§ 4.4 p.m.
§ House again in Committee.
In his speech on the Second Reading of this Bill my noble friend foreshadowed the Amendment which he has just moved. He spoke very lucidly then, and this afternoon he has moved his Amendment with equal lucidity. I am afraid that the reply which he may receive will not be as lucid. It would have been if my noble friend the Leader of the House had been replying, as he had wished, but he has had to go, as he asked me to explain to my noble friend, to a meeting of Ministers; I am rather hoping that it will be a short meeting.
May I say straight away that the Government recognise that there is a problem here, actual or potential. In practice, of course, as those of your Lordships who are familiar with these rather occult matters know, when a valuation officer makes a proposal to insert a new hereditament value in the existing valuation list, or to alter the value of a property which has been structurally changed, he values or revalues the property at "tone of the list", as my noble friend has said. That is the normal administrative practice to-day, as I understand it, in England and Wales, and I have no reason to believe that it is not universally adopted by all valuation officers. Nevertheless, as my noble friend has already made clear, a gap may sometimes open up or could open up between administrative practice and strict law. Since the Ladies' Hosiery and Underwear case in 1932, to which my noble friend coyly alluded, it has been at the best doubtful whether the administrative practice of "tone of the list" could be sustained if a legal move were made to enter a property at full, up-to-date value.
All this, as your Lordships know, became particularly relevant after the war. The list prepared in 1934 was still in force, but rental values had risen very substantially. It was, however, general practice, even before the Inland Revenue became responsible for valuation for rating, to value by reference to "tone of the list". Nevertheless (and my noble friend also referred to this), in the 420 1950s a small number of local authorities made proposals to increase the assessments of commercial property in their areas, and they succeeded. It was in the light of this that on the Motion of a Back-Bench Member in the Commons an Amendment was made to the Rating and Valuation (Miscellaneous Provisions) Act, 1955, to withdraw for the remainder of the 1934 lists the right of third parties, rating authorities and others, to make proposals. When the 1961 revaluation was postponed for two years, third party rights were similarly suspended by the Rating and Valuation Act, 1959. That suspension ends automatically when the 1963 lists come into force.
It was in fact precisely the problem inherent in meeting this question by legislation which was perhaps the strongest reason that led my right honourable friend, the Minister of Housing and Local Government, to set up the Working Party on Rating and Valuation two years ago, so much of whose work is embodied in the Bill we are discussing in Committee. It is possibly ironic that the Bill to which they gave birth does not contain this baby to which my noble friend is so attached. Why is this? In the first place it is because, despite the provisions included in the Valuation for Rating (Scotland) Act, 1956, to which my noble friend has referred, the Working Party found very great difficulty in formulating a satisfactory statutory basis for "tone of the list". It is possibly because the English and the Welsh are not so clever in these matters as the Scots. But in any event I assure your Lordships that they looked into this point very closely and found, as I say, very great difficulty indeed in finding a proper statutory formula. I shall come in a moment to the particular difficulties which we see in my noble friend's proposed formula. It shows the type of difficulty which does crop up, even though I should be the first to admit that the draftsmen to whom I have spoken about this have been full of praise for my noble friend's Scotch draft.
The second reason was that the Working Party concluded that there would be no practical problem here if there are, as we hope, from 1963 onwards regular five-year valuations (that was the point which my noble friend admitted the force of) 421 because there would be then little or no inducement for partial or local revaluation in advance of general revaluation. As a practical matter, therefore, the sort of difficulty which arose in the 1950s. with some local authorities should not arise in the 1960s. The third difficulty to which my noble friend alluded was that the Working Party found the treatment of hereditaments assessed by reference to accounts and profits something of a Kumbling block. In passing, I may add that it is not entirely clear to me whether my noble friend's Amendment is designed to include or exclude hereditaments assessed by that method. I would, of course, grant that one can in any case add a proviso preventing it from applying to such hereditaments, but in that case we should exclude an important area of rating. The Government have endorsed the Working Party's view that this is not the time to try out a new formula which would touch part only, even if a major part, of the problem. But there is no question—of this I can assure my noble friend—of holding up what everybody has agreed is a desirable objective until all these hereditaments assessed by the profits method are dealt with. There is no question of that.
On general grounds, therefore, I cannot. I fear, recommend your Lordships to accept my noble friend's Amendment. There are, however, a number of more detailed drafting objections which I should like briefly to draw to your Lordships' attention. I hope to be fairly brief. I wish to do this because they show the type of difficulties which arise in these admittedly difficult cases. First of all, under the present administrative arrangements the valuation officer does not—indeed, cannot—impose a "tone of the list" value if the current rental value of the property is lower. The new clause, as my noble friend said, would do so. At first blush this is reasonable—a question of "swings and roundabouts". But at any particular time the people on the swings are not necessarily those on the roundabouts; indeed, some may be permanently on one or the other so far as rating is concerned.
May I just give an example? Perhaps a multiple store has opened up in a market town and is competing with increasing success with the small shops already established on the outskirts or 422 neighbouring villages. In such a case, the clause as drafted would prevent the assessment of the multiple store from rising, or the assessments of the small shops from falling. This may be the result desired. I understood that the noble Viscount would in fact feel that it would be equitable; but possibly the small shopkeepers would not. Certainly, the Government would not feel disposed to settle an issue of this kind without really full consultation.
Secondly, a similar point arises on the insertion of a new hereditament into the list. It seems that under the clause as drafted a new hereditament would have to be assessed at "tone of the list" even though the rents of comparable unaltered hereditaments had declined since the list was prepared. The occupier of the new hereditament would clearly get only disadvantages from the clause, whatever advantages the other hereditaments had had from it earlier. This again may be a perfectly proper result; but it certainly needs careful examination. Thirdly, subsection (2) of the proposed Amendment defines a "material, change of circumstances" as including (I quote from the wording of the Amendment)any relevant decision of a court or tribunal in proceedings arising from a proposal to alter a valuation list.It is not entirely clear, at least to me, what this means. It may mean that if a court has altered the values of comparable properties by decisions on proposals, the new values may be taken into account in assessing the tone of the list. If that is the intention, I submit that there is a large gap in the provision. The number of proposals settled without recourse to court, or indeed tribunal, is vastly greater than the number determined by the courts, and if these changes are not to be regarded as affecting the tone of the list, then the lists themselves would soon get into a pretty odd state.
Alternatively, the "relevant decision of a court or tribunal" may be intended to be confined to decisions of principle—whether it is competent, say, to make deductions of particular items in arriving at gross values. If that is the case, I think I should mention that the phrase seems to extend the decisions of local valuation courts. These are responsible bodies and nothing I say, I hope, will be taken in any way as running them down. 423 Their decisions, however, are seldom reported, and they cannot in any sense be regarded as binding on another local valuation court. It may be right to include their decisions among the "material changes of circumstances" under the clause. But, here again, there is need for a very full study of the possible consequences, and for consultations.
Some of the expressions used in the definition of "material changes of circumstances" are not easily understood and could lead to litigation—for example, the phrase "general level of valuations". If, as is usual in England and Wales, the phrase refers to the level of valuation of assessments in the lists, the other provisions of the clause itself appear to prevent any change in their general level. It is possible that this phrase has been taken from a Scottish provision in which it may have another meaning.
These are what I would call the technical objections to my noble friend's Amendment. I hope I have shown that they underline the great difficulty of finding a suitable formula to express in statutory form this desirable concept of "tone of the list". They also, I think, underline the undesirability of your Lordships' opting for my noble friend's formula before there has been proper time, as there must be in these rating matters, for really adequate consultation with all concerned. These are, I think, the two main objections to my noble friend's Amendment. There is also the difficulty, which I do not wish to labour (I take his point on it) about hereditaments assessed by the profits method.
Finally, it has yet to be shown whether we really need to legislate on "tone of the list" given the fact that we hope that from 1963 onwards there will be regular five-yearly reviews. Indeed, I should like to emphasise—I think it cannot be too strongly emphasised—that the genesis of these proposals is an abnormal pattern of rating revaluations, mainly attributable to the war. Long periods without general revaluations are bound to produce unusual strains and stresses. Even a limited extension of the five years' life of lists throws the subject into relief. But the situation is safeguarded, as has already been noted, for the extended life of the lists now current. It seems to us to be odd to wish to move 424 to make further safeguarding provision for what should be the nearest to normal general revaluation since 1934, and for what the Government hope will be the first five-year list since 1929.
For these reasons, I trust that my noble friend, having ventilated with great ability, this difficulty—we admit that there is a real difficulty here—may feel able to withdraw his Amendment. I should like to draw his attention to the fact that my right honourable friend has already indicated in another place that there will be an opportunity after the 1963 lists have come into force, for a full review of the rating arrangements for the gas, electricity and transport industries. He proposes that the problem of "tone of the list" should be further examined at the same time.
There are a number of reasons why it is felt that this would be a better time than now to tackle this particular conundrum. First, the profit method of valuation will then be restricted to a narrower field. There is no intention, as I have already mentioned, of withholding a provision of this nature if a suitable one can be found which would safeguard the large majority of ratepayers on "tone of the list", until some other method of assessment has been found for all the hereditaments assessed by the profits method. But the task will certainly be easier if their number has been reduced. Secondly, there may in some years' time be much better evidence than there is now of how the Scottish provision in the context of the new Scottish valuation rates, which I understand have only just come into force, is working out in practice.
Finally, we then may have much more definite evidence than we appear to have now as to whether we are likely to be faced with a practical difficulty, given the new valuation lists. Given this assurance that this is a matter which will be examined after the 1963 lists have come into force, and that my right honourable friend is indeed very willing to have this problem looked at then, which he thinks will be a better time than now, I trust that my noble friend will not press his Amendment to-day.
§ 4.21 p.m.
§ LORD LATHAM
The speech of the noble Viscount in introducing this Amendment, and the speech of the noble Earl 425 in resisting it, indicate the entwined complexity of rating and valuation. The noble Viscount has rendered a useful service in drawing the attention of the Committee to this difficult complication. But I think it is stretching language a little too far to suggest that, in the result, there is any widespread injustice being done to ratepayers. I think it is the case that, on the whole, the valuation lists are prepared on the basis not of current values but rather of those prevalent at the date when the current valuation list came into force. It is the case that the complications and difficulties which hitherto, I understand, have prevented this matter from being dealt with legislatively no longer exist with the same force, having regard to the circumstance of three proposals to dispense with the profits basis of assessment for the most part altogether.
But the considerations which have been advanced by the noble Earl are, I think, conclusive. It would be, I think, unfortunate if we sought to settle this matter, which is perhaps one of the most complicated elements in rating, as it were (I am sure that the noble Viscount will not misunderstand me), "off the cuff". It is a matter which ought to be considered soon by all the interested parties; and the Working Party, which I gather still exists, is an admirable agency for dealing with that matter. In those circumstances, and having regard to the assurances which have been given by the noble Earl on behalf of the Government, perhaps the noble Viscount may feel that he has done a useful job—indeed he has—and be content to withdraw the Amendment.
VISCOUNT COLVILLE OF CULROSS
I am very grateful both to my noble friend Lord Jellicoe and to the noble Lord, Lord Latham, for what he has just said. I entirely agree that this is an exceptionally complicated matter and should not be settled "off the cuff". I would also agree that it requires deep and close study by everybody concerned. What fills me with some disquietude, however, is the time element; because it is by no means the first time it has been considered. It was apparently abandoned as hopeless by the Working Party set up in 1959, and abandoned, I think, for reasons which I do not find altogether convincing. My noble friend has said that it will not be held up for 426 ever, until they have dealt with all the profits bases of hereditaments. This I accept, and very gladly accept. None the less, I feel that if this is so the moment will have to come when they will be required to find an equivalent basis to go beside some such thing as my Amendment for such hereditaments as remain to be assessed on the proper basis. That is what I had in mind in moving this Amendment, and wondered whether my noble friend would deal with it.
The difficulty is this. I accept that the Inland Revenue do use "tone of the list". But if a case comes to court, the court is always bound to uphold the current value and not "tone of the list" value. If a valuation officer should take (and I have some examples where he has clone this) figures which represent current value, and not "tone of the list", the ratepayer cannot usefully go to court because the court is bound to uphold the valuation officer. Therefore, I feel there is some urgency about this. When my noble friend says that this will be considered after 1963, does he mean 1968, or that it is going to be considered with some urgency after the new list comes into force?
I am afraid that I cannot give a definite answer. I do not think it would be right for me to tie down my right honourable friend to a date on this matter. But I think I can give my noble friend an assurance that the Government are fully seized of the desirability of looking into this important question when the 1963 list is in force, and I will certainly represent to my right honourable friend my noble friend's view that this is a matter that should be dealt with in the early part of the currency of the 1963 list, rather than the latter part. It is my impression—though I do not wish in any way to commit my right honourable friend—that it is the intention to look at this in the early days of the new valuation list, when the valuation officers have settled down.
I was surprised to hear that my noble friend has evidence that, in certain cases, valuation officers are not valuing a property on a "tone of the list" basis. I was not aware until very recently that there were such cases. If he is in possession of evidence on that, and will 427 let my right honourable friend have it, we will certainly have those particular cases looked at, and looked at attentively. I think there was another question which my noble friend put.
Here, I think, I should avoid getting into too deep water. But, of course, each hereditament or undertaking, or group of undertakings, which is valued by reference to profits has what is designed to be in each case a separate formula, and it might well be that there could be worked out a method by which tone of the list could be introduced into that formula. In certain cases, of course, for these industries to which formulæ do apply, they allow already for something which is beginning to approach that concept. But I would agree that this is something which could well be examined again.
VISCOUNT COLVILLE OF CULROSS
I think that is very much more satisfactory and I am most grateful to my noble friend. I am not going into the detailed defects which he has pointed out in my Amendment. With the assurances which he has given, I beg leave to withdraw.
§ Amendment, by leave, withdrawn.
§ 4.30 p.m.
§ VISCOUNT COLVILLE OF CULROSS moved, after Clause 1 to insert the following new clause:
§ Assessment by reference to rentals
§ . Where, for the purpose of making or altering a valuation list, it is necessary to value or revalue a hereditament, then, notwithstanding any rule of law to the contrary, in determining the value of such hereditament account shall be taken not only of any rent of the hereditament itself but also of any rents and assessments of comparable hereditaments.
The noble Viscount said: This Amendment raises a similar point and goes to the same principle. It is based on the decision in another case in 1937 in the Appeal Court, a case in which Lord Justice Scott delivered himself of one of the most famous judgments in the whole of rating law. The particular passage that is relevant to this reads as follows:
Where the particular hereditament is let at what is plainly a rack rent"—
that is, a current market rent—
or where similar hereditaments in similar economic sites are so let, so that they are truly comparable, that evidence is the best evidence and for that reason is alone admissible.
This particular sentence falls into two halves, and the part with which I am concerned is that, where there is a direct rack rent for the hereditament itself, this is the only evidence that should be admissible in attempting to assess the hereditament for rating. My Amendment has been put down in order that not only should this direct evidence alone be admissible, but also there should be taken into account the values, the rents and the valuations of comparable hereditaments, perhaps in the same area or within the knowledge of the valuation officer. This would mean that the judicial decision would be overruled, and I think again it would lead to fairness and equity as between individual ratepayers. I hope that this also may be a problem which will be considered in conjunction with the main one which I raised on my previous Amendment; and, if that could be said to be so, I should be more than satisfied. I beg to move.
After Clause 1, insert the said new clause.—(Viscount Colville of Culrass.)
I fear—and I do not think this will cause any surprise to my noble friend—that the doubts which the Government have about his first Amendment extend, for roughly the same reasons, to his second one; but straight away, for that very fact, I can give him the assurance for which he is asking. However, as this is an Amendment which to some extent stands on its own feet, I think it should be looked at on its own merits, as my noble friend has done in his explanation. Therefore, with greater brevity than on his first Amendment, I should like to give him our views upon it as they are now. As I understood from him, the first purpose of the Amendment would be to offset the court's decision in the Robinson case in 1937.
Part of it, yes. I will not deal at any length with that decision, because my noble friend has explained it; but its effect, as I understand it (and my understanding in these deep matters is shallower than his) was, 429 broadly speaking, to declare that the actual rent paid for a hereditament, where it cannot be impeached—for example, because it was fixed long ago—is the best guide to the rental value of a hereditament. In such a case it would not avail the ratepayer to point out that comparable hereditaments had lower assessments than his. That is doubtless the strict law, as my noble friend said. However, in practice, the valuation officer is already required to determinethe rent at which a hereditament might reasonably be expected to let from year to yearon certain conditions as to rates, taxes, repairs and so on, which vary according to whether the property in question is assessed to gross value or direct to net annual value. Even if the property is let, the actual rent is not conclusive as to this value. Even if the letting is recent, it must be very rare indeed for the letting to have been on precisely the statutory terms defining gross value or net annual value. In practice—and I think this is the point—the valuation officer will need to take account of any other relevant rental evidence. Where there is a comparable property, the property of course is not valued in isolation.
There is a difficulty which I should like to touch on about the wording of my noble friend's Amendment, in that it does not define "comparable". It is by no means clear that identical houses, one in Westminster, say, and one in Northumberland, are not in this sense "comparable". But the rent paid for the one will be no guide to the rental value of the other, and so, apart from the administrative difficulty of collecting information about comparable hereditaments from an unlimited area, the clause could produce quite the wrong results. But that may be merely a question of drafting.
The second purpose of the clause is to secure that alterations to the valuation list between general revaluations should be made on the tone of the list principle, as my noble friend said. In that case, there are a number of technical difficulties with the clause as drafted, and again I should like very briefly to touch on them. If the main object of the clause is to secure "tone of the list"; it is rather questionable whether in fact it 430 would do so, I am advised. In determining the value of a hereditament—and these are the words of the Amendment—account shall be taken not only of any rent of the hereditament itself but also of any rents and assessments of comparable hereditaments".The exact force of the words "account shall be taken" is, I am told, open to speculation. Moreover, account is to be taken of "any rents and assessments". The rents and assessments of comparable hereditaments may be quite distinct. For example, in preparing the 1963 list the valuation officer would have regard to the rents of a row of shops and might find those actual rents a true indication of their current rental value to the hypothetical tenant. He would assess them accordingly. A comparable shop is then built four years later, in 1967. The actual rents of the original shops may by now be very different from what they were in 1962, when the list was prepared, but the assessments, of course, would be unchanged. Account, my noble friend's Amendment reads, is to be taken of both the rents and the assessments; but which is to weigh more heavily, and which is to influence the new assessment?
As I have already explained in discussing my noble friend's first Amendment, the Government feel it wise to make haste somewhat slowly, but not too slowly, in seeking to secure a firm statutory basis for tone of the list. Because of that, and in view of the assurance which I gave my noble friend at the start of my brief discussion on this Amendment, I hope he will not press this one, either.
§ LORD LATHAM
I am sorry to say that I am unable to support the Amendment moved by the noble Viscount, and I hope that he will not press it, and, if he does press it, that the Government will not accept it; because I am advised that the result of the acceptance of a modification of the law in the sense of the Amendment would strike a very serious blow at the stability of the valuation lists. This is a matter which is not unrelated, of course, to the subject matter of the first Amendment; and, so far as I know, it is a matter which has not yet been considered by the Working Party. I am advised that the associations and bodies concerned with rating and valuation would very much regret it should 431 this proposal be embodied in the Bill. I hope, therefore, that the noble Viscount will see fit to withdraw the Amendment.
VISCOUNT COLVILLE OF CULROSS
My Amendment was intended to get round the difficulties arising from Lord Justice Scott's judgment. It would appear that the Inland Revenue have already done so, although they have not done so statutorily. If this means that the associations to which the noble Lord, Lord Latham, refers are not satisfied with the present practice of the Inland Revenue, I am surprised. None the less, what I have done, I think, is that I have again pointed out a realm in the law of rating where the strict law and practice do not coincide; and it seems to me that it is absurd that they do not coincide in either of these places. It was with the intention of clearing up this sort of anomaly that I drew attention to it in the first place. However, as my noble friend has said, it will be considered along with the problem raised by my first Amendment, I will not press it now, and I beg leave to withdraw it.
§ Amendment, by leave, withdrawn.
§ Clause 2 agreed to.
§ 4.40 p.m.
§ VISCOUNT RIDLEY moved, after Clause 2 to insert the following new clause:
§ Amendment of 15 & 16 Geo. 5 c. 90
". The Rating and Valuation Act, 1925, shall be amended:—
(a) by the addition to paragraph (b) of subsection (1) of section twenty-two of the following words:—
'Provided that in the case of a dry-dock including its associated machinery the rental estimated under this sub-paragraph shall not exceed one pound sterling.'
(b) By the addition to section twenty-four, after subsection (10), of the following words:—
§ "(11) For the purposes of this section and any order made by the Minister under the powers conferred on him by subsection (5) hereof, floating docks and pontoons with any bridges or gangways not of a temporary nature used in connection therewith, and slipways, uprights, cradles and grids for ship construction and repair shall be deemed not to be in the nature of a building or structure.'"
§ The noble Lord said: This Amendment and the one which follows are, I hope, simpler, in terms of words and law, than the two we have just been dis- 432 cussing. The point I have in mind is at least clear to me. It may well be that the drafting of the Amendment is not right, and I should even be willing to accept the fact that it is perhaps put down in the wrong part of the Bill. However, we can have a discussion on this very important point of policy, which I think your Lordships would in any case want to have; and the question of where this proposed new clause should eventually go into the Bill can be decided later.
§ This Amendment deals particularly with the case of shipbuilding plant. Here at once I ought to declare my interest in that industry. This is a question of the widest importance, and I want to start by saying that I am not making the point that industry should not now pay its full share of rates. I am not arguing for the continuation of industrial derating, but I would emphasise the point that for many years past all sorts of industrial plant has been paying rates. When there was a derating of 75 per cent., the decision as to what plant was rateable and what was not did not present such an acute problem as it does now. There is a Plant and Machinery Order which arises from the 1925 Act and which lays down in some detail the various items on which rates are paid. It has been held by many that no process plant at all should pay any rates, and that only structures should pay. Indeed, I think there is a great deal of justification for that by comparison with any type of undertaking where the plant is not a structure. That is to say, to put a very simple case, a building may be put up and filled with very expensive machine tools. The building will pay rates, the machine tools will not. In the case of a shipyard, a structure will be put up upon which a ship is to be built, and it will pay rates. It seems to me that the right solution as to what is the definition respectively of "plant" and "structures" has not yet been found.
§ This becomes particularly important, I think, when the fact is to be remembered that valuations have been increasing. The last revaluation, apart from the partial abolition of derating, increased rates very substantially, and I think it is doubtful whether, in many cases, industries are not paying more than they should. This comes at a time when there is intense competition in the 433 international field for the building of ships, when there are more shipyards in the world than there is need for, and when we in this country have to fight all we can to keep our industries going. It is sometimes said that it does not matter to any industry how much rates it pays, because whatever the amount it is a reduction on the tax payable. But I must remind your Lordships that taxes are paid only on profits, and ships are now being built with no profit element in them at all. Some firms are doing that for the sake of keeping their men together, keeping them employed, and keeping the business going. That is by no means entirely universal, but there are still firms that are doing that. In such circumstances, a substantial increase in rates means nothing but an increase in the cost of building the ship itself. It is partly for that reason, and partly because of the manifest unfairness (as one might call it) of the fact that some of the structures are rated at all, that I have put down this Amendment.
§ During the debate on the Second Reading of this Bill in your Lordships' House—and I think the same was said in another place—figures were quoted showing the present proportion of rates paid throughout the whole country by industry, by commercial properties and by householders. Those figures are very interesting. While they have some bearing on the question of whether or not industry should be derated, they do not have much effect on the local situation, or on a particular type of industry whose share of rates is unfairly higher than it should be.
§ May I refer to some of the items which are mentioned, which are all items, except for the first one, which appear in the Plant and Machinery Order, 1960? In mentioning these items, I ought to explain that I put them under these two headings in this Amendment because, as I understand it, a dry dock comes under Section 22 of the 1925 Act, and the other items come under Section 24. The wording is different, but the intention in both cases is the same. A dry dock, is, after all a very expensive piece of plant; and local authority services can do precisely nothing towards the efficient running, use and functioning of a dry dock. It is true that local authority services provide education, welfare and other services for the individuals who work there; but in 434 actual practice the expenditure on a dry dock is so very high, in relation to the number of men employed, that one would think there is no case for rating a dry dock at all.
The next category in this Amendment, under paragraph (b), deals, first, with floating docks and then with pontoons with bridges or gangways. Those items seem to be so far removed from being attached to the land on which a structure might be built that they, too, would seem not proper to be rated. The last group mentioned—and this is a quotation from the present Plant and Machinery (Rating) Order—are:
slipways, uprights, cradles and grids for ship construction and repair".
Here the comparison between other industries becomes very acute. When you wish to build a large aircraft you put it on a cradle. That cradle does not pay rates. In a shipyard the slipway, the staging, the grids and supports, do pay rates. That seems to me an unreasonable state of affairs. Any other plant in any other industry which is used as a supporting structure to enable an aircraft, or whatever it is, to be built is excluded from rating. It would therefore seem unreasonable to bring in shipbuilding plant by the specific mention of it in the 1925 Act, and in the Plant and Machinery (Rating) Order.
§ I am not saying that this situation is new: it is not. But the effect is particularly noticeable because of all the various factors which come into it. First of all, there is the abolition of derating; secondly, the difficult trading conditions in the shipbuilding industry; and then again the very invidious comparison (as one might describe it) between what happens to the shipbuilding industry in this type of case and what happens to other industries. I believe that if this Amendment were agreed to, the actual total share of rates paid by industry would not be significantly affected. But it would make a vast difference to the small number of places where ships are built; and we must do all we can, whether by means of this Bill or by any other action the Government from time to time takes, to reduce to the very minimum the cost of the things we make for export, ships being one of them. I beg to move.435
After Clause 2 insert the said new clause —(Viscount Ridley.)
§ 4.50 p.m.
I think that all noble Lords are aware of the difficulties confronting the shipbuilding industry. I well remember taking a minor part in a debate in your Lordships' House about a year ago, in which the whole position of the industry was fully examined. The difficulties of this great industry to-day are certainly not less than they were then, and they have not been exaggerated by my noble friend Lord Ridley. There, fore it may seem odd that I should ask your Lordships to resist, as I now propose to do, an Amendment so clearly designed to help this industry in its present difficulties, more especially as my right honourable friend the Minister of Transport, speaking on Clydeside only last Friday, made it clear that the Government were actively examining ways and means of assisting the industry. But of the various ways and means of assisting the industry which may be open to the Government, any tinkering with the rates is one which would be wrong to adopt.
Why is that so? First, there is the question of principle. As I hoped I made clear during the Second Reading debate, the Government are convinced that it is in the general interest that we should move as rapidly as possible towards the situation where all the main classes of rateable property are rated fully at up-to-date values. To derate one industry would be to depart from that principle. So far as I know, there are no precedents, with the possible exception of agriculture, for derating a particular industry, and we feel that to establish such a precedent would be undesirable. If we derate one industry, just because it is in what we hope are temporary difficulties, why should we not derate another industry which may be in trouble?
Moreover, the measure proposed by my noble friend would drive a cart and horse through the general principle of rating equality. His paragraph (a), I think, goes further than the Amendment proposed and pressed very hard in the House of Commons, which proposed that the shipbuilding industry should continue to enjoy 50 per cent. derating. Likewise 436 his paragraph (b) makes inroads into the principle that rates are payable on buildings and structures or plant that is in the nature of buildings and structures. That may be a wrong principle, but it is in fact a very respectable and old one. So much for the principle of the thing.
In suggesting that your Lordships should resist this Amendment, I think I should make it clear that the Government believe that the industry's fears about the rates liability in 1963 under the present Bill, with full rating of the industry, are exaggerated and possibly misconceived. It appears to be a general assumption, which I think underlay some of what my noble friend said in the Second Reading debate, though I did not hear him say it in Committee to-day, that re-rating and revaluation together could double the shipbuilders' rate bill overnight. Even worse fears are current on Clydeside, which, of course, it is not proper for us to discuss on this English-Welsh Bill.
In that narrower context, however, I feel that I should reiterate my right honourable friend's general view, which he expressed on the Second Reading of the Bill in the House of Commons—namely, that without industrial re-rating, industry's share of the rate burden might be halved in 1963, and after re-rating, apart from what happens to the householder, its share might still be no more than its present share. Of course, there are unknown factors which make estimates hazardous, but there would have to be some very sharp increase in the rental values of shipyards—and this at a time when the shipbuilders are taking a pretty gloomy view of their prospects—to justify anything like their own pessimistic forecasts of the effect of this Bill on their rates liability.
I should like to repeat an assurance which was given in the House of Commons—namely, that if it were established that there is a recession in the shipbuilding industry, or part of the industry, such as to affect the rent which might reasonably be expected to be secured for the hereditaments which the yards occupy, that would be taken into account in the valuation of those hereditaments for the 1963 list. It is worth remembering in this context that the 1956 list, the existing list, was based on a booming industry. Although this 437 may be a slightly technical point, I should like to make it. At a time of depression, the shipbuilding industry enjoys a particular technical advantage. Compare, for example, a possible depression in the shoemaking industry with one in the shipbuilding. Theoretically, it might be easy to convert a factory which makes shoes into, say, a factory which makes toffee. Thus, if a shoemaking factory were reassessed in a time of depression in that industry, its hypothetical rateable value might not fall. But with shipbuilding, it is quite different. It is highly improbable that a shipyard will lend itself to bootmaking. Therefore, in a time of depression the hypothetical rental value of a shipyard is likely to reflect this built-in inflexibility in the industry and fall accordingly.
Since this is perhaps a rather esoteric line of argument, I would remind your Lordships of the humdrum fact that, unlike the householder, all industries, including the shipbuilding industry, deduct their rates from gross, and not net, profits. Of course, nobody, neither industry nor other ratepayers, likes to pay rates—except, I understand the noble Lord, Lord Morrison of Lambeth. Everybody reacts more or less strongly to an increase in rates. Not infrequently they are represented as the last straw, the additional expense, which will tip the scale to make production unsaleable. But I do not think that one should be unduly swayed by these arguments without looking at the other side of the coin. None of the other services and supplies which shipbuilders require come at cut prices—even when the shipbuilding industry is faced with difficulties—so why should the local government services? Is it right that householders in shipbuilding areas, many of which, as my noble friend well knows, are very much one-industry areas, should be compelled to bear the additional burden which would fall on them if the shipyards were to be totally exempted from rates, as this Amendment would provide?
Whilst I am only too well aware of the special difficulties of the shipbuilding and ship-repairing industries to-day, I trust that my noble friend will see the force of the arguments which I have used against this Amendment, which I feel is open to serious objection.
§ LORD LATHAM
It seems to me that this Amendment must really be taken with Amendments Nos. 4, 10 and 11, all of which stand in the name of the noble Viscount, Lord Ridley. I was encouraged to hear him say, so recently after his statement on Second Reading, that he was not this afternoon, at all events, objecting to re-rating. In fact, what he proposes to do is to take the main element out of rating; to chip away, as it were, from the re-rating which is to come into full operation in 1963, in respect of a particular industry.
As the noble Earl has said, the incidence of rating (apart from agriculture) cannot be related to particular industries or to their economic condition at any particular time. If there is a responsibility, it is a responsibility of the nation as a whole. Any assistance to be given to depressed industries ought to be given by the State and not by the local authorities in which fortuitously they happen to be located. Moreover, generally speaking, considerable assistance by way of initial allowances and investment allowances is given to the shipbuilding industry, as also to all other industries.
In the course of his speech on the Second Reading of the Bill, the noble Viscount said that he was associated with a company where the rates had gone up ten times since 1950. That may be so, but it was not because the present rating is excessive. The real reason is that the former rating was grossly less than it ought to have been. We must remember, in connection with the heavy industries up to 1959, that they paid on a 25 per cent. basis on a valuation made as far back as 1934. It is only since 1959 that they have been required to pay 50 per cent. on 1956 values. From 1934 until 1959 they had the immense benefit, apart from derating, of paying upon a valuation which was made as far back as 1934. That was a continuing subsidy by local authorities to industry and, as the noble Earl has said, ultimately it was a burden cast upon the householders. As I say, it is not that they are over-assessed now, but that they were under-assessed before.
As the Minister of Housing and Local Government has said in another place, the total rate liability upon industry is no more than about 1 per cent. on the turnover; actually, it is less than 1 per 439 cent. Notwithstanding what the noble Viscount has said about the absence of liability for income tax upon the shipbuilding industry because it is trading at a loss, I would remind him that, even so, there are certain tax elements from which deductions can be made in respect of rates as well as other expenses which can amount to something in the region of 53½ per cent. At present, industry as a whole pays no more than 11½ per cent. of the total rateable value of the country. It is estimated, as I said on the occasion of the Second Reading, that when the valuations are complete and the necessary adjustments have been made, as and from 1963, the contribution of industry and commerce to the total rates of the country will be reduced by something in the region of 15.5 per cent.
The noble Viscount on Second Reading made what I can only call, with respect, some extraordinary statements. He said [OFFICIAL REPORT, Vol. 231 (No. 84). col. 834]:Most of the rates services nowadays are for individuals, and there is nothing direct that a local authority can do out of the rates for some of the very big firms, or even for many of those of smaller size. Big firms have their own fire services and police inside the works their own ambulances and arrangements for dealing with accidents. They provide, in many cases, housing for their men, and they spend very large sums on education, on apprentice training, on technical colleges, scholarships, university courses, and so on. As they incur those large sums on social expenditure, one would think it hardly reasonable that they should pay all over again.Really, that is a most extraordinary doctrine. It is the doctrine of the jungle, and the doctrine which animated those who were responsible for the Industrial Revolution and left this country with its guts torn out for all the world to see. As to these services which the local authority are supposed not to provide, would the noble Viscount contemplate with any satisfaction having a big factory if there were no sewers? Do the workmen of big factories never need the toilet? The sewers are provided by the local authorities. The roads are maintained and lighted by the local authorities; and you could not have a factory or workers going to the factory unless you had roads and means of transport. Then, in regard to surface drains, does not the rain fall upon a big factory, and does 440 not the surface water need to be dealt with by the local authorities?
As regards fire services, the fire services provided by industry are for immediate internal purposes. If there is a conflagration, or the danger of one, quite properly the local publicly-maintained fire brigade is called upon; and industry expects that the fire services will be available to be called upon in any case of need. I do not doubt for one moment that the Jaguar Company had an efficient internal fire service. Nevertheless they had a very big fire, and not only was the fire brigade of the particular local authority called in aid but the fire brigades of all the surrounding districts. All those services are provided for the big firms, as well as for the small ones. It is really an extraordinary doctrine that, because industry provides facilities for apprentices and education, industry should be exempt from the education rate. After all, none of those facilities would be of any value whatsoever if the local authorities did not provide, first of all, primary education, which is the basis of all education, and secondary education. What is the good of talking about technical colleges, scholarships and university courses if there has been no education and the scholars are unable to read or write?
Then there is refuse collection and disposal. It is a doctrine of the jungle to suggest that, because there are one of two minor facilities, even including ambulances, provided by industry, therefore industry should have special treatment and have certain concessions made to it. That is a situation which we cannot for one moment accept, and I am glad to hear from the noble Earl that the Government will resist this Amendment. It is an Amendment which carries one back to the spirit infused by the attitude of mind of a hundred years ago, when 'we had 76,000 cesspools in London, and things of that kind.
As regards education, which is the largest expenditure of local authorities, we are being told—and quite rightly in my submission—that we are not spending sufficient on certain aspects and certain elements of education. We are spending something in the region of £800 million a year, most of which is spent through local authorities, and is first borne by the local authorities, with grants, of course, from the Exchequer. It is anticipated that within a few years 441 the total sum will be in the region of £1,000 million. Does the noble Viscount suggest that all industry should be entitled—because he talks of the large as well as the small—to contract out of certain elements of local government expenditure liability? We certainly will vote against this Amendment.
The noble Lord who has just spoken has been discussing the Second Reading. He has quoted me, but he did not quote what I said before or after that passage. It rather tends to imply that I was suggesting that industry should pay no rates at all, which, of course, was not in my mind. I am sorry that the noble Earl, in talking on this Amendment, did not take up the point which is really worrying me and which is the propriety of certain items of plant paying rates compared with others that do not. That is the point. Accepting the principle that industry should be rated, that there should be no fear or favour for anybody, and bearing in mind the point he himself made and what I think is the general view of the Committee, then I think it is proper to raise the question as to what is plant, what is structure and what is machinery. It is on that basis that I put down these Amendments. I know the present definition is an old one. I think it is a hundred years ago or more that plant of this kind was rated. But now it is becoming much more elaborate and complicated, and much further removed from a structure. In the ordinary way rates are paid on land and the structures which are put upon it. That, I think, is the real argument before us—as to whether these particular items to which I have referred should be classified as structures or not. I think it is a matter of definition rather than of principle, but the definition is a very important one.
The next Amendment, No. 4, deals with the same point I had in mind, but on a temporary basis—that is to say, it is an Amendment to the first valuation lists that come in. The same arguments apply on the rights or wrongs of the matter on both those Amendments, so that when I come to that Amendment I will not ask your Lordships to listen to me any further on the merits of the case. But I should like it to be quite clear that it is not any question of the liability for rates, but the question of what should properly be assessed which 442 is worrying me at this point. I do not know whether the noble Earl in charge of the Bill has quite answered the point I was trying to make on that matter.
I think part of the difficulty here is that we are, to some extent, faced with a whole series of linked Amendments from my noble friend. There is the Amendment immediately following this one, and then there are Amendments dealing with the rating of plant. I had been proposing, because of that, to deal with the question of plant at rather greater length when we came to those later Amendments. But I should like to say here and now that, as my noble friend doubtless realises, only two years ago a thorough investigation was made into the whole question of the rating of plant by the Ritson Committee, which reported in 1959. As I will be showing when we come to these later Amendments, the Government feel that we should rest on that Committee, at least for the time being.
Secondly, I should like to remind my noble friend—and I will be repeating these remarks later on when we come to the later Amendments—that in dealing with this whole question of the liability of industry for rating on plant, my right honourable friend in another place said that if industry itself could come up with constructive recommendations as to how the rating valuation within industry could best be allocated, then he would be prepared to look at it. I think that this is something which is much more susceptible to that treatment rather than making a clear exception in favour of one particular industry at this moment.
§ On Question, Amendment negatived.
had given notice of his intention to move an Amendment to insert a new clause dealing with the valuation of dry-docks and dock-yards. The noble Viscount said: If it had been the feeling of the Committee that something ought to be done in this matter of plant, this Amendment would have afforded an easier way of doing it, because it would have been a standstill Amendment for the new valuation list and would have kept things going for the time being. Possibly it is more convenient to have a debate on this question of plant on one of the later Amendments, and I shall not move this one.
§ 5.18 p.m.
§ LORD MESTON moved, after Clause 2 to insert the following new clause:
§ Pilot survey for site value rating
§ ".—(1) In the year following that in which valuation lists come into force for the first time after the passing of this Act the Minister shall, in consultation with such associations of local authorities as appear to him to be concerned and with any local authority with whom consultation appears to him to be desirable, cause to be carried out a pilot survey and valuation of any appropriate area or areas for the purpose of comparing a valuation based on the site value of the land in such area or areas, whether occupied or not, with a valuation on the current basis.
§ (2) The Minister shall cause to be laid before Parliament a report of such survey and valuation made under this section."
§ The noble Lord said: I beg to move the Amendment standing in my name. I believe the majority of people in this country think that the present rating system is not satisfactory, and there the matter seems to stand still. No one ever makes any suggestion as to what amendment in that rating system should be introduced. The object of this Amendment is to remedy that omission. I am not suggesting for a moment that the rating and taxation of site values and of land is a cure for all evils, or that it is an absolutely perfect system in itself. But this is a serious suggestion and one which might be further explored. One criticism of the present rating system is that it discourages development. The merit of site value taxation is that, by making people pay according to the value of the land, they are encouraged to make the best use of the land.
§ The chief difficulty in discussing this question is a shortage of reliable estimates showing how much a change in taxation would affect various classes of property. I may say that if any of your Lordships feels inclined to support this Amendment it will not be taken against you that you are in favour of the rating and taxation of the site values of land. All that you are being asked to do is cast a duty on the Minister to carry out a pilot survey in valuation of appropriate areas with the purpose of comparing valuation based on the site value of the land with valuation at current prices. I am quite sure that many of your Lordships will agree with me that it would be impossible to introduce a clause whereby one wished to substitute rating and taxation of land values for the pre- 444 sent system of rating. That would be an absolutely ridiculous thing to try to do in the present Bill. All that this Amendment seeks to do is to empower and compel the Minister, in due course, to make a survey and valuation of an appropriate area in order that a comparison may be made between the two systems of rating. I beg to move.
After Clause 2 insert the said new Clause.—(Lord Meston).
§ LORD DYNEVOR
I very much hope that the Government will resist the noble Lord's Amendment. I have a very great respect for the noble Lord's business perspecuity and acumen in relation to property matters, and therefore I am always at a loss to understand why he will pursue this particular hare, for it has been most conclusively proved over the last fifty years that any such measure of such a character, designed somehow or other to secure for the community such values as may accrue to property in price, always fails and has always been repealed. If my noble friend will forgive me for saying so, I submit that, in spite of what has been said, this is an attempt to secure into the system of this country approval for a system of site value rating which is not part of the law of the land at this moment. Vigilance is required when such proposals are made.
I expect your Lordships are familiar with the story of the Corporation Bill of the 1840's or 1850's which came before Parliament in the days when divorce could be obtained only by an Act of Parliament, and in the middle of this somewhat lengthy Bill the town clerk managed to insert a clause stating "The town clerk is hereby divorced"—because he did not like his wife. That, of course, was possible because of a lack of vigilance on the part of Parliament of the day. This Amendment is a case where your Lordships should be particularly vigilant in not allowing a clause which suggests that site value rating should be part of our system.
§ LORD AMWELL
Has the noble Lord read the speech of the Housing Minister, Mr. Brooke, made only two days ago?
§ LORD DYNEVOR
My right honourable friend the Minister for Housing is entitled to express any view that he wishes. I am expressing only mine.
The noble Lord has argued his Amendment persuasively and, as he said, on the face of it his proposal is a modest and relatively uncommitting one. It would be tempting to advise your Lordships to accept this Amendment if only out of curiosity to see what results the experiment would yield. But although I rather like experiments myself, I am afraid I must advise your Lordships, along with my noble friend, Lord Dynevor, against backing the noble Lord's experiment. I do so, first, on strictly practical grounds. I am advised that the cost of his pilot scheme, both in cash and time, would be really quite substantial. The evidence required for the work has not yet been collected, let alone collated. The areas to be covered by the noble Lord's experimental survey would have to be fairly wide and pretty diverse if any useful picture were to be obtained at all. I am sure the noble Lord would agree with me that there would be no point in carrying out this project unless it were done properly; and to do it properly would be expensive. It would be expensive in time and skilled manpower, both scarce commodities. There are barely enough valuers at the moment to administer the present method of rating valuation, and any material increase in their work would disrupt it entirely. In the new clause my noble friend chooses perhaps the busiest year they will ever have had with appeals—that following the year in which the new valuation lists will come into force. But I would suggest that almost any other year would be almost equally a bad choice.
Those are the practical difficulties. I think myself that they are really quite compelling but there is another. If the Government were seriously to consider the possibility of embarking on a system of site value rating, perhaps it would be quite right to ride roughshod over these practical difficulties in order to find out whether the proposed change, radical as it would be, would be likely to yield acceptable results or not. But the Government made it quite clear in the 1957 White Paper on Local Government Finance that they were not proposing to alter the main basis of local taxation. I think it would be politically dishonest as well as administratively 446 foolish to embark on the noble Lord's proposed experiment.
May I, in conclusion, in suggesting to your Lordships that you should reject this Amendment, read an extract from the April issue of the Journal of Rating and Valuation, a journal which I commend to your Lordships for light bedside entertainment. It is from the pen of Mr. Young, town valuer in Southern Rhodesia, where the art of site value rating is practised. He writes:Southern Rhodesia has had site value rating since the first Sanitary Board, but, with everything in its favour, from completely unsettled land to its thriving cities and towns of today, it must be admitted that the system has not produced the Utopia the site value rating protagonists would have us believe. Perhaps, instead of a pilot valuation, a visit to Southern Rhodesia to study the rating system would be helpful. But come quickly; we are trying to change it!
I thank the noble Earl for his reply. It would appear from the attitude of the Government that they do not agree with the rating and taxation of site land values, but they prefer the taxation of capital gains. However that may be so, I can only say that I have always taken the view, and always will, that nothing will be perfect until you get a Liberal Government in power. But as that does not appear to be immediately practicable, I beg leave to withdraw the Amendment; but I understand that the noble Lord, Lord Silkin, has something to say.
§ LORD SILKIN
I only want to say one or two words. I would not have said those but for the statement made by the noble Lord, Lord Dynevor, which I thought was very challenging and controversial, in fact unnecessarily controversial, because this Amendment cannot stand up in any case. It has no bearing on the Bill and it could not be carried out in time for the inquiry to have any effect on the Bill; and I do not think the noble Lord, Lord Meston, seriously expected that it would be acceptable. But the noble Lord, Lord Dynevor, suggested that if there was a problem it was incapable of being solved.
The task of securing for the community some of the benefits which arise from the activities of the community, I think we must accept, is a problem. We have only to look at the rising value of land, rising almost daily before our 447 eyes, to see that something is happening here which is most undesirable and which really ought to be tackled. Whether the taxation of land values is the answer or not I should not like to say at this stage; I think it is worth a debate. But the fact remains that to brush it to one side and to say that every effort that has been made to deal with this problem has been found unsatisfactory and has been repealed is really grossly unfair. It is a fact that one Party has tried to do something and another Party has frustrated it and repealed it when it came into office. That is true. But I deny entirely that it was repealed, on the occasions when something of the kind has been tried, merely because it was not workable. I believe it was workable and could have been made to work if there had been the desire to do it.
All I wanted to do at this moment was to register my view that there is a very grave problem here of land values, and it is coming on us very rapidly and will have to be dealt with. We know, each one of us from our own experience, that land which two or three years ago was worth £2,000 an acre is now fetching £10,000 or £12,000, entirely as a result of the efforts of the community, mainly because of planning permission to build; and this cannot go on. Private residential properties which persons bought for £3,000 or £4,000 a few years ago are now fetching as much as £8,000 or £9,000 or £10,000. This cannot be justified by the intrinsic value of these properties. So while the noble Lord, Lord Dynevor, is quite right in objecting to this particular Amendment, I want to register my view that he is wrong in suggesting, so far as I can gather from his speech, that it is not a problem at all, or, if it is a problem, that it cannot be solved; it has been tried before and it has failed. The solution was put forward on one occasion by a Liberal Government and reversed by a Conservative Government. A further solution was put forward by a Labour Government and again reversed by a Conservative Government. If the noble Lord regards that as evidence that it has not worked, he is satisfied with very little.
§ Amendment, by leave, withdrawn.448
§ Clause 3 [Valuation of certain hereditaments hitherto valued by reference to profits, etc.]:
I was beginning to get a little uneasy at constantly having to pick holes in noble Lords' Amendments. This particular Amendment, which is a drafting one, I can commend to your Lordships. I trust that it speaks for itself. If your Lordships wish, I shall be happy to explain it, but I am sure that it is a purely drafting Amendment. I beg to move.
Page 3, line 7, leave out from the third ("the") to ("the") in line 9, and insert ("second valuation lists for the purposes of which any order under this section has effect") —(Earl Jellicoe.)
§ On Question, Amendment agreed to.
§ Clause 3, as amended, agreed to.
§ 5.31 p.m.
§ LORD DERWENT moved, after Clause 3 to insert the following new clause:
".Subsection (2) of section three of the Valuation for Rating Act, 1953, shall be amended by the addition of the following words at the end thereof:
'For the purposes of this Act, a hereditament which is used for the purpose of providing persons with board and lodging for reward, whether full board or not, shall be deemed not to be used as a private dwelling-house where either—
§ The noble Lord said: The object of this Amendment is to provide a yardstick so that valuation officers can say with some exactitude, where a hereditament (I was going to use the word "house"), is used for the purpose of providing persons with board and lodging for reward, whether that house should be rated as a private house or as business premises. May I say at the beginning, so that there is no misunderstanding, that my Amendment in no way affects the widow who takes in a lodger to supplement her old age pension; it in no way affects a farmer who takes in two paying guests during the holiday season, and it in no way affects a gamekeeper who wants to let a room for a fortnight to Lady Chatterley.449
§ This problem, of course, particularly affects holiday resorts. There are houses all over the country where the business of letting rooms is carried on, but they are still rated as private houses. In case your Lordships think I am exaggerating the problem, there was one resort where an intensive investigation was made and it was found that businesses of this nature were being carried on on premises rated as private residences, and they all did one or more of the following things. They all accommodated up to ten persons, lodgers, paying guests, whatever you like to call them, and in certain cases up to 30 persons; they displayed exterior signs throughout the year offering accommodation; they had regular advertisements in the national Press, or they had displayed or other advertisements in the local guide. Yet they were all rated as private houses. The effect of this is twofold. Because these businesses, these so-called private houses, are not properly rated, their competitors—hotels, boarding houses and so on—in fact, the whole body of ratepayers in a locality, have to pay more rates. The second effect is that there is no power of inspection by the local health department; and, of course, the expense of conforming to the food hygiene regulations is avoided.
All this trouble arises from the Valuation and Rating Act, 1953, Section 3 (2), which reads as follows:
For the purposes of this Act a hereditament which is used for the letting of rooms singly for residential purposes shall be deemed not to be used for the purposes of a private dwelling or private dwellings if the whole or substantially the whole of the available accommodation is used for such lettings; but save as aforesaid a hereditament shall not be deemed for the purpose of this Act to be used otherwise than wholly for the purposes of a private dwelling or private dwellings by reason that one or more rooms therein are let for residential purposes.
The trouble arises in the first part of that provision, and lies in the phrase "substantially the whole". I will quote to your Lordships three cases which show what nonsense has been brought about by this wording. The case I will deal with first is the case of Walls v. Peak—the latter a Bournemouth valuation officer—because of certain remarks made by the noble and learned Lord, the Master of the Rolls, in his judgment. This is what he said:
This case has raised a question of the construction of Section 3 of the Valuation for
Rating Act, 1953, which has left me with a most unhappy feeling that the Parliamentary intention, in the end, may have been defeated. Excluding the dining room, eleven of the rooms of the house constitute accommodation in the hereditament suitable for being used for the letting of rooms. Seven only are let, and I cannot think it is possible that seven out of eleven is `substantially the whole'. If that is right"—
and he found it was right—
it is the end of the case.
And that remained a private house.
§ I will quote two other cases heard before the Lands Tribunal. The first was Buckley v. Tudge. In that case it was held that six out of nine in the available accommodation was "substantially the whole", and therefore the house the subject of the appeal was not a private dwelling-house. The other case was Willingdon v. Woodward, where it was held, again by the Lands 'Tribunal, that five out of seven of the available accommodation was not "substantially the whole", and therefore the house the subject of the appeal was a private dwelling-house. To make the matter even more idiotic, I will quote in those three cases the percentage of the rooms let to the number of rooms available for letting. In the first case, Walls v. Peak, this was a 63 per cent. letting, and it was found to be a dwelling-house, not a business premises. The next case was that of Buckley v. Tudge. This was a 66 per cent. letting, but not a dwelling-house. When we come to Willingdon v. Woodward it was 71 per cent., and it was found to be still a dwelling-house. It really is the most awful nonsense, and it is no good pretending that under present law valuation officers can conceivably make up their minds with any exactitude as to what is or is not a private dwelling-house or business premises.
Where the 1953 Act went wrong, in my view—and I think I have shown it—was in using the phrase, "substantially the whole". The courts have found that as taking how many rooms are let out of a total number lettable. I believe the Act was wrong there. My Amendment seeks to lay down a yardstick by which the number of rooms let, not the number of rooms lettable, will be the criterion. Your Lordships will notice in my Amendment that the first of the ingredients in the yardstick, as it were, is "four or more bedrooms." The reason why I have suggested that is that the Catering Wages
Commission had the same problem as to what was or was not a business subject to the Catering Wages Act. The Catering Wages Commission recommended to the Minister of Labour that four or more bedrooms should be the criterion of whether or not a place was business premises. When the Minister considered that, he told the Wages Board that he set up that the criterion should, in addition, be where sleeping accommodation for eight or more persons was let; and I have added:
more than half the available accommodation.
You have there a three-fold tier by which the Valuation Officer can say "it has four or more bedrooms, therefore it is a business premises", and "it has not got that accommodation, therefore it is a private house." That is what I am seeking to do.
§ An Amendment of this kind was introduced into another place and was resisted by the Parliamentary Secretary on three grounds. The first was that the provision in the 1953 Act, which it seeks to modify, has no relevance to the private house which takes boarders during the holiday season, but merely distinguishes the flatlet house from the private dwelling house. I agree that I do not know, but I hope that we have met that particular point, which I am not sure is a valid one. But assuming it is valid, we have tried, in my Amendment to meet it and I think we have succeeded.
§ The second reason he gave for rejecting the original Amendment was that the definition in the 1953 Act had applied for five years—indeed what a mess it has got into ! —and that to change it immediately would probably mean delaying the 1963 revaluation, from which hotels, boarding houses and other commercial properties are likely to benefit most. Redrawing the boundary line would also create further anomalies. I cannot accept that. To lay down a yardstick and say that that delays the valuation officers in carrying out their duty to make certain something which at the present time is dense fog, is nonsense. Indeed, I should have thought that if we made it certain what had to be done, the anomalies would certainly decrease, even if they did not disappear altogether.452
The third reason he gave was that
The definition will lose importance in 1963 and be entirely irrelevant by 1968.
I do not accept that either. When all the properties are valued on the same basis, the current basis, there will still be a difference between the private house and business premises; so it will not, in fact, disappear. Finally, I come back to the words of the Master of the Rolls. He said that in his view the intention of Parliament was being defeated. In my view, it is quite time that the intention of Parliament stopped being defeated, and I beg to move.
After Clause 3 insert the said new clause.— (Lord Derwent.)
§ 5.47 p.m.
My noble friend's Amendment, which he put with vigour and most persuasively, touches on an area of rating law and practice, which I should be the first to admit is an exceedingly difficult one. Certainly the particular subsection of Section 3 of the Valuation for Rating Act, 1953, which he seeks to amend has given the lawyers plenty of trouble. What is more important, the legal language in which it is wrapped up bears on the practical problems and grievances and difficulties of a great many people. It is certainly true that there is a widespread feeling amongst hotel-keepers and boardinghouse keepers, especially in seaside towns, whose properties are rated on the commercial basis, that they are exposed to unfair competition from people who take in trippers and run what may virtually be a boarding house, yet manage to escape the rate burden because of the shelter provided by this part of the 1953 Act. I think that is all common ground between my noble friend and myself. As I understand it, his amending clause would provide that where any one of three tests is satisfied—and they are set out quite clearly—the house would not be treated as a dwelling house for the purposes of rating valuation, and would therefore not get the benefit of the 1939 valuation, or from 1963 to 1968 of any possible derating which may be introduced under Clause 2 of the present Bill.
Before I turn to the substance of my noble friend's Amendment I should like, 453 parenthetically, to point out one technical difficulty in his proposed Amendment. In paragraph (c) "available accommodation" is referred to. But in fact, for the class of house or hereditament to which his Amendment is particularly addressed there would be no definition of "available accommodation", because the definition already contained in Section 3 (2) of the 1953 Act would not be applicable, as it is in terms of hereditaments used for the letting of rooms singly—namely, flatlet houses, not the type of house which is covered in the second part of that particular subsection. It is, in fact, a technical difficulty—and only a technical difficulty—but I felt I should refer to it.
§ LORD DERWENT
I am sorry to interrupt my noble friend. I have not quite understood it. It is the words, "available accommodation" that are worrying him over the technical difficulty. Is that so?
Yes, it is; because if my noble friend will look at the subsection which comes in the first part of the clause he will see that it refers to flatlet houses, not to the type referred to in the second half of that particular subsection. But again I would emphasire that that is only a technical difficulty which doubtless could be overcome by drafting.
As I have suggested, there may well be a case for saying that some of the houses which the new clause would take out of the class of "dwelling houses" ought not to have been in that class, with the benefit of valuation at 1939 values, would not dissent from that view. But there are two sides to this picture. On one side there are the hotel-keepers and boarding-house keepers; and clearly we must bear their interests in mind. But we should not forget, I would suggest to noble Lords, a less organised, more numerous and no less deserving group of people—and here I come to those people, very often widows, who eke out their incomes with a few boarders during the summer season at the seaside or who help themselves, and at the same time help the community, by putting up students at our universities, technical colleges and training schools.
Under my noble friend's Amendment, the widow with five rooms available in 454 an ordinary small house would not have the benefit of a 1939 valuation if she took three boarders—students perhaps in three of the rooms; and that, I would submit to your Lordships, would be harsh. Apart from any question of where the dividing line should be drawn—and there are great difficulties in drawing this particular dividing line—I suggest to the Committee that the effect of the new clause must be looked at in the light of the principle underlying Clause 2 of the present Bill: that a jump from 1939 pre-war values to current rental values could suddenly impose so large an increase in the share of the rate burden as to warrant the use of the new power in Clause 2 to cushion that effect.
On that basis, this Amendment ought not, I suggest, to be made, for its effect would be that possibly a substantial number of hereditaments which have hitherto been valued at 1939 rentals would move immediately at full rating to current values without the benefit of the action taken under Clause 2. It is worth remembering (and I have no hesitation in repeating this argument, which I think was used by the Parliamentary Secretary in another place) that boarding houses and hotels proper will have had their increase from 1934 to 1955 values cushioned by temporary derating from April 1, 1957 to April 1, 1963. It would, in fact, impose a double jump, as it were, on some people who may be possibly undeserving, but on others who most certainly are deserving.
In any event, I would suggest to your Lordships that it would be a mistake to tamper with this definition of "dwellinghouse", difficult though it may have proved and still prove, after it has been in force for five years and just at a time when it is becoming less important. From April 1, 1963, it will be important only if derating orders are made under Clause 2 and only to the extent of any derating allowed under that clause. From 1968 it would cease to have almost any relevance. I would admit it would have some slight relevance, the relevance being that it is true that the dwelling house may even then have a somewhat lower assessment than the professed boarding-house which is next door and is in other respects quite similar, but only to the extent that 455 the hypothetical tenant would be prepared to pay more rent for the boardinghouse which he could conduct as such without the need to obtain planning permission for a change of use; and the Amendment does pot change that.
What I would suggest to your Lordships is that the proposed Amendment (I should be the first to agree that it is not without merit) is virtually locking the stable door after the bogus boardinghouse keeper has almost bolted. Finally (although I do not wish to lean too heavily on this argument), the Amendment is open to serious practical difficulties. The new clauses will have effect immediately, and they will throw a great burden of work on the valuation officers at the very time when they are going to be fully stretched in preparing the 1963 lists. I do not wish to argue this what one might call administrative difficulty too far, but I feel that your Lordships should be aware that there is a serious practical difficulty involved in accepting this Amendment. In the circumstances, I feel I must advise your Lordships against agreeing to this new clause, although I should be the first to say that my noble friend has moved it in persuasive terms.
§ LORD DERWENT
As regards my noble friend's general comments, I do not agree with them. He talks about difficulties of definition. I may have the definition wrong, but the principal difficulty, of course, is the 1953 Act; that is what causes all the fog. He then says in his other general remarks that the boarding-house keeper is becoming less of a problem—I know the way the argument went. But the trouble is, he is becoming more in numbers. So, although what he wrongfully gains may become less, his numbers become greater, and the problem is a very, very serious one, particularly in resorts which have a short season.
I am not going to ask your Lordships to divide this evening on this Amendment. There were a good many points raised by my noble friend. I may put down a different Amendment on the next stage, but I should like to look at the points he raised. But although I am not asking your Lordships to divide tonight, I give due warning that if I decide to put down this or another 456 Amendment on the next stage, I am not saying I shall not divide on that. But I should at the moment like to look at it again before I do so. I beg leave to withdraw it.
§ Amendment, by leave, withdrawn.
§ Clauses 4 and 5 agreed to.
§ 6.0 p.m.
§ EARL JELLICOE moved, after Clause 5 to insert the following new clause.
§ Adjustment of gross value by reference to provision of or payment for services, etc.
§ ".—(1) The following provisions of this section shall have effect for the purpose of ascertaining the gross value of a hereditament in oases where it falls to be ascertained by reference to the rent payable in respect of that or some other hereditament (hereinafter referred to as the standard hereditament) and either or both the following conditions are fulfilled, that is to say, the rent of the standard hereditament is partly attributable to the provision by the landlord of services in relation to that hereditament (including the repair, maintenance or insurance of premises not forming part of that hereditament) or the tenant, in addition to the rent, contributes towards the cost of any such services.
§ (2) Where the rent of the standard hereditament is partly attributable to the provision by the landlord of such services, the sum falling to be deducted from that rent for the said purpose as being the amount attributable to the provision of those services shall not include any amount in respect of—
- (a) any profit made, or which might be expected to be made, by the landlord in providing those services;
- (b) the cost of repairs to, and maintenance and insurance of, premises not forming part of that hereditament.
§ (3) Where the tenant of the standard hereditament, in addition to the rent,—
- (a) makes payments to the landlord in consideration of the landlord undertaking to provide any such services in relation to that hereditament; or
- (b) otherwise contributes (directly or indirectly and whether in pursuance of an undertaking to do so or not) to the cost of repairing, maintaining or insuring other premises not forming part of that hereditament but belonging to or occupied by the landlord, being premises which the landlord has not undertaken to repair, maintain or insure, as the case may be;
§ (4) Nothing in the foregoing subsection shall be taken to prejudice any right to make a deduction from the rent of a hereditament, for the purpose of ascertaining gross value, in 457 respect of services provided by the landlord or other matters.
§ (5) Any reference in the foregoing provisions of this section to premises includes a reference to any plant or machinery which by virtue of section twenty-four of the Act of 1925 is treated as part of those premises for rating purposes or would be so treated if those premises were a rateable hereditament.
§ (6) In the definition of "gross value" in section sixty-eight of the Act of 1925, the proviso (which provides that no account shall be taken of the value of services provided by the landlord and which has become unnecessary) shall cease to have effect.
§ (7) An alteration in a valuation list made in pursuance of a proposal made for the purpose of giving effect to any of the foregoing provisions of this section, being an alteration which would by virtue of subsection (1) of section forty-two of the Act of 1948 (alterations retrospective to beginning of current rate period) be deemed to have had effect as from a date before the passing of this Act, shall be deemed to have had effect as from the passing of this Act."
§ The noble Earl said: This new clause, the introduction of which was foreshadowed by my right honourable friend in a Written Answer in another place on May 18, seeks to remove an anomaly in the law governing the valuation for rating of hereditaments which share the use of premises that neither form part of those hereditaments nor constitute a separate hereditament. Possibly the best example is a flat. Each flat in a block has the use of stairs, lifts, corridors, the roof which covers the block and the outside walls that support it, and so on. Normally, no flat incorporates any of these common parts. The same situation can, of course, arise elsewhere. Adjoining houses may share a common drive to their respective garages; and offices in a block and maisonettes are in many ways comparable to flats.
§ To understand the anomaly—and the Amendment which I am moving is an important one—I feel that, at the risk of teaching those of your Lordships who are connoisseurs in these matters to "suck eggs", and at the risk of sending asleep those of your Lordships who are not, I must briefly outline the process of ascertaining rateable values. For a nonindustrial building, the first stage is to find out the gross value. In general terms this is the rent at which the building might reasonably be expected to let from year to year if the law's hypothetical tenant (and I think it was Mr. Aneurin Bevan's fugitive one) undertook 458 to pay all usual tenant's rates and taxes, and if the landlord undertook to bear the cost of the repairs, insurance and the other expenses, if any, necessary to maintain the hereditaments in a state to command that rent. This definition comes from the Rating and Valuation Act, 1925. As regards dwellings, the Act of 1953 provides a slightly different definition for the purposes of the current, 1956, lists. It is broadly the same, but relates the rent to 1939 values; and we shall be going back for the next list to the 1925 Act definition.
§ From the gross value thus obtained, a deduction falls to be made in accordance with a statutory scale as representing the cost of repairs, maintenance and insurance. The value as so reduced is the net annual value of the building. Its net annual value is also its rateable value unless it is entitled to some measure of derating—for example, the rateable values of offices represent at the moment 80 per cent. of their net annual values. For the sake of completeness, I ought perhaps to mention that for other properties—industrial buildings., land with ancillary buildings, public utility undertakings and the like—net annual value is ascertained direct, and is the annual rental value with the tenant bearing the cost of repairs, et cetera.
§ In the case of a block of flats, there are four stages in the established procedure for determining rateable value. First, the rents of the individual flats, appropriately increased where the tenants are liable for any repairs, are aggregated. From the aggregate, the cost of any services provided by the landlord is next deducted. The third stage is to reapportion the reduced amount among the flats, the amount apportioned to an individual flat being taken as its gross value. Finally, a deduction is made in accordance with the statutory scale from gross value to net annual value in respect of repairs, maintenance, et cetera. The major question with which the new clause deals is what it is permissible to deduct at the second stage—namely, from the aggregated rents of all the individual flats.
The leading case, I understand, is Bell Property Trust Limited v. Hampstead Assessments Committee. In that case, decided in 1940, the Court of Appeal allowed the cost of repairs and maintenance of the common parts of the block
—staircases, corridors, lifts, roof, et cetera—to be deducted at the second stage. That case, however, was taken under statutory provisions which have since been amended. Under the Third Schedule to the Valuation (Metropolis) Act, 1869, there were no fixed or even maximum rates of deduction for "buildings let out in separate tenements". The deductions were "to be determined in each case according to the circumstances and the general principles of law". This meant that they were usually based on an estimate of the average annual cost. The following is a brief extract from the judgment of the Court in the Bell case. The crucial words, I think, are these:
… As the cost of these repairs was deducted in arriving at the gross rental, they form no part of the sum on which this percentage has been taken, so they have not been deducted twice …
The basis upon which the earlier deduction was calculated is not, I think, known, but in view of the conclusion (which was the conclusion of the noble and learned Lord, Lord Goddard) it presumably did not include any part of the cost of repairing the common parts.
§ Under the Rating and Valuation (Miscellaneous Provisions) Act, 1955, London was brought into line with the rest of the country as regards the ascertainment of net annual value from gross value, although slightly different scales of percentages were retained for London. The deduction now to be made is not directly related to the actual cost of repairs, but is a fixed percentage. In the case of the ordinary house this percentage deduction must cover repairs and maintenance of the roof, external walls, access path and drive, gutters, et cetera, as well as repair and decoration of the house internally.
§ What about flats? Here we come to the heart of the difficulty. If the cost of repairing, the common parts in a block of flats is deducted before gross value is computed, as the 1940 case, the Bell case, provided for, then the percentage deduction from the individual gross values of each separate flat in the block would need to cover only internal repairs and decoration, and not, as in the case of a house, all repairs, including repairs to the outside. The Government do not consider that this discrimination as between the flatholder and the house- 460 holder is just. It would appear to lead to obvious discrimination in favour of the flatholder.
§ Since the provisions of the 1955 Act came into force, the Inland Revenue have assumed, perhaps incorrectly, that this change in the law achieved the object of putting houses and flats on the same basis as regards deduction for repairs: all their assessments in the 1956 lists have been made on that basis, in fact. That is to say, in the case of flats, they have not allowed deductions to be made for repairs to the common parts of the block at the second stage before the gross value of each individual flat was fixed. It was largely on those grounds that the Inland Revenue resisted a move to apply the 1940 Bell decision, as regards the 1956 lists, to the same block of flats which was at issue in the Bell case. However, in September of last year, in the case of Peachey Property Corporation and Ors. v. E. C. A. Green, V.O. (which means valuation officer), the Lands Tribunal decided that the decision in the Bell case must be applied. The main purpose of the new clause is to reverse that decision in the circumstances which apply in London now under the 1955 Act.
§ In asking your Lordships to agree to this Amendment, I wish first of all to make it crystal clear that, notwithstanding what is said in a letter which has already been quoted in this House and which appeared in The Times to-day, the new clause will not affect the assessments of thousands of flats—and, indeed, offices—as has been alleged in certain quarters. I am assured that, in itself, it will not give rise to more proposals for increases in rate assessments. What it will do is rather to prevent the making of thousands of proposals to reduce existing assessments. If that reduction were to happen, it would merely transfer that share of the burden of rates on to other shoulders, largely those of householders, if this clause is not acceptable. I need hardly say that these proposals would fall upon the valuation officers at the worst possible time. If this clause is not accepted, we anticipate that there are likely to be thousands of proposals to reduce existing assessments. If those proposals came now, they would obviously come at the worst possible moment, to which I have already referred in dealing 461 with another Amendment, when the resources of the Inland Revenue are fully stretched with the preparations of the 1963 valuation lists.
§ I would again emphasise that it is my understanding that the clause, the acceptance of which I am moving, will not in fact give rise to any proposals for increases in rating assessments. It may, of course, be argued that the explanation of the Peachey case which I have given (if I may be excused the shorthand of calling it the "Peachey case") has been in terms of external walls, access paths, and so on, and the repair of these particular items was not in fact in issue in that case. There, as I understand it, the legal arguments turned on matters like stairs, corridors and lifts common to the block in question. However, that does not, of course, mean that, if the Peachey decision were allowed to stand, there would be no deduction for repairs to these other parts of the block in the process of determining the gross values of individual flats. I am advised that the Peachey principle covers them as well as repairs to the parts discussed in that actual case—namely, that it would cover the repair of outside walls, et cetera, as well as things like the maintenance of and repairs to a lift.
§ It may also be argued—and one can quite understand the argument—that in a block of flats lifts are essential, but that lifts are rarely, if ever, found in an ordinary house. Part of the answer to that is that the value of the lift is comprised in the rental value of the flats. The flat at the top of a twelve-storey block would have very little rental value if there were no lift giving access to it. Be that as it may, the weakness of the argument for special treatment of lifts, and any other common parts peculiar to flats in a block, is, I think, best demonstrated by considering the situation in a parallel field—the assessment of offices in blocks. And the assessment of offices will, of course, be governed by the decision in the Peachey case, and, indeed, by this new clause, if your Lordships decide to incorporate it in the Bill.
§ If, as is not uncommon with large concerns, an office block is in single occupation, it is assessed to gross value as a single hereditament. No deduction is made in arriving at gross value for the maintenance of lifts, et cetera. Probably no opponent—if there is such a 462 person—of the new clause would argue that there should be such a deduction. The cost of repairing the lift in that case is regarded as covered by the statutory deduction from gross value to net annual value. If, now, the large concern vacates that block and the landlord lets it in suites to a number of smaller concerns, the Peachey decision would require a deduction to be made for the repairs of common parts, including the lifts, in arriving at a gross value of the individual suites. In addition, scale deductions would also be made from gross value to net annual value for each of the suites. To allow the Peachey decision to continue in this field would, we consider, give rise to anomalies. The suggestion that the common parts used for access—the lifts, stairs, and corridors in the Peachey case—are distinguishable from the other common parts—walls, roofs, gutters, and so on—is not, I would suggest, at least in equity, tenable.
§ I should perhaps mention that subsection (2), paragraph (a), of the clause also secures that any profit made by the landlord in providing other services in relation to the hereditament—for example, heating, or a supply of hot water, or porterage or cleaning services—is not deducted in the process of arriving at gross values. This is not, in fact a new principle in the same case already quoted, the Bell case, the Court of Appeal held that the deductions for the cost to the landlord of providing services in arriving at the gross value of each flat could properly include an allowance for a reasonable profit to the landlord on the provision of those services. The Government considered in 1948 that that decision on a reduction for profits ought to be reversed, and this was achieved by the provisions of the proviso to Section 82, subsection (7), of the Local Government Act, 1948. This specified that the amount to be deducted from the rent in ascertaining the gross value was to be the cost to the landlord of providing those services "exclusive of profit".
§ Section 82 of the Act of 1948 was repealed by the Valuation for Rating Act, 1953; but Section 6 of that Act made similar provision. The present clause, subsection (2), paragraph (a), replaces the provision in the Act of 1953 and also the proviso to the definition of "gross value" in Section 68 of the Act of 1925, and extends the exclusion of 463 profit from the deduction to other cases in which separate hereditaments share common parts—principally offices in a block. There is clearly no distinction, I would submit, in principle in this respect between "offices" and "dwelling houses". I should perhaps add that the Amendments to Clause 27, (Amendment No. 26) and to the Fifth Schedule (Amendment No. 37) are, for the most part, consequential upon this new clause.
§ May I, in conclusion, and with apologies for detaining your Lordships with, to some extent, a technical explanation, summarise the primary reasons which I have advanced for this Amendment? In the first place, the Government believe that the strict interpretation of the law has given rise, in the case of flats and offices in the London area, to obvious anomalies. They had thought that the 1955 Act had clarified and tidied up the position. However, it is clear from the Lands Tribunal decision in the Peachey case that this is not so. This Amendment is designed to straighten out the situation. Secondly, the Government believe the proposed Amendment to be, in equity, valid. If it is not adopted, there is bound to be a quite considerable transfer of the rating burden from the shoulders of flatholders and the occupants of offices on to the shoulders of other classes of ratepayers, mainly householders. This will come at a time when the householder is already likely to be under rating pressure. Thirdly, if no Amendment is made, the Inland Revenue is bound to be faced with a mass of proposals for decreased assessments at a time when the resources of the valuation offices are fully stretched with the preparation of the 1963 lists. Finally—and I wish to emphasise this—if, as I hope, your Lordships decide to adopt the proposed new clause, it will not lead to any increase in the assessments of the properties with which it deals. I beg to move.
After Clause 5 insert the said new clause.—(Earl Jellicoe.)
§ 6.10 p.m.
§ LORD DERWENT
I am going to ask your Lordships not to accept this new clause. I suggest that there is little merit in it, and that it should never have been 464 brought into your Lordships' House at this stage of the Bill in circumstances, about which I am almost tempted to use the word "improper". I am also going to suggest that, if your Lordships accept this clause, it is going to run into considerable trouble in the House of Commons.
I am going to tell your Lordships the same story as the noble Earl, but with rather different emphasis. Since the Rating and Valuation Act, 1925, repairs to the common parts have been allowed to rank in arriving at the value. In spite of my noble friend putting up a smokescreen about offices, offices have nothing to do with it. It was considered fair then and it has been considered fair ever since that those parts which are common—lifts, passages, pathways and so on—should rank for repairs. I submit that there is no particular reason for altering this now. My noble friend said that anything saved in rating would be transferred perhaps to houses, but I am advised that it would make practically no difference. My noble friend also says that it will not alter the assessment of any blocks of flats involved. I am told that the increase may be very rapid and large. I cannot produce figures for this, but those who advise me could do so, and this is what they tell me.
The next Rating and Valuation Act, in 1953, removed the item of profit from the cost of services—in my view, quite rightly—and I do not think that it was much in discussion. Then we came to the 1955 Act, where perhaps a little of the "hanky-panky" started. At that time, the Government introduced an amendment to the law which sought to remove from services, in the context we are talking about, the cost of repairs to common parts. I am told—I do not know with what truth—that the clause of the Bill was so obscure that neither House realised that this was the intention of the Government, but that is difficult to prove. What I do know is that in neither House did the Minister in charge of the Bill explain to the House that that clause of the Bill was going to have the effect of taking out the repairs to common parts.
Now we come to the great question of the immense administrative work that this is going to place on the valuation 465 officers. What happened was that the Government thought that in the 1955 Act they had altered the law and the valuation officers then proceeded to function as if the law had been altered. What is going to cause the work is the fact that the law had not been altered. In connection with the valuation of a flat in 1957, the Peachey Property Corporation brought a case before the tribunal making an objection to the valuation of the valuation officer, as a test case. The case was not heard until September, 1960, and the Peachey Company won.
This Bill was not introduced in the House of Commons until November, 1969, two months later, when the result of the Peachey case before the Lands Tribunal was known to the Government, No mention was made of the Government's intention to put in this clause on Second Reading in the House of Commons or during the Committee stage, of which there were 17 sittings, or on Report stage, which took two days. It was only in an answer to an inspired question in the House of Commons that it suddenly appeared that the Government had further intentions, which so far they had not divulged to the House at all.
What is worse is that the Valuation Office have appealed to the Appeal Court in the case of Peachey. No decision has been given by the Appeal Court and the case is still sub judice. If this new clause goes into the Bill, it automatically upsets the Peachey case. As your Lordships realise, I do not like the clause and I do not like the way it has been done. In the unlikely event of your Lordships agreeing with the Government and not with me, I feel, in all the circumstances, that the decision about whether this new clause is going to the House of Commons or not should be made openly by your Lordships and not just allowed to slip through, because it is believed by certain honourable Members of another place, rightly or wrongly—I cannot tell you which—that the Government have introduced this clause in the hope that it will become a Lords' Amendment and thereby undergo less discussion when it goes back to the House of Commons. I do not know whether that is true or not, but that is what many honourable Members think, and this Amendment is going to have 466 rough treatment if your Lordships send it to the House of Commons. I believe that, in all the circumstances, this new clause should not go through without your Lordships having openly expressed your views upon it.
§ 6.28 p.m.
§ LORD LATHAM
I am sure that the House would not wish to have its decisions determined or, shall I say, deflected by a threat of what might happen in the House of Commons. That, in fact, is what the noble Lord has threatened. A threat based on apparent knowledge of what some Members of the House of Commons may do should not deter your Lordships' House from doing what it ought to do.
We support this Amendment, which has for its purpose the overcoming of mischief arising from two decisions by the court. While decisions of the courts are not maintainable, it is proper for Parliament, whether in this House or another place, if it is in the public interest, to correct what the courts have decided. There is no impropriety in your Lordships' House so doing. The clause is intended to correct the mischief which flows from the decisions in the Bell and Peachey cases. Perhaps it is unfortunate that the Government did not discuss this Amendment with the Associations representing the rating authorities, but perhaps, in the circumstances, the Government may be partially forgiven for that failure to discuss. The situation is such that this anomaly ought to be corrected, with one or two other anomalies which either issue from that or otherwise. We will certainly support the Government in this Amendment.
I think the burden of my noble friend's complaint against this clause is twofold. In the first place, I have given an assurance to your Lordships, based on the best information that I can command—and I looked at this and went into it with some care, because I anticipated that the clause might not have an altogether easy passage—that the passing of this clause will not lead to any increased assessments. I cannot understand the logic behind the thought that it will, because the type of property with which the clause is dealing is already valued in the 1956 lists on the principle of this clause, as the valuation officers, rightly or wrongly, believed that what 467 they were attempting to do was already the position.
My noble friend says he is informed that this will lead to substantial increases. I feel that it is up to him, if that is the case, to give the information, and not, if I may put it quite delicately, hide behind information which he says he is not at present in a position to produce. If he has that information, no one would wish to hear it more than I; because it is clean contrary to the expert opinion that I have received.
§ LORD DERWENT
I said that I could not give details; and my noble friend has not given his details either.
What I have done is to give the logic of my reasoning; but, as I understand it, my noble friend has not given the logic behind his claim that it will lead to increases.
Secondly, my noble friend complained of the way in which the Government have handled the inclusion of this clause in the Bill. He is, of course, quite entitled to make that case and to argue that it should have been included in the Bill in another place. I am not a great expert on Parliamentary procedure, but I know of nothing abnormal in including a new clause in a Bill coming from another place to your Lordships' House; and there was in this case a practical reason behind the delay. The Peachey decision was given, I think, in late September; and we have already heard enough this afternoon to know that it was fairly far-reaching. It was obviously necessary to consider its implications and to take the advice of the Board of Inland Revenue legal advisers and of the valuation office on its consequences for administration. The views of Ministers then had to be obtained and Government policy determined.
Noble Lords who are better acquainted with these matters than I am will know that the autumn and winter, at the beginning of a new Session, is possibly not the easiest time to fit in considerations of narrow, albeit important, issues like those underlying this clause. Thereafter it was necessary to draft. The draftsmen are (I do not want to overstate this) extremely heavily engaged at 468 this time of the Session, and this is possibly not the easiest of subjects to draft. I would ask my noble friend to take my assurance that it would have been impracticable to deal with this issue in Committee in another place, despite their seventeen meetings.
§ LORD SILKIN
The noble Earl is doing his best in a difficult task, but was it not possible to give the Committee in another place some idea as to what was in the mind of the Government? Why should it have been left until the Bill had left the other place before any inkling of this arrangement was given? If the Government were seriously considering amending or clarifying the 1955 Act, surely they could have mentioned that in Committee, rather than leave it, as the noble Lord, Lord Derwent, said, to an inspired Question, I believe after the Bill had received its Third Reading in another place.
I am afraid I do not know the precise mechanics of this, and I am not an expert in the procedure of another place.
§ LORD SILKIN
I am putting a simple question to the noble Earl. He does not have to be an expert to say why the Government did not refer to this throughout the stages of the Bill.
To have had any purposeful discussion in another place it would have meant having a substantive Amendment down.
I should have thought that there was little point otherwise. However, I do not wish to pursue this aspect with the noble Lord.
Then my noble friend suggested—and I do not wish to labour this point, because the noble Lord, Lord Latham, has touched on it—that it was possibly the Government's intention to smuggle this clause into the Bill in your Lordships' House, with the idea of sneaking it through the other place, when the Bill goes back, without their noticing it. That, I feel, is a little far-fetched; and I think it also underestimates the attention which your Lordships give to important legislation of this kind. Finally, my noble friend has stated that he is in 469 favour of your Lordships' taking an open decision openly arrived at on this clause. I think all your Lordships would welcome that, because that is surely the point of debate in this Chamber.
VISCOUNT COLVILLE OF CULROSS
The noble Earl has not yet answered the point made by my noble friend Lord Derwent, that this case is now on appeal from the Lands Tribunal to the Court of Appeal. In these circumstances, is this a very suitable moment for legislation to be introduced to pre-judge the issue of the case?
§ LORD CAWLEY
The noble Lord, Lord Latham, said that we were seeking to correct the courts. But as I see it, we are seeking to correct the law which has been interpreted for us by the courts.
§ LORD DERWENT
Before the question is put, could my noble friend answer my noble friend Lord Colville of Culross?
I am sorry I did not answer that particular point—it escaped me. I understand the position is that the hearing by the Court of Appeal of the appeal against the Lands Tribunal decision has been deferred, with the consent of both sides.
§ 6.38 p.m.
§ LORD LINDGREN
This discussion as I understand it, raises a technical point in regard to both the other place and your Lordships' House. A decision which has been made in the Courts in regard to past legislation in no way inhibits this House or another place in changing the law. If we find there is a defect, as there obviously is, and if learned judges make decisions which are at variance with what was thought to be the interpretation of an Act, surely it is the correct function of a Legislative Chamber to make clear the original intention of the legislation. That, as I understand it, is what is being done here. I should be the last to be party to going behind the backs of the Courts to undermine what is the function of the Courts. But as I understand it, what we are really trying to impose is the intention of the original Act of Parliament; and if that is so, I see nothing wrong with it.
§ On Question, Amendment agreed to.470
§ 6.40 p.m.
§ LORD MILVERTON moved, after Clause 5 to insert the following new clause:
§ Advertising stations
§ ".In section fifty-six of the Act of 1948 (which provides for advertising stations to be separate hereditaments in certain cases)—
- (a) after the word 'right' where it occurs for the second time there shall be inserted the words 'together with any hoarding, frame, post, wall or structure erected or to be erected in the exercise of that right';
- (b) after the word 'accordingly' there shall be inserted the words 'provided that liability for the payment of rates upon such hereditaments shall only arise as from the date of exercise of the said right'".
§ The noble Lord said: The reason for this Amendment can be briefly stated. Section 56 of the Local Government Act, 1948, provides that if the owner of land or of a building enters into an agreement granting to another person the right to place an advertisement on the land or building, the grant creates a rate, able right. But in a case decided in the House of Lards on June 23, 1960, Imperial Tobacco Company Limited v Pearson it was held that the value of this right for rating purposes could not include the value of any structure put up by the advertiser after the date of the agreement; the value had to be taken at the date when the agreement was entered into. This decision, as was said by Viscount Simonds in his Opinion, marked a departure from the usual course of rating law. In rating law, premises are valued in the physical condition in which they are at the relevant date, so until this decision one would have expected that, if a structure was subsequently put up in the exercise of such a right, the rateable value of the advertising station would go up and the rating authority would receive an increased payment by way of rates.
§ Turning to the Amendment, I would point out that paragraph (a) accordingly seeks to provide that the value of any hoarding, frame, post, et cetera put up in the right of the exercise to display advertisements shall be taken into account in addition to the value of the premises before erecting such hoarding or the other things that may be concerned. This part of the Amendment is in favour of the rating authority. The next part is an attempt in some way to restore the 471 balance. Paragraph (b) of the Amendment provides that liability for the payment of rates on an advertising station shall not arise until the advertiser begins to exercise the right. At present, liability for rates arises as soon as a right to display the advertisements has been granted, even though the right is not used for some time or, in fact, as sometimes happens, it is not used at all. That, stated briefly, is the case for this Amendment. I beg to move.
After Clause 5, insert the said new clause.—(Lord Milverton.)
§ LORD DENNING
May I say a word on this proposed Amendment? I hope the Committee will accept it, because I happened to be engaged in the decision to which my noble friend has referred. It was a case where the Imperial Tobacco Company put up a great hoarding in Bradford on some premises of the Bradford Corporation, with a neon flashing light, "Players please". Before 1948, that flashing light on the building would have been rated on the occupiers of the building itself, the Bradford Corporation, and they would have paid £165 a year. That would be the rateable value. In 1948 Parliament deliberately placed the responsibility for the rates of such an advertising station not on the occupier of the house or the building, but on the advertiser who put it up—in this case, on the Imperial Tobacco Company. In other words, the liability for rates on advertising stations was placed on the advertiser himself.
As I read the Act, the intention of Parliament was not to alter the amount of rates payable, but simply to make the advertising contractor liable and not the occupiers of the house. In a decision which came before this House, sitting judicially, last year, it was held that the amount of the rates payable had been altered; that the advertising contractor, owing to the words of the Act, was only liable to be rated on the right to put up the hoarding. He was not rateable on the actual structure itself, and it was common ground that in rating the ordinary principle of rating is that you rate the structure which is erected. But owing to the words of this Act of Parliament where it said "the right" it did not say "right including the structure", and 472 the rates have been diminished on all these stations. In this case, it meant that the rating value was reduced by £15. I am sure that was quite undesigned by Parliament. In the result, Lord Simonds said it was the literal wording of the Act. I sought to get out of it in a dissenting Opinion, but I had to adopt the literal translation. If this Amendment restores the 1948 position, the proper amount of rateable value, and enforces the law as it should be on the advertising contractor, I ask the Government and your Lordships to accept it.
§ LORD BURDEN
After the explanations of my noble friend, and the powerful arguments of the noble and learned Lord, Lord Denning, there is little one need add in support of the case. It is perfectly true, as the noble and learned Lord has said, that the amount at issue in this instance is a matter of £15, but it is of tremendous importance to local authorities, because undoubtedly this will be taken as a test case and it will throw the whole practice of local authorities out of line. As a plain man, and not as a legal expert, it seems to me that one cannot rate a structure for advertising until that structure has been erected. Therefore, it must be at a later stage that the value to the advertising company, or whoever it may be, has to be assessed; and it is agreed that only when the full value is being taken by the advertising people will the full assessment come into account. As a plain man, it seems to me that the case which is put up is unanswerable, and I trust that the Government will be prepared to accept it.
§ LORD DERWENT
Clearly, on rating grounds this is probably desirable, but I should like to ask whether I have misunderstood this Amendment, and whether paragraph (a) could not have most undesirable effects. As I understand it, the rating will be done after the advertisement is up, as it were, with the structure. Some advertising structures nowadays are extremely expensive from the point of view of lights, and so on. The only danger I see—and I do not know if it is a real one, and perhaps somebody will tell me—is that it is likely to lead to cheap and shoddy advertising; and that, I am sure, the noble Lord would not want.
§ LORD BURDEN
One cannot speak for advertisers, but as this is only restoring the position which existed prior to 1948 I see no point in thinking that it is going to lead to shoddy workmanship. I have a higher opinion of advertisers than that.
§ LORD DERWENT
Of course, pre-war and just-post-war advertising was much more shoddy than present-day outside advertising.
§ LORD BURDEN
Very solid funds are still at the disposal of the large companies for advertising, as the Inland Revenue people will tell you.
§ LORD MILVERTON
It is obviously impossible for me to answer that question, because from anybody except professional advertisers it is a matter of opinion, but I should have thought that the ordinary advertiser would wish to make his advertising attractive. Therefore the matter may be safely left to self-interest.
I do not think it falls upon me to discuss the merits or otherwise of the advertisements as they will be as a result of this clause; it is really for me to discuss the merits or otherwise of the Amendment moved so winningly by my noble friend Lord Milverton and seconded so ably by Lord Burden, and on which it has been very helpful to have the advice of the noble and learned Lord, Lord Denning. I am advised that there are some possible difficulties with the technicalities of the drafting of my noble friend's Amendment. For example, there may well be considerable difficulty in valuing, in the words of paragraph (a) "a hoarding to be erected in the exercise of that right". This is probably a plain man's point, and plain men have very little place in your Lordships' House when you are discussing rating and valuation, but it strikes me that it may be difficult to value something to be erected. It also needs to be considered whether it is necessary to indicate more clearly what constitutes "exercise" of the right—whether to instal electricity for a neon sign yet to be erected is exercising the right or whether the effective date should possbily be later. But I raise these points only to show that there may be some technical difficulties in my noble friend's Amendment.
§ LORD LATHAM
We are anxiously waiting to hear whether the Government accepts the principle, leaving aside technical defects.
I was hoping to produce that as a little bonne-boache. I hope I have said enough to indicate that whilst there may be one or two technical difficulties there is probably a great deal to be said for the proposed new clause. I think enough has been said in your Lordships' House this evening to indicate that. If the House generally feels sympathetic, as I am sure your Lordships do, and if my noble friend is prepared at this stage to withdraw his clause, I will gladly undertake to see what further consideration can be given to it before the Report stage, and possibly then put down a rather more watertight one in its place.
§ LORD MILVERTON
I am grateful to the noble Earl for the courteous consideration which he has given to this Amendment, and in the circumstances I gladly ask leave of the House to withdraw the Amendment in the hope that at a later stage the principle will be embodied in better language than was at my disposal.
§ Amendment, by leave, withdrawn.
§ 6.55 p.m.
§ VISCOUNT RIDLEY moved, after Clause 5 to insert the following new clause:
§ align="center">Moving machinery
§ ".—(1) The Minister shall by order provide for excluding from the plant and combinations of plant and machinery which are treated as comprised in Class 4 in the Third Schedule to the Act of 1925 (which describes the classes of machinery and plant to be deemed to be part of a hereditament for rating purposes) any item or part of an item which moves or rotates.
§ (2) Any statutory instrument containing an order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament."
§ The noble Viscount said: This is quite a simple Amendment, and I hope I shall not detain your Lordships very long. Clause 5 deals with various suggestions made by a Committee appointed two years ago, under the 1935 Rating and Valuation Act, to deal with the definition of plant and machinery in the order which defines which type of plant and machinery is not to be rated. In another place it was agreed on behalf 475 of the Government that Clause 5 should deal with two recommendations made by what was then called the Ritson Committee. One of these was the question of excluding plant which is portable up to a certain size, and the other dealt with matters connected with drainage. There was, however, another recommendation which was, I must say, a majority one, and not unanimous, from that Committee. In paragraph 43, a majority of, I think, 3 to 2—and a majority is a majority, whether in Committee or in your Lordships' House—recommended that any plant which moves should be exempted. That is consistent with rating policy in relation to all machinery used in factories and elsewhere.
§ This is not a marginal case of whether a piece of processing plant is plant or structure; this is definitely an item of moving machinery and it is an item which cannot do its work without moving and therefore should be classified in the same way as machines, which also do their work by moving but are smaller than items of plant here referred to. They happen to be mostly fairly large things, and that is why they are structures. Had they been smaller they would probably have been excluded, but they do not, so far as one can see by their nature, demand any payment of rates, any more than do their smaller cousins which do their work also by moving yet do not pay any rates. I do not think I need say much about this Amendment. It is rather simple and no definition is needed. It is consistent with what has been proposed by the Committee specially appointed to do the job. I hope very much that the noble Earl in charge of the Bill will accept it as being a reasonable and sensible proposition. I beg to move.
After Clause 5 insert the said new clause.—(Viscount Ridley.)
§ LORD LATHAM
I hope that the Government will not accept this Amendment. The noble Viscount, Viscount Ridley, said that it is simple. It is not so simple as all that. Moving machinery would cover the large rotating kilns used in the concrete industry, and a good deal of other very heavy machinery which otherwise is not eligible for exclusion from the incidence of rates. 476 The Government appointed a Committee, but they have not embodied the recommendations of that Committee, if any, in this Bill—not even the majority decision to which the noble Viscount referred. This would mean, as I said in an earlier speech, the chipping away from the re-rating proposals of the scheme in order to get very important elements of machinery exempt from rates. We therefore hope that the Government will resist this Amendment.
§ LORD LINDGREN
There is just one further point to which I would draw your Lordships' attention. Whilst it is true that processing machinery generally is exempt, it is a fact that some processing machinery requires structures to be built in order that they can be anchored or set and to operate. This would, in my opinion, undermine the valuation of quite a number of important and valuable structures although the actual machine itself might not be actually rated.
The intention, and I am advised the effect, is that the structures, foundations and so on, which support the plant will remain rated.
I am afraid that I can give more comfort to the noble Lords opposite who have asked me to reject this Amendment than I can give to my noble friend behind me who has asked me to accept it. As my noble friend explained, this new clause seeks to require my right honourable friend the Minister to order the exemption from rates of any item of plant or combination of plant and machinery which moves or rotates and any part of an item which moves or rotates. It thus seeks to carry out, albeit, I think, in a slightly different form, the suggestion of the majority of the five members of the Ritson Committee. My noble friend was quite right; the Committee split three to two in his favour on this issue.
My noble friend has summarised very succinctly the arguments of the majority of the Committee, which are found in paragraph 43 of the Committee's Report. May I, for a moment, but only for a moment, reverse the coin? I would remind your Lordships that the Courts have held hitherto that movable or rotatable plant, such as tilting furnaces and rotary kilns, in cement works, are 477 "in the nature of a building or structure" and therefore rateable. I gather that the leading case is Cardiff Rating Authority v. Guest Keen Baldwins Iron and Steel Company Limited, and that probably the leading judgment is that of the noble and learned Lord, Lord Denning, who has just left the Chamber. The Chairman, Sir Edward Ritson, and another member of the Committee, had no doubt that these installations, which are often massive, are structures or in the nature of structures, and that to exempt them would mean ignoring Parliament's intention in the Act of 1925 that rates should be payable not only on buildings and structures but also on plant which is "in the nature of a building or structure." Their view finds cogent expression, as do the views of the majority—they are in paragraph 42 of the Report. They thought it unreasonable that massive rotary kilns and tilting furnaces should escape rateability while their static counterparts, serving the same purpose, were rated.
The classical example is to be found in the steel industry. Compare a Bessemer Converter to the open-hearth furnace. Both do the same job, I gather, but in different ways. One may do it less well than the other—though I do not know; but they do the same job. But, just because it rotates, the Bessemer Converter would be totally derated under my noble friend's Amendment, while the open-hearth furnace would not. I would ask your Lordships whether this would be equitable.
In any event, I must make it clear that my right honourable friend, the Minister of Housing and Local Government, has endorsed squarely the minority view. In his opinion the intention of Parliament in passing the Act of 1925 was cane clear. The phrase, "in the nature of a building or structure", has been under close examination in the Courts from time to time with particular regard to movability of parts of the plant in question, and it is not accepted that the present situation leaves any room for any great uncertainty. If the clause is advocated merely on the grounds of narrowing the field of rateable plant—and I think it has been advocated on rather wider grounds—the reply is that the Government accept the minority opinion of the Ritson Committee Report: that 478 it is unreasonable to discriminate between completely static plant and plant which has moving parts if they are both "in the nature of…a structure." Having said that, however, I should be the first to admit that the balance of argument is perhaps a pretty fine one. That is shown in the fact that this very expert Committee split on this particular subject. However, my right honourable friend has given this clause his most careful consideration and his opinion remains the same. Therefore I must ask your Lordships to resist this Amendment, or, better still, ask my noble friend not to press it.
I think that without much logic but with some force, my noble friend has said he will not agree to the Amendment. I do not want to misquote him, but I think he said it would not be fair to some firms to exempt their plant while others had to pay. But if we look at the matter objectively I feel there is a sharp distinction between plant that cannot do its job without moving and plant which can. That is the distinction we are asking for. I should like to read just a few words of the Report of the majority which appear in paragraph 43 of the Ritson Committee Report:They think that a structure is essentially static and that the actual revolving or moving parts of an item of plant cannot be considered to fall within the definition of a structure in the context of something akin to a building.That is the point on which the argument turns. I think, and a lot of others think, that it would be logical that everything movable should be treated in the same way and everything static in the same way. However, I do not think it would be much use for me to press the Amendment any further this evening. I have made the point. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 7.8 p.m.
§ VISCOUNT RIDLEY moved, after Clause 5 to insert the following new clause:
§ Process Plant
§ ".—(1) Subject to the provisions of this section, the Minister shall by order provide for excluding from the plant and combinations of plant and machinery which are to be treated as comprised in Class 4 in the Third Schedule to the Act of 1925 (which describes the classes of machinery and plant to be deemed to be part of a hereditament for rating purposes) any machinery or plant which is in or on a hereditament for the purpose of manufacturing 479 operations or trade processes (hereinafter in this section referred to as 'process plant').
§ (2) For the purpose of advising the Minister as to what process plant should be excluded from the said Class 4, there shall be constituted a committee consisting of five persons to be appointed by the Minister, and the said committee shall as soon as may be after the passing of this Act prepare a statement setting out in detail all process plant which appears to the committee to fall within the said Clause 4.
§ (3) The committee shall as soon as the said statement has been prepared transmit it to the Minister, who shall cause it to be published in such manner as he thinks fit.
§ (4) The Minister, after considering the statement and any representations which may be made with respect thereto, shall make an order excluding from the said Class 4 the process plant set out in the said statement, but subject to such modifications as he shall think fit to make therein.
§ (5) Any statutory instrument containing an order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament."
§ The noble Viscount said: This Amendment concerns the general point of definition of which plant should be structure and which should not. It is suggested that the procedure of the 1925 Act should continue. I know that it is a little over two years ago that the Ritson Committee reported, but things have changed since then, and they are still changing. I am not entirely sure that the wording of this Amendment means what I intend it to mean; the drafting is probably not perfect. My intention was that there should be a new attempt at a definition of plant which comes within the category. The old definition is, of course, of long standing and has been supported in the Courts often enough, and its purpose and objective is known. But I would submit that there have been so many changes in industries, and in processes, since the original Act was passed on which this definition was founded that it is time it was looked at again.
§ The last Committee, two years ago, I think, did not have the opportunity of making any suggestions as to how the list should be changed, or rather how the principles on which the list is founded should be changed; they were asked merely to decide which plant was put on it. That, of course, is a rather narrow field, and one which I think is not wide enough for things at the present time. It would be much too complicated 480 and difficult to produce an Amendment to cover by definition all the changes, or even the principles which one had in mind. That is why I have put the Amendment in the form that the Minister should be obliged to appoint a Committee to advise him and then to make an order based on it. I think this matter is more important than it was. There is much more change in the sort of plant which is being used than there has been for a good many years past, and it is probably right that this point should be looked at on its merits. I do not believe, although things are changing, that this Amendment would have a very substantial effect on the total amount paid throughout the country by industry in rates. I cannot quote any figure or percentage, but there must be a fairly high incidence on some particular industries and less on others.
§ This Machinery Order, and the plant and structure problem in general, brings me to the general consideration which I was trying to put forward on the Second Reading debate. I do not think it will be long, in terms of years, before we are due to reconsider our taxation and rating structure both for industry and for other purposes. I myself, having known it and worked on a local authority for many years, believe that the rating system is now getting past the point of being able to do the things for which it is designed. I think it was in the reign of Queen Elizabeth I that rating for Poor Law purposes began. That system has been adjusted and adapted up to the present day, and I do not think that it can for long continue as a means of supplying local authority funds. However, that is a much wider question than we are dealing with here. I mention it only because this question of defining what should or should not be rateable comes near to the heart of thinking how the system should be designed. For those reasons, I beg to move.
After Clause 5, insert the said new clause.— (Viscount Ridley.)
§ 7.12 p.m.
§ LORD LATHAM
I invite the Government to resist this Amendment. The noble Viscount is a most able and disarming advocate. He would have us believe that the machinery covered and comprehended by the words "process 481 plant" is relatively small and unimportant as a part of the rateable value. According to the information I have that is not the case. Moreover, to exempt process plant would result in excluding from rating the quite substantial foundations on which process machinery in many cases stands, and which are at present treated as being rated as part of the hereditament, or as the hereditament.
As regards the noble Viscount's concluding remarks, I join with him warmly in representing to the Government that the time is overdue for a complete and thorough review of the system of local government taxation and the relation between local authorities, local government and the central Government in regard to the provision of the wherewithal to meet growing expenditure. Indeed, if I may refer to what took place in another place on Second Reading of the Bill, my Party put down an Amendment that the Bill should be rejected, or expressing regret that the Bill did not provide for a thorough consideration and examination of the finance of local government. Of course that Amendment was defeated, but it is clear that sooner or later—and I believe sooner than some people think—we shall be bound to reconsider the incidence of expenditure and of the provision of the funds to meet it by local government. Meantime, I think it would he against that, and it would be unfair as between one plant and another plant, if this Amendment were carried. I repeat, I hope that the Government will resist it.
My noble friend has put very fairly the case for derating process plant in industry. I fully realise that this is an issue on which many sections of industry hold strong views. Nevertheless, I fear that, once again, I must give my noble friend somewhat cold comfort. While thanking the noble Lord, Lord Latham, again for his support, I should like to take this opportunity of thanking my noble friend for the sustained courtesy with which he has hitherto accepted these rebuffs.
I suppose I should "blow cold" at first and make it clear why the Government are with the noble Lord opposite in opposing this Amendment. Why is this so? I will not deal with possible drafting points to which my noble friend referred, because there are questions of 482 principle here which I think are more important. I do not think I need labour the first one, but to accept my noble friend's Amendment would be to make a very significant inroad indeed in a long established sector of our rating system.
As your Lordships know, plant and machinery have long been included in the valuation of the hereditament in or on which they are situate. I do not think I need go again into that at any length, because this is a matter which we have already discussed at considerable length to-day. Of course I realise that industry, or sections of it, have long urged that it is wrong to rate process plant, and that it may penalise those sections of industry which have a large proportion of plant and may discriminate against them in favour of those sections which have a lesser proportion of small machinery. I accept that. Nevertheless, the Government cannot accept that there is anything wrong with the principle of rating plant which is, or is in the nature of, a building or a structure. What is wrong with rating a process? We rate houses which are used for the process of living in. We rate shops which are used for the process of selling things. We rate warehouses which are used for the process of storing things. Why exclude buildings which are used for the process of making or adapting something, or plant in the nature of a building or structure which is used for precisely the same purpose? As I understand it, that is the logic of rating process plant.
The second reason, as most of your Lordships know, is that to accept this Amendment would, in practice, mean a significant reduction in industry's rate burden. I know that my noble friend took the contrary view, and he also said that he did not have detailed statistics on this subject. I too have no detailed statistics on it, but I am told that it might lead to a reduction of something like one-third in industry's total rate burden. Be that as it may, it is quite clear that rating authorities would lose several tens of millions of pounds in rateable value, and other ratepayers would have to pay substantially more. The Government cannot ask your Lordships to accept an Amendment which would have this effect at a time when the householder, who unlike industry must meet his rates from taxed income, is 483 faced with a substantial increase in his share of the rate burden.
Thirdly, quite apart from the drastic effect which the acceptance of my noble friend's Amendment would have on industry's share of the rate burden, it would also lead to some striking anomalies. Steel works and oil refineries, for instance, occupy great tracts of land and, in general, relatively little by way of buildings in bricks and mortar. If all their plant and machinery were exempt—and most of their plant and machinery is process plant—there would be little left to rate, and their liability to rates would be derisory. Would it be right to exempt an oil refinery? Consider the capital investment locked up in that refinery, practically all of which consists of process plant without even a roof over its head; and consider the dependence of that refinery and the industry it serves on many of the services of local authorities, on education, on roads and on health. Would it be right virtually to derate that refinery? In any event, as the Committee will already have noticed in passing Clause 5 of this Bill, the Government had decided to derate small moveable plant, and this affords some assurance to industry.
For all these reasons the Government consider that a radical change of the kind proposed is not acceptable. However—and this is where I can blow a trifle warmer—the Minister made it clear in another place (I have already alluded to this on an earlier Amendment, as, indeed, my noble friend the Leader of the House did on Second Reading) that if industry as a whole were to come forward with constructive proposals for redistributing the rate burden more fairly among particular industries, the Government would be only too ready to examine those proposals. He held out, however—and I am in the same position—no possibility of doing anything in this respect in time to catch the 1963 bus. To recall that assurance to your Lordships, however, is as far as I am able to go. I must, therefore, hope to persuade my noble friend, having given process plant a very good run for its money, to allow plant of this sort of bear, at least for the time being, its full share of rating.
If the plant were allowed to run it might not need to move or rotate. I am afraid we cannot get it into that category. My noble friend has been good enough to give me some answers as to the Government's view on my Amendment. I do not feel quite convinced about all the points. First of all, I think he compared it to rating on shops and offices and said that shops are rated, as they are. But I think the point is that some industries employ process plant which is rated; others employ machinery which is not. That comparison seems to show that something is wrong.
As to quantities in relation to the effect of the rating system in total, I can express no useful opinion; I have no figures. He quoted the case of an oil refinery, of which I cannot speak. As regards a steel works I know of, the process plant accounts for one-third of the rating. That is one case of a modern works: the proportion is estimated at that figure. As most of this plant is at steel works and things like that in rather large pieces in fairly small numbers, I should have guessed that the total effect on the whole of the money paid by industry would not be very great, though I cannot produce any figures to support that.
My noble friend's third point was that there would be anomalies. I believe that there are now, in the way I have quoted. Some manufacturing industries employ entirely machinery and pay on the building and not on the machines. Another has a building with the same costs—it is in the same area, perhaps—and pays on the process plant. I think that is an anomaly, and that some day it will have to be looked at. I will not make any more of this. I have perhaps taken up too much of the time of the Committee this evening, but I think these are important points which ought to be discussed here, and the Committee ought to know that there are these problems going on. One day I hope that we shall be able to find a solution which everybody will think fair to all parties. I therefore beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clauses 6 to 8 agreed to.485
I think we have made fairly good progress this afternoon, and in view of that I beg to move that the House do now resume.
§ Moved, That the House do now resume.—(Earl Jellicoe.)486
§ On Question, Motion agreed to, and House resumed accordingly.
§ House adjourned at twenty-five minutes past seven o'clock.