RESIDENTIAL OCCUPIERS (Hansard, 23 January 1974)

§ The Under-Secretary of State for the Environment (Mr. Hugh Rossi)
I beg to move Amendment No. 7, in page 15, line 41, leave out 'is the tenant of, and'.

§ Mr. Speaker
With this amendment it will be convenient to discuss Government Amendment No. 8.

§ Mr. Rossi
The object of these amendments is to extend the rebate scheme to sub-tenants. The matter was not raised in Committee, but sub-tenants have the benefit of rent allowances and it was thought only right that they should have rate rebates.

§ Sir Brandon Rhys Williams (Kensington, South)
I beg to move Amendment No. 74, in page 15, line 46, at end insert: 'Provided that a residential occupier shall not be eligible for any benefit under this Part of this Act in respect of any part or all of a hereditament for which a claim for an allowance against tax has been accepted'.

§ Mr. Speaker
With this amendment it will be convenient to discuss new Clause 17, Duty to notify local authority when a tax allowance is granted.

§ Sir B. Rhys Williams
The amendment's effect is limited to Clause 13. I should also like to draw attention to the purpose of new Clause 17 which applies the same principle universally across the whole area of residential premises. The 1707 object of both is that, where premises are residential in appearance but are partly commercial, professional or business in use, they should not be eligible for the favourable rating assessment which is rightly applied to premises which are genuinely residential.
The problem is felt acutely not only in South Kensington but throughout central London and probably in areas of all our great cities where there are active business communities. The effect is felt in rapid rises in rents for flats, particularly because agents find that they are able to obtain much higher rents by letting flats to companies which require to use them for their executives than if they stick exclusively to applicants wanting genuine residential occupation.
Companies may want accommodation in central London for direct business or professional use of a social or entertainment character, or they may be willing to set up their executives at company expense in what they deem to be prestige areas because they think it to be in the interests of their business.
The effect of this type of competition is often to establish sensational rents for blocks of flats where a number of leases have to be negotiated and which can be used by the agent as an example in dealing with existing occupants when their leases expire. Those occupants then find themselves obliged to compete because it can be shown that if they leave the premises the owners can readily obtain the figure demanded by the agent.
6.30 p.m.
We need to find a solution to this problem. It could be done if we could identify these quasi-comercial properties by their treatment for tax purposes. Obviously one does not want the Inland Revenue to have to make disclosures of confidential information to local authorities, but it would not be wrong to require ratepayers to declare to their local authorities whether they can get assistance in paying their rents through the tax system by declaring them as wholly or partly a business expense.
It is necessary to emphasise the word "partly", because hon. Members will know of cases in which professional or business people use one or two rooms of their houses as offices—and one can 1708 not object to that. But one also knows of cases in which a tax concession can be obtained, and it would not be wrong for the principle that I am seeking to apply to accommodation which was wholly devoted to entertaining for business purposes to apply in part to that part of a house or flat which was used as business or professional premises.
One could make it a duty of the ratepayers who are able to establish a claim for a tax allowance in respect of part or all of the premises for which they have to pay rates to notify their local authority of the facts. The authority may then require that a fresh assessment should be carried out, taking into account the way in which the premises are deemed to be used for tax purposes.
This device of using the tax system is a useful recommendation because it is obviously difficult, if not impossible, from outward observation to detect that business is creeping into a block of flats which is outwardly purely residential. My right hon. Friend might reflect that the effect of a proposal of this kind, if it were accepted, might be perhaps even to double the rates on the part or the whole of the premises which was identified by this means. I do not want to suggest exactly how the reassessment might be tackled, but, if the effect were to double the rates, that would not be inordinate. The local authority would then have the benefit of the higher income which was thought appropriate from commercial premises.
Another effect, I hope, would be that the tendency to bid recklessly for vacant premises would be somewhat checked and that some property which had effectively gone out of residential use might return to meet genuine housing need. I appreciate that the precise form in which my amendment appears may not be acceptable for technical drafting reasons, but I hope that my right hon. Friend will consider this idea seriously and favourably none the less.
It seems equitable that people who get help with their rents through the tax system should not also be able to get help with their rates from the taxpayer. The real argument is the housing cost problem which manifests itself particularly in areas which business people consider prestige areas but also more widely. Possibly my right hon. Friend, if he feels 1709 that I have made a useful point, will consider amending the Bill to this effect in another place.

§ Mr. Rossi
I am grateful to my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) for raising this interesting point. With his usual acumen he has described an area of some difficulty. For the reason that he has himself given, I cannot accept his amendment because there are considerable drafting difficulties in it—particularly the use of the phrase "commercial premises", which is not defined in any legislation. There is some case law on the point, but this is an area of great uncertainty.
It would not be for me at this stage even to go so far as to give an undertaking that it would be possible at a later stage to define the matter precisely enough to give effect to what my hon. Friend is seeking. He has made a point about a problem which, I feel, is possibly limited to Kensington and is not very prevalent in the rest of the country.
The national average domestic rate payment in 1973–74 is estimated at £65. If an occupier uses, say, one-eighth of his accommodation for business purposes and gets an allowance, his rates will rise to £65.64, which is an increase of only 1p per week. In Kensington, where properties are rated more highly, there would be a more serious difference, but, having regard to that kind of figure, it seems to be a case of using a sledgehammer to crack a nut which possibly exists only in Kensington.
My hon. Friend has mentioned the other problem that tax allowances are personal to the taxpayer but a rate assessment is made on property. It would require information possibly to pass between the Inland Revenue and the rating authorities to bring forward the kind of scheme that my hon. Friend has in mind. Also, Amendment No. 74 goes contrary to amendments that the Government accepted in Committee, when a case was made by hon. Members to give a rate rebate to the small shopkeeper or the seaside landlady.
When talking in terms of rent rebates, what we are saying is that relief should be given to classes of people whose income is below certain limits. Those 1710 limits may be more generous than those allowed by the Inland Revenue for tax threshold purposes, but that is another matter altogether. I do not think hon. Members should complain when we are being as generous as we possibly can be when dealing with rate rebates.
Although it is possible that people in this category are living in highly-rated property in Kensington, nevertheless when applying for rebates, we are having regard to their ability to pay and income within the criteria laid down by the rate rebate system. I therefore hope that my hon. Friend will not press his amendment.

§ Sir B. Rhys Williams
With leave of the House, I am grateful for my hon. Friend's remarks and I am glad that he appreciates the extent of the problem in South Kensington. However, I think that it he could examine this problem he would find it was more widespread than he thinks.
I am not concerned with the problems of part business or professional use of premises which are genuinely residential. What worries me is the increasing number of flats in London which are not being used for residential purposes at all and which have therefore been withdrawn from the housing market by embassies, multinational companies and organisation which like to have an address where they can entertain visitors, and which they can use as a letterhead and where they exploit the character of the neighbourhood to enhance their business without thinking of the needs of the residential population. They seem to be willing to bid recklessly when accommodation becomes available in the areas they fancy, and this is very hard on people who are genuinely seeking to renew their leases and cannot compete.
In view of my hon. Friend's remarks it would be futile to press the amendment at this stage. I hope he recognises that there is a real problem here and that he will not allow the matter to drop. If he does not accept my recommendation, I hope he will make his own.

§ Mr. Rossi
I am grateful to my hon. Friend for elaborating his point of difficulty. We will certainly consider it and write to him.

§ Sir B. Rhys Williams
I am glad to have that assurance and I therefore beg to ask leave to withdraw the amendment.

§ Mr. Rossi
I beg to move Amendment No. 65, in page 16, leave out lines 1 and 2.

§ Mr. Speaker
It will be convenient to discuss at the same time Government Amendments Nos. 66 and 67.

§ Mr. Rossi
This is a simple matter of bringing the residents of the Temples into the rate rebate scheme. Under Clause 10 the Temples are deemed to be local authorities for the purpose of the domestic element. At one time it was thought not necessary to extend the rebate to residents of the Temples because at this point they did not charge and have never charged a rate. They charge inclusive rent. But it is foreseeable that in future the Temples might wish to charge a rate, so it was felt necessary to make these amendments now to save the need for amending legislation in future.