HL Deb 10 May 1923 vol 54 cc117-42

LORD ARMAGHDALE rose to ask His Majesty's Government if they are aware of the widespread feeling of alarm created by the quinquennial assessment of house property now in progress, and. in regard to which the public are without any information as to the basis upon which the assessment is being made; if they are aware that assessments have been increased by 40 to 100 and in some cases to 150 per cent., and in the case of properties occupied by owners and for which no rent is paid, great expense and trouble are caused to thousands of people in appealing against arbitrary and extravagant valuations; and if a statement can be made as to the principles which have been laid clown for the guidance of the valuers who are charged with the duty of making these assessments.

The noble Lord said: My Lords, in putting this Question I may perhaps be allowed to anticipate to some small extent the reply which I shall receive. I have no doubt I shall be told, on behalf of the Government, that the public have had fair warning that this re-assessment would take place. It is true that the late Chancellor of the Exchequer, Sir Robert Home, referred to it in his Budget speech last year, and the necessary provision for the revaluation was made in the Finance Act. But no one was very much concerned at that announcement. The quinquennial valuation had been a regular process in our financial system for many years. The great majority of property owners had been very little affected by it because property values had changed very little from year to year. There was no reason, therefore, why apprehension should be aroused by the announcement that the re-assessment interrupted by the war would be resumed. No one anticipated for a moment that the valuers would increase the assessments so largely as they have done. No one imagined that advantage would be taken of an artificial and temporary rise in values to increase assessments altogether beyond that, which I submit is reasonable or just.

The advance in property values has been limited by the legal restrictions imposed on rent. One point which appears to have been overlooked is that the increase in rent was permitted as compensation to property owners for the extra cost of repairs and rates, It is by no means certain that owners generally have derived an increased income from their property when rates and repairs are taken into account. There seems to be no sufficient reason, therefore, for the wholesale advance in assessments which appears to be taking place. Further, it is clear that in many cases the increase in assessments has been altogether unreasonable. What justification can there be for advancing annual values from 40 to 100 per cent.? In some cases within my personal knowledge the increase is as much as 150 per cent. That, I may say, is on property in the occupation of the owner. It has always been the property of the owner. He built it. He has remained in the house ever since. He has never let it and has no intention of letting it. Yet some person from a distance comes forward and, without consultation of any kind, increases the valuation 150 per cent.

I should like to know the basis upon which this assessment has been made or upon which such assessments have been made. It cannot be rent, because no rent has been paid. In the case of country houses no real comparison can be made with other properties which are let to tenants. Houses, as we know, differ widely one from another in size, in situation, and in all the conditions which have a bearing upon annual value. There is a strong suspicion that the new assessments are arbitrary and artificial, and owners, very naturally I think, resent being put to the trouble and expense of appealing against claims which are so manifestly unjust. If this re-assessment is carried through on the lines of the valuations already made the remissions of taxation in the Budget will be completely nullified. What the Chancellor of the Exchequer has given with one hand he will be taking away with the other. And I venture to think that the Government would be well advised to reconsider this matter.

Apparently, it has been left to the Treasury officials to conduct what has been very properly described as a new Domesday survey. Those officials naturally aim at expedition and the largest possible return. But there are other considerations which have to betaken into account in a matter of this kind. In this country it is necessary to proceed along the lines of consent. I do not think that there would have been any great objection to a moderate increase of assessments, but the sense of justice has been outraged by the extravagant demands of the taxing authorities. The Government would be well advised, I think, to recognise the growing strength of public opinion and the growing strength of public resentment, and to suspend the revaluation pending a full and impartial inquiry into the whole question.

LORD PARMOOR had given Notice to ask His Majesty's Government if it is not possible to adopt the same basis of valuation for all purposes whether local or Imperial. The noble and learned Lord said: My Lords, I do not know whether it would be advisable for me to add my Question to that which the noble Lord has asked, because we are clearly dealing with the same subject matter?


By all means.


I do not want to repeat what the noble Lord has said because I think that I agree with all the statements he has made. But I would point out to your Lordships that it appears to me that the root source of the discontent to which he has referred is that not only is the basis of valuation uncertain and doubtful but the valuation may be made for different purposes in a large number of different ways. In other words, there is not the same basis of valuation for all purposes, whether local or national, although I shall point out to your Lordships in a moment that practically every Commission or Committee which has looked into this matter has said that the foundation of all amendment of this question of local rates and national taxation must be found in the re-adjustment and amendment of the valuation principles themselves. I think I may state that without limitation.

Turning to matters of practical experience, I suppose that many other people have had the experience to which I am now going to refer. If you want to appeal, as I, for instance, had to appeal on a very difficult question of wood valuation, you will find, as I found, that you have to make an appeal under four heads to four different authorities—the Poor Rate authority, the county authority, the borough authority, and the authority under Schedule A of the Income Tax. In the result, if I might refer to my own experience for a moment, although I got a reduction of more than one half of the charges which had been made, the expenses were so large that it will take a great number of years to recompense one in respect of them. That is really monstrous in connection with a question of valuation.

I wish at the outset to repudiate the notion that any landowner desires for a moment to get a valuation on less than the full amount at which the land ought to be valued for Income Tax purposes. I am certain that every one would repudiate that. But let us see what the difficulties are. It is really very important that this matter should be understood. May I begin with what was said by the Royal Commission on Local Taxation of which I happened to be a member—one of the few members now surviving—and of which Lord Balfour of Burleigh was Chairman? It is really the source of modern information and modern principle on both the points with which I am now dealing. We came to the conclusion unanimously that nothing could be done in the reform of our rating and taxation law unless the question of valuation was put right in the first instance, and it was in consequence of that that we issued the preliminary Report towards the end of the last century saying that until this question of valuation had been put right it was really useless to deal with other matters.

These are the words of the preliminary or interim Report which was made at the end of last century:— We have arrived at the conclusion that an alteration in the law for the purpose of obtaining a uniform basis of valuation in England and Wales is a necessary preliminary to any revision of the existing system of local taxation. After going through many pages of history we made this recommendation, to which I desire to call the attention of the noble Lord who represente the Treasury:— That there should be only one valuation authority in each county, and the valuation list of the authority should be the basis on which rates and taxes for all purposes should be raised. One would have thought that it was a self-evident proposition, as regards valuation of property on which certain rates and taxes were to be levied, that you should have one settled valuation which would apply for all purposes. I sympathise with what the noble Lord opposite has said, because until you have that one settled valuation for all purposes you get, perhaps, in two adjacent districts, valuations not uniform for all purposes but wholly distinct.

In 1904—I am bound to go through this history in order that your Lordships shall appreciate the point I want to make—a Valuation Bill was introduced and read a first time which had within its provisions the exact recommendations of the Royal Commission on Local Taxation. I may remind your Lordships that within the Metropolitan area—that is the County of London—there is one valuation for rating and taxation purposes, and what we reported was that that had worked well. Every Committee or Commission which has dealt with this matter since has invariably reported that that system of one valuation for all purposes on one ascertained basis has worked well. Where you have had that system you have not had the sources of irritation to which the noble Lord has referred. As the Metropolitan Act of 1869 was working so well I thought it better to make exactly the same provision in all the other counties as had been made in the County of London, and my colleagues agreed with me that you should have one basis of valuation; but as regards the machinery, which is a different matter, certain alterations were introduced.

Then, in 1914, a Departmental Committee was constituted in order to see whether the Report of the Royal Commission was still up to date, and they went in very great detail into the various questions connected with this matter of valuation. In their Report in 1914 they quote the recommendation of the Royal Commission to which I have already referred and then say— The valuation list, as finally settled, should be conclusive for purposes of all rates. Your Lordships will notice that that was a Rating Commission. I will point out in a moment how the matter has been dealt with for Income Tax purposes under Schedule A. The Commission reported that as regards all rates in this country you should have one valuation in order that all properties might be dealt with in the same way.

Next we come to the Income Tax Committee which reported in 1920. I want your Lordships to listen while I read what their Report was. This is on the very question of Schedule A with which you are dealing at the present time, and it really is regrettable that all recommendations of this kind should be forgotten. They say— In concluding our review of this part of the subject"— that is the valuation part— we may refer to the expediency of having one valuation for national and local purposes in England and Wales outside the Metropolis. You have, therefore, three times over this recommendation, to which I call attention in my Question, of adopting the same basis of valuation for all purposes whether local or Imperial. Why should we have a further attempt at a revaluation until this primary difficulty has been set right? Why should you have the risk of the valuations being different respecting the same property when it is valued for three or four different purposes? It is clear in principle that the value of the property as such must be the same if properly ascertained, whether it is for rating, or Income Tax, or for any other purpose.

When the Chancellor of the Exchequer was dealing with this matter in the House of Commons he said that the objective of this valuation—which will be extremely costly to owners—was to ascertain the income on which Income Tax could properly be assessed. That may be the objective, but I want to point out that that is an objective at which he will not arrive under the present system. I will show in a moment the difference between the rating system and Schedule A, because it is very important. It is a matter to which Sir Trustram Eve referred in some interesting letters in The Times. Under Schedule A the test is rack rent. Annual value is rack rent. Rack rent, if a rent has been fixed in the last seven years, is the same as actual rent, but, apart from that, you have to ascertain in every case what the rack rent is. Just conceive what that means as regards the real value of property. How is it to be done in the time at the command of the valuers for a huge area like that which they have to value at the present time? They cannot do it. In my view rack rent is an entirely improper basis for valuation for Income Tax purposes. It results, as everyone knows who has had the management of property, in a far too high figure being arrived at, so that Income Tax is paid on a figure which really is entirely our of proportion to the income actually derived.

Therefore, my answer to the Chancellor of the Exchequer would be this: If this is your objective—and I think it ought to be your objective—the first thing is that you must have a different system of valuation. You are really perpetuating what has been acknowledged again and again to be an abuse. How can we doubt that in those circumstances the sources of irritation arise to which the noble Lord has referred? When we come to the rating point you have a different test of value altogether. It is the test of the value to the occupier. The owner does not come in at all. I do not want to go into subtle matters of our rating law, but everyone knows that as regards Poor Law rates, which govern a vast amount of our expenditure in country districts, the test is what would a hypothetical occupier pay subject only to certain statutory deductions? And although the owner has not received a penny of income whatever, yet under this principle very heavy rates might have to be paid as regards the particular property. I may remind your Lordships of this principle by a reference to a well-known case—the drainage scheme in London. Persons who have put drainage schemes into operation do not get one penny of income; it is a waste of expenditure. But it was held that although the property might be nothing but a source of expense to the owner yet under this principle, which is applied in rating cases, you might have a very heavy charge indeed because the occupier was getting some hypothetical advantage.

It has been pointed out that no one really knows whether the rating basis is likely to be adopted or what I have called Schedule A basis. Valuers as regards Schedule A do not take the trouble to go into the valuation, which they ought to do in order to carry out a statutory duty, and for a short cut adopt the rating figure. That is extremely unsatisfactory. You have an appeal against Schedule A. The first thing you are told to do is to appeal against your rating valuation. I have protested again and again that it is not much good doing that because you are dealing with two valuations on entirely different bases. The answer has always been: "We shall not consider your appeal under Schedule A until we see the result of your appeal before the rating authorities," although admittedly you are proceeding on two entirely different bases. This is one of the reasons why there is a tendency to imagine that as regards Schedule A you can proceed not by valuing the property but by some percentage addition, 40 per cent., or 100 per cent.—I have not had the misfortune to meet with 150 per cent.—or whatever it may be.

The answer to that is that it is illegal; that you have to value each property; that you cannot put a general percentage valuation over a large number of properties. You have to look at each farm, each wood, each acre. That is the only way in which a valuation can be fairly carried out. How are you going to do it? That is not what is being done. It is not a possible transaction; there is not a sufficient staff. I recollect in the case of an appeal against Schedule A as regards some woods of about 1,000 acres, that if it had been properly valued it would have taken months because it was spread about in different places. It was admitted by the expert valuers on both sides that it was wholly impossible, and in a case of that kind you come to a compromise and lake some all-round addition or subtraction. But you cannot deal with valuation as a whole in that way. It would be most unjust to attempt to do so, and I should like to know whether the Government really believes that this revaluation can be carried out so that each property can be properly considered.

I am all in favour of local valuations because you have local knowledge. What on earth does someone in London know of the value of a farm on the Chiltern Hills, or in some district that he has never seen? What does he do? He gets the returns and puts on a percentage. That is wholly unjustifiable, and I hope that the system will be condemned from top to bottom. There is, of course, great inducement to do it because it is about the only way you can proceed. We ought first to have had a proper Valuation Bill with the same basis of valuation for all purposes. Having the same basis of valuation, one could have approached and dealt with it fairly and, I hope, have got a fair result. I deeply regret that we began at the wrong end. I deeply regret that these constant recommendations for valuation in a fair way and uniform all round have been disregarded. So long as they are disregarded I do not think there is the slightest chance of avoiding the friction, and something more than friction, to which the noble Lord has referred. In our country districts, where there is no superfluity, we shall be put to a large expense and even then have no guarantee that a right assessment will be made.


My Lords, this subject of valuation and assessment is one with which some of us have been familiar for a great many years. What has happened under this special valuation is apparent. It is the automatic result of the steps which were taken last year. But I do not believe that the Chancellor of the Exchequer or any member of His Majesty's Government contemplated for a moment the results which have been revealed in recent announcements. If the late Government, when they decided to have this valuation on this system, had thought that it was going to impose this tremendous burden upon a vast number of small people, I believe they would have taken steps to make the public understand what it was that was really contemplated. I do not think they foresaw anything of the kind.

The noble and learned Lord who is more familiar with this subject than probably anybody else in either House has dealt with the case of the large owner. It is hard enough in the case of a man like my noble and learned friend who, in addition to his own exceptional and unique knowledge upon this subject, is in a position to employ agents, valuers and experts, sufficient to see that justice is done by his case. But, as he has told us, even if he succeeds, as he did in his own case, in securing a great reduction in the proposed valuation of the Inland Revenue Department, he does it at so heavy a cost that any advantage cannot be enjoyed for some years to come. It will take a long time to wipe out the cost. That is what happens to the rich man who can afford to employ these experts.

But what of the millions of small men who are occupying their own property? And at what a moment in our social his tory is this being done? It is being done at the very time when successive Governments, irrespective of Party politics, have been doing all in their power to increase the number of small owner-occupiers by inducing people to build their own houses, to purchase their own houses, to become owners and occupiers of their property. And when this has become the policy of the whole country, and not merely of a particular Party, when it has been pursued with the greatest earnestness and with no small measure of success, when you have all these small owners in being, you suddenly produce a valuation which exposes them to a brand-new charge of an extortionate character. As my noble friend said in the admirable speech in which he brought this question to your Lordships' notice, this is not only to take away with one hand what you have given with the other; it is a cynical denial of all those principles of a branch of social reform which you have been laying down in Parliament, in articles in your newspapers and magazines, and in a score of other ways for the last five and twenty years.

The Prime Minister, when he started upon his great enterprise of government, told us—and I rejoiced at the declaration—that one of his main objectives was to secure tranquillity in the country. If this is the Government's recipe for tranquillity, all I can say is that it is the most amazing concoction of objectionable drug" that I ever came across in all my experience, and I venture to say that the Bill which we were discussing a short time ago for controlling noxious drugs ought to have an Amendment introduced into it before it leaves your Lordships' House to secure that this kind of concoction shall not be administered to the unfortunate citizens of this country.

I am not going to trouble your Lordships with a whole list of individual cases, but I am going to give one case that has just happened and was brought to my notice yesterday. It is the case of a house that was altered some years ago and was used during the greater part of the war as a home for Belgian refugees. Some of these people, as your Lordships know, remained for a considerable time after the war was over until it was possible for them to return home. Since the house was vacated by the Belgian refugees it has not been occupied at all. But what has happened? The assessment has been put up in a most arbitrary way by, I believe, something like forty or fifty per cent. Could there be a more ludicrous case than that? I do not say that it is unjust or inequitable or anything of that kind; I say that it is perfectly ludicrous, and it could only have been done by somebody who had never seen the house, had never been inside it, knew nothing on earth about it, had perhaps only heard it described by somebody who in turn had probably never seen it, and who then proceeded to put a valuation upon it.

Upon what basis is this burden imposed? Many of us have argued for many years that there is no tax so fair or so easily to be justified as the Income Tax. It is imposed upon a man's property whilst he is alive, it is easy of collection, and it is very productive. Those are the constituent properties which go to make a wise and good tax. We have always said that it is not to the Income Tax in any form that objection is offered, but to the method of assessment upon which the Tax is based. Anybody who is familiar with the Income Tax knows perfectly well that for the ordinary individual to try to fill in his returns is to court, I should think with considerable certainty, being penalised by all those innumerable penalties which are to be found in the complicated and most remarkable document which is circulated by the Income Tax collectors. It is not their fault; they are only carrying out the law.

My noble and learned friend Lord Parmoor told us the history of valuation and assessment. I remember many years ago, when I was a member of the Government in the Lower House, bringing in a Bill to try to deal with valuation and assessment. It was based upon the Report of the Commission to which Lord Parmoor referred. Nobody objected to the main principles upon which the reform was to proceed. The objections arose from the fact that there is an almost unlimited number of vested interests connected with these valuation or assessment bodies, and each of these held that you could reform the system while leaving their particular assessment committee alone.

This present proposal is not only unjust in itself but it is grossly unfair, because it attacks those who are least able to protect themselves, the small occupier-owners throughout the country. I observe that a statement has been made in another place that the proposal for a much longer period of time for appeal than the twenty-one days at present allowed cannot be entertained, that this is an ordinary process of law, and consequently things must take their course. I cannot believe that this is the last answer of the Government upon this question I assure them—indeed, I think they know it already—that there is profound feeling in the country about this matter among people who are law-abiding, who are ready to bear the heavy burden of taxation which rests upon them—and God knows it is back-breaking for many people in this country,—who are ready to undergo all the self-denial and the deprivations which are required of them If the taxes are to be paid, but who do ask that they should be fairly treated, and that there should be a postponement. The Government could of course quite easily secure a longer period than twenty-[...] days, and I think that this is a very [...] request to make in face of the [...]ealities of the situation.

I entirely agree with my noble friend Lord Parmoor that what we want is a brand-new system of valuation. We want to go to the very foundation of things. It is perfectly ludicrous, apart from being unjust, that two absolutely similar properties situated, as is often the case, within easy distance of one another, should be valued for these purposes on a totally different basis, and apparently by a totally different system. I am not sure that I am not using a wrong word when I say that these things are conducted upon a wrong system. I do not believe that there is any well-laid-down principle of any kind in regard either to valuation or to the basis upon which it proceeds. I believe it is left entirely to the happy-go-lucky administration of people who know very little about the work upon which they are engaged. Hitherto, although the burden has been a heavy one, it has not been so heavy as to excite public attention as is the case now.

I would earnestly press on His Majesty's Government that the wisest course to take now would be to set up a Committee to inquire into the effect of this particular valuation, as a remarkable illustration of the present injustice of the system, and, in addition to making that inquiry, to see whether definite proposals cannot be made for reforming the whole system of valuation and assessment so that it shall be uniform, so that there shall be a reduction in the number of assessing authorities, and so that there shall be one basis for all taxation whether it be by Taxes or by rates. If I may venture to say so, I have always advocated that the use of the word "rating" is, in itself, not only a misnomer but misleading. Really there is no difference whatever between rates and taxes. They are the same things, paid by the same individuals—the only real difference lies in the purposes to which they are applied—and for that you ought to have one system of valuation. I am convinced that if you have an inquiry it will be found that there is no attempt on the part of property owners to evade Taxes, but that they are paying a great deal more than they ought to pay. You are now adding to their burdens. I entreat the. Government to realise that there is a strong feeling in the country that there is bad administration, and I hope that they will set up an inquiry on the lines that I have indicated.


My Lords, there are two questions on the Paper this afternoon addressed to the Government, one by my noble friend Lord Armaghdale, and the other by the noble and learned Lord opposite. Before I endeavour to deal with those two questions and answer them in a way which may not be altogether as satisfactory as my noble friends may wish, I would venture to deprecate the use of rather unnecessarily strong language with regard to the assessment that is now being made—an assessment which has not been arbitrarily set up, but which, as I shall endeavour to show, is necessarily taking place after the lapse of a number of years. My noble friend behind me, Lord Armaghdale, in his Question, speaks of the "widespread feeling of alarm" which has been created by the quinquennial assessment, and my noble friend Lord Long also used rather hard words with regard to this assessment. He spoke of the tremendous burden being thrown upon poor people, and I think he applied the epithet "extortionate" to the methods that are being adopted. He also used the words "grossly unfair."

May I most respectfully ask my noble friends to consider whether language of that sort is not rather calculated to create a widespread feeling of alarm, or certainly to intensify it, which I am sure is not their object? It is true that the issue of these notices of assessment of annual values, in connection with the re-assessment, has created—I am perfectly willing to admit it—a certain amount of anxiety in the public mind, judging from the letters that have appeared in the Press, and from the speeches and statements that have been made in another place. I may, of course, be wrong, but I cannot help believing that this anxiety, if not largely, at all events to a certain extent, is based upon misapprehension as to the true facts, and that some quite erroneous notions have recently gained currency on the subject. It has been suggested in the first place—these words were not used by my noble friend this afternoon—that this re-assessment is in the nature of some kind of plot by the Government, hastily and recently conceived, with a view of getting back on the one hand what they have given to the public on the other by the recent reduction of sixpence in the Income Tax. Any such suggestion has no foundation whatever in fact.


I made no such suggestion; far from it. Whatever action may be taken by the present Government they have inherited it from their predecessors.


I expressly said that my noble friends made no such suggestion, but the suggestion has been made in the Press, and I have no doubt that many of your Lordships have read it. This re-assessment, as a matter of fact, was determined upon by the late Government and announced to Parliament a year ago. It was announced in the Budget speech of Sir Robert Horne. It was approved by the last Parliament, and when I say it was approved I say so because that Parliament passed certain legislation affecting the procedure, although in no way the basis, of the re-assessment that was to take place. I will refer noble Lords more particularly to Section 32 of the Finance Act of last year. The position at the time when the last Parliament reached that decision was as follows: The assessment to Income Tax under Schedule A, had, by the usual clause in the annual Finance Act, been continued in force since the last re-assessment, which was made as far back as 1910. The tax was therefore being collected on an assessment which had become out-of-date and inadequate. In the ordinary course re-assessments are made every five years, and but for the war they would have been made in the years 1915 and 1920. The war made it impossible to undertake the task of dealing with such an enormous amount of property in those years. The area thus waiting to be re-assessed was the country outside the Metropolis. In the Metropolis, as noble Lords have pointed out, and as many who are interested in the subject know, there is only one basis for rating and Imperial Taxes and as a matter of fact the valuations were made in London in the years 1915 and 1920. I dare say many of your Lordships who own London houses will remember when the last revaluation took place. I do not know what was your experience on that occasion, but I have no reason to believe, and I have never heard, that any general friction took place over that revaluation in the Metropolis. I therefore venture to hope that there will be no great amount of friction eventually taking place over the revaluation which has now to be carried out over the rest of the country.


The noble Lord forgets that the valuation in London is on an entirely different basis from the valuation outside the Metropolis.


Of course, I know the basis is different, but objections are made in London to the re-assessment, just the same as objections may be made in the country. All valuations made in London are not accepted at once.


I hope the noble Lord will forgive me if I interrupt, but really he has mistaken what at all events is my attitude and the attitude of those who hold the same view. We do not object to the amount of the valuation, supposing it to be the right one, but we are objecting to the hopelessly confused and variable methods by which assessments are arrived at, and what we advocate is the assimilation of the system prevailing in the country outside to that which prevails in the Metropolis.


I will come to the point raised by the noble Viscount later. To resume what I was saying, owing to the unavoidable postponement of the re-assessment in the country since the war, property has hitherto been paying tax on the basis of the annual values fixed in 1910. In many cases those values do not reflect—they cannot reflect—the considerable changes in value which have taken place in the interval. My noble friend Lord Armaghdale, in his Question, says that the public are without any information as to the basis on which the assessment is made. As early as the latter part of the summer of last year, or the early part of the autumn, the forms were being gradually issued, calling on owners and occupiers of property to furnish particulars of rents or annual values specifically for the purpose of this re-assessment. These returns have, for the greater part, been furnished and examined, and, together with other information in the possession of the Inland Revenue Authorities, including particulars of current rating values, they have provided the basis for the assessments of which notice has now been given.

It has been suggested that this re-assessment is being made on some novel basis. I can assure your Lordships that that is not the case. The present reassessment, like all previous ones since the year 1842, records the annual value of property, or, broadly speaking, the annual rent which is paid for the property under the ordinary conditions under which the tenant pays rates and the landlord does repairs. This annual value represents the gross assessment; of course, it must not be confused with the net assessment on which tax is actually collected, which is arrived at after the statutory reduction for repairs. We have to deal at this moment not with the laws as many of us would like them to be, but with the laws as they are, and statutory enactments provide that a property owner can claim relief from the tax for any extent of repairs and maintenance in excess of the statutory reduction for repairs, so that in the result he is left to bear the tax solely on the income which he enjoys, or, in other words, on the rent, less repairs and maintenance. As a matter of fact, I think that in the last Finance Act a very considerable advantage was given to the owners of property, in allowing further reductions in respect of repairs and maintenance. Of course, that is beside the point that is now raised.

I have hitherto spoken more of the cases of owners who let their property, but it is obvious that a considerable amount of criticism is being made with regard to the case of the owner who occupies his property. The number of these persons has, I believe, greatly increased since the last re-assessment. Into the causes of that increase it is unnecessary to go, but I believe the fact itself will not be disputed. It is alleged in certain quarters that properties are being re-assessed by reference to the enhanced prices which have been paid in recent years for what is commonly known as vacant possession. That allegation is, as I am informed, an unfounded one. No attempt at all has been made to force up values by reference to those figures of capital sales. The law provides that the owner-occupiers are to pay taxes on the basis of the rent which their property is worth if let unfurnished; that is to say, on the rent which it may be presumed to be worth if the property is let to somebody else.

I am bound to admit that it must be difficult at the present moment fairly to assess country mansions of any considerable size in remote country districts, because not only are they unsaleable but they are in many cases unlettable. The re-assessment in these instances of owner-occupiers is based on the rent which the property is worth to be let by the year, but in the vast majority of cases the evidence is available in rents paid—rents for the most part governed by the Rent Restrictions Act—for similar property in the vicinity. It is important to observe that it does not seem to have been generally understood that from the gross annual value thus ascertained the owner-occupier is allowed to make the same deduction for repairs and maintenance as if the property were let on ordinary tenancy. I understood my noble friend Lord Armaghdale to say that the annual value had been increased over the 1910 figures by from 40 to 100 per cent-and in some cases 150 per cent., and that statement has also been made in another place. As I am informed by the Treasury, these statements, generally speaking, will not hold good.


In making the statement that a vent had been increased 150 per cent. I said that that was within my own personal knowledge.


Of course, I do not for a moment dispute the accuracy of the noble Lord's statement with regard to any particular case. All I say is that, generally speaking, as I am informed, such a statement will not hold good. There are no doubt exceptional cases to be found in different parts of the country, where rents have been greatly increased, and in those cases obviously the re-assessment of 1923 will be much increased. Examples, I am told, can easily be found where owners of business premises have increased their rents of late years by much more than 100 per cent., and most of your Lordships, I think, will believe that there is no reason why persons who increased their rent by much more than 100 per cent. should not now bear taxes upon that increased income.

My noble and learned friend opposite spoke of the expense of appeal, and my noble friend Lord Long mentioned the same point. I am sure that none of your Lordships is desirous of spending a shilling more than you need on going to law; at all events, so far as I am concerned I have taken care to follow that rule. But it must be remembered that inspectors of taxes or the people whoever they are that send out the assessments, are not always infallible and that in some cases it is not only advisable but necessary to appeal and go to law in regard to our assessments. I only hope that everybody who does so will have the same good fortune as my noble and learned friend, who appears on appeal to have got a reduction of, I think he told us, fifty per cent. in his assessment. Doubtless, there will be many cases of objection on the part of taxpayers to the assessments that are now being, or will shortly be, sent out. But I assure your Lordships there is no novelty in that. On the occasion of previous assessments there have always been numbers of appeals as far back as memory goes, and I do not think I am going too far in saying that in most cases those appeals will result in a more or less satisfactory settlement with the inspector of taxes, and that it will not be necessary to carry the appeals to the local Commissioners of Taxes in an appreciably larger number of cases than on former occasions.

May I mention that I happened yesterday to have some conversation with a land agent in a large way of business in the south of England? I asked him whether he anticipated much difficulty in this matter or had reason to expect that his clients' assessments would be unfairly increased. He replied that he saw no reason whatever to expect it. He had always found in his experience, which was a long one, that the local inspectors of taxes were reasonable people and that if they were given the information they asked for he was generally able to carry his business through in a satisfactory way.

Now, the re-assessment is being made on values for 1922–23 and I have heard it alleged that this is unfair because the values in that year were exceptionally high and taxpayers will be damnified by having high valuations continued from year to year in a falling market. I do not think that there is very much in this criticism. In the first place, special provision was made in last year's Finance Act to enable a taxpayer to require that the assessment for the year 1923–24 should be reduced to the current year value if that value was less than the value for 1922–23. Moreover, if the annual value of a property, whether it be rented or occupied by the owner, decreases during any year for which the present annual values may be continued in force an appropriate reduction in the assessment can be claimed and will be made.

Broadly, this re-assessment, which is not in the least degree a new thing, for, as I have said, there have been many similar re-assessments in pre-war years, aims at securing a fair incidence of the Income Tax on people who derive income from land and houses. I ought, perhaps, to add that though the re-assessment is primarily intended for Income Tax purposes it falls by law to be used also for Inhabited House Duty, which falls on tenants as such and is borne usually by them. The re-assessment will probably result in a rather larger yield from that duty which, as your Lordships are aware, is a very low one. Its maximum rate, even on the largest houses, has only been 9d. in the £ of annual value. It is so small that even in the largest cases the increase in the charge is not likely to be felt very severely.

Having said so much in regard to the Question raised by my noble friend Lord Armaghdale, I conic to that of the noble and learned Lord opposite. He put before your Lordships in far more lucid language than I can command the different bases upon which assessments are made for rating and Income Tax purposes. It is, therefore, unnecessary for me to trouble your Lordships with a recapitulation of what those bases are at present. But the noble and learned Lord explained to your Lordships how various Committees at different times had considerered this system and had found reason for pronouncing it to be unsatisfactory. I think he said that the last year in which an Inquiry was held or a Report presented was 1914.


It was 1914 on the rating point and 1920 on Schedule A.


It is not for me to say, but I imagine that the preoccupations of the war in this instance, as in so many others, have caused the postponement of many reforms for which public opinion appears to be nearly ripe. Be that as it may, the weight of public opinion certainly seems to be behind the noble and learned Lord when he suggests, as I understand he does, that the time has come when the question of one basis of valuation should be adopted for the whole country. On the question as to whether steps should be taken to abolish this dual valuation and to set up one uniform valuation, binding for tax and rate purposes alike, all I can say is that it is at present under the consideration of His Majesty's Government. I really do not know to whose opinions members of the Cabinet attach the greatest importance, but I have no doubt they will give great weight to the views expressed by the noble and learned Lord, and if the result of the discussion that has taken place in your Lordships' House this afternoon should be in any way to hasten the establishment of a single basis, no one would welcome it more warmly than myself.


My Lords, on a matter so technical as this a layman can only intervene with a great deal of hesitation, and there are but three or four remarks that I would venture to offer upon this subject to your Lordships. In the first place, there is a point which I think has not been mentioned and which I venture to submit to the noble Marquess does in some cases amount to a very real hardship upon the owner of land These new assessments are made and served, and quite rightly so, upon the occupier of land. The occupier of land pays the tax and is empowered, under our existing legislation, to deduct it from the rent which he pays. But he does not always bring it to the notice of the owner of the land. The twenty-one days pass and the owner finds that the period for appeal has elapsed. That constitutes, I think, if my facts are correct, somewhat of a hardship upon the owner of the land, and if the noble Marquess on considering the matter finds that that is so, perhaps he will be good enough to consider whether there is not some possible method of remedying it.

I confess that I feel, and have felt for a long time, that in all these matters of assessment we want a better method of appeal—a cheaper and, above all, a simpler method of appeal. That the matter is full of difficulties we all admit. We do not want to bring in expensive experts, which at once means high costs, but we do want, if we can, to find a tribunal which will command the confidence of the payers of rates, and which will be thoroughly cognisant of the subjects with which it has to deal. I hope that in the course of this new assessment the privileges which have been quite rightly won for woodlands will in no way disappear. As is probably known to many of your Lordships, during the past few years the assessment of woodlands has been reduced, and that has been done, I think, with general approval in view of the necessity of keeping up our plantations and forests in this country. The assessments have been reduced to a fair extent, and I hope that in the new assessment nothing will be done to alter that.

My last remark shall be one of congratulation to the noble Lord who has just sat down upon the announcement which he has made with regard to the single valuation. I am sure that there is nobody interested in this subject who will not hail the announcement he made with the greatest pleasure. I am glad to know that the subject is under the consideration of His Majesty's Government, a phrase upon which those of us who are optimistic may build great hopes, but upon which some others of us who have had experience before of subjects that have been under the consideration of His Majesty's Government will not build such great hopes. If the noble Marquess the Deputy Leader of the House is going to speak, perhaps he will tell us whether he himself shares the pessimistic views or the optimistic views of those of us who have listened to that welcome announcement.


My Lords, the subject of rating reform has been a very familiar one in my hearing ever since I have had a seat in Parliament, and though, of course, I cannot pretend to have a tenth part of the knowledge of the subject possessed by the noble and learned Lord (Lord Parmoor), who is a very great authority upon it, I am, or perhaps I ought to say was, familiar with the Report of Lord Balfour of Burleigh's Commission, and realised from the perusal I made of it what a very complicated and difficult subject this is. There is no doubt that the subject of rating reform is an urgent one. It has been an urgent question for the last twenty years, and when the noble Earl in his kindly way suggests that I should hold out hopes as to what may happen from the consideration which His Majesty's Government is giving to the subject, I shall reply with due caution, for I also know how often such consideration does not bear fruit. But we are a young Government, and we are an optimist Government, and we hope that we shall be able to deal with all these subjects. I confess that both in my private and my public capacity I should be pleased if this subject were at last to be tackled.

Before I go into the general question I would make one reply to the noble Earl upon the point which he brought under our notice as to how the owner is to be made aware of the occasion for an appeal from him when the occupier pays the rate, which is, of course, the law. I have made a note of that particular point, and will take care to pass it on to my right hon. friend the Chancellor of the Exchequer. Upon the general question I suppose everyone will agree that Income Tax assessment must be checked and modified from time to time. No complaint can be made that the present Government, who are trying to put everything right, should among other things try to put Income Tax assessment right—a matter which has been intermitted for, I think, ten years or more. There is nothing surprising in that, but I confess I was very much shocked when I heard from my noble friend behind me that in several instances this is being done in an extortionate manner. I am certain the House will believe me when I say the Government have no desire to be made responsible in any sense for anything extortionate, and if my noble friends will bring to my notice, or to the notice of the Chancellor of the Exchequer, instances which they have, he will, I am certain, give every attention to those particular cases.

But, broadly, I think my noble friend who answered for the Government is right-in saying that there is a good deal of misapprehension upon this subject. Let me take a very common case—the case of a house within the limits of the Rent Restrictions Act. Under the legislation as it exists up to now the owner of that house has been allowed to raise the rent by 40 per cent., and in addition to that the tenant pays enhanced rates, as the rates have gone up. There will be, of course, no increase in the Income Tax assessment in respect of the rates. There can be no claim to an increase of assessment because the rates have been raised. Then what about the 40 per cent. increase in the rent? If I remember aright, 25 per cent. of that 40 per cent. increase is in respect of repairs. No increase of assessment can, therefore, take place upon 25 per cent. of the 40 per cent., because, as your Lordships know, repairs are specifically exempted from the purview of this assessment. But that is not all. There will be a part of the original rent which will be used by the landlord for repairs. That, too, would be exempt. Your Lordships, therefore, will see in that typical case that the actual rise in the assessment must be very small. That is a good case to use by way of illustration. We know for certain how much the rent is raised in these cases, because it is limited by Act of Parliament.


May I interrupt the noble Marquess for one moment, because I want to take the exact ease he is mentioning? It has been held by the Judicial Department of this House that the rates are quite independent of the Rent Restrictions Act, and therefore while we have to pay a rate of £100 under the Rent Restrictions Act we may be able to get only £50. That shows the difficulty of different classes of valuation.


As to that there is no difference between me and my noble and learned friend. Of course, there ought to be only one kind of valuation. I am dealing with the particular charge which is made against the Inland Revenue authorities for this change in the assessment. I think I have shown that in the particular case I have quoted the change in the assessment must be very small, because the amount of the increase of the rent is limited by the Rent Restrictions Act, and the greater part of the increment in the, rent is exempt from a corresponding increment in the Income Tax assessment because the greater portion of the increase allowed is in respect of repairs Your Lordships will see, therefore, that in the vast number of cases of these small houses there will be no real grievance.

My noble friend Lord Armaghdale, with his great acumen and knowledge of this subject, said, "But what about the occupying owners?" Far be it from me to "ay that mistakes are not made by the assessment authorities, and that injustice may not be done which ought to be corrected. Of course that is true, but, broadly speaking, the principle is plain. The occupying owner is to be treated like any other owner; that is to say, there is to be a rent calculation of what the property would realise if it were let, and that forms the basis of the gross assessment just as in the case of the owner who does not occupy his own property. In the thing is fairly done there ought to be no difficulty in arriving at a fair assessment on exactly the same principle, not counting rates and repairs, as in the concrete case I have given your Lordships. Those are the principles.

1 feel that it is a subject which the Government ought to approach with the greatest care, and I assure your Lordships that I shall report to my right hon. friend the impressions which I have gathered from the debate in your Lordships' House. The noble and learned Lord will correct me if I am wrong, but I gathered that he finds fault not so much with the action of the assessment authorities in the present instance as with the law as a whole.


That is right,


That is a relief to my feelings. As to the question whether the law ought to be altered I believe everyone is of one mind. We are all agreed upon that. Let us hope that the sanguine feelings I have expressed as to the future of this question under the care of the present Government may be justified and that my optimism will bear its due fruit.

House adjourned at seven o'clock.