My Lords, I declare my relevant interests: as a business rate payer; as a one-time employee of the Inland Revenue Valuation Office, the antecedent body of the present Valuation Office Agency;
my membership of several professional bodies concerned with business rates; and as a landlord of let premises. Since this matter relates to local government finance, I further declare my vice-presidency of the LGA.
I thank the Minister for her forbearance, her communications with me and the facility of meeting her officials some days ago. I also thank the many noble Lords who have expressed an interest and listened to my sometimes convoluted explanations. I am particularly grateful to the noble Lords who have added their names to this amendment, and for the fact that they raised the matter in Committee when I was not able to attend.
In explaining the background, I start by noting that the valuation of business premises for rating purposes is a specialist field. Indeed, one feels that one is dealing with a rather narrow and slightly nerdy area of activity. It is true that it relates fundamentally to the rent that a hereditament, as it is called, would let for at a specified antecedent valuation date on a series of statutory assumptions, but the manner in which this calculation is made is obscure, may not bear any relationship to the actual rent and may be valued according to a pattern of rental evidence, precedent or a formula that is not immediately obvious, even to experts. There is an assumed state of repair. Some tenants’ improvements and production plant will increase the assessment; others will not. That opacity defies most ratepayers’ comprehension and is in itself offensive to the principle of transparency.
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Currently, entries in the present rating list are by reference to an antecedent valuation date of 1 April 2008 —the peak of the property market. The national non-domestic multiplier—the number of pence in the pound which the rateable value is factored by to give the amount of rates payable—has been going up year on year by a percentage above inflation and now amounts to nearly 50% of the assessed rental value. In real terms, that is probably about 30% to 35% of the amount payable to the landlord in rent in most of the south-east of England; it is more in the north-east and north-west, and I have heard of some instances where ratepayers are paying more to their landlord in rates than in rent.
For decades it was customary for the Valuation Office Agency to share freely evidence underlying a rating assessment, but since 2010 it has pleaded confidentiality of information outside the arena of formal appeal processes due to its interpretation, after a pause of five years, of the Commissioners for Revenue and Customs Act 2005—the CRCA. Roughly speaking, this was to prevent the disclosure of private tax affairs. I never understood why it was appropriate to take the extraordinary step of extending this to the realms of business rating.
Faced with some 250,000 outstanding rating appeals, the agency has blamed the rise of slick but often unprofessional operators offering cut-price rating appeals for this state of affairs. It points out that some 50% of the appeals are eventually withdrawn and a further 25% are dismissed by the valuation tribunal in the appeals process. This has coincided with increased pressure on departmental budgets, reductions in the
number of skilled staff and a legacy of failure going back much further to keep the rating system in a proper state of care and maintenance. This has been exacerbated by the fact that rates are being levied on the historically high 2008 antecedent valuation level and at absolute levels that ratepayers consider unfair and inequitable, coupled with the deferral to 2017 of the revaluation that would have taken place this year, leaving them paying rates on historically high tax bases.
I note with considerable regret that standards in the VOA seem to have slipped. I have been presented with some disturbing evidence of several high-profile cases in which valuation officers have been a great deal less than candid about the interpretation that can reasonably be placed on the evidence available or have attempted to conceal relevant facts in the context of rating appeals. This has reached the point where the confidence of ratepayers and professionals in the VOA has reached rock bottom. It is commonly believed that the agency has moved from being the dispassionate and objective government valuer to a partisan tax-gatherer as a proxy of Her Majesty’s Revenue & Customs—HMRC. That matters. It matters professionally and in terms of the fair administration of this tax.
I do not blame individuals, who I suspect have been forced into a straitjacket caused by insufficient resources, coupled with demands to maintain the tax base at all costs. The problem is the system, which even the immediate past president of the Valuation Tribunal for England said in a recent interview in the Estates Gazette is broken and no longer fit for purpose. Seen in that context, the refusal to disclose information to ratepayers at the very earliest stage is identifiable as a deliberate blocking measure designed to frustrate access to essential information which otherwise the ratepayer cannot be expected to divine for himself or herself. It effectively ensures that a formal appeal is the only route to obtaining the full facts. This is to keep the hapless payer on the hook for continued payment of escalated rates bills for as long as humanly possible.
Despite attempts by the Minister’s officials to reassure me, I remain utterly unconvinced by what is in Part 6, so my amendment is designed to cut through all that: to prevent the Valuation Office Agency citing CRCA and to free up the entire system by a process of transparency. It is the antithesis of what I see as the Government’s retreat behind a further wall of regulatory barriers in Part 6. The Minister mentioned earlier today the intention to remove red tape and simplify things for business, so it is instructive to note what is actually in the draft regulations recently published under the Bill, under the Check, Challenge, Appeal consultation, and to contrast and compare this with the express thrust of government policy and the ostensible purposes of the Bill.
First, Part 6 will enshrine what I might call the confidentiality embargo in law. There is an obvious question as to whether it will thereafter seep into an extended embargo at appeal stage, so as to become like the public immunity certificates which apply in other areas of the law. I would like the Minister, if she would be so kind, to clarify what is intended there. That would be very helpful. Secondly, Part 6 would
pave the way for fees to be charged for making an appeal. This was an additional item put in following the earlier consultation in 2013. Thirdly, it may require a full statement of case and supporting evidence to be supplied ab initio by the ratepayer, failing which the valuation officer may declare the proposal to alter an assessment invalid—due, it might be added, to the absence of the sort of information that I am trying to ensure would be disclosed but which would, under the Bill, continue to be denied to ratepayers. All these measures are to be operated by the Valuation Office Agency as judge, jury and executioner without any apparent rights of challenge as to the fairness or appropriateness of what is imposed.
It seems to me that this is aimed at protecting the operation of the Valuation Office Agency and, perhaps, the tax base, but it is specifically to the unreasonable prejudice of ratepayers, the huge preponderance of whom are small businesses. It is clear to me that no additional funds for administration are to be available. Such reform as the Government have committed to is on the premise of fiscal neutrality. The Minister referred to small business relief; I would cite that in connection with fiscal neutrality because I remind your Lordships that small business relief is paid for by an additional amount levied on the ratepayers of larger properties. To say that all this is a manifestly disgraceful state of affairs is an understatement. It really looks more like the stuff of a police state and goes to the heart of confidence in fair taxation, impartial administration and the rule of law.
I turn briefly to the matter of confidentiality. This was looked at very closely in an opinion given by David Holgate QC, now the honourable Mr Justice Holgate, in which he debunked the fine distinction made by the Valuation Office Agency as between the CRCA and the Local Government Finance Act 1988. He points to the mismatch between this and the overriding duty under Section 41 of the 1988 Act, which requires valuation officers to maintain correct levels of value. In one Docklands offices case in 2014, the vice-president of the valuation tribunal made some unusually critical comments about the VOA straying from its assessment and valuation duty into revenue protection mode. As I have said, the principles of justice, honesty and fairness are at the core of any taxation code in a western democratic society, so there is an important principle at stake here.
My amendment has pan-industry support from such bodies as the Association of Convenience Stores, the British Council of Shopping Centres, the British Property Federation, the British Retail Consortium, the Federation of Small Businesses, the major rating surveying practices, relevant professional bodies and so on. I have seen the trade industry’s most recent letter to a government Minister about this. In other words, all the arguments against the consultation that was commenced in 2013 and then not proceeded with in 2014 remain unresolved and unallayed.
In every other walk of life, the direction of travel is to reduce conflict and speed up process, ensure disclosure at the earliest stage in pursuit of those and reduce thereby costs, risks and delay. What is it about the Government’s stance in the Bill so that, of all the
measures that they might have chosen, this flies in the face of those admirable aims? What do the Government not understand about businesses that they choose what appears to be a deliberate racking-up of bureaucracy, a restriction of access to justice and a perpetuation of creeping malpractice? Concealing evidence is manifestly and objectively wrong. This is the only area of taxation I know of where what will have become statutory concealment applies.
Assuming that the measure gets through this House and the other place—although I hope that this debate will be noted and acted upon—I predict that it will foster dismay and a further cultural shift among ratepayers of equal and opposite magnitude to what I regard as this outrageous part of what is otherwise a good Bill. Part 6 is, ultimately, a temporary prop which will eventually fail. In any event, it will not work. People talk to each other—and in the property world, they talk to each other a lot. That is what makes our property industry so transparent and fluid. The common enemy will be seen as the system and its administrators. In a culture of growing scepticism and disregard, the provisions of Part 6 will simply provide further fuel to the flames. I hope that, even at this stage, the Minister will reconsider.
Perhaps I may say a brief word about government Amendment 65 while I am on my feet. This amendment, too, consolidates a principle of non-disclosure. In any event, I do not see how the disclosure of facts relating to a property transaction, the vast majority of such evidence being held by the Valuation Office Agency, equates to disclosure of personal or corporate tax affairs. The Government’s stance on this is narrowly founded, oblique and, I suggest, flawed. That said, I beg to move.