(Agreed to by Nine out of the Fifteen Commissioners.)
Reviewing the evidence we have taken on this subject, we think that although it cannot be said that it would be impossible to assign separate values to site and structure, especially where a comparison could be made with neighbouring property of a similar character which had been recently let, such a system would certainly be attended with considerable uncertainty, complication, and expense, and in this respect our conclusions are identical with those of the Select Committee on Town Holdings, who reported "that the scheme is open to very great objection on the ground of the difficulty and uncertainty of the proposed system of valuation." The valuation of every site, upon the basis of the rent which might be obtained for it, if it were cleared, would be highly speculative where no means of comparison was ready at hand, and even where such means existed, many varying factors, such as rights of light, and the existence of easements, and other restrictive covenants, would have to be allowed for, and the circumstances of the surrounding property closely investigated. As the term for which a lease was granted approached its termination, further difficulties would arise, especially where the capacity of the site might not be fully utilised by the buildings then standing. And when all these questions had been considered, the results would be so hypothetical in character that a large number of appeals and attendant expense would be inevitable.
A separate valuation of sites would not be impossible, but would be complicated, expensive, and uncertain.
Difficulties as to sites not fully utilised by buildings, and as to leases approaching their termination.
The proposal really involves a fundamental alteration in the present system of arriving at the net annual value of property, a system which is based upon the rent which a tenant from year to year might be expected to pay for the whole rateable hereditament as it stands. The system is not unattended with considerable difficulty in its practical application, but it has stood the test of experience, it is well understood, and, in our opinion, there would be an immense increase of cost and considerable litigation if the ascertainment of values for rating purposes were to be made dependent on the hypothetical considerations to which we have referred. As the late Lord Farrer said, "Valuers will, no doubt, put a valuation on anything, whether they know anything about it or not; but the question is what real basis they have for their valuation. The only ultimate basis of a valuer's knowledge is his experience of actual market values; and as the land and the houses upon it are sold and let together, no such basis can exist for a separate value of the two things."
Unless, therefore, some important object is to be gained, which cannot possibly be carried into effect except by recourse to the dual system of valuation proposed, we feel that its introduction would be indefensible. Any further departure from the basis of fact, and the consequent extension of the element of hypothesis in the valuation of property is obviously to be avoided if practicable, and we are unable to concur in the view expressed by the various supporters of the scheme, that the ends which they respectively have in view would justify the introduction of an admittedly difficult and intricate system which would certainly result in further inequalities of valuation as between one ratepayer and another.
The abandonment of the present system of assessing the annual value of the whole hereditament as it stands is most undesirable, unless important objects are to be secured thereby.
We have elsewhere referred to the present practice which exists in the ascertainment of the net annual value of property, and expressed the opinion that the scale of deduction prescribed either by law or practice might with advantage be applied with more elasticity by Assessing Authorities.
With regard to the suggestion that the separate valuation of site and structure would assist the division of rates between owner and occupier - a proposal which we cannot endorse - we would point out that the result of such valuation would not be of any assistance in the determination of the real value of the various interests in the property, since those interests are charged on the hereditament as a whole, and include in their security both site and structure. Apart from the immense difficulties which arise in the varying conditions of the contractual obligations, no sound apportionment could be made on site value only, and the ascertainment of the land value does not seem to us to be of any utility, even if it were decided to introduce a system of dividing rates as between owners and occupiers.
It is also claimed that the separate assessment of site values would tend to a fairer assessment of the hereditament as a whole, on the ground that land is a property which commands a larger number of years' purchase in the market than buildings or structures. This raises the question whether the basis of the assessment of property for local taxation should be radically altered by the substitution of capitalised for annual value. We have already expressed our opinion against the introduction of such a change.
The practice as to deductions can be rectified by other means.
The separate valuation of site and structure would not assist in the division of rates between owner and occupier - even if such a division were desirable.
The separate valuation of sites would not improve valuation generally.
The remaining, and by far the most important, object for which the new system of valuation is sought to be introduced is the imposition of a special tax on the "site" or land values, and as to this, we desire to say that we cannot concur in the suggestion that it would be equitable to select land as a particular class of property and place on it a burden in addition to that which it bears in common with all other rateable properties. Such a proposal does not appear to us to be justified upon either of the two grounds which have hitherto formed the basis of our system of local taxation, since neither in respect of their ability to pay, nor of the benefits which they receive, does it appear to us that the owners of land values, using the term in its widest sense, contribute inequitably to local expenditure at the present time, as compared with the owners of other classes of rateable property. It would be difficult, in our opinion, to maintain any effective distinction between sites which have increased and sites which have diminished in value; but, even if it were possible, land is not the only class of rateable property the value of which may be enhanced by circumstances beyond the influence or control of its owners, and we see no reason why, by reason of such enhancement of value, it should be placed in a new and separate category so far as rating is concerned. In any case, however, it is obvious that, if a special burden is to be imposed on land, on the ground of any increase of its value, the object could not be equitably met by the imposition of a new rate on site value from year to year. The extent of such increase varies not only as between district and district, but as between different parts of the same district, and in some cases there is either no increase at all, or a diminution of value. The imposition of a new rate of any given amount upon the annual value of all property in land would, therefore, bring into existence new inequalities of liability, unless measures were taken to differentiate not only between district and district, but between property and property - an obligation which, in our opinion, could not be satisfied by any possible modification of existing rating machinery.