RATEABLE VALUE (STATUTORY DEDUCTIONS) (Hansard, 22 February 1957)

§ Mr. Cyril W. Black (Wimbledon)

I want to raise the somewhat unexciting but nevertheless important question of differential deductions from gross to rateable value. The House will know that the method of arriving at rateable value in assessing properties is by deducting from the gross value the appropriate deduction set out in the Second Schedule of the Rating and Valuation (Miscellaneous Provisions) Act, 1955.

In the case of gross assessments up to £20 and over £120, the scale of deductions is the same for properties all over the country, but it may possibly surprise the House to know that in the case of gross assessments between £20 and £120 there are two scales of deduction, one for the Administrative County of London and the other for the remainder of the country. We thus have the position that there may be two exactly similar houses, which have the same gross value, one just inside the London boundary and the other just outside the London boundary, and which have different rateable values, the house inside the London boundary having a lower rateable value and the house outside the London boundary having a higher rateable value. That difference in rateable value in the case of houses with a similar gross value can be as much as £4.

So far as general rates are concerned, it does not seem to me to matter very much that these differences should exist, because a lower rateable value means a higher poundage and vice versa, but in the case of other rates which are based upon rateable value and are levied over a wider area than London, the existing position is very unfair indeed to ratepayers outside the boundaries of the administrative County of London, as I hope, quite briefly, to be able to show.

If the London scale of deductions were at all levels similiar to that operating in other parts of the country, it is estimated—and I think reliably estimated—that 823 the rateable value of London would be at least £800,000 higher than in fact it is, or, to put it in another way, because of these differential deductions from gross to rateable value London, relative to the remainder of the country, is under-assessed to the extent of at least £800,000 rateable value. I want to mention, quite briefly, some of the consequences which follow from that.

First, there is the Metropolitan Police rate. The area served by the Metropolitan Police, is of course, very much greater than that of the administrative County of London, and as a result of the differentiation in the deductions from gross to rateable value, London is underpaying in respect of the Metropolitan Police to the extent of about £64,000 a year, that burden being transferred to the ratepayers in those parts of the Metropolitan Police area which are outside the administrative county. There is thus imposed on the outside areas an unjust additional burden which is, I suggest, manifestly unfair to the ratepayers there.

The water rate is levied by the Metropolitan Water Board and again, the area served by that Board is very much greater than that of the administrative County of London. According to my calculations, which I believe to be approximately correct, the effect of the present position is that the London ratepayers pay £56,000 a year too little to the Board, the deficiency in their payments being made up by an overcharge on the ratepayers outside the administrative County of London who are within the area of the Metropolitan Water Board. That, again, is very unfair.

A greater injustice arises in connection with the Wimbledon and Putney Commons rate, a matter of particular concern to my constituency of Wimbledon. Under quite an old Act, a special rate is levied upon the ratepayers in the areas surrounding the Wimbledon and Putney Commons, and goes to the funds of the conservators, who are charged under the Act with the upkeep, maintenance and administration of the commons.

The levy of those rates falls mainly upon the Wandsworth and Wimbledon rate payers, but the result of these differential deductions is that the ratepayers of Wandsworth who pay the Wimbledon and Putney Commons rate 824 pay too little, while my constituents have the burden transferred to them and pay too much. It is a matter of very real grievance to them.

In this connection perhaps the most important aspect of all arises in respect of the effect on the education grant made to the local education authorities. As I have said, the rateable value of London is about £800,000 too low, by reason of the increased scale of deductions—from which London benefits—from gross to rateable values between a gross of £120 and a gross of £20 a year. That depression of the rateable value in London, which affects the 1d. rate, also means that London gets a higher education grant than would otherwise be the case, as the grant, as aft present calculated, is, of course, based upon a formula which includes a reference to rateable value. For the purpose of the grant it is an advantage to a local authority to have a low rateable value because the grant is more where the rateable value is low than where it is high.

I have endeavoured to find an explanation of these differential deductions, but it is somewhat difficult to trace the whole history of the matter. So far as I can find, the differentials were brought into existence a good many years ago on account of the fact that it was contended that inasmuch as wages in the building industry were higher in London than outside London, and the principal reason for the deduction from gross to rateable value is to provide for the cost of repairs to the houses on which rates are levied, it was therefore right to adopt a more generous system of deductions in London than in other parts of the country.

Whatever merit there may have been in that argument many years ago, it is certainly not an argument that is in any way adequate today for the maintenance of the existing state of affairs. In the first place, the higher rates of wages paid in the building industry are not confined to the administrative County of London but extend over a very much wider area and take in a large number of the outlying districts which are, as I have shown, prejudiced by the existing arrangement; and if it be the explanation that the higher deduction is in order to cover the heavier cost of repairs, why is it confined to properties with a gross value of over £20 and under £120? The increased cost of 825 repairs is a factor that operates equally in the case of properties where the gross value is under £20 or where the gross value is over £120. Therefore, I suggest that there can be no merit in that argument in support of the present differential deductions.

There is, in my submission, no justification for a continuation of this differentiation. As the House will know, the Minister may, by Order, vary the deductions. It is open to him, under the existing law, to do so at any time. Having drawn attention to what I think must be admitted to be an injustice, I want to ask the Parliamentary Secretary to make representations in this matter to his right hon. Friend with a view to an Order being made varying the deductions and bringing the deductions in London into line with the deductions outside the London area.

If for any reason the Minister does not feel it expedient at this moment to make such an Order, may I at least ask that he should do so by not later than the time when the new financial arrangements with the local authorities are brought into force, because it is quite clear that any financial arrangements between the central Government and the local authorities which are based in any way by reference to rateable value require as a matter of justice between the different local authorities that there should be uniformity of assessment. That uniformity, I hope I have demonstrated, does not exist at the moment so far as London and the rest of the country are concerned, by reason of these differential deductions.

Therefore, if justice is to be done, it is imperative that this matter should receive attention before any new system of local government finance is brought into existence.

§ The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. R. Bevins)

My hon. Friend the Member for Wimbledon (Mr. Black) has raised the question of the differences between the scales of deductions from gross value to net value for properties in the County of London and elsewhere. I do not propose to argue the statement of the facts as given by my hon. Friend to the House, because, substantially, they are correct, and I do not 826 want to be repetitive and take up the time of the House.

The first question we must ask ourselves is this: what is the reason for the statutory deductions from gross annual value? The Parochial Assessment Act, 1836—I am sorry to have to go back so far—provided that rates must be made on an estimate of annual value, that is to say, of the rent at which property might reasonably be expected to let from year to year free of all usual tenants' rates and taxes, and tithe commutation rentcharge if any, and"— these being the important words— deducting therefrom the probable average annual cost of the repairs, insurance and other expenses, if any, necessary to maintain them in, a state to command such rent. Those last words give the reason for the operation of the scales of statutory deductions. They do not, of course, explain why there is one scale for the County of London and quite a separate scale for the rest of the country.

I must say at once that I do not pretend to know whether the difference between these two scales is based on some purely rational factor, or is an accident of history. It has been argued by some people that the cost of repairs in the London area is greater than in the rest of the country. That may or may not be the case. The fact of the matter is that these differential scales of deduction do exist, although, as my hon. Friend has said, in their application to individual, ratepapers they are not particularly large or particularly important.

It is true, as my hon. Friend said, that this differentiation which, of course, affects net annual values on which rates are paid, has one or two rather curious effects. The first is that in the case of the Metropolitan Police and the Metropolitan Water Board, which levy charges both within and without London, it is possible to find cases where, as in the hon. Gentleman's constituency, the statutory deductions are lower, and the contribution of the ratepayer living in a certain type of house will be rather more than the contribution of a ratepayer who lives in exactly the same sort of house but who happens to live across the road on the other side of the administrative boundary.

827 There is not a great deal in it. In fact, the maximum difference at any point in the statutory deductions between Wandsworth and Wimbledon is a matter of only £4 a year. That arises in the range between gross values of £48 and £102; in the lower ranges it falls to £1, and in the higher ranges also it falls to £1. There is, of course, a psychological effect, also. A ratepayer in my hon. Friend's constituency, for example, may find that his neighbour living in exactly the same sort of house enjoys a lower rateable value, and may feel aggrieved. But that is very largely a matter of psychology, and I do not think it inflicts any undue hardship on my hon. Friend's constituents.

If the scales for London and the rest of the country were to be brought into line, those people who live just outside London, but who contribute to the Metropolitan Police and Metropolitan Water Board, would, no doubt, be a little better off than they are at the present time; but it would lead also to a shift in the rate burden within rating areas themselves, because people whose statutory deductions were reduced would lose to the benefit of other ratepayers in the same area.

As I said, I am not prepared to say this afternoon whether the cost of repairs, insurance, and so on, necessary to maintain properties is higher in London than it is outside. It may be. I should be putting myself in an entirely ridiculous position today if I were to argue that the cost of repairs in Wimbledon is lower or higher than in Wandsworth. That would be quite untenable.

828 My right hon. Friend has the power to alter scales of statutory deductions by Order which would, I think, require the affirmative Resolution of both Houses. But he can do so only if he wants to alter the scales for one or more classes of property in the country as a whole, in London as a whole, or in the country outside London generally. That, of course, would involve the laying of an Order, which would mean alterations affecting the statutory deductions and, therefore, the rateable values of literally millions of properties throughout the country. I am sure that my hon. Friend will agree that it would be quite unthinkable to undertake an action of that sort between general revaluations of property.

As my hon. Friend knows, we are due, in the absence of any new legislation, to see houses assessed at current rental values at the next revaluation, which is due to take place in 1961. If houses are to be reassessed, alterations, in the rates of deductions will have to be considered before that is done. That, I think, would be the time to review these differential scales. Putting the matter quite simply. I entirely agree with my hon. Friend that these differences exist. Whether they are rational or not, I am not prepared to say. At the moment it is not feasible for my right hon. Friend to rectify what may prove to be an anomaly, but we shall certainly look at it before revaluation in 1961.