RATING AND VALUATION BILL (Hansard, 28 April 1959)

§ THE EARL OF DUNDEE

My Lords, I am afraid that this is the kind of Bill which cannot possibly give any sort of satisfaction to anybody, least of all to the Minister who has the duty of moving the Second Reading. Not only does it deal with a subject which is the reverse of entertaining, but its purpose is purely negative. Its main provision is to postpone from April 1, 1961, to April 1, 1963, the date on which the new valuation lists for rating will take effect.

This postponement may be vexatious to many people but the reasons for it are simple. The basis for valuing houses for the valuation lists at present in force is laid down in the 1953 Valuation For Rating Act. Under that Act the 1956 quinquennial valuation had to be based on 1939 values, but for the next quinquennial valuation in 1961, the basis had to be the current rental values. That is to be the basis for the next valuation lists. For houses, gross value has first to be ascertained, and this is legally defined in the Rating and Valuation Act. 1925, as the rent at which the hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenant's rating and taxes and if the landlord undertook to bear the cost of the repairs and insurance and the other expenses, if any, 1124 necessary to maintain the hereditament in a state to command that rent. What has to be established is the current rent at which houses might be expected to let year after year. There is no abstract way of establishing this rental value. It cannot be left to the intuition of even experienced valuers and has to be based on the rent which a willing tenant would be prepared to pay to a willing landlord if a house were available for letting.

The Government are advised by the Valuation Office that in order to get a valuation which can be undertaken with confidence that the results would be defensible, evidence of free market rents must exist for something like 10 per cent. of the houses in this country—that is, practical evidence from the actual letting of such houses. We are advised by the Valuation Office that for 1961 practical evidence will be available for not more than about 2 per cent. of houses, and that that is far too small a proportion on which to found a revaluation which could be supported before the valuation courts and the Lands Tribunal. On the other hand, we have been advised that for 1963, two years later, it is expected that about 10 per cent. of the evidence will be available, which is regarded as the necessary minimum. The Government have therefore concluded that there is no alternative to postponement.

The decision to postpone was reached with reluctance, but the Government are satisfied that this is a matter on which they must be guided by the expert advice given them. A revaluation which could be shown not to be supported by adequate evidence would seriously undermine public confidence in the whole rating system. I think that that is fairly generally agreed. What is not quite so generally agreed is subsection (3) of Clause 1 of the Bill, which prevents a local authority from making proposals for an increase in the value of a property in certain circumstances during this interim period. Under the existing law—that is, under the Local Government Act, 1948—a "person aggrieved" may move to alter a valuation list in certain particulars. Thus, not only may proposals in respect of a property be made by the owner or occupier seeking a reduction, but the owner or occupier of other property in the area may, for example, move for an increase in value. 1125 It is mostly the local authorities who use this power to secure increases in assessments of property which they neither own nor occupy. Experience has shown that some authorities cannot be relied on not to move for wholesale revaluation of commercial properties during the currency of a list.

Having reached the conclusion that a general revaluation must wait until 1963, the Government thought it desirable that the door should not be left open for attempts to be made to secure partial revaluations. Therefore, subsection (3) of Clause 1 makes it impossible for anyone other than the valuation officer, or the owner or occupier concerned, to make any proposal for altering the current valuation list.

The local authority associations, speaking generally, do not seem to dissent from the Government's view that during the period of postponement local action to bring the assessments of some properties or classes of property up to full current rental value, while the assessments of other properties or classes continued unaltered, would produce inequitable results as between the two groups of ratepayers. They are, however, strongly opposed to the temporary suspension of their right to make proposals to correct what seem to them to be errors in the lists, and the discussions with the associations which we have had were directed at finding a simple Amendment which would save the error-correcting powers.

Unhappily, no solution has presented itself; the problem needs long and careful review and probably much re-writing of the statutory provisions. But after consultation with the Chancellor of the Exchequer, the Minister has given an assurance in another place that valuation officers will be instructed to give full weight to local authorities' representations and to be prepared, in instances where there is a reasonable case for the local authority's views, to make proposals enabling the authority to have the issue determined, if necessary, on appeal. In the Minister's view, the legitimate interests of third parties will be safeguarded by this arrangement. For the long term, some other solution is obviously desirable, and the general problem of the proper basis for changes in assessment between general revaluations is to be included in a general review of the whole field of rating and valuation 1126 which will be undertaken over the course of the next two or three years by a Working Party of local government and departmental representatives, who can take outside advice as necessary.

The only other main provision in the Bill is in Clause 2. This postpones the effect of certain notices served under subsection (3) of Section 8 of the Rating and Valuation (Miscellaneous Provisions) Act, 1955. This Section 8 was added in 1955 for this reason: before the 1956 revaluation charities had often been sympathetically under-assessed by local authorities, and anxiety had been expressed that charities and kindred bodies might suffer large and sudden increases in assessments on their revaluation at full rental values in 1956. To prevent this the new Section 8 froze the amount of rates chargeable to bodies of this kind for 1956–57 at the amount charged for the previous year; that is, the last year for which rates were levied upon values in the old valuation lists. If this resulted in a reduction of rates for 1956–57, the proportion of the reduction was to be determined and the same proportionate relief was to be allowed in each subsequent year unless the rating authority had served three clear years' notice to reduce or discontinue it.

In introducing that provision the then Minister of Housing and Local Government explained how it was intended to work. Referring to the notice to be given, he said that there would be a warning period before anything happened which might severely prejudice an organisation, so that in any event there would be plenty of time for Parliament to consider the position and decide whether to legislate. Now, in fact, because of the way in which the provision has worked, it is clear that the time for consideration provided by the section is inadequate, and the sole purpose of Clause 2 is to provide additional time. I beg to move.

§ LORD LATHAM

My Lords, I am sure the House is indebted to the noble Earl, Lord Dundee, for the clear way in which he has explained this Bill. The subject matter of the Bill is not a very interesting one, especially following the debates we have had this afternoon on other and more attractive matters. The noble Earl 1127 said that this was a negative Bill; and indeed it is. It is a footling Bill. It arises, of course, on the circumstance that the Minister made a grave miscalculation and misjudgment when he assumed that within a short time after the operation of the Rent Act, 1957, and the Rent Act, 1958—which, of course, was designed to protect in some way tenants from the inequities which flowed from the Act of 1957—we should have a free market in rent for residential premises. Those of us who opposed the Rent Acts took the view, and stated it, that no such free market would emerge. The Minister of Housing and Local Government has been bound to admit that that is the case, because that is the only basis upon which this Bill is promoted. The valuation officials have advised the Minister, so he said in another place, that, as the noble Earl has said, having regard to the nature of the lettings of the 13½ million dwellings which have to be revalued, no more than 2 per cent. of them will provide evidence of what is a free market in rents. The valuation officers have said that no less than 10 per cent. is required to provide this evidence, and accordingly the valuation is to be adjourned for two years.

Of the 13½ million dwellings which have to be revalued, 5 million are owner-occupied and, therefore, are of no assistance whatever in establishing what is a free market in rent and what is the basis of such free market, if and when it exists. There are 3 million which are publicly owned, mostly by local authorities; most of them are subsidised and they accordingly bring no evidence as to the operation of a free market. Then there are the houses which are let furnished on special terms which give no assistance in determining the basis in conditions of a free market. As regards the balance of the normal tenancies, most of these are controlled; and as the premises become vacant, they are decontrolled. There is nothing to indicate that by 1963, let alone by 1961, which is the date when the valuation must commence if it is to be operative for 1963, the position will be very much changed from what it is now.

As we submitted when discussing the Rent Acts, there cannot be a free market in rents so long as there is a large demand for housing accommodation which is 1128 unsatisfied. The local authorities still have long lists of applicants and, of course, the authorities' ability to build houses is much restricted from what it was. Moreover, there is the circumstance that at any moment there may be further de-control. It is the policy of the present Government to de-control gradually. The Prime Minister, when he was Minister of Housing and Local Government, said at Llandudno that it was the policy of the Government to remove controls altogether.

In that connection, the proposal to defer the operation of the revaluation has received a rather bad Press. The Times of February 20 said: But, if decontrolled tenanted houses are too few to establish what real rent levels would now be if the whole market were now free, why should it be supposed that they will be numerous enough shortly after the next Election? The Economist was even more caustic in regard to the matter. The Economist of February 21 said: The Government's decision to postpone from 1961 to 1963 the next valuation of property for rating carries a definite whiff of political cowardice. It goes on: The Minister has now stated that this year is too soon after the decontrol of several hundred thousand houses under the Rent Act to get a fair picture of current house rents. One trouble about this argument is that it might be extended indefinitely. More than 4 million working-class houses still remain controlled. As I have said, there is nothing to justify the assumption that there will be the minimum of 10 per cent. of lettings under normal conditions available by 1961, when the valuation must commence. The postponement of this revaluation has some rather serious consequences for local government. For instance, it continues for an additional two years the 20 per cent. de-rating which has been conferred upon commercial properties, resulting in a reduction of some £44 million in rateable value. It also extends for a further period of two years the relief, whole or partial, which is given to charities. That is a considerable loss of rate income, estimated, according to the figures given by the Minister in another place, at no less than £2,600,000 a year covering some 53,600 properties.

The rating system at present is a maze; indeed one might almost say it is a jungle. 1129 You have the prosperous industry de-rated 50 per cent.; you have equally prosperous commerce de-rated 20 per cent.; agriculture, not impoverished, de-rated 100 per cent. and charities variously relieved, with the result that the residential ratepayer—and this is an important factor—who pays his rates out of taxed income, whereas the non-residential commercial and industrial ratepayer pays his rates out of untaxed income, is providing (or was in 1957) some 52 per cent. of the total rate income of the country. So while we shall not oppose this Bill if the Minister is advised by the officials that it is impossible to do a fair and proper revaluation by 1961—clearly the matter must be dealt with in the light of that advice—we have no illusions as to the reason for this postponement, nor are we entirely uninfluenced by the circumstances that before 1963 there may be some additional measure of de-control.

The noble Earl mentioned the provisions of Clause 1 (3), which was the subject, he said, of considerable consideration and debate in another place. We take the view that this power should not be taken away from the local rating authorities; that if, as may be the case, the rent of new hereditaments is higher than the rent for older hereditaments, there is no reason at all why there should not be a difference in the valuation. The result of this proposal will be to freeze valuations independent of the rent which a willing tenant is prepared to pay to a willing landlord; and accordingly at the proper time we shall put down Amendments to adjust the situation.

The noble Earl was good enough to mention that, following conversations, it had been decided that the valuation officer should be instructed in regard to this matter. That is a co-operative and helpful suggestion, but really it does not meet the point of view of the local authority 1130 organisations who resent very much that this power to make a proposal should be removed and that they should be prevented from in any way changing the valuation which applies to similar hereditaments, even in cases where it is proper that it should be changed. In the view of the local authorities it ought not to be made to apply to new hereditaments coming into rating. With those remarks, as I have said, we shall not oppose the Second Reading of the Bill.