RATING AND VALUATION BILL

HC Deb 23 February 1959 vol 600 cc816-76

Order for Second Reading read.

3.31 p.m.

The Minister of Housing and Local Government and Minister for Welsh Affairs (Mr. Henry Brooke)

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

The reason for the Bill is a simple and inescapable one. The Valuation Office of the Board of Inland Revenue has reported to the Government that it is impossible in time for April, 1961, to make new valuations of all the house property in England and Wales on a current rental basis that would be reliable and defensible. There are about 13½ million houses and other dwellings which will have to be revalued, so that it is no small task. The Valuation Office has advised the Government that there will not be sufficient evidence of free market rentals available in time for 1961, but that there will be in time for 1963.

The sole purpose of Clause 1 of the Bill, the main Clause, is to defer the revaluation by two years, in line with the advice of the Valuation Office. The people at the valuation offices have to do the actual work of revalution and they then have to defend their valuations when appeals are made against them to the valuation courts or, eventually it may be, to the Lands Tribunal. The Government cannot set aside expert advice of this kind.

We have not accepted it lightly. The Valuation Office is directly responsible to my right hon. Friend the Chancellor of the Exchequer and not to me, but my right hon. Friend and I have gone into the whole matter thoroughly. We have questioned the Valuation Office and tested the validity of what it says. It has been proved to us that this conclusion is inescapable.

The present valuation on which rate demands are based came into force on 1st April, 1956. In accordance with the law, the basis for valuing residential properties is the 1939 rental value, whereas all other property is assessed by reference to 1956 rental value. Under the law as it stands that difference was only to apply for the 1956 valuation. The law says that there shall be a revaluation every five years and provision was made for the whole of the next valuation—that is, the 1961 valuation—to be on the current value basis, unless, of course, further legislation were passed meanwhile. It has become necessary to introduce that further legislation, but we are not altering the current value basis because I think that everyone agrees that we ought to continue to aim at getting back to that.

This Bill in no way affects the basis; it affects only the time. The valuation officers could revalue commercial, industrial and other similar property on a current basis in time for April, 1961, without difficulty. The difficulty solely concerns houses and flats, and so on. The overwhelming preponderance of residential properties in the valuation lists is not always realised. Only 14 per cent. of all rateable properties are industrial and commercial and so forth; 86 per cent. of the total number are residential. For that reason, one cannot have a sound revaluation as a whole if there is not a sufficiently sound basis for the valuation of houses.

If I may go into the technicalities for a moment, the task of a valuer is to establish what is called the gross value. Once that is done, the net annual and rateable values are deduced from the gross value according to a statutory formula. If they wish, hon. Members can look it up and find the gross value defined in Section 68 of the Rating and Valuation Act, 1925. There,"gross value"is defined as follows: 'Gross value 'means the rent at which a hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenants' 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 hereditament in a state to command that rent. That is the statutory definition of gross value.

What valuation officers have, therefore, to find in time for 1961, if we leave the law unamended, is the current rent at which each of the 13½ million houses may be expected to let from year to year. This is not something which they can arrive at in an abstract way. It cannot be discovered by intuition, it cannot even be discovered by intuition guided by experience. It has to be based on the market at the time—in other words, on the rents which houses are currently commanding in a free market.

That does not necessarily mean the rent of the one particular house which is being valued. It means the rent of a sufficiently representative quantity of houses to give the valuation officers their yardsticks. The valuation office says—I am sure that this view would be sustained by all competent valuers—that if evidence of free market rents exists for something approaching 10 per cent. of the houses in the country, a valuer can undertake his task with confidence that the results will be defensible.

Some of the comment which I have seen in the Press and elsewhere since the Bill was published has ignored the fact that it is not only the valuation officer himself who needs reliable rental evidence. There is, of course, a right of appeal by the citizen to the valuation courts and a right of further appeal from the valuation courts to the Lands Tribunal. Both the valuation courts and the Lands Tribunal, therefore, must have a sufficient body of evidence of market rents if they are to perform their tasks, which are highly responsible tasks. Their work becomes impossible if it is not practicable for them to obtain from available rental evidence a coherent picture of rent levels against which the particular cases before them on appeal can be viewed.

What we all have to look at, in judging Clause 1 of the Bill, is the degree of likelihood that evidence of current free market rents will be sufficiently available. I would remind the House that the time which is material is not 1961, but 1959 and early 1960. The 13½ million new assessments cannot be produced all at once, at the last moment. Indeed, the law requires that the new valuation lists must be in the hands of the local authorities before the end of 1960, though they would not begin to operate until April, 1961. So, if the valuation office waited longer to start on its immense task it would be too late to get it finished. It is the material which it would be able to collect about rents in 1959 which matters.

So we have to ask how much material could the valuation office get if it started here and now? About 5 million of the 13½ million properties are owner-occupied: therefore, they give no help at all in determining rents. Another 3 million houses or so are publicly owned and most of these are subsidised. Subsidised rents, again, are no help to the valuer in arriving at the free-market rent. Then there are all the houses which are let furnished, or let on special terms, such as between one member of a family or another. All these afford no solid material to the valuer. So we are left with only the houses and flats which are let unfurnished on normal tenancies.

By far the greater part of these of course are still under rent control. Very few of them can as yet provide any real evidence of free-market rents. Of course, the evidence will accumulate as individual houses and flats become vacant and are relet, because upon falling vacant they are decontrolled. That evidence will build up year by year: this provision of the law has been in operation now for little more than eighteen months whereas, two years' hence, it will have operated for about three and a half years. If some rents in some parts of the country have settled below the top limits allowed by the Rent Act, that also will provide evidence of market conditions.

Then, of course, we have the many thousands of rather larger houses and flats which the Rent Act freed from control because they were above certain rateable limits. For a large number of these, leases of three years or longer have been negotiated. Here, at any rate, it might be thought, is a block of evidence on which the valuers could rely. But the rents under these three-year leases were negotiated at a time when the market had not settled down at all, and under special provisions in the Rent Act which said that leases had to be for not less than three years if an increased rent under it was to take effect at once. The Report of the Valuation Office to the Government is that the market is not yet settled sufficiently, even in that block of decontrolled property, to furnish trustworthy evidence of free-market rents.

The picture is of a growing body of reliable evidence over the next two or three years. As that evidence increases, it could be used to challenge before valuation courts and before the Lands Tribunal valuations that had been made by the valuers in 1959 and 1960 on evidence which, the valuers themselves say, will be inadequate to support their valuations. Indeed, the estimate given to the Government by the Valuation Office is that if the law is not amended and the valuation is to proceed forthwith, satisfactory rental evidence will be available for less than 2 per cent. of all the houses in England and Wales. This is far too small a proportion on which to found new valuations that could be successfully supported before the valuation courts and the Lands Tribunal, if challenged.

These are the conclusive reasons which have led the Government to accept that there is no alternative to a postponement of some sort. The year 1963 has been chosen because the Valuation Office advises that there should be enough evidence available in time for that, but that there would not be enough in time for a valuation any earlier than 1963. That is why the first two subsections of Clause I take the form they do.

Subsection (3) is put in because, if there is to be a general postponement, a door ought not to be left open for attempts to secure partial revaluations. Subsection (3) debars anyone, other than the valuation officer or owner or occupier concerned, from making any proposal for altering the current valuation list. It is exactly similar to the provision in Section 2 (2) of the Rating and Valuation (Miscellaneous Provisions) 1955, with regard to the lists then in force. So we are not creating a precedent.

Mr. Raymond Gower (Barry)

Can my right hon. Friend give an assurance that the subsection does not create a permament effect and in no way stops ratepayers' associations from making representations? The subsection appears to have aroused a good deal of concern, People have written to me about it because they have the impression that it will take away the right of a person who is not a party to a valuation to appear, some right that was formerly enjoyed.

Mr. Brooke

It certainly does not take away permanently any power, but what it does is to prevent a third party, at a time when the Government are seeking to postpone general revaluation, from taking steps to start what might develop into a partial revaluation in some area.

Mr. G. R. Mitchison (Kettering)

Does it mean that a rating authority can make no proposal while this postponement is in force?

Mr. Brooke

I was going on to explain the one action that a rating authority could take. I have already mentioned that this was exactly the same provision as was, on a previous occasion, put into another Act of Parliament. The subsection preserves the right for a rating authority to make proposals to include properties in the lists. That is mainly concerned with challenging cases of exemption from rating. The rate relief of 20 per cent.—

Mr. Mitchison

Will the right hon. Gentleman answer my question, if he would be good enough to do so? Does this subsection prevent a rating authority, with the exception that the right hon. Gentleman has indicated, making proposals during the period of this postponement?

Mr. Brooke

That was what I was seeking to say to the hon. and learned Gentleman. I am sorry if he thought I did not answer his question. I was indicating the one field in which the right of a rating authority to make a proposal during this interim period would be preserved. There would not be a right otherwise. I am sure that the House, on consideration, will see the reason for that.

The rating relief of 20 per cent. granted to shops and offices and certain other properties by the Rating and Valuation Act, 1957, was stated in that Act to be for the period while the existing valuation lists remained in force. If the Bill is put on the Statute Book that relief will continue automatically until the next revaluation, in 1963. That is obviously right, for the causes which justified the 1957 Act will continue to operate until there is another revaluation.

The other substantive provision of the Bill, although it is subsidiary to the main one, is in Clause 2. This Clause will postpone the effect of certain notices that have been already served under subsection (3) of Section 8 of the 1955 Act so that no notices can take effect, at the earliest, until 1st April, 1963. I am sure that the House will wish to have some more detailed explanation from me of that. Section 8 in the 1955 Act is a rather complex one which was not in the Bill when it was introduced in Parliament. The Section was added, I think, at the recommittal stage of the Bill.

Before the 1956 revaluation, when local authorities were responsible for rating assessments, charities had often received a sympathetic under-assessment from the local authorities and, during the course of the 1955 Bill, hon. Members expressed a great deal of anxiety in case bodies of this charitable character might suffer swingeing increases in assessments on their revaluation at full rental values in 1956. It was to prevent that happening that Section 8 was introduced.

Section 8 froze the amount of rates payable by bodies of that kind in 1956–57 at the actual amount charged in 1955–56. If this resulted in a reduction from the full rates they would otherwise have to pay in 1956–57, the percentage reduction was to be determined and the same proportion of relief was to be given in each subsequent year, unless the rating authority served three clear years' notice to reduce or discontinue the reduction. My right hon. Friend the present Minister of Defence, when he was in my place said to the Committee on 6th July, 1955: there will be a warning period before anything happens which might severely prejudice the organisations, and this will ensure that in any case there will be plenty of time for Parliament to consider the position and decide whether to legislate."—[OFFICIAL REPORT, 6th July, 1955; Vol. 543, c. 1156.] It seemed at first that no valid notice to reduce or discontinue the relief could operate to render the charitable organisation liable to full rates before 1st April, 1961. This view appeared to be borne out by a decision of the Court of Appeal in 1957 in the case of St. Pancras Borough Council v. University of London. To withdraw relief as from that date, 1st April, 1961, the notice would need to be served before 31st March, 1958. Therefore, I decided that the right time to collect the information which would give a complete picture of the way in which rating authorities were exercising their power was from April, 1958, onwards. My right hon. Friend the Minister of Defence had given a promise in 1955 that this information would be collected at the appropriate time and would be made available to Parliament.

Meanwhile, I informed the House on 23rd January, 1958, that to advise me on the whole subject I was appointing a Departmental Committee to review the way in which Section 8 had worked and to recommend how bodies coming within its purview should be treated for rating purposes in future. This Committee which has been sitting under the chairmanship of a former High Court judge, Sir Fred Pritchard, hopes to complete its work within the next few weeks and, of course, its Report will be published.

In asking for approval of Clause 2 of the Bill, I should like to give the House some preliminary information on the size of the problem. We have found from our enquiries that about 53,600 properties enjoyed reduced rates in 1957–58 under Section 8 of the 1955 Act. At full rating they would have paid £5,800,000 in rates that year. Actually, they paid about £3,200,000. It might be of passing interest that the reduction of £2,600,000 is equivalent to slightly more than the product of 1d. rate throughout the whole country. Our information also shows that by 31st March, 1958—

Mr. G. Lindgren (Wellingborough)

It may be 1d. rate throughout the whole country, but, in the circumstances of particular areas, a 1d. rate would be disastrous to particular local authorities.

Mr. Brooke

I was not seeking for a moment to argue that it was the equivalent of 1d. rate in each local authority area. All I am doing is to give some preliminary information, as I thought the House would wish, as to the magnitude of the problem and the total overall picture. The Pritchard Committee will be reporting on all these matters shortly, and its Report will be published. I am not seeking to go into great detail, nor to anticipate any of the recommendations of the Committee. I merely thought that before asking the House to give a Second Reading to the Bill it was right to give some of the information which was in my possession as to the general magnitude of the problem. I am seeking to do nothing more than that.

According to the information in our possession, by 31st March, 1958, notices had been served by rating authorities to discontinue relief in respect of about 31,000 out of a total number of 53,600 properties which are enjoying relief. We do not know the extent to which rating authorities, when these notices take effect in 1961, are likely to exercise the discretion they have under subsection (4) of this important Section 8 to grant partial or complete relief from rates, but further details no doubt will appear in the Pritchard Committee Report when it is published.

I said it was thought that April, 1961, was the earliest date at which notices to discontinue the Section 8 relief could take effect. But a few months ago a decision was given in the High Court in the case of Westminster City Council v. King's College that in certain circumstances notices served by 31st March, 1957, to reduce or terminate relief as from 1st April, 1960, are valid. That makes the whole matter of much greater urgency because the Pritchard Committee Report is not yet ready and, although I have no idea what will be in the Report, it is common knowledge that the subject is a highly complex one; and by the time the Report is published there will be less than twelve months before some of the notices under Section 8 may begin to take effect.

That, quite clearly, leaves not enough time for the Report of the Committee to be thoroughly studied by all the very many bodies involved, for any representations made upon the Report to be considered and then for any legislation which may arise from the recommendations to be prepared and put on the Statute Book before the spring of next year—1st April, 1960, being the critical date for some of these cases. If, in the light of the Pritchard Committee's Report, it seems that legislation of some sort is desirable—and I am not prejudging that, because I do not know what the Pritchard Committee will say—then it may be that that legislation can be undertaken well before 1963. But as, by Clause 1 of the Bill, we are postponing the general revaluation to 1963, it seems sensible and it seems coherent under Clause 2 to prolong the Section 8 standstill until the same date.

This will afford ample time for anything which the Pritchard Committee may recommend to be thoroughly considered by all concerned. I am not saying that the Section 8 standstill will necessarily continue until 1963. I am saying that in the Bill we are providing for it to continue until 1963 unless, between now and then, Parliament decides to enact some fresh legislation on the rating of charities which might come into force earlier. In the conjunction of circumstances created by the probable date of the Pritchard Committee's Report and by the High Court judgment in the King's College case, I think that it will probably be agreed that this is the sensible course to follow so that there may be ample time.

The Bill does not apply to Scotland or to Northern Ireland.

It is simply a postponing Bill. I fully recognise that it must be a disappointment to local authorities in England and Wales, who had looked forward to seeing by 1961 a valuation based overall on current values. But I must ask them to accept my statement that a proper revaluation before 1963 on a current value basis is quite impracticable, and neither they nor I can set aside the expert advice which has been given by those on whom the responsibility of making a reliable revaluation will squarely fall.

4.3 p.m.

Mr. G. R. Mitchison (Kettering)

It may be that the Government have succeeded in placing themselves, the ratepayers and the local authorities in such a mess that a postponement of some sort is inevitable. The Minister has already indicated that he has had a pretty bad Press. Let me remind him that he provoked a leader in The Times of 20th February about this Bill headed,"An Uninviting Change". The Times is not a Labour paper. The right hon. Gentleman provoked in the Economist, again not a Labour paper, a passage headed,"An Unwise Reprieve". The reason which he gave for objecting to these comments seems to me to be somewhat insufficient.

What is interesting in this matter is to see how sudden the Government's decision has been. On 18th February, 1958, we were discussing, in Committee on the Local Government Bill, the general grant and the period for which it should be made. The Parliamentary Secretary indicated to the Committee that the initial period was taken as two years, not that it had anything to do with the timing or result of the next General Election, but simply because it was known at that time that there would be revaluation due in 1961. He went on to say: although the first period we have taken is two years, we regard a longer period of three years as being preferable …"—[OFFICIAL REPORT, Standing Committee D, 18th February, 1958; c. 328.] That was in February. In November last year the Government brought in, and on 5th December secured the assent of the House to, the General Grant Regulations, which limited the period to three years for the reason which I have just given and which the Parliamentary Secretary indicated.

Accordingly, we may conclude that at the beginning of December, 1958, the Government were still looking forward to a revaluation in 1961, at that time saw no difficulty about it and apparently had not consulted the Valuation Office as to whether it was practicable. In view of the dates which the right hon. Gentleman has given it is certainly not too much to say that they left it extraordinarily late. Two months later or thereabouts, on 11 th February, 1959, the right hon. Gentleman intimated that he intended to bring in the Bill, for substantially the reasons which he has put forward today.

I am very interested indeed in this opinion of the Valuation Office. It is said to be impartial. It is said to arise from the circumstances. But it has obviously come to birth rather quickly, and it is interesting, therefore, to look at it. I regard the need for the Bill as entirely the Government's own fault. Let me tell the House why I think that this is so.

In 1956, the Government were making a comprehensive review of local authority finance, including revaluation. That was under the Minister's predecessor. Early in 1957 the right hon. Gentleman himself said that he had been thinking about this for a very long time and would produce the result quite soon. He produced the result in the White Paper which preceded the Local Government Act.

In effect, all that the White Paper did was to add 25 per cent. to the liability of industry for rates. Industry already had a 25 per cent. liability. A further 25 per cent. was added, and the remaining 50 per cent. was left untouched, with the result that the present position is as the right hon. Gentleman stated in the Answer which I have mentioned—that industry is rated at 50 per cent. on present-day values, shops and offices by reason of the concession made in the 1955 Act are rated at 80 per cent. on present-day values, and the householder is rated on pre-war values.

That raises an obvious problem. Undoubtedly, relief could be given to the householder if his share of the rates were diminished by full industrial revaluation. Equally, the promised removal of the 20 per cent. concession to shops and offices would also relieve him. Nevertheless, at the end of the day it is highly probable, in my view, that something more will have to be done to help, at any rate, the small householder. This is a major political problem.

Mr. J. A. Sparks (Acton)

I am sure that my hon. and learned Friend does not wish to give the impression that the 50 per cent. rates paid by industry are received by the local authority. He knows, of course, that of the £30 million extra revenue from industry, the right hon. Gentleman intends to take £20 million for the Treasury. Thus, the local authorities will not have the benefit of the 50 per cent. rerating.

Mr. Mitchison

I am obliged to my hon. Friend. I appreciate the point, but I was assuming for the moment that the Government might begin to see a little more sense and when it came to facing the problem of what to do about the domestic ratepayer, if I may so describe him, would accept a 100 per cent. rating of industry and would revise their habit of taking two-thirds of any increase for the Treasury. I was simply looking into the future as hopefully as I could.

The substantial point is that this has been a major political problem facing the Government for a considerable time, and there is not the least doubt that they have had it well in view and have constantly postponed it. I therefore cannot accept a last-minute difficulty in the basis of valuation as sufficient excuse for not having done something about this matter a good deal earlier. The difficulty about proceeding on a pre-war valuation, apart from any question of amount, is that it becomes more and more unreal and more and more difficult to work with every year we go forward.

The Government ought long ago to have faced up to the problem of what was the fair thing to do as between these three different classes of ratepayers. They have not done so. We are told now that there is not sufficient evidence of a market valuation. The reason for that is the Rent Act, and nothing but the Rent Act. As the right hon. Gentleman quite clearly showed, it is his own measures which have now brought him into such a position that there is no real open market on which to value.

Let me give the right hon. Gentleman a very good illustration of what is happening. I have seen today a bulletin about house prices, issued by the Cooperative Permanent Building Society. The Society takes three classes of houses. Class 1 are the thoroughly good modern houses. Class 2 are what I might call reasonable houses. Class 3 are thoroughly bad houses with really little future. In the country as a whole exactly what one would expect has happened. Comparing the quarter ended 31st December, 1957, with the quarter ended 31st December, 1958, we find a small rise of 2 per cent. in the value of the really good houses; there has been a rise of 4 per cent. in the middling houses and a rise of only 1 per cent. in the really bad houses.

When one looks at the crowded part of the country, what does one find? In London—and we all know the housing problems of London—the good and the middling houses have risen respectively by 1 per cent. and by 3 per cent. Since this index is based on the prices of resale with vacant possession, the really bad houses in London have risen during that one year by no less than 13 per cent. On the North-East Coast, where, again, there are real and peculiar housing difficulties, one gets the same sort of picture. There has been a rise of 4 per cent. in the good houses, 1 per cent. in the middling houses and no less than 9 per cent. in the really had houses.

Partly owing to the failure of the Government to encourage public or council housing and partly owing to the disturbance caused by the Rent Act, people have been forced to buy these baddish houses in the crowded towns, but not in the rest of the country where the effects have not been so bad. The result is that, in the really crowded and congested urban areas, such as London and parts of the north-east of England, there has been an altogether disproportionate rise in the value with vacant possession of the worst house.

With it goes the other side of the picture. The former occupants of those houses have been forced either to buy or to accept exceedingly onerous leases, leases on terms which are often too high in rent and almost invariably impose on the tenant a burden of repairs that he cannot possibly carry. It is that pressure, due to the Rent Act, that has upset the market in houses. It has resulted naturally in an artificial state of affairs. What is the indication that anything will ever be done in 1963 if it rests with the party opposite?

Let me take the Economist's views, to which I have referred. I want to trouble the House with the first paragraph, because it is very sound criticism indeed: The Government's decision to postpone from 1961 to 1963 the next valuation of property for rating carries a definite whiff of political cowardice. I suppose I have a more sensitive nose. I should say it stank of it. They could have dealt with this years ago if they had wanted to.

Then, after dealing with the present position, the article says: The Minister has now stated that this year is too soon after the decontrol of several hundred thousand houses under the Rent Act to get a fair picture of current house rents. One trouble about this argument is that it might be extended indefinitely. More than 4 million working class houses still remain controlled. I call the attention of the House to the next sentence: Although it hates to be reminded of the fact, the Government (if it stays in office) should certainly be hoping to decontrol a further batch of these houses in the next few years. I can put that sentence a good deal more clearly. At the Conservative Conference at Llandudno, just before the Rent Act was introduced, the right hon. Gentleman's predecessor told the Conservative Party quite clearly that the Government proposed to remove control altogether. The Rent Bill was only the first stage in that. It contained in one of its subsections power to go further and practically to complete decontrol simply by administrative order, subject to affirmative Resolution. There is not the least doubt that, if the Tory Party is returned at the next General Election, it will proceed almost at once to decontrol the remainder of the controlled houses in the country. It has said so, and we have no reason to disbelieve it. It has taken power to itself to that end.

The result will be that the difficulty which is now caused by the extent of decontrol that the Government have already put through will recur again when they put the next stage through, and again after that and again after that We do not know, and we have not been told, when they hope to have completed the process. So long as that threat is there, it is impossible to say that in 1963 or at any other particular date the market will be settled, to use the right hon. Gentleman's phrase. It is he who has unsettled it.

What has the right hon. Gentleman to look at now for the houses which will give an indication of real market value? He cannot, he rightly says, look at owner-occupied houses. He cannot, as he again rightly says, look at the publicly-owned houses. He cannot look at the houses which are still rent controlled, or so he tells us. I am not very clear why, but he tells us that. Therefore, he is left with the houses which were decontrolled under the Act and even those, as he rightly pointed out, were subject to negotiations which—these are my words—were negotiations under duress and do not represent a fair result as regards rent or as regards liability for repairs.

All that the right hon. Gentleman has to go on, so he told us, is the number of houses which fell into decontrol year after year owing to changes in ownership or by people leaving the house and in that way creating a new tenancy. No doubt that number will increase. What use will that be if further measures of decontrol—promised measures or threatened measures, call them what you like—will come in should the party opposite return to power?

Therefore, I start looking at the Bill from a different angle. The difficulty about this valuation arises out of the Rent Act. The limitation of this small number of houses arises out of the Rent Act. The postponement to 1963 will not be much use if, as we are told, other houses are to be decontrolled should the Conservatives be returned to power at the next General Election. The Conservatives do not like the mention of the next General Election, so do not let us say much more about it.

I hate upsetting the feelings of the right hon. Gentleman, who intimated that he would bring the Bill in by giving a Written Answer, which prevented anybody asking him a few questions about it. Then he introduced it as a small Bill and with the maximum of quietness. The trouble with the right hon. Gentleman is that he always wishes to blush unseen, but at the end of the day he is obliged to blush for his own misdeeds.

Perhaps I may now continue with my quotation from the Economist: Further, that"— decontrol— could provide an occasion or pretext for further delay in rating revaluation. The cynical may also reflect that if valuers can still perform the contortions necessary to refer everything to a 1939 basis they could surely apply equal ingenuity to the detection of current values. I absolutely agree with that. At present, the Government are putting through Parliament another Bill—I only mention it— relating to building societies, and furthering them in their task of making advances on houses. That presupposes that there is something like a reasonable market value for the houses on which the advances are to be made. The indications one gets about prices show changes, but they are explicable changes, and I find it very difficult indeed to understand why the real reason for this is the technical difficulty of not being able to make valuations at the moment or, if that is the real reason, why things are to be any better at the date to which we are asked to postpone the revaluation.

I come back to another conclusion, and a much simpler one. The Government ought to have faced up to the problem of rating as between householders and shop and office owners and industrialists at a much earlier stage. As it is, they have taken it in bits and pieces, as they have been pressed from time to time. It is not a very creditable performance. When we discussed the Bill dealing with shop and office property we on this side said that it would enure not for the benefit of small shopkeepers but for that of the owners of large stores, blocks of offices, banks, insurance companies and the rest —and, as my hon. Friend the Member for Acton (Mr. Sparks) has just pointed out to me, when they tackled that part of the legislation dealing with industrialists it was only to enable the Treasury to take two-thirds of the proceeds.

The Government have never faced up to this present question at all. We may hear many things today, but one thing I am sure we shall not hear from the right hon. Gentleman, and that is what he proposes to do in 1963 in relation to the domestic occupier—the domestic ratepayer, as I call him. About that, I am quite certain that we shall not hear anything from the Minister today. And if the Parliamentary Secretary follows his usual practice at the end of the debate, and ask us what we intend to do about it, I can only say that I have already given him one broad hint, but let me tell him two things.

First, we are pledged, as this Government were pledged in 1956, to a comprehensive review of local government finance. We intend to do it. The Government have not done it. Secondly, let me say that it is up to the Government to tell us what they intend to do, when the time comes, before asking us our intentions when we cease to be the Opposition and become the Government. Or is it that the party opposite has so completely given up hopes of any success at the next General Election that it has merely pushed the baby a little further on so that we may carry it from its extreme youth, or even from when it is conceived in what I might call the revaluation womb? I suspect that the latter may possibly be the reason.

I shall not say much about the rest of the Bill. The outstanding objection to Clause 1 (3), and an objection immediately taken by local authorities is that, as it stands, the local authorities are unable to make any proposal whatever, except, of course, to include a new subject in the valuation list. That is to say, changes may be made from time to time without the local authorities having any power at all to intervene. That was a power that they secured with some difficulty, and one that they value as necessary for the proper performance of their local government functions. We shall have to discuss this in Committee. For the moment, the right hon. Gentleman will find that he has successfully united all our local authorities in objecting to this removal of a power that was thought to be, and has been found to be necessary in the past—and which is now to be removed for a period of uncertain duration, but, at least, until 1963.

The right hon. Gentleman rightly pointed out that Section 8 of the 1955 Act was brought in at the last moment. It has created a great deal of difficulty in its application, and I feel sure that I was not the only hon. Member in the House to welcome the appointment of a committee to consider the matter. All I would say now is that we shall have to consider further whether it is really necessary to tie the solution of this question to the larger one of the postponement of the valuation altogether.

As matters are, I quite understand the difficulty of the Government. I understand rather less clearly some of the difficulty in the Valuation Office. I do not believe it to be insuperable—as the Economist hints in the sentence I have just quoted. However, the Government's difficulty I do indeed appreciate, and I say that it is entirely their own fault. It is they who have refused in the past to face up to this question. It is they who, by their own legislation and its effects, have caused the difficulties that now trouble the valuation office. That is the position.

We do not know when the next election is to be—unless the right hon. Gentleman or the Parliamentary Secretary is to tell us today, which seems improbable—but, as matters stand, I can, at the moment, see the political wisdom of running away from this problem for the time being. I can see that, as matters now stand—

Mr. Gower

rose—

Mr. Mitchison

Let me, at least, finish my sentence—there may well be no other choice open to the Government. If we were to refuse, or to attempt to refuse, to pass this Bill today, the only result would be to leave the valuation lists to appear in October, 1960, the new assessments to come in in the spring of 1961, and to face the country with that. On the other side of the picture, we would have a Government that had not said a word about what they were to do to meet the social problem that is involved, and constantly involved, in the relation of the domestic ratepayer to the industrial and the office ratepayer in matters of valuation.

Mr. Cower

At the point when I tried to intervene—and I am obliged to the hon. and learned Gentleman for giving way—I thought that it was singularly inappropriate that he should refer to my right hon. Friend as one who might be running away from an unpopular thing. I know of no Minister who has tackled so courageously things that he deemed to be necessary.

Mr. Mitchison

I had finished what I had to say, Mr. Speaker, but where the Economist finds a definite whiff of political cowardice, I find real political cowardice, not so much in this Bill as in the omission to deal with this problem at a much earlier stage. I find some political cowardice in it now. I think that a really able Minister might, even at the last moment, succeed in persuading the Prime Minister to put off the General Election until the last possible moment and let us know what he intends to do about this. But the one thing that we shall not hear from the courageous and right hon. Gentleman today is how he proposes to rate the domestic ratepayer if his party comes back into power.

4.28 p.m.

Mr. John M. Temple (City of Chester)

The hon. and learned Member for Kettering (Mr. Mitchison) seemed to rest his case very largely on the very authoritative articles in The Times and the Economist. However much these newspapers may know about this problem, I prefer to rest my arguments on the advice of the Valuation Office of the Inland Revenue which has spoken quite categorically on this matter. It has not given one piece of advice or another, but has left my right hon. Friend no alternative but to deal with this matter in the way he proposes.

My right hon. Friend has perfectly rightly described this as a postponement Bill. Rating and valuation has frequently been postponed in the past by all political parties, so I do not think that there is anything wrong in describing this as a postponement Bill, which, in fact. it is. However, the object underlying the postponement is extremely important. It is to enable us to have a correct and equitable valuation in 1963. This revaluation is a major step. It is the step which will use current values for all types of property which are to be valued —for domestic hereditaments, for commercial undertakings and for industrial undertakings as well. That is the major underlying step so that all will be brought on to a current basis.

Looking back over the recent history of these valuations and revaluations—I make no party capital out of this point— the Local Government Act, 1948, which was brought in by the party opposite when in power, had two bases of valuation for domestic hereditaments. All pre-1918 hereditaments, large houses and some flats, were to be valued on a 1939 basis. Those hereditaments had come into being thirty years before. Post-1918 hereditaments were to be valued on a formula basis, based on the cost of construction. That formula was ingenious, but on the face of it, when the position came to be assessed, it did not work out equitably. That was the great difficulty.

That formula basis was never implemented and was overtaken by the Valuation for Rating Act, 1953, which amended the basis of valuation to the basis which we have at the present time, namely, the mid-1939 basis. It has been said that this 1939 basis is not a good basis for the present time, but I would say that it is, indeed, a good basis, because mid-1939 was the last time at which there was a sufficiently large band of decontrolled houses to get a realistic assessment of rent in a free market.

Mr. Arthur Skeffington (Hayes and Harlington)

The hon. Gentleman says that this is a reasonable basis. I should like to know whether he has heard any of the evidence given before the Lands Tribunals when both sides have tried to get back to this 1939 basis. If the hon. Gentleman had done so he would not have come to this conclusion.

Mr. Temple

I said that it is a realistic basis at the present time because mid-1939 was the last time when there was a sufficiently large band of houses available to be assessed on that rental basis. Since that time, rent control has been operating and the band in the free market has been too small.

The Bill has the objective of reassessing all hereditaments on the one basis. My right hon. Friend has said that according to the Valuation Office of the Inland Revenue there are only 2 per cent. of hereditaments which can form the basis of an assessment at the present time and that that percentage is too small. But we have heard it quoted that as the Rent Act operates 125,000 houses per annum will come out of control and, therefore, by 1961, when the valuations will be made under this Bill, if this Bill is enacted—

Mr. Mitchison

By 1963.

Mr. Temple

The valuations will be made in 1961 and will come into operation in 1963. They were to be made in 1959, to come into operation in 1961. By 1961, a good sample will be available. With 125,000 houses coming out of control—that is, in the band below £30 rateable value in the provinces and £40 rateable value in London—approximately half a million houses will be available in that band. That will be taken as a basis for valuation by the rating and valuation officers. One thing which would be certain to distort the values would be if the party opposite should get into power and should bring into operation its big schemes for the municipalisation of house properties, because the free market value basis would be destroyed and there would be no current market basis on which to form this valuation.

I should like to refer to an item in the Schedule to the Bill. In the Schedule, we have reaffirmed the principle that these subsequent revaluations are to be quinquennial. If it is absolutely necessary to make these revaluations quinquennial it will be extremely costly. As everyone knows, house properties are reasonably constant in value. When one has got this whole valuation basis to a basis of current market values, I should think that a valuation every seven years might be sufficient.

Mr. Douglas Houghton (Sowerby)

The hon. Gentleman need not worry. He will not get revaluation every five years. We never have had it and we never shall have.

Mr. Temple

I am obliged to the hon. Gentleman for supporting my argument. I am not often supported from the other side of the Chamber so readily as that. I am reinforced in what I am about to say.

All the life offices—and the hon. Member for Sowerby (Mr. Houghton) knows a great deal about this matter—when they are considering valuations for their funds, normally prefer to use a quinquennial valuation basis. It is nothing like such a task to value life offices commitments as it is for the valuation offices to value in England and Wales alone 14 million domestic hereditaments, quite apart from the industrial and commercial hereditaments as well.

Serious consideration should be given to the advisability of substituting in this Bill the figure 7 for the figure 5. Then we shall have accepted as a principle that market values for houses are reasonably constant, and I am sure that it would give great satisfaction throughout the country if the figure 7 could be inserted in the Bill.

Mr. Mitchison

Since the hon. Gentleman seems to know about life office valuations, would he tell us whether they are finding any difficulty in valuing their properties at present?

Mr. Temple

I was not dealing with the difficulty or otherwise of valuation. What I am saying is that life offices regard a five-year period as the correct period at which to value their investments. The only point that I was deducing was that if they value at five-yearly intervals, and their task is not so great as that which would confront the Inland Revenue, then, indeed, the Inland Revenue basis of valuation of property might be over a longer period.

Having said that, may I say that I welcome the Bill wholeheartedly, because one can see that at the end of the day valuation of all properties will be on a current market basis. It will be based on such a wide sample of values that justice will be seen to be done all round. The question of accuracy of values is very important. After the last valuations we had 650,000 appeals. I would say that if this postponement takes place the number of appeals will be kept to a minimum.

4.38 p.m.

Mr. Douglas Houghton (Sowerby)

The hon. Member for the City of Chester (Mr. Temple) said that valuations have frequently been postponed in the past. That is true. Valuation lists are the most postponed things in Britain. Only the millennium has been postponed more times for good reasons. At the rate we are going, the millennium will come before we get valuation on a current market basis.

When this matter was considered in the 1953 Measure I was heavily on the side of the Establishment. I made speeches then in support of adopting the 1939 basis of values, and they were so lengthy and so convincing that the then Minister, the present Prime Minister, and the then Parliamentary Secretary, the present Postmaster-General, excused themselves from making any speeches in Committee on the ground that I had made much better ones in support of the Bill than they could have done.

That was most disconcerting to my hon. Friends, and I abstained from voting on Second Reading, and abstained from Divisions during the Committee stage, because I was convinced in 1953 that there was no alternative to the 1939 basis of valuation for residential property. I joined issue with my right hon. and hon. Friends, who said that valuations on a current values basis were possible. I now beg to announce that I am no longer on the side of the Establishment. The Ministry cannot rely on me this time, because 1953 was a long time ago and a great deal has happened since then.

The Minister has said that it was the aim of both sides of the House to get back to current rental values for rating assessments. Get back? We have never been on them. Never since 1925 have we been on current market values for rating and valuation purposes. The right hon. Gentleman read out the definition of annual value in the 1925 Act as if it was of importance in this connection. but he will remember that, when the valuations were made on current value under the 1925 Act, the political cowardice of the Government of the day compelled the valuation authorities to fiddle with their valuations to please the owner-occupiers, and were backed heavily by the building societies, who said, "Our clients will never be able to keep up their mortgage repayments if you soak them to the extent of these new valuations."

I remember all that, and I was not in the House, but the right hon. Gentleman talks about: getting back to the current values basis as if we have been on it. I suggest that the Minister's approach to this matter is quite unrealistic.

The Minister has given us the opinion of the Valuation Office. This is not some unexpected and divine revelation of the state of affairs in the world of rents that no one could foresee. In 1953, when the revaluation on current rental values was fixed for 1961, it was presumably the then Ministers expectation that it would be possible to have a revaluation on that basis. We were told that the 1939 value was only an interim measure, that it was only something inescapable in the circumstances of the moment, but a continuation of the 1939 values is apparently now something equally inescapable in the circumstances of the moment.

Current values was the aim, and we were to get to it in 1961. In fact, the evidence upon which we were to get the current value basis in 1961 was much less flimsy in 1953, when the Minister expected that we could achieve that, than is the position today, unless the present Minister of Housing and Local Government had some foresight as to the kind of rent control legislation that was going to be introduced some years afterwards, but the present Prime Minister made no forecast about rent control. In fact, subsequent to 1953, assurances were given about maintaining rent control, yet, despite that, it was expected that by 1961 it would be possible to get back, to use the words of the Minister, to current values.

I do not know what the Valuation Office has said to the right hon. Gentleman. I can only take his word for it. I think that what he did was to go to the valuation officers and say, "Now, you boys, can you find a lot of reasons why we should postpone revaluation in 1961?", and they found him quite a lot. The right hon. Gentleman underestimates the valuation officers. The Valuation Office can value anything. They could value the right hon. Gentleman, and then knock 20 per cent. off to keep it in line with the assessments of commercial properties.

Let us look at all the difficulties of valuing on the 1939 basis by many people who have never had experience of it. While I admit that there will be difficulties about valuations whenever they are made, I do not believe that a revaluation on some different basis from that of 1939 values is impossible today.

The rating situation at present is obviously unsatisfactory. Nobody is paying on current value today. House property is assessed on 1939 values, commercial properties are on current values, less 20 per cent., industrial properties are on current values, less 50 per cent., and agricultural land and buildings are not rated at all. That is the present position on rating. What disturbances of the balance of the rate burden between residential, commercial and industrial properties have taken place in the last twenty or twenty-five years I do not know. An article in The Times gave some figures, but as long as we continue this unrealistic position in rating we shall never get the balance right.

I suggest to the Minister that it would have been possible to have had a revaluation on 1960 values. After all, there are different values of property today from those of 1953, and they are different values from those of 1939. The whole level of rents has increased in recent months, and, although the Minister says that the market has not settled down and it is not yet clear what the new rental basis will be for many properties, both in and out of control, I suggest that there was something interim to be found to bring rating assessments more into line with current rentals than 1939 values will be.

If the right hon. Gentleman had found it possible to do that he could then have adjusted the concession given on current values both for commercial and industrial premises. There is nothing sacrosanct about the present discount for commercial and industrial premises, but the Minister seems to want to go from 1939 values to current values in one leap. Whenever he is able to make that leap, he wants to make it at one go. I believe that wanting to make it in one leap will almost indefinitely postpone his making it at all. He will never get within leaping distance without serious social and political difficulties, and I believe that this postponement Bill is not a postponement until 1963, but is an almost indefinite postponement of revaluation.

Mr. Temple indicated dissent.

Mr. Houghton

I see that the hon. Gentleman shakes his head, but can he tell me when the last revaluation was for purposes of Schedule A Income Tax, when the next one will be, or whether there is any prospect of there ever being one? Valuations are postponed indefinitely.

Mr. Temple

I think that the last assessments for Schedule A Income Tax were in 1925, as the hon. Gentleman should know.

Mr. Houghton

They were, in fact, in 1935, and there has not been one since. It is true that excess rents were taken care of by special provisions in the Income Tax Act, but the point that I am making is that the whole history of valuations is in favour of postponement. It would be quite a mistake for the hon. Gentleman and his hon. Friends to think that there could be any real intention behind holding a revaluation in readiness for 1963, because, on his own showing, unless there is substantial further rent decontrol, the level of rents of the vast majority of controlled houses will be the same then as they are now.

I suggest that the basis of valuation will have to be nearer to the controlled rental level than to the free market level to give equity in the basis of valuation among residential properties. The Minister really has his basis of valuation there now. It will be no different and no better in 1961 or 1962. I believe that it may be further confused and made difficult because many of the rentals of decontrolled houses will have broken away from their present moorings. That is my opinion, and I think it a great pity that we should be postponing revaluation once again. I believe that the Minister could have found something which would have got us nearer to current values than the result of merely sticking to 1939 values for a further period.

In my opinion, the Valuation Office has, perhaps, been a little too modest about its capacity for hypothetical valuations, even in present circumstances. For rating purposes we have always had a good deal of hypothesis in the valuation. It is always the hypothetical tenant, never the real one, never the actual tenant. They have been 1939 values based on the condition and environment of the property today, not as it was in 1939; it has been projected back to 1939 to achieve some sort of assessment of the property in its present condition and environment had it been left in 1939. There is always a great deal of hypothesis, yet the current revaluation was carried through with astonishingly little difficulty, considering the magnitude of the task and the big changes which were brought about.

If we were to find the 1959 or 1960 level, something related to the changes in rentals which have taken place since the Rent Act, with a consequent adjustment of concessions given to commercial and industrial premises, that would have been a more realistic and a bolder attempt to make sense out of the rating situation today. Although I understand that my right hon. and hon. Friends do not propose to divide against the Bill tonight, I shall not be perverse on this occasion and insist on doing so myself.

4.53 p.m.

Sir Patrick Spens (Kensington, South)

I always listen with great interest to the hon. Member for Sowerby (Mr. Houghton) on rating matters. With most of what he said I largely agree, but I do not wish to talk about industrial premises, commercial premises or residential premises. I wish to speak about a fourth category, namely, properties belonging to charities. In effect, I am directing attention to Clause 2 of the Bill.

As my right hon. Friend said, a great many of those properties were sympathetically assessed in the past, and, in 1955, enjoyed sympathetic assessments. All over the country and in our universities there are very many buildings owned by charities which are devoted to education, and these buildings continue now on the basis of those sympathetic or charitable assessments of 1955.

Under Section 8 of the Rating and Valuation (Miscellaneous Provisions) Act, 1955, the 1955 assessments stood in the sense that, until a notice was served by the local authorities on those concerned, they were allowed to continue to pay nothing more than they were paying in 1955. There had then been reassessment on the basis of residential premises, involving the ridiculous postulate that one could find a hypothetical tenant who would take for occupation some enormous college building capable of housing 300 or 400 people. Of course, these reassessments made enormous increases on the sympathetic assessments previously enjoyed.

As I understand it, Clause 2 of the Bill really means that the sympathetic assessments of 1955 will stand now until 1963. This will give all those concerned in the administration of educational and other charities an extra period of years during which arrangements can possibly be made. I know that the whole case for educational buildings has been raised before the Pritchard Committee, and I think that it is unfortunate that we should be discussing Clause 2 before the Committee has reported. I rise merely to ask my right hon. Friend whether I am right in assuming that the effect of the Bill is that, for those charitable educational bodies, the 1955 assessments will stand until 1963.

Mr. H. Brooke

I was not giving any pledge on behalf of this Government or a future Government that there would be no further legislation on this subject until 1963. If, for instance, the Pritchard Committee brings forward recommendations which are generally acceptable, and which can be passed quickly into law, something may be done; but this will hold the position until 1963 unless further legislation is passed meanwhile.

Sir P. Spens

I am much obliged to my right hon. Friend. That will give very great satisfaction to very many people who are concerned with educational charities of this sort.

4.58 p.m.

Mr. Arthur Skeffington (Hayes and Harlington)

The main reflection which many of us have to the introduction of the Bill is that it demonstrates once again the totally inadequate nature of the basis of local government finance in Britain.

Some of my hon. Friends, particularly my hon. Friend the Member for Acton (Mr. Sparks), have drawn attention repeatedly to the quite extraordinary, complicated and inequitable system from which local authorities have to draw their revenues. It is a system which penalises the careful landlord or owner, for the better he keeps his premises the higher will be the rental value which the hereditament will attract. On the other hand, a slum owner or improvident landlord whose property deteriorates is benefited because his property attracts a lesser rental value. It is a system which pays a bonus to the careless or the antisocial.

Apart from the inequitable basis of our present rating formula, there is the sheer technical difficulty of valuation to which my hon. Friend the Member for Sowerby (Mr. Houghton) referred. Those of us who had some differences with him over the 1939 basis of valuation, particularly during the Committee stage of the 1953 Act, very much welcome him into our ranks today. He has, I think, shown considerable courage in admitting that, even if he was right then, he takes a different view about the problem today, and it is in that sense that I welcome and accept his speech.

Owners and revenue authorities today have no clear yardstick regarding the valuation of domestic properties, on which they have to adjudicate. One has only to try to imagine the difficulties of creating what the real rental values were in 1939, that is, twenty years ago, to realise what an impossible task it is. The fact that this system is to be postponed for at least two years means that the difficulties will increase, the disputes will become greater and ratepayers' dissatisfaction will mount. I can see very little diminution in the number of appeals that all this will entail.

It is an extraordinary requirement that in estimating the rental value of domestic property today—that under the 1953 Act—we have to consider what a district was like twenty years ago with all the amenities that now exist and to assume that in 1939 they did exist, while, on the other hand, things of value which do not exist today are to be excluded. One has to ignore overcrowding, on the one hand, and rent control, on the other. As I said in the Second Reading debate on 21st May, 1953, and on several occasions in Committee, this is not really a task for valuers but an assignment for magicians. The fact that, on the whole, the Valuation Office has managed to get so many agreements is a tribute to its fair sense if not to its skill, for it is not so much a matter of skill as one of common sense.

This is an extremely difficult formula for all concerned and the present debate gives me the opportunity to refer to an example which occurred in my own constituency and which, I hope, may help when any additional amending legislation is introduced. I had recent experience of a case in Hayes, where 1,200 council houses had been revalued. By some quite extraordinary oversight the fact that all the houses had electricity was unnoticed by those carrying out the valuation. I make no general attack upon the valuation officers, because they had this very difficult task to do and were working under very high pressure indeed. On the other hand, it is very strange that the fact that these 1,200 houses had electricity was not known.

When the matter came to the notice of the local valuation office the assessments were increased by £2 per dwelling. Many of us thought that the assessments were wrong—a view to which the Lands Tribunal ultimately came—but the difficulty was in trying to fight the case on the basis of rental values before the war. One had to try to get back to what an average housewife would have preferred in 1939, when there were fewer electric gadgets such as hair driers and vacuum cleaners and try to assess whether she would have preferred a hot water system both upstairs and down in preference to electric light in those days.

We were able to produce some evidence to show that that was, indeed the case because some tenants refused to have electricity even at a very low cost and preferred to have a domestic hot water system. I cite this case as an example of how this complicated renting formula can go wrong to show how farcical it is to try to assume how people reacted in a financial sense to the facts of twenty years ago to get a valuation today.

When one seriously thinks about these matters one realises that our valuation system which is so traditional has little else worth while. It is surely time that there was some simplification, or, as many of us on this side of the House think— although it would not be in order to follow this up this afternoon—that an altogether different basis of valuation was introduced.

The Government must, of course, carry the primary responsibility for today's difficulties because, apart from what my hon. and learned Friend the Member for Kettering (Mr. Mitchison) said about the effect of the Rent Act on rental valuations it is the fact that the Government were fully warned in 1953 about the difficulties of returning to the domestic values of 1939. It is not often that one can claim prophetic vision, but I said in the Second Reading debate on the 1953 Act, that I thought this system would break down as it broke down before. I said that that would break down and we should have postponement, as we did in 1938, of the valuation which was to take place in 1939 and 1940.

I asked the present Prime Minister, who was then the Minister of Housing and Local Government, whether he really thought that it would work. I asked him this on two occasions, and on the first occasion he gave me a rather frivolous reply, which later he admitted was frivolous, to the effect that the valuers had devised it and that it ought to work. When I asked the right hon. Gentleman again, he said that he had answered in a somewhat frivolous way, and then went on to say: What I meant was that Ministers are but dim and transient phantoms who flit across the stage, and that these men who are uphappy enough to have devoted their lives to valuing will have to carry out this work long after I have forgotten all about it."—[OFFICIAL REPORT, Standing Committee C, 30th June, 1953; c. 113.] No doubt the right hon. Gentleman has forgotten about it, but we are force-ably reminded of it and so are the valuation officers and domestic and commercial property owners who are concerned with paying rates now. The fact is that the Government really took no notice of the warnings given in 1953, and that is another reason for this postponing Bill.

As my hon. Friend the Member for Sowerby said, in this matter we have had a whole series of postponements—1939, 1952 and now this postponement. I shall be very surprised if we get the present valuation lists implemented without a further postponement. Indeed, I hope that before then we shall get a new basis of valuation altogether, which will be fairer.

Having said that, I wish to make one further point. Though the valuers have no real yardstick of valuation for much of their work on domestic property, they have done the job. It seems to me a little unfair then to blame them for the fact that there is to be a postponement. I believe that there are other reasons. I do not know whether it has anything to do with the General Election, but I cannot think that the postponement is due to the Valuation Office.

I will end as I began, by saying that the Bill provides further eloquent proof of the unfairness, the complications and the difficulties of the present system. Today, not a single class of property owner is, in fact, paying upon the full value of his property. Shops have one value—80 per cent. of current value— houses another value for 1939 values, and industry is paying only a minor proportion towards the services which it receives from local authorities. On a previous occasion, I showed how some industries spend thirty, forty or fifty times as much every year on advertisements as they contribute towards the local Government services from which they benefit like everybody else. I hope that the time will come, even if the present Government will not act, when we shall have an alternative system which will be fairer as between one ratepayer and another.

5.9 p.m.

Mr. Raymond Gower (Barry)

The hon. Member for Hayes and Harlington (Mr. Skeffington) commented on some of the anomalies of the rating and valuation system. He implied in some of his remarks a criticism of that system. I can understand that, but he will appreciate, I am sure, that this has long been a difficult matter and that when the 1948 Act was introduced by the Government of his party they reverted to the 1939 formula in respect of certain classes of houses.

Mr. Lindgren

Under the 1948 Act a very complicated basis of valuation was brought in, and that was subsequently altered by the Government after 1951.

Mr. Gower

They resorted to what the hon. Member has called a very complicated formula. That is a fair summing up of the position. It is not an easy matter to settle or to solve.

The point which I particularly want to make is that the question of basis is a long-term matter which is not to be treated in the present Bill. This Bill deals with certain aspects of machinery, and, in discussing that, the hon. and learned Member for Kettering (Mr. Mitchison) made a highly imaginative speech in which he peered into the glass to find anything which he thought was frightening or calculated to cause despondency to certain electors. I was surprised that the hon. Member for Sowerby (Mr. Houghton), who always speaks in an informed and interesting way on these subjects, appeared to imply, like the hon. and learned Member for Kettering, that the reason given by the Valuation Office was largely bogus. I was surprised that he should contend that that was the case. I am prepared to accept from my right hon. Friend that this is a long and difficult job, and surely it is not unreasonable that the Government should say that it is a job which cannot properly, efficiently and fairly be carried out in the time originally contemplated for its completion.

For my part, I have found that the chief complaint is not that valuations are too late or take place too infrequently, I should like valuations to take place less frequently. My hon. Friend the Member for the City of Chester (Mr. Temple) suggested seven years. I would say that they should not be more frequent than ten years. Like the changes made by the Boundary Commission, I do not think that they should take place too often.

Mr. Lindgren

They have hardly been too frequent. We have waited twenty-one years, from 1935 to 1956.

Mr. Gower

The chief complaint of my constituents is that some time ago they had to face a change in the basis of the rates which they had to pay, and I am sure that they would not like a change every five years, as suggested. A much longer period should be written into a Bill introduced at a very early date.

There is not only complaint about the time. Another complaint is that the system as it is at present, administered centrally, takes too little account of local conditions. I confess that the former system, perhaps, had its own grave faults and there was a very strong case for having a central, broad valuation for the whole country. The complaint which I find most prevalent among people in my constituency with whom I have discussed this matter is that the system is too rigid and takes too little account of the circumstances prevailing in a particular locality.

The hon. Member for Sowerby also made the point that there is uncertainty in rental values at present, and, like his hon. and learned Friend the Member for Kettering, he partly attributed this to Government policy. The hon. and learned Gentleman, indeed, developed the argument that it was largely due to the Rent Act and the changes in rent which resulted from it. I respectfully suggest to the hon. and learned Gentleman that there would surely be uncertainty if the policy of his own party were applied— for example, if there were a sudden, wholesale municipalisation of rented houses, or even if such a scheme were introduced more gradually. In either case, there would be a considerable effect on rating valuations.

I think that my right hon. Friend was quite right in saying that this Measure is essential. It is better that we should postpone this operation and do it carefully and properly rather than rush it, as the hon. and learned Member for Kettering seemed to advocate.

5.16 p.m.

Mr. G. W. Reynolds (Islington, North)

I should like to express agreement with the hon. Member for Barry (Mr. Gower) to the extent that obviously something must be done. Whether the mere postponement of valuation lists for two years is the best thing to be done is another matter.

The main reason which the Minister gave for this Measure is that at present there is not a big enough free market in residential property to allow the valuation officers to gather the material which they require for the preparation of lists to come into operation on 1st April, 1961. The Minister went further and told us that there would appear to be at present about 2 per cent. of domestic hereditaments which had their rents fixed in a relatively free market, and that the figure required is about 10 per cent. to enable the valuation officers of the Inland Revenue to do their job.

I should like to know how we shall get 10 per cent. of that sector in a free market by 1961. The work will commence in 1961, so that it is by 1961 that we must have the 10 per cent. to which the Minister referred, in exactly the same way as he is now saying that in 1959 we have to have the 10 per cent. free market to have the lists ready for 1961. The Minister is saying that, based on some calculation best known to himself, we should have this 10 per cent. free market in 1961. The valuation officers will then be able to get to work and supply valuation lists to come into operation in 1963.

How will the size of that free market increase from 2 to 10 per cent. over the next two years? There are the 125,000 houses which have been mentioned as coming out of rent control by normal movements or by death of tenants and things of that nature, but we are talking of about 13 million domestic hereditaments, and 125,000 of them, even over two years, to make the ¼ million, will not go very far to bring the present 2 per cent. up to 10 per cent.

The other factor which I suppose the Minister hopes will enable this figure to come nearer to the 10 per cent. level is that in the next two years some, but not all, of the three-year agreements entered into under the Rent Act, 1957, will come to an end. He apparently assumes that the majority of these agreements will be renewed for another period, and that that will bring him nearer to the 10 per cent. I still do not think that, even if all the agreements were renewed, that will bring him up to the 10 per cent. Unless other legislation is brought in, it is most likely that once the: three-year agreements come to an end a large proportion of the properties will go out of the rental market altogether and will be put up for sale by their owners and, by sale with vacant possession, become owner-occupied. This will not help in any great measure to increase the percentage.

Unless we can have a more detailed explanation how we shall change in two years from a 2 per cent. free market in domestic hereditaments to the 10 per cent. which the Minister has told us is desirable and necessary before the job is done—and the present figures do not support the contention at all—we can only assume that, with an election some time this year or the early part of next year, we shall see action taken under the appropriate Section of the Rent Act, 1957, to decontrol more rented houses. If the Minister is honest with the House, I think he will say that that is what he has in mind.

As far as I can see, it is the only way in which it would be possible to guarantee a free market in 10 per cent. of the residential hereditaments within the next two years. We now have an indirect statement by the responsible Minister that by 1961 the area of decontrol in rented dwellings will have been considerably increased and that by then they hope to be able to carry out a revaluation. I see no other way of reaching the 10 per cent. figure, which the Minister himself said is necessary by that time, without further decontrol of rented property.

I agree with quite a lot of what has been said by my hon. Friend the Member for Sowerby (Mr. Houghton) concerning other and, perhaps, better ways of doing this task. It might well be difficult for the valuation officers, with only 2 per cent. of the properties to consider, now to fix current rental values for property to come into operation in 1961. The task that they had to do in 1956, however, was even more difficult. They had to work out, as my hon. Friend said, what a hypothetical tenant would be prepared to pay by way of annual rent for a property in 1939, provided that the surroundings were the same as actually surrounded it in 1956, that the tenant was responsible for the payment of rates and that the landlord was responsible for repairs and insurance—all of this in 1939. We might just as well throw in the proviso that the moon was made of blue cheese and that the sun never set on the British Empire during a whole period of twenty-four hours. This would have just about as much relevance as many of the factors which had to be taken into account.

That was done and we had a hypothetical value as well, for that was all it was. Had the Minister wanted, it would have been possible to have revaluation in 1961 and to put local government finance back upon a rather more stable footing. It would have been possible to have a short Bill, not the present one, but one that would lay down definite guidance to the valuation officers—it need hardly have been anything like as complicated as the guidance issued with the 1953 Act—so that they could get on with the job of revaluing domestic hereditaments in England and Wales on a basis laid down by Parliament, which might even have been—and I would like to consider this further—the Government's own assumption that a reasonable rent was twice the 1939 gross value. Something of that nature could have been brought in.

I agree completely with my hon. Friend the Member for Sowerby that the further we get away from 1939, the more difficult it will be to go in one step from 1939 value to whatever happens to be current value at the particular time. The Government should have taken the opportunity here and now of taking a step towards arriving at current rental value.

I am extremely disappointed that the job is to be postponed, because it was only a short while ago, two years or so, that the Minister came to the House and said that having undertaken a full review of local government finance, and having in that review come to the conclusion that it was neither possible nor desirable to have alternative forms of income or other local taxes for the local authorities, the local authorities would have to rely for their main income upon the rating system.

I do not want to comment on the arguments either way concerning alternative forms of revenue. On the whole, I tend to support the Government on that line. At the moment, I see no alternative to the rating system. The Government, however, having told the House and the country—and having taken through Parliament a Local Government Act which settles the matter effectively for several years—that the local authorities must rely upon the rating system for their own income, have a duty to ensure that in the rating system the local authorities have a proper, workable and adequate system of local government finance. Instead, they are pushing off for at least another two years the time when the local authorities will have something like current values for the property from which they have to obtain revenue. I look forward to the day when, as many hon. Members have said, we can have current valuations for all property in the rating list. I do not think that they will come as such a shock to many occupiers of domestic property in quite a large part of the country.

Obviously, on the day that domestic property is rated at its current level, we must have current level valuations for the payment of rates for both industrial and commercial property, and the incidence of the larger share of the burden having to be met by industrial and commercial property will to a certain extent—although not completely, as it will vary from one part of the country to another —iron out the blow to the residential hereditament. That would bring us from the 1939 value to the current value in one sweep.

I should like to know what is to happen concerning the Valuation Department when we have this two-year delay. At the moment, there is a staff of 4,444 in the Valuation Department of the Board of Inland Revenue, or 500 more staff than we had during 1955–56, when they were in the throes of preparing the valuation lists that: were to come into operation on 1st April, 1956. I assume that, in effect, this additional 500 staff replaces the work that was being done at that time by private valuers under contract, which from time to time has been said to be roughly equivalent to the work of some 500 valuers. Presumably, therefore, the Department has sufficient staff, if given the go-ahead, to prepare a valuation list by 1st April, 1961. One can only assume that the staff is there as the money is being spent as outlined in the Estimates, with the exception of only a few thousand pounds.

At present, therefore, the Department has a staff of 4,444. I understand that amalgamations are taking place within the Department to enable other valuation staff to be used on this type of work. This will allow certain of the valuation staff not only to do rating work, but to do other work on compensation and other matters which is normally carried out in the Department.

We are spending over £4 million a year on maintaining a section of the Board of Inland Revenue, but we are told that we cannot have new valuation lists yet. I suggest that it would be much easier, both for the staff and for the Department, and much more preferable for the local authorities—and we must bear in mind that the Minister himself, in introducing the Bill, has pointed only to the difficulty of rerating domestic hereditaments—if we could have some sort of system that would enable the staff to get on with the revaluation of other hereditaments and, instead of insisting on what I regard as the stupid idea of the revaluing of all property once every five years, if we could have the new valuation lists coming out as to half one year and half two years later.

The Minister mentioned that 13½ million hereditaments were domestic ones. He did not mention that their rateable value totalled £320 million. There is, in addition, a further 2,167,000 hereditaments comprising commercial premises with the current 20 per cent. derating, including public buildings of one kind or another, valued in a rather different way, licenced premises, industrial premises and certain miscellaneous kinds of property. As compared with the 13½ million domestic hereditaments, however, these 2 million premises have a total rateable value of £290 million, or almost as much as the 13 million houses. From the point of view of the Valuation Department, of the Appeal Courts and of the Lands Tribunal, I suggest that it might be easier, if domestic hereditaments are to be revalued at the date set out in the Bill, to proceed with the revaluation of all hereditaments other than the domestic ones. The Minister has said only that there would be difficulty in assessing the value of domestic hereditaments. Why, then, postpone the revaluation of all property? Evidence is available as to the values that could be assessed for industrial and commercial property. Not only has the Minister not allowed the valuation officer to prepare complete, or even partial, lists for property other than domestic, but he is stepping in and, in the Bill, stopping the local authorities from doing some of this work themselves. If the Minister is not prepared to allow the valuation officers to do it. I do not see why he should step in at this stage and stop the energetic local authorities from doing the job. I realise that that is a messy way and not the ideal way of doing it, but the Minister is deliberately going out of his way to stop the energetic local authorities from doing the work and ending some of the gross inequalities of valuation which now exist in their areas.

On this subject, I can speak with considerable experience of the constituency represented by my hon. Friend the Member for Acton (Mr. Sparks). We have found there during the past few weeks that industrial property which was assessed in 1956 with a value of 3s. per square foot is now being let at prices in excess of 6s. per square foot. There is plenty of evidence of that and yet the Bill will stop the Acton Borough Council, or any other rating authority, from endeavouring to correct that kind of anomaly. Other evidence is also available to show that a large amount of commercial property revalued in 1956 in the greater London area is now being let at annual rents greatly in excess of those that were taken into account in fixing the value. That is without any reference to the large premiums which have to be paid at the same time.

There is plenty of evidence to show that by a simple piece of legislation, the Minister could allow the Valuation Department to prepare the valuation lists concerning this type of property and for them to come into operation at the normal time. Not only is the Minister not doing this, but he is going out of his way to stop the local authorities from doing the job.

I should like to comment shortly on the position concerning Section 8 of the 1955 Act. The idea, as I understand it, was to preserve a measure of local discretion, with the advantage also of avoiding the need to define by Statute the bodies or organisations or charities which were to receive favourable treatment for rates. For years prior to 1956 the individual rating authorities have been doing this. They have been making allowances by sympathetic assessments, perhaps illegally but on the whole doing it satisfactorily. They have local knowledge. The then Minister of Housing and Local Government said during the Committee stage of the Rating and Valuation (Miscellaneous Provisions) Bill, 1955: If we leave the discretion to local authorities to decide to which individual charitable organisations they will give exemption or remission, that allows the human element to come into play; it allows local knowledge to come into play; it allows the facts of individual cases to be assessed."—[OFFICIAL REPORT, 28th June, 1955; Vol. 543, c. 307.] The intention was that as from 1961—or, as it turned out, 1960—the local authorities should be allowed to use that individual discretion and that local knowledge. I must express my sincere disappointment that the allowing of local initiative will be deferred now for a further period of two or three years.

I want to refer particularly to one group of organisations which has been able to claim this kind of allowance. It is, in the main, the group referred to by one hon. Gentleman opposite. I see no reason why the anomalous position of local ratepayers having to subsidise national universities should be continued for another three years under the provisions of the Bill. One has only to look through the list of local authorities to see easily that local authorities in areas of universities are the hardest hit by the effects of Section 8 of the 1955 Act.

I find that all the county boroughs losing more than 1 per cent. of their possible collectable revenue are university towns. Birmingham, Bristol, Cardiff, Exeter, Manchester, Liverpool, New- castle, Nottingham all lose more than 1 per cent. of the possible amount of rates they could collect because of allowances under Section 8, a large part of which are allowances to the universities. Then we come to the real hard case of the county boroughs. The City of Oxford loses 9 per cent. of the possible rate collection for this area because of allowances made under Section 8, mainly to the university.

Five Metropolitan boroughs are losing more than 1 per cent. of the possible collectable rate, namely, Finsbury, Holborn, St. Marylebone, Stepney and St. Pancras. Many of them lose 2 per cent. or more. It is when we come to the non-county boroughs that we see authorities which have been hard hit, with Aberystwyth losing 17.3 per cent., Bangor 16.6 per cent., Cambridge 15¼ per cent., Durham 8½ per cent. and Loughborough 3.28 per cent.

I appreciate that the Minister can say that this is taken into account in the calculation of the Exchequer equalisation grant, and will be taken into account because of its effect on the rate poundage in the rate deficiency grant under the Local Government Act, 1958. This is true, and all the non-county boroughs I have mentioned benefit from that grant and therefore will receive some help for the loss they incur under Section 8. However, only six of the county boroughs receive any payment from the present Exchequer equalisation grant. I do not know how many will be helped under the new rate deficiency grant. Oxford, one of the hardest hit, is not helped by the grant and I doubt whether it will be helped by the new deficiency grant.

We must bring the provisions of this Clause to an end as soon as possible to allow those local authorities to go through the list and decide to which ones they wish to give help. The Minister told us that some 53,000 cases at present were being allowed rate remission under the provisions of Section 8. He also told us that in 31,000 cases the local authority had given notice to terminate relief. I think I can say safely that in the majority of cases where local authorities have given notice to terminate relief, they have given notice indiscriminately to every organisation at present receiving relief under Section 8.

This does not necessary mean that when 1960 or 1961 arrives—depending on whether they were fortunate or unfortunate in getting the notice served—they will refuse to give relief to all those bodies. It simply means that they are safeguarding their own position, and that in 1960 or 1961 they will look at each individual case and decide whether or not at that stage they will grant any relief, in the light of circumstances at that time and each twelve months thereafter, because they must look at the question every twelve months and decide whether to continue the relief. The Minister gave the impression that the reason for this was that many local authorities would refuse to renew relief after 1960 or 1961. I do not think that is true. I think they have served the notice to cover themselves so that they can stop giving relief if they desire to do so, but in the case of purely local charities I think they will continue to give that relief.

I can see the necessity for having some time in reserve when considering the Report of the Committee on the rating of charities when that comes along, but I was surprised to hear the Minister say today that he expected to receive that Report within the next few weeks. The Minister said he did not know what the Report would recommend. It may well be that things are in such a muddle that the Report will recommend that things are best left as they are. Nevertheless, we are to postpone it for another three years over and above the earlier date to enable the local authorities to get out of the provisions of Section 8 now. That is unfortunate, and I am sorry we are doing it today.

I repeat my hope that we can get on to full current valuation of all types of property as quickly as possible. Even if we defer this for another two years, it will have to come sooner or later in stages. I do not think that in the next valuation lists we shall get full valuation of residential hereditaments for rating purposes. I think that will be funked by the Government when the time comes, and I hope that as quickly as possible we shall restore to the rating authorities the power to make sympathetic allowances to charitable institutions in their own area, because they are the best bodies to do it and I am certain they are capable of doing it.

5.37 p.m.

Mr. J. A. Sparks (Acton)

I listened with great interest to the Minister and was not at all convinced by some of the arguments he advanced in support of postponing the next valuation lists. In the main they did not seem to me to be valid arguments for a postponement, because most of the factors mentioned by the right hon. Gentleman which mitigated against a true valuation being made in the next valuation lists will exist at the date of the postponement suggested in the Bill.

I would not for one moment accept that it was necessary to obtain information as to free rentals in respect of only 10 per cent. of the 15½ million houses that are assessed to rates. Why the right hon. Gentleman should select 10 per cent. I do not know, but I should have thought it a totally inadequate percentage the result of which to apply to the whole of the remaining dwellings.

The right hon. Gentleman advanced certain reasons for being unable to obtain what he regarded as a realistic valuation for the lists which would normally have been in operation in 1961. His reasons were owner-occupation, local authority houses, controlled lettings, furnished lettings and the present tenancy agreements for controlled dwellings arising from the Rent Act. I do not know whether the right hon. Gentleman expects that in three years' time all those factors which are mitigating against arriving at a free market rental will disappear. He certainly is a super-optimist if he does. I would go so far as to say that in three years' time these factors will remain, having altered little one way or the other in that period.

I know what the right hon. Gentleman is trying to do with the Bill. It is most significant that the next valuation lists are to be postponed for three years.

Mr. Charles Pannell (Leeds, West)

On a point of order, Mr. Deputy-Speaker. Owing to the lack of interest which is being shown by hon. Members in the affairs of the natives of these islands, I call attention to the attendance in the Chamber.

Notice taken that 40 Members were not present;

House counted, and, 40 Members being present—

Mr. Sparks

I do not think that the Minister's real intention in bringing forward the Bill was adequately disclosed by him in moving the Second Reading. It is significant that the postponed date will effect a great change in respect of the rents of decontrolled dwellings under the Rent Act. By that time the protection afforded by the 1958 Act, which enables the courts to intervene and suspend possession orders for three years if they feel it necessary, will come to an end. The result of the 1958 Act has been to persuade a very considerable number of landlords and property companies to enter into tenancy agreements with their tenants for a limited period of three years because they know very well that if they did not do that the chances of getting possession would be somewhat remote. Therefore, the right hon. Gentleman assumes that by 1961, when the 1958 Act comes to an end and the tenancy leases of decontrolled houses have come to an end, there will be a free market in rental values. When that time is reached we shall notice, especially in areas where the housing shortage is acute, very substantial increases in rents over and above the very high rents now embodied in three-year tenancy leases. It is clear that the right hon. Gentleman and his advisers have this development in mind in postponing the operation of the next valuation lists for three years.

I feel that the method of assessing what is generally termed free market rents is not just. In areas where there is a serious shortage of housing accommodation—this applies in and around London and in our cities and large towns—the rents charged in a free market are not reasonable ones. There is a scarcity value which landlords are able to impose upon people who are desperate for housing accommodation and who must pay what is demanded or find themselves homeless or living in one or two small rooms. Therefore, it is clear that the Government are deferring the next valuation lists because they are hoping by 1963 to have a pattern of what they call free market rents based mainly upon the coming to an end of the 1958 Act and the full play of the principles embodied in the Rent Act.

It is monstrously unfair that such a basis should be used for assessing rentals upon which householders will have to pay rates. It should also be borne in mind that this basis of assessing free market rentals is to be applied for owner-occupation. That means that the owner-occupier will have to pay rates based on the highest possible rents that could be obtained for any property in the district in which he lives. The same rental basis is to be applied to council tenants, and the same basis will be applied to practically all the other categories of householders who are responsible for paying rates to the local authority. Therefore, there is no doubt whatever that when the period of postponement comes to an end the householders, mainly of our cities and large towns, will find themselves having to bear a very much higher proportion of the rate revenue needed for their district than they are doing now or have done at any time in the past.

I do not quite agree with all that my hon. Friend the Member for Islington. North (Mr. Reynolds) said about the effects of derating, although he happens to be the chairman of the Finance Committee of the Acton Borough Council. He said that the increased current value upon industrial hereditaments would very largely offset the increased rate demand from householders. It must be understood—and my hon. Friend will agree with me—that my constituency is one of the most heavily industrialised in the country and industrial valuation forms a very high percentage of the area's total valuation. We must not fall into the error of supposing that the effects in my constituency will be similar to those throughout the country. The increase in the current value of industrial rating at the end of this period will not in most cases make up for the increased burden which householders have to bear as a result of the higher assessments which are to be placed upon them.

We must not forget that industry is not paying a fair proportion of the rates of the districts concerned. The right hon. Gentleman said that industrial and commercial valuations account for 14 per cent. of the country's total valuations and residential valuations for 86 per cent. The figures are significant. There is not the slightest doubt that in most cases householders pay the major burden of financing local government activities.

If industrial and commercial hereditaments were valued at the current market value and had to pay 100 per cent. of their assessment, as householders do, the rate burden would be roughly 25 per cent. for industrial and commercial hereditaments and about 75 per cent. for householders.I do not say that that would be fair in every case, but it would be much more equitable than the present basis.

Unless the right hon. Gentleman includes provisions to repeal the 20 per cent. derating of shops and commercial premises, which is automatically to take place with the new valuation, and unless he is prepared to provide that industry shall pay 100 per cent. of its assessment, the balance will continue to be heavily weighted against the average householder.

My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to industrial derating. Unless one inquires closely into the precise effects of previous legislation, if one takes only a superficial view, one might think that industry is now paying 50 per cent. of its rates to local authorities. That is true on the surface, but the fact remains that although local authorities apparently receive 50 per cent. of the assessment of industrial hereditaments, in fact they receive only about 33 per cent. That is because in previous legislation the right hon. Gentleman withdrew two-thirds of the advantage which would otherwise have gone to local authorities in the increased rating of industry from 25 per cent. to 50 per cent.

I do not want to go over the old ground which we have covered on so many occasions when discussing the principle of industrial rating. The case for calling upon industry to pay 100 per cent. of its assessment is unanswerable and we all know how that can be done in equity to the householder who otherwise has to pay an unduly high proportion of the rate demand.

I do not believe that in three years we shall be any nearer a free market rent for house property than we are today. I hope that the Parliamentary Secretary will explain precisely how the present factors, which he said prevent a realistic assessment of a fair rent, will have changed in three years. We shall listen carefully to his explanation. I am convinced, as are many others, that those factors will be as present in three years as they are today.

I do not accept that there are valid technical reasons for not having the next valuation list put into operation in 1961, as was intended. It has not been beyond the ingenuity of the valuers to discover the 1939 rent paid by a hypothetical tenant. That was very difficult, but it was done and yet the valuers have not been able to establish what they regard as a fair rent. I still think that that could be done, bearing in mind the broad pattern of rents applying to uncontrolled and furnished lettings, and the rents of local authority accommodation. It must be remembered that when subsidies paid for council houses are taken into account, rents charged by local authorities are fair, because no one makes a profit out of them. If we are looking for fair rentals, which do not allow people to make too much money out of the holding of property, we shall find them in the rents charged by most local authorities, taking into consideration the effect of subsidies.

The right hon. Gentleman has not advanced an adequate argument for postponing the coming into force of the next valuation lists. It would be in the general interest of householders if the valuation lists were brought in, as was intended, in 1961. The basis of those lists would be much fairer than it is likely to be in three years' time. There is no reason for further postponement, because all the relevant factors are available to enable a reasonable and fair rental to be assessed for the purpose of local rating.

6.1 p.m.

Mr. G. Lindgren (Wellingborough)

This can hardly be described as an exciting debate. Apart from the ministerial team, there have never been more than two hon. Members on the benches opposite. We are now winding up this debate at six o'clock, although we are dealing with a fundamental social and political problem. The expectations of ordinary people are practically the same, no matter where they live. They want jobs, reasonable wages, a home, education, parks and open spaces for their youngsters, the facilities of public health, and protection by the fire and police services. All the facilities which go to make human life worth while are provided by way of our local government system, and rent and rates form a large proportion of the budget of the average household.

We are now dealing with the financing by local authorities of the basic human services available to deal with the welfare of our people. Speaking as one who has been brought up in local government, I am disappointed to think that it still leans for its livelihood upon the national Exchequer. The Bill does nothing to correct that situation. In fact, as my hon. Friend the Member for Sowerby (Mr. Houghton) pointed out, it goes some way to perpetuate it.

For years local government finance has been upon a very unsatisfactory basis. My hon. Friend the Member for Acton (Mr. Sparks) made a very courageous speech, bearing in mind the fact that he was suffering from a very severe cold, but in spite of what he said I must point out that everybody is receiving a subsidy at the expense of local rates. The shopkeepers and the occupiers of business premises are being subsidised to the extent of 20 per cent.; industry to 50 per cent., and I would estimate that domestic hereditaments, at 1939 values—speaking not as a valuer—one subsidised at about 50 per cent. The only people who are paying rates at full values are local authorities, in respect of schools and public utility properties.

For far too long local government finance has been at the mercy of successive Governments, and the present Government have once more ducked the issue. Using words a little more forceful than those used by my hon. Friend the Member for Sowerby I would say that the excuses put up by the Government today are not the real reason for the postponement of the Bill. If they were given the task the valuation officers of the Inland Revenue Department could have undertaken it. They have undertaken far more difficult tasks in the past.

The Government's excuse is that there is a lack of evidence about free rent. Will the evidence be any better in 1963 than in 1961? My hon. and learned Friend the Member for Kettering (Mr. Mitchison) had something to say about what was likely to happen if the Conservatives were returned at the next General Election. He envisaged their carrying out their intention of removing further properties from control. It would take until the end of 1960 or the beginning of 1961, at the earliest, before effect could be given to such an aim. In that case they would have an excuse for further postponing the valuation list, because of the upset of the market.

At some time some Government must introduce valuation for rating on current values. My hon. Friend the Member for Sowerby made the excellent point that the longer this question is delayed the worse becomes the position of local authority finances, and the more difficult it is for the Government to tackle the problem. If action is postponed again in 1963 it will be difficult to implement the new list in one step. Even if it is dealt with in 1963 it will be difficult. The rate burden is not now equitably distributed between one class of ratepayer and another, as was pointed out by my hon. Friend the Member for Acton. The Bill does nothing to remedy that situation; in fact, it makes it worse.

The Minister explained, as a reason for his inclusion of Clause 1, that he did not want local authorities to carry out partial revaluations in their areas—

Mr. H. Brooke

A local authority cannot carry out revaluation; it can only seek to initiate a partial revaluation.

Mr. Lindgren

It can do that only by submitting proposals to the valuation court, which determines whether the local authority the local valuation officer is correct. If that is the reason, the Minister is admitting something which, so far, we have not claimed—that there are serious mistakes in the existing valuations and that, in fact, we shall perpetuate mistakes which have already been made.

By this Clause the local authority is being pushed further out of the rating picture. The third party right of objection will be taken away from local authorities which have a duty to see that there is fairness between one ratepayer and another. If it considers that an injustice is being done, a local authority has the right to insist upon equity. The Bill will prevent a local authority from making proposals when it thinks that there is under-valuation. We must emphasise that problems arising from under-valuation have been revealed as applying particularly to shops, offices and industrial properties, and it is in respect of such property that local authority proposals are generally made. Upon the incidence of rates paid by shopkeepers and commercial and industrial ratepayers depends the amounts of rates paid by domestic ratepayers.

I do not wish to make any specific charges, or to assert that the Inland Revenue Department has deliberately placed a wrong value on certain properties. I do not suggest that there has been connivance between industrialists and shopkeepers and the Department, but mistakes are bound to happen, even in the best-regulated families. In the past, there have been obvious mistakes. There have been cases where local authority finance officers have gone to the Inland Revenue Department to call attention to a mistake, and sometimes the Department officials have said, "We will have a look at it and put in a counter-proposal", and that has been done. Often, the Inland Revenue Department officers have said, "No, we shall not touch it. We shall leave it as it is." Then the local authority has had the right to say, "We think that you are wrong. We will put in a proposal of our own." The matter has gone to the valuation court and an independent decision given.

I am worried about Clause 1 (3). I do not think it right, as was suggested by the Minister, that the intention of the Clause is just to hold the balance during these two years, to prevent a local authority from carrying out a reassessment for two years. The intention for a long time has been to prevent local authorities from exercising this power. I envy the ability of my hon. and learned Friends to refer quickly to references with which to illustrate the points they wish to make. I do not find it so easy to refer to references, but I am certain that it was the City of Liverpool Corporation which wished to revalue a shopping area in the city. The right of the local authority to put in proposals was contested, as was its right to employ a valuer. If I remember correctly, the case went to the courts and the question whether the city was entitled to employ a valuer was argued and a decision given in favour of the local authority.

The Parliamentary Secretary may argue that when the Bill which eventually be- came the 1949 Act was in draft form, and was discussed by this House, the third party right of local authorities were excluded. That is true, but the right was restored by a suitable Amendment during the Committee stage discussions. The then Minister, my right hon. Friend the Member for Ebbw Vale (Mr. Bevan), admitted that local authorities had a duty to ensure that there was fairness as between one ratepayer and another. It was agreed that the local authority should be regarded as an aggrieved person, and that right has been used effectively by local authorities. In my own town a case arose involving a big department store, about which the local authority made proposals. The case is now before the valuation court.

The provisions of the Bill will remove the right of reassessment of industrial property and take away local authorities' rights regarding commercial property. When new proposals are made and are added to the valuation lists they often show a different basis. For example, to quote a fictitious figure, it may be that an industrial property is charged at 8d. a foot. The finance officer will say, "If this property is worth 8d. a foot, and the other properties are valued at about 6d. a foot, we ought to revalue them, because otherwise this new property will pay a greater proportion of the rate than the others." The proposals contained in the Bill will prevent local authorities from exercising a bargaining power when negotiating with the Inland Revenue Department.

As I said in my intervention during the speech of the hon. Member for Barry (Mr. Gower), local government finance has suffered from the revaluation basis for many years. We had to wait twenty-one years, from 1935 to 1956, for the valuation. Then, a big task was given to the Inland Revenue Department for the first time and it would have been surprising if all the valuations made by the Department were absolutely correct. I can remember a case in Shropshire, where serious mistakes had to be put right. In carrying out such a big undertaking a large number of mistakes are bound to be made and they have to be put right. I suggest that that can be done only by co-operation between the local authority officers and the Inland Revenue Department, and if the Department is to have the last word all the time it will not prove much of a partnership.

This postponement will perpetuate the ill effects of any mistakes which have already been made. In calculating the amount to be received by a local authority in the general grant there is a deduction of 9d, which goes to make up the full deficiency grant. If there are discrepancies in valuations between one area and another, the whole basis of the payment of that 9d. levy, and of the amounts received by local authorities, becomes unbalanced and unfair when one authority is compared with another.

I re-emphasise what almost every hon. Member from this side has said, that the Government have failed to face up to a very difficult task. They have shown a lack of courage to which attention has been called by the technical Press, and I am sure that before the Committee stage we shall be subjected—I do not mean wrongly—because of this bad reception in local-government circles, to considerable pressure from local authorities to put certain things right in Clause 1 (3).

The Government have been running away from an opportunity to put local government finance more securely on its feet. I hope that they will have second thoughts and that they will withdraw not only Clause 1 (3), but the whole Bill, and will set about giving local government a financial basis which will be fair to the local authorities and enable them to carry out the work which the Government have asked them to do, and will, at the same time, make for fairness between one ratepayer and another.

6.21 p.m.

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

The hon. Member for Wellingborough (Mr. Lindgren) said that we had not had a very exciting debate. That is true. I have listened to all the speeches except one, and I cannot help feeling that there has probably been a good deal more agreement between the two sides of the House than a third party listening to the debate might suppose. The hon. Member said hard things about my right hon. Friend and Her Majesty's Government. We take those in good part, as usual.

The postponement of the 1961 revaluation for a period of two years is important to a great number of people. Probably a majority of people will welcome this postponement. Others like hon. Gentlemen opposite who have spoken, do not welcome it. No matter how much we may disagree in our line of approach to this problem I think all will agree that there is a certain psychology in the paying of rates which makes it most important that any system of valuation for rating shall be as fair as it can be made and that it shall be felt by the overwhelming majority of ratepayers to be fair.

Mr. Sparks

When the hon. Gentleman says "fair," may I remind him that his right hon. Friend, in moving the Second Reading, spoke of free market value, which is a very different thing from being fair?

Mr. Bevins

Perhaps the hon. Member misheard what I said. I was not talking about rentals, but was saying that any sysem of valuation for rating should be fair and should be seen by the majority of ratepayers to be fair. The paying of Income Tax may be unpleasant, but it does not hurt overmuch. It is a relatively painless form of extraction. But paying rates hurts very many people.

The hon. and learned Member for Kettering (Mr. Mitchison) observed that the Government had brought this postponement upon their own heads by their own policy. I do not accept that for one moment. The hon. Member for Sowerby (Mr. Houghton) was on the point when he said that the history of revaluation was a history of postponement. It is indeed. The postponements that have taken place in this field have not always been the responsibility of the party on this side of the House. There was a postponement as far back as 1952 which, although it was announced by my right hon. Friend the present Prime Minister, had been foreshadowed by right hon. Gentlemen associated with the Labour Government which left office towards the end of 1951.

I was saddened to think, and so I am sure was my right hon. Friend, that the hon. Member for Sowerby, after all these years, had at last deserted the Establishment with which he was so intimately connected. Perhaps it is because of that fact that his contribution to this debate was not quite so accurate as those he has made in earlier debates on this subject. I thank my hon. Friends the Members for the City of Chester (Mr. Temple) and Barry (Mr. Gower) for their helpful and constructive speeches and my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) also. His views on charities were wholly in accord with those of my right hon. Friend and of the Government.

The hon. and learned Member for Kettering quoted quite a bit from the Economist and seemed to agree with its view that if the Valuation Office could successfully do 1939-value revaluation then it could equally do revaluation on the basis of current values. The fact of the matter is that there is no comparison between rating houses in 1956 on the basis of 1939 rents and, on the other hand, making attempts at this stage to rate all house property and dwellings on the basis of current free market rents. In the first case there was at least a reasonable quantity of evidence upon which the value could be based, but at this moment there is not sufficient evidence to go ahead. I am sorry that the hon. Member for Acton (Mr. Sparks) has been handicapped by a cold in the course of the debate. He referred to an assertion by my right hon. Friend that householders bore 86 per cent. of the rate burden and industry and commerce only 14 per cent. My right hon. Friend did not say that. Those percentages referred to numbers of hereditaments rather than to values.

The hon. and learned Member for Kettering had a good deal to say about Clause 1 (3), and so had the hon. Member for Wellingborough. The hon. and learned Member complained, as I understood it, that changes might be made in the valuation lists and that rating authorities had no power to intervene. That is not so. Rating authorities still have power to object to any proposal for alterations in the lists and to appear and to be heard, whether or not—

Mr. Lindgren

This is an important point. A valuation court cannot increase a proposal. A local authority can object and the valuation court can only confirm or reduce the proposal of the valuation officer. It is the right of the local authority to make its own proposal as a counter proposal to that of the valuation officer, which is the important thing. That is the only way it can put the valuation right.

Mr. Bevins

Would the hon. Gentleman let me finish what I was saying? I was saying that rating authorities will still have power to object to alterations in the list, to appear and to be heard, whether or not they have objected, at the hearing of appeals. Unless it has contracted out the local authority must also be a party to any agreement between valuation officers and ratepayers for settling proposals without recourse to the valuation courts. It is true that local authorities cannot initiate proposals, but what I think the hon. Gentleman was referring to in his speech was the power of local authorities, in conjunction with other agencies, to correct obvious mistakes.

The provision in the Bill is limited to the period of current valuation lists, but if the obvious mistake is already in the list then the local authority has, after all, had three years since April, 1956, to take action about it. If the obvious mistake is just about to be made by way of a valuation officer's proposal, or that of a ratepayer for that matter, the rating authority can object and take part in the whole proceedings.

Mr. Lindgren

This is fundamental, particularly to developing areas. There is no secret: that in Hertfordshire we have been very much concerned at the undervaluation of industrial properties. There was no enthusiastic excitement by the valuation office to go forward with revaluations. Only when the local authorities, in conjunction with the county, in argument with the Inland Revenue, had behind them the threat of putting in proposals themselves, was the revaluation taken up. We cannot do that any more if Clause 1 (3) is carried. Sheffield County Council recently had a revaluation of a part of its area. Obviously, it was correct because the valuation court approved it, but that will be prohibited in future.

Mr. Bevins

I appreciate the point the hon. Member has made, but the fact is that a period of nearly three years has elapsed in which something could have been done about those cases.

The hon. and learned Member for Kettering seemed to give the impression to the House that we should need much more decontrol of houses if it were to be possible in 1963 to carry out a revaluation on the basis of market values.

Mr. Mitchison

The hon. Gentleman did not quite understand me. I said the party opposite was pledged to full decontrol. If it got the chance after the next General Election I would expect it to do it. That would make an even bigger mess of the house market than decontrol so far has made.

Mr. Bevins

The hon. and learned Member must forgive me if I appear stupid, but parts of his speech were a little tortuous. Perhaps I may say this in association with what was said by the hon. Member for Acton, who took the view that the position of the valuers and the ability of the valuers to get on with the job for a 1963 list would not be very different at that time from the circumstances in which they are working today. This is an important point, which was touched upon by the hon. Member for Islington, North (Mr. Reynolds). I should like it to be clear to the House that the advice which my right hon. Friend has had from the Valuation Office is that sufficient rental evidence should be available to carry out a revaluation to take effect in 1963. That is based on the existing measure of decontrol—that is to say, without any further decontrol the Valuation Office believes that in 1963 it ought to be able to carry out revaluation.

I appreciate that some hon. Members may feel that the Valuation Office requires to have evidence of market values for, as it were, a very large slice of house property before it would be able to do that. I am advised that is not the case, but that what matters is that there should be a sufficient proportion of houses let at free market rents to give the Valuation Office a yardstick for valuing all house property. As I say, we are advised that, even with the present limited measure of decontrol, a sufficient proportion of houses let on free market rentals should enable the Valuation Office to do the job.

Mr. Sparks

Will the valuers at the same time take into consideration the basis of local authority rents throughout the country, of course adding to them any subsidies which are being paid? That would mean realistic rents which would be much fairer than the scarcity value rents.

Mr. Bevins

I do not think that is practicable. I do not think that one could expect the Valuation Office to take into account the rents of subsidised houses.

Mr. Sparks

I meant including the subsidy. I did not say the net rent exclusive of subsidy, but the rental which goes to the local authority including subsidies.

Mr. Bevins

I understand what the hon. Member is saying. The trouble is that the subsidy does not attach to the individual house. That is where the difficulty lies.

Mr. Sparks

It could be worked out.

Mr. Bevins

The hon. Member for Sowerby said in effect that my right hon. Friend had gone to the Valuation Office and implored it to think of reasons for postponing revaluation. I thought that rather naughty of the hon. Member. It happens to be entirely untrue. The hon. Member for Hayes and Harlington (Mr. Skeffington) said the Valuation Office could do the revaluation in 1961 if it were told to. That, again, is not true.

I should like to say a word or two in emphasis of what was said earlier by my right hon. Friend because the feasibility of this operation is the heart of the matter. As my right hon. Friend said, houses account for about four-fifths of all rateable properties in England and Wales. In order to reassess on current values, the Valuation Office would be faced with the difficult task of deciding the current rents at which those houses might be expected to let from year to year.

That is not a matter of the whims or fancies of the Valuation Office. It is not even a matter of intelligent guesswork or intuition. It has to be founded on actual market conditions and the rents which willing tenants are prepared to pay to willing landlords. Therefore, we say that the Valuation Office must have reliable evidence of market rents. It must have that information, not only to produce a valuation which is fair but also to enable the valuation courts and the Lands Tribunal to determine appeals by ratepayers and others. If the courts and the Tribunal could say that the evidence available for the Valuation Office was inadequate, how could they possibly determine values? How could we avoid a really serious lack of public confidence in the lists?

If many of the earlier appeals that went to the courts or the Tribunal led to a significant reduction in assessment, I do not see how we could expect to avoid a flood of appeals which might bring the whole system into disrepute. These are really serious questions. The matter before the House is whether we have sufficient evidence of current free market rents at this time. We certainly have not got it from the millions of houses which are owner-occupied, from houses which are let at subsidised rents or from controlled houses which, again, provide very little evidence of free market rents. So we come to decontrolled dwellings.

The hon. and learned Member for Kettering said that one of the seasons why there was such a paucity of evidence of free market rents was the confusion created by the Rent Act. That was the line taken in this matter by the Daily Herald. It said on 12th February: the Rent Act has created so much confusion that the Inland Revenue has been unable to collect enough evidence to lay down a standard valuation in any area. With the greatest respect to the hon. and learned Member, and rather less to the Daily Herald, that view is entirely wrong. It is the Daily Herald which is creating the confusion. The obvious effect of the Rent Act will be to help in determining free market rentals. I am sure that hon. Members on both sides of the House realise that had there been no Rent Act there would have been little if any possibility, either now or in the future, of assessing houses on the basis of free market rentals.

It is true, as my right hon. Friend explained earlier, that in the decontrolled sector the market has not yet had time to settle. Many of these houses are let on three-year leases which will fall in by 1961, and when the new leases are negotiated the new level of rents may well give us a pretty good pointer to market levels, at any rate for this type of property.

The important point is that this information about new rents negotiated under these leases would not be available to the Valuation Office in time for the preparation of the 1961 list, and the danger is that a comparatively small variation in the level of those rents between the time the rental evidence was collected and the date when the new list came into existence could play havoc with the new list.

Mr. Houghton

In view of this, most of which could have been foreseen and none of which is surprising, why were false hopes held out and the bogus date of 1961 put into the earlier legislation?

Mr. Bevins

It has always been the hope of my right hon. Friend and the the Government that it might be possible to go ahead with the revaluation for 1961, but it has become increasingly clear and is now, in the view of my right hon. Friend and his colleagues, perfectly well established that this operation is not practicable at the present time.

Mr. Mitchison

The hon. Member does not like the Daily Herald. He has not mentioned the Economist. May I try him with a question from The Times? It reads: But if the decontrolled tenanted houses are too few to establish what real rent levels would now be if the; whole market were now free, why should it be supposed that they will be numerous enough shortly after the next election? That is out of the leading article called "An uninviting change".

Mr. Bevins

I dealt with that point a few minutes ago when I said that the numbers of houses in the decontrolled sector which are let on lease may be the same in two or three years' time as now, but the vital point is that the market has not yet had time to settle and that in two or three years' time there is every reason to suppose that the evidence of market rentals which we can derive from that class of property will have some value. As my right hon. Friend said, the estimate of the Valuation Office—and this is not our estimate—is that good rental evidence is probably not available for more than about 2 per cent. of the houses in England and Wales, and that is nothing like good enough to put firm legs under a valuation list.

A great deal has been said this afternoon, in perhaps a rather nebulous fashion, not only about the feasibility or otherwise of the revaluation at current values, but also about the possibility of taking two bites at the cherry. The hon. Member for Sowerby and his hon. Friend the Member for Islington, North, made some comments on that proposition. The hon. and learned Member for Kettering, to whom I listened with rapt attention, seemed to me to walk to the edge of an abyss and to stop just in the nick of time. I was not quite clear what the abyss was, although I had my suspicions.

One point of view which I think has found expression in the debate is, why not make a clean job of valuation for the first time for many years and have revaluation of all properties, domestic, commercial and industrial, at current market values or the nearest approach to it that we can get? I have tried to explain why, from a practical point of view, that operation is unworkable at the moment, but I understand that a number of hon. Members opposite are reluctant to accept that statement. They appear to think that the Government are afraid of alienating the tenants of houses whose assessments would no doubt rise. The hon. and learned Member for Kettering used a rather inelegant phrase and said that our action "stinks of political cowardice."

This is based on the fallacy that because rateable values would rise, the householder's share of the rate burden would rise correspondingly. What matters in this respect, however, is not the extent to which assessments of this class of property and that class of property rise or fall. What matters is the proportion which the new values of houses bears to the new values of other properties. The values of other properties have certainly increased since 1956, as the hon. Member for Acton said. In addition, the 20 per cent. abatement would disappear on revaluation on that basis. What is more, the statutory deductions, related as they are to repair costs, would no doubt have to be increased. That would be only right.

These are some of the factors which affect the share of the rate burden borne by the householder, by industry and by other interests. With the greatest respect, nobody can be dogmatic about how a process of that sort would work out. Indeed, in our debate today the hon. Member for Acton expressed one view which was not in accord with the view expressed by one of his hon. Friends.

May I turn to the suggestion of improvising not a system of market values but an artificial system, as it were, which was a move in the right direction? The Government clearly could have applied a multiple of two or some such figure to existing house assessments. We examined that proposal and a number of variants upon it. Having done so, we decided that those ideas were not acceptable. To begin with, when we jobbed backwards a few years ago to 1939 rental values, that was a crude enough basis about seventeen years after the event, and it produced a great deal of dissatisfaction throughout the country and led to many thousands of appeals. Clearly, as time passes, that basis of pre-war values will become still more imperfect.

The trouble with multipliers, whether the multiplier is 1½ 2 or 2½ is that they always multiply the weaknesses which exist. Apart from the fact that, working under a system of this sort, we should have to make special provision for the old houses and the large houses which would often have current rental increases much less than the average increase, I think we should also find that a multiple basis would work very unevenly throughout the country. In those areas where commercial and industrial values have increased very little—that is to say, in the main in those areas where trade is not flourishing and where at the moment there is some unemployment—the householder would get, relatively speaking, a raw deal in the proportion of rates which he would be called upon to pay.

It was very largely for these reasons that my right hon. Friend and the Government took the view that the right course at this stage was to postpone revaluation until 1963. I beg the House to believe me when I say that this decision was taken upon severely practical grounds and upon advice tendered to my right hon. Friend by the Valuation Office. Considerations of politics never entered into the matter at all. I know that the hon. and learned Member for Kettering is a little preoccupied with the next Election, but we on this side of the House are not, and we have no reason to be.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Hughes-Young.]

Committee Tomorrow.