From the Trenches

‘’May you live in interesting times‘’ is one of those old double-edged Chinese proverbs, and events in Wuhan province have certainly now given it a whole new meaning. At the time of writing, COVID-19 is rapidly gathering momentum across Britain, and we are in ‘self-imposed isolation’ here, being in the over seventies at-risk group. Living in remotest Herefordshire and just recovering from our second ‘once in a hundred years’ flooding in two months, you might have thought we were well placed, but the virus has already reached our next-door neighbour via an outpatient visit to hospital. Time to look out those old army composition ration packs, maybe. Certainly, no one knows where all this will bottom out but bottom out; it will and everyday life for most of us will resume.

Not everything will survive, of course, either mortally or economically, and if the rating system in its present form is a victim, I, for one will not be sorry – if nothing else, recent events, even before the virus kicked in, have once more underlined the hopeless failings of the tax in its present state, with yet another department store group collapse (Beales) and ever-growing resistance across the whole of commerce and industry. The recent budget regurgitated another series of sticking plaster ‘solutions’ of discounts, holidays and exemptions to ill-defined and anomalous groups of taxpayers. Still, it entirely failed to address the fundamental defects of a historically successful and fair levy, which has been systematically undermined by successive governments through the Local Government Finance Act 1988 and its plethora of futile amendments.

The budget did stipulate a ‘thorough review’ of the whole system of local taxation, to be completed in time for the Chancellor’s fiscal statement due in September (but now doubtless overtaken by COVID-19). Given that this is the tenth such ‘review’ in almost as many years, I, for one, am not holding my breath. In fairness, this review appears to be unrestricted by the usual undermining conditions such as ‘must be fiscally neutral’ and is broad enough to encompass internet trading and the prospect of a land tax, but the structure of the exercise is yet to be revealed.

Ever keen to assist our beleaguered administration, I offer the following observations. Whilst aware that psychiatrists invariably categorise the use of capital letters and underlining as indicators of deep psychopathological disturbance, I feel that my use of them here is not only appropriate but essential. I need to attract the attention of the politicians and civil servants who have not only made such a complete hash of the current rating system but have systematically ignored the following criteria despite their repeated highlighting by those involved in trying to deliver a fair tax.

So here goes:

The tax rate is far too high

The current basic national business rate exceeds fifty per cent when it should be no more than thirty to thirty-five per cent. The rate is even higher for larger properties (which owes everything to political expediency and nothing whatsoever to fiscal logic). A simple comparison with the rates for income tax, corporation tax, capital gains tax et al. underlines this point.

Transitional adjustment between revaluations is unnecessary and unfair.

If allowed to operate correctly and accurately, the tax, based on the clear market indicator of rents paid, is a fair reflection of ability to pay. The current heinous practice of ‘phasing in’ changes in liability following revaluations must be abolished forthwith; particularly as governments have been unable to resist phasing in reductions in liability much more slowly than increases. Consequently, those whose assessments (and ability to pay) have reduced can easily be paying a one hundred per cent tax rate, or more, on their newly lowered rateable value. What a disgraceful nonsense.

Re-establish rates as a local tax

Rates were conceived in 1601 as a means of funding local services, and that function remains to this day. Indeed, with central government imposing an ever-increasing burden on local authorities (LAs), from social care to social housing, that need has never been greater. In the 1980s the extreme left-wing politics of the Militant Tendency, predecessors of today’s Momentum movement, gained power in many LAs such as Liverpool, Sheffield and Camden and abused local government’s then taxing powers through grossly excessive rate increases. Sheffield reached £4 in the pound, and it was Camden’s policy to compulsorily acquire every property in the borough, funded by increased rates income. The Conservative government reacted, some would say over-reacted, by ‘nationalising’ rates under Treasury control, to be redistributed as central government saw fit. As with privatisation of the railways, the scheme has been an abject failure in seeking to apply a single national solution to diverse local problems. There has been some recent tinkering of the system to give an appearance of localisation, but imposing responsibility without authority never works. Rates need to be set and applied locally, albeit within a sensibly wide range set by central government.

Bring back the valuation office

The Valuation Office was set up in 1911 as an autonomous professional body to deliver objective property assessments, originally for estate duty (inheritance tax) and a national land tax, planned by Lloyd George and Winston Churchill but never implemented (but see later!). Its role, which it executed with such competence that it became recognised as the national benchmark of valuation expertise, was expanded in 1948 to encompass all valuations for both domestic and commercial rating assessments, a role previously provided with variable competence by LAs. It delivered this service with equal success under an entirely cognate management structure headed by the Chief Valuer. Tragically its independence was destroyed in the 1990s by transition to Agency status, directed by the Treasury and now managed by a board almost totally bereft of any cognate expertise, which understands little and appears to care even less about its professionalism, merely overseeing endless budget cuts and imposing directives to maximise tax yield with minimum assets. As a result, successive rating lists have become less and less accurate, and confidence in its valuations has evaporated. In the 2017 revaluation, massive increases in the assessments of, for example small independent shops (some up 80% in five years?) in what was plainly a falling rental market highlighted an incompetent organisation wholly out of touch with the real world. A rural petrol filling station had its assessment increased from £4,600 to £26,000! (subsequently settled at £12,250). A heritage stately home saw its rateable value increase from £22,000 to £217,000 on instruction from ‘higher management’, even while a previous increase was in negotiation – it was ultimately settled at £50,000. In any other valuation forum, this would amount to professional negligence and will only be remedied by reversion to its pre-1990s independent professional status and management, and adequate funding.

Abolish ‘check-challenge-appeal’

It is, or should be, axiomatic to any scheme of taxation that it is open to a simple, straightforward and transparent scheme of appeal to an independent court or tribunal; indeed, such a fundamental right is internationally recognised. Such a system broadly existed in this country until 2017. Then in England, but not elsewhere in the United Kingdom, a scheme known as CCA (check, challenge, appeal) was imposed by the government without consultation (always a clear indicator of bad legislation, as with empty rates in 2008). This cynical attempt to frustrate the appeal process not only makes the whole method of challenge, so complex and time consuming as to render it all but impossible for a lay taxpayer to embark upon, but further requires the appellant to submit a fully argued and evidenced case before a challenge is even considered by the Valuation Office Agency, let alone providing access an independent court or tribunal. Meanwhile, the VOA refuses to disclose the evidence on which its calculations have been made. It is a system that is as morally bankrupt as it is fiscally abhorrent and should be scrapped without further delay

Abolish rate liability on empty property

This was another iniquitous measure arising from political expediency and is entirely illogical and unfair in a tax regime calculated explicitly on the value of the occupation of property i.e. rent. So: no rent, no tax. Indeed, this was the basis of the tax from its inception in 1601, only nibbled away at from 1966 and wrongly even then. That is not to say that all property should not attract a liability to tax, as envisaged in 1911, but it cannot and must not be based on rental value.

Eastablish a level playing field in the age of the internet and global economy.

The anomalies of the present tax regime in the era of internet trading and multinational companies manipulating their tax havens are well established, particularly but by no means exclusively in the retail sector, where the distorting impact of business rates has wreaked havoc on high streets across the whole country. Of course, the likes of Amazon pay rates, as they routinely plead, but they bear no relation to the scale of their trading figures, as a simple proportionate comparison with conventional retailers quickly highlights. As we at last have a government with a decent working majority, now is the time to tackle this long outstanding issue. Abolish all existing adjustments, back dating, exemptions and reliefs and start again.

Whilst often introduced and justified as addressing ‘unfairness’, these almost always arise from political expediency and generally achieve the opposite effect e.g. why do public schools pay 20% of their liability but state schools 100%? There are now so many of these political tweaks that it needs highly complex computer systems to try to work out who owes what and when, and even these routinely perpetrate errors which require even more complex programmes to try to unscramble them. Taxpayers need to be able to understand how and why they have to pay large sums of their hard-earned profits to the state and business rates, if unmolested by all this flim-flam, can achieve that – as it did so until 1990; until when, incidentally, the assessment was the lesser of the entry in the rating list or market rental value. We may not have liked it, but at least we could understand what we didn’t like.

Introduce a land tax

Business rates currently contribute a very substantial £30 billion in tax revenue, a sum which must be significantly reduced to bring it down to a feasible yield – the current level is patently unsustainable. In order to make up the resulting shortfall, a tax on land ownership, which is currently effectively tax free, should be introduced, as already exists in other developed economies. Australia, for example, has a dual system taxing ownership and occupation. Much work has already been done to facilitate such a tax, which would only need to be set at a modest level to redress the much needed reduction in rates yield. A mere 0.5% tax rate on the estimated total land value would raise £20 billion in revenue. It would also redress many of the anomalies and imbalances which currently exist and render our whole tax profile perceptibly unfair e.g. on agricultural and residential ownership. The Valuation Office Agency, if properly managed and funded, already has the records and expertise to establish the tax base, and the Land Registry already records the majority of ownerships.


COVID-19 is going to have a massive effect on our economy and way of living in the months and years ahead but it does offer a unique opportunity to review and redress the balance in our currently failing tax regime. Let’s not waste it!

Tom Dixon RD BSc (Est Man) FRICS IRRV (Hons) is a past President of the Institute and a consultant with Daniel Watney, Chartered Surveyors. The views expressed are his own and do not

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