§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hughes-Young.]
§ 8.25 p.m.
§ Mr. Denzil Freeth (Basingstoke)
After the immensely successive and very speedy excitements of the last few minutes, perhaps we might consider in calm—not only in calm, but also almost in solitude—the rating for valuation purposes of petrol filling stations. I wish to raise this problem which came to my notice in connection with a particular constituency case. It was the case of my constituent, Mr. H. L. Baird of Andover, whose appeal to the Lands Tribunal is now sub judice and to which I do not now wish to refer. I do not wish to argue against a particular case but against the general principle of the way in which petrol stations are assessed for the purpose of finding their gross rateable value.
I wish to refer to the case of Mr. Baird because of the method used by the Inland Revenue valuation officer at the appeal by my constituent at a valuation court held in Andover in January, which was fully quoted in the issue of the Andover Advertiser of 11th January this year. With your permission, Mr. Deputy-Speaker, I wish to quote from the report in that newspaper what the valuation officer, Mr. D. W. Wand, said on that occasion. That newspaper stated that Mr. Wandreferred to a method used by valuation officers when they assessed garages, businesses, which he thought were among the most difficult to rate. The officers used to value the buildings, the storage tanks and the forecourt, and 'that was the answer'. 'Now we value the buildings and estimate the throughput of petrol and apply prices to that throughput'. Mr. Wand's 'price list' was: for every 50,000 gallons the rate is £2 each thousand; 50,000 to 100,000 gallons £2 10s. each thousand; from 100,000 to 150,000 gallons £3 each thousand; and for over 150,000 £3 10s. each thousand.In other words, the Inland Revenue officer stated at that valuation court that Inland Revenue officers formerly valued the site, the amenities and fittings of the petrol station and then, to quote Mr. Wand, "That was the answer". Now, according to Mr. Wand:We value the buildings and estimate the throughput of petrol and apply prices to that throughput.650 I wish to ask my hon. Friend why the method was altered, when the method was altered, and whether the alteration was published or done purely in a hole-in-the-corner method?
I suggest that to assess the rateable value of petrol retail pumps upon the throughput of petrol is grossly unfair, first because it is almost the only type of business which is rated upon throughput or turnover or total production. If I were to open a store for the selling of toys or clothing, my store would be rated for rateable value upon the building which I occupied, upon the site which I occupied, upon how likely it was to attract trade and therefore how popular it would be, and upon what its rent might be. My store would be assessed upon the fittings, the amenities and so on. But it would not be assessed upon the amount of clothing or toys which I sold.
Turning to a business about which I have some knowledge, where profit is a very small margin of total turnover, such as a stockbroker's business, we find that a stockbroker's office is rated for valuation purposes upon the type of office that it is, upon its floor space and upon the site which the office occupies. It is not rated upon turnover, which in a business with a very low percentage profit on turnover would obviously be grossly unfair. Yet here, irrespective of the rate of profit which is earned upon the turnover, upon the throughput of petrol, the Inland Revenue has apparently decided—a decision applied almost only to this type of business—that retail petrol stations shall be rated almost mainly upon the throughput of the petrol which they have sold.
The second reason I believe this method of assessment to be grossly unfair is that throughput does not depend solely on the station which one takes over. I should have thought that one of the basic ideas of rating was that the rateable value of a building was the same for whatever business purpose that building was used, no matter how great the success or the failure of the owner of that business. Throughput does not depend simply upon the excellent position of the site. It does not just depend upon the number of buildings upon it, or upon the amenities, or even upon the fittings. It depends first of all upon the initiative and the enterprise of the man 651 running that business, for instance whether he goes out to get business, whether perhaps he stocks other things besides petrol which people will pull in to buy, whether he gets a licence to sell cigarettes, whether he does repairs. Throughput depends, first of all, very largely upon initiative and enterprise.
It depends, secondly, upon the service which is given. When I have found a garage which has given me good service —if people have rushed out to clean my windscreen and have polished it, if they have asked whether the car needed air or water and if they have looked whether I needed oil—I have made a mental note to try to call at that garage again if I happen to be passing. But if they did not bother about my windscreen and if, when I asked them to check my tyres, they replied, "There is the machine; you can do it yourself," I have made a mental note not to return there. Throughput therefore depends upon the service given.
Thirdly, throughput depends largely upon the hours when a business is open. Not very far from my constituency there is a petrol station which as far as I am concerned is permanently shut. It is virtually never open at week-ends. Frankly, when I pass down that road, however much I need petrol—and I hope I never need it so badly that I have to stop within the next mile—I do not slow down at that petrol station because it seems to me likely that it will remain shut.
Let us take the extreme example of two petrol stations within half-a-mile of each other on a good stretch of one of our main roads at a time when there is no petrol rationing. The owner or manager of one petrol station may say to himself on a Saturday afternoon, "I am going off to play football", or "I will take my family into the local town to do the shopping and to go to the market ". He may also say, "I do not open on a Sunday because I like to play golf that day". His turnover will not be as great as that of the man who is open all the week-end and stays open as long as possible to pick up the maximum amount of trade. Throughput depends not only upon the site but upon the hours which the garage proprietor or manager is prepared to stay open.
Finally, throughput can depend very largely on the personal contacts of the 652 owner or manager of the garage. After all, selling petrol is like doing most other sorts of business, in which we know that personal contacts can mean a great deal. If a garage manager has become friendly with the manager or the owner of a fleet of lorries, so that those lorries make a regular point of filling up at his garage every time they pass, he has, of course, a better business than if he merely sits down and does not attempt to go out to get that sort of trade. Throughput depends on the personal contacts, initiative, enterprise, service and hours of opening of the manager or owner of the garage. And those are things with which, I contend, rating valuation has nothing whatever to do.
In addition to these points, I submit that an assessment for rating purposes on throughput is unfair, particularly in view of the table of progressive charges given by Mr. Wand and quoted in the Andover Advertiser. Thus, if we take the lowest charge, that up to 50,000 gallons, the rateable value would be £2 per thousand; between 50,000 and 100,000 gallons it would be £2 10s., and between 100,000 and 150,000 gallons it would be £3 per thousand gallons.
This particular progression completely ignores labour costs. One man may be able to run a petrol station which sells up to 50,000 gallons a year, and cope with that in comfort. If the sales go up to 70,000 gallons he cannot cope with it himself, and has to employ a man to assist him. When a business gets to that awkward stage of expansion, when it is just too much for one man to manage and is not really big enough to pay for two men, it is a difficult time in the history of the expansion of that business.
Under the scheme drawn up by my hon. Friend's valuation officer, not only does the man have the difficulty in an expanding business of taking on and paying a man but, in addition, he moves up from the £2 to the £2 10s. per thousand gallon category, and his rateable value goes up from £100 to £175 by virtue of that relatively small, 40 per cent. increase in turnover—the profit on which is probably completely wiped out by the taking on of another man. Nevertheless, according to Mr. Wand's assessment, his rateable value goes up by 75 per cent. Even my hon. Friend cannot make me believe that that is right.
653 I suggest that the Inland Revenue is not even consistent in insisting on this method of turnover, or throughput, as a means of assessing rateable value. The Inland Revenue takes only the throughput on petrol. It does not take the turnover on spare parts sold, or the turnover on repairs done; and it does not, for one moment, take the throughput of the cigarettes and matches sold. Why not—if throughput is to be the peculiarity of the rating assessment of garages?
Basically, what the Inland Revenue is doing is putting an extra tax on success. Turnover has a direct relationship with profits. The bigger the turnover, then, roughly speaking, the bigger the profits. And if the profits are big, they are taxed by Income Tax. They may be taxed through Surtax, and they may be taxed through Profits Tax. We have enough taxes upon success, but Income Tax, Surtax and Profits Tax are decided by legislation in this House. This House not only decides the rates which are to be levied, but decides at which levels the rates of tax are raised or lowered. Here, according to Mr. Wand's assessment, we have a progressive tax on profits; a progressive tax, decided not by Parliament or in public, but by Departmental officials and privately.
Therefore, I would suggest to my hon. Friend that this method of assessing garages is as wrong in form as it is wrong in essence, and that a tax designed to be related, as the rateable value of a business should be related, to the site, to the buildings, to the amenities and to the fittings, should not be levied on profits as well. Site, buildings, amenities and fittings are, I contend, the only factors which should be taken into account. According to Mr. Wand, they were the only factors which were taken into account. I would ask my hon. Friend to ensure that in future they are the only factors which are taken into account.
§ 8.40 p.m.
§ The Financial Secretary to the Treasury (Mr. J. Enoch Powell)
It will be convenient, I think, if I begin by defining my own status in this matter, which is, in fact, a very limited and rather indirect one.
The relevant statues lay down in general terms the basis upon which different types of property are to be assessed 654 for rating. Under the Local Government Act, 1948, it is the duty of the Inland Revenue to make those assessments in accordance with the law. The question whether, in any particular case, it has done so in accordance with the law is not a question for me. It is a question which, upon a proposal being made, falls to be decided, in the first instance, by a local valuation court, and, on appeal, as my hon. Friend the Member for Basingstoke (Mr. Freeth) mentioned, by the Lands Tribunal.
It is, therefore, a question for the courts to decide whether, in any particular instance, the valuation officer has or has not succeeded in correctly interpreting the law of rating in connection with a particular property.
Of course, the Commissioners of Inland Revenue and I, as answering for them in this House, have a responsibility for seeing that in general the valuation officers do, broadly, succeed in complying with the law as interpreted by the courts. It would be a matter of concern if it were found that in any particular area or in regard to any particular type of property, decisions of the courts showed that the assessments made by the valuation officers of the Inland Revenue were not in accordance with the requirements of the law.
§ Mr. Freeth
I am not complaining at all that the law is being contravened. All that the Rating and Valuation Act, 1925, asks valuation officers to do, as I understand it, is to arrive atthe hereditament might reasonably be expected to let from year to year"—with various provisos. It is the method of assessing that rent, and nothing else, against which I am complaining.
§ Mr. Powell
But I do want to make clear that the question whether the right answer is arrived at or not is not for me; it is a question referable to courts as provided in the Acts and which only the courts in a particular case can decide. The Commissioners of Inland Revenue and I come into the matter only if it appears, on the basis of decisions of courts, that the results arrived at by valuation officers are, in fact, not in accordance with the law. So much by way of defining my own limited status in this matter.
Like my hon. Friend. I propose not to comment—it would be quite wrong 655 for me to comment—on the particular case from which this debate took rise, which is, I understand, sub judice. I hope that he will understand if I prefer also not to comment, at any rate now, at this Box, upon a newspaper report; though, if my hon. Friend will let me have it, I will certainly look at it in detail and communicate with him if there is anything that I can usefully say. All I can do, here and now, is to make some general remarks upon the problems facing a valuation officer who is called upon, in the case of a property of this type, to interpret what would be—again, like my hon. Friend, I quote the words of the Statute—the rent at which the hereditament might reasonably be expected to let from year to year "—under certain conditions.
Petrol stations are not commonly let, nor are a good many other classes of property, such as public houses, hotels, racecourses and cinemas; and so some other approach has to be found rather than the very simple one of ascertaining at what actual rents comparable properties in the vicinity are letting.
Clearly, in arriving at the rent which a tenant would pay for a petrol station, if tenants did rent petrol stations, the business likely to be done at a particular petrol station is of very direct relevance. Thus, one would pay more rent for a petrol station on the Great North Road than for a petrol station on a by-road. One would pay more rent for a petrol station in a position which happened to catch and attract the traffic, which was well situated for a petrol station, than one would pay for a petrol station less well situated. So that the actual business which is done in a particular petrol station, in so far as it is an indication of the aptitude of that station for attracting business, is relevant to the rent which would be paid and thus to the correct assessment.
§ Mr. Powell
Perhaps I will meet the point in my next sentence.
It would, of course, be quite wrong simply to take turnover at a particular garage under a particular manager in particular circumstances and to attempt to deduce from that in isolation the rent 656 which a tenant might reasonably pay from year to year. As my hon. Friend said, all sorts of factors enter into it, such as the hours at which the petrol station remains open and the business acumen and activity of the proprietor. All sorts of qualifications must, therefore, be applied and taken into account before turnover in a business of this sort can provide even a rough yardstick for the rent which a hypothetical tenant would pay for it from year to year.
One could not, however, even after those qualifications had duly been introduced, rely simply upon turnover. The buildings themselves, their value, their attractiveness, their modernity, and so on, must all be factors which would affect the letting value of the premises. I am sure that a correct assessment of one of these properties, which, by their nature, are so difficult to assess, cannot be arrived at unless all these factors are taken into account and given their proper weight.
Whether the result of taking those factors into account in any particular assessment does or does not hit the mark laid down and intended by Parliament is, I must again repeat, a matter which can only be decided by a court and, on appeal, by the Lands Tribunal. In the case to which my hon. Friend has referred, that course is being taken and it will be very interesting to see what is the result.
I can, however, give my hon. Friend the assurance that every effort is made by the valuation officers of the Inland Revenue to take into account all the factors reasonably bearing upon the letting value of these premises. In general, if we look at the decisions given on appeal by the courts and the Lands Tribunal, I think we should conclude that by and large their assessments are not too far from what, in the view of the courts, the law requires.
I do, however, in conclusion, repeat that I am perfectly ready to take the particular report which my hon. Friend quoted to the House and investigate it for him. The position which I have put before the House is the general position as it applies to the rating of these types of property throughout the country.
§ Mr. Deputy-Speaker (Sir Gordon Touche)
The hon. Member needs the leave of the House if he is to speak again.
§ Mr. Freeth
I was about to ask a question of my hon. Friend before he sat down. Will he not agree that, although he said that petrol stations were not normally rented, in fact tied petrol stations are rented, and that with the agreement of the owner it might well be possible to obtain the rent figure and to make due allowance for particular trading terms with which that rent was bound up?
Secondly, could my hon. Friend tell me whether or not it is true, as I have had it reported to me, that recently a directive went out from the Treasury that local valuation officers were not to place as much reliance as they had been doing in the past two years on petrol throughput? Thirdly, will he not agree that the essential thing that one has to try to get 658 is the aptitude of the station and not the aptitude of the garage proprietor?
§ Mr. Powell
Clearly, where the actual rent of a comparable station or of that station is available, that is a most important factor and might well be the decisive factor in determining the assessment or the decision of the court upon appeal. As regards the second question, I will certainly ascertain whether there has been any such directive. I do not think that it would be from the Treasury, if it existed at all, but I will certainly find out if I can trace any such directive and let my hon. Friend know. Thirdly, I have already agreed that in ascertaining the letting value for the purposes of assessment for rating, one must disregard the variation in aptitude as between different individual tenants.
§ Question put and agreed to.
§ Adjourned accordingly at seven minutes to Nine o'clock.