HC Deb 26 June 1973 vol 858 cc1494-502

11.40 p.m.

Mr. Charles Loughlin (Gloucestershire, West)

The issue I raise affects every ratepayer in the country. It is a national problem, though I shall try to spotlight it by illustrations from my constituency. Incidentally, in answer to a Question from me, the Minister has said that the rateable values of domestic properties in the greater part of my constituency show an average increase of 215 per cent. as against an increase of 154 per cent. in the South-West Region. However that could happen when the region includes such places as Cheltenham, Bath, Bristol and Gloucester, goodness only knows.

I am not allowed to ask for new legislation in this debate. Therefore, I wish to spotlight the fallacy of the national rent basis of the present system and the injustice of nonsensical anomalies of the revaluation which has recently taken place and the stupidity of having a revaluation at all. There was no need for a revaluation, particularly at a time of rising inflation and escalating property values. Revaluation is merely a device to hide rate increases. It makes the poundage rate smaller, but the total rates paid are higher. If one takes the gross rateable values of all domestic properties, even with the revaluation they never relate to the notional rent on which the system is supposed to be based.

To the vast majority of people, higher property values are paper values. Those who are affected are those who have to sell or those who have to buy, and this is important in the context of the rates system. Youngsters who have to buy in an escalating market not only have to pay high mortgage outgoings, but increased rates increase their monthly outgoings and place an additional burden on them.

Rates must be taken into account in people's weekly budgets. I am told on good authority that, because many councils this year have drawn on their balances, we can expect a substantial increase in rates next year, irrespective of any rising costs which may occur in the next 12 months. An official of a small local authority in my area tells me that its rates must rise by 10p in the pound for that reason alone.

I have examined the valuation lists of one of my local authorities and discussed them with a council official. Neither of us can find a common pattern. There were variations in valuations even in streets where properties were identical and adjacent. I have discussed this with hon. Members who have said that the same is true both in London and elsewhere.

In one street, six identical properties alongside each other were previously rated at £61 and now range between £196 and £206. Heaven only knows how such variations arise. I can only assume that one or two houses have beetles. I could quote scores of properties previously carrying the same rateable value which have been revalued and now differ by between £2 and £20 for no obvious reason. On this ground alone, revaluation is a nonsense.

We discovered two strands in our examination of the rating lists. First, private properties previously valued at up to £90 were increased in value proportionately more than properties previously valued above £100. Some values went up by four, five or six times, whereas the higher valued properties went up by two, two and a half or three times. So the average man—the young professionals and executives—are now being called upon to pay substantially more in rates while those who can afford it are being asked to pay proportionately less. That is barmy when we remember that the rating system was deliberately designed to have the opposite effect.

The other strand was that council houses were revalued at a higher level than were comparative properties in the private sector. That is a social injustice that cannot be justified.

Perhaps the most remarkable injustice relates to almshouses which had previously been valued at £17 and went up to £77 and £84; and the valuation was increased by seven times, and nearly eight times in one instance. Fortunately for the tenants the local authority was fairly generous.

Even with higher value properties there is the same nonsense. In one village, property A is valued at £340, property B at £280 and property C at £250, yet property B and property C are far more valuable in every particular on a rental basis than property A.

It is no good the Minister claiming that rates have not gone up substantially because of revaluation. I have yet to discover a domestic rateable value that has been reduced. I will quote two cases. The rates paid in the first case were £22.20 last year. This year they are £30.09. If no revaluation had taken place, the rates payable—on official information—would have been £26.42. That is an example of a small property with a previous rateable value of £30 which has gone up by almost four times.

The other case is referred to in a letter which I received this morning in which my constituent says: My bungalow was originally rated at £86, now I have been informed that this has been increased to £244, an increase of 182 per cent. over the original, but it is 2.8 times. This is quite painless until the rates to be paid are calculated, but I am now called upon to pay £86.46 instead of £71.05, an increase of £13.41 or 18.88 per cent. The figures which I have used may appear small to some in London and the larger cities. I believe that their problems are far greater, and the Minister should bear them in mind in his reply. I should like to know what comfort he can give Londoners with, I am told, rateable values for normal properties in the region of £500 and £600 a year.

I ask the Minister how these valuations were arrived at. How many inspections of properties took place? How does he account for the wide variations? Is there enough staff in the areas to do anything like a spot check on inspections? How can the Government expect ordinary people to cope in paying increased rates on top of all the other increases in the cost of living which have been imposed upon them during the lifetime of this Government? Revaluation, with its consequent increases in rates, was a deliberate act on the part of the Government. It was an act calculated to increase the cost of living at a time when Ministers throughout the land were stopping people from getting further increases in their incomes.

I do not want to hear too much about the subvention of the Government meeting half the cost of any increase over 10 per cent. That seems to be very much like offering someone a £1 note in exchange for £2. I think that it is a fiddle, and I think that the Minister knows it. But he might tell us whether this is automatically applied or whether ratepayers have to make application. If it is calculated automatically, perhaps he will tell me what I should say to my constituent, whose letter I have quoted, who still has an increase in rates payable of 18.88 per cent. What is more, taking the country as a whole, that is by no means an excessive increase in rates caused by this revaluation.

The ratepayers have again been conned. They face further burdens which they cannot afford to bear. Before the next half-year's payments become due, the Government must take action to ease the burden. Will they take from the rates items which should be borne centrally, especially items such as education and health and welfare—services which impose a great strain in the localities?

I do not think that people wish to go cap in hand to the local authorities for rate rebates. This is not an age of Poor Law relief, and the poor take-up in most of the selective benefits which the Government have introduced has exposed their attitude to selectivity as being more of the eighteenth than of the twentieth century. People are independent. They are entitled to be, and they have a right to dignity.

I want the Government to say quite clearly why, when even gross rateable values do not relate in any way to the rental values of properties, it is necessary to have any revaluation and why it is necessary to continue with this system—though I am well aware, Mr. Deputy Speaker, that if I proceed with that argument for too long, I shall incur your displeasure.

11.53 p.m.

The Minister for Local Government and Development (Mr. R. Graham Page)

I apologise to the House and to the hon. Member for Gloucestershire, West (Mr Loughlin) for not being in my place to hear the hon. Gentleman's first few words. But I was in time to catch the gist of his opening of the debate, namely, that there was no need for revaluation.

So long as rates are based on the rental value of property, we should endeavour to keep pace with the change in rental values. Revaluation is only a matter of fairness and justice between individual ratepayers and their districts.

Although statutorily the intention we have a quinquennial revaluation, the Labour Government postponed the last one so that, when we reached this year, the rental values in use were those which prevailed 10 years ago. There have been changes in those rental values during that period of 10 years. There has been not only a general increase affecting all properties but also relative changes between one property and another. It is only fair and just that there should have been that revaluation. Of course, having been left for 10 years, there are bound to be substantial changes.

The hon. Gentleman has drawn attention to what he called a number of anomalies within his own knowledge, variations in the valuations of properties which appear to be similar. It is not for me to comment upon individual cases.

The valuations have been carried out by professional valuers employed by the Inland Revenue on principles which apply throughout the country, not on the basis of directives by central or local government. Indeed, the whole purpose of changing from valuation by local authority employees to valuation by the central Government was so that the same principles might be applied throughout the whole country.

The hon. Gentleman made the comment that the lower the capital value of a house, the higher appeared to be its increase in rateable value as a result of this revaluation. I think there is an explanation for that, since we still base rateable value on rental value. It is a question of demand when considering rental value. There may not be such a great demand for the larger house as there is for the smaller house. Therefore, the tenant is prepared to pay a comparatively higher rent. Whether it is right to base rateable value on rental value is debatable. Perhaps we ought to change to capital rather than to rental values. This is not the time to debate that point, because it involves legislation. But, while we are still basing rateable value on rental value, the value will depend to some extent on demand as well as on the amenities of the house itself.

The hon. Gentleman drew attention to differences between the valuations of council houses and owner-occupied houses in the same area. He said that as a rule council houses were valued at a higher level than owner-occupied houses in that area. I have a similar problem in my constituency where it works the other way round. I am assured that owner-occupied houses have a better amenity value than council houses, although perhaps in outward appearance they appear the same, and therefore they have been valued at a slightly higher rate.

We must have faith in the professional valuers. Of course there is human error, and for that purpose there is provision for appeal against valuations.

Mr. Loughlin

How many valuers are there?

Mr. Page

The valuers were hard pressed during the period of valuation for perhaps three or four years before completion last year, but not so overpressed that they had to neglect their duties. They carried out the valuation thoroughly. They did not, of course, inspect every property in the land. In normal valuation work one takes a value over an area. However, I think that the work was carried out thoroughly and that, on the whole, the valuations are correct and in accordance with the rents that those properties would command.

The hon. Gentleman went on from that to consider the burden of rates, the rate bill. There is nothing extraordinary in the fact that rate bills have increased this year. They have increased each year for many years past. If rate bills did not increase, it would mean either that the local government services were being cut or that further general taxation was being imposed in order to increase the amount by which the taxpayer subsidises the local government services.

Each year, local government services are increased and improved—the public demands that—each year local government servants are better paid, and each year the central Government increase their contribution to the cost of local government services. But no Government, and no Opposition, have ever proposed that the taxpayer should meet all the increase in local government costs. It would be very unhealthy for local government if local authorities were to be wholly cushioned against rises in local government expenditure.

Nevertheless, this year the Government have provided a bigger cushion than ever before for domestic ratepayers. The 60 per cent. of local government expenditure that will be paid by the taxpayer and will not go on the rates at all is a greater subvention than ever before, and totals over £3,000 million.

Whatever rate poundage is fixed by the local authority, it will be reduced for the domestic ratepayer by the domestic element of 6p in the pound. In addition, the Government will refund to every ratepayer half of any increase in his rate bill over 10 per cent. in so far as the increase is due to revaluation. I would deny that that is in any way a fiddle, as the hon. Member described it. From a calculation of this, it is clear that the Government are contributing about £10 million in this assistance to prevent a large jump in rateable values and therefore in rate burden on certain properties by reason of the fact that they have been left unrevalued for 10 years.

This brings me to the impact of revaluation on the rate bills this year. So far as the impact of revaluation on the amount that the householder pays in rates, it has been a very small element. The hon. Member asked whether, when a householder's rates have gone up and he believes that this is the result of revaluation, he has to make a claim on the £10 million subvention. No, it is automatically applied. The local authorities will be under an obligation either to make the refund or, if they charging half-yearly to take it into account as credit on the second half year's bill. So there will be no need for the individual householder to claim.

The hon. Member's own constituency is a very good example of the variations in rates in one area as compared with the region within which it is situate. I answered a Written Question of his recently and gave figures which showed that, over the region as a whole, they had increased by 154 per cent. and in his own constituency by 215 per cent. Indeed, when I saw those figures I looked to see whether I could find the reason for that. The reason is obvious. The houses in the hon. Gentleman's constituency have become more desirable over the past 10 years by reason of the access to that area. In that time we have had the Severn Bridge and the M4 and M5 on the other side of the Severn. Altogether, I imagine that those who are working at a distance, perhaps in Bristol, are more prepared to pay substantial rentals for houses in the hon. Gentleman's area than they were 10 years ago.

Mr. Loughlin

The region includes places such as Cheltenham, Bath, Bristol and Gloucester, which are all highly desirable areas. How is it that my constituency has such large increases when those places are part and parcel of the region?

Mr. Page

The region also includes a development area in the south-west and some much lower rateable value areas in the area of Cornwall and Somerset, which brings down the average to that figure. But I do not think from the fact that the hon. Gentleman's average increase in rateable values is up by 215 per cent. that there is anything wrong in the valuation, or, indeed, that as a result his constituents will have to pay more on their rate bills. The average rate bill in England and Wales before revaluation was £60. After revaluation it is £65.39. Those are the figures for the whole country.

Of the areas in the hon. Gentleman's constituency, perhaps East Dean and West Dean have come out worst in the revaluation. Before revaluation they had an average of £28 to £30 per household. They have risen by about one-third. They are now still only in the region of £39 to £40, as against the national average of £65. Lydney has risen by about 14 per cent. or 15 per cent., but it is still only £44.51 as compared with the national average of £65. Newent has risen by only 5.5 per cent., and Gloucester rural by 7.7 per cent. Compared with the national average, the hon. Gentleman's constituency as a whole is still well below that average and is not, to that extent, overburdened in the payment of rates.

Should the Government go further to stop any increases in rates, further than the £10 million for part of the increase due to revaluation? The answer to that is that the Government do not have the power to do so. They can only persuade local authorities to take all matters into consideration and see whether they can keep the rates down substantially this year, and particularly this year, during the period of price and pay restrictions.

The hon. Gentleman mentioned the fact this year that many of them had responded to that by resorting to reserves. But that is a common practice of local authorities in managing their financial affairs. One year they can put money to reserve; the next year they can keep their rate poundage down by resorting to that reserve. This is a common practice in local government finance. I am not pessimistic about next year in that, because the reserves have been eaten up this year, the rate poundage will have to rise enormously next year. I do not believe that that is so from the monitoring which I have had the opportunity of doing over the past few weeks.

From that monitoring of the rates—I say it is only persuasive; we cannot force any local authority to reduce its rates—we find that a very great number of the local authorities, some 1,000 out of the 1,400 rating authorities, had paid attention to the percentage increases which were agreed in the rate support grant negotiations last year and had increased their rate poundage only on the same basis as those increases which were negotiated with the local authority associations last year. Others had gone beyond that.

Again I take the hon. Member's constituency as an example. Of the five rural district councils within his constituency, with which he is concerned, four had kept—

The Question having been proposed after Ten o'clock, and the debate having continued for half an hour. Mr. DEPUTY SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at ten minutes past Twelve o'clock.