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The Deputy Chairman of Committees: Before inviting the noble Earl to speak to his amendment, I should point out that the corrections to which I was referring were to Amendment No.2. However, as the whole batch of amendments is being spoken to in one group, I hope that was clear at the time.
The Earl of Lytton: In speaking to Amendment No. 1, I really wish to speak in generic terms to all the
other amendments in this group. I would stress that they are all probing amendments, so there is no dispute about that.I thank the Minister most warmly for her statement which enormously helps the proceedings here this afternoon. It was a very comprehensive explanation of the Government's position, for which I am most grateful. For reasons which I shall explain a little later, I would perhaps wish that the Minister had gone a little further in one or two areas. I apologise to the Committee for the fact that my comments may, to some extent, cover points that have already been made. It is in the nature of the animal, but this is a technical issue and it is important that points are conveyed in the terminology which befits it and which itself is fairly technical.
The Minister has been as good as her word at Second Reading in that she has provided an opportunity for meeting her and her officials to discuss the issues. Only last week there was a further meeting with her departmental officials, enabling me and various advisers to go through issues in much greater detail. That was of enormous value and I wish to pay tribute to that process. I am also extremely grateful to the noble Earl, Lord Courtown, the noble Baroness, Lady Hamwee, and her noble friend Lady Miller of Chilthorne Domer, and the noble Lord, Lord Monkswell, for their support and interest in this matter. It is a very technical issue, although, in global terms, it is quite straightforward in many respects.
I would also like to express my thanks to those in the various professions involved with rating valuation for their support and back-up in attending meetings, liasing with interested parties and answering technical queries of mine. This has been of incalculable worth, and, as a part-time parliamentarian, I have found this extremely important. The candid and constructive manner in which officials in the DETR and the Valuation Office Agency have answered queries has also been enormously helpful, and I should like to record publicly my appreciation of that.
The issues at stake, as I said, are essentially practical and to that extent they are simple, but the way in which they may be affected by the Bill are of course immensely technical. I apologise again for burdening the Committee with some further detail, but it is important to set out the matters for the record. I am sure the Minister will agree with that principle.
The concern with the Bill has throughout revolved around its apparent lack of transparency of purpose. This is important, for the certainty which has hitherto lain behind the assessment of annual value of non-domestic property for the purposes of a local tax is central to every business occupier. However, I recognise that the case of Anston Properties Limited v. Benjamin potentially gives rise to a valuation lacuna referred to by the Minister, which could be misinterpreted and with which the Government quite properly seek to deal. The fear was that the case was being used as a pretext for the alteration of the previous understandings on which the basis of valuation was arrived at with particular respect to the treatment of disrepair.
In another place, the various professions lobbied for changes to be made to the Bill because of this fear, but the understandings reached and the reassurances given in discussions with officials outside that place were not in the event translated into an amendment to the Bill nor into words of comfort given by the Minister on the Floor of the Chamber, for reasons which I entirely understand. I cast no aspersions about that. However, it has been left to this Chamber to remedy the situation.
I certainly accept that the intention of the Government has been no more or less than to recite in language relevant to the valuation basis of today--in other words, the post-Local Government Finance Act 1988 terms of phrase--the basis of valuation which has always been understood by valuers in practice. The question was: did the Bill actually do that? Certainly I was not at all sure.
While in rating valuation there is a hypothetical landlord and a hypothetical tenant under an assumed lease, the property of course is always in the real world, as the Minister has said, and the circumstances surrounding its notional rental value follow as near as possible to the real world as can be achieved in practice. That much is common ground, and was common ground at our meetings. In most cases the landlord is deemed to have put the property in a state of repair sufficient to command that rent, but specifically not at any cost. I think again that is a matter of common understanding and agreement.
In terms of alterations to rating valuations, there are four legs. I will deal first with the treatment of disrepair. It has always been the case that normal recurring repairs and maintenance such as decoration, attention to external joinery and the maintenance of a wind and watertight fabric, and indeed a tenantable interior, should not affect the rating assessment. So if the standard of decoration is neglected, for instance, the assessment should not be reduced for that reason alone. Beyond that there will be a need from time to time to carry out much more intrusive overhauls and modernisation to reverse obsolescence or perhaps to deal with serious inherent defects. These may well--but, it should be stressed, this depends on the merits of each case--fall outside the assumption that the property is in good repair and can, but do not invariably, have a bearing on the rating assessment.
As an example I have referred the Minister to situations where there is high alumina cement in reinforced concrete structures. The building is still usable up to a point but is severely devalued and may eventually have to be demolished. I referred also to situations where a terrace of retail properties might all have basements but only some of these basements might be damp-proofed and usable, and perhaps some could never be used because of a lack of adequate means of escape in the event of fire.
My concern was to ensure that these situations were not altered by the Bill. I am pleased to see the Minister nodding in affirmation of that. I wanted to make sure that properties would continue to be valued for what they are, rather than what they might become in the future. I wished to be certain that the real world values would apply reflecting all characteristics, advantages
and disadvantages and that these would not become the subject of extended statutory assumptions as to circumstances. I was pleased to note the introductory comments from the Minister in that respect.The second leg relates to total destruction. There has never been any argument that if a property is totally destroyed by, say, a fire, the assessment would be reduced to a nominal level, or more likely still, the entry removed from the valuation list in which case no rates are payable. There is absolutely no issue before us on this point. I wish to make that clear to the Committee.
The third leg is the partial damage or destruction of the property. Just as for repairs, it has long been the practice that where part of a property is damaged or destroyed and cannot be used beneficially in part or in whole for a significant period of time, then the assessment could be reduced to the extent that the benefit of the actual occupation was damaged in reality. This could include, for instance, the consequential effects of destruction of one part of the property on the use and occupation of another part that remained. Here, too, I am concerned to ensure that the practice remained intact.
The fourth leg is the deleterious effect on the beneficial occupation of the property. Losses in value because of a general recession are pure economic factors which are only dealt with at quinquennial revaluation, and that I am sure is an accurate and accepted statement of the facts. However, there can be situations during currency of the valuation list where an identifiable physical change not physically touching the property can trigger a loss in economic value. Adjacent development works referred to by the Minister are one example, or there could be specific changes in the locality for other reasons.
Assessments are often adjusted to take account of the duration and severity of such situations, so where sites are being assembled and the property is empty awaiting redevelopment the value of the property is often reduced-- I do not say it is always reduced--but often reduced, because each case has to be dealt with on its merits, sometimes to a nominal figure if there is neither de facto beneficial occupation nor the intention to reoccupy in the future prior to redevelopment.
As I have said, each case has to be dealt with on its merits, and the Valuation Office Agency, if I may say so, has acquitted itself with considerable distinction--I do not just say that as a former employee of its predecessor body--in establishing fair and widely accepted ground rules for dealing with this.
I want that to continue. It would be disastrous if the Bill resulted in all that consensus being thrown away and the matter being thrashed out in the courts at enormous cost. That would be a failure of the process in which this Committee is involved.
So the object here is to ensure that the practice of the past, and in particular pre-Anston, is continued in the future in the new legislation when this Bill becomes law. With any change there is a risk of reinterpretation. That should be eliminated as far as possible and I make no apology for dwelling on some of the finer points for that reason.
My amendments set out to reconfirm on the face of the Bill the wording that would, as closely as possible, transfer the meaning of the General Rate Act 1967 provisions into the present situation in which we are dealing with an amendment of the Local Government Finance Act 1988, and which itself replaced the 1967 Act.
Turning very briefly to Amendment No. 1, therefore, the context of this can clearly be seen. It would necessitate the valuation of a property on the facts of the case. It seeks to eliminate as far as possible an interpretation of the Bill that there might be a deemed or assumed state of repair rather than the actual state of repair. But as I now understand and believe, this is a long way from the intentions of the Government. I was very pleased to note that from the statement made by the Minister. I am grateful to the Minister and feel she has put my mind substantially at rest on this issue, although she may have some other comments to make.
I have one question that arises out of her statement. In the light of her comments, would she agree to go a little further and undertake to include what she has said to the Committee in a preface to the practice note?
Perhaps a verbatim account of what I hope will be a reasonably concise debate today could be published as an adjunct to the practice note. I suggested previously that it might be a preface. That may be putting the cart before the horse. I do not mind where it goes, but if it is in there it would certainly be important. I feel that what has been said in this Committee, which is an invaluable and crucial explanation of intent, ought to be an intrinsic part of the practice note and the valuation procedure that follows from that. It should not simply be left to be dug up at some subsequent event following a battle in the courts when, having reached the conclusion that the intention of the Act is uncertain, Hansard is studied in order to try and put in place certainty.
That concludes my remarks on this. I have already begged to move the amendment, but I commend it to the House. There will be an opportunity for other noble Lords to comment, but I would particularly welcome comments from the Minister on that last point about incorporating our deliberations today within the practice note itself.
4 p.m.
The Earl of Courtown: I wish to speak to all the amendments standing in my name and in the name of the noble Earl, Lord Lytton. I was interested to hear what the Minister had to say in her opening statement. I shall need to read Hansard carefully before commenting on that. As I said on Second Reading, when we reach the Committee stage we must ensure that the Bill is made to work properly to enable the property professions clearly to interpret the legislation. The industry needs law that gives certainty, simplicity and consistency and I hope that we are getting some way towards that now. Those are the aims of the amendments. I realise, of course, that the Minister may not agree that they achieve those aims but I look forward to hearing what she says in response.
The noble Earl, Lord Lytton, has made a very eloquent and informed speech and I do not intend to repeat everything he has already said. However, there are a number of areas in particular that I should like the Minister to explain; for example, definitions. She touched on that subject but I wonder whether she could clarify it a little further, particularly in relation to the definition of the word "reasonable" in respect of repair, and also the definition of the word "repair" itself. I know that this matter concerns many in the industry and I look forward to her reply.
I was also interested to hear what the noble Baroness had to say about the practice note. I wonder whether this could be expanded into a more formal code of practice because it is so important that the interpretation of the Bill is in accordance with what is being said here, as the noble Earl, Lord Lytton, said today.
The Minister will be only too aware of problems concerning codes of practice and practice notes that arose when she was on the other side of the Chamber. It is an important issue and there were many serious debates and Divisions on it in the latter term of the previous government.
Will the noble Baroness also confirm that the Government remain committed to the previously unquestioned principle that every rateable property falls to be valued on an individual basis? Will she also confirm that there are no plans for the computerisation of the rateable value process because that would ignore the individuality of properties and the rating system? We have looked carefully at the various amendments and it is important that we get a clear response from Her Majesty's Government on this issue. I look forward to hearing the Minister's reply.
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