§ Mr. Neil Thorne (Ilford, South)I welcome the presence of the Under-Secretary of State for the Environment, my hon. Friend the Member for Ealing, Acton (Sir G. Young), to reply to this debate. I know that the other Under-Secretary of State for the Environment, my hon. Friend the Member for Pudsey (Mr. Shaw), was to reply but has an important and pressing engagement. It is typical of my hon. Friend the Member for Acton generously to step into the breach.
The present rating system dates back more than 400 years. Queen Elizabeth I made provision for the poor and a levy was raised from the occupiers of each property in the parish to satisfy what was required by the churchwardens for the relief of the poor. This arose directly from the action taken by her father, King Henry VIII, in dissolving the monasteries which until then had provided for the poor out of their sizeable assets. It is perhaps appropriate that we should be discussing this matter today, on the morning of the first visit of a Pope to this country.
Over the years, the system has been expanded to provide for many other services. This was particularly so during the last century when local authorities took over from the churches responsibilities in education, welfare and a number of other spheres. Moreover, almost every year this century, Parliament has heaped further duties and responsibilities on local authorities, and thereby considerably escalated the cost of funding those duties.
Inevitably, the increase in this burden has had two results. First, Governments have found it necessary to provide finances from the Exchequer to help carry the load. Secondly, there have been increasing demands for the abolition of the tax altogether, on the ground that it is a very heavy burden and is no longer equitably applied. My right hon. Friend the Secretary of State for the Environment has this very much in mind and is currently examining the results of his public consultation paper "Alternatives To Domestic Rates".
In the meantime, however, the Local Government, Planning and Land Act 1980 was passed to provide a fairer way of distributing the funds allocated by central Government for this purpose. The biggest spenders among local authorities are now not necessarily those that receive the largest subsidy from Government funds, as previously seemed to be the case when each council had the right to demand subsidies based on its own interpretation of it s needs. As a result of the 1980 Act, grant-related expenditure was brought into being, with the intention of establishing the basic needs of each local authority according to its duties and responsibilities, calculated by reference to a rather complicated formula.
Clearly local authorities have very different views about their needs—that is why the previous system was unfair—but they certainly do not lose any opportunity to state their case to Government and to request flexibility due to some difficult problem that is not shared by others or at least not to the same extent. They therefore never cease asking the Department for flexibility. It is right and proper that there should be sympathy and understanding for the problems of others, and I am sure that my hon. Friend and his colleagues take those representations most seriously.
1185 Until recent years liability to pay rates depended upon beneficial occupation, without which no rates were payable. This was changed by the General Rate Act 1967, which gave local authorities the power to charge empty rates in their area. Incidentally, empty rates are not the same as general rates. They are higher, as they do not benefit from the subsidy applied in relation to domestic general rates.
Local authorities had previously expressed the wish to exert that power because they believed that property owners were intentionally keeping premises empty purely and simply to benefit from a capital gain. This applied especially to the domestic sector, in which it was then, as now, extremely difficult to effect a letting that truly reflected the value of the property. Authorities adopting the rights provided by the 1967 Act could thus ensure that an owner became liable to pay rates after a period of three months' vacancy.
§ Mr. Sydney Chapman (Chipping Barnet)I congratulate my hon. Friend the Member for Ilford, South (Mr. Thorne) on raising this subject in an Adjournment debate. Is he aware that an increasing number of people believe that, whatever the merits or demerits of the 1967 Act, the provisions need clarifying? The provision for a three-month rate exemption period to which my hon. Friend has referred does not state specifically whether it is three months in any one financial year, three months per individual owner or three months only for all time on any one property. The latter is certainly the interpretation given to it by my local authority in a dispute that I have had with it on behalf of a constituent.
Therefore, whatever case my hon. Friend is advancing, does he agree that schedule 1 and/or section 17 of the General Rate Act 1967 requires amendment?
§ Mr. ThorneI thank my hon. Friend for that intervention. He raises an important point that should be cleared up. I hope that my hon. Friend the Minister will bear it in mind when he replies. I do not think that the House or Parliament generally ever expects to be able to cover every eventuality, but this is a real and important point that clearly needs further consideration. I am sure that it will be dealt with appropriately at the earliest possible moment.
The result of the 1967 Act was to concentrate the minds of property owners, who were induced to reconsider very carefully the situation in relation to any empty building, to such an extent that premises were sometimes let without any rent being charged so long as the rates were met.
Paragraph 1(1) of schedule 1 to the 1967 Act provides:
Where, in the case of any rating area in which, by virtue of a resolution under section 17 of this Act, this Schedule is in operation, any relevant hereditament in that area is unoccupied for a continuous period exceeding three months, the owner shall, subject to the provisions of this Schedule, be rated in respect of that hereditament for any relevant period of vacancy; and the provisions of this Act shall apply accordingly as if the hereditament were occupied during that relevant period of vacancy by the owner.It was realised, however, that this could be very harsh indeed. Paragraph 2 therefore provides:No rates shall be payable under paragraph 1 of this Schedule in respect of a hereditament for, or for any part of the three months beginning with the day following the end of, any period during which—In considering three months Parliament rightly decided that unnecessary hardship could indeed occur. As a result of an amendment, therefore, paragraph 3A now provides:
- (a) the owner is prohibited by law from occupying the hereditament or allowing it to be occupied;
1186 - (b) the hereditament is kept vacant by reason of action taken by or on behalf of the Crown or any local or public authority with a view to prohibiting the occupation of the hereditament or to acquiring it;
- (c) the hereditament is the subject of a building preservation order."
Without prejudice to section 53 of this Act, a rating authority shall have power to reduce or remit the payment of any rates payable in respect of a hereditament by virtue of paragraph 1 of this Schedule if they consider that the payment would cause hardship to the person liable for those rates.I understand that it has been made clear by the Department that hardship is not exclusively financial but may also be considered on other grounds.Parliament has been anxious to ensure that the law should be fair in its operation and to provide, after 400 years of rating law, that rates could be charged not only on occupation but also when a property is unoccupied. We are still in the early days of this entirely new departure and therefore it is important that those local authorities that are involved should be particularly cautious and careful in their handling of this issue.
There have been cases where that is not so. I have a constituent who has indeed suffered in this way. He is a Mr. Ducker who lives at 17 Park Avenue, Ilford, who purchased a 999-year leasehold interest in 52 Woodberry Grove, N.4 in 1957. He lived in those premises until 1968 when he moved to his present address. Shortly after Mr. Ducker left that property, he let the premises to a Miss Yvonne Elizabeth Murray who died in tragic circumstances on 16 May 1975, leaving the property vacant. At a later date, Mr. Ducker was informed that squatters had occupied the premises. Subsequently, in 1977, the premises were boarded up by the Greater London Council.
In July 1978 Mr. Ducker received a demand for unpaid rates, back-dated to August 1975. On 15 August 1978 Mr. Ducker received a summons for non-payment of rates. There has been copious correspondence between Mr. Ducker and the local authority between those dates and subsequently.
Mr. Ducker paid the rates on 52 Woodberry Grove from 1957 until 1973, in spite of the fact that he let the property to Miss Murray in 1968. The rate demands throughout this period were sent to Mr. Ducker at his address in my constituency, where he still lives. During 1973, Miss Murray began to pay the rates and continued to do so until her death, and the rate demands were no longer sent to 17 Park Avenue.
When Miss Murray died in 1975 Mr. Ducker informed the local authority that the property was no longer occupied. He did not hear from the local authority in any respect until he received the rate demand in July 1978. That rate demand claimed rates from August 1975—excluding the three-month period—and related to the property as a valuable one, although it had been boarded up since 1977 after being severely vandalised and had been uninhabitable since that date, which was, or should have been, within the local authority's knowledge.
Mr. Ducker feels that due to the local authority's failure to send a rate demand for those three years he was denied the opportunity to challenge the valuation of the property and the rate assessment. Furthermore, the local authority was at all times aware of Mr. Ducker's address and could have contacted him there at any time. The local authority 1187 claims to have had the property inspected every four to six weeks by a rate inspector and should therefore have been aware of the property's condition.
The important factors in this case are in my opinion that the local authority failed to send a rate demand to Mr. Ducker in respect of the property at 52 Woodberry Grove until July 1978, three years after it had been notified that the property was vacant, although at all times it knew Mr. Ducker's address and had previously corresponded with him there. The local authority failed to inform Mr. Ducker of the property's valuation on which the rate assessment was based.
By reason of those actions the local authority deprived Mr. Ducker of the opportunity to appeal against the assessed valuation of the property. The local authority failed to inform Mr. Ducker that the property was boarded up in August 1977 as being uninhabitable, and failed to inform him that it was open to him to have the property's value reassessed. The local authority failed until August 1979 to inform Mr. Ducker that it was open to him to have the property's value reassessed, that being two years after the property was boarded up as being uninhabitable and one year after the first rate demand had been sent.
Therefore, the authority allowed a debt in excess of £1,000 to accumulate. It then took Mr. Ducker to court and there was a complete muddle about that as well. It served a summons on Mr. Ducker for non-payment of rates and the hearing of that summons was moved from one court to another, of which he was not notified. It was purely by accident that he learned where the hearing was subsequently to take place.
In all the circumstances, I believe the local authority failed in its duty to act fairly and to observe the rules of natural justice.
Mr. Ducker wondered what he could do about all this. On advice, he decided to take the matter to the local government ombudsman. However, owing to the effluxion of time it was not possible for the case to be heard. Clearly Mr. Ducker is not a man to rush to have his grievances redressed at the first possible moment. In view of the enormous amount of time that had elapsed, he did not realise that he had to make his objection within a set period.
Councillor Lobenstein, an excellent councillor in the London borough of Hackney, who I am sure is well known to my hon. Friend the Under-Secretary of State for the Environment for his good works in that part of the world, took up Mr. Ducker's case and did the best that he could on his behalf. Sadly, it was all to no avail because the case was, as I said, ruled out of time and therefore it could not be heard.
In passing, it may interest my hon. Friend to know that although the parliamentary ombudsman has a duty to report to a Select Committee of the House, I can trace no such requirement for the local government ombudsman. He may wish to establish whether that should be corrected. The House having established such necessary arrangement in the former case, it seems to me that it ought to have done so in the latter case as well and thereby reserved to itself some say in the running of such a department. Perhaps that needs looking into.
I believe that this case was earlier referred to the local authority's finance committee. It was asked to consider waiving the rates because, clearly, Mr. Ducker had not 1188 benefited from the premises being left vacant. The local authority appears only to have replied that it would be prepared to purchase the property from Mr. Ducker.
That raises another issue. There seems to me to be a grey area between, on the one hand, the local authority's demand for substantial rates and, on the other, its telling him that it would be happy to buy the property from him and settle the rate demand out of the amount that it was prepared to pay him. That offer would appear to be somewhat suspect, because on the one hand it was applying pressure for the settlement of the rate demand and on the other expressing willingness to purchase property in which clearly few people would he interested. There could be a conflict of interests here, and I seriously wonder whether that is a right and proper thing for it to do at one and the same time.
In view of the hardship that was suffered, it is harder to understand why the finance committee was not prepared to be much more understanding in this case, particularly over the doubt concerning the squatters. Clearly Mr. Ducker would not be responsible if the squatters were in residence. It would be up to the local authority to recover rates from them, although that in itself is a difficult matter. The local authority would not find it easy to recover rates from squatters, particularly after they have left the premises. It is much easier to go for Mr. Ducker, whom I hesitate to call a sitting duck, but nevertheless he is a highly respectable man living in my constituency whose address at all times had been known to the local authority.
When members of the London borough of Hackney come to my hon. Friend and his colleagues to ask for sympathy and understanding in their own case—they obviously do have considerable problems in Hackney—he should also remind them of the need to be sympathetic and understanding to their own ratepayers.
It is in my view immoral of a local authority to expect to have a fair and understanding hearing from the Department when it is not prepared to give in like manner to its own ratepayers. I ask my hon. Friend to consider what might be done to ensure that this does not happen again.
Mr. Ducker has agreed to pay the money. His income is very modest and he has to find £50 a month to settle the local authority's bill. That seems wrong. He is not the type of man to plead poverty or to take advantage of the social security system. He believes in standing on his own feet and I applaud that. It is immoral for the local authority to have used its might in that way when an examination of the facts of the case would have illustrated its own inadequacies.
§ The Under-Secretary of State for the Environment (Sir George Young)It is a pleasure to end the current session in the manner in which I have spent so much of it replying to Adjournment debates initiated by my hon. Friend the Member for Ilford, South (Mr. Thorne). I thank my hon. Friend for raising the topic today. It is important.
The question of levying rates on empty houses is difficult and affects relatively few people. Nevertheless, it is a topic that needs detailed consideration regularly to ensure that the legislative provisions do not become counter-productive, that they are fully understood and not applied unfairly.
The concept of empty property rates is, in rating terms, relatively new. My hon. Friend rightly put the subject in 1189 the broader context of our proposals for domestic rating reform and our policies for rearranging the rate support grant.
The powers for local authorities to levy rates on unoccupied property at their discretion were introduced in the mid-1960s with the aim of providing a disincentive to keeping property empty for speculative purposes. That such powers were desirable at the time few, in retrospect, would dispute. We are all aware of Centre Point which was one example of the property speculation then rife. Times change, however, and there was a strong suspicion towards the end of the 1970s that, far from being kept empty for speculative purposes, properties were empty because their owners were unable to find a buyer.
Therefore, when this Government took office my right hon. Friend the Secretary of State instigated an investigation into the whole question of empty property rates. The investigation was carried out by officials within my Department in consultation with representatives of industry, of local authority associations and other appropriate bodies. The investigation showed that there was little, if any, evidence of the speculation of the 1960s and early 1970s and that empty property rates were exacerbating the problems caused to industry by the recession.
Many firms were being forced to close factories through lack of sales, but their plight was then made worse by the requirement to pay, in some cases, substantial sums in rates on those non-productive units that they also found that they could not sell. There was a strong case, therefore, for the abolition of those rating provisions.
One must bear in mind, however, that the abolition of the local authorities' powers to levy empty property rates would deprive local authorities of a substantial source of income in those areas where such rates are levied.
Without going into the Government's views on local authority expenditure, which are well known and do not need rehearsing in this context, it is fair to say that this loss of income would be recouped, in some areas, by increasing the rate burden on the other ratepayers. This would particularly hit the inner cities and other areas suffering from a declining industrial base.
The abolition of empty property rates in these areas would increase the rates burden on the remaining industries which would reduce their competitiveness and might lead to those industries being faced with the choice of relocating or going under. There is a genuine risk that the abolition of empty property rates could in some areas promulgate a spiral of industrial decline.
There is also the question of local authority services. My hon. Friend mentioned the argument that many owners complaining about the rating of empty property use as a justification for their complaint the fact that empty property does not benefit from the services provided by the local authorities. Rates are, of course, a form of tax and the question of degree of direct benefits derived is not perhaps strictly relevant, but I think that the basis for complaint is not quite correct.
Empty property continues to derive benefit from the protection afforded by the police and fire services. I am sure that it is agreed that any of the local authorities' services and activities which directly or indirectly reduce vandalism is also of benefit. I do not propose to delve further into that approach. Suffice it to say that I am 1190 satisfied that it is fair that where local authorities judge it to be appropriate the owners of empty property should be required to make some contribution towards the rates, in recognition of the services from which they continue to derive benefit. That is the background to the current legislative position.
The position today is that rating authorities may resolve to levy rates on property that has been unoccupied for more than three months, or six months in the case of newly constructed dwellings—the so-called grace period.
My hon. Friend the Member for Chipping Barnet (Mr. Chapman) mentioned the need for clarification. His was a somewhat up-market point for me and I do not have the reply at my fingertips. I shall write to my hon. Friends with the Department's interpretation, such as it is, of the present statute. I was not aware that there was any confusion about how it should be interpreted. In response to my hon. Friend's intervention, I shall make inquiries and see whether my Department has a role to play in sorting the matter out.
When the rating authorities resolve to levy rates on empty property they can levy rates on any class or classes of hereditaments, or they can restrict such levying of rates to certain areas within their district. That is the policy of the borough referred to by my hon. Friend the Member for Ilford, South where there is a slightly lower rate in one part of the borough which the authority is trying to revive industrially.
Rating authorities can also set the level of empty property rates at anything between nothing and 100 per cent. of the full rate on dwelling houses, and up to 50 per cent. on other hereditaments, including industrial and commercial property.
As my hon. Friend rightly reminded the House, local authorities have discretion to reduce or remit the empty property rates that they have levied in individual cases, but only on ground of hardship. I shall return later to the specific case to which my hon. Friend referred.
The Local Government Planning and Land (No. 2) Act 1980 varied the previous legislation in respect of empty property rates. My right hon. Friend the Secretary of State now has powers to vary the maximum percentage of the full rate that can be levied as empty property rates either uniformly or in relation to different classes of hereditaments in different areas and to vary the initial grace period. It was the introduction of these powers that enabled a 50 per cent. limit on authorities' discretion to vary commercial and industrial rates for empty property to be introduced with effect from 1 April last year.
As I have said, the major problems at the time appeared to be in the non-domestic sector and it was not considered appropriate to use the powers to place a ceiling on the amount of rates that local authorities may levy on empty houses. Of course, I am aware that, where rates are required to be paid on unoccupied dwellings, owners who have had to move because of their jobs and who are unable to sell their homes can face severe hardship. But I think that there are also arguments for retaining a level of rating on such properties generally.
Since this Government came to power, our primary concern in housing has been to see that the best use was made of existing housing stock. In England, some 92,000 local authority dwellings were estimated to be empty on 1 April 1981. This was an improvement on the previous year when the figure stood at 100,000, but there were still a number of authorities with levels of empty housing way 1191 above the 2 per cent. of stock recognised in management and maintenance subsidy arrangements as the acceptable level. My hon. Friend the Minister for Housing and Construction has made vigorous efforts to exhort local authorities, new towns, housing associations and Government Departments to bring back empty housing into productive use.
In the private sector, the shorthold tenancies provision in the Housing Act 1980 was designed to encourage private landlords to let their dwellings.
Whilst I do not want to argue that the abolition or limitation of rates on empty houses would, by itself, lead to an increase in the numbers of dwellings left vacant, or to the length of time they remained unoccupied, I believe that the removal of any sanction that has the effect of discouraging such action could be contemplated only after very careful consideration.
As I mentioned earlier, I accept that empty property rates are causing hardship in some areas where owners who have been forced to move are unable to find buyers for their old homes. But the legislation is flexible enough for local authorities to take account of this. The power to levy empty property rates is discretionary and should be used to reflect the time state of the housing market and not purely for dogmatic reasons. The buoyancy of the housing market is far more dependent on local circumstances than is the market for industrial premises, which would make it difficult to legislate on any basis other than a broad based discretionary power.
I turn to the specific case put forward by my hon. Friend. I am afraid that at this stage I am not in a position to comment on the detailed case history that he gave. But my hon. Friend made a powerful case on behalf of his constituent, and one cannot but feel sympathy for Mr. Ducker.
Local authorities have been given wide discretion in the use of their powers to levy rates on empty premises. Without having been able to consider all the facts of the case, however, and, therefore, without making any judgments in the circumstances that my hon. Friend described, I can say that the Government hope that local authorities will use their discretion in a sensible and defensible manner, taking account of all the relevant circumstances and balancing these against the need to encourage the full use of empty properties.
My hon. Friend made a specific point about the local government ombudsman, and I was pleased to see my hon. and learned Friend the Member for Colchester (Mr. Buck) in his place, because he has a specific interest in these subjects. I am sure that he will take this matter further. But I note that the case was referred to the local government 1192 ombudsman, and I was sorry to learn that he was not able to make a full investigation. From the account that my hon. Friend gave the House, it seemed to me that i he London borough of Hackney had not acted with quite the perception and sensitivity that might have been expected.
My hon. Friend asked whether there was a role for me to play in terms of discussions that I might have with the London borough. I should like to look into that suggestion, and I shall let my hon. Friend know whether there is a role for my Department to play.
I listened with enormous care to what my hon. Friend said. This is a subject which we have to keep constantly under review. If we consider that there is overwhelming evidence that the provisions for the rating of empty property are not working as intended, clearly we shall have to review them. I hope that my hon. Friend will accept my assurances that we shall not hesitate to use the available powers to amend them if that case is made.
§ Mr. Neil ThorneBefore my hon. Friend sits down, may I say that I hope that he will look into the specific point about the residential occupier having to pay rather more than he would if the premises were occupied. There would seem to be an additional burden here. Whereas a commercial ratepayer would be paying much the same rates whether the premises were occupied or not, the residential occupier falls into a different bracket.
It may have something to do with paragraph 1(2) of schedule 1, which provides:
Subject to the provisions of this schedule the amount of any rates payable by an owner in respect of a hereditament by virtue of this paragraph shall be the specified proportion of the amount which would be payable if he were in occupation of the hereditament; and no reduction shall be made under section 48 of this Act in respect of any rates so payable.It may be that under section 48 the local authority will make reductions because the property is being residentially occupied. It therefore seems wrong to me that a residential property owner should be penalised at a higher level if the property is unoccupied. If the local authority suspects that it is being kept vacant to be used for some other purpose, it is always open to it to refer the matter to the district valuer for the re-rating of the premises as a whole.
§ Sir George YoungMy hon. Friend makes a valid technical point that occupied houses attract domestic rate relief which reduces the rate poundage by 18.5p, and he points out, quite rightly, that this does not apply to empty property. That means that empty houses may in some instances be subject to higher rates than they would face if occupied. I shall write to my hon. Friend about this, because he seems to have raised an important issue.