§ Motion made, and Question proposed, That this House do now adjourn..[Mr. Howie.]
§ 4.4 p.m.
§ Mr. Robert Allan (Paddington, South)
The Financial Secretary to the Treasury has sat for so long lately on the Treasury Bench that I have considerable compunction in asking him to come here on a Friday afternoon to answer this debate. However, the matter that I wish to raise is so important that I do not feel inclined to drop it, even out of consideration for the hon. and learned Gentleman who has been showing such patience towards hon. Members on this side of the House lately.
I say that because the matter which I am raising is concerned with rates, which are becoming of dominant importance in the individual and family budgets of most people. Rates are becoming for many people the highest tax that they pay in the whole year and many people in my constituency are paying out more money in rates than they are paying out in rent.
As is well known, the broad effect of the 1963 revaluation was to put a very much higher share of the rate burden on the domestic ratepayer. Whereas before revaluation he footed about 45 per cent. of the total rate bill in the central London boroughs, after revaluation he footed about 59 per cent. Not only did the domestic ratepayer have to bear this very much greater portion of the rate burden, but also, because of revaluation, the rate burden itself was greatly increased in the central London boroughs, particularly because of the higher proportion of the central precept which they had to pay. In Paddington that alone amounted to about £250,000.
2080 As a result of this, a great deal more money is demanded from the domestic ratepayer, and if the Minister of Housing and Local Government is right when he says that the rates will double in the next 10 years this will become one of the most important matters in any person's domestic finances. In this event it is absolutely essential that individual ratepayers should see that there is fairness between one section of the community and another. As a result of revaluation, in my constituency particularly and in other Central London boroughs, it is quite obvious that it is not so.
The rateable values of property owned by 5,400 of my constituents went up five times and more. Many of these people are having to pay out in cash twice, three times, seven times, and even 13 times as much money as they paid before. This is in comparison with a general level of rates in that area which has not increased by anything like so much. It is quite obvious, therefore, that there are very grave inequities and inequalities in the assessment of rates in an area like Paddington.
Investigations have shown that the demands on ratepayers in purpose-built flats were very much higher than on those in converted flats. A widely quoted example from my constituency, which can be repeated many times over, is of two properties situated quite close together in the Lancaster Gate area. One is called Riven Court, a new block of purpose-built flats with a total rent of £2,201. This was assessed at £3,540 and this can be compared with a neighbouring large house converted into flats, No. 33, Cleveland Square, where the total rent income was £3,062 and this was assessed at only £1,520.
Therefore, the purpose-built flats were assessed at £1,300 more than the actual rents, and the converted flats at £1,540 less than the actual rents. I know that the valuation officer did not have to go by the actual rents but he was not supposed to ignore them so completely as this example shows. One block which was very severely hit was Park West in my constituency, where the gross value went up 6.2 times. There, a flat let at £400 a year was assessed at £500 a year, whereas many exactly similar flats in converted blocks for which the same rent 2081 is paid were assessed not at £500 but at £200.
The Peachey Property Corporation, which owns this block among other properties, decided that it would challenge in the courts the general inequality of assessment by the only way open to it, that is, through seeking to quash the existing valuation list and secure an order that a new one be prepared. The company lost its case in the Divisional Court and its appeal has recently been dismissed, by a majority, in the Court of Appeal.
Without going into the details of the case, it is fair to say that all three judges concerned admitted that there were serious errors in the preparation of the valuation list. Two of them, Lord Denning and Lord Justice Salmon, did not think that these errors were of such a nature as to justify quashing the whole list. The third, Lord Justice Danckwerts, took the opposite view. In his judgment, Lord Denning pointed out many different classes of error but said that in each case they were not of such a nature as to justify attacking the whole list. The other two judges were more outspoken than that. Lord Justice Danckwerts, who gave the dissenting judgment, said that no satisfactory explanation had been given of the amazing disparities which had been brought to light, and he added:I would say that the results are so incomprehensible that some incorrect method or incorrect use of material must have been made to produce them.Lord Justice Salmon, giving his judgment against Peachey, while admitting that it had been established that there were very serious errors, said:It is not enough for the appellant to show that the list contains many mistakes due to ineptitude, carelessness and stubborn incompetence. If it were, they might well succeed.The opinion of these three judges has been recently confirmed by the Minister of Housing and Local Government when speaking on the Report stage of the Rent Bill. The right hon. Gentleman said that the Milner Holland Report on London housing had foundthat in a really large minority of cases the rateable value is a positively misleading factor.… Unfortunately, under the new valuations, it is reckoned that in some areas more than a quarter of the rateable values are unfair.2082 He went on to say:I sometimes wonder whether we shall stimulate an increasing number of appeals. But what I state is a fact."—[OFFICIAL REPORT, 30th June, 1965; Vol. 715, c. 705.]The Times, commenting on the Minister's statement on 3rd July, said:What the Minister has admitted will come as no surprise to those ratepayers who have compared their own assessments with the valuations placed on similar or dissimilar properties round about. And it will come as no surprise to anyone who reads the judgment of the Court of Appeal in the case in which the Peachey Property Corporation is challenging the Paddington valuation list. … That anomalous and capricious values are more or less widely distributed through these lists is already widely believed. The new element in the situation is that the Minister of Housing has had the frankness to agree.… It would seem to be incumbent on Mr. Crossman, now that he has shaken any remaining faith in the equity of the present method of assessment, to investigate the obvious alternative.The alternative would require legislation, so it would be out of order for me to mention it. But, in any event, this is an urgent problem which can be tackled immediately by administrative action. However, before enlarging on that, I wish to take up the reference in The Times to the Peachey Property Corporation. Some hard things have been said about that company, and Lord Denning himself, in my view, misrepresented its motives. I know that the company has put in a tremendous amount of work and spent a lot of money in exposing and challenging what are now admitted to be widespread inequalities stretching far beyond the limited interests of the company itself or even of its tenants. I think those who are responsible for this deserve thanks for what they have done.
But what is now to be done? The Minister of Housing talked of an increasing number of individual appeals, and the Court of Appeal itself said that the way to remedy these serious errors was not through quashing the whole list but through private action. But the errors are so enormously wide in scope—25 per cent., the Minister of Housing has told us—that if individuals concerned did take action, only chaos would result. Anyway, why should individuals go to the great trouble and considerable expense, because expense there would be, to rectify what Lord Justice Salmon has calledthe ineptitude, carelessness and stubborn incompetence of the valuation officer and those in authority over him.2083 It is up to those who have this authority to use it and to put matters right, which they can now do by administrative action, and it could be done tomorrow. I have sought this debate in order to urge the Minister to do this. He need not concern himself about whatever further legal appeals or decisions there may or may not be. He can act now, and he should certainly do so because, as rates rise, inequalities will become increasingly intolerable.
§ 4.16 p.m.
§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)
I am grateful to the hon. Member for Paddington, South (Mr. Robert Allan) for raising this subject, in spite of the fact that I have had to weary the House with my presence and my voice rather a lot this week.
In recent weeks there has been a great deal of publicity given to the criticisms that were made in the Court of Appeal about the way in which the valuation officer for Paddington carried out the rating revaluation, and I am very glad to have this opportunity of replying to some of these criticisms.
The Peachey Property Corporation Ltd. asked the courts to quash the valuation list of Paddington and to order the valuation officer to make a new list. The Divisional Court rejected that plea and, on appeal, their decision was upheld by the Court of Appeal. As I understand it, in the Divisional Court the case was mainly presented by the Peachey Co. on the basis of a property called Park West. They did not complain about the assessment for that property but complained that other properties had been undervalued and that the comparison was unfair. When they got to the Court of Appeal, I think they changed their line of attack and, on the basis of evidence which had been put in to reply to their arguments in the court below, they swung round and said that Park West had been over-valued. In any event, in both courts they failed to establish their case that the list should be rejected. They were given leave to appeal to the House of Lords, and I think there have been some suggestions in the Press that they intend to do so, but they have not in fact lodged any notice of appeal up to now. The 2084 case is not therefore sub judice; otherwise I would not be able to say some of the things I am proposing to say.
The judgments in the Court of Appeal stress what is described as "the inconsistency" or "the remarkable disparity" between the assessments which the valuation officer placed on purpose-built flats and those which he placed on flats in converted houses. For example, it was stated in the judgments that, on average, the assessment of purpose-built flats in the new valuation list was about six times the figure in the 1956 valuation list, whereas the ratio for converted houses was only two or three to one. The Inland Revenue tell me that these figures were based on a list of properties that was not truly representative of the position in the area as a whole, and it was not intended to be since details of those properties were introduced for an entirely different purpose.
The Revenue have done an exercise covering the whole of Paddington, taking in all the properties in the area which are either purpose-built flats or flats and rooms in converted houses. The true ratio between the 1963 and the 1956 figures turns out to be, on average, 4.5 to 1 and not 6 to 1 for purpose-built flats, and 3.5 to 1 and not 2 or 3 to 1 for flats in converted houses.
I think hon. Members will agree that this gives a very different picture. It gives a picture which, speaking for myself, I would certainly be prepared to defend and justify because I think that there are good reasons why the ratio should be different, provided that it is a moderate difference and not the extreme one which the Court of Appeal on the evidence before it—and, as I have said, it was partial evidence—was led to conclude. I must make clear that this information which I am giving to the House was not before the Court of Appeal, but what I say is a fact, and the valuation officer for Paddington will be able to testify to this fact in any future rating appeals that may come before the valuation court.
The hon. Gentleman also quoted some figures relating to two properties—Cleveland Square and Riven Court. He was quoting figures which were published in an article in The Sunday Times. As he has given them, I will not repeat them. They correctly record what was published. 2085 The newspaper described the figures as fairly typical and said that the average discrepancy was over £100 per flat. I must point out that that is a very misleading comparison. The Riven Court rents which the newspaper said were inclusive of rates were, in fact, exclusive, which utterly alters the picture. Even then, the valuation officer thought that the rents for that property were too low, and that is a view which it would seem has been shared by the surveyors of the owners and occupiers, because they have now withdrawn their appeals against those assessments.
The judgment of the Master of the Rolls in the Peachey case also suggested that the flats owned by the Peachey Corporation in Park West were assessed at a gross value of 20 per cent. above their actual rents. This again was referred to by the hon. Member. The Peachey Corporation has made proposals for a reduction of these assessments, and when its appeals are heard the valuation officer will testify that after appropriate adjustments have been made to express the rents in terms of the statutory definition of gross value the assessments do not in general exceed the rents.
As to the general criticisms about the way in which the rating assessments have been made, I remind the House that what valuation officers are required by law to do is to assess all the properties in the area according to the rents which they may reasonably be expected to fetch. No one can pretend that is an easy task in an area like Paddington, which includes such a wide variety of properties and which during the period in question has undergone such very great changes, some parts of the area going up in value and others down because of changes of fashion or redevelopment or absolescence. As is well known, it included also much of the Rachman property.
Nevertheless, the valuation officer had a great deal of useful evidence on which to base his valuation. He has had the rent returns and the information which is supplied to him by the rating authorities. He and his staff have inspected nearly every house externally and at least half of them internally. In addition to that, the superintending valuer for the North London region has arranged co-ordinating conferences attended by the valuation officers of the neighbouring 2086 areas. The object is to exchange information so as to ensure a uniform approach.
From the rental and other evidence available the valuation officer and his professional staff had to construct the valuation list. The valuation officer had to sift and weigh the rental evidence very carefully as, particularly in the case of the accommodation in converted houses, the rents from so-called free lettings in 1960 and 1961 varied considerably in properties which were obviously of much the same value. Hon. Members know of the problems which were attendant upon the results of creeping decontrol following the 1957 Act, and they will know what extraordinary variations there were in rents for similar properties under these so-called free lettings.
Broadly speaking, the valuation officer rejected from consideration all those rents which were not rack rents agreed between the landlord and the tenant. In building up his pattern of assessments he left out of account controlled rents and rents which appeared to him to be imposed by extortionate landlords who were squeezing them from families in desperate need of shelter., Naturally, most of these extortionate rents were being paid for accommodation in converted houses. Particularly was this so in the area which became known nationally as the "Rachrnan Empire". I stress, therefore, that the figures given of actual rents in converted houses can be very misleading and many are rents which have been disregarded—rightly so—by the valuation officer for the purpose of his valuation.
I need hardly say that valuation for rating purposes is not a matter capable of scientific precision. It is a matter of judgment, calling for professional knowledge and skill, and valuation officers are properly qualified for the job. No one will pretend that, in the colossal task of having to revalue about 17 million properties, including 14½ million dwellings, they got all their valuations right the first time. Of course, they did not. That is why Parliament has provided an appeal system for ratepayers who think their assessments too high.
They can appeal to the local valuation court and if dissatisfied with the result they can appeal further to the Lands 2087 Tribunal. There have been, since that revaluation, just under 1 million—I call them, loosely, "appeals" but technically they are proposals made by people who have objected to the valuations. Of these some 630,000 have been either withdrawn or settled by agreement with valuation officers without going to court; about 79,000 have actually gone to court and 250,000 are outstanding. Taking it very broadly and generally, I think the effect of this general system of appeals has shown and supported the general proposition that valuation officers have made a very good job of what was a gigantic and immensely difficult task.
The Paddington ratepayers have made some 9,000 appeal proposals against their assessments and in their case more than 3,000 have been disposed of either by court decision or by agreement with the valuation officers. I cannot agree that the severe criticisms that have been made of rating assessments in Paddington are well founded. No doubt what is to be expected is that some of the assessments will require further adjustment because of appeals. That is what the appeal system is there for. But, in saying that, I make it clear that the Board of Inland Revenue has complete confidence in the competence and efficiency of the valuation officer for Paddington.
The hon. Gentleman referred to what my right hon. Friend the Minister of Housing and Local Government said in a recent Rent Bill debate. He was, of course, dealing there with the question of whether the gross value under the valuation system would be a useful addition to the Rent Bill by providing, as it were, a sort of statutory yardstick for the purpose of arriving at a fair rent. But, of course, so many other factors have to be taken into account in deciding, between a particular landlord and tenant in relation to that tenancy, what is a fair rent, and there would be so much room for argument as to whether a departure should be made from the yardstick, that my right hon. Friend decided, quite rightly if I may say so with respect, that it was much wiser not to attempt to lay down such a yardstick. He suggested instead that the rating valuation should be taken by the rent assessment committee as a yardstick for the main purpose of the Bill—a fair rent—but he was not, I 2088 understand, seeking to suggest that the valuation officers had not done a very good job. I remind the House of what he said:It is of crucial importance that it be understood, and understood widely outside, that in not writing rateable value in here one is not implying or suggesting that it should not normally be taken into consideration. But after it has been taken into consideration, a rent officer or rent assessment committee will be perfectly entitled, having considered it, to say, 'This is one of those instances where rateable value does not work as a yardstick and it should be disregarded'. It is safer to enable them to do that, surely, than to write into the Bill an instruction that it must be taken into account."—[OFFICIAL REPORT, 30th June, 1965; Vol. 715, c. 706.]He also stressed that he was very anxious to make the rent assessment committees the final tribunal as to what is a fair rent and did not want to provide an opportunity for legalistic arguments to be raised by way of appeal. He feared that if one attempted to write in a statutory yardstick of that kind, it would provide an opportunity for just that sort of legal argumentation which he was trying to avoid.
Finally, about the Valuation Office generally, its staff carry very heavy burdens, and, since I have been in my present office and have been responsible for individual questions which have come up to Ministers about the office, I have become very much aware of the extent of the task imposed on them. Speaking not only of their rating valuation but of the wide range of their other duties, both on my own behalf and on that of my right hon. Friend the Chancellor of the Exchequer, I should like to express the Government's appreciation of the ability and devotion with which they are carrying out their work. I am grateful to the hon. Member for Paddington, South for having given me this opportunity of Paying a tribute to them.
§ 4.31 p.m.
§ Mr. Eric Lubbock (Orpington)
As I am not familiar with the circumstances in Paddington, it may be thought that I should not intervene in this debate. I should like to take up in the few moments remaining one or two points made by the Financial Secretary. First of all, he referred at length to the statements made by the Minister of Housing in our recent debates on the Rent Bill. Having taken part in all those debates, 2089 I can remember exactly what the Minister said. I would confirm the accuracy of the quotations which the hon. and learned Gentleman gave from the debate the other night, but, in addition to these criticisms which the Minister made of the proposals to use rateable value as some kind of yardstick in determining what a fair rate should be, he went considerably further than this, as the quotation mentioned by the hon. and learned Gentleman will prove.
He said that as much as 25 per cent. of gross rateable values settled after revaluation were faulty. I am quoting the sense of his remarks and would not guarantee that he used that exact term. The hon. and learned Gentleman has not dealt with that point. The Minister went considerably further than merely saying that, in some cases—in perhaps comparatively few cases—it would not be appropriate to use gross rateable value as one of the yardsticks which the rent assessment committees should look at in determining a fair rent.
§ Mr. MacDermot
I have the Minister's words in front of me. He did not say that the values were faulty, but he used the word "unfair". He was talking about a yardstick for fair rents. The experience of the appeals does not bear out that suggestion. What the Minister was referring to was one of the appendices 2090 to the Milner Holland Report, to which he referred specifically, which showed the variation between the actual rents now being levied and the gross values. In these cases, in about 25 per cent. of cases in London, there was a wide discrepancy, but that does not mean that the actual rents being paid are fairer than the gross values.
§ Mr. Lubbock
No, but the use of the word "unfair" reinforces my point. I understood the Minister to be saying that there was a serious degree of unfairness in the rating system which had appeared particularly in that part of London. It is not confined to Paddington. One could produce serious examples from London and, I dare say, from other parts of the country as well.
I will take one example. I have had correspondence about houses of an almost exactly similar nature. One was owned by the local authority and the other is in owner-occupation. I could not see why there should be any difference in the rateable value—
§ The Question having been proposed after Four o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at twenty-six minutes to Five o'clock.