§ 10.20 p.m.
§ The Minister of Housing and Local Government and Minister for Welsh Affairs (Dr. Charles Hill)
I beg to move,That the Valuation (Statutory Deductions; Order, 1962, a draft of which was laid before this House on 22nd March, be approved.The Order brings up to date the scale for making deductions from the gross value to net annual value for the purpose of assessment for rates. As the House will appreciate, these are the deductions which take account of the average cost of repairs, maintenance and insurance of rated properties. The Order is made as a corollary of the extensive changes which will occur in the levels of gross values generally as a result of the revaluation which comes into effect as from 1st April next year.
Perhaps I owe the House in the first place a word of explanation about the statutory deductions. First, they do not arise as regards certain kinds of property—for instance, factories, utilities, and land, with or without ancillary buildings—for these properties are assessed directly on their net annual value. This is largely because the rental levels of these classes of property usually exclude maintenance costs and leave them as the tenants' own responsibility.
For other kinds of property, including in particular houses, shops, offices and the like, the Rating and Valuation Act, 1925, requires that the gross value, calculated by reference to the rental value on the assumption that the landlord is responsible for repairs, must be taken first and then the net annual value must be calculated by knocking off a scale-deduction in respect of maintenance and so on.
Some hon. Members may doubt whether it is necessary to go on with this distinction between the two, but that is another subject not for argument tonight, because it is a statutory requirement of Section 22 of the Rating and Valuation Act, 1925, that certain properties must start with a gross value. My task has been to see that the scale 788 of deductions from gross value to arrive at the net annual value, and therefore the rateable value, is a fair one.
I may be asked why revaluation necessitates a new deduction scale, a new Statutory Order. After all, the present scale of deductions is basically a percentage scale—fixed, incidentally, in 1928. It was appropriate enough from 1928 until the late war. Indeed, it has not been all that inappropriate since the war, but now that the new revaluation is due to take place there is strong argument for this change. As the House knows, the revaluation will show a very marked rise in the levels of gross value. For example, houses will show gross values on average four times the pre-war figure. In terms of the current figure, it is three times.
It is important to get this absolutely clear. The so-called pre-war valuation figures were based on valuations done in 1934 and 1935. In 1956 there was a revaluation on 1939 values, and the change between the pre-war position and the 1956 position was an increase of 1⅓. The change between the 1956 position in terms of valuation and the forthcoming position is a threefold increase. In short, the forthcoming revaluation means a fourfold increase in terms of pre-war values and a threefold increase in terms of current values.
Let me say just a word about the revaluation aspect. Contrary to the expectations of my predecessor, and those of the Opposition—for had it not been contrary to their expectations they would not have moved that the power to derate or abate should be used when the increase in the revaluation of domestic properties was 25 per cent. or more—the share of rate burden on householders generally following this revaluation has not increased. It has decreased by a very modest amount—1.6 per cent. to be exact, but it is as well to take it as being at roughly the same level, because appeals of one kind or another may affect the position marginally.
How have we arrived at that overall calculation? Taking domestic properties for England and Wales as a whole, the position is roughly the same. The first stage was a revaluation—not, as one weekly newspaper implied, by the 789 Minister of Housing and Local Government but by the Valuation Department of the Inland Revenue. Two adjustments were then made. The first adjustment was made on the assumption that the House would approve the new scale of statutory deductions, and the second was made in terms of what the rate deficiency grant would be in relation to the new valuations.
As the House will appreciate, a calculation is made of the yield of a 1d. rate per head of population for each area, and a similar calculation is made for the average for the country as a whole. The difference between the two figures gives rise to rate deficiency grant. By the application of the existing formula of rate deficiency grant to the new valuation figures the contribution made by the rate deficiency grant—as it were, the Exchequer's contribution as a ratepayer—increases from about £110 million to about £134 million.
When one is speaking of the burden of the rates and the Exchequer contribution, it is as well to reflect that that contribution consists not only of the general grant—currently, at a level of £472 million a year—and not only of specific grants, but also of the rate deficiency grant, which now runs, as I say, at about £110 million a year and which as a result of revaluation is likely to run at a figure of some £134 million as from 1st April next year. The Exchequer's share of local expenditure is now of the order of about 52 per cent.
Taking into account, first, the application of the new scale of statutory deductions and, secondly, the new results in terms of increased Exchequer contribution flowing from the application of the existing rate deficiency grant arrangements, the share of burden on the householders as a whole is roughly the same, or with a reduction of about 1.6 per cent. As the White Paper clearly demonstrated, the position varies in different areas, giving extreme cases of an increase of some 27 per cent. in the share of rate burden borne by householders in Bournemouth to a decrease of 24 per cent. in the share borne by the householders in Halifax. So within, as it were, the first category—the share of the rate burden borne by the householders—there is a varaition above and 790 below, but on average the position is approximately the same.
Hon. Members will have seen from the White Paper that apart from industry, the increase in whose share of the burden is some 43 per cent.—an increase of approximately £34 million gross and, after allowing for taxation, some £17 million net—there is a fall in the proportion of the rate burden borne by every other group of ratepayers.
It is interesting to observe that in the case of shops, for example, which have enjoyed derating of 20 per cent. in the last few years, despite the disappearance of that abatement on 1st April next year, there is, following this revaluation, a decrease of some 13 per cent. in the share borne by that category—which also includes offices. I should add, in order to remove any doubts on the point, that so far as Schedule A is concerned this revaluation is for rating purposes only, and I am authorised by my right hon. and learned Friend the Chancellor of the Exchequer to say that it cannot therefore affect assessments for Income Tax under Schedule A. These will continue on the present basis unless and until it is changed by a Finance Act.
To come back to the main calculation, valuations in terms of house property are four times what they were before the war and three times current levels. But repairs, since pre-war days, have gone up even more. The cost of repairs, etc., is estimated to be four-and-a-half times what it was in 1939. To put it in another way, if we take the figure of 100 for 1939, the current figure is estimated to be 452.
As I have said, the present scale of deductions from gross value is basically a percentage one. I should like to deal with the reason that a new scale is needed. It is needed, firstly, because the cost of repairs has gone up more than the valuations themselves, and, secondly, because the principal element in the current scale is a percentage element. As the value of the property rises, so the percentage falls. If there had been no change in the scale, properties which are at present enjoying the higher percentage of allowance would slip down the scale so that the percentage deduction would be smaller. It has therefore become necessary, with the revaluation and with the new estimate as 791 to the cost of repairs, to introduce this new scale.
How has it been ascertained that the cost of repairs has gone up from 100 as the pre-war level to 452 today? The first stage in the process was an investigation, I think in the early 1950s, by the Royal Institution of Chartered Surveyors as to the validity of the pre-war scales, based on a knowledge of costs actually incurred. The result of that was to justify—somewhat belatedly it may be thought—the pre-war scales of deduction as appropriate to the circumstances of their day.
Then, as many hon. Members will recall, the Girdwood Committee on house maintenance investigated the cost of repairs, and it showed that by 1953 the cost of repairs, taking the pre-war figure as 100, had risen to 316. By the same method of calculation, using the same elements in the calculation, but applying the different costs of today, it has been ascertained that the appropriate cost figure for today, compared with the prewar 100, is 452.
There is one qualification of the general proposition, and that is that an anomaly in London has been corrected. Those hon. Members who study this will recall the maximum scale in London, which became the fixed scale. It has been thought desirable, with the concurrence of the London County Council and the Metropolitan Joint Standing Committee, to merge the two scales, taking in relation to that part of the scale to which the property relates, an intermediate position.
This does not mean that the middle range of houses in London lose, as they at first appear to do, a benefit of between £1 and £4 which they have hitherto enjoyed. After all, taking like for like, house for house, the house in London is likely to have a higher gross and a higher net value than the equivalent house outside, and so will enjoy the bigger rate of deduction by the application of this scale. It has been thought reasonable and sensible to do that.
That is the case for the Order. First, that a new scale is necessary in relation to the revaluation which is taking place. Secondly, because repairs are four and a half times what they were pre-war, whereas revaluation is four-fold in relation 792 to pre-war. For those reasons I submit that this new scale is necessary, is appropriate, and I invite the House to approve it.
§ 10.38 p.m.
§ Mr. James MacColl (Widnes)
We are all grateful to the right hon. Gentleman for having guided us so well through this extremely complicated and obscure field of local government, and indeed of valuation. This is one of the most difficult sides of valuation.
I do not say this by way of criticism, but what the right hon. Gentleman said will not exactly thrill or raise the temperature of the House, except for one remark about Schedule A, and I should like to ask the right hon. Gentleman what it meant. Is the right hon. Gentleman giving us an undertaking which lasts precisely until next Monday, or is he departing from the usual policy of members of the Government about this time and committing the Chancellor of the Exchequer on his Budget statement?
§ Mr. MacColl
I think that the House, and indeed the country, will be grateful to know that between 10.40 on Thursday night and 3.34 or 4.15 on Monday no one need worry about what is happening to his Schedule A. I am sure that that will be a great source of comfort to everyone.
I perhaps unwisely tried to test the statutory deductions which are being made to see how they compared with the previous ones, and perhaps wisely I took the figure which did not appear in the obliging appendix to the White Paper. It seemed to me that the results I obtained either showed the inadequacy of my arithmetic, which I am perfectly happy to believe, or that they are in some ways somewhat unjust.
I took two houses with gross values of £40 and £50, both of which, under the existing scales, have a statutory deduction of £10, leaving a rateable value of £30 and £40. On the four and a half times principle, if the gross values are four times the early figure, the statutory deductions would be four and a half times. So in each case there would be a statutory deduction of £45 under the 793 new scale. Entering into the new scales at £160 and £200, respectively, four times £40 and £50, my calculations show that in the case of the £40 one the statutory deduction is £46—it is as near as may be £45—and the statutory deduction in the other case is £54. So the house with the high value figure is getting substantially more benefit than does the other. As I say, that may well be an arithmetical miscalculation on my part. I would not expect the Parliamentary Secretary to work it out at this time of night, but no doubt he has the benefit of advisers and a table, and, therefore, I should like to know whether I am right or wrong about that.
I wish we could have a Standing Order or rule in this House that any Minister who says he has consulted local authorities should be made to lay on the Table the results of his consultations. The right hon. Gentleman has told us he consulted the local authorities before producing these scales. More definitely and precisely he said he obtained the agreement of the London County Council and the Standing Joint Committee in regard to the changes in the London figures. About that I want to say something in a moment, but I should like to ask him the same question I asked him before, which is, whether this mystic word "consultation" means that the whole of these figures are substantially accepted by the local authorities' associations as being reasonable ones, or whether the responsibility rests with the right hon. Gentleman and the local authorities have just simply had an opportunity of saying what they think about them.
The other query I should like to raise—again a technical matter, perhaps—is that it is very interesting to find that these new calculations of what were the costs of repairs to a house are, as it, were, the old Girdwood extrapolated from 1953 to 1962. Well, I seem to remember that when Girdwood was the subject of some controversy in regard to Rent Act increases it was not regarded by everybody as being the impeccable authority it is now said to be, and I am just wondering whether, if Girdwood was not regarded by all hon. and right hon. Members as a first-class authority in 1953, how reliable it is in its new form. How accurate have these inquiries 794 been? How reliable is the information, which is a vital part of this whole calculation as I understand it? It would be nice to have some information about the degree of reliability which ought to be placed upon these figures.
This is a very important stage in the process of recasting our system of valuation. It is not, I was excited to learn, the final stage. We were informed in Appendix 3 of the White Paper that adjustments in respect of gas and electricity hereditaments will have to be made by Order requiring an affirmative Resolution. That excited me because I could see that we might have a renewal of those cosy evening encounters between the right hon. Gentleman and myself which are now playing such a big part in the lives of us both. When are we likely to have the new Order for gas and electricity hereditaments? I presume it will not be before Easter, but will it come fairly soon?
The right hon. Gentleman dealt, if I may say so, in a very interesting way with the remarkable development that, in spite of all the prophecies, the valuations of domestic property have not moved in the way it was thought that they would. The right hon. Gentleman is a tough warrior, and I never thought I should ever see him look defensively at me, but he did look at me rather defensively, I thought, when saying, in effect, that we on this side had made just as big an error in estimating as the Government made, and that the Opposition had shown that they shared the same views. Bless my soul—what else could we do but accept what the Government said about it? We do not have access to valuation officers. We have no facilities whatever for doing more than accepting the Government's word.
The right hon. Gentleman's predecessor has had many hard knocks in the House—and still, fortunately, gets them—but nobody has ever suggested that, when he made a definite assertion, he was likely to be misleading the House. It was, therefore, natural that we should accept that the movement would be in a certain way. I think that everyone will be very pleased that it will not turn out like that. Obviously, a good deal of hardship, trouble and difficulty will be avoided.
795 Speaking of the global average, the right hon. Gentleman explained that this result was due to two major influences: one, the share borne by the rerating of industrial hereditaments; the other, the part played by the rate deficiency grant. My only comment on the fact that this happy effect has arisen out of industrial rerating is to say what a great shame it is that it did not happen a good time ago. After all, in 1956, on 16th March, Mr. Sparks, then the Member for Acton, who was a most devoted student of local government and planning matters, particularly of local government finance, obtained, with the enthusiastic support of the hon. Member for Croydon, North-West (Mr. F. Harris), a Second Reading for a Bill to provide for the rerating of industrial hereditaments. The Bill was killed upstairs in Committee, and the Government, no doubt, would not disclaim all responsibility for its throat being cut at that stage. Certainly, the Parliamentary Secretary would. not, because his part in it was direct and immediate.
If only the Government had listened to the voice of the two prophets in the wilderness, one on each side—let us not make a party issue out of it—there would have been a tremendous saving in the burden of local rates on the domestic ratepayer. It is a great shame that we have had to wait so long to see a major part of the Labour Party's programme being taken up, too late, by the Government and at last showing its value.
This leads me to ask whether these effects, which have been mentioned as affecting the average, also explain the local disparity between one place and another. The right hon. Gentleman mentioned Bournemouth and Halifax. Is the fact that Bournemouth will have a heavier share of local expenditure falling on the domestic ratepayers and Halifax will have a smaller burden falling on them due again to the fact that Halifax valuations have generally been lower than Bournemouth valuations and, therefore, have been brought up rather more than proportionately to the national average standard of valuation? Is it due to the fact that industrial rerating has played a larger part in Halifax than in Bournemouth, or is it due to the operation of the rate deficiency grant? 796 We want to know how far these statutory deductions will operate fairly. The case that they will operate fairly on average has been demonstrated by the right hon. Gentleman. Will they operate fairly between one locality and another? If, for example, the valuations in Halifax have been jumped very quickly because they were below the average, they will be affected more than other areas. It would be helpful to know the causes.
This leads me to ask about London. I agree that the amount involved is small, but I was surprised to read about this London change, not because I was concerned about change of any sort, but because it seemed to me surprising that it was being done by Statutory Instrument. The differential between London and the rest of the country is entrenched in the Act itself. Section 5 (6) of the 1955 Act gives the Minister power to vary and, in particular, it mentions the difference between London figures and provincial figures. It is, therefore, surprising to find that in a matter of principle, of making a difference between London and the rest of the country, which has been passed by Parliament and entrenched in the Act, the Minister should be abolishing it by Statutory Instrument. That is rather different from going up and down with the percentages or changing methods within the particular ranges. It is rather different to have abolished the distinction altogether without legislation.
The right hon. Gentleman is well advised, and no doubt is not in danger of being challenged in court, but it seems to me a curious thing to do. Far be it from me to teach the London County Council or the Standing Committee its job, but I should have thought that this would fall rather heavily on Londoners, becaues the rates paid per head of the population in London are much higher than in any other part of the country. I presume that that will continue under the new system.
London is one of the places where the share of rates falling on the domestic ratepayer will go up by 7 per cent., which is a considerable increase. All these forces seem to be in the direction of increasing the domestic burden in London, and I am not happy that the statutory deduction is to be relatively, though of course not absolutely, reduced. I should not for a moment think that 797 there is anything about this proposal which should be challenged. Generally we accept it and will not vote against it, but I should like these obscurities to be cleared up.
§ 10.55 p.m.
§ Mr. John M. Temple (City of Chester)
I agree with the hon. Member for Widnes (Mr. MacColl) that this is a comparatively obscure matter and I shall try in the course of my remarks to stick very closely to the actual subject of the Statutory Instrument which is under debate.
I have no hesitation in welcoming this Order and I think that under present legislation there is no doubt that these proposals are about right. It certainly was wise of my right hon. Friend to adjust the percentages which are affecting the statutory deductions. He has used a multiplier of four and half, which I think in the present situation of the cost of repairs is perfectly reasonable.
These statutory deductions are comparatively important matters with regard to the rateable values of property in the household sector. I am one of those who have consistently said that they approve of the rating system. I think it is a satisfactory system. But I think that even a satisfactory system can on occasions require a major overhaul. I believe that a major overhaul of the rating system would not be inappropriate in the comparatively near future. I believe, certainly, that a minor overhaul of one of the components of the rating system—namely, the system of statutory deductions—is considerably overdue. That is not, however, to say that I disagree with the present proposals of my right hon. Friend.
My first reason for suggesting that it would be desirable to have an overhaul of this narrow part of the rating system is that I believe there are two essentially diverse components of gross value. One is a "static component," and that is the component which we are considering tonight—the statutory repairs deduction. I think that when the Minister pointed to the fact that there had not been an alteration in these statutory deductions since 1939 my right hon. Friend made it quite clear that this component of the gross value, namely the statutory deduction, is indeed a static component. I 798 take just one example of the house with a gross value of £50 in 1939, given in Appendix II of the White Paper, which had a statutory deduction of £10. and that £10 has persisted as the statutory deduction over the twenty-four years right up to 1963.
I was interested to hear my right hon. Friend refer to the Girdwood Committee's Report on the cost of repairs in 1953. My right hon. Friend said in fact that the cost of repairs in 1953 had gone up by 316 per cent. since 1939, but the "static component" of the gross value had not altered at all in the intervening years.
There is a second component of the gross value, which is arrived at by deducting the statutory deduction from the gross value to give the rateable value of a particular property. But rateable value is only an index. It is only a multiplier. So to that extent I describe rateable value as a dynamic component, because when rate poundages change, as they do, with rising costs, then the burden of rates increases on the ratepayer, and to that extent rateable value in itself is a dynamic factor within this system and is constantly adjusting itself to current prices, unlike the statutory deduction factor, which I call the "static component" of the gross value of properties which does not vary in between revaluations.
So I believe that it would be better if both these components were flexible and both could be a variable. As the cost of repairs rose the statutory deduction could rise, and that would compensate owners of properties for the increase in the cost of repairs which takes place.
Secondly, there is the factor of the "gross value" of the property determining the statutory deduction. For example, there is the case of two almost identical flats with the same cubic capacity, one in central London and the other on the outskirts or in the provinces. The one in central London, by reason of extra amenity, has a much larger gross value than the suburban or provincial flat. The cost of repairs and maintenance of both are more or less the same, but in the case of the central London flat, the statutory deduction, which is supposed to cover the cost of repairs, is very much greater than that 799 which can be deducted from the provincial flat, although they are similar physically.
Exactly the same position obtains with regard to three- or four-bedroomed houses. For instance, a house on the seafront at Brighton and another similar one in a backstreet in Brighton would have dissimilar gross values and a dissimilar statutory repairs deduction, although the cost of repairs would be more or less the same.
There is, therefore, a case for a very careful review of this system of statutory deductions. It may well be thought possible that domestic hereditaments might be assessed direct to net annual value, and that we could abolish this system of statutory deductions once and for all. Quite a proportion of the hereditaments which have been referred to by my right hon. Friend are assessed either direct to gross value or direct to net annual value, and I believe that this is a subject which could well be looked at by an expert committee.
I have no wish to detain the House. I have tried to stick very closely to the very narrow subject under debate. In current circumstances, this Order is justified. I hope that before another Order of this nature is laid the whole system of statutory deductions will be reviewed as part of a comprehensive review of our rating system.
§ 11.3 p.m.
§ Mr. Hugh Rees (Swansea, West)
I do not want to detain the House long, but I wish to illustrate one or two points where the figures underline the need for a change in approach to this problem. The White Paper, "Revaluation for Rates in 1963," says on page 2:The present scale applies equally to all types of property assessed to gross value. So will the new scale.That is true, but it does not apply equitably. It is more important to get an equitable balance than it is to get an equal balance.
In examining the new scale, we can forget about the amounts up to £55, giving 45 per cent. deduction of the gross value. These properties are probably assessed at less than £12 now. They are the smaller, older properties, mainly in slum clearance are likely to come down before the 1962 list comes into operation.
800 In the group exceeding £55 but not exceeding £430, one can have, for example, a house with an old gross value of £60, with a rateable value of £48 and a statutory deduction of £12. It is probable that the new valuation figure, if we follow the examples given in the White Paper, will come out at about £180 gross value, and £130 net value. In other words, we have a £50 statutory allowance. If one breaks it down, one finds that the cost of painting the house externally is £40 or £45 and the cost of painting a room at £15, which is not unreasonable. If the house is a three-bedroomed house with a bathroom, two reception rooms, a kitchen, landing and entrance hall—a modest house—we find, taking fire insurance, a general repairs allowance at £10 per annum and management, that the actual cost on this house is £72 to £75, but the statutory allowance is £50.
I fully appreciate that this statutory allowance has to be from all properties generally and that some will cost less, but some will cost more. For that reason J think that the whole approach to the problem is wrong. I shall not pursue that further, but I would remind my right hon. Friend that I put down an Amendment to the Bill when it was before the House. If it had been accepted it would have saved him having to bring in this Order because the net annual value would have been direct figure valued. However, we are not debating that, we are debating this Order.
In regard to the figures in paragraph 5, in which there is reference to four-and-a-half times 1939 values, it must not be overlooked that we were using a level applicable in 1928. At that time the cost of the labour element in the cost of repair was about a quarter. As the years have gone by, the cost of the labour element has increased until now it is about half, or sometimes slightly more.
§ Mr. Fernyhough
Some of us have repairs and have to pay for them. We know that when we pay the bill the figure is such that to say, as the hon. 801 Member has said, that the labour cost is half, is nonsense.
§ Mr. Rees
If one examines the cost of putting a slate on a roof one finds that a good Welsh slate costs 12s. 6d. or 13s., but it will cost about 28s. to put it on a roof. In the repair and maintenance of a house one is not putting a new roof on every week, but a single slate may get damaged. If we take constructional costs of putting up a new house, this multiplier is probably right, but when a man has to be brought five or six miles and paid for travelling to and from the job, on a small job one finds that the labour cost element is high—understandably so—and the multiplier is wrong. The statutory deductions should have been greater to get a true reflection of proper repair and maintenance cost at present.
On the whole question of whether we should value in this fashion, if we take shop property, which is now assessed at gross value, we find that nearly all shops are let on net terms, the tenant undertaking repairs and maintenance. The valuer is faced with the job of adjusting the figures, or grossing up, and there has to be an adjusted gross value and a further mathematical calculation. That applies to 90 per cent. of the valuation list, according to the figures. I cannot help but feel that here is a clear-cut example of the need for a change to net value, which would have made this Order unnecessary.
Another point of difficulty is that these figures will probably be out of date by the time the second valuation list comes into operation, yet again one will have to consider a fresh Order. I urge my right hon. Friend to consider the whole question of whether this is the way to deal with rating assessments.
§ 11.10 p.m.
§ Mr. E. Fernyhough (Jarrow)
I should not have intervened had it not been for the exaggeration to which we have just listened by the hon. Member for Swansea, West (Mr. Rees). The hon. Member started by talking about £40 a year for painting. He said that labour costs accounted for 50 per cent. of this. This is nonsense.
§ Mr. Fernyhough
The hon. Gentleman can make that qualification. He said it cost £15 a room. At 50 per cent., labour costs would account for £7 10s. of that. I can tell the House that the men who are doing the job do not get that money. Somebody else is getting it. I know these people. I talk to them. I know something about the wages they are getting. If these are the charges which are being made for work, it is not due to the wages being paid at trade union rates. It is due to the excess which is being put on by those who employ the labour. If the hon. Member wants to talk about these costs, he must direct his attack, not at those who are doing the job, but at those who are employing the labour.
§ Mr. Graham Page (Crosby)
I agree with my hon. Friend the Member for the City of Chester (Mr. Temple) that we should try to devise a new way of dealing with statutory deductions, because the present way is not satisfactory. I agree with my hon. Friend the Member for Swansea, West (Mr. Rees) in his realistic outlook towards the cost of repairs. My hon. Friend the Member for Swansea, West said that before the revaluation comes into effect we may well be quite out of date in this present valuation of repairs. My right hon. Friend the Minister said that in 1953 the cost of repairs had already increased by 316 per cent. on the earlier figure, yet no alteration was made. Therefore, we are already several years behind in making alterations in these statutory deductions.
The figures given in the White Paper are terrifying. We are told that the present assessments of property are to be increased fourfold. Thus, a property now assessed at a gross value of £100 is expected under the revaluation to be assessed at a gross value of £400. This is terrifying. No matter how we try to kid ourselves that the real thing that matters is the rate poundage, we know very well that—
§ Mr. Graham Page
I accept my right hon. Friend's correction. He made that quite clear in his opening speech. It is just as terrifying if it is only three times as much instead of four times as much—in other words, a gross value of £100 will be £300 in future. I was saying that however much we say that it is the rate poundage that matters and not the rateable assessment, we know that this rate poundage gradually creeps up to about 20s. in the £, although in the first year local authorities may reduce the rate poundage. We shall never get any better figure, by which I mean lower figure, until we transfer a good deal of what are really national services from the shoulders of the ratepayer to the shoulders of the taxpayer.
§ Mr. Deputy-Speaker (Sir William Anstruther-Gray)
Order. The hon. Member is going a little wide of what we are debating.
§ Mr. Page
I accept that Ruling, of course, Mr. Deputy-Speaker, but as the debate has ranged rather wide I thought that I might be permitted to go as wide—but let me now come to the Order itself.
What is the magic of the existing scale that we still use it, and merely increase it by certain percentages? Why do we consider that the 1925 scale was right, and that we can take account of the existing cost of repairs just by increasing that scale by percentages or fractions? This Order merely amends the old scale. It does not even give a higher percentage all the way up, with the result that the proportion allowed for repairs in relation to the larger rateable values is not as great as that at the lower rateable value levels. I do not know what justification there is in principle for that. Why should it be assumed that the more highly rated house does not need as much repair, in proportion, as does the less highly rated one? The result of it is that the more highly rated house to some extent subsidises the general rates.
The real complaint about this Order which perpetuates the 1925 scale is that 804 that is not relative to the cost of repairs. My right hon. Friend talked about re pairs increasing to a figure of 452 as compared with 100 some time ago, but that does not bear any relationship to the actual cost of repairs to the in dividual. The new scale is not based on what it costs a householder to repair or decorate his house, but on some per centage scale which was worked out in 1925 and has since been maintained. The Order seems to perpetuate some thing that has no relationship to fact at all—
§ Mr. Douglas Houghton (Sowerby)
Does it say anywhere in the Acts that this is a deduction for repairs at all? I am not sure that it does. In any case, as the hon. Gentleman knows, there is no provision for additional relief for excess repairs in the case of rating as there is in the case of Schedule A. I have always understood that the statutory deduction for Income Tax Schedule A was called a repairs deduction, but I have never understood that the statutory deduction for rates was linked with repairs at all.
§ Mr. Page
I am astonished that the hon. Gentleman, who is so well informed in these matters, does not appreciate that the difference between the house that is let with the responsibility for repairs, insurance and maintenance on the tenant, and the house which is let with those items a responsibility on the landlord, is the difference between the gross value and the rateable value. Therefore, the statutory deduction from gross value in order to reach the rateable value is necessarily the statutory figure, though not necessarily the real figure, representing repairs, maintenance and insurance.
One refers to repairs and maintenance, because those are the main items. I understand that the statutory deduction is supposed to represent the cost to the individual of repairs, insurance and maintenance of his house; it does not represent that figure by being some statutory deduction from the gross value. I should like to see, properly calculated, what it costs the individual at present to repair and maintain his house. If that were done, I think that we should get a different sort of figure from the figures set out in the Order.
§ 11.20 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Geoffrey Rippon)
I will try to reply briefly to some of the points of detail which have been raised in the debate. I think that there is no dispute that the Order as it stands is a good Order which ought to be approved. At the same time, I appreciate that a number of hon. Members on both sides of the House have been concerned about a number of minor issues.
The hon. Member for Widnes (Mr. MacColl) was concerned to know how far there really had been consultation with the local authority associations. Their comments on the Government's proposals were asked for before the 1963 revaluation estimates were available. They all expressed concurrence with the proposals which had been put forward by the working party considering this matter.
The hon. Member for Widnes was also a little concerned as to whether the figures were correct—whether when one had a look at the new scale, one was ensuring in every case that it was exactly an increase of four-and-a-half times in the statutory deduction. He quoted two examples—a house of a gross value of £40 now and a house of a gross value of £50 now. Under the old fixed scale the deduction was £10. He said that if we now assume new gross values of £160 and £200 respectively, the new statutory deduction, according to his mathematics, would be £46 and £54 respectively. His mathematics, I hasten to assure him, are perfectly correct.
The point is that the new scale smoothes out the hump that previously existed and the amount climbs steadily with the gross value. Indeed, the figures that he pointed to show the need for the new Order. If no new Order had been made, a number of houses which previously received a fairly high statutory deduction—the small houses—would have found themselves, under the old scale, in a bracket which gave them a very small percentage statutory deduction.
A number of hon. Members were concerned as to the reliability of the extension of the old scale. Was this really a fair and reasonable way of setting about it? We started, as my right hon. Friend 806 said, with the assumption that under the old scale the cost of repairs in 1939 was 100. We know that the Gird wood Committee in 1953 said that, taking 1939 as 100, the figure would be 316. Extending the Girdwood formula, we have reached a figure of 452.
As far as the 1939 figure was concerned, the Royal Institute of Chartered Surveyors had something to say on this in a report which it issued in 1951 entitled "A Memorandum on Rent Restrictions and the Repair Problem." Paragraph 12 of the report said:An analysis of records in respect of many thousands of dwellings has clearly shown that on average the actual expenditure was about equal to or slightly in excess of the relevant statutable deductions—that is, related to outgoings in 1939.
It would therefore appear that it is fair to take the pre-war statutory deduction as being realistic in relation to the cost of repairs, and therefore reasonable to carry it forward. We think that the Girdwood Committee formula and the figure of 452 is reliable. An independent calculation by the editor of "The Rating and Valuation Reporter" produced a figure of 459. I think that is a fairly good cross-check showing the reliability of the figure.
§ Mr. Temple
Can the Joint Parliamentary Secretary say exactly when this figure was determined? It is going to be operative from 1st April, 1963. Is he allowing for any projection of increased costs as between the figure when it was determined and the possible cost in April, 1963?
§ Mr. Rippon
The figure was determined at the beginning of this year. One could project forward indefinitely. It may be that these costs will fall. There is power for my right hon. Friend to introduce a new Order in due course if that were found to be necessary.
The views of the professional bodies were sought on the broad intention of the Order, again before the 1963 figures were available, to see if they thought that we were approaching this problem in the right way, and the Rating and Valuation Association said:It seemed to the Council that a reasonably workable formula for universal application is the correct approach, technically and administratively, and that any scale suggested should be as simple as possible in its operation.807 The Valuers' Institution said:The Institution believes that the method suggested … is the most acceptable basis of arriving at the equitable rate of statutory deductions and provided that the increase is based in the relative values of (a) the gross value of houses and (b) the costs of repairs, then the results should be satisfactory.Broadly, I think that we have adopted a method which is acceptable not only to the local authority associations but also to the professional bodies who have views on these matters.
§ Mr. Houghton
Do the Schedule A claims to the Inland Revenue throw any light on this? These are probably more up-to-date figures than anybody else has.
§ Mr. Houghton
The hon. Gentleman is aware that taxpayers send claims to the Inland Revenue for actual expenditure in excess of the statutory deduction. Nearly 1 million claims are put in every year. I am asking whether that information, in addition to the Girdwood Committee and the Royal Institute of Chartered Surveyors, has thrown any light on the present researches.
§ Mr. Rippon
No. I do not think that we have kept going back to these bodies and asking them for revised figures. What we have done is what I have explained. We started at 1939, at 100, brought it up to 1953, and extended it according to a formula agreed with the working party, and discussed with the various associations whether this was a fair basis for action, bearing in mind that we need a fairly simple and practicable approach to the problem.
The Schedule A claims showed no regular pattern. It may be, as my hon. Friend the Member for Crosby (Mr. Graham Page) said, that if one looked at each individual case one would get a slightly different result, but I think that the majority of ratepayers would rather have the certainty that is represented by a formula of this kind than 808 be told, "That is your gross value. Now make your case in respect of your own repairs in your area". It is not an ideal arrangement, but from the point of view of simplicity and advantage to the ratepayer this is a better way of dealing with it than trying every time to get at exact actual figures of repairs.
It seems to me that, on looking ahead, my hon. Friends the Member for the City of Chester (Mr. Temple) and the hon. Member for Swansea, West (Mr. Rees) may be right in saying that we should consider a future review by experts to determine whether we should go direct to net annual value. At the moment we are governed by Statute. We have to determine gross value and then make a statutory deduction. From the point of view of the discussion tonight, however, that suggestion is in a sense academic. There is nothing that we can do about it except consider whether new legislation could be introduced in the future.
The distinction was originally made between gross value and net annual value because of the preponderance of rental evidence for the respective types of property. In the case of house property, I think that there is a much stronger argument for ascertaining gross value and then making a statutory deduction to net annual, than in the case of shops. As regards houses, in the existing state of the law we must assume the landlord primarily responsible for much of this work of repair.
The hon. Member for Widnes asked one specific question about when we could expect Orders on gas and electricity. I can only tell him that it may be in June or July, but the consultations with the various bodies are not yet complete.
Then there is the final point which he raised on the subject of London; an important point because he asked if we had the power to deal with the matter in this way. I would refer him to Section 5 (5) of the Rating and Valuation (Miscellaneous Provisions) Act, 1955, which provides thatIn the case of any class of hereditaments, the net annual value of which falls to be ascertained under paragraph (a) of subsection (1) of the said section twenty-two, the Minister may by order provide that, for the deductions specified in the said table, there shall be substituted deductions of such amounts, or of 809 amounts to be calculated in such manner, as may be specified in the order".The said table is to be found in the Second Schedule to that Act, and provides specifically for statutory deductions from gross value both outside London and in London. I think that makes it clear that there is power to deal with the matter in this way.
§ Mr. MacColl
I may be a better mathematician than I am a lawyer, but the point which interested me was subsection (6) where it says thatSubsections (1) and (4) of the said section twenty-two shall have effect as well in relation to hereditaments in London as in relation to heerditaments outside London, so however that in the application of subsection (1) of that section …this distinction shall be preserved in the Schedule. It seemed to me there was a distinction enshrined in the Schedule. I was querying whether the distinction in the Act was abolished by the Statutory Instrument.
§ Mr. Rippon
I am advised that we can in fact do this, and it seems reasonable that it should be so done. I suppose that at most one could say that there should be two tables both giving the same figures. I think that we have done it in a sensible way.
I do not think that I can add anything to what my right hon. Friend said about the merits of the proposal. Of course, a house in London will have a greater statutory deduction normally 810 than a similar house elsewhere in the country because it will also have a higher gross value. Average figures are always a little misleading, but the average deduction in London would be £45 deduction compared with an average deduction of £33 for the whole of the country.
I do not think that there is any other specific point with which I could usefully deal.
§ Mr. MacColl
There was the one I raised about the difference between Halifax and Bournemouth, and whether the statutory deduction would bear equally in both those two extreme cases.
§ Mr. Rippon
I do not think that I can off the cuff give the reason for the different figures for Halifax and Bournemouth. No doubt we could make an analysis of each area if the hon. Gentle-man put a specific Question on the point. I cannot say now why that difference should exist. I can only say, as my right hon. Friend said, that the Order has been thoroughly discussed with the experts, not only members of the professional bodies, but also with the local authority associations. I think that it meets with their general approval, as, I am sure, it will secure the general approval of the House.
§ Question put and agreed to.
§ That the Valuation (Statutory Deductions) Order, 1962, a draft of which was laid before this House on 22nd March, be approved.