HL Deb 14 July 1953 vol 183 cc602-29

3.15 p.m.

Order of the Day for the Second Reading read.

LORD MANCROFT

My Lords, this is a short and undramatic Bill. It deals with the valuing of houses for local rates. The rating system, like the digestive system, excites concern only when it begins to go wrong. Part IV of the Local Government Act, 1948, introduced some new devices for valuing houses to be used in the new lists that are at present being prepared. The results of these new devices have turned out to be so topsy-turvy, so redolent of the world of Alice in Wonderland, that they would have gravely upset the body of ratepayers if rates had ever been levied on them. So this Bill forestalls this embarrassing result by substituting a better method of valuing houses.

May I turn for a moment to the provisions of the Act of 1948? At present, houses, like other rateable property, are assessed on their current rental value or, more precisely, the rent at which the property might reasonably be expected to let from year to year. As there has been no general revaluation for nearly twenty years, most assessments are still pre-war rental values, and as rating valuation is only a way of sharing out the rate burden, the valuation officers of Inland Revenue are keeping the assessments of newly built houses in line with the assessments of other houses, instead of trying to fix their strict current rental value.

The aim of Part IV of the Local Government Act, 1948, was to adhere to prewar rental values for houses. It divided houses into two main groups, however, and it gave a different formula for each for assessing. There were two main groups. The first group consisted of pre-1919 houses, all private fiats and the larger post-1918 private houses—that is, houses of over £75 rateable value (£100 in London). There are, so far as I know, some 7,500,000 of the pre-1919 houses in this group. These were to be assessed by reference to the actual rents of comparable properties in the locality paid on August 31, 1939. The second group consisted of post-1918 local authority houses and flats, and small private post-1918 houses—that is, houses of up to £75 rateable value (or £100 in London). There are some 4,500,000 properties in this group. These were to be assessed by taking 5 per cent. of the hypothetical 1938 cost of constructing the house, plus 5 per cent. of the hypothetical1938 site cost, in the case of local authority houses, or 5 per cent. of the value of the site at April 1, 1949, in the case of private houses. My Lords, if that has given your Lordships a hypothetical headache I can only apologise, and say that that is the most accurate way in which I can describe the working of the system.

May I now pass for a moment to the actual results of the 1948 Act? First of all, as the valuation officers proceeded with their work, it struck them that using the cost basis on the one hand and the rental basis on the other was producing the most incongruous results. To test this first impression which they had gained, they took about 30,000 representative samples of post-1918 and pre-1919 houses of roughly the same character and size from about seventy-three towns and districts all over the country. Quite frankly, those samples showed that the two formulæ which I have just explained would not work together; that some very odd results came out. For instance, the assessments of pre-1919 houses turned out to be on an average about 30 per cent. higher than the assessments of comparable post-1918 houses, which in most cases are probably much better houses. Houses which just counted as small post-1918 houses, being just under the limit of £75 rateable value were assessed at 7 per cent. lower than houses just above the borderline. Houses which counted as post-1918 houses because they had been bombed and rebuilt got lower assessments than similar houses which had not been bombed. The unbombed pre-1919 houses worked out at 40 per cent. higher than the rebuilt houses which, if anything, were probably better than the older houses. These last cases showed in glaring form—as I hope your Lordships will agree—the discrepancy between the results of the two formulæ. The trouble is that these two formulæ are quite rigid, and cannot be reconciled.

The cost method produces results that are reasonably coherent with themselves. This is because the hypothetical cost of construction had to be estimated from statements issued by the Minister of Health containing specifications, with sums to be taken as the 1938 cost of providing houses to the various specifications. The specifications were the same for every rating area, and many areas were given the same sets of figures, so that over many areas similar houses got the same assessment. On the other hand, the method of finding assessments by reference not to rental values, as at present, but to actual rents in the locality in 1939 produced results that necessarily varied from locality to locality according to the rental history of the houses in each locality. Reference to actual rents meant that the valuer must follow the general run of the actual rents, whether they had been controlled rents or uncontrolled rents. Owing to the varied incidence of the Rent Acts, with which your Lordships are probably only too familiar, the values of different types of houses assessed by reference to actual rents were not coherent with each other in the same locality, and were inconsistent as between different localities.

Generally, the assessments of the pre-1919 houses, as I have said, worked out higher than those of post-1918 houses, but the gap could not be closed by any device for raising the assessments of the post-1918 houses—I mean a device like making the gross value of the post-1918 houses, say, 7 per cent. instead of 5 per cent. of the hypothetical 1938 building cost—because there is no single ratio between results in the two groups. The 7 per cent. would help the average, but ratepayers, quite naturally, are not content that they should have to pay only a few pounds more than their neighbour if they have no better a house. So decreasing the average gap would not solve the problem. Nor could the cost method be extended to all houses for, as was recognised when the 1948 Act was framed, it is only the newer and smaller houses that can be assessed conveniently from specifications, and, indeed, assessed so as to give reasonable values, because the cost of building some 19th century houses to-day would be absolutely enormous.

Now as to the method which the Bill proposes. The Bill reverts to the method of assessing all houses on rental value, which enables them all to be assessed reasonably in relation to each other. The Bill follows the Act of 1948, however, in sticking to pre-war values. Under the Bill, the gross value of a house is to be not its current rental value, as at present, but the 1939 rental level or, more precisely, the rent that might reasonably have been expected to be paid for the property at the end of June, 1939, assuming that the property itself and the locality, with all its premises, services and amenities, had been as they are at the time the property is being valued. The leader-writer of the Daily Telegraph, in my respectful submission, is not quite right in saying that the valuer ignores any changes in the circumstances of the locality since 1939. That is not so. If a spot was rural in 1939, and is now covered with factories and houses, the valuer has to estimate what the rental values of the houses would have been if the factories and the houses had been there in 1939, which he does from his knowledge of other similar places.

The rent to be estimated is the rent in the free market in 1939, for the Bill now lays down that the valuer is to discount not only the effects of the Rent Acts but also the effects of any marked lack or glut of houses. He also has to discount any overcrowding at the present time except in so far as it means that the neigh- bourhood is actually going down. In 1948, there was some doubt as to whether there would he enough evidence of 1939 rental values for this sort of thing to be done, but the valuation officers of the Inland Revenue, who, as your Lordships will be aware, took over rating valuation from rating authorities at the beginning of 1950, can use evidence from more than a single rating area, and they are satisfied that there is enough evidence of rents in the 1938–39 period to enable both pre-1919 houses arid post-1918 houses to be assessed on 1939 rental levels. All the private post-1918 houses were then, of course, free from rent control.

All houses, then, will be assessed on 1939 rental levels except in the special cases of what I may call white-elephant houses. Here perhaps I ought to declare an interest of my own, because if a house with seventy-seven stairs between kitchen and nursery, no lift, and a plumbing installation that was clearly put in by Mr. Heath Robinson on an "off" day, is not a white elephant by current standards, I should like to know what is. Where, therefore, because a house is a white elephant, its current rental value is lower than its 1939 rental value, the ratepayer is to be given the benefit of the lower value, and so his assessment will be the current rental value. It is also worth mentioning, I think, that the special position of agricultural houses will still be preserved, for while they will be assessed on 1939 rental levels like other ho uses (or on current levels if the figure happens to be lower), their value will be that of a house occupied in connection with agricultural land.

I should like now to say a word or two about private garages and storage premises, because I know that this has been a matter which has caused some uneasiness in the past. All the appurtenances of a house, its garden, yard, sheds and garage, which together with a house count as a single rateable hereditament, will be lumped in with the house, and the property assessed (as a whole) on 1939 values. Sometimes, however, a domestic garage counts as a separate rateable property because it is detached from the rest of the land. It may, for instance, be separated from the house by a road. Again, garages and store-sheds for a block of flats count as separately rateable properties. It would, obviously, be unfair to value these domestic garages and sheds on current levels, while garages and sheds within the curtilage of a house were, in effect, valued on 1939 levels. The Bill, therefore, provides for the assessment on 1939 values of small domestic garages and of storage premises for household goods, bicycles and so on, where the premises form separate rateable properties.

And now a word about partly residential property, which is again something which has caused trouble in the past. These provisions for valuing houses on 1939 levels that I have been discussing, apply only to private dwellings, and not to hotels or boarding houses. The Bill, however, allows a house still to count as a private dwelling even if a living room is used for some non-domestic purpose, for instance for giving tuition, or if one or two rooms are let, provided that the room is not constructed or adapted for some non-domestic purpose, or the property is not used for the business of letting single rooms. In other words, it allows a house still to count as a private dwelling even if it is not wholly used for the purpose of a private dwelling but for some of those incidental purposes to which houses are ordinarily put. Where, however, a property is genuinely of a mixed sort—for instance, a shop with living rooms above—the Bill provides, in effect, for a split in calculating the assessment. The property will not be treated as two properties; it will be treated as a single property with a single assessment; but in calculating the assessment the part of the assessment attributable to the living rooms is to be estimated on 1939 rental values, the rest being estimated in the usual way on current rental values.

To sum up, my Lords, this Bill still adheres to pre-war values for dwelling-houses, but it seeks to put right the technical defects of the Act of 1948. The objection has been made by the Daily Telegraph leader writer and other commentators that the Bill is only a piece of new patchwork, and that something more drastic ought to have been done to the whole rating system. But a revaluation is in progress and little more remains now but to complete the valuation of dwelling-houses. The results of central valuation will probably themselves be pretty drastic, and no one can see clearly where we are until this revaluation has been carried out. So the problem is simply to find a workable method of valuing houses for this coming revaluation, and not delay this revaluation to the Greek Kalends by attempting to devise some new system which would mean starting the general revaluation all over again.

Nor, in truth, has anyone offered any better suggestion for valuing dwelling-houses. The Daily Telegraph would prefer valuing houses on current levels, but I should have thought this would be impracticable, for there is pretty well no free market in lettings to-day, and the evidence of the rent at which a house might be expected to let is so scanty that no valuation which could really be defended, if challenged in court, could be founded on it. Of course, valuers could value on current levels, in the sense that they can do anything you ask them to do, but they would not have the evidence to support their valuation, and in most cases would probably have to work on 1939 evidence and adjust it up according to their own guess. It is clearly better, I submit, simply to use 1939 evidence.

The leader writer in The Times newspaper offers the remedy of taking the rents actually paid each year for particular houses. This would mean that the householder whose controlled rent was higher than his neighbours' would have a higher assessment as well, while owner-occupiers would be left in the air, without any way of deciding whether they should have the higher assessment of the neighbour on one side of them or the lower assessment of the neighbour on the other. Plainly, as is done in Scotland, where the rent is usually the gross value, the value of owner-occupied houses would have to be the rent which the tenant might reasonably be expected to pay, so that once more we return to the old 1925 formula. Since Scotland has been prayed in aid by The Times newspaper, it is perhaps worth my remarking that in Scotland the asperities of such a system are softened, first, because the system has grown up on them—they have got used to it—and, secondly, because the owner pays part of the rates.

Rating valuation is only a device far sharing the rate burden, and what is important is to see that people's assessments compare reasonably with those of their neighbours. It is sometimes objected that the 1939 values are "dead values," and that ratepayers will have no means of knowing whether their assessments are correct. But there is still in existence plenty of evidence of 1939 values, and the ordinary householder will be able to do what he has always done—namely, compare his assessment with his neighbour's and claim a lower assessment if he has an inferior house. In other words, he will use the valuation officer as an expert witness on his own behalf. Whatever the difficulties of using pre-war rental evidence, it does enable houses to be assessed reasonably in relation to each other.

That is all there is to this Bill. I cannot honestly pretend it is a Bill that I hold in very high affection. Equally, I feel that it is a Bill for which I need make no apology to your Lordships. No Government likes to bring in a Bill such as this, but whatever Government had been in power at this moment, either this present Government or one of the Party of noble Lords opposite, I am certain that it would have had to bring in such a Bill as this. Those who criticise this Bill—and looking at the list of speakers who contemplate taking part in the debate, I am certain there will be criticism—must forgive me if I ask whether they have any alternative system to put in place of the system put forward in this Bill. It is in the confidence in my suspicion that no better alternative exists that I ask your Lordships to give this Bill a Second Reading this afternoon. I beg to move that the Bill be now read a Second time.

Moved, That the Bill be now read 2ª—(Lord Mancroft.)

3.35 p.m.

LORD SILKIN

My Lords, in introducing this measure, the noble Lord, Lord Mancroft, did not do so in his usual enthusiastic tones; indeed, I have seldom heard a Bill introduced with less enthusiasm—and I am not surprised. This Bill has been almost universally condemned. The noble Lord took his courage in his hands and referred to the ever-faithful Daily Telegraph. If the Daily Telegraph ever criticises anything that is done by the present Government, it must be something pretty bad. He also referred to The Times, which has had a number of articles about the Bill. It is a fact that the Bill has been criticised by almost everybody who is interested in and informed on this subject. I will not refer to the technical Press, but the Bill has had a pretty bad technical Press. In another place, it was opposed on the Second Reading, the relevant clauses were divided against in Committee, and it was opposed on Third Reading.

The noble Lord endeavoured to justify this Bill by asking those who were against it whether they could put forward anything better. My short answer, of course, is that the onus is not on us. It is for the Government to produce a workable measure. The Bill is justified on the ground that the valuation provisions of the Local Government Act, 1948, have broken down, but the noble Lord gave no proof of that at all. He mentioned that there had been some specimen valuations in different parts of the country, but he did not tell us what these valuations were. He did not establish to the House what the anomalies were, except in the most general terms and in such a way that it is impossible to check them for ourselves. In another place, the Minister in charge of the Bill was asked to say in what way the 1948 Act had broken down, and all he could do was to reply in general terms. It would have been easy to publish a White Paper and give actual examples of how these anomalies had arisen. Nothing of that kind has been done, however, and we are left to take it on the word of the noble Lord opposite, and on the word of the Minister, that the 1948 Act has broken down.

But they have to go beyond that. It is not sufficient for them merely to say that the 1948 Act has broken down; they also have to establish that the present measure is not in the same danger, that it will not produce the anomalies, or anomalies of an equal degree, to those which are alleged to have followed from the 1948 Act. I shall endeavour to show that the present Bill will produce as many anomalies and will be just as unsatisfactory as the 1948 Act is alleged to be. I do not necessarily suggest that the anomalies will be the same, but they will be equally unsatisfactory. I do not propose to go into the history of valuation for rating. It will be within the knowledge of those with an interest in the subject that the 1925 Act, which is the basis of the system of valuation, had broken down in 1937–38, and that although we were then due for the normal quinquennial valuation, the Government of the day decided not to have it, because they recognised it was anomalous. Instead, they set up a Committee, known as the FitzGerald Committee, to advise them on a new basis of valuation. The war came, and as a result the quinquennial valuation which was due never took place; and we have had no valuation since.

The fact is that the Government, in this Bill, are reinstating a method of valuation which, on the admission of the Government of the day, had broken down in 1937–38. They are reintroducing this matter in circumstances which make the anomalies even greater than they were in 1937–38. Let us go through some of the anomalies which exist to-day, on the basis of what the Government are proposing to do. First of all, we are much further away from 1939 than we were before the war; and by the time valuation is complete, I suppose fifteen or sixteen years will have elapsed. Valuers are being asked to value existing premises on the basis of what the rent would have been in 1939, assuming that there was a free market: assuming that all the circumstances which now exist, as a result of changes that have taken place in the surroundings, existed in 1939; assuming that the methods of transport which now exist existed at that time; and indeed, doing a whole series of gymnastics in order to assume the conditions upon which they have got to carry out this valuation. We have had something like 1,500,000 houses built since 1939. Valuers have got to assume that these houses existed in 1939, and they have got to make assumptions as to what would have been the rent of those houses if they had existed. Indeed, they have got to build up for themselves a completely imaginary picture of these houses, and to carry out a valuation on that basis.

When the Bill was first introduced, it was not merely that the first valuation was to be carried out by reference to 1939 values; that was to be a permanent feature of our valuation system. For all time we were going to carry out our valuations, and base our rates upon 1939 values. As the noble Lord will agree, the Bill as first introduced referred to the "first valuation" and to "subsequent valuations." Fortunately, the Minister had the good sense to delete "subsequent valuations," and the Bill as it appears before us refers only to the "first valuation." I mention that as an indication of the recklessness and the lack of thought with which this measure has been introduced. So valuers have got to go back to 1939, and they have to imagine what the rent would be in the various hypothetical circumstances to which I have referred.

The noble Lord has mentioned that something like7,500,000 dwellings were then under rent control—the noble Lord seems to doubt that figure. At any rate, whether it was 7,500,000 or some other figure, it was a high figure. But that has got to be ignored. The valuer must not take the actual rent. He must value the premises, not on the basis of what was being paid in 1939 but upon what a willing tenant would have been prepared to pay but for the scarcity. I think the noble Lord rather suggested that in 1939 there was little or no scarcity of accommodation, and that there was substantially a free market. I can assure him that there was no free market in 1939: there was considerable scarcity. I do not know whether the scarcity in 1939 was as great as it is to-day, but there was a scarcity; and any accommodation that became available with possession in 1939 commanded a premium, or was held back and sold with vacant possession and brought a very good price. I can say that from my own personal experience in London and in the large cities of the country. Whether the same circumstances prevailed in the rural areas I should not like to say for certain; but we all know that there was a shortage of rural accommodation before the war, just as there was of urban accommodation. So to talk of a free market, and to assume that 1939 has been chosen because there was in that year a free market in dwellings is to talk in terms of complete unreality, and with complete lack of knowledge of the circumstances.

It will be extremely difficult, if not impossible, to carry out this valuation on a basis which will be fair and realistic. I agree with the noble Lord that valuers can value anything; of course, they can put down a figure as a valuation; and no doubt they will do so, if those are their instructions. But whether they will have any relationship to what is expected of them under this Bill is quite another matter. My own view is that valuation will become largely a matter of gueswork, and nothing more. For those reasons alone, I think that this Bill is completely unsatisfactory. One would have hoped that, if the Government were introducing a valuation measure, they would have sought to get rid of some of the outstanding anomalies and endeavoured to treat all sections of the population alike. A revaluation is not a purely academic exercise. A revaluation means that certain people will be relieved of burdens and others will have additional burdens imposed upon them.

I should like your Lordships to realise what is going to happen under this Bill. So far as residential property is concerned (and the noble Lord has confined himself to residential property), if this Bill is carried out, apart from the difficulties and anomalies to which I have referred—if one can really get at what a dwelling-house would have fetched byway of rent in 1939, and if the assessment is made on that figure—it will mean that generally throughout the country there will be some increase in assessments, in varying degrees. It will mean that for a number of reasons, but in particular, because in the past assessments have been considerably below what they should have been. If the valuation is carried out in the spirit of this Bill, assessments will be substantially increased. Varying estimates have been made, and I should think that the average figure is something like 50 per cent. But it is not only residential property that is to be valued; shop property and business premises also are affected. We all know that shop property has increased in rent, probably, threefold, and sometimes more than that; and the same applies to office accommodation. There is no provision in this Bill directing valuers to disregard scarcity value, so far as office accommodation and business premises are concerned. They will have to value strictly on the basis of the 1925 Act. Secondly, they must have regard to the rent that is being paid, and we may well find that the rates of business premises, offices, shops and so on will go up three or four times, in comparison with what they are to-day, and we shall find the whole basis of rating drastically changed. If that is to be the effect of this measure, I am surprised that the noble Lord had nothing to say about it. It seems to me a most important consequence of what we are doing.

LORD MANCROFT

May I get this point quite clear? Is the noble Lord saying that the rates will go up, or that the assessments will go up?

LORD SILKIN

I am talking solely in terms of assessments, and on the basis that this measure is going to bring about a drastic redistribution of the burden of rates.

If I may come on to another point, I am, of course, well aware that if you increase assessments all round—if you simply doubled all assessments as they stand—then theoretically, but only theoretically, you could reduce the rate poundage; and, again theoretically, nobody would have to pay more rates, in terms of money, than they are paying to-day. But in fact we know that it does not work that way. If the assessments were doubled all round, no question of transfer of the burden from one section of the community to another would arise, and if it were possible to reduce the rates by half it would be a standing temptation to every local authority to spend more money. They would do so, and it would be a difficult temptation to resist. Therefore, the increase in assessments would almost certainly lead to an increase in the burden upon the individual tenant. But where you get this happening, the burden on the householder probably increasing by up to 50 per cent. and the burden on shop and business premises by 300 to 400 per cent., as it must do, then you have a complete redistribution of the burden of rates upon the population, with the enormous economic effects which are likely to arise. No suggestion has been made and, in fact, there was no reference in the noble Lord's speech to this, in my view, vital question.

There is another section of the community who are involved, and it is that section which enjoys at present the benefits of de-rating. One would have thought that, when the Government were introducing a new valuation measure, the position of those people who at present enjoy the privilege either of not paying the rates at all or of paying only a small proportion of the legitimate rates, would have come under review. I am not at this moment saying whether the farmer should be de-rated and be required to pay the full rates that he did before the 1929 Act. Nor am I expressing any opinion about the industrialist who enjoys a de-rating of three-quarters of his rates. But at least, these are matters which ought to have come under review, and one would have expected to hear from the noble Lord what the Government's decision on this was, and why they have arrived at the decision. What we do know is that conditions are very different to-day from what they were in 1929, when de-rating proposals were passed. Whether this change in conditions justifies a review of the situation or not is something we should have liked to hear from the noble Lord; but we have not heard it.

The House will have gathered from the comments I have made that I do not think that this is a good Bill—and that is putting it very mildly. The noble Lord asked, as he was entitled to ask, what we should do, and I told him that the responsibility is upon the Government. When we were sitting on those Benches we sometimes asked noble Lords what they would do, and the response was, "It is your responsibility to get on with it. Our job is to criticise what you are doing." I will not disguise the fact that this is not a simple matter: I do not pretend that it is easy. There are proposals which have been put forward for dealing with the rating problem. I am betraying no secret when I say that my noble friend Lord Douglas is to speak and he has his views—which many of us share—on how to deal with this question. But, assuming that we are going on with the present system, what we want is to achieve a method by which valuation is easily understood, easy for the citizen to object to if he is dissatisfied, which will certainly not be the case under this Bill (it will be most difficult for a citizen to prove that the valuer is wrong), and is regarded by everyone as fair as between one section of the community and another. It may well be that even the combined skill of both sides of this House could not produce a satisfactory scheme in all respects at the present moment. I should have thought—and here I am going to "stick my neck out"—that it would have been better to continue on the basis of the 1948 Act until we were quite sure that we had something better.

Various proposals have been put forward. The Times put forward a number which I should have liked to see more seriously considered. A number of Members in another place put forward the suggestion—which I agree is not a solution—of setting up a Royal Commission to consider the problem in an even wider context: the relationship between public finances and local government finance, and the possibility of alternative methods of raising local government finance. None of us can feel very happy at the present relationship between Her Majesty's Government and the local authorities, so far as finance is concerned. To an increasing extent the local services are being subsidised by the Exchequer. Consequently, inevitably, there is bound to be greater control by the Exchequer over local finances and over local services; and the responsibilities of the local authorities are becoming greater and greater. They need more and more money, and the time may well have arrived when we ought to consider new methods of raising money for the purposes of local government services. That fact, again, has been put forward as a justification for appointing a Royal Commission to see whether we can produce something better—some better proposals than the 1925 valuation. But whether that be so or not, I object to this Bill because, in my view, it is no improvement on the existing methods of valuation, and it also creates additional anomalies. Although we do not propose to divide the House, because it is not our custom to divide the House on Second Reading on measures which have come to us from another place, we nevertheless feel that we ought to register our opposition to this measure in the strongest possible terms.

4.2 p.m.

VISCOUNT GAGE

My Lords, this is a highly technical Bill, and I do not believe that anybody's opinion on it is worth a great deal unless he has considerable knowledge of valuation or, better still, has practised it. I certainly cannot claim to have had such experience, but I have consulted valuers and local government associations; and it seems to me that the general feeling is that, though this is not considered by any means a perfect Bill, it will provide a better method than by leaving the law as it stands. With great respect to the noble Lord who has just sat down, I do not think he was very fair to the Government—although I am not speaking for the Government. He rather suggested that the Government had rushed into this matter in a reckless way and that they are proposing a change in the law which is not justified on any grounds. It would be out of order for me to quote proceedings in another place, but I observe that the Minister said that before deciding on this change the Government took30,000 samples and found as a result that the effect of the present state of affairs would produce very great anomalies. I do not know what test the noble Lord would apply but I think that if the Government started by taking 30,000 samples they could hardly be accused of mad recklessness.

LORD SILKIN

I did not say that they had not taken samples or that they had not given the matter some thought. My criticism on that part of the speech was that we and the public had not been informed in any detail of the results of these investigations, so that we were not in a position to judge whether the results justified the changes or not. In other words, we cannot tell whether the 1948 Act has broken down or not, and we do not know what the outcome of these tests has been.

VISCOUNT GAGE

I thought the noble Lord was suggesting that nothing was said in another place and that there are objections to the figures given in another place. I agree that there is no comprehensive report upon which the public can judge. But, as I was saying, I think that the professional bodies and the local government associations do support this Bill, largely because they cannot think of anything very much better. They think this Bill is an improvement on the existing state of affairs—and that is why I support the Bill. I agree that it is a somewhat half-hearted support, but, as a layman, and probably a very ignorant layman, I cannot see bow anybody can expect to get perfection under existing conditions.

I suppose that the realistic way of valuing a house would be to relate the valuation to the rent which the house actually commands in the market. But there is no free market in house rents; on the contrary, these rents are fixed in a highly artificial way and a way which bristles with the most extraordinary anomalies. If you relate your valuation to the actual rents you will reproduce in your valuations all the anomalies which so unhappily disfigure the rating situation. On the other hand, if you try to introduce a little more sanity into your valuation system you are driven to use various hypotheses. Some hypotheses may be more efficient than others, but they are all to a certain extent unrealistic and are all vulnerable to criticism. Valuation is not, perhaps, a subject which lends itself to jocosity, but I thought that The Times of July 9 did succeed in producing a very witty article on the hypotheses in this Bill. The Times referred to the Bill's "tortured words," to the "game of guessing" what rents might have been in circumstances that do not exist arid never have existed and so forth—all of which is quite justifiable. But it did seem to me that just as witty an article might have been written on the actual solution favoured by The Times.

The present situation seems to provide one more argument—if any more were needed after the debate we had some weeks ago on Lord Buckmaster's Motion on rent restriction—to prove that these Acts are in urgent need of revision. I think Lord Silkin referred to the desire to get some equality into the rating system. Surely that applies to the desirability of getting some intelligible equality into the system of rents. As this Bill is in temporary form, I live that before any valuation takes place a considerable change may have been made in the law affecting rents, and that there may be some relation between rents and rating and valuation. Surely that is the realistic way in which valuation can be intelligently conducted.

This is, of course, a technical Bill, but, as the noble Lord, Lord Mancroft, remarked in his speech, like the digestive system, rating does create popular excitement when things go wrong. I do not know whether the rating system could be described as having gone wrong, but it is the fact that all over the country rents have risen and will continue to rise; and these rises have concentrated more and more attention on the rating system and on any anomalies that may have existed in it. Although t I support this Bill at the present time I do not believe we have heard anything like the end of this subject.

4.10 p.m.

LORD DERWENT

My Lords, I follow with considerable diffidence the noble Lords who have already spoken because they have all three spoken as experts. I am speaking as a far lower form of life—as a mere ratepayer. But, luckily for other noble Lords, much of what I had been going to say has already been said, so I will be brief. I do not think it is reasonable to oppose this Bill at the present time. It is, of course, an extremely complicated matter, but the valuation system under the 1948 Act has broken down. The noble Lord, Lord Silkin, says that we have no proof of that; but surely it is obvious that it must have been the valuers who were dealing with the valuations on those test cases who have reported to the Minister that the system would not work. Therefore some other system has to be found, and unless one is going to wait indefinitely, a system must be put in now as a temporary measure. I agree that, as a long-term measure, this Bill would leave much to be desired.

There are two aspects of the Bill about which I should like to talk. I dislike the 1939 basis for valuation almost as much as the noble Lord, Lord Silkin, dislikes it. I dislike it principally because 1939, particularly as late as June, 1939,was a year when values were rather jumping about. I would even have preferred a 1938 value or the beginning of 1939; but late 1939 seems to me merely to make the hypothetical work of the valuers rather more difficult than it need have been. What I am hoping that my noble friend, when he comes to reply, will say, is that, as soon as possible, we shall get on to a more modern system and come more nearly up to date. I think it is unfair of the noble Lord, Lord Silkin, to say: "Why take 1939? After all, it was a year of great scarcity values." Suppose Her Majesty's Government had said: "Now we are going to try to bring things more up to date and we will choose a post-war year." At once the noble Lord, Lord Silkin, would have said: "How dare you take a postwar year! Because scarcity is worse than it has ever been." Personally, I think that this scarcity element within a comparatively short time will not have such an effect on valuation matters. I think there will be a scarcity for many years but I do not think it will make very artificial values in a few years' time.

Something which seems to me much more important, taking a long-term view as opposed to this purely temporary Bill, is the question of the Rent Restrictions Acts. The whole question of valuation of house property is bedevilled by them. I am told that no Government dare undertake the revision of those Acts because it is political dynamite. But really dynamite is one of the safer and easier explosives to handle. It has been suggested in some quarters that a Committee should be set up to examine the question and that members of all political Parties should form part of that Committee. Then I am told that no member of an Opposition Party would dare to sit on such a Committee. I do not know upon what that assertion is based, but, even supposing it is true, surely the fact that they had refused to sit on such a Committee would prevent them at a later stage from exploding the dynamite to any good effect. Therefore I hope that my noble friend, when he comes to reply, will give an assurance that Her Majesty's Government will undertake the revision of the Rent Restrictions Acts in the very near future—and I hope he will be able to say, in the next Session.

There is one final matter I want to mention: the question of local government finance and the Royal Commission which the noble Lord, Lord Silkin, mentioned. There are many people, and I am one of them, who think that in the near future the whole question of local government finance will have to be put on a different footing. Certainly, by the time these valuation lists have appeared in a few years' time, the Government of the day will be very exercised in their minds and probably worried as to how they are going to take the next step and what further legislation they are going to introduce. May I, therefore, urge that Her Majesty's Government should set up a Royal Commission at once, so that, at the time the Government of the day have to consider all these matters again, they will have the Report of a Royal Commission in their hands and will know where they stand.

4.16 p.m.

LORD SALTOUN

My Lords, I realise the necessity for this Bill and support Her Majesty's Government in this matter, but I want to take this opportunity to make a mild protest about something in the Bill which I hope the noble Lord, Lord Silkin, will agree with and sympathise with; and, if he gets back to power, I hope he will remember it and put into practice. If I go to a professional valuer and ask him to value for me a thing in which he is competent and skilled, and he makes a valuation, it is right to turn to him and say: "Where is your market?" No professional valuer will value anything without regard to a market, and a value without a market is not a real thing at all. It is quite a short distance to the Surveyors' Institution. If the noble Lord likes to go round there and ask them about it, he will find, unless their teaching has varied very much in the last forty years, that they will say exactly what t am saying this afternoon.

In this Bill and in all these other Bills the word "value" is used when what is really meant is "assessment." Very often the courts are asked to fix a value in one way or another. They adopt the same method and the figure they produce is also called a "value," but really it is only an assessment, an opinion. Thus we have value used in two completely different senses, which may be all right so long as the fact is recognized; but in politics the distinction is not recognised. They are used as if they mean the same thing. That does a great deal of harm. I wish that Her Majesty's Government could find words to substitute for the words "value" and "valuation" in all these things, because believe that they do a great deal of harm.

4.19 p.m.

LORD DOUGLAS OF BARLOCH

My Lords, this Bill is only one of a number which have been brought forward from time to time to try to improve the system of valuation in England and Wales. Every one of them has resulted only in making it more complicated and more difficult to operate, and has produced an ever-increasing dissatisfaction. At the beginning of this century the method of valuation in this country, as established by law, had obtained a certain degree of simplicity, at any rate. The only ques- tion which required to be answered was this: what would this particular house or shop, or whatever it may be, be worth by way of rent if it was let at the present moment upon a yearly tenancy, upon the conditions that the tenant paid the rates and that the landlord undertook to do the repairs and effect the insurance? That was the one simple question which had to be answered in order to make a valuation for rating purposes in this country fifty years ago.

In 1896 there was a Royal Commission upon the question of local taxation, presided over by Lord Balfour of Burleigh. The Commission made a number of very voluminous Reports. Among other things they pointed out that there were many parishes in England and Wales which had not been revalued for twenty, thirty or forty years, with the result that the level of assessments was quite chaotic and this simple question had not been answered. Then came the First. World War which, in practice, made the matter still more complicated, because of two things: rent restriction and inflation of money values, which resulted in the old valuations automatically becoming completely out of date. That problem had not been solved by the time the Second World War broke out. It should have been hut it was not, and in the meantime a number of other complications had been introduced. De-rating had been evolved at the instance of the present Prime Minister. This is now universally discredited—nobody believes that it does what it was supposed to do, and in fact it results in a new series of inequalities in the burden as between one ratepayer and another.

Now we come to this Bill. The task of the valuer now is going to be a great deal more complicated. He has not got to answer the question: What would this house he worth by way of rent if it were let at the present day? But he has to answer the question: What would it have been worth if it had been let in 1939? As time goes by, and those who are familiar with the conditions in 1939 are not so numerous as they were, I do not know what kind of evidence is going to be brought forward when these questions are debated before the tribunals to which the ratepayer can appeal. It cannot at any rate he the valuation which was already in existence in 1939, because many of those valuations were extremely inac- curate. It was discovered as a result of samples which were taken that in many cases they were 20, 30 or 40 per cent. away from the true value; so the valuations then existing cannot be a standard by which the ratepayer can discover whether the valuation proposed now is or is not a fair one.

Then we have got all the houses which have come into existence since 1939. They have got to be valued upon the assumption that they existed in 1939, with all the surroundings and conditions which they possess at the present day. By way of example, let us take some of the great new housing estates which the London County Council have built in the vicinity of London, in places where there were, possibly, no houses at all in 1939, or perhaps only a few cottages. How is the valuer to ascertain what rent somebody would have paid for one of those houses if, in fact, they had existed in 1939 with all the surroundings that there are at the present day? And how is the unfortunate ratepayer to inform himself whether the estimate which the valuer has made is correct or not? It will be a very difficult operation indeed, and is not likely to produce a great deal of satisfaction.

Then let us go on a stage further. There are a number of other hypotheses which have to be met in relation to some or all of these valuations. Let us look at Clause 2 (5) of this Bill. Here, the valuer is asked, when he is ascertaining what the rental value of the dwelling-house is, to have regard to whether the Rent and Mortgage Interest Restrictions Acts had produced an effect upon the rentals of property in the neighbourhood; and he is also asked to consider whether there was a marked scarcity or an abundance of dwelling accommodation or of any particular kind of dwelling accommodation. I do not know how that question will be answered. I do not know what evidence is going to be produced with regard to it— how the ratepayer can check the accuracy of the opinions which the valuers form about it. Let us look at the last few words of this particular subsection. The valuer has to assume that all the accommodation in the locality of a kind comparable…had been due shortly to become available for letting free from any restrictions…"— and not only that— and without any marked deficiency or excess in the amount of such accommodation as compared with the number of persons acceptable as tenants of such accommodation and genuinely competing for tenancies thereof. How many various hypotheses have been introduced in this remarkable phrase? Look at the last few words, particularly: a marked deficiency or excess in the amount of such accommodation as compared with the number of persons acceptable as tenants…and genuinely competing for tenancies. But the number of people who compete for tenancies depends upon the rent at which the tenancies are being offered. The valuer is obliged to reason in a circle. This does not provide a solution of the problem, it only makes the problem far more intricate than ever it was before. I defy anybody to conduct a rational valuation by means of that formula.

The noble Lord who introduced this measure to-day said that the ratepayer would be able to compare his assessment with the assessment of his neighbours, and if he found that he had been over-assessed in comparison with them he would be able to obtain redress. That is not what I understand the law of rating in England and Wales to be. I believe it has been held by the courts on many occasions that it is not a ground for objection to a valuation to say that X or Yin adjoining premises has been assessed at lower values. I do not believe that that has ever been the law in this country. If it is the intention of the Government to make it so, I think it might be a very worth-while reform, and very helpful indeed to the ratepayer, because he would then have at any rate some objective standard with which he could compare the assessment placed upon his particular house. And it might conceivably save a number of anomalies from arising. But I am afraid that is not the law at the present time. Nor do I find anything in this Bill which proposes to make it so.

A good deal has been said this afternoon about the Rent Restrictions Acts, upon the assumption, I think, that the rents fixed by the Rent Restrictions Acts had to be taken into account in making valuations for rating purposes. That again is not the law in this country, as I understand it. I believe it has been held by the courts that the fact of rent restriction has got to be disregarded in making a valuation for rating, and the valuer is not to pay any attention to the controlled rent at which the property happens to be let, If that is so, it merely emphasises the point that the system of valuation for rating in this country had already broken down before the war began, and was not, in fact, being operated in accordance with the law at all. There are innumerable anomalies and inequalities, and this Bill is merely going to build up, on the basis of the anomalies and inequalities which existed in 1939, a fresh set of them to apply to every house which has come into existence since then. It is not a solution of the problem. I think it is merely going to postpone a solution.

I said earlier that the system of valuation for rating in England and Wales, as it had been evolved up to half a century or so ago, possessed a certain logic. It asked quite a simple question, which it should have been possible to answer with a moderate degree of certainty. There were, of course, a number of difficult cases relating to things like schools, hospitals, gas works and so on, which, in the ordinary course of events, never are let by a landlord to a tenant. But so far as the majority of properties were concerned—those which were, in the ordinary course of commerce, let from time to time—it should not have been too difficult to answer the question. But even if it had been answered correctly, I do not think the result would have been equitable—and that for a very simple reason. The result of this system of rating, quite clearly, is that the better the use anyone makes of a particular piece of land, the better the building lie erects upon it, the better he develops it, the more rates he has to pay. And that seems to me to be a very unfortunate result indeed.

It is of some importance, I think, to remember that in a very large part of the English-speaking world which derived its institutions originally from this country, it has been decided over a considerable number of years to alter the system of rating. In New Zealand, in most of Australia, in the Western part of Canada, and in some cases—but not many—in the United States, it has been decided to base the local rates not upon the value of the buildings and structures, and other things which have been put on the land, but upon the value of the site alone. That system has been working now for fifty years, sixty years and seventy years, in some cases, with perfect satisfaction, with very considerable ease in valuation, and, administratively, with complete efficiency. This was a matter, too, which was considered as long ago as 1896 by the Royal Commission which then sat to inquire into these subjects, and the Chairman, Lord Balfour of Burleigh, and two or three of his colleagues, made a recommendation in this direction. Nothing, unfortunately, has yet been done about it, but it is a subject which deserves inquiry, and, I hope, will receive it., because we must recognise that this Bill at the best is only a stopgap which cannot possibly have any permanent benefit.

4.38 p.m.

LORD MANCROFT

My Lords, when I first entered local government service, directly after the war, I was, within the first few days, put by the Town Clerk of my borough on the Rating and Valuation Sub-Committee. I did not find myself very happy as a member of that body, and so I applied for a transfer. I was then transferred to the Cemetery Committee, which was much more exciting. But I rather wish now that I had stayed on the Rating and Valuation Sub-Committee until it was abolished, because should then have been able to claim, if not to be an expert on the subject, as Lord Derwent has kindly but incorrectly described me, at least to have had more experience of it. Lord Silkin, however, is an expert, and therefore he must be listened to with attention and care. And, indeed, I have listened to him with attention and care. But I also listened to him with a certain amount of gloom, as I did not find expressed in his speech that huge amount of enthusiasm for the Bill which I had hoped for. Let me turn, immediately, to one point upon which I think that I, together with the noble Viscount, Lord Gage, must have misunderstood Lord Silkin. When Lord Silkin was speaking, I wrote down the words "recklessness and lack of thought." I thought that he applied that to one particular provision of this Bill. Apparently he did not. Let me say that to no aspect of this measure can an accusation of recklessness and lack of thought be applied. Not in their wildest moments could the Opposition support such an accusation against the Government, who have considered this subject and have brought forward this measure after the most careful examination and the most detailed inquiries.

LORD SILKIN

Perhaps the noble Lord would allow me to explain. Evidently, he did not understand the particular passage in my speech to which he has just referred. I was referring to the fact that in the Bill, as originally introduced, this method of rating by reference to 1939 values was to be a permanent feature. It was not only for the first assessment but for subsequent assessments. That seemed to me to be some evidence of recklessness.

LORD MANCROFT

I am sorry that I misunderstood the noble Lord. I thought that he meant that the whole Bill was reckless and showed lack of thought. Another point is this. Lord Silkin complains that there is no real evidence of a breakdown. I am sorry if he finds my speech wanting in that respect. I thought I produced sufficient evidence. After all, seventy-three areas and 30,000 different inquiries suggest that the matter had been gone into pretty carefully, and by independent examiners at that. I can assure the noble Lord that the last thing the Government want to do is to bring forward a Bill like this on inadequate evidence of a breakdown, and for no particular reason.

The noble Lord, Lord Silkin, volunteered kindly "to stick his neck out, "to use his own phrase. He said, rightly, that it was the Government's business to legislate and it did not come well from their representatives to ask what anybody else would do. He volunteered the suggestion that, Micawber-like, we should stick to the 1948 Act until something better turned up. I have already, I hope, convinced your Lordships that the relevant provisions of the 1948 Act, in the opinion of the Government if not in that of the noble Lord, Lord Silkin, have broken down. The noble Lord's second suggestion, which was really The Times' suggestion, was the method of taking the actual rents, but that suggestion is not consistent with his first. The second is inequitable, for reasons which I hope I sufficiently explained. The third method suggested was that of a Royal Commission. But when is a Royal Commission going to report and what are we going to do until that far off day? That will not help us to get a revaluation done at the moment.

The noble Lord, Lord Silkin, made one point which I thought opened up an impressive field of speculation. He said there was a possibility that if the assessments went up, the rates might not come down as a good authority ought to bring them down: the temptation to overspend on the raised assessment would be almost irresistible to some ambitious local authorities. That, of course, is a real temptation. I hope the time will then come when the ratepayers will be much more concerned than they are at the moment to see that their local authority behave themselves financially and do their duty. I think that all noble Lords who, like myself, have been for some time in local government will agree with me that the apathy of the local government voter, the indifference of the ratepayer to the way in which his elected representatives dispose of his hard-earned cash, is a deplorable reflection on the political education of a supposedly democratic people. Perhaps the noble Lord's warning will be taken.

My noble friend Lord Derwent also suggested a Royal Commission, but I think more as a long-term remedy than as a short-term one. I would point out to him that the 1939 basis is laid down for the first revaluation only. So far as I can see, this is the only workable method for the moment. After the revaluation the Government of the day will have to decide what measures should be taken for a second revaluation. Of course, that will depend a great deal on the circumstances of the time. In the meantime, all that is proposed is to take the 1939 basis for the present revaluation.

My noble friends Lord Derwent and Viscount Gage and the noble Lord, Lord Douglas of Barloch, all made rude remarks about the Rent Acts. In my time I have made rude remarks about the Rent Acts and I do not think that any debate even touching on this question will be held for some time to come without somebody making rude remarks about the Rent Acts. All I can say is that the noble and learned Lord the Lord Chancellor is at the moment upon the Woolsack. He understands the Rent Acts; I do not; and he has heard what your Lordships have said.

The noble Lord, Lord Douglas of Barloch, told me I had my law wrong. That is more than likely. I spent twelve years in practice getting my law wrong. On this occasion, however, I think I had it right and he is wrong. I will look carefully at what I said and at what the noble Lord said; if he is right, I will apologise. But if he is wrong, I have dropped a gentle hint to him about what he should do. I am afraid I have not heard from any side of the House the hearty cheers of approval I hoped this measure might possibly evoke. Strictly speaking, as I said in my opening remarks, it is not a Bill which any Government would be over-enthusiastic to produce. It is too much to say that it is making the best of a bad job. What I must say is that it is the only solution I know of to the difficult problems with which we are now confronted. I do not regard it for one moment as the perfect solution, but until somebody produces a better solution, I suggest that this is the one we have to try. This afternoon, with the greatest respect to noble Lords who have taken part in the debate and have made helpful suggestions, I have not heard of a better solution than, if I may say so with all modesty, the one I have tried to put forward.

On Question, Bill read 2ª, and committed to a Committee of the Whole House.