Select Committee on the Crossrail Bill Minutes of Evidence

Examination of Witnesses (Questions 6720 - 6739)

  6720. The first concern does concern the home loss payment that is stipulated in the Land Compensation Act 1973 which, as far as I can establish, is in fact still the relevant legislation. One suggestion I might make for the record, and I am not asking you to enact it, is that if the people who publish Hansard on the Internet also published a version of the Act as originally enacted, but also a version of Acts in what I call `changes tracked', i.e. in colour when something has been superseded or deleted it might help ordinary people to follow them.

  6721. Now, the Land Compensation Act 1973 is the area that covers this home loss payment. There is some question about why anyone should get a home loss payment at all. Some people suggest that you should purely be happy to receive a neutral-value payment for the value of your home and move on and that is all you might deserve in principle, so I would like to give a little bit of background on that.

  6722. First of all, compulsory purchase is essentially an illegal act at common law, so, if someone is doing something they would not normally be allowed to do, it is permitted by Parliament in certain limited circumstances, which suggests there might be some grounds for considering it. Furthermore, I think the front of the Bill suggests that it is intended to be compatible with the Convention on Human Rights. Nevertheless, obviously under the Convention and the Human Rights Act, you have the right to respect of your private and family life, your home and your correspondence, and there is a first protocol in which Article 1 says that every natural person, real person, is entitled to the peaceful enjoyment of his possessions, so effectively we are moving against a normal situation by being able to do compulsory purchase.

  6723. Now, in the case of a business-owner, somebody who owns shares in a company, if the company is moved lock, stock and barrel across the street to new premises, they pay for new signage and, if the new level of business is about the same, they will get the same dividends, but they will not actually have been affected and there is no reason why that person should really have any uplift in the case of a business, and I can understand that principle because they are indeed in the same position.

  6724. My area of concern relates to private homeowners, and there are two or three areas of concern. I do not think that what happens in other countries is of any particular relevance to what happens in this country, although I do understand that in some countries, such as France, a larger percentage payment is normal and that in certain other countries the principle of negotiations is closer to the `willing seller' principle, so people possibly get a price closer to what they would have got normally. Essentially, I am referring to a conference of the International Federation of Surveyors which the RICS attended, and the procedure was that they noted that, in terms of economics, a willing buyer and a willing seller reach one price and, if you are in your home, then obviously if somebody comes along and tries to buy it, the price which you are willing to accept will probably be slightly higher than you think it is worth and, if it is slightly less than somebody else thinks it is worth, there is an overlap or a zone of possible agreement, at which point a purchaser can do it. You also obviously have the alternative of just staying put if you do not agree with the price, and the problem with compulsory purchase is that the homeowner does not have that negotiating power and, therefore, it is not necessarily possible to achieve the willing seller. It was noted at the conference that I referred to that, therefore, the compensation is likely to be less than the worth placed upon it by the owner. Going to the home loss payment under the Land Compensation Act 1973, when it was enacted, it was stipulated that the home loss payment would be 10 per cent of the value of the home up to a maximum of £15,000. In 1973, the value of the average home, and I take these figures from the Department of Communities, was £9,942. This means that the compensation payable, the maximum compensation obviously, the maximum cap was one and a half times the average home which would mean that your home would need to be 16 times the normal size before you approached that cap, and I think that £150,000 would have bought you an extremely grand home indeed in 1973, possibly so large that you could not really be said to have lived in all of it, or an absolutely vast estate. To look at the distribution of homes, it is always very difficult at the very end of the distribution to say what proportion would be caught because it is a small number, but again, to use figures from the Department of Communities' website and also a parliamentary answer a couple of years ago in response to a question of Lord Oakeshott of Seagrove Bay in terms of the distribution of property values, in that particular case 99.8 per cent of homes are worth less than ten times the average. The point I am making here is that, when the Land Compensation Act 1973 was enacted, the will of Parliament was clearly that virtually every homeowner would receive the 10 per cent figure and there was a cap obviously at some extreme level, possibly because you could not actually realistically occupy something, and it is not for me to speculate as to the reason, but virtually every homeowner would have been included, 99.8 per cent of them.

  6725. Just to recap, as I explained, the maximum compensation level in the Act was £15,000. The average home was £9,942. If we look at the position now, however, the average home in 2007, same source, was £221,580. We do not need to agree an exact figure as the comparison is so overwhelming. However, the maximum compensation is only £44,000, so whereas the value of the home has gone like that (indicating), compensation has gone like that (indicating), so instead of it being many, many times the value of the average home the position has been totally reversed and it is only a tiny fraction.

  6726. I am a little bit concerned because I received this letter encouraging me not to come here, which states that the level is varied from time to time by the Government by reference to the Department of Communities and Local Government's house price index which varies in line. If this is in line I hope the Crossrail engineers are able to build a straighter line when they build their tunnels than this line, because a line that takes you from ten times your price in 1973 to 20 per cent of the price, i.e., a fifth of the price, in 2008 is not a straight line; it is an inverse line. The main point I wish to make is that I believe that the will of Parliament at the time was that virtually everybody should get this ten per cent and that effectively by accident we have moved to this position. The reason I think the accident could have occurred is that if only one or two properties in a thousand will be affected it happens very rarely and this is also the first time there has been a major development in the West End of London, which happens to have the highest property prices in the land, so this may be the very first time that this cap has been triggered on an ordinary person living in a fairly ordinary flat.

  6727. People might say that is just hard luck, but there is another concern. The other concern is that the valuation of property cannot be an exact science. Unfortunately, research is not readily available to me on the exact distributions of valuations that might be arrived on for a given property. Having made inquiries, I think the going rate might be an error margin of plus or minus five per cent. I do not think the figure needs to be exact for the purposes of my argument. That is based on what large firms use in training for seeing whether people are getting the right answer. My concern is that if somebody says to me, "We agree a value of the property of a certain amount of money", and it is wrong by five per cent, but then the compensation I receive is the home loss payment which is in fact only two or three per cent, I can end up with less than the value of my property when I have been fully moved out, i.e., I would have suffered a serious injustice. This is the point that I am wishing to raise. Of course, it is possible that the error could go the other way and I would be in pocket and I would not know. However, I do not think that in the matter of an injustice you can go on the balance of probability because what that would mean is that some members of the public from time to time would suffer an injustice and some would not. I do not think in the case of compulsory purchase where I have no choice to go back and say, "No, I am just going to stay", that I should have any chance at all of such an injustice happening.

  6728. Those are my points on the first point. Would it be helpful if I split the three points up and paused for discussion between them as they are quite separate?

  6729. CHAIRMAN: No, I think go straight on.

  6730. MR PRITCHETT: The second area of concern—this is 9 and 10 in my petition—is effectively the loss of freedom to sell or move house. The blight payment is news to me. We have previously seen information about a Crossrail hardship scheme that has been handed out at the information centres and sent in the post, but, owing to the fact that when the plans for the nice mushroom-shaped building disappeared and we were planned to be demolished they did not write and tell us, there has been no awareness on the part of local residents that such a thing would apply, and it might be worth noting for the future that it would be helpful if people were informed if they were going to fall within the definite scope of something like a blight if the argument is going to be used, "You have had the choice to use this blight scheme". However, I feel that a blight scheme is not entirely a substitute for the possibility, for example, of being able to test the water by looking for a possible purchase of your house, seeing if you like the price, and, if you like the price, moving, and, if not, staying put. I think it is a bit like building a building or having a baby. It is a process that once you have started it really has to go through to its conclusion some months later and you have to be happy with what you have got at the end of it, so it is not entirely the same thing. Essentially, in financial circles now it is accepted that there is an option value in the ability to buy or sell something. Financial options are traded on the markets in London and there are formulas available for how much they are worth. If you therefore lose the option to buy or sell something you have lost and the person who has gained it has got it. I think there is a difference between the option to buy and sell at will and the option to enter into a process that I understand could realistically take a minimum of six, seven, eight months and then if voluntary agreement was not reached a further nine months to go to a Lands Tribunal at the expense of tens of thousands of pounds, so you could be talking about a year and a half, by which time the property market could have moved away from the position you were in at the start of the process and you cannot change your mind. I really do not think it could be suggested to be a direct substitute and I therefore feel that property owners should be compensated for this lack of choice.

  6731. Finally, the area we are in is a conservation area. We are removing possibly a couple of per cent of the residents of the entire little village, believe it or not, in which we think we live. A lot of people locally know each other and there is a very interesting diverse community there. It is the sort of community that is so diverse that at one end you will have people talking about popular television shows and you have got other people who bang on about things like antiecclesiasticaldisestablishmentarianism and other very academic topics in the evening, but even so everyone gets on very well. It is a very peaceful and harmonious area, Soho, among lots of different sorts of residents. We are going to be losing quite a few residents and perhaps it would be quite nice if one or more of those residents could be involved in the redevelopment of the lost area to provide the sort of replacement property that would fit in well with the area if they could come up with a sensible proposal to do so. Residents have particular experience of, for example, the amount of noise that is tolerable from nightclubs and things like that, and also possibly will notice things that other developers might not have noticed, for example, the lack of good cre"che facilities in the area and if you are in a major transport interchange it might be quite nice to have a cre"che where people could leave children while they went shopping or to meetings or work locally. Things like this are not always necessarily thought about in the sorts of monoliths we have sometimes seen put up by interests that come from outside.

  6732. My most specific concern about these provisions is that it seems a little odd to me in the modern age where we have a traditional openness and not having cartels and matters like that when you are having things like tendering that there seems to be a Solomon's baby principle in terms of people putting in proposals for redeveloping the land when it has been finished with. If one person says they will do it that is fine; they can re-acquire the land at market value, but if two people, possibly without even knowing each other, put in a suggestion and they are both thrown out the thing goes back to the commercial process, but bear in mind here that the proposals to re-acquire the land would be at the proper market value so there is no suggestion that anyone is getting some sort of discount or benefit out of this and my concern is that that particular provision is not in keeping with the modern-day spirit of how you conduct competitive tendering proposals.

  6733. Finally, although I do not think it would be appropriate for the Committee to instruct the Secretary of State how to split up the site, I would observe that as a road goes bang through the middle of the site, the northern side bounds on Oxford Street, which is obviously a very retail-led area, the southern side is further into a quieter area and there are several houses around there, it would have been possible to take a view that the site could logically be split, and I feel that to have it hard and fast in the policy that it should be disposed of as one as opposed to be open to sensible suggestions is too narrow. By "sensible suggestions" I do not think it would be sensible for one person who has got a tiny plot in the middle to demand to re-buy that back and then ransom everybody else. That would not be constructive. What I am talking about would be the potential, for example, for a residential strip at the south end and a more mixed retail commercial and residential strip at the north end. However, I think all I am asking for on that particular front is flexibility.

  6734. Finally, I have submitted a handout of some proposed amendments that I feel would deal with all of the points that I have raised.[6] In terms of the home loss payment I am proposing. "(a) That subsection 1 of section 30 of the Land Compensation Act 1973 shall be amended by deleting the words `a maximum of £15,000 and'", which would remove the cap on the ten per cent for the home loss payment, and also "b) That subsection 5 of section 30 of the Land Compensation Act 1973 shall be amended by deleting the words `maximum or'", because if the maximum has been abolished there is no need for regulation to vary it.

  6735. CHAIRMAN: Mr Pritchett, they have been changed by statutory instrument already.

  6736. MR PRITCHETT: I understand that the limits have been changed. What I am proposing to do is by striking out the original limits to strike out the concept of having a limit, full stop, rather than moving the limit. I hope that would be effective. If not, I am sure that parliamentary counsel could draw up an amendment to achieve the same objective. What I am asking is to achieve the objective. It would be highly presumptuous of me to say exactly how it should be achieved. Clearly the variation has been totally inadequate in terms of keeping up with property prices and, more particularly, totally inadequate in keeping up with the scope of the original Act which was to include almost all the homes, and now in central London it would include nothing like almost all the homes. It is excluding perfectly ordinary flats. Because it is so rare this probably has not been brought up before, so I am not complaining about it; I am bringing it to people's attention. I think that would be the easiest way of doing that. I cannot really see any reasonable objection to that. Essentially "payable under a cap" is not proportional, but I do feel there is a principle that fair compensation probably supersedes equivalence. The idea that everybody gets the same compensation is not particularly fair. If somebody compulsorily purchased a £5 book and I got 20p compensation I might be perfectly happy with that. If somebody compulsorily purchased a £500 book and I got 20p compensation I do not necessarily feel that would be fair. That is the first suggested amendment.

  6737. Secondly, to deal with the issue of the long time the compulsory purchase or blight process and Lands Tribunal process could take in your loss of value of it I have proposed a second set of evidence on the handout under "Concern 10". It says, "(a) where the price of a land interest has changed materially between: the date of the commencement of the compulsory purchase process—the normal valuation date as part of the compulsory purchase process, the price paid shall be the highest of the prices applicable on the dates. `Materially' shall be either 1% of the value as assessed for compulsory purchase or a change of 1% in the Halifax index of property prices most specifically applicable to the property; (b) If a home-owner is not made aware either of the specific intention to acquire their property or of the blight provisions within twelve weeks of either the intention to acquire becoming specific or of the blight provisions becoming applicable, the value of the property shall be the highest price that their value could have been set at between the date of the intention becoming definite and date of acquisition under the compulsory purchase or the threat thereof or the blight provisions".

  6738. Finally, with respect to the land disposal policy, I think that in practice extracting a slight variation in undertaking or the policy would be the best way forward. I presume that making amendments to the Bill is a last resort. I have effectively therefore taken here a chunk of the existing policy and will read out the bit that is effectively a change on the second page of my handout. It says, "Holders of Qualifying Interests (existing definition will need to be included) shall qualify for the offer back of an interest. Where only one expression of interest from a former owner or long leaseholder with a qualifying interest is made to acquire a site, that person will be given the opportunity to acquire the site at market value within the timescales set. In the event that there is more than one bid from holders of Qualifying Interests, (a) the holders shall be given a period of four weeks to attempt to form a consortium before a second deadline; (b) In the event that there remains more than one bid, the winner shall be drawn by lot and that person will be given the opportunity to acquire the site at market value within the timescales set; (c) In the event that the winning bidder does not acquire the site within the timescales set, then the bidder shall be excluded and the selection process repeated. A consortium bid shall be allowed to propose to split the site in development terms or amongst members of the consortium or otherwise as long as the disposals shall be capable of meeting planning requirements and appropriate undertakings given to the Secretary of State." Obviously, there is a planning brief already and people are going to have to be sensible about the split between retail, commercial, possibly some low-cost housing units and things like that. Finally, "A land interest for this purpose could comprise the floors to be constructed on a site above a station or other structure above or below ground or in the subsoil." In fact, I think that point is not because I think that. That is for the avoidance of doubt that if there is something underground there is still a 125-year interest up for grabs above ground, but I think that principle is accepted.

  6739. Just to finish off on the point of the willing seller, some people might feel that someone will say, "You are lucky to get any compensation at all and people do not really have a concept of the willing seller". I asked my taxi driver on the way here this morning what he thought would be fair if someone were to ask to buy his house and he said, "It happened to me once. A property developer asked to buy my house". He said, "I became a willing seller at one and a half times the price", so that is a 50 per cent uplift as opposed to ten. I said, "How would you feel if you had a position where the compensation you received was only two or perhaps three per cent?", and he said, "That's rubbish". That is a man in a London taxicab. That is what an ordinary member of the public thinks about this. This issue has not, as far as I am aware, been looked at seriously but I genuinely believe it is a serious point. It is not a flippant proposal at all. Thank you very much, your Lordship.

6   Committee Ref: A34, Crossrail Bill proposed amendments (WESTCC-112_05-001 and -002) Back

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