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Mr. Sanders: We shall test that point in Committee, as the Minister's remarks do not fit with my reading of the Bill. Clearly, the Bill says that if the owner fails to maintain a property, the tenant pays the higher bill under the new valuation. There is also an escape clause, which will cause a problem with the definition of "reasonable". We have had no true, concise definition that will make matters fair for those who must pay the uniform business rate.
6.40 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Alan Meale): As my hon. Friend the Minister for Local Government and Housing said earlier, the Rating (Valuation) Bill is a short Bill to ensure that, in valuing a property for rating purposes, the property is assumed to be in a state of reasonable repair. That assumption will apply whatever the actual condition of the property, except in relation to repairs that would be uneconomic. The Bill puts the law on rating valuations on a fair and equitable footing while also making clear the assumptions that underlie the valuations made for both the 1990 and 1995 rating lists, and for future valuations.
Opposition Members have asked about the implications for ratepayers. In practice, most ratepayers will see no change as a result of the Bill. Valuations of non-domestic property carried out by the Valuation Office agency are already based on the assumption that a property is in a state of reasonable repair, unless the disrepair is such that it would be uneconomic to remedy it. In such cases, the repair is assumed not to have been made, and the rateable value is adjusted downwards appropriately. As my hon. Friend also said, the Bill simply codifies those principles, ensuring that they will be applied consistently in future.
The position of derelict property will remain the same as it was previously. If it is incapable of being let in that state, it will attract no value. In other circumstances, the valuer will assume a state of reasonable repair when valuing a property, taking account of its age and location. If the property is run down because it is near the end of its useful life, or if it is in a rundown area, those facts will be reflected in the assumption about its reasonable state of repair.
Mr. Sanders:
Surely that is the whole failing of the uniform business rate system. Why have not the Government introduced a Bill that would address that point?
Mr. Meale:
If the hon. Gentleman will bear with me, he may find out.
If a property is in need of repair to bring it up to a reasonable state, the cost of repairs will be taken into account. If the costs are such that a landlord cannot hope to recover them from the rent that he could reasonably expect to receive for a property given its age and location, he will be assumed not to make the repairs. The rateable value of the property in that case will be lower, reflecting its unrepaired state.
Retrospection has also been raised. I am obliged to advise the House that property has already been assessed on the basis of an assumed state of repair in both the 1990 and 1995 revaluations. If the Bill did not apply retrospectively, all previous rateable values would be brought into question. In such circumstances, it would be a physical impossibility for valuation officers to reassess in 1999 the repair condition of 1.7 million properties on each day since 1990.
My hon. Friend the Minister for Local Government and Housing has pointed out that the Bill contains safeguards for the ratepayer in the case of Benjamin v. Anston Properties Ltd, and for others who lodged proposals to change their rateable values before the date on which the tribunal decision was made. In recognition of the fact that
such ratepayers might have sought to argue on the same basis as the ratepayers in the Anston Properties case, the Bill ensures that retrospection will not apply to any ratepayer whose appeal had not been finally dealt with by that date. Those ratepayers, and the ratepayer in the Anston case, will effectively enjoy the fruits of their litigation in respect of the 1990 and 1995 lists.
I am not aware of any appeal having been levied since the date of our announcement in July. On whether retrospection should apply only to appeals lodged before the date of that ministerial announcement, I must say that that would be illogical. The Bill protects anyone who made a proposal before he or she knew the judgment in the Anston case and who had not settled his or her appeal by that date. It may be argued that such ratepayers might, quite independently, have interpreted the law in the same way as the Anston ratepayer, and, ultimately, the courts. As such, they should not be denied the fruits of their litigation.
Any ratepayers who had not made a proposal by the date of the Anston decision had presumably not done so because they were happy with their rateable value and the way in which it had been calculated. To allow such ratepayers to avoid the effects of retrospection if they managed to enter a proposal between the dates of the Anston decision and the Government's announcement of legislation would simply benefit those who were quickest off the mark, and that would be unsatisfactory and unfair.
Questions have been raised as to whether the Bill would conflict with certain European conventions. We are satisfied that it does not. We made an early announcement on 29 July of our intention to legislate. We have ensured that the Bill does not deprive the appellant property owner of the fruits of his litigation, and that the Bill is not unfair to other property owners who had already commenced proceedings. The retrospective effect of the Bill does not affect the ratepayer in the appeal, or any other ratepayer who, on or before the date of the decision on the appeal, had made a proposal for alteration of the rating list which was not disposed of before that date.
Hon. Members must realise the possible financial consequences if the Bill is not enacted, asking, for example, how many appeals might be made if it is not. As my hon. Friend has said, appeals could be lodged against any of the 1.7 million rateable values in each of the 1990 and 1995 rating lists on the back of the Anston case decision. It is impossible to say how many additional appeals might be generated if the decision was not reversed, but the figure could be 1.7 million.
We have conservatively estimated that there might be as many as 250,000 properties in a sufficient state of disrepair to encourage owners to appeal. Even using that estimate, it is impossible to gauge the degree of the financial implications, but we might be considering a loss of up to £7 billion over the nine years since 1990, or in the worst case scenario, up to £49 billion if all 1.7 million properties are taken into account. Hon. Members should treat the matter seriously, realising that a reduction of even just 1 per cent. in rateable values would lead to losses from the non-domestic rating pool of some £140 million in 1998-99 alone.
Hon. Members have inquired about how the Bill affects property maintained in a better-than-average state of repair, asking whether rateable values would be adjusted accordingly. The answer is straightforward: the rateable value of a property will depend on the facts of its case. In principle, however, where premises have been maintained to a higher standard of repair than in other similar properties of their age or in the same area, the higher standards should be disregarded when assessing the property's rateable value.
Similarly, if a fire, for example, were to leave a property incapable of beneficial occupation, the property would be removed from the rating lists, and no rates would be payable until it was repaired. If, however, the fire's effect left the property lettable, disrepair resulting from the fire would be disregarded. In cases in which damage is relatively minor and a property is not rendered incapable of beneficial occupation, the valuation officers should make a valuation on the basis of a state of reasonable repair, except where it would be uneconomic to carry out a particular repair. Where repairs are being carried out, and are clearly economic, they should, quite rightly, be reflected in any valuation.
Some Opposition Members asked whether the Bill would simply increase litigation. We do not believe so. There is considerable case law, in the context of both rating and of landlord and tenant law, on when works to a building comprise a repair, a renovation or an improvement. The precise nature of what is a reasonable state of repair will reflect the facts in each case, but I recognise that Opposition Members have signalled that they will revisit the issue in Committee. We look forward to that debate.
The Opposition suggested that the Bill radically changes the law. We do not believe so. We cannot answer for what valuers believed, but valuation officers have since 1990 valued property on the assumption that it is in a reasonable state of repair. That assumption underlies the values that appear in both the 1990 and 1995 rating lists. Moreover, it is the only practical means of ensuring that ratepayers are treated fairly as regards their rate bills over a five-year period.
The Bill is a worthwhile and necessary measure. It is consistent with good administration and, above all, it will ensure fair treatment and a fair tax assessment for all ratepayers. I commend it to the House.
Question put, That the Bill be now read a Second time:--
The House divided: Ayes 268, Noes 30.
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