RATING VALUATION OF COMMERCIAL PREMISES (Hansard, 6 December 1954)

§ Mr. Sandys

I understand that occupiers of shops and offices are anxious about the possible effect upon them of the revaluation of property, which is now proceeding in accordance with the provisions of the Local Government Act, 1948, 19W as amended by the Valuation for Rating Act, 1953. This anxiety arises from the fact that shops and offices and other commercial premises are being assessed on present day values, whereas dwelling-houses are being assessed on 1939 values, and industrial property, although assessed on present-day values, is partially de-rated. This may, it is feared, throw an unfair rate burden upon the owners of commercial premises.

With regard to the complaint that the partial derating of industrial premises, together with the total derating of agricultural land and buildings, gives an unjustifiable advantage to these types of property, it must be pointed out that these provisions have been operating for a quarter of a century and have not in any way been amended by post-war legislation. The question of revising these arrangements is a much wider problem which raises major issues of national policy.

On the other hand, the special treatment accorded to dwellinghouses has its origin in the Local Government Act, 1948. That Act preserved current market value as the basis for the valuation of all classes of property, except dwelling-houses. This exception was made on the grounds that, during and since the war, owing to the acute housing shortage, there had been no normal market in houses, and that it was therefore necessary to go back to the period before the war in order to obtain any reliable indication of true values.

The 1948 Act accordingly provided that dwellinghouses, other than those built after 1918, should be assessed by reference to the level of rents in 1939. As regards houses built since 1918, the Act prescribed that they were to be valued on the basis of the "hypothetical 1938 cost of construction." The application of this special formula for the valuation of post-1918 houses proved in practice unworkable, and was therefore abolished by the Act of 1953, which put the valuation of all houses on to the same basis, namely, 1939 market value.

Other things being equal, the adoption of this preferential basis for the valuation of house property would doubtless have the effect of reducing the share of the rate burden borne by householders, while increasing it correspondingly for other ratepayers. However, it is by no 20W means certain that in practice the change in the incidence of the rate burden will be as great as might, at first sight, be expected. There are a number of reasons for this.

In the first place, it should not be assumed that the assessments of dwelling-houses will not be increased. In 1934, when the existing valuation lists were made, houses were generally assessed by reference to the level of restricted rents, whereas, for the purposes of the forthcoming revaluation, the free market letting value in 1939 is to be taken as the basis. Furthermore it is well-known that, in the past, local authorities adopted widely differing standards for the valuation of various types of property. In some areas, dwellinghouses were deliberately undervalued on grounds of social policy. In others, industrial premises were often assessed on a favoured basis in order to attract industry to the area.

Now that all valuations are to be made on a national basis by the Inland Revenue, any bias of this kind in favour of dwellinghouses and industry will be eliminated. This will naturally benefit occupiers of other types of property, such as shops and business premises. Moreover, it must be remembered that almost all occupiers of commercial premises are also themselves householders or tenants and, therefore, benefit directly or indirectly from any reduction in the rates on dwellinghouses. This includes shopkeepers living over their shops, whose domestic apartments will be assessed, like other dwellinghouses, at pre-war values.

Apart from the question of how the rate burden can most equitably be distributed among the various types of property, it will, I am sure, be universally agreed that revaluation is long overdue. It is now 20 years since the last valuation was made. When the Act of 1948 was passed, the intention was to secure a new valuation by 1952. However, various technical and practical difficulties, including those dealt with under the 1953 Act, have necessitated successive postponements.

If fresh changes in the basis of valuation were now to be made, it would inevitably involve further delay. This would have the effect of prolonging the countless anomalies which exist under the present system and the blatant injustices which they cause. In this con- 21W nection, it should be pointed out that local authorities have the right, in the interval between valuations, to ask for the assessment of individual properties to be revised and brought up to date.

The result is that, here and there, assessments are being raised on to a current value basis, while other properties continue to be assessed on the lower basis of pre-war values. If local authorities thought that there was going to be a further postponement of national revaluation, there is little doubt that this practice of piecemeal reassessments would be adopted much more generally, thereby creating fresh inequalities and confusion.

A postponement of revaluation would also prolong the present dissatisfaction over the allocation of the Exchequer equalisation grant. This is distributed on the basis of rateable values and these have for the most part been calculated by the local authorities themselves, in accordance with varying principles. It is, therefore, clear that an equitable allocation of the grant will not be achieved until valuation is put on a uniform national footing.

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Finally, I should like to emphasise that the pre-war basis for the assessment of dwellinghouses applies only to this first post-war revaluation. As I have explained, there are many uncertain factors in the situation; and consequently, we cannot yet be sure how the new basis of assessment will work out in practice. I can, however, give an assurance that, as soon as the effects of the forthcoming revaluation can be fully measured the Government will review the position and will consider whether any changes are necessary.