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THE CHICKEN AND THE EGG (A Tale of Bills and Consultations)

AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

January 2016.

It used to be the practice that, when legislative changes were pending, a Bill went to Parliament, which debated and (usually) passed it, following which Whitehall went about drafting the regulations which would follow it, again for consideration, and approval, by Parliament. In the case of the proposed reforms to the rating system, however, things seem to be happening in a different order: at the time of writing this piece, however (early January) the Enterprise Bill (which has had a couple of rating clauses inserted into it, has yet to pass from the first house to the second; but already the consultation on the proposed regulations has just closed; so there are those who believe that the regulations themselves are already substantially drafted.

These proposed changes are controversial, and apparently not understood by many professionals. VOA staff cannot express views in public, one way or another, of course; private practice valuers have mixed views about different parts of the package (though generally hostile to the proposals as they stand), and billing authorities are unsure about the potential outcome, for them - or, indeed, what outcome they hope to see . All of that being so, what I am going to do is to set out, in summary form, what I believe to be the views of various “camps”, before adding a few thoughts of my own. I stress that I am drawing for this piece, on published speeches and correspondence, other than when I set out my own views, which I flatter myself are informed - at least to some extent!

The Government’s Proposals

Recognising that some measure of reform was required, proposals for change were put forward in 2014, but these met with such a degree of general disapproval that they were withdrawn, and replaced, last year, with the present proposals for reform of the appeal system, which have become known as “Check, Challenge, Appeal”. These proposals have been the subject of a consultation which has just closed, while, simultaneously, a Bill has started its passage through Parliament. This Bill, the Enterprise Bill, at present awaits its Third Reading in the House of Lords, from which it has to pass to the Commons. This Bill, the Enterprise Bill, is mainly directed at improving opportunities for business and widening opportunities for apprenticeships; but clauses have been added to it, principally to provide for the widening of the Commissioners of Revenue and Customs Act 2005, to permit what is said to be a wider sharing of information given to a Valuation Officer for rating purposes, than the 2005 Act is said to permit.

The new system contemplates a three-stage process. The Government’s assertion, as it appears from the Bill, is that information received by the Valuation Office Agency for rating purposes is to be treated as confidential taxpayer information, in the same way as information provided for capital taxation purposes, just as information given to an Inspector of Taxes, has for many years been treated as confidential - to the extent, I believe, that a taxpayer’s file remains closed from inspection by third parties until a century after that taxpayer’s death. The applicability of this principle to rating information is challenged, as is the assertion, going back to a VOA Circular of 2010, that the 2005 Act prevents disclosure.

The objective is to reduce the numbers of appeals against assessment; and the idea to bring this about is that ratepayers should not start by putting in proposals against their assessments, but should follow two new stages before an appeal is made.

The “Check” stage, is the first of these stages; and is intended to allow ratepayers to see how an assessment has been arrived at (presumably by examining the VOA website) by assuring themselves that the factual information held by VOA is correct. Data shared by VOA with the ratepayer will include “…fuller detail about the valuation, including the rents for that property. The valuation may be amended in the light of any updated factual information”. This, it is said, will resolve some cases and this particular stage will not take long to complete.

The second stage is that of the “Challenge”, in which the ratepayer is to set out full details of its case and to provide full details of is valuation. This is the point, we are told, at which the VOA will “… share relevant property information collected from third parties (such as full rental details, receipts and expenditure and construction costs) that has informed the valuation”. The Government takes the view that “…..under the present system, ratepayers and their agents often do not provide case details until the case has been listed for a hearing….. far later in the process”. This earlier exchange of information of property market information under he new system (the spokesman continues) means that the Challenge stage “… can proceed quickly and ratepayers can make well-informed decisions on how to proceed.” the Minister, Baroness Neville-Rolfe denies that additional burdens will be places upon businesses, explaining that: “…while [their] proposals mean that businesses should provide full information at an earlier stage, in most cases they will not need to provide more information, in total”.

As to the status of rating information in VOA hands, the Minister says: “ We are confident that the officers of the Valuation Office Agency are required by the Commissioners of Revenue and Customs Act 2005 to treat information provided as confidential except where the law specifically provides for information to be shared. The Act (sic) also provides for the Valuation Office Agency to share information where it is for the purposes of the Valuation Office as valuation officers are within the ambit of HMRC”.

Opposition in Parliament

The best place to look for what was said is, of course, Hansard for 25th November, from about 8pm, when the House considered Amendment 64. The well-briefed, cross-bench Earl of Lytton (himself an ex-VO rating surveyor and an honorary member of the Institute) moved the amendment and made a number of comments in relation to several matters outside the strict scope of this article, but relevant to it, to which replies were furnished in Lady Neville-Rolfe’s response (she is a Department for Culture Media and Sport minister) to his subsequent letter. That response is in the Library of the House.

Followers of this debate would do well to read the Hansard speeches, including those by Lord Mendelsohn and Lord Stoneham, and the Minister’s letter. Between them. they go a long way towards setting out the proposals and the objections thereto.

This amendment was called on, fairly late in the evening, by which time many peers had left the Palace of Westminster. Because of the very low numbers present, Lord Lytton felt it inappropriate to divide the House; but the questions raised in that debate cannot be regarded as answered and settled. I will return to what I regard as the “elephant in the room”, in my personal comments

Objections to the Consultation Proposals

Although in her letter the Minister refers to “the Act”, the Enterprise Bill is just that - a Bill, even though a consultation on regulations would normally follow enactment. Nevertheless there has been a consultation process in relation to, essentially, the “Check, Challenge, Appeal” procedure, which Whitehall seems to assume is safely enshrined, already, as a statutory instrument. It has drawn heavy criticism from many sides, and on differing bases according to the complainants’ standpoints.

The most frequent complaints have been about the length of time which the ratepayers say will be needed to complete the first two stages (as opposed to what the Minister tells us), and the wide endorsement of Professor Zellick’s call for wider and much earlier sharing of information between Agency and agents, in order to reduce the numbers of appeals. Some argue that a return to full disclosure at the outset would go a long way towards the reduction in appeal numbers, while others blame the current and continuing logjams on government action in limiting the backdating of appeal effective dates, generating a wave of appeals, on the increasing encroachment of the Treasury into an area which was traditionally one for local government, on the growing bureaucracy around appeals in he Valuation Tribunal for England and the extended underfunding of the Agency.

Space simply does not permit a review of all of the objections to the proposals - they are legion and varied. Some want to see greater billing authority involvement, while others do not. Some want penalties for ratepayers at differing scales for providing incorrect and misleading information to the Agency. The standard of many of the representations submitted, has been balanced, and high.

Everyone agrees that reform is necessary - the main debate has been about the extent and nature of those reforms.

My Two penn’orth

For all of the discussion, few have mentioned the elephant in the room, which I will now do. I believe that this whole parliamentary and consultation procedure begs the question of the 2005 Act operating to limit the power of the Agenc to disclose information given to it in connection with its activities under s41 Local Government Act 1988, to ratepayers. My belief, shared by Sir David Holgate in his Opinion for the Rating Surveyors’ Association (of which the Department has a copy) and by others, is that that Act does not operate in that way. There is no suggestion, of which I am aware, that information given to or used by the Agency in compulsory purchase and compensation cases, is to be treated as confidential - compensation is not an HMRC function, and nor is rating.

The Department has been asked to supply supporting evidence for its expressed view: it has declined to do so; and the question cannot therefore be said to be settled. Indeed, had it been so settled, in 2005, I cannot believe that it took VOA until 2010 to proclaim that its powers were so limited, if indeed, as a matter of law, they were so limited. To assert otherwise would be to accuse the Agency of considerable inefficiency. There would therefore seem to be other reasons behind this argument, which have not been made clear.

When rating valuation was removed from the control of local government in the late 1940s rating valuers who transferred from local government to he Inland Revenue Valuation Office worked in parallel with the District Valuer service, created to deal with Estate Duty prior to the First World War. The head of a local office was styled the District Valuer and Valuation Officer, a style which lasted until agency status came along and, like the waters of equity, the two tasks flowed in the same channel but did not mix. The Board of Inland Revenue appointed a DV/VO and, for taxation purposes, the office reported to the Board; but the client department for rating was what has become DCLG.

Information given to the Valuation Office for capital taxation purposes was regarded as confidential and was to be treated as such, in the same way as information given to an Inspector of Taxes. This issue of confidentiality was debated at the highest level in the Valuation Office and a guidance note was issued, in (I believe) the nearly 1980’s, in the Chapter Instructions over the signature of Walter Williams CB FRICS and also, perhaps, that of Norman Behr FRICS (the two Deputy Chief Valuers at he time) that information received by the Office on a Particulars Delivered form could be used in negotiation “over the desk” but could not be used in rating valuation proceedings, unless the capital transaction was disclosed, separately, on a Form of Return for rating purposes. This is the only restriction of which I, and others who worked within the Valuation Office at the time, am aware, and no doubt the VO Circular is available and discoverable in VOA records.

It follows, therefore, that, in my personal capacity, I have difficulty in accepting the assumption which the Department invites us to make, without producing any evidence or argument that the scope and extent of the Act of 2005 is as it claims. I share the views of Sir David Holgate, who reviewed the history, with his customary degree of care. As always, I am open to correction; but if I am right in this, then this consultation, with all due respect, is fundamentally misconceived, being based on a false premise. Perhaps the easiest way to deal with this would be for the Minister to publish the advice which makes the Government so “confident” of its stance.

Peter Scrafton

©J.P. Scrafton, 2016

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