lieut.-Colonel Elliot

I was saying what I believe is the intention of the Minister and of the Government, and the Minister, through the mouth of the Parliamentary Secretary, indicated his desire to meet the House in this matter. It is up to us to see how far we can meet him.

The intention of the Minister as I understand it, is not to clamp down a rigid system, but to ensure a reasonable system which can be reasonably interpreted. This can be secured either by directive or, if necessary, by words in the Bill. I am sure my right hon. Friend will do his utmost to meet the House. If he does not, I am sure the House will press its views upon him very strongly. As we have seen, this House is in a position to press views upon Ministers with much greater force than we were able to press our views upon the right hon. Member for Ebbw Vale, who was backed by a majority of 100 or 200 according to whether his supporters felt like turning up or not. This is another matter.

To sum up, the system of mixing the valuations seems to me to have been unsuccessful. That system of valuation by cost will break down in practice because that complicated form which I have quoted cannot be applied to the whole of the 12 or 13 million houses in this country. We are driven back to a definition of rent, but the definition of rent must be applied in a reasonable manner. It is not as has been said a free market if you take 999 houses out of that free market and leave one only in the market. That is not a free market—it is a famine market.

Mr. Bellenger

That is the definition of the right hon. and gallant Member.

Lieut.-Colonel Elliot

No, it is not, because a free market is not the same thing as a famine market. It is up to the collective wisdom of the House to ensure this. I do not think it is beyond the wit of man. I think the Minister has given us a reasonable basis on which to work. Let us work soundly, and well, and swiftly, on that basis.

5.46 p.m.

Mr. C. W. Gibson (Clapham)

I must confess that I was not very convinced by the speech of the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) and I do not propose to follow him in the convolutions of argument into which he seemed to be getting.

In introducing the Bill, the Parliamentary Secretary was very careful to say that it was a technical and non-political Bill. I do not think anyone can accept that; I certainly cannot. One of the things that the Act which this Bill will replace did was to begin to provide for some valuation of sites and for the proper recording of them—not all of them, but a very large number—and that would have given a basis for public policy later on. That portion of the items in the assessments has gone.

It is significant that several times in the history of this country whenever a Government have got somewhere near the beginning of the assessment of site values the Conservative Party, a year or two later, have been able, in some way, completely to get rid of even the beginning of that system of getting site values down on paper so that we may know what the cash value of land in this country really is. The exclusion of this site valuation could only be a political decision.

I object to this Bill because, as the right hon. and gallant Member for Kelvin-grove admitted, it seems to go back to all the old difficulties and inequities of the system under which, right up to the moment, we have been operating in connection with the assessing of rateable values. I do not believe that the new formula, as the Parliamentary Secretary called it, will make any difference. It does not seem very new to me, but seems very like the old formula refurbished with the added complication that, instead of having current rental values, we have to take a house of 1939 and assume that it was in a condition then in which it would be if it were lived in now. That seems to provide untold opportunity for argument between lawyers and everyone connected with the rating system and would by no means provide a simple and sound solu-to the rating problem with which this country has been bothered for so many years.

"The Times" once said that the present system of raising revenue by local rates hits the poor hardest of all. It always has done. It punishes the man who makes some attempt to make his house a little better to live in by increasing his rateable values, and consequently the amount he contributes to the local rate fund. Any proposals to alter the rating system which does not make some attempt to deal with that aspect of the problem is not merely failing to do things which ought to be done but is running away from the problem.

In these days, with everybody's rates going sky-high, there is a good deal of talk in the country and in the Press about the enormous increase in the expenditure of all our local authorities. The suggestion is made that it is now getting to a dangerous height. I do not feel disposed to disagree with the suggestion that rates are getting to a dangerous height, but the solution is not to reduce the expenditure by reducing the services given to people. The solution is by finding, if we can, some additional or new form of revenue.

The Parliamentary Secretary said he would not say anything about de-rating. I think it is a crime on our people that there is still de-rating of industrial properties. This system was introduced when we were in the midst of a trade slump, and was justified as a means of assisting big industry to get through the financial difficulties of that time. Since then we have been through trade booms and war, and we have had a continuing boosting of trade since the last war, but still industrial hereditaments are relieved of 75 per cent. of their rates by the derating Act which is applied to them. I will not say anything about agriculture because I do not represent an agricultural constituency, but in principle the situation there seems to me to be equally bad.

I think that everybody ought to pay his full share of the cost of running our local government authorities. Industrialists, who at present escape paying 75 per cent. of their rates, should be made to pay, because they are still getting the value of all the services the local authorities provide in their district; and, incidentally, they are getting the increased land values which the activities of the local authorities have created round about them. They ought to pay a bit more, and the de-rating Act ought to be abolished.

I do not dispute that that would involve complicated discussions about the Exchequer equalisation grant. I want local authorities to have more freedom, and to be less under the control of Whitehall. If they can be given a little more freedom by getting rid of the Exchequer equalisation grant, and can be given more income by getting rid of the de-rating of industrial premises and by putting a stiff tax on site values, it will be worth while, and I therefore wish to spend two or three minutes on the subject of the rating of site values.

I have never been able to understand why anybody who has made any study at all of the financial difficulties of local authorities—or even of the justice of the case—can oppose the suggestion that the landowner as a landowner should pay something towards the cost of providing the local services which help to preserve, improve and protect his property. At present he does not. On one occasion I gave the House an illustration of the enormous difference a public improvement makes, and, if I may, I should like briefly to repeat it.

Before the war, when the old Lambeth Bridge was hanging in the air by its shrunken wires, nobody could let at any price the land on either side of the footway; it was at very, very low values. Since the London County Council decided to rebuild the bridge, and to put a good strong bridge there which was useful to the community, across which traffic as well as pedestrians could go, the site values on both sides of the bridge immediately went up sky-high, and the fortunate landowner benefited greatly.

If the Government are concerned to provide revenue for local authorities, here is a way in which they can provide some without very much difficulty, and without any unfairness to anybody. It is a means of giving to the man who now pays on property a very considerable relief. I am fortified in this suggestion by the fact that about 300 local authorities have asked for it. On one occasion the London County Council daringly introduced a Bill to permit them to rate site values in London, but a Conservative House of Commons threw it out. Nearly 300 local authorities have expressed themselves as in favour of the rating of site values, and I should imagine that that is an expression of opinion no Government can completely ignore in the long run.

It is sometimes said that this is quite impracticable. There is not time, and it would not be fair to weary the House by going into a long theoretical argument about it. The fact is that it is in operation in New Zealand, as my right hon. Friend said recently in a speech and in an article. In New Zealand they have been able to assess land values for the whole of the country. The interesting thing is that the land of New Zealand is apparently worth about £200 per head of the population. On that basis this country must be worth anything from £15,000 million to £20,000 million in capital value. A site rate on that amount would bring in a considerable sum of money to the relief of the troubles which local authorities are now experiencing. Then, again, the City of Sydney raises all its rates out of a tax on site values. Before we have done with this Bill, I hope that enough will be said to persuade even a Conservative Chancellor of the Exchequer to begin experimenting along these lines, although my hopes are very faint.

Even if this Bill is passed and those who love it go back to the old rental value system, the present system stands condemned, even in the Tory Press. Recently "The Times" said: In their present form rates are an inequitable tax levied on the occupiers of arbitrarily selected types of property, bearing more hardly on the poor than on the rich, and penalising improvements to property. Although I do not often agree with the editorials of "The Times," I think they were absolutely right in saying that about the present system of raising local rates. There are ways and means by which the local authorities can be provided with additional income. Again I should like to quote an authoritative mouthpiece of local government, the "Municipal Journal," which on 21st November in an article dealing with the Government's plan to get rid of development charges— something which I strongly favour but for different reasons—said: We have repeatedly urged that the Government, in considering amendment of the Town and Country Planning Acts, was under a moral obligation to reconsider the principle of site value rating. The White Paper and the Town and Country Planning Bill make clear that the development charge is to go now, but that the promised further Bill will be deferred until next session to allow plenty of time for discussion. We have not had that yet. In discussing the case for site value rating—which we again urge the Government to consider—the following arguments are relevant: by levying a rate related to the value of a site, the owner of valuable land would be given a strong incentive to develop it to get a higher return from it, or to sell it to someone else able to do so. The incentive to sell in such a case would be strong, because the owner would be faced with a high site value rate while he continued to hold the land. The purchaser would know this and would himself take into account the rate in estimating the price he could afford. The scales would be tipped more in the purchaser's favour with beneficial effect on prices. This is the "Municipal Journal" speaking; not a Henry George-ite. The increase in value of sites due to the activities of neighbouring developers—often the local authority—would accrue to the community instead of to landlords who had done nothing to earn it. Local authorities would be provided with the additional source of revenue they so urgently need. And, most important, the machinery of planning would be put on a logical and sound financial basis. So I say that difficult as the rating system is and difficult as is the building up of our assessment values, there is no need for pessimism. If the Government boldly go ahead with a tax on site values and get rid of the derating of industrial premises they can find for the hard-pressed local authorities a good deal more money to enable them to meet local demands.

It is clear from all the evidence that in the places where the rating of site values has been tried the system has had beneficial effects on the town planning aspect of local government. Therefore, I say that on grounds of good town planning, good local government and social justice, so far from introducing a Bill to go back to the bad old system which stands condemned, it would be better to withdraw this Bill and to introduce another to put into law some of the things I have suggested.

6.4 p.m.

Mr. Derek Walker-Smith (Hertford)

The hon. Member for Clapham (Mr. Gibson), while keeping impeccably in order, was perhaps doubtfully relevant in some of his observations to the House.

Mr. Gibson

I was in order.

Mr. Walker-Smith

I repeat that quite clearly the hon. Gentleman was impeccably in order, but doubtfully relevant in some of his observations. Most of his observations were addressed to two themes. One was the rating of site values, and I do not propose to follow him in that. Though it is an absorbingly interesting topic for academic discussion, it is really a little remote from what we have to consider today.

Mr. R. R. Stokes (Ipswich)

No.

Mr. Walker-Smith

Secondly, he talked about derating. On that subject the hon. Gentleman plunged in where my hon. Friend feared to tread. I shall follow the hon. Gentleman on that subject for a few minutes before I come to the specific question of the valuation of dwelling-houses. The hon. Gentleman said that he would repeal the Derating Act. I am not sure which Act he meant because derating is the product of two Acts—the Rating and Valuation Act, 1928, and the Local Government Act, 1929. I suppose that even the hon. Gentleman would stop short in his zeal at repealing the whole of the Local Government Act, 1929, which deals with a great many matters besides derating.

The relevance of derating to what we are discussing is that the effect of derating is necessarily to transfer part of the rate burden to somebody else. This Bill provides for a statutory undervaluation, as it might be called, of dwelling-houses. The combined effect is to concentrate the main rate burden on the remaining classes of hereditaments, that is to say, on shops, offices and so on. The logic of the hon. Gentleman's advocacy of derating is that all hereditaments should be treated alike and not only that industrial hereditaments should no longer have favourable treatment but that residential hereditaments—dwelling-houses-should also not have favourable treatment.

It is true that there is this diversity of treatment, and it is argued—it was stated in that excellent and thoughtful leader in "The Times"—that the conditions promoting derating are now irrelevant. Even if that were so, it would need a stronger case to justify reversing a process which has existed for some years than to show that it would not be necessary to introduce derating if it were not already in existence. It is right to say that 75 per cent. is not necessarily an inviolable percentage in all circumstances for derating. The principle followed by Mr. Chamberlain in 1929 was that there should be a substantial measure of relief but that it should stop short of total relief on the ground that industry should not be divorced from local government.

Indeed, Mr. Chamberlain offered his resignation if the then Prime Minister intended to accede to the suggestion put forward for the total exemption of industrial hereditaments. The hon. Member for Clapham ought, in fairness, to remember, with those who, like him, are making this attack on the principle of derating, that the object of derating coupled with the block grant was not so much to give a subsidy to industry as to generalise employment. It did give a subsidy to industry, but that was in the interest of generalising employment.

For example, under the previous percentage basis of grant it was computed that the City of Oxford got 102d. per head by way of grant whereas Merthyr Tydvil got only 44d. It was for that reason that the block grant was introduced, weighted not only for rateable value and density of population but for numbers of children and for the ratio of unemployment. The whole object was to generalise employment and to make industry more attractive in the depressed areas.

Mr. Charles Pannell (Leeds, West)

It failed.

Mr. Walker-Smith

Let me put this to the hon. Gentleman, because he was in the House in 1948—

Mr. Pannell

No, not until 1949.

Mr. Walker-Smith

Perhaps that explains why the party opposite acted as they did. Perhaps it was the lack of the hon. Gentleman's expert guidance on these matters which caused them to falter. But his hon. Friend the Member for Clapham was here, as I remember well, and so was the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton). What hon. Gentlemen opposite decided to do was to jettison the block grant and to retain derating. That is what they did. It is quite true that, in Committee upstairs, voices were raised from time to time saying, "What about derating?" But they were stilled, if my recollection is right, by the majestic oratory of the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan). The effect of it was that in 1948 derating was accepted as a principle by hon. Members opposite.

What I therefore want to ask them now is this: Did they think that in 1948 they had got it the wrong way round? Do they think that they ought to have jettisoned derating in favour of the block grant, because they are not very pleased with the Exchequer equalisation grant which the right hon. Gentleman introduced in the Local Government Act, 1948? I read in the newspapers the other day that a deputation is to see my right hon. Friend to complain of the working of the Exchequer equalisation grant. The trouble with the Exchequer equalisation grant is that it is absolutely dependent for its equitable working on uniformity of valuation, whereas the block grant was not so dependent because it was weighted by other factors to which I have referred.

The real trouble, before the question of derating comes in, is that we have to put right this question of the Exchequer equalisation grant and see whether it is possible without uniformity of valuation. I am not at all sure that we can ever get uniformity of valuation on any national scale. We can get it within a county borough, because normally there is one superintending valuer to each county borough, but I am doubtful whether we can get absolute uniformity of valuation even within a county.

Let us take my own county of Hertfordshire by way of example. In Hertfordshire, we have seven valuation officers, of whom six come under the superintending valuer at Cambridge and one under the superintending valuer for North London. It does make it far more difficult to get uniformity of valuation even within a county, let alone the much wider concept of uniformity of valuation throughout the whole nation. We must always bear in mind that valuation is not and does not pretend to be an exact science—

Mr. Houghton

It does have the advantage that they are not under the pressure of local assessments.

Mr. Walker-Smith

What I am suggesting is that, even with the Inland Revenue, it will still very likely be impossible to get uniformity of valuation; and if that be so, it does not seem to me that the equalisation grant is ever going to work, which is a repetition of what I prophesied in 1947.

So far as derating is concerned, I ask hon. Members to remember some of the implications when they put forward these proposals. As far as agriculture is concerned, if the derating of agriculture is accepted, then that fact clearly has to be brought into account in the annual review of farm prices under the Agriculture Act, 1947, which, of course, will raise prices to the consumer and raise the cost of living. As far as industrial hereditaments are concerned, the same applies, with an added effect upon the prices of goods for the export markets, which will make it more difficult to compete in export markets and may therefore generate unemployment as well as other consequences.

I should say, therefore, that there are these very large problems to face. Nobody would suggest that this Bill solves all the problems of rating, and I certainly do not. I do agree that there is a case for an inquiry into and comprehensive review of local government finances, as suggested by "The Times" and that there is a danger in a continued piecemeal approach to these problems. It is not a novel suggestion which is made in "The Times," because it has been made before, and from the Conservative Party and notably by my hon. and learned Friend the Member for Ilford, North (Sir G. Hutchinson), who I regret is not able to be here today.

I do not think it is right to attribute to derating all the consequences which flow from the non-receipt of the equalisation grant in those counties which are unfortunate enough not to receive it. There are some counties, of which my own county of Hertfordshire is a notable example, where the inequity of not receiving the grant is aggravated by the great influx of new population, which does not, for the initial period, add to the rateable value proportionately to the added expenses of the county. From that, it follows that we must either attain equality and efficient working of the Exchequer equalisation grant; or, if that is impossible, as I fear it is, we should reconsider the equalisation grant system and see whether it is not better to revert to something in the nature of the old block grant, weighted as it was to take account of those matters to which I have referred.

On the precise point of the valuation of dwelling-houses, there are two questions which the House has to consider. First, is it right to substitute the hypothetical tenant basis for the calculations in Part IV of the Act of 1948? Secondly, if that be so, is it right to take the year 1939 instead of current rental value as the basis of valuation. In regard to the first question, I accept the test applied by the only people who are in a position to apply it in the Ministry, with the resulting answer that Part IV would not work sufficiently well.

Certainly we have got very odd results from applying that basis of valuation. To take the obvious case where there is war damage, there was a tendency to get a lower valuation for the new reinstated hereditament on a cost-of-works payment than for its neighbour, which is precisely similar in layout but very much older and therefore not so good. If it is right that the Part IV system did not work, there is a limit to the length of time which we can spend in adjusting the formula, as "The Times" suggested, and as was suggested by the hon. Member for Brighouse and Spenborough (Mr. J. Edwards). There is a limit to the extent of experimentation that could go on without any guarantee that the system would work in the end.

I come now to the second question: whether it is right to substitute 1939 for current rental values. The choice of 1939 has obvious disadvantages from the point of view of the machinery of valuation. It is always difficult to value in relation to a date that has passed. With the 16 or 17 years which will separate us from that date when the next quinquennial comes along, the memory of valuers will not be fresh. A further disadvantage is that a very large proportion of the younger valuers have no memory or knowledge of 1939 at all.

There is one compensating advantage to set against this, and that is, of course, that there was more rental evidence for letting houses in the open market in 1939 than there was in the post-war period. I think it is perhaps right to say that the machinery of valuation can cope with the problem if the policy reasons for wanting the year 1939 are sufficiently strong. I think, however, that the recommendation of the Urban District Councils Association, of which I have the honour to be a Vice-President, is probably right when it says that it should be confined to the next valuation—the first valuation—and not proceeded with thereafter.

Of course, all these disadvantages are going to become greatly aggravated if 1939 is adhered to as the date beyond the next valuation. From the policy point of view, the substitution of 1939 seems to me to achieve these objects. It gives a preferential treatment for dwelling-houses as against shops and offices, if that be desired; it prevents too sharp a rise in assessments of dwelling-houses, which is a desirable object; and, to some extent, it solves the difficult problem of the rating of rent-controlled houses.

The hon. Member for Brighouse and Spenborough was perfectly right when he said that in law one is supposed to disregard the fact that a house is rent-controlled. That has been so since the decision of the Poplar Assessment Committee v. Roberts in 1922. But though by going back to 1939 one gets rid of the difficulty of the Poplar Assessment Committee's decision in regard to rent-controlled houses—those brought under rent control by the 1929 Act—the problem of the old controlled houses presumably still remains because, of course, if one took the valuation on hypothetical rents for 1939 and followed the Poplar Assessment Committee's decision and excluded the fact that they are controlled, one would be likely to get a rise in valuation of those houses. Perhaps that is a point which could be adverted to when my right hon. Friend replies.

So far as the general question of what my hon. Friend described as free market valuation is concerned, I think he is right in what he says. Quinquennial valuations are not normally what might be called competitive valuations. It is quite true that one must regard the fact that a house is rent-controlled, but when a valuer proceeds to do his valuation for the purpose of the quinquennial valuation he does not value competitively; he values in the sense of assuming that all the hereditaments of a like class are to let simultaneously. That, in practice, excludes a good deal of what might be called the competitive value, lowers the value of non-controlled houses, and, by so doing, to some extent shortens the gap between the non-controlled valuation and what would be the valuation if the law permitted the taking into account of the fact that the house is controlled.

I think this is a good Bill so far as it goes, because it substitutes what will be a workable system, albeit it is only a refurbished version of the old system, in place of a system which appears on the best evidence we have to have broken down. Of course, it is only a modest Measure, an interim Measure, and all the big problems of rating and local government finance still lie ahead of this Government and of the House of Commons. Therefore, although it is a step in the right direction, I think it must be acknowledged to be a relatively short step. The final solution of these problems of rating and local government finance will require a broader inquiry, and, ultimately, a more comprehensive Measure.

6.25 p.m.

Mr. G. Lindgren (Wellingborough)

I do not intend to follow the hon. Member for Hertford (Mr. Walker-Smith) except on two points. The first is one in which I am in agreement with the hon. Gentleman—I like to agree with him whenever I can—and that is in regard to the difficulties arising out of back-dating valuation to 1939. In addition to the difficulties he mentioned, there is the fact that the Bill asks the valuer to assume that the property in 1939 was in exactly the same condition as it is today. I shall have some- thing to say about that a little later. It also asks the valuer to assume that the transport and amenity values in the area were the same in 1939 as they are today.

I oppose this Bill for the reason to which the hon. Member for Hertford referred in regard to the equalisation grant. I agree that we have to take a uniform valuation throughout the length and breadth of the land if the equalisation grant is to be of any material value. At the moment, it is a bonus payment to those who had a rather lower opinion of value than some other areas under the old Acts. Until we get a basis of uniformity, the equalisation grant cannot really be effective, and we shall therefore penalise the county authorities, and prior to them the rating authorities, who valued on a really sensible basis. It is alleged by some authorities in Hertfordshire, with which the hon. Member for Hertford and I have some association, whether rightly or wrongly, and particularly by my own authority of Welwyn Garden City, that the Hertford borough was always under-rated whereas we were always highly rated.

I oppose this Bill because it just goes back to the old 1925 Act. If hon. Members opposite were frank and fair they would agree with those of us who have had experience in local government, particularly as chairmen of rating committees or even of assessment committees, that the 1925 Act was not worked by local authorities. Indeed, as was pointed out by my hon. Friend the Member for Brig-house and Spenborough (Mr. J. Edwards), the Tory Government of the day admitted that fact. They were really afraid of what might happen if the valuations took place in 1939.

The last valuation which took place under the 1925 Act was in 1934, and the fear of the increased valuations which were likely to arise from the re-valuation in 1939 caused the Government of the day to set up the Fitzgerald Committee. The war intervened, and, of course, no one can blame successive Governments since then for not doing anything about it. But all this Bill does is to go back to the 1925 Act and to substitute what is deemed to be the rentable value in June, 1939, for the current value under the 1925 Act. All the old vagueness, all the old disparity and all the old inequalities will still exist.

Unlike myself, the hon. Member for Hertford is a lawyer and is used to playing with words and defining words. I sometimes accuse lawyers of defining words to meet a particular case. What does "reasonable" mean? The right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) asked for practical examples. None of the examples which he quoted were really practical examples. They were only assessments which certain surveyors and others had assumed were likely to take place.

Let me give a concrete example of what will happen under the Bill. There is nothing like taking a personal example. When I was working for my living in industry the first thing I looked at in a wage agreement was how it affected me. It is not unreasonable for me now to see how the Bill affects me, as tenant of a house. I am living in a house, and I have lived in the same house ever since 1926. It is one of 100 houses built in Welwyn Garden City by a public utility society, and the rent in 1926 was £46. It is still £46 in 1953. I am not leaving it, so nobody need apply for the tenancy. That £46 is the rentable value. The gross value is £33 and the net rateable value is £25.

As I have paid that rent from 1926 to 1939 I do not think I am unreasonable in suggesting that that is the rent which could reasonably be expected to be paid in 1939. After all, I have already paid it for 13 years. These 100 houses were not controlled under the Rent Restrictions Acts between the wars, and did not come into rent control until 1939. Out of 100 tenants who went into these houses in 1926, only two of us are left.

Between 1926 and 1939, all the other tenancies changed, and many have changed since; and because of general changes in values, because Welwyn Garden City was growing and was developing amenities and there was a greater attraction to come there in 1938 and 1939—apart from the possibility of war—than there was in 1926, the public utility society which owned the houses quite reasonably varied the rent factor to the new incoming tenants. Many of the tenants who are sitting there and who were there in 1939, pay a rant from £52 to £55, whereas I am paying £46.

What is the valuer going to say? He is going to say that 50 out of 100 of these tenants were, in June, 1939, paying a rent of £52. In fact, some pay £55, while a few who have been there a long while still pay £46. What is the valuer going to say about what is a reasonable rent? My reasonable rent is £46, because it is the rent I paid for 13 years prior to 1939 and which I am still paying today. Knowing something about valuers I guarantee that the valuer is going to say that the reasonable rent in 1939 is £55. Then I shall have something to say about it.

Look what is going to happen, even if the valuer assumes the rent to be £46. That £46 becomes the gross, and the actual net rateable value becomes £36. Even if the valuer is really a pal of mine and I have been down to the "local" and squared him beforehand, the best he could do for me is to make the gross value £46 and the net rateable value £36, and I suffer an increase of £11. What is the percentage of £11 to £25, compared with what was going to happen to certain houses referred to by the Parliamentary Secretary, in so far as the 1948 Act was concerned?

The Bill is equally unfair to the landlord. I have never been accused yet of being an advocate on behalf of the landlord, but it is true to say that the Bill is unfair to the good landlords. What does the Bill ask the valuer to take into account? To assume that the property was, in 1939, in the condition that it is in today. Therefore, the landlord who has maintained his property in a good state of repair outside and internally and in a good structural condition will have a higher valuation placed on him and his tenant will therefore pay a higher rent than in the case of the landlord who has let the property go. It is possible; otherwise, what is the meaning of the words in the Bill which instruct the valuer to take account of whether it was to be assumed that the condition of the property today was the same as in 1939?

I talked just now about the possibility of securing uniformity or equity. I would agree that there is a possibility of some degree of uniformity within the Bill, some fairness as between ratepayer and ratepayer, in one small area. We cannot do that on a rental basis. Those responsible for valuation for the time being must at least ignore the rent and try to assess the area according to amenity value, allowing 5½d. in one area, 6d. in another, and so on. This value shows itself in the type of property and the rent demanded, and we get some relationship to the rent and the footing method of dealing with it. After all, that applies so far as the 1948 Act is concerned. It is a method which is more easily applied and is more definite. I hope to say something about that later on.

I am also opposed to the Bill because it will unfairly affect the new towns. As hon. Gentlemen know, my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) and myself followed Lord Silkin at the Ministry of Town and Country Planning, later the Ministry of Housing and Local Government, and we took a special interest in new towns. We urged their development to deal with the problems of re-housing, overspill from London, industrial dispersal and the rest. One of the problems we had to face was that we were developing new towns when engineering and building costs were at their peak.

What happened? What is the problem hon. Gentlemen on both sides of the House have in regard to constituents who go to new towns? It is that the rates are very high indeed because of the cost of building, etc. In the case of new towns which started on virgin ground there is no comparable 1939 rent or valuation which can be taken into acount, so people who are paying high rents are likely to be those most highly rated. They get the worst of both worlds. They get the burden which comes from having assumed the responsibility for tenancy of a house in a period when costs were very high and were reflected in rents, and they are further burdened because under the Bill rateable values will be correspondingly high.

This burden is all the more awkward because in the main the people who are going to the newly-developed areas and the new towns are the younger people, who are struggling with problems at the most responsible time of their lives. Their families are growing up and they must think of the possibilities of education, training and so on. At such a time they are to be burdened not only with the additional rent but with the additional rates. They are the unlucky victims of going to highly rated houses in the areas in which they are forced to live.

The Parliamentary Secretary to the Ministry of Housing and Local Government said, and I think that it was also claimed by the right hon. and gallant Gentleman the Member for Kelvingrove (Lieut.-Colonel Elliot), that under the 1948 Act there was more than an assertion that the older property would be penalised as compared with the post-war property; that is to say, taking the pre-1914 property, the 1919–39 property and the 1945–53 property, the worst hit by the revaluation would have been the pre-1914 houses.

I will not disagree with that. I think that it is a perfectly true allegation that the pre-1914 houses would have had the steepest rise in rateable value under the 1948 Act. The Parliamentary Secretary did not say, however, that the steepest rise in values would have been on the larger houses even in the case of the 1919–39 and 1945–53 houses. But I suggest that under this Bill the people who will be worst hit will be those who now carry rate of mortgage repayments on the 1945–53 houses.

Even if it were true that the pre-1914 houses were the hardest hit, it should be remembered that those houses are occupied by people who are getting towards middle age or even beyond it and whose families have grown up. Even if the family is not completely off their hands, it is generally a wage-earning group and so, even if there were an increased rate, it would be borne by those on whom its effect would be least.

But the Government are now placing a higher burden on the post-1945 group and a much greater burden on the 1919–39 group, and the least burden of all on the pre-1914 group. That may appear to the Government to be a basis of equality, but I suggest that that is not the case if we consider it in relation to the general problems of present-day life. It may be that this action on the part of the Government is a prelude to dealing with the Rent Restrictions Acts and rent revision. I cannot say whether that is so or not, and I would not accuse even this Government of using a Valuation for Rating Bill to assist them in trying to deal with the vexed question of the Rent Restrictions Acts.

I have never been convinced by those who were alleged to be trying to work the 1948 Act that they really wanted it to work. At least it can be said for that Act that it provided a set of principles. On the basis of those principles there was a possibility of securing uniformity. There are no principles in this Bill and therefore we cannot secure uniformity. Income Tax is recognised as the fairest tax of all.

Mr. Houghton

That is news to me.

Mr. Lindgren

We all try to avoid paying, or rather we try to pay as little as we can, but generally speaking it is accepted inside this House, and certainly outside, that the Inland Revenue Department, in their application of the principles laid down by successive Governments in the Finance Bills that come before this House, apply those sets of principles fairly as between one individual and another from one end of the country to another.

Rating is only another form of taxation and surely we should have one set of principles which should be applied fairly between one person and another. We did not have that in the 1925 Act and we shall not have it under this Bill. Therefore, the incidence of taxation which arises as a result of local expenditure carried out on the instructions of the Government is not fairly applied to people in the area concerned. If we are to try to deal with the problem of rating we should try to arrive at some general fairness.

I should like to deal with two other points, one of major and one of minor importance, in this Bill. The first is on the general question of the deduction from gross value to rateable value under the Second Schedule of the 1925 Act. The 1948 Act did not deal with that at all, though I admit that there still remained certain Amendments made in the 1928 Act which applied mainly to London. But let us consider what will happen under the Second Schedule to the 1925 Act as a result of this Bill.

At the moment, in the case of houses under £20 rateable value, deduction from gross value to rateable value is 33 per cent. In the case of a rateable value of over £20 it is only 25 per cent. As a result of this Bill, many rateable values of below £20 will go up to well above £20, and, therefore, for the owners of some properties there will be a drop from 33 per cent. to 25 per cent. in the allowance for repairs and so on.

The general increase in the cost of repairing property is, and always has been, recognised under Schedule A for Income Tax purposes. Why should it not be recognised in this Bill? I hope that the Minister will consider whether that point cannot be met, in fairness to those who try to do repairs to the properties which they own.

In Clause 3 (1, c) of this Bill valuers are instructed to differentiate between council house estates and other property where a garage is used for a commercial vehicle, as opposed to one used for private purposes. This will be a problem for local authorities and valuers and will mean constantly changing the incidence of rateable value. My right hon. Friend the Member for Ebbw Vale (Mr. Bevan) and my right hon. Friend the Member for Bishop Auckland and the present Minister of Housing and Local Government have urged local authorities to erect garages in associaton with local authority houses where there is a need for them for commercial purposes. In fact, by right hon. Friend the Member for Ebbw Vale, when he sanctioned their erection, said that we were carrying out a housing policy on the basis of need and that whether the occupier was a managing director or a man who slept above his shop, if he needed a house and could prove his need then he ought to have a house.

There are people in local authority houses who are small commercial undertakers, taxi proprietors or people with similar occupations, and if we adhere to Clause 3 (1, c) of this Bill we shall create a problem for the local authorities. This Bill does not give the justice, equity and fairness which the Parliamentary Secretary claimed for it. It creates more anomalies than the 1948 Act would ever have done and, what is worse, it will place an additional burden on those least able to bear it at the present time. They will be those who are suffering the incidence of high rents or high mortgage charges for post-war houses. This Bill will cause considerable hardship to them.

I am not concerned with saving the Government from the wrath that will come upon them. Perhaps we ought to let the Government go forward with this Measure so that the people will get more upset with them than they otherwise would. I agree with my hon. Friend the Member for Brighouse and Spenborough (Mr. J. Edwards) that anybody who is to deal effectively with this problem is in for a load of trouble. Nobody associated with local government could in any way disagree with that statement.

Urgent though the problem is, we ought to establish a basis of equity as between one person and another and between authority and authority, from one end of the country to the other, and the money set aside for distribution should be allocated to local authorities in the best possible way on the basis of what they are required to do in their respective areas. This Bill in its present form does not in any way help us. It takes us back to 1925 with all the anomalies which occurred then and which occurred later in 1938 in anticipation of 1939. The Government got cold feet then because of the obvious outcome of the valuation, and before the proposals in this Bill are applied I am sure the Government will again get cold feet and that those proposals will not be put into effect.

Mr. Speaker

Mr. Thornton-Kemsley.

Mr. Pannell

On a point of order, Mr. Speaker. I understand that this is a Bill relating to British rating. I also understand that the Scots Members are extremely sensitive if there is any incursion by mere Sassenachs when they are discussing their own affairs. We have had a long disquisition from the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) on this subject; I am not complaining, because it is a matter for you, Mr. Speaker; but I do ask you to note this remarkable intervention, and I hope that the Scots, if we ever invade their territory, will not be the parochial-minded persons that they are at the moment.

Mr. Speaker

I should point out that the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) is a former Minister of Health, and as such had to deal with these very problems. I think I am right in saying that the hon. Member who is about to address us has certain technical qualifications to which the House would like to listen.

6.53 p.m.

Mr. C. N. Thornton-Kemsley (Angus, North and Mearns)

I am indeed indebted to you, Mr. Speaker, for making my task much easier because I had intended to explain that although it is true, as the hon. Member for Leeds, West (Mr. Pannell) has pointed out, and as indeed the hon. Member for Wellingborough (Mr. Lindgren) pointed out, that John O'Groats and, indeed, Scotland as a whole is outwith the terms of this Bill, yet it is a fact that the background to the problem we are discussing is the system of Exchequer equalisation grants, because the whole basis of those grants and their fairness must depend upon there being uniformity of valuation, and of course the Exchequer equalisation grants apply to Scotland just as much as they do to England.

So this matter affects vitally the whole economy of Scotland. But you were right, Mr. Speaker. I have in a sense, I suppose, some technical qualifications in that I happen to be a valuer—not, unfortunately, a valuer in the Inland Revenue, so I shall not be able to accept the offer of the hon. Member for Wellingborough and visit him before making a valuation of that highly desirable but lowly-rented house which he described to us this afternoon.

I have in my personal practice, in such time as my Parliamentary duties allow me, to deal from time to time with rating, and I am grateful to you, Mr. Speaker, for giving me an opportunity of making a few observations which have occurred to me from a professional point of view. Until 1948 the basis of valuation of dwelling-houses was laid down in Section 68, the definition section, of the Rating and Valuation Act, 1925. It was, to quote that section: … the rent at which a hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenant's rates and taxes … and if the landlord undertook to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditaments in a state to command that rent. That is a definition which valuers have to bear in mind constantly.

After the war it was thought that because of the incidence of rent control and the scarcity value which all houses with vacant possession attracted to themselves, there was no proper basis for valuing on the rental basis, and it was thought that unfairness would result from trying to apply that basis which had been applied in the past. No one has expressed that difficulty better than the right hon. Member for Ebbw Vale (Mr. Bevan) who, when he was Minister of Health, said in this House: It was quite impossible in a street composed of similar cottages, with decontrolled rents at 25s. and controlled rents at 6s., to find out what would be the rent, and therefore the rates, of houses occupied by the private owner-occupiers …"—[OFFICIAL REPORT, 18th November, 1947; Vol. 444, c. 998.] It was, of course, for that reason that Part IV of the Local Government Act, 1948, altered the basis of valuation in respect of dwelling-houses and certain flats and maisonettes, but left the basis of valuation for all other types of property, offices, shops and commercial premises, unchanged. It left them on the 1925 valuation basis. I shall make reference to that aspect of the problem later.

The Parliamentary Secretary has demonstrated the inequalities of the 1948 basis, and I want to say at once that I am quite certain that the basis of this present Bill is infinitely preferable to the old basis, the basis of the 1948 Act, where we had dwelling-houses valued in part upon the basis of 1939 rental values and in part upon the hypothetical 1938 cost of construction. As a valuer, however, I cannot welcome valuations by reference back to a period which is now already 14 years in the past and which, as one speaker pointed out. by the time new valuation lists are deposited, if they are ever deposited, will be 15, 16 or 17 years in the past.

I think we are making the most frightful difficulties for new entrants to the valuing profession. Men who were only about 20 or 21 years old in 1939 have not had very much personal experience of valuing properties in 1938 and 1939. They were usually the estimators and not the valuers. Those men are now 33 or 34 years old. If we are going to value on the basis of 1939 values no one under the age of 34 has any practical knowledge of 1939 values.

It is perfectly true that if a man has been valuing since the war he has prob- ably done a good deal of valuation for building societies, and the House will be aware that most building societies have a form which has to be filled up when valuations for advances are made, and that one of the questions asked is, "What is the estimated rental value in 1939?" He has had to estimate that, and he has a certain amount of knowledge because of it, but it is not first-hand knowledge and it will be very difficult for him to value on the basis of 1939 values.

As the hon. Member for Welling-borough pointed out, it will be much more difficult to value a house on the basis of 1939 rents, with such conditions as the state of repair, the character of the neighbourhood, the availability of transport, shops and schools and all the amenities of the district, not as they were in 1939 but as they exist today. That is a very difficult exercise. Any valuer who has been valuing for a very long time would find some difficulty in doing that, and I do not know how a young man will be able to cope with these valuation problems.

Mr. Houghton

Perhaps older men will be employed.

Mr. G. R. Mitchison (Kettering)

Is it not the case that in Scotland, instead of chasing the hypothetical tenant in the mists of history they chase the actual tenant and consider the actual rents at the present time?

Mr. Thornton-Kemsley

Yes. The Scottish rating system, although often criticised, has much to commend it, and much which might be examined with a view to possible improvements in the English system.

We have been hearing a lot about uniformity. The Parliamentary Secretary spoke about it in his speech. How much uniformity will this Bill give us? Between one dwelling-house and another it will give uniformity—there will be much more uniformity than we had under the 1948 Act—but what about all the other properties? Their basis of valuation is not to be altered; they will remain covered by the 1925 Act. What about offices and shops? I am not considering the case of the big shops only but of the small ones. They will still be valued on the basis of the present-day rent. That basis was laid down under the 1925 Act.

For the past 18 months estimators and Inland Revenue valuers have been concentrating almost exclusively on the revaluation of shops. They have been going round measuring them up, ascertaining the present rents and reassessing them. Shop rents have been inflated to an enormous extent as a result of the war and the consequent sellers' market. It was a free market, but as for years and years goods had been unobtainable people had flocked to buy, and had often bought anything they could lay their hands on. Shop rents have risen to three or four times the 1939 values, and the new rating assessments which are being made are based on those inflated rents.

The same thing applies to offices. Let us consider any city—the City of London or any other city where office blocks have been blown out of existence by enemy action. A large part of Mayfair, which was purely residential before the war, is now taken up by commercial buildings, under temporary licences granted by the London County Council. Those licences last until 1960, 1965 or even till 1970. Everyone is waiting until the City of London is rebuilt. I wonder how long it will be before the offices are rebuilt around St. Paul's Cathedral. This situation leads to inflated rents for offices just as it does for shops. I cannot believe that we shall get uniformity by putting the valuation of dwelling-houses on a 1939 rental basis and valuing shops, offices, and all other commercial buildings on a present-day rental basis.

Although I ought to declare an interest, because I am connected with a group of companies which own large departmental stores, I am not so much concerned about them as I am about the small shopkeepers, the men who have paid rent which may have been fixed after the war and which may be £200 or £250 a year. At the moment their rating assessment may be £50, £60 or £65, which is very little, but they will be reassessed on the basis of something like £150, and they will find that their rates may be 20s. or 25s. in the £ upon assessments which are double or treble what they were. Those men will have great difficulty.

For two reasons—first, because of the increasing difficulties of valuing by referring to 1939 values and, secondly, because of inequality as between the basis of valuation of dwelling-houses on the one hand and of shops, offices and commercial buildings on the other—I urge that this Bill should be regarded as a temporary Measure, for the purpose only of facilitating the preparation of the new valuation lists. I do not suppose it is necessary to give notice in advance of my intention to move an Amendment, but if there is any Amendment about which I feel strongly and which I shall hope to put on the Order Paper, it is that in page 1, line 9, the words "and subsequent lists" should be deleted. We should regard this as a Measure which is dealing with this problem—probably in the only way in which it can be dealt with —as a necessary Measure for dealing with the difficult problem of bringing about the new valuation lists.

I should like to see a really authoritative inquiry into the whole subject of local taxation. We have got into a great mess over this. I am convinced that a Royal Commission should be set up to examine this whole question. I do not want to say any more about Scottish rating than this; that in Scotland the owner, whether or not the property is occupied, still remains liable for paying a proportion of the rates. The only way he can avoid doing so is by removing the roof. That is why, in Scotland, one sees so many ruins which have had the roofs removed.

It does not follow that because a building is empty it is not enjoying the benefit of local services. It is enjoying police protection. If the streets were not lighted and paved the house would be more likely to be entered by night. It is enjoying public services of one kind and another, and a very strong case could be made out for making the owner of unoccupied property contribute something towards local expenses.

I am not convinced about the wisdom of continued derating. I am sure it would be impossible to go back on derating at present, but, from a long-term point of view, I keep a very open mind on the matter. These are all things about which we ought to have the benefit and advice of an authoritative Royal Commission. I am sure that unless something like that is done we shall find that after the new valuation lists have been compiled, and after people have paid rates on the basis of the new valuations, we shall be faced with a loud outcry, whatever Government is in office. Some shopkeepers will be driven out of business because houses will be rated on the 1939 basis and shops will be rated on the 1955–56–57 basis of inflated rents.

That is not equality and it is not uniformity. I do not envy any Government which has to solve the problem. Certainly I do not think any Departmental committee can do it, and I urge upon the Minister that as soon as possible he should set up an authoritative Royal Commission to examine the whole problem of paying for local services.

7.12 p.m.

Mr. Arthur Skeffington (Hayes and Harlington)

I will certainly join the hon. Member for Angus, North and Mearns (Mr. Thornton-Kemsley) in his suggestion that it is time for a Royal Commission to be set up to consider the whole basis of local rating and local finance. It is for that reason, among others, that many of us on this side of the House have some suspicions about the timing of this Bill. No one, on either side of the House, has said that it is not an important Bill. Its financial consequences will affect every household in the country and practically every business enterprise, and affect them in the sense that more money will ultimately be raised from them by local taxation.

In those circumstances, one would have thought that, as this is a Measure of such importance, the Government would either have given us very much more time to consider it and have given it pride of place, say, over the Measure which was afforded to the brewers a Session or so ago; or, alternatively, in view of the very unsatisfactory nature of either the system of valuation which we discuss this afternoon or that which was contained in the 1948 Act, it might have been held over for a more detailed review of the whole circumstances of local Government finance and rating instead of being rushed through at the last moment before the Coronation.

This course has all the more to recommend it, I think, when we realise that what is proposed is a return, with a very minor modification, to the principles of the 1925 Act which have been so condemned and criticised by every section of responsible opinion. We know what the 1937 Departmental committee said about the valuations throughout the country. Indeed, I must deprive myself of the joy of reading the most destructive criticisms of the 1925 system—both the system of valuation and its effect—which were contained in a pamphlet published in 1948 by the Conservative Party Central Office entitled "Valuation Reform." There are so many hon. Members who wish to speak that I must forgo my joy of quoting some of the more destructive passages about the principles to which, through this Bill, we are being asked to return. In those circumstances I think it is most unfortunate that we are having to consider the whole basis of valuation at this moment without being given the opportunity of further, detailed research and investigation.

It is not as though the Parliamentary Secretary could suggest that if this Measure is passed, and even if it is improved in Committee, that we are likely to avoid the anomalies and the difficulties with which we were confronted under the 1925 Act. I do not know whether the Minister will claim that. I should like to quote some passages from the book on the Local Government Act, 1948, written by Messrs. Roots, Price and London, in which they said that: The operation of the Rating and Valuation Act, 1925, designed to secure uniformity of assessments throughout the country was much impeded and indeed frustrated by the effect of two world wars. The then authors referred to the effect of rent control and summed up by saying: It had been anticipated that a new Quinquennial Valuation would be undertaken by all rating authorities during 1939–40. It was however clear that the effect of following strictly the definition of Gross Value would be substantially to increase the assessments of nearly all residential properties within the country. Local Authorities were unable to face this, and in 1938 representations were made to the Government of the day that the Quinquennial Valuation of 1939 should be postponed and that some method of preventing a steep increase in the rateable values of these properties should be explored. We shall face precisely the same consequences if this Measure becomes law. I repeat: it seems to me unfortunate that the Minister, who is not without great ingenuity and great imaginative qualities—many of us enjoyed reading some of his literary and unorthodox political contributions in the 30's—has let this opportunity pass without making a great contribution to the problem of local government finance.

Our criticism of the 1925 system concerns not only the difficulty of assessment, the great variations which existed throughout the county and the unfairness of them, but also the financial consequences of returning to this old hypothetical tenant basis, which are so unfair as between individuals. I do not want to quote in full the speech made by Earl Lloyd George in 1907 about the inequities of rating—a speech made at a time when none of the complexities of rent restriction existed—but I must remind the House that he said that by this method of assessing rate value by what the hypothetical tenant would pay, we penalised the good householder, the man who repairs his property and makes little additions to it.

He was thinking, for instance, of the man who puts on a porch, not of the man who makes a large-scale development or adds a garage. He meant the man who maintains his property and keeps adding slight improvements. Under the old hypothetical tenant basis his assessment tends to be increased while, as Earl Lloyd George said, the slum landlord, when the five-year valuation comes round, who has done nothing to his property and therefore its condition is worse, has his assessment the same: or it is lowered. It seems unfortunate that we should be asked to go back to such a system.

I have tried to do what the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) said we ought to do—to find out some facts and figures of how these proposals are likely to effect particular areas. Unlike the examples which he made in 1947, which took in the whole country, I have done something much more simple—I have tried to find out the effect of the Minister's proposals, on one small area, the area of Hayes and Harlington in Middlesex. It may well be that I have made some mistakes, because these calculations have had to be made hurriedly, but I am quite prepared to give the Minister my figures if he is interested. This is an easy area to assess in one respect because nearly all the hereditaments—or the greater part of them—have been built since 1930. We have very few old properties to confuse the problem. The number of hereditaments in 1930 was only 4,737, whereas today there are 18,593, so that more than three quarters of our rateable hereditaments have been built since 1930, and that makes the calculation and the estimation of value easier.

One other factor which assists me is that practically all the domestic dwellings with which I am mainly concerned at the moment are of the same type, built either by private enterprise on estates developed before the war or by the Council. They are very similar except that I should say that the council houses are rather better appointed and finished and rather more tastefully set out than the houses built before the war. However, they are very much of the same type small villas. One other fact that will affect these calculations is that, with the possible exception of Acton, there is more industry in this locality than in practically any other constituency in the country, having regard to population and size.

Even when one takes into account what the council receives in lieu under the Derating Acts, derating costs the Council of Hayes and Harlington a net £20,000 a year, which is probably equal to something like a 2s. rate. I may be a little sensitive about this because a week before I was returned to this House and was engaged in some activities outside, the Hayes Council were forced to put up the rates by 4s. 1d., the heaviest increase in Middlesex, largely on account of the Middlesex County Council precept. With industry being rated, the council's problem would be much less.

Against that background I now give examples of how the present Bill, if it becomes an Act, will affect property, and contrast that with the position now and the position under the 1948 Act. I have taken a typical Nash house named from the builder who erected a number of the houses before the war. Under the Rating and Valuation Act, 1925, the gross value of the house of 1,020 super feet was £26, and the rateable value £19. Under the Local Government Act, 1948, of the Labour Government the cost of building was £416. One can give very accurate figures because they are all recently built houses. The site value was put at £100, with the result that the total cost was £516. Applying the formula, one got, curiously enough, precisely the same gross value and rateable value as under the 1925 Act, that is £26 gross value and £19 rateable value. Now applying the formula which the Minister proposes in this Bill, the current rent per week is 29s. 2d. From that one takes off rates and water at 9s. 10d., leaving what I assume will be the standard rent for 1939 of 19s. 4d. This calculation, unless I have made a mistake, or unless the Minister is going to issue instructions or regulations to alter the facts, gives a gross value of £50 and a rateable value of £40, so that the increase assessment on that house rises from £19 to £40, a very steep rise indeed—very much worse than that in the example of £7 given by my hon. Friend the Member for Wellingborough (Mr. Lindgren).

Applying the formula to the area as a whole it will be seen that the whole incidence of assessment is shifted. For example, the domestic class of property, whose incidence of assessment is now 66 per cent. of the total rateable value, will go up to 68 per cent., whereas the commercial type of property, whose incidence of assessment is now 7.36 per cent., is going to go up only to 9.52 per cent.; and in the case of industry from 11.05 per cent. to 14.27 per cent. Under the 1948 Act domestic property, instead of going up to 68 per cent. of the total rateable value, would have gone down to 53 per cent. of the total value of the whole area, a benefit to the occupier of domestic property, and commercial property would have gone up from 7.36 per cent. to 13.99 per cent., instead of merely 9.52 per cent. Under the Minister's proposals industrial property at 11.05 per cent. at present is going up to 14.27 per cent., but under the 1948 Act would have gone up to 20.9 per cent. of the total assessment.

So unless I have made a mistake the facts are that domestic property in Hayes and Harlington will carry a much greater share of the total rateable assessment of the whole area, and industry and commerce will pay very much less, than they would have done under the 1948 Act. Incidentally I calculate that licensed properties and entertainment houses are all going down. That must be wrong. I can see no principle by which valuation proposals can be defended of which these are the results. I do not want to trespass upon the time of the House any longer. I have tried to state the practical effect of these proposals in a specific area. There will be an increase in the assessment of domestic properties, and a further burden will be placed upon domestic property rather than upon industry and commerce that can better bear it. I repeat that the Minister has let slip a magnificent opportunity of making a great contribution to the future of local government.

7.27 p.m.

Mr. J. B. Godber (Grantham)

As one who has very little expert knowledge of the subject of valuation. I must admit that I have been listening to this debate today with an ever-deepening sense of gloom and forboding. [HON. MEMBERS: "Hear, hear."] Before hon. and right hon. Gentlemen opposite cheer too much, they should wait to hear what I have to say on this point. They may not wish to cheer then.

Ever since the speech of the Parliamentary Secretary, every Member who has spoken, and certainly every Member who has spoken from the other side, has been trying to bring out a contrast between one house and another, and saying that we cannot get uniformity on any basis that has yet been devised in this difficult question of valuation for rating. There has been speech after speech, to which I have listened most carefully, trying to find a means to be used in place of the means put forward in the Bill.

The only concrete suggestion I have found is one by my hon. Friend the Member for Angus, North and Mearns (Mr. Thornton-Kemsley), which was supported on the other side, that there should be a Royal Commission to go into the question of local government finance. That is a rather long-term measure. All these speeches have given me the impression that it is quite impossible to find any solution to this problem at all, and that we are going to set neighbour against neighbour and friend against friend in a most unhappy situation, whatever is done.

Looking at it from an inexperienced point of view, it does strike me that at any rate this Bill, compared with the Measure of 1948. has one merit, in that it is going back to some system which has worked if not for perfect uniformity, for some uniformity in the past. I agree that it does not go back entirely, but the principle it goes back to is one that operated in the past. The Act of 1948 was designed to split the whole process into two quite separate and distinct compartments which it could be shown have proved very difficult to reconcile in every case. It is surely better to have one system to work on in trying to achieve uniformity.

I agree that the point already discussed with regard to shops and offices is rather a difficult matter which falls to be considered in a different way. The rating of householders in particular is the most vital matter to consider because of the difficulty in which so many of these people are placed. Rates are probably the worst form of taxation that could possibly be devised, because they are the only form of taxation based on neither the ability nor the inclination of the individual to pay.

Mr. Houghton

No tax is based on inclination to pay.

Mr. Godber

The ordinary form of taxation as we know it, in Income Tax, is certainly based on ability, as I think the hon. Gentleman will agree. There are many indirect forms of taxation based on inclination. The hon. Gentleman has no need to smoke or drink but if he does he is willing to pay the duty in order to obtain the pleasure from doing it, so that it is a tax based on inclination.

Mr. Houghton

The inclination to buy the cigarettes is greater than the disinclination to pay the duty.

Mr. Godber

That may be so, but it is at any rate a voluntary payment of tax. Rates are quite different and distinct in that they are fixed arbitrarily.

For myself, I have always thought rates a thoroughly bad form of tax which I should be happy to see abolished altogether, but I doubt whether that is practical politics at present. This links up with the whole question of Government finance. Like many other hon. Members who have already referred to me leading article in "The Times" yesterday, I should like to read out what seemed to me the most important part. There were some parts with which I agreed and some with which I certainly did not agree. Naturally, I shall not read out the parts with which I disagree. The part that struck me most forcibly was this passage: Measured against the responsibilities of local authorities, rates have been a dwindling source of revenue over a long period. This has led inevitably to the dangerous centralisation of the machinery of government, and the vitality of local self-government is being imperilled thereby. Services best left to a suitably re-organised and better financed local government have been taken over by Whitehall, and in performing the functions left to it local government has become dangerously dependent on government grants. This financial crisis is the true crisis of local government today, though much less discussed than the related defects of organisation and boundaries. With that part I thoroughly and entirely agree.

As one who has served some years on a county council, I was always struck by the weakness of the financial background of the whole of local government, and the fact that the amount of money raised locally in the form of rates amounted, on average, in the authority with which I was concerned, to less than 33⅓rd per cent. of the money being spent. That seemed to me a thoroughly unhealthy state of affairs, which was bringing about the very effects mentioned in that article. Of course, it never has been local government; that has always been a misnomer. Local administration was even failing to be local in that respect; and the domination of the central Government by means of its financial pressure was so great that many good men who could put in useful work in local government were not coming forward to do so. That is probably common ground between us. That is the basis on which we should be looking at the whole question of local government finance.

I feel most strongly that there are, or should be, other means by which local government could be financed. I believe that rates are a bad thing in themselves. I agree that local government finance should be produced by rates to some extent, but I do not think it should be any higher than the present basis, and probably less. I do not see why some other form of local revenue should not be found to take the place of part of the rates, which would at any rate augment the rates and give local authorities a local source of finance greater than that which it would receive from the central Government.

That would be the basis on which I should like to see something done. I obviously cannot follow up this point further, but I do not see why there should not be some form of Excise Duty, perhaps, collected and administered locally. We have got too set in our minds over the whole question of local government finance. Rates should not be the be-all and end-all in that respect. They are at present the largest source of locally produced revenue for local government.

I should now like, if I may, to touch on re-rating which has been mentioned by one or two hon. Members, particularly the hon. Member for Clapham (Mr. Gibson). I have noticed that the subject has appeared in a number of Questions on the Order Paper lately, clearly indicating that certain hon. Members are thinking very strongly on the lines of re-rating. I am not at all certain whether the re-rating of industrial property might be justified, but I am quite certain that the re-rating of agricultural property would be absolutely unjustified, for the same reasons as those given by my hon. Friend the Member for Hertford (Mr. Walker-Smith), that it is sheer and utter folly to re-rate at a time when the price of agricultural produce is subsidised. To re-rate agricultural property at this time is the same, in effect, as putting a tariff on imported foodstuffs. Would hon. Gentlemen opposite suggest that?

Mr. Pannell

Since the hon. Gentleman challenges us, perhaps I might interject. If any farmer pays any Income Tax —I do not know whether he does, but I assume he does—is it not equally reasonable that he should pay rates as well as of Income Tax?

Mr. Godber

That is possibly true up to a point. I agree that some of them do pay tax, although many find it very difficult to make a living. I am sure the hon. Member for Wednesbury (Mr. S. N. Evans) would confirm me in that, if he were here. It seems to me quite ridiculous to put up the price of food production in that way at this time, and I very much hope that that policy will not be pursued. If it is the policy of the party opposite, then I think we should know.

Mr. George Brown (Belper)

I think the hon. Gentleman will agree that labour costs in food production has risen enormously since we had the de-rating Act. The value of land has decreased, and the result is that we in this country have a very much greater output of food per man than some other countries, but we have rather less output per acre than some other countries. Does the hon. Gentleman not agree that if the land costs the farmer more he will have to produce more per acre, to make greater use of his acres, and that, therefore, we should get greater productivity, more efficient use of the land, so that, far from costing us any more, we might make a net gain out of it.

Mr. Godber

I should like to deal with that point, but I am sure that Mr. Speaker would not permit me to do so. It seems to me that the right hon. Gentleman has based his argument on a false assumption. It may be true that, compared with Denmark, our production per acre is less; but if it is compared with practically any other country in the world, the right hon. Gentleman knows as well as I do that our production per acre is far in excess. I do not think that it would be wise for him to follow that point too far. However, that is straying a little from the terms of this Bill. I merely want to emphasise that it seems to me folly that anyone should consider re-rating agricultural land at this time.

I have said that I think money should be available to local authorities independently of the main source of supply which is coming to them now from the central Government. If it has to come from the central Government, I do not see any real harm or hardship in the Exchequer equalisation grant. I noticed that some of the local authorities who do not receive it are somewhat concerned about that at the moment. The trouble in so many of these cases is that a number of local authorities are so well provided for compared with localities receiving help by way of grant that they can well afford to do without it.

Mr. Awbery

The non-receiving authorities are getting no compensation for losses sustained through de-rating. That is the complaint of those local authorities.

Mr. Godber

I think that the hon. Member will agree that the purpose of the Exchequer equalisation grant was to give equality over the country as a whole.

Mr. Awbery

Is it fair for an authority like my own which lost £350,000 rateable value as a result of the de-rating Act, to receive nothing at all in return for what it lost?

Mr. Godber

I think that was the point of the 1948 Act. The time when the hon. Gentleman's authority should have had recompense was when the Exchequer equalisation grant was brought in. It seems to me that the purpose of that grant was to give as fair and equal a rate burden throughout the country as possible.

Mr. Pannell

The idea that the Exchequer equalisation grant would give justice between authorities depended on a complete revaluation of property under the 1948 Act, which has been deferred by this Government, and now we have had this substitution of something which is not adequate. My hon. Friend's point is one which will have to be met.

Mr. Godber

I was coming to the point of getting equality of valuation for the country as a whole. That point was included in the 1948 Act by moving the valuation from the local authorities to the Inland Revenue valuation officers. That is one point of that Act which is retained in this Bill. Therefore, the great thing is to keep on with it and get some form of valuation on a national basis as soon as possible.

For that reason. I welcome this Bill so far as it goes. I hope very much that the suggestion of a Royal Commission on local government finance will be considered. I think it would be of inestimable value that something of that sort should be done, because if we do not solve the problem of local finance we are not going to solve any problem that confronts local government today. That is the fundamental problem which will have to be solved.

I welcome this Bill because I think it is necessary at the present time as a short-term interim Measure, and I beg my right hon. Friend to consider the point that there are other sources that could be made available to local authorities than the source of rates. I am happy to support the Bill in the hope that it is only a short-term Measure.

7.45 p.m.

Mr. Donald Wade (Huddersfield, West)

I was glad to hear the Parliamentary Secretary, in opening the debate, state that he anticipated that wider issues would be raised during the debate and that they would be dealt with by the Minister in replying.

It is very difficult to discuss this Bill without entering into the larger problems of rating. Before making one or two observations on the Bill, I feel that I should declare an interest. The hon. Member for Angus, North and Mearns (Mr. Thornton-Kemsley) said that he had an interest to declare. I have no financial interest, although like most Members in this House I have to pay my rates, or attempt to pay them, and they appear to get more and more each year. Like a great many ratepayers throughout the country I am deeply concerned with the growing burden of rates. I am interested from that point of view and in securing certain political reforms which nave a direct bearing on this subject, and which are relevant, I think, in weighing up the advantages and disadvantages of this Bill.

In the first place, I am very much in favour of the abolition or, at any rate, the radical amendment of the derating provisions of the 1929 Act. This is not a new proposal. Liberals have been urging the amendment of this Act for many years. As to whether the Act was justified when it was introduced is, I think, arguable, but it is very difficult to justify its provisions today. Conditions have altered very greatly since 1929 and there is a growing feeling that the time has come when derating should either be brought to an end or very considerably modified.

In the borough of Huddersfield, which I have the honour to represent, there is a very considerable loss of revenue as a result of derating. It has been calculated that the loss is equivalent to a 3s. rate, that is to say, the ratepayers of Huddersfield are called upon to pay the equivalent of a rate of 3s. in the £ more than they would do if the revenue which is lost by derating were available.

Sir Herbert Williams (Croydon, East)

What the hon. Member is grumbling at is that the 1948 Act did away with the system whereby there was full compensation.

Mr. Wade

I am dealing with that point. I do not want to deal at length with the Exchequer equalisation grant, but I think it fair to point out that the borough of Huddersfield, together with 27 other boroughs, receive no grant from the Exchequer Equalisation Fund. I do not propose to go into the reasons for that, but I would point out that one of the reasons for the injustice which is felt is the fact that there is no uniformity and there has not been in the past uniformity in valuation for rating purposes.

I think that the provisions of this Bill, or the existing provisions as amended by this Bill, are relevant in considering this question of derating. If this Bill is passed distinction will be maintained and increased between dwelling-houses and industrial premises. I believe that if the Government then propose to remove the derating provisions there will be very strong protests, and perhaps some grounds for objecting on account of the greatly increased burden of rates which would fall upon industry. Many of the complications in this Bill are due to the distinction made between dwelling houses and garages, on the one hand, and industrial premises, on the other.

What I fear is this—that industrialists will contend that it would be too great a burden upon industry to remove the derating provisions, if there is this distinction between industrial premises and private dwelling-houses and garages. On the other hand, if we retain the provisions of the Derating Act, while it would shift the burden of rates away from private dwelling-houses on to industrial premises, it would at the same time relieve industrial premises of three-quarters of the rate burden.

The first reform I should like to see is the amendment of the derating provisions and the next is an alteration in the principles of valuing for rating purposes. I should like to see the site value taken as the basis for assessing rates rather than the rental value. That would be in accordance with the general principles of the taxation of land values. I do not propose to argue that case this evening but, putting aside the general arguments of principle which justify the taxation or rating of site values, there are certain considerations which I think are relevant.

If rates are to be based on the rental value one needs a completely free market to arrive at a true figure. It has been clear from the debate today that it is difficult to arrive at an estimated rental value and there has not been for many years a truly free market. Incidentally, I am not quite sure what the Parliamentary Secretary had in mind when he referred to a free market. A leading article in "The Times"—not the one to which reference has been made—of 9th May, 1953, contains this observation. … since the 1914–18 war and the prevalence of rent control, the housing market has largely ceased to be free. I think that is correct. One of the difficulties of basing rates on a rental value is the fact that there is not really a free market. Secondly, it is increasingly difficult and complicated to try to calculate the estimated rental value, and it has been made more difficult by the ruling in the Poplar Assessment Committee v. Roberts to which reference has been made. As I understand the law, that ruling still holds although it appears to have been largely ignored in the years before the war. It must be a difficult task for the Board of Inland Revenue, particularly as it is a central body without all the local knowledge required.

The Explanatory Memorandum to this Bill refers to "the circumstances of the locality" and I can see the difficulties which will arise without adequate knowledge of the locality, quite apart from the fact that one has to go back to the year 1939. There will also be a difficulty facing the ratepayer which, although it is perhaps a secondary point, I should be glad if the Parliamentary Secretary would consider. The ratepayer who may wish to appeal will be in an even greater difficulty than the valuer who has to assess the property for rates. It will be extremely difficult for the ratepayer to prove that the assessment is unfair and, as I understand it, at present it is not permissible for a ratepayer who wishes to appeal against his assessment to quote other figures in the valuation list in support of his claim for amendment. It would be of assistance to ratepayers who wish to appeal if they were allowed in future to do so.

I have mentioned the practical difficulties of using this basis of rental values for assessing rates, but there is the further objection that, however it is calculated, it puts a premium on improvements. Sooner or later there is a tendency for the rates on a property which has been improved to go up because of that fact. I was interested to hear the hon. Member for Clapham (Mr. Gibson) speaking in support of both the reforms I have been advocating, namely, the abolition of derating and the rating of site values. I must observe, however, that during the years 1945 to 1950 no attempt appears to have been made by the Socialist Government to alter the derating provisions or to introduce the rating of site values.

I can understand the problems facing the Minister, many of which have been inherited, and for which he is not responsible. They have been inherited, largely from the difficulty of putting into effect the Act of 1948. The Parliamentary Secretary could have said, "The machinery has broken down and we fear it will be impossible to carry out the new valuation even at the postponed date of 1956. The only way to get over the difficulty is to adopt this rather unsatisfactory method of reverting to the year 1939 because, by doing that, from the evidence which we have available for 1939 it will be possible to ensure that a valuation will take place as intended. This is only a stop-gap measure and we do not intend to continue valuing for rates on this basis." If that had been said, there would be some reason for supporting this Bill, but I fear that it is not merely a temporary measure. I am concerned about the words in Clause 2 "and subsequent lists." They seem to imply that this will continue as the basis for valuing. For that reason I am concerned about the effects of this Bill.

There is this sentence in the "Financial Times" of 9th May, 1953: The new Bill does little more than substitute an unsatisfactory for a clearly unworkable system. In considering how unsatisfactory it is, four questions must be asked, the first two of which I have already raised. Firstly, will it facilitate derating? Secondly, will it help us to get away from estimated rental values as the basis for assessing rates? Thirdly, will it simplify the task of the valuer? Fourthly, will it bring about greater equity?

I have grave doubt about simplifying the task of the valuer. There is, however, a somewhat unorthodox suggestion which I will put forward for the future which, if it had been adopted a few years ago, might have avoided the postponements that have taken place. It is extremely difficult to get a sufficient number of qualified valuers to carry through a revaluation of the entire country in any one year. But perhaps if England and Wales were divided into five areas it might be possible for one area to be revalued in each of those five years, and by that means the difficulty might be overcome with no injustice done to any one area. Another could be dealt with through the Exchequer equalisation grant, and it would be possible to work out a suitable formula.

Referring again to the Bill, if one takes the 1948 provisions, as they would be amended by this Bill, it appears there would be four categories of ratepayers. I do not say four categories of assessment, but four categories of ratepayers. There would be those owning a dwelling-house and garage as defined in this Bill who would be liable for rates without any derating relief with the assessment based on rental value as at June, 1939. Secondly, there will be agricultural land and planning which will continue not to be rated at all. Thirdly, there will be industrial premises which will continue to be rated on one quarter their rateable value. Lastly, there will be everything else, chiefly offices and shops, which will be rated on their full, up-to-date value.

It appears that the result of it, whether intended or not is that the owners of shops and offices will suffer the heaviest burden. I should be interested to know what reason the Minister has for having a bias, if that is the right word, against shopkeepers. I have no special brief for multiple shops or great stores or for a particular body of ratepayers. I know that there are many small shopkeepers throughout the country who find the rates a very heavy burden, and there is no doubt about it when this revaluation takes place as a result of these provisions, the increase of rates upon the shopkeepers will be very heavy indeed.

In conclusion, whatever we do, however we alter the method of assessment, and however we alter the position as between one part of the country and another, it will not reduce the total burden of the rates by 1d. There is a very strong case for an inquiry into the whole subject of the rate burden, into the relationship between local finance and national finance, and into the problem of the country districts where most of their roads are unclassified and where the amount that a 1d. rate can raise is so small that it is impossible to pay for the costs of modern education and other necessary services.

That problem has got to be considered, as has the problem of the local authorities who have to raise large sums of money while being without control over a great deal of the expenditure of it. All these problems need looking into, but in the meantime it is our task to see that as far as is humanly possible the burden of rates is shared fairly and reasonably amongst all sections of the community.

8.4 p.m.

Mr. G. R. Mitchison (Kettering)

I agree with the hon. Member who said that rates are a bad form of levy. Of course they are, but they are very convenient for any local authority, so convenient, in fact, that no one has been able to devise a satisfactory substitute. The local authority cannot depend on such taxes as Income Tax, Purchase Tax, or consumption taxes of one kind or another because of their fluctuating character and because of the almost insuperable difficulty of assessing or collecting them on a local basis.

But rates are bad. They are bad because they go on to one kind of property to the exclusion of others and they are bad, too, because their incidence and their collection have always suffered from a radical confusion. I believe they are about the worst instance of an English compromise. I say "English compromise" because I do not believe the Scots have been so bad. Rates started as a levy for charitable purposes according to ability to pay. They turned gradually but not until quite a late stage into being levied not according to ability to pay nor according to the benefit obtained by the person paying them, but solely according to the value or supposed value of the piece of property concerned.

Successive attempts to make that work have been steadily interfered with, because it was found that the literal and logical application of that principle led to a considerable measure of social injustice. Small houses were given an illogical preference for the perfectly good social reason that rates are in their nature a highly regressive levy, and therefore they weigh very hardly on the small owner.

That led, of course, to one Royal Commission after another. To those Members who say, "Yes, we want a Royal Commission," I would say that rates and local government finance share with the Scottish Highlands the distinction of having had more commissions and inquiries than any other subject, and they have the further distinction that all the commissions and inquiries have failed to solve the problem. I think the root reason for that is that no Government and no party have ever really faced up to the confusion between what they are trying to do and the good social motives that prevent them doing it.

The hon. Member for Huddersfield, West (Mr. Wade) was talking about Income Tax. I think that comparison is a very useful one. Income Tax as we apply it in this country is nothing but a plain, simple tax and is not the regressive tax that rates are. We have converted it into a progressive tax by dealing with it at two ends. At the one end we have given reliefs and allowances on the lower scales, and at the other we have imposed additional taxes. Therefore, out of something which, without all those changes, would be a regressive tax just as the rates are a regressive levy, we have made an efficient, progressive tax.

We ought to do exactly the same thing with the rates. We ought originally to have proceeded on the most realistic and anti-social basis in trying to arrive at the values. We ought to have applied social considerations and got our element of progressive levies in at the second stage. I do not believe we shall ever get any success or order out of rates until we begin and try not to apply the progressive and social elements to the business of valuation, but make up our minds to apply them as we do in Income Tax by way of allowances and, if necessary, additions added at a second, distinct stage. It has never been done. There have been deductions from rates but nobody has ever sought to use these deductions for a similar purpose to the changes—the allowances. Surtax and all the rest of it—in the taxation system. I start from that assumption.

Now I want to say something about the Bill. This Bill is misconceived. It is thoroughly reactionary and it has been brought in in circumstances which invite some comment on the control of Parliament over the expenditure of public money. What has happened is that the Government, having the 1948 Act and being obliged for that purpose to have and to employ certain valuers, and submitting estimates to this House which until we are told to the contrary we presumed would include that element of expenditure in them, have apparently ceased to carry out the 1948 Act and have employed those same valuers and spent that sum of money for a different purpose. It has been spent not for carrying out the other Act but for making what appear to have been extensive inquiries into what they propose to do in this Bill.

I am not saying that it is not proper that inquiries should be made. Of course it is proper, but I say that to stop, as they appear to have stopped, carrying out a piece of existing legislation and then to have this expenditure of staff time and public money for the purpose of inquiries, is not something that ought to be done by Ministries without coming to this House in some form or another and giving some indication of what they are doing.

I say also that I regard it as exceedingly bad that on a matter of this sort—a matter which is one of considerable and well-known difficulty—a body of evidence should be collected by the Minister and not published, not put before this House, and then used in bits and pieces to support what I thought was a rather thin argument which was employed when the Bill was introduced. Surely that stuff ought to have been published. It would have been easy to do it, and we have paid for it. Why should not we have it? Why should we be left without it to consider this extremely difficult problem?

There is another aspect to which I object. We were told by the Parliamentary Secretary at the start of the debate that the burden lay on the critics to produce constructive criticism. Equally, the burden is on the Minister to produce some reason for the change he proposes to make and to give some indication why it is to be made. He has completely failed to do either the one or the other. We were told at the start of the debate, and I noted it with interest, that one of the two principles—and I agree that there are two principles in the 1948 Act—had resulted in a measure of fair and equitable treatment within the class of rating valuation it was supposed to cover. The adherence in one form or another to the 5 per cent. of hypothetical cost of site and hypothetical cost of building had had that result. I should like to know a great deal more about why, if that principle has had that result, it is being thrown overboard completely instead of being accepted. I could not get any indication at all about that, though I listened carefully for it.

Next I come to what everybody knows about the hypothetical tenant. We are sick of him; but in this case we have got a hypothetical tenant living in the midst of history, receding from us as time goes on, living on a hypothetical site, even with a hypothetical bus, and, best of all, living in a completely hypothetical free market. It does not conform with the realities of the country we live in to talk about a free market in houses nowadays. Let us consider Corby in my constituency. Is anybody going to try to value a town like that on the basis of a free market?

There are a few independently owned houses in the old part of the town. Then there is a large block of houses let at low rents because they are tied houses owned by an industrial company. They are let at a quite different level of rent. At the next stage is another different level —the urban district council houses. Then, entirely owing to the legislation that we have put through this House, we get similar houses belonging to the Development Corporation and let at a rent which, as is the case in every new town, is substantially higher than that of council houses and which represents an entirely different level. Where is the free market? Which is the free market? Which is the real value of the house?

If we are to hunt for a hypothetical tenant at all, I suggest that we shall not get any more reality into the proceedings by putting him back into 1939. We are merely making the whole notion a somewhat more ridiculous one and, I should have thought, a somewhat more unworkable one. If we are to have a hypothetical tenant, why not have him today? We have the same radical difficulty to face, that there is not such a thing as a free market in houses.

I said just now that I thought the Scots had been a little bit less muddled about this than the English. I think so for two reasons. First, they impose their rates on two people, both the owner and the occupier. They divide the rate accord-ingly and, as was indicated by the hon. Member for Angus, North and Mearns (Mr. Thornton-Kemsley) the owner goes on paying even if the house is empty. That seems to be a reasonable and logical proceeding. The next thing they do is something that appears to be regarded as the most complete heresy in England, and I suppose that I must be a particularly virulent heretic because I have never understood why it was so heretical. They actually have the impertinence to base the rates on the rental. That is the one thing which we do not appear to do in this country.

They do it and they follow it up logically. They do not merely revise their rates every five years: they revise their rates when there is a change of rental. There is a degree of reality about that that seems to be lacking in the English system. That derives, I suspect, from those fundamental confusions between the benefit we get from rates and the value of the property upon which the rates are being assessed, and from the confusion between social justice and a logical method of taxation. One can make the two fit but one cannot make them fit merely by pouring them into one mould and hoping that the result will come out right.

That is my somewhat original, personal, probably incorrect and obviously inexperienced view of some of our rating difficulties. But I shall vote without hesitation against this Bill because I think that it has been brought in in the wrong way. We have not been given proper information. We ought to have been given it. It is definitely a step backward to a system that we know did not work and that is made worse by the increasing remoteness of the hypothetical tenant and the increasing unreality of the supposed free market in houses.

I shall vote against it, too, for a third conclusive reason. I think something better than this has to be done about rating in this country. It is not a business for a Royal Commission; I am sick of them in this connection. It is a business for some Government to have the courage to face reality, to make these allowances to social justice where they ought to be made, and not to get them hopelessly muddled up with the problem of finding the value of a house and leaving it at that.

8.21 p.m.

Mr. Ian Horobin (Oldham, East)

I do not propose to deal with much of what was said by the hon. and learned Member for Kettering (Mr. Mitchison), but I think that perhaps someone from this side ought to say a word or two upon what I would call the rather synthetic indignation about the Minister's very sensible, as I think, action when, coming into office and inheriting amongst the minor miseries and confusions which he did inherit in his Ministry, the obvious fact that the 1948 Act had broken down in this respect. Before coming to the House with new proposals, and it was obvious that some would be required, he immediately took counsel with his excellent officials to try to find out what would have happened and the various effects of possible alternatives. I really do not think even the severest financial purist can feel there was anything very wrong on that score.

I should like to begin by saying that I do agree with something which was said by a number of hon. Members opposite to the effect that, unless there is some objection to it—and the Minister can tell us if there is—it would be reasonable that we should have some more details of the result of his sample inquiry. I do not think anybody on either side of the House would accuse the Parliamentary Secretary of choosing unfair examples, but they are only three cases. As far as my knowledge goes they are typical of certain conditions, but unless there are some good reasons to the contrary, it would be helpful and reasonable if some more information on the result of this sample inquiry could be given.

Mr. Sparks

Would the hon. Gentleman agree that, whatever formula the right hon. Gentleman applies, he can always find anomalies. There has yet to be devised any uniform system that will iron out anomalies.

Mr. Horobin

That is rather what we are discussing it is a matter of degree. All I am saying—and I am agreeing with what was said by some hon. Members opposite—is that, unless there are grounds to the contrary, it is a reasonable request to make to the Minister that we should have more information on the results of his inquiry. I could not accept the suggestion that there was something improper on the part of my right hon. Friend in carrying out that inquiry before bringing forward his proposals.

In spite of what was said by the hon. and learned Member for Kettering, I would add my support to the views which have been expressed, with considerable experience behind them, by hon. Members on both sides of the House, that we are getting completely bogged down on this whole question of local government finance. Whether a Royal Commission is the right way or not—and I am not an expert in these matters—the fact is that over and over again ad hoc piecemeal methods, tied to particular dates and dealing with particular problems, having unexpected complications and connections with other things, have been adopted, with the result that there is an impressive body of support on both sides of the House for some wide and authoritative inquiry into the whole question of the finance of local government. It is overdue and it is quite useless to bother about things like boundaries and functions until we have considered how local authorities are to get their money.

Having said that, I hope I shall carry a number of hon. Members with me in saying that we must not have the idea that we shall get either a speedy or a unanimous report from a body of that sort. Let us run over some of the suggestions thrown out in this debate. We have had some people who are looking to the Scottish rating system, but there are a lot of people, apart from any other points, who hold very strongly the view that it is inequitable to tax a man on an income he has not got, and even if that man benefits from the police now to protect his property or lease, why on earth should an owner who cannot let his house contribute to the poor rate when, if he has no other income, he will soon be an applicant himself?

Mr. G. A. Pargiter (Southall)

Does not the hon. Gentleman know that there is no poor rate now?

Mr. Horobin

I think that is somewhat of a quibble. Then we have had references to derating. Apart from all the arguments as to whether this is the time to add new burdens to industry, and I would ask if it was not the right time in 1945, in the middle of the terrific boom, why does anyone suggest that it is the right time now? Apart from that, we must consider some of the implications of the matter. It may be roughly true that people pay very different ordinary rates on private hereditaments and nevertheless should have one vote each, but it does raise very considerable problems where, in the case of some local authorities, industrial ratepayers may be paying as much as all the rest put together. When we are considering economy in local government expenditure, that would lead some members of the Royal Commission to inquire a little more carefully than some people have done into the policy of abandoning derating.

Finally, we have had the suggestion of taxing site values—a matter we might discuss till the coronation after next. I would make only one comment on that. I hope I shall carry the right hon. Member for Bishop Auckland (Mr. Dallon) with me, but perhaps not. He has some interest in open spaces, and one of the greatest objections to the rating of site values is its deplorable effect on private open spaces. If we get an inquiry that will have any chance to do the job, it will take a long time before it reports, and, in the meantime, something has to be done. This is not an academic argument. Somebody has got to prepare a valuation list now until such times, if ever, as local authorities are no longer largely dependent on rates. Now why are rates on houses taken as a basis today for local contributions? Primarily, of course, because the size of his house is a rough and ready guess of a person's income and capacity to pay.

I do not think that anyone who listened to the speech of my right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) can any longer be in doubt that a combination of the construction cost method and the rent method, which is prescribed in the present Act, leads to inequities. No one considering rates based upon houses in this way as a rough and ready estimate of what a citizen should contribute can remain in doubt that on that score alone the 1948 Act stands condemned.

But I think we must go a step further. It is not only that the "new" house rates completely fail in fairness to tie up as a test of contributions to local expenditure with the older houses: I do not think that right hon. and hon. Gentlemen opposite have always fairly applied their minds to the grotesque inequities which exist among the old houses themselves. We have a tangle of dates which determine how much Smith who lives in an old house shall pay as against how much Brown shall pay.

Some houses have been controlled continuously since 1914 and are based on rents which may go back for years before that, and others are controlled and then de-controlled and as a result actual rents have nothing whatever to do with determining the citizens' fair contribution to local expenditure. The more one goes into the situation of these old houses the more one is convinced that we must abolish any system which continues from year to year those intolerable inequities which simply depend on such accidents as whether one's mother died or whether one is second in succession to a statutory tenancy having nothing whatever to do with whether one should pay £10 or £20 towards local expenditure. Any system which continues indefinitely these accidental variations stands condemned on that score alone.

If we are driven back on those grounds, whether we like it or not the hypothetical tenant is the only thing left. We may not like it; he may be "wandering about in a fog," but we have got to catch him because there is nothing else to catch hold of and because somebody has got to prepare a rating list.

Mr. Mitchison

He died 13 years ago.

Mr. Horobin

We must bring him to life again. We must attempt the very difficult problem in the light of a long series of rent restriction Acts of determining—I will not go into a metaphysical argument of what is a free market and what is not—determining what the hypothetical tenant would pay. It is easy to make points, some of which have substance and others which have not, in order to throw doubts on the possibility, but I have made it my business in the last few days to refresh my memory and my contacts with responsible professional bodies on this matter.

The plain fact is that while it is not possible for any human being to decide generally what a tenant would pay over the whole realm of private hereditaments today there does exist sufficient information for a valuer to say what he would have offered in 1939. A very large number of houses were then decontrolled. There was not the enormous scarcity market due to bombing, and so on. It is sufficiently recent for records to exist and for a very large number of valuers to know from their own experience.

Of course, none of us likes the 1939 year. Sacred dates are the curse of the whole housing problem, but we are driven back to the fact that with any date subsequent to 1939 it is impossible to tell what the hypothetical tenant would have paid for the hereditament. If, as I have pointed out in my previous argument, we have to find that man and determine what he would pay, we are, whether we like it or not, driven back to the most recent date before the last war. It is not a perfect solution, but somebody has to get a start with preparing the next rating lists.

The course of the debate has shown that there is no alternative but that which has been chosen by my right hon. Friend. I am sure, while there will be irregularities, that this is a further step towards trying to apply the principle of the free market and saying that the value of a thing is what somebody is prepared to pay for it. That is a step in the right direction. The proposals of my right hon. Friend are a great improvement on the present situation, but we must be under no illusions—I am certain that my right hon. Friend is not—that this is the end of our difficulties. This Bill will not solve them. If the new valuation list comes out before the next General Election I should not think that any hon. Gentleman on either side of the House will be particularly happy about it. There was no sign of a desire to push on with the 1948 valuations before hon. Gentlemen opposite went into the last election.

We have to be practical. In matters to do with housing and with valuation for rating, repairs to houses etc., the whole country has got itself into a false state of mind in the last 20 years. No doubt the new valuations will be thoroughly unpopular. All the people who are better off will say that it ought to have been done long ago, while the people who are worse off will ask: "Why did you do it? Lead me to a polling booth." If we put off dealing with these problems because we are afraid of the electorate we do not deserve to be here. We are making a step against obvious inequalities, by the Bill, particularly with regard to older houses, which have made it impossible for us to proceed along the lines of the 1948 Act. There will be many problems, some of which we may be able to deal with under the Bill. Others will have to wait.

There is the problem of the shopkeeper, which is particularly interesting to hon. Gentlemen on these benches. It will be difficult to justify the inequality of rating the shopkeeper on a present-day basis while rating the householder on the 1939 basis; but that may be the price we have to pay for tidying up some of the inequalities. The Bill is nothing more than an overdue, necessary, interim Measure, and as such I have not the slightest doubt that the House would be well advised to vote for it. A great deal of further effort will be needed before we arrive at a situation where those who have studied the matter will feel clear in their minds about the ultimate solution of local finance. That matter will take a long time, and may lead to results which none of us will be willing to accept; but something has to be done in the meantime. And this is it.

8.39 p.m.

Mr. G. A. Pargiter (Southall)

The Bill is probably one of the best admissions from the Government of their habit of looking backwards. We do not usually accuse them of looking back quite so far as they do in the Bill, in which they look back to 1601. The Government tell us: "We are very sorry, but we cannot find anything better than 1601 on which to base a Measure for raising money for local purposes." That is the admission which the Bill really is, because it goes back to the property valuation method which was used in 1601. When we have an admission of that kind from the Government it does not seem that there is much hope of progress in this direction or other directions in local government affairs.

But let us take the Bill as it is. First. I do not think that anyone on this side of the House is satisfied that the 1948 Act could not have been made to work. It could well have been amended if it had been found unworkable in certain respects. We have yet to learn that it has proved to be, or would have proved to be, as unworkable as the 1925 Act when it came to revaluations in later years. We have established from our experience of the 1925 Act that what the Minister now proposes to do was found to be quite unworkable, and that as a result that Act was not brought into effect.

The burden of the charge against the 1948 Act has been that it assesses unfairly as between old properties and new properties. If that is the worst that can be said about it, and if the only inequality that it produces is one between two classes of property, surely it could have been amended in a form to make it workable. Instead of that, we are now to go back. I am inclined to think that it is a doctrinaire objection to the 1948 Act rather than the merits of this Bill that has brought the Bill before the House.

Assuming that the 1948 Act was unworkable in respect of dwelling-houses, it is fairly obvious that if one is to use the basis of rental evidence one might expect that there would be a reasonable amount of rental evidence available. I am speaking about real evidence. It is the evidence that is produced when a man wants to rent a property and goes to a landlord and says, "How much rent do you want?", and who, when a figure is quoted, replies, "I am not willing to pay that for the property. I will go down the street to see what some other landlord will do for me." That would be evidence of what a willing tenant would be willing to pay.

In the London area, and certainly in the area with which I have been con- cerned, in the post-1918 period there has been no willing tenant; and there is no particular merit in 1939, because the position was the same then. Rent was paid upon a scarcity value for property which either was not council property or was subject to a controlled rent. Are we to take those scarcity values as the basic values upon which rates are to be assessed? If we are, obviously we shall have gross discrepancies, because if a controlled rent standard is no longer to be applied and used, but is to be equated to the scarcity rent, it will not be a question of how much other properties are being bumped up to meet something like post-war values; there will be an enormouse discrepancy between the relative values which will be applied to pre-1939 and post-1945 cases.

If that is so, what evidence can we have as to whether the provisions of this Bill will work? Equally, what evidence will there be that there will be any degree of uniformity?—because surely the question of rating values, particularly in regard to the equalisation grant, ought not to rest upon whether there were scarce properties on which rental evidence was available in Middlesex or whether there were properties in country districts of a lesser scarcity value. If it is to be based on the exact rents paid, where will we obtain equity between one area and another? If the equalisation grant is to work, there must be equity as between one area and another.

This Bill cannot possibly produce equity. It can only make the present inequity still greater. Therefore, unless we are to have at the same time a declaration from the Minister that before any of this Bill is brought into operation there will be a complete revision of the basis of the equalisation grant, still greater inequalities will be operative as between one area and another.

These are very important factors with which the Minister should deal. We have not heard very much from him yet. I hope he will tell us what he is going to do to get over these inequalities which will become even greater than they are at present. If he tells me that since there has been central valuation things have very much improved, I invite him to look at a type of property from which he might be able to get some evidence of how far the disparities which are sup- posed to have been abolished have been maintained.

I should like him to look at post-war new school valuations. If he will look at post-war school valuations—I am seriously inviting him to do this—he will find that the measure of disparity in assessment, about which we complained so much, under the local authorities before the war has been maintained at the present time since they have been taken over by the Inland Revenue Department. He will find as between comparable schools a difference in values of up to four and five times, whether he bases it on capital costs or on amenities or on the number of school places. I do not mind which basis he takes; he will find that, as between one area and another, there is no comparison in the actual values.

This means that we cannot rely on the Inland Revenue to do the job that they were supposed to do. If they cannot do it with regard to a relatively simple thing like schools, how are they going to do it with regard to the much more difficult problem of determining the 1939 hypothetical rent? Of course, it can be done by adding two and two together, or thinking of a number and dividing it by two. I think the basis of valuations will be something like that.

I say specifically that there is no rental evidence in any of the suburban areas on which a fair valuation can be fixed. There was some logic in the attempt to provide it on a capital basis. If we cannot find a hypothetical tenant and thus find the hypothetical rent, what are we going to do to find the rent that the property might reasonably command? What instructions are to be given to the valuation department? This House is entitled to know.

Obviously the valuers will do their job properly, using their skill in accordance with instructions given to them, but in the absence of factual evidence, what sort of instructions are they to get by which they can arrive at a reasonable rent? If the Minister can give us a satisfactory answer to the question what would be regarded as a reasonable rent, he will have some case upon which he can base this Bill.

I want to know, quite apart from that, where we are going on this question of the agricultural tenancy which is to be the tied cottage value. What is to be regarded as an agricultural tenancy? Is it to be one of those delightful places in Sussex or Surrey, where there is an old farmhouse which has been beautifully modernised and is occupied by a successful London stockbroker who has got 10 acres of orchard or something of that kind? If so, are those 10 acres of orchard to constitute an agricultural tenancy, and is the value of that property to be regarded as being on the same basis as the value of the tied cottage? If it is, the inequalities will be even greater than they have been in the past.

Many of these properties have been badly valued in the past, and plenty of evidence has been adduced from time to time as to the discrepancies in the different parts of the country and the shocking effect this has had upon equalisation grants and rateable values generally. I invite the Minister to give us some idea of what will constitute an agricultural tenancy, because I can see that some people will do very well out of this provision if it is applied in the form which is proposed here.

If we are to consider what is a reasonable rental for the town, why should we not consider what is a reasonable rental for the country? Is there any reason why it must be on the basis of a tied cottage? If it is to be on that basis in the country, should we not base it on a tied service tenancy in the town?—which is probably a much lower rental than would be commanded in the ordinary market. There is no merit in applying one standard for the country and one for the town. If we want equity, let us try to get it, and not depart further by saying that we shall weight the scales in favour of some very desirable properties in the country, by regarding them as agricultural tenancies, as against much smaller properties in the towns.

The arguments which have been adduced from this side of the House are very good reasons why the present Bill is not likely to stand up to any real test of equity, quite apart from the general question of the burden of local government finance and whether rating is the right method by which it should be achieved. What we should be concerned about is the provision of some degree of equity as between what one person pays and what another pays. My submission is that in no circumstances can this Bill do that. The evidence which would be required in order to make it possible is not available, and for that reason the Bill should be rejected.

8.52 p.m.

Mr. Douglas Honghton (Sowerby)

Other of my hon. Friends have been sitting here for a very long time and wish to make a contribution to the debate. I hope to be able to make a few short points in five minutes.

I believe the Minister is doing the right thing in abandoning Part IV of the 1948 Act; I do not think he has any escape from doing so. He has not only the difficulties to which the Parliamentary Secretary referred, regarding the disparity of valuation between the post-1918 houses and the pre-1918 houses, but he had, as the House learned at the time of the introduction of the New Valuation Lists (Postponement) Bill, some quite serious administrative difficulties, and months ago the technical staffs necessary to undertake the work of estimating the hypothetical cost value of the post-1918 houses were dispersed, because the Valuation Department had run into serious difficulties in working out Part IV of the 1948 Act.

The question is whether the Minister's remedy is the best that can be found. One has to admit that any re-distribution of the rate burden will be unpopular. The 1948 Act would have re-distributed the rate burden, and this Bill, combined with what is left of the 1948 Act—in regard to revaluation—will also redistribute the rate burden. There will be serious discontent when the valuation lists are deposited, but the Minister would probably have had ready assent to his proposal to abandon Part IV of the 1948 Act if he had produced more evidence than he did of the difficulties which have arisen. If he had deposited valuation lists under Part IV of the 1948 Act when he introduced this Bill, he would have had no difficulty in convincing the House that the basis of valuation should be changed.

Another thing which has not been mentioned so far is that the acid test, in the end, will be the poundage—the rate in the £. The natural corollary of the lifting of rateable values should be the reduction of the rate in the £. There will be no uniformity in the rating system without some quite drastic re-distribution of the rate burden. I forecast that the assessments on commercial and business premises will be raised by no less than 60 per cent. over current value, and that the valuations of private dwelling-houses will rise by 15 or 16 per cent.

Had Part IV of the 1948 Act continued to operate we would have had the striking anomaly that the house in which my hon. Friend the Member for Welling-borough (Mr. Lindgren) lives would continue to be assessed on its present value, or something a little below, while older houses in the neighbourhood would suffer an increase in their rateable value by 16 or 20 per cent., notwithstanding the fact that between the wars the inter-war houses were most generously rated by reference to the pre-1914 houses. The inter-war houses have had the advantage all along the line and they are bound to suffer some increase in rateable value if any equity is to be imported into the rating system.

In the minute that remains to me, I can make only this comment. Obviously this Bill will not remove all anomalies and is not the perfect alternative, nor is it the lasting solution, but uniformity will be provided by centralised valuation better than it was or could have been by local administration. That is the Minister's only salvation. Will he ensure that there is plenty of time between the depositing of the valuation lists and their coming into operation so as to allow local authorities to tell their ratepayers what effect the new valuation lists will have upon the poundage, because unless that is known the ratepayers will have many fears and anxieties and we may yet again see valuation lists suffer the fate of their predecessors, because sometimes valuation lists make cowards of otherwise courageous Ministers.

8.56 p.m.

Mr. J. A. Sparks (Acton)

In the short time which is left I can deal with the subject only briefly. In the first place, most of the speeches which we have heard today have gone very wide of the principles in a Bill which deals with rating valuation. Everybody has been agreed that it is only part of a wider problem— the reform of local government. If the Minister is anxious to attain immortality within the Ministry of Housing and Local Government, he should take the initiative in the wider field of local government reform. He will then be remembered for a very long time.

The proposal in the Bill to go back to the 1939 rental basis is not the proposal for which the Conservative Party argued during the Committee stage of the 1948 Act. They argued then for a totally different principle. They were not prepared to support the formula of the hypothetical tenant because they realised the anomalies which arose as a result of a basis which in any event was not operated by the vast majority of valuers. The hypothetical tenant basis, it was decided in the courts, had to be assessed without any reduction for the lower rents of rent-controlled dwelling-houses, so that in law the valuer had to assess the maximum rent obtainable in a free market, but the right hon. Gentleman will find that hardly a single district valuer did that.

There was complete under-assessment throughout the country because it was realised how inequitable it would be to enforce that principle. Indirectly or unlawfully there was, therefore, some regard to the lower rents of the controlled dwelling-houses. The right hon. Gentleman is returning to that situation. Instead of the word "tenant" we have the word "rent," but in the long run it means exactly the same thing. It may, of course, be fairly operable in areas where the supply balances the demand, as the Parliamentary Secretary said, but in Greater London we have not had that position— I was about to say for centuries—for certainly the last 50, 60 or 100 years. The supply has always seriously lagged behind the demand, and is likely to do so for a long time.

Consequently, to go back to the 1939 dead values, to assess in time of scarcity a rent which would have been payable in 1939, inevitably means revaluation of assessments for a whole range of dwellings on a higher basis than previously existed. So the right hon. Gentleman is merely going to repeat again the anomalies which existed in connection with the formula which was operated in 1939.

I suggest to him that there is another basis upon which he could base his formula for valuation. I suggest that he accept current values. He is going back to dead values, values 13 or 14 years old, and as time goes on they will become more antiquated than they are at the present time. Therefore, if the right hon. Gentleman wants to lay down a basis which is easily ascertainable and easily workable by district valuers, he can do no better than accept current values. I recognise that he would have to make adjustments. He would have to make them by way of rebate or some system of derating for those houses that are pre-1919, or even some houses constructed between the two wars, but if he accepts present-day values and proceeds upon that basis, he will considerably simplify the problem with which he has to deal.

Nothing has been said about the position with regard to new houses erected since 1945. Apparently, the right hon. Gentleman is going to assess them with a totally different value altogether from that at which they were before the war. He is going back to 1939 to assess them for rating purposes. Good luck to the tenants of the new properties since 1945. Their assessments are going to fall. [An HON. MEMBER: "No."] One of my hon. Friends says "No." They are bound to do so if the right hon. Gentleman accepts the 1939 rental basis. If the right hon. Gentleman is going to base his assessments of new properties since 1945 on current values, I am in agreement. That is my proposition, and that he should derate in relation to dwellings built earlier.

I appeal to the right hon. Gentleman, if this new formula in the Bill is to go through, to give us an assurance that it will be reviewed after the first quinquennial period. I am sure he will find a number of anomalies arising. Whatever system we devise, there are bound to be anomalies. We want the formula that will reduce them to the lowest possible minimum. We should have some assurance that after experience of this new formula the whole basis will be reviewed in four or five years' time, or in some short period of time. I hope that in Committee the Minister will consider Amendments to try to improve the basis of the Bill.

9.5 p.m.

Mr. Hugh Dalton (Bishop Auckland)

This Bill has not had a good Press—not even a good Tory Press—and today it has met with a good deal of criticism in this House, and not only from this side of the House. I do not think the right hon. Gentleman himself would claim that it is carrying us very far towards the satisfactory solution of this very difficult problem of local rating, and the submission I and many of my hon. Friends make is that, although this Bill moves only quite a short distance, so far as it does move it is by no means clear that it is moving in the right direction. Indeed, in spite of what was said by my hon. Friend the Member for Sowerby (Mr. Houghton), who is a great expert in this field, there are strong grounds for thinking that it is moving in a wrong direction.

I shall not speak at length tonight. The more detailed points can be considered in Committee—if the Bill survives the critical Division which will follow the right hon. Gentleman's speech. But there are one or two observations I wish to make on some of the wider issues which are in place on Second Reading, but which will scarcely be in place in Committee.

References have been made to derating and re-rating. On this I have not got a closed mind, but I think the arguments should be deployed in the right context, and that we should examine with great caution any proposal to modify the derating arrangements which the Government of the day might propose. Since some of my hon. Friends are rather eagerly in favour of re-rating that which has been derated, I only wish, without committing myself in any way, to sound one or two notes of warning.

In the first place, to re-rate fully, or even partly, the industrial and agricultural hereditaments which are now derated may affect the prices of some of the products of the derated producers. The hon. Member for Hertford (Mr. Walker-Smith), with whom I do not always agree—and I shall express disagreement with him on another point in a moment—was, in my view, quite rightly interpreting the great constructive Act of 1947 dealing with agriculture, when he said that it would be perfectly in order for farmers, when discussing what should be the guaranteed prices in the next price ascertainment period, to advance the fact that they were now having to pay rates, through re-rating, which they were not paying before. This might therefore operate to increase the cost of living, which the Government have already increased to a great extent. This might yet be a further step along the same road.

Mr. Gibson

A justification for more wages, too.

Mr. Dalton

That could follow also, of course. In other words, re-rating here might be a disorganising element in the life of the countryside and the agricultural economy.

In the second place, I represent a constituency within a Development Area, as do many of my hon. Friends and some hon. Gentlemen opposite. Under various statutes we have achieved reasonably full employment in the Development Areas, and although we have not yet sunk deeply into unemployment in those areas, yet there are many industries recently opened up there which are still precariously poised. Re-rating these people will quadruple the rates they pay; it will quadruple the rate burden on every industrialist we have coaxed into Development Areas in past years, and it is by no means clear that that might not result in serious unemployment.

In the third place, is anyone simple enough to believe that, if derating is done away with, the Exchequer assistance to local authorities will remain wholly unchanged? Not at all. "The Times," which is not friendly to this Bill, in the leading article yesterday which has already been mentioned, says at the end that we should get rid of this derating, and that then we shall be able to readjust and reduce the Exchequer grant in aid of the local authorities. That, of course, is the purpose of many people who are advocating the removal of derating. When derating was first introduced by Mr. Neville Chamberlain—and I remember the debates well—the argument was that the local authorities were to be deprived of a large amount of their rateable value; but it was argued—I do not say whether justifiably or not—that this derating would stimulate industry, would help agriculture and would increase employment.

But it was also said that, because we were depriving the local authorities of all this rateable value on industrial and agricultural hereditaments, we must make it up to them by further grants by way of compensation from the Treasury. Therefore, there was introduced what was known as the block grant, and further assistance was given by the Treasury to local authorities as compensation for loss of rateable value. Does any hon. Member think that this hard-pressed Government now in office would be able to resist the argument that, if they gave back to the local authorities the rateable value taken from them under derating, they must also reduce the aid given to the local authorities in general and must, in particular, deal with this Exchequer equalisation grant, which has been referred to several times today?

Quite certainly it could be assumed that the local authorities would lose from the Treasury almost as much as, and perhaps more than, they would get in additional resources through re-rating the derated hereditaments. That is my plain reading of a practical political issue. Therefore, I move to this point. Let us keep an open mind on this question of derating and re-rating and not plunge either for or against it, until we see the complete picture of what might be proposed in this connection, or alternatively, if it is really desired to argue strongly in favour of re-rating the derated, let it be made quite clear that those who advocate that—at any rate, those on this side of the House —are advocating it on the basis that the grants from the Treasury to the local authorities are not reduced. Otherwise, we may be caught in a trap, like the rabbit that did not see quite where it was going in the political moonlight.

Mr. Awbery

rose—

Mr. Dalton

I cannot give way this time. I have been very self-sacrificing to my hon. Friend who wanted to speak on this side.

The next point on which I wish to say a word or two concerns the question of the equalisation grant. That is, of course, the child of two parents—my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) and myself. It was we who devised it, and it was, I think, a very satisfactory outcome of our activities on behalf of the local authorities. I wish to challenge the argument put by the hon. Member for Hertford, when he said that this particular form of grant was wrong, or objectionable, unless we had absolute uniformity in valuation. I took a note of the phrase he used because I think it illustrated in an emphatic manner the weakness of his argument. I think that the hon. Gentleman said that this grant was absolutely dependent for its justification on uniform valuation. That is not my view.

My view is that that is perfection. In heaven all things are perfect, so they say, but on earth we have to put up with some imperfections. The basis of this grant is that we distribute to local authorities according to their need, those who are below the national average of rateable value per head being brought up to that average, and those who are above it receiving nothing because they do not need it. That is a very good and simple principle, even if there is some lack of uniformity in the valuation. This grant, as we are giving it now, is far preferable, as between the different local authorities and as establishing a national minimum of reasonable conditions, to the old block grant which it superseded or any other grant which the wisdom of officialdom or of politicians has yet devised.

In other words, I do not at all welcome the possibility of the basis of the grant being modified. I remain persistently in favour of it. I am anxious to see that uniform valuation which would give us the best possible distribution of the money available. But even without complete perfection. I am still a loyal parent of my intellectual offspring in this field. [An HON. MEMBER: "Child of the moonlight."] Having uttered these few warning observations, I now turn to the question of the 1948 valuation. "The Times" leader writer on Wednesday was not at all satisfied that the Minister had a case. He said: Because (so it is said) the system of valuing houses introduced in 1948 has broken down, the Government propose to return to the system which seemed to have broken down in 1938. There was a great outcry before the war, when in 1938, a uniform valuation according to the law as then existing was attempted. "The Times" continued: There was no similar outcry when Mr. Bevan's Act of 1948 sought to achieve uniformity in valuations…. I want to emphasise the fact that "The Times" pointed out that when the 1948 plan was brought in, although there was some political debate and opposition, it seemed a promising line of advance. I think that the Minister should give us a great deal more information, possibly in the form of a White Paper, so that we have the evidence in some detail of why it is now the view of the Minister that this change should be made.

If the 1948 provisions are swept aside, we shall be jettisoning the separate valuation of sites which was beginning under the formulae. My hon. Friend the Member for Clapham (Mr. Gibson) is an old supporter of the taxation and rating of site values. So am I, subject to an important condition which I think is now generally accepted. I am inclined to think there is a great deal to be said for increasing the available taxable resources of the local authorities by letting them place part of the rates upon the ground landlord and the owner of the site.

I am referring to what was said by the hon. Member for Oldham, East (Mr. Horobin) when I say that all this is, of course, subject to the planning legislation which has now been accepted in broad outline by all parties in the State. We must decide the use to which particular areas of land are to be put in the light of the national and also of the local interest. Some land must be reserved for housing and other land for industrial development and other land for open spaces and playing fields, national parks and the like, all of which in the past have not been adequately considered but which we believe we are now dealing with more skilfully.

Therefore, I do not think there is any conflict between the continued desire to shift some part of the burden of local taxation on to the ground landlords and the acceptance of the principle that the use to which specific areas of land shall be put is a matter in which the social and the national interest are so closely involved that there must be planning of land use, and enforcement of such plans.

Lord Rosebery, who was not a demagogue, whatever else he was, had something to say on this subject. The other day I was reading what the Prime Minister had to say about him in his book "Great Contemporaries." Lord Rosebery once advocated placing part of the tax for local government upon site values, saying, "I would like to make the great ground landlords skip." That was, I think, the nearest approach to demagogy that ever passed the lips of that great nobleman. Some Members of the House may still remember that noble Lord, and many will recall the almost religious crusade conducted on this subject by Mr. Lloyd George and others.

Now in a later and more prosaic time it is still true to say that the ground landlord is the person who gains most from the activities of his fellows and who contributes least. He ought, therefore, to make a larger contribution to the needs of others. That argument still stands, and for that reason it is a pity that this hopeful step towards these site valuations should be swept away together with the other provisions of the 1948 Act.

My hon. and learned Friend the Member for Kettering (Mr. Mitchison) made a very clear and excellent speech on the subject of the hypothetical tenant of a past age. He picked his words with care, grace and judgment and they can be read in HANSARD tomorrow by those who did not hear them. I shall not endeavour to repeat his arguments, but he and others have made a good case for trying to bring ourselves up to date, and moving a little nearer to the present time than this hypothetical tenant of 1939, hypothetical in himself and in his surroundings, and also in the conditions in which his house is being valued.

Is it not a very strange hypothesis that we take all the post-1939 developments, all the new roads and housing estates, factories, public houses, etc., and value the house as it would have been if they were all there in 1939? We do get ourselves into the most dreadful intellectual tangles in this matter. We have all had some responsibility in the past for it, but I hope we shall be able to move forward in future legislation towards a more current and realistic valuation for whatever local properties are to be taxed for local government finance.

I have two more points that I wish to put. The first point is one which might be pursued on the Committee stage of the Bill. It should be made quite clear whether or not rent control is being assumed in these valuations. It can be argued either way, but at the moment I am arguing against all obscurity. Here again, "The Times" leading article is very emphatic and sensible on the subject. We must say clearly whether this is the assumption or not.

Finally, there is a matter which is causing some considerable dismay and surprise in some hon. Members' minds. I hope I shall have the attention of the Minister to this matter. There is great concern about the way in which the administrative talents of some of the right hon. Gentleman's officers have been applied in carrying out hypothetical research of one sort and another, and the way in which they are seeking to go one step ahead of this House and carry out a number of valuations on a basis of which they hoped hereafter this House might approve. The Minister should have a further explanation to offer about that. I do not want to labour the point at this late stage. I merely say that it seems at first sight to be very unusual and undesirable, and later on the Public Accounts Committee may have something to say about it. That would be a later chapter of this story. Meanwhile, I hope that the Minister will give some account of what has been going on.

I think also that this strengthens the argument put by my hon. Friend the Member for Brighouse and Spenborougb (Mr. J. Edwards) and others of my hon. Friends, that we should have much more information on this point as well as on the other I have mentioned. We should have information in some detail with some sorting out of statistics, comparative tables and so forth, and areas divided one from another. We should have information not only as to why it is thought that the 1948 formula would give rise to intolerable anomalies but also why it is thought that this new device, on the basis of the researches carried out in the Department, would give satisfactory results. We ought to have two sets of statistics presented so that we can all draw our own conclusions from them.

Having said that, I repeat that we shall vote against this Bill because we think that it is too short a step, and probably in the wrong direction. In Committee we shall be somewhat limited as compared with today's debate and we shall do our best then to improve the Bill. But, wider than that, I hope that the Minister is considering future action. We know the difficulties, but whoever is in office at any moment has a unique responsibility and should not rest merely on the fact that all these things have not been done by others but should do them himself and concentrate his own attention upon them. I hope that all these difficult problems of rating are receiving continuing attention in the Department of which the right hon. Gentleman is the head. I shall now give way and leave him, I hope, enough time to answer the many points which have been put during the debate.

9.27 p.m.

The Minister of Housing and Local Government (Mr. Harold Macmillan)

It is, I think, traditional that on the Second Reading of a Bill one may discuss both what is in it and what is not in it. I do not complain. On the contrary, we are grateful for the considerable latitude allowed on this occasion in dealing not only with the main problems envisaged in the Bill but with some of the wider issues regarding the whole question of local government, local government finance and other matters. Naturally, perhaps, the hon. Member for Brighouse and Spenborough (Mr. J. Edwards) who opened for the Opposition confined himself more to the Bill itself than did the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), who has just wound up in such a charming speech. I have never heard the rejection of a Bill moved in such a friendly way. He covered the wider field.

Members of different parties naturally approach these matters with somewhat different backgrounds, but they are really not party questions—or they should not be so. So far as I am able I shall try to approach them from as impartial a view as I can. I shall try, in the phrase so familiar to my predecessor when he was in office—the familiar jargon of our office—to approach them "in a quasijudicial capacity," which has been more popularly defined as the condition of a man who is neither so drunk as a lord nor so sober as a judge.

The Parliamentary Secretary, in the admirably lucid and, I thought, cogent speech with which he introduced the Bill, said that it is of a very limited character at least compared to the whole range to which speeches have gone today. For instance, it does not deal with the derating of agriculture or industry. It does not deal with equalisation grants. It does not deal with local government reform, whether from the financial, the functional or, still less, the territorial point of view. It does not deal with the question of the expansion of the basis of taxation and of the revenue open to local authorities. It deals, as it says in the Short Title, with valuation for rating, and with nothing else. But it does not deal with all aspects even in this restricted field, for it does not deal with the question of who shall do the valuing. The 1948 Act transferred this from local rating committees to the Inland Revenue, and the Bill does not change that decision.

I thought the right hon. Gentleman opposite made an error—and this is the only slight complaint I have to make against him—when he quoted from "The Times," which we all do when it suits us, and perhaps not when it does not take such a friendly view. He quoted the sentence: There was no similar outcry when Mr. Bevan's Act of 1948 sought to achieve uniformity in valuations … by making the Inland Revenue the sole valuation authority. The right hon. Gentleman did not quote the intervening words: an aim retained in Mr. Macmillan's Bill.

Mr. Dalton

I did not want to be too long.

Mr. Macmillan

The Bill does not deal, either, with the valuation of public utilities. We may have to deal with that a little later on, when decisions over gas nationalisation are complete. It does not deal with offices, shops and all the rest. There is no change at all in the 1948 plan. It does deal, however, as it says, in the Long Title, with making new provision as respects the gross value for rating purposes of dwelling-houses and private garages and of certain hereditaments partly used as private dwellings; and for purposes connected with the matter aforesaid. The Parliamentary Secretary pointed out that this Bill does not depart, even in this sphere, from the purposes of the Act of 1948. For obvious reasons, Parliament decided that houses could not be assessed at current levels. In my view, they cannot now be so assessed. In 1948, Parliament decided that houses should be assessed at 1939 levels, and we adhere to that decision. I think it is right to say that the 1948 Parliament wanted to see uniformity in the technique of valuation all over the country. That was the aim, but that is not the same thing as to say that valuations will be equal, or that properties of the same general amenities will necessarily have the same value in different parts of these islands. Obviously, for instance, a small house in Westminster is worth more—so long as there is a free Parliament and a Division Bell can be fitted in it—than a small or even a larger and better house in an outer suburb. Uniformity is not the same thing as absolute similarity, nor is equity the same as equality.

What we all want—and if we have not got it, we think we have the nearest thing to it—is fairness as between one house and another. The British people want a thing to be fair. We want fairness as between one house and another in the same district, and especially in the same street. We also want, and that we hope to get by uniformity of the method of valuation, general fairness as between one district and another for other purposes of central government. We find, on an authority which I must accept, that the method and the purpose chosen in 1938 to achieve those objects, which we all want to achieve, require amendment, and it is the sole purpose of this Bill to make the necessary Amendment.

The hon. Member for Brighouse and Spenborough did not seriously defend the 1948 method as regards capital costs. He suggested that it might be altered, and the hon. Gentleman almost admitted that it had serious failings. I am not blaming anybody for that. Nobody could deny that this new method is simpler than the old and that it has the great advantage of being one method and not two methods. If we are going to approach a complicated problem like this, with all its different ranges of houses and different periods all over the country, it is better to have one method, even if there may be some failings or shortcomings in that method.

It is the difficulty which my hon. Friend the Member for Oldham, East (Mr. Horobin) pointed out in an admirable speech, and that was reinforced by the hon. Member for Sowerby (Mr. Houghton). I like to see the hon. Member for Sowerby here, whether in the House or in Committee. He always comes to my rescue, and he always knows all about it. He is the great expert on the Government side. He made a very helpful and a most informed speech because he really does know about this, and he is only saying in public what all my advisers have been saying to me in private.

I tell the House quite frankly that no one more dislikes the necessity for introducing this Bill than I do. I only do it, as my hon. Friend the Member for Old-ham, East pointed out, because we have to get on with the job. Ministers, unless very young or very innocent, hate introducing Bills. They are a great source of trouble and worry and interfere terribly with the proper job of the Minister which, in my view, is administrative and not legislative. I am frankly far more interested in building houses than in valuing them.

No one was more distressed than I when I was told some months after taking office that difficulties were being encountered in assessing dwelling-houses in accordance with the 1948 Act. Of course, to the tyro, perhaps, that phrase is not so full of meaning as it is to the more sophisticated politician. I knew and feared the consequences. "Difficulties are being encountered." That is a tremendous condemnation from devoted officials whose sole purpose in life is to make our legislation work, however ill-constructed, and who can nearly always make it work, however unworkable it is. "Difficulties are being encountered." Why, that is what a good civil servant would say on the last lap up Mount Everest. So when I hear them say that, I know what it is they mean—"We cannot make the darn thing work, try as we will. You will have to do something about it."

I said, "Is it as bad as Town and Country Planning? Oh, golly!" So— and this is the answer to the last point which the hon. Member repeated and which was started by his colleague the right hon. Member for Ebbw Vale (Mr. Bevan) who came in at the beginning of the debate with a kind of prologue and epilogue—on 1st August of last year I told the House with absolute frankness what had happened, and even repeated the fatal phrase. I added that we would see whether these difficulties could be overcome.

No one seemed to object to that. It was not said to be unconstitutional, and various suggestions were made, some of which I said I would look at, and one that we should alter the formula, that is, if the mathematical figure of five does not come out, try six, seven or eight. Having experience in this matter, I was shocked at that suggestion. If one alters figures like that in other walks of life it gets one into quite a lot of trouble. However, even this would not do the trick, and, of course, it could not, because the fundamental problem is that one cannot equate like with unlike. It is on that point that the hon. Member below the Gangway has put his finger, and it is really the whole purpose and reason for this Bill.

I asked Parliament to give us time for fresh thought, and in November we came and asked for a Bill to give us power to postpone the coming into force of the new valuations. We have tried in the time available to see whether we could find a solution to produce the greatest degree of equity and fairness which can be obtained. If the House gives us the Second Reading of the Bill, the new method will be subjected to the close and informed scrutiny of a Standing Committee, every Member of which will be an expert—except of course the Minister. There will be a lot of advice and criticism, but I have no doubt that we shall hammer out with good humour a good bit of work as the result of our joint labours.

Before coming to the more detailed points, there is one observation I want to make because it covers the only other serious attack made on the Bill. It was made with admirable skill by the hon. Member for Brighouse and Spenborough in a well-balanced and well-argued speech, as all his speeches are. It has been suggested, and the hon. Member repeated it, that somehow the Bill will have the effect of placing increased burdens of taxation upon those least able to bear them. I cannot accept that proposition. It is based upon a complete misconception, and it has only to be examined to show its fallacy.

Surely, in making any genuine assessment the important thing is that it should really try to be fair—not popular, as was pointed out in the speech of the hon. Member for Acton (Mr. Sparks), because these things are not popular—and I mean fair for everybody, not of course as to the result of each calculation, which will vary with each town and with each district, but as to the method by which the calculation is arrived at. Under the present Act, paradoxically enough, while the ultimate aim was to get uniformity of valuation between rating areas and the counties, it was difficult to get any reasonable degree of uniformity in a single road.

I shall, where I can, give to me Committee any detailed precedents which I think will be useful. As to the result of these investigations, I can assure hon. Members that we did not try to make them come out this way. I can assure the House that I do not want to have this Bill. It is a great bore. It is going to be a long time in Committee and is going to upset my normal administration. We want it only because we could not refuse to consider the examples from the 73 different towns or districts which produce results which will always have the same general effect of not giving a fair balance between different classes.

Mr. Dalton

Is the right hon. Gentleman going to accede to the request—

Mr. Macmillan

I will think about that. By "fair" I mean that the method should be really fair. It has been said by certain critics that because in some areas, where the great majority of houses in 1939 were still rent-restricted and only a few escaped—if I may use that expression— from rent control, the valuer would today have regard to the level of rents of the houses out of control as a proper indication of the free market value. I think that is the argument.

That is surely not so, and if it is so it is not going to be so. My right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot), with his great knowledge, put his finger on the point and was absolutely right about it. In such a district, the few houses which had escaped control would command a very high rent. That would be a scarcity and not a free market rent. By a free market I do not mean a black market. I mean a state where accommodation genuinely exists and where there is neither glut nor a scarcity, but a nice easy fit. If I live to see that sort of thing all over the country while I am Housing Minister, I shall, of course, say "Nunc Dimittis."

I am told that there is enough evidence in the country to show that if we operate a formula in this spirit we shall get, broadly speaking, a fairer system of valuation as between one house and another. It is important to get a fair basis between houses, but it is also important to get a fair basis between two or three kinds of old house. There is in these cases just as much ill-feeling between the person who has the higher valuation and the person who has the lower valuation, if they really have much the same kind of amenity. There will be, of course, an evening out of assessments. Some, no doubt, will rise, and some ought to rise, but I hope that we shall obtain a reasonable degree of equity.

Mr. Sparks

When the Minister talks about a reasonable rent, is he aware that the reasonable rent in most of Greater London and London is really a scarcity rent and that that is the difficulty?

Mr. Macmillan

I have tried to say what is appropriate on Second Reading on what I think the Bill means and what I want it to mean. When we come to the Committee stage I hope that the hon. Member will help me to secure that the Bill does mean what we want it to mean. That is the difference between the broad brush of Second Reading and the Committee stage.

I think that under this Bill something like real justice will be much more nearly done, not merely between area and area, or district and district, but also between man and man.

I should like to deal with various points which have been raised before I come to wider issues. My hon. Friend the Member for Angus, North and Mearns (Mr. Thornton-Kemsley) asked questions about the basis of valuations. He did not agree that the basis was fair. He asked whether it was fair that we should assess shops and offices on current valuation and assess houses at 1939 valuation. He asked whether this did not throw an unfair burden upon the commercial community.

The right hon. Gentleman the Member for Bishop Auckland asked me the other day, when we passed the delaying Bill, whether we ought not to introduce assessments in respect of shops and offices as soon as they were ready, even if assessments of dwelling-houses could not be brought in until much later. In a sense, these two points made by my hon. Friend and by the right hon. Gentleman just about cancel out, because if there is an injustice done to the commercial community by the dual basis of assessment, that injustice would certainly be considerably enhanced if we brought into effect assessments by stages. To the extent that a certain amount of house property is undoubtedly under-valued, it would increase inequities between the two classes of property. Therefore, I think that the best thing to do is to wait and bring the whole valuation into effect when the whole job is done.

We were asked when we hope to get the whole matter finished. I cannot answer that. I have got into so much trouble for making estimates that I will not make any more. I do not know when the Bill will receive the Royal Assent, so we must just watch and pray. Then there were some who felt that it would be better to return rating valuation to the rating authorities. I have thought a lot about this and I have a certain amount of sympathy with it. It might be argued, as I think was done by the hon. Member for Southall (Mr. Pargiter), that whilst the local authorities at least produced some kind of valuation, the central authority could produce no valuation at all. I think that the balance of advantage lies with the centralised system.

Mr. Pargiter

The right hon. Gentleman must have misunderstood what I said. I said that from the evidence available with regard to schools, even the Inland Revenue Department have not got over the difficulties of disparities in valuation.

Mr. Macmillan

Perhaps if I say that the one authority was not very much better than the other it would be a fair way of putting the hon. Member's argument.

But the overwhelming argument is that so much depends on our modern method of distributing grants and so forth between the central Government and the local government, and so much is likely to depend on it in future in any organisation of local government that I can foresee, that it is really important that there should be confidence among all concerned that the valuation on which those calculations are made are made by a single authority. I think that that outweighs all other difficulties.

I must refer once more to the question of the irregularity of which we have been accused. I shall explain once more exactly what we have done. I explained it to the House in August and I explained it again in November, and I think it was a perfectly straightforward account. We have continued to make a certain number of valuation tests in the old manner, and we have made some in the new manner of an exploratory kind. I Jo not see how anyone can complain of that on the part of the Inland Revenue so long as these tests are purely exploratory. The only thing which would be wrong would be if they tried to give such valuations legal effect when there was no legal power behind them.

I thought the right hon. Member for Bishop Auckland took this matter very nicely, as he always does. His colleague, the right hon. Member for Ebbw Vale, almost threatened me with impeachment. However, he has gone away, so I suppose he is quite happy about it. Nevertheless, I always observe what extraordinary sticklers for constitutional propriety and etiquette embryo revolutionists invariably are.

I should like to say something about the wider questions which have been raised. I make no complaint about the range of the debate. It has been of great value from every point of view. But, of course, it is much easier to pose these questions than to answer them. While it it the duty of Opposition and back bench Members on the Government side as well to pose problems, it is the privilege of Ministers to answer them in their own time. I am sure that nobody who raised these great issues really expected that at the end of a Second Reading debate on a Bill of a comparatively limited character I should announce great decisions of public policy involving almost every Department of State. I can only say that we have given, and shall give, most careful thought to the points which have been raised on both sides of the House and which have been very well put from various points of view. We shall consider them as carefully as we can in framing our future plans.

The first question was that of derating. The hon. Member for Clapham (Mr. Gibson) made an eloquent appeal that we should immediately abolish the derating system, and other Members took the same view. It has been widely canvassed, of course, and I should like to recall the circumstances and the climate in which derating was first suggested. It was when British industry and agriculture were struggling with considerable economic and monetary difficulties affecting not only Great Britain but the whole world, and derating, by being concentrated upon productive industry and upon the transport of certain heavy goods, undoubtedly gave a considerable stimulus.

Its second purpose was to deal with another question. Incidentally, I am glad the right hon. Member for Bishop Auckland recalled it, because it was almost the most important purpose. He and I, alas, are among the older Members of the House. That second purpose was to deal with the danger that areas particularly affected by depression with a heavy burden of rates, which fail to attract those new and lighter industries upon which their future must partly depend, for naturally they would go to the more prosperous and less rated localities.

I think derating has helped, assisted by planning and the location of industry and other measures all working along the same lines. Suddenly to alter this whole system and everything that has grown up beneath it would, I think, put new strains and stresses on our economic life which might be very dangerous. It should not. therefore, be done, if it is done at all, without very considerable care, thought and study. But I should have thought that if there had been a proper time to make the change—I think my hon. Friend the Member for Oldham, East pointed this out—it surely would have been in the conditions of five or six years ago. Then there was the great post-war boom. Then there was the sellers' market.

At that time both Germany and Japan were virtually out of the export market, which they are now re-entering, and British exporters, whether of textiles, engineering products or anything else, were on a very good wicket. At that time there was some pressure from hon. Members opposite to take that course, but it was not taken. I wonder whether it is now the considered and official view of the party opposite that agricultural production should carry the full cost of rating with all that may be implied to the cost of living, and that British industry should carry once more the full burden of rating, regardless of its effect on such exporting areas as Lancashire?

I do not know whether that is the official view. From what the right hon. Member for Bishop Auckland said tonight I rather thought that there had been some signs of alarm in high quarters in the party opposite. He certainly did not give his hon. Friends the green light. I thought he showed the red light—even if it was the moonlight—when he said that there was a danger that his hon. Friends had been caught like rabbits in a trap. I have here a Motion asking for an early day—which the Lord Privy Seal may be able to give—which says: That this House takes note of the rising cost of local government and the general increase in rates; considers that industry and agriculture should pay their due share of the cost of the local government services which they use; and is of opinion that industrial and agricultural hereditaments should no longer be derated. That was signed by 159 "rabbits." The keeper did his best, but they had been in that trap for something like three weeks. It is not fair.

Other matters have been mentioned, including the question of the Equalisation Fund. All I will say about that is that I have received deputations from Members of all parties. This is not a party question. I have seen Members who happen to represent non-receiving

authorities, asking to share in the Fund, and Members representing receiving authorities, asking that their money should not be given to anybody else.

There was also the question of different methods of taxation—local Income Tax and the rest. Finally, there was the question whether we should appoint a Royal Commission. Some were in favour of it and some were against. The hon. and learned Member for Kettering (Mr. Mitchison) was against it and my hon. Friend the Member for Oldham, East was a little in favour of it. Royal Commissions are sometimes used to delay and sometimes to expedite the creation of a policy. I am not quite sure for which purpose this Royal Commission was recommended.

Passing from these great issues, I still believe that, on the narrow issue, this is the only thing we could do. We did not particularly want to do it, but we have to do it; it is a duty we must perform. I think this Bill is the best way of getting some sensible rating assessment system. Any inequities and difficulties can be hammered out in Committee. I believe the House of Commons will be well advised to give this Bill a Second Reading.

Question put, "That the Bill be now read a Second time."

The House divided: Ayes, 181; Noes, 159.

Division No. 179.]	AYES	[9.58 p.m.
Aitken, W. T.	Cooper, Sqn. Ldr. Albert	Harrison, Col. J. H. (Eye)
Allan, R. A. (Paddington, S.)	Cooper-Key, E. M.	Harvey, Air Cdre. A. V. (Macclesfield)
Arbuthnot, John	Craddock, Beresford (Spelthorne)	Harvey, Ian (Harrow, E.)
Ashton, H. (Chelmsford)	Crookshank, Capl. Rt. Hon. H. F. C.	Harvie-Watt, Sir George
Baker, P. A. D.	Crosthwaite-Eyre, Col. O. E.	Heath, Edward
Baldock, Lt.-Cmdr. J. M.	Crouch, R. F.	Hill, Dr. Charles (Luton)
Baldwin, A. E.	Crowdar, Sir John (Finchley)	Hirst, Geoffrey
Barber, Anthony	Deedes, W. F.	Holland-Martin, C. J.
Baxter, A. B.	Digby, S. Wingfield	Holt, A. F.
Beamish, Maj. Tufton	Dodds-Parker, A. D.	Hope, Lord John
Bevins. J. R. (Toxteth)	Donner, P. W.	Hornsby-Smith, Miss M. P.
Birch, Nigel	Doughty, C. J. A	Horobin, I. M.
Bishop, F. P.	Drayson, G. B.	Howard, Gerald (Cambridgeshire)
Black, C. W.	Drewe, C.	Howard, Hon. Greville (St. Ives)
Bossom, A. C.	Duncan, Capt. J. A. L.	Hudson, Sir Austin (Lewisham, N.)
Boyd-Carpenter, J. A.	Duthie, W. S.	Hulbert, Wing Cdr. N. J.
Boyle, Sir Edward	Eccles, Rt. Hon. D. M.	Hyde, Lt.-Col. H. M.
Braithwaite, Sir Albert (Harrow, W.)	Elliot, Rt. Hon. W. E.	Jenkins, Robert (Dulwich)
Braithwaite, Lt.-Cdr. G. (Bristol, N.W.)	Erroll, F. J.	Johnson, Erie (Brackley)
Brooke, Henry (Hampstead)	Fisher, Nigel	Jones, A. (Hall Green)
Brooman-White, R. C.	Fleetwood-Hesketh, R. F.	Joynson-Hicks, Hon. L.W.
Browne, Jack (Govan)	Foster, John	Kerr, H. W.
Buchan-Hepburn, Rt. Hon. P. G T.	Fraser, Hon. Hugh (Stone)	Lancaster, Col. C. G.
Bullus, Wing Commander E. E.	Fraser, Sir Ian (Morecambe & Lonsdale)	Langford-Holt, J. A.
Butcher, Sir Herbert	Galbraith, Rt. Hon. T. D. (Pollok)	Law, Rt. Hon. R. K.
Campbell, Sir David	Garner-Evans, E. H.	Leather, E. H. C.
Carr, Robert	George, Rt. Hon. Ma). G. Lloyd	Legge-Bourke, Maj. E. A. H.
Cary, Sir Robert	Godber, J. B.	Linstead, H. N.
Channon, H.	Gower, H. R.	Lloyd, Maj. Sir Guy (Renfrew, E.)
Clarke, Col. Ralph (East Grinstead)	Graham, Sir Fergus	Lockwood, Lt.-Col. J. C.
Clarke, Brig. Terence (Portsmouth, W.)	Grimond, J.	Longden, Gilbert
Cole, Norman	Grimston, Sir Robert (Westbury)	Lucas, Sir Jocelyn (Portsmouth, S.)
Colegate, W. A.	Harris, Frederic (Croydon, N)	Lucas, P. B. (Brentford)
Lucas-Tooth, Sir Hugh	Peyton, J. w. W.	Sutcliffe, Sir Harold
McCorquodale, Rt. Hon. M. S.	Pickthorn, K. W. M.	Teeling, W.
McKibbin, A. J.	Pitman, I. J.	Thomas, Rt. Hon. J. P. L. (Hereford)
Mackie, J. H. (Galloway)	Raikes, Sir Victor	Thomas, Leslie (Canterbury)
Maclay, Rt. Hon. John	Redmayne, M.	Thomas, P. J. M. (Conway)
Macleod, Rt. Hon. lain (Enfield, W.)	Rees-Davies, W. R.	Thompson, Lt.-Cdr. R. (Croydon, W.)
Macmillan, Rt. Hon. Harold (Bromley)	Renton, D. L. M.	Thornton-Kemsley, Col. C. N.
Markham, Major S. F.	Robinson, Roland (Blackpool, S.)	Tilney, John
Marlowe, A. A. H.	Roper, Sir Harold	Touche, Sir Gordon
Marples, A. E.	Ropner, Col. Sir Leonard	Turner, H. F. L.
Marshall, Douglas (Bodmin)	Russell, R. S.	Turton, R. H.
Marshall, Sir Sidney (Sutton)	Salter, Rt. Hon. Sir Arthur	Vane, W. M. F.
Maude, Angus	Savory, Prof. Sir Douglas	Vaughan-Morgan, J. K.
Maydon, Lt.-Comdr. S. L. C.	Schofield, Lt.-Col. W.	Vosper, D. F.
Medlicott, Brig. F.	Scott, R. Donald	Wade, D. W.
Mellor, Sir John	Shepherd, William	Wakefield, Edward (Derbyshire, W.)
Mott-Radclyffe, C. E.	Simon, J. E. S. (Middlesbrough, W.)	Walker-Smith, D. C.
Nabarro, G. D. N.	Smithers, Peter (Winchester)	Ward, Miss I. (Tynemouth)
Nicolson, Nigel (Bournemouth, E.)	Smithers, Sir Waldron (Orpington)	Waterhouse, Capt. Rt. Hon. C.
Oakshott, H. D.	Snadden, W. McN.	Williams, Gerald (Tonbridge)
O'Neill, Phelim (Co. Antrim, N.)	Soames, Capt. C.	Williams, Sir Herbert (Croydon, E.)
Ormsby-Gore, Hon. W. D.	Spearman, A. C. M.	Williams, Paul (Sunderland, S.)
Orr-Ewing, Charles Ian (Hendon, N.)	Speir, R. M.	Williams, R. Dudley (Exeter)
Orr-Ewing, Sir Ian (Weston-super-Mare)	Stevens, G. P.	Wills, G.
Osborne, C.	Steward, W. A. (Woolwich, W.)	Wilson, Geoffrey (Truro)
Partridge, E.	Stewart, Henderson (Fife, E.)	Wood, Hon. R.
Perkins, W. R. D.	Strauss, Henry (Norwich, S.)
Peto, Brig. C. H. M.	Summers, G. S.	TELLERS FOR THE AYES:
		Mr. Studholme and Mr. Kaberry.
NOES
Acland, Sir Richard	Greenwood, Anthony (Rossendale)	Pannell, Charles
Adams, Richard	Greenwood, Rt. Hn. Arthur (Wakefield)	Pargiter, G. A.
Allen, Scholefield, (Crewe)	Grey, C. F.	Paton, J.
Attlee, Rt. Hon. C. R.	Griffiths, Rt. Hon. James (Llanelly)	Plummer, Sir Leslie
Awbery, S. S.	Hall, John T. (Gateshead, W.)	Popplewell, E.
Bacon, Miss Alice	Hamilton, W. W.	Price, Philips (Gloucestershire, W.)
Bartley, P.	Hannan, W.	Proctor, W. T.
Bellenger, Rt. Hon. F. J.	Hargreaves, A.	Reeves, J.
Benn, Hon. Wedgwood	Hastings, S.	Reid, William (Camlachie)
Bevan, R. Hon. A. (Ebbw Vale)	Hayman, F. H.	Robens, Rt. Hon. A.
Blackburn, F.	Healey, Denis (Leeds, S.E.)	Robinson, Kenneth (St. Pancras, N.)
Blenkinsop, A.	Herbison, Miss M.	Rogers, George (Kensington, N.)
Blyton, W. R.	Hobson, C. R.	Shackleton, E. A. A.
Bowden, H. W.	Holman, P.	Shawcross, Rt. Hon. Sir Hartley
Bowles, F. G.	Holmes, Horace (Hemsworth)	Short, E. W.
Brockway, A. F.	Hughes, Emrys (S. Ayrshire)	Silverman, Julius (Erdington)
Brown, Rt. Hon. George (Belper)	Hughes, Hector (Aberdeen, N.)	Simmons, C. J. (Brierley Hill)
Brown, Thomas (Ince)	Hynd, H. (Accrington)	Skeffington, Arthur
Burke, W. A.	Hynd J. B. (Attercliffe)	Slater, J. (Durham, Sedgefield)
Butler, Herbert (Hackney, S.)	Irving, W. J. (Wood Green)	Smith, Norman (Nottingham, S.)
Castle, Mrs. B. A.	Janner, B.	Sorensen, R. W.
Chetwynd, G. R.	Jay, Rt. Hon. Rt. Hon. D. P. T.	Sparks, J. A.
Clunie, J.	Jeger, Dr. Santo (St. Pancras, S.)	Stewart, Michael (Fulham, E.)
Collick, P. H.	Johnson, James (Rugby)	Summerskill, Rt. Hon. E.
Corbet, Mrs. Freda	Jones, David (Hartlepool)	Swingler, S. T.
Cove, W. G.	Jones, Frederick Elwyn (West Ham, S.)	Taylor, John (West Lothian)
Craddock, George (Bradford, S.)	Jones, Jack (Rotherham)	Taylor, Rt. Hon. Robert (Morpeth)
Crosland, C. A. R.	Keenan, W.	Thomas, David (Aberdare)
Crossman, R. H. S.	King. Dr. H. M.	Thomas, Ivor Owen (Wrekin)
Dalton, Rt. Hon. H.	Lee, Frederick (Newton)	Thorneycroft, Harry (Clayton)
Davies, Ernest (Enfield, E.)	Lee, Miss Jennie (Cannock)	Thornton, E.
Davies, Harold (Leek)	Lever, Leslie (Ardwick)	Thurtle, Ernest
de Freitas, Geoffrey	Lewis, Arthur	Turner-Samuels, M.
Deer, G.	Lindgren, G. S.	Ungoed-Thomas, Sir Lynn
Delargy, H. J.	Lipton, Lt.-Col. M.	Viant, S. P.
Donnelly, D. L.	MacColl, J. E.	Wallace, H. W.
Driberg, T. E. N.	McKay, John (Wallsend)	Weitzman, D.
Ede, Rt. Hon. J. C.	McLeavy, F.	Wells, Percy (Faversham)
Edelman, M.	Mann, Mrs. Jean	Wheeldon, W. E.
Edwards, John (Brighouse)	Marquand, Rt. Hon. H. A.	White, Mrs. Eirene (E. Flint)
Edwards, W. J. (Stepney)	Mason, Roy	Whiteley, Rt. Hon. W.
Evans, Albert (Islington, S.W.)	Mayhew, C. P.	Wigg, George
Evans, Edward (Lowestoft)	Mikardo, Ian	Wilkins, W. A.
Evans, Stanley (Wednesbury)	Mitchiton, G. R.	Willey, F. T.
Fienburgh, W.	Moody, A. S.	Williams, Rev. Llywelyn (Abertillery)
Finch, H. J.	Morley, R.	Williams, Ronald (Wigan)
Fletcher, Eric (Islington, E.)	Morris, Percy (Swansea, W.)	Williams, W. R. (Droylsden)
Follick, M.	Morrison, Rt. Hon. H. (Lewisham, S.)	Williams, W. T. (Hammersmith, S.)
Foot, M. M.	Moyle, A.	Winterbottom, Ian (Nottingham, C.)
Freeman, John (Watford)	Murray, J. D.	Winterbottom, Richard (Brightside)
Gaitskell, Rt. Hon. H. T. N.	Oliver, G. H.	Yates, V. F.
Gibson, C. W.	Oswald, T.
Glanville, James	Padley, W. E.	TELLERS FOR THE NOES;
Gordon Walker, Rt. Hon. P. C.	Palmer, A. M. F.	Mr. Pearson and Mr. Arthur Allen.

Bill read a Second time, and committed to a Standing Committee.