Council Tax Valuations in England and Wales
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NATIONAL AUDIT OFFICE REPORTBY THE COMPTROLLERAND AUDITORGENERAL CouncilTax Valuations in Englandand Wales ORDEREDBY THEHOUSEOFCOMMONS TOBEPRINTED 30MARCH1994 LONDON:HMSO f7.40 NET 320 COUNCIL TAX VALUATIONS IN ENGLANDAND WALES This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act. John Bourn National Audit Office Comptroller and Auditor General 16 March 1994 The Comptroller and Auditor General is the head of the National Audit Office employing some 800 staff. He, and the NAO, are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. COUNCIL TAX VALUATlONS IN ENGLANDAND WALES Contents Page Executive summary 1 Background 4 Main findings and conclusions 8 Was the banding exercise completed on time? 8 Were all properties banded? 8 Were properties put in the right bands? 9 Are proposals to change bandings properly and promptly handled? 19 What is being done to maintain complete and accurate lists? 22 Did the tendering and contract arrangements secure proper controls 23 and value for money for the taxpayer? Appendices 1. Chronology of the Council Tax valuation exercise 28 2. Organisations consulted by the National Audit Office 29 -1 ~..~..~.-_... _~.__ -~--- .--Te~~.... j-3.2 s COUNCIL TAX VALUATIONS IN ENGLAND AND WALES Executive summary 1 This summary records the results of a National Audit Office examination of the Council Tax bandings given to domestic properties in England and Wales by the Valuation Office Agency. The main banding work was carried out by the Valuation Office and private sector valuers in 1992 to provide the basis for the introduction of Council Tax on 1 April 1993. Was the banding 2 The Council Tax came into operation as planned on 1 April 1993 reflecting the exercise fact that the banding of all properties in England and Wales had been completed completed on time? on time. Whilst the valuation of individual domestic properties is a relatively straightforward professional task, the completion of 21 million bandings to a 12 month deadline was, by any standards, a significant achievement. Were all 3 The direct National Audit Office examination was necessarily selective and could properties banded? not therefore positively confirm that all properties were banded. However, the steps taken by the Valuation Office and other evidence suggest that the final valuation lists are unlikely to have significant omissions. Were properties 4 The correct banding for a property is, like all valuations, a matter of professional put in the right judgement. Valuers had to weigh up many factors - the size, layout and location bends? of a property, sales of similar properties and the price which might reasonably have been expected on the valuation date. The National Audit Office did not second guess professional judgements on individual valuations but examined, first, the way in which the Valuation Office planned and controlled the work and, second, the bandings given to an independent sample of some 12,000 properties sold around the valuation date. 5 The Valuation Office planned and controlled the work using lists provided by local authorities. The lists were checked against previous domestic rating records, recognising however that these had not been comprehensively updated since 1988. Some 80,000 “key properties” were established throughout England and Wales to provide all valuers with common valuation reference points. The Valuation Office set a 10 per cent valuation tolerance level to reflect acceptable differences in professional judgement, and, for quality control, independently checked samples of all banding work. These arrangements worked well and private sector and Valuation Office valuers achieved a consistent level of accuracy. 6 Examination confirmed that around three quarters of the National Audit Office’s independent sample of some 12,000 properties were given a band corresponding to the purchase price. Adjusting the purchase price to take into account the 10 per cent valuation tolerance brought around 91 per cent of the sample into line with the bandings given. An inconsistency between an individual purchase price and the banding of the property does not necessarily mean that the banding is wrong. 1 COUNCILTAX VALUATIONS IN ENGLANDAND WALES Similar properties can and do sell for different prices and valuers had to take into account the weight of relevant sales evidence as a whole. Subject to that important proviso, the results suggested that, for England and Wales as a whole, around 19.3 million properties were banded correctly, around 900,000 properties could be (but are not necessarily) in too high a band and around 1.1 million could be (but are not necessarily) in too low a band. As expected, bandings were in general more accurate for lower valued and similar properties in urban areas and less accurate for higher valued properties and those in rural areas. 7 The National Audit Office concluded that in general the banding of all properties was carried out to a level of accuracy that met acceptable professional standards, given the time constraints and the statutory limits on valuation methods. The Valuation Office were satisfied that the 914,000 or so proposals to change bandings was about the level to be expected from an exercise of this size and timescale. Are proposals to 8 The Valuation Office received 914,000 proposals for rebanding (four per cent of change bandings all properties) by the statutory deadline of 30 November 1993. They had settled properly and 261,000 cases by the end of February 1994, against a target of 280,000 by 31 March promptly handled? 1994. But there are wide variations in how quickly cases are being resolved by local valuation offices, with proposals being cleared most quickly in urban areas consisting mainly of low value properties and most slowly in offices covering Outer London and rural areas in southern England. 9 Not surprisingly, the majority of proposals settled to date have been those where decisions on banding were relatively straightforward. For most of the proposals outstanding the accuracy of the banding is unclear and these are likely to take longer to resolve. The Valuation Office aim to settle 730,000 proposals (80 per cent) by the end of 1994 and the rest as quickly as possible in 1995. The estimated cost of dealing with each proposal in 1993-94 is somef115, part of which relates to the work done by valuation tribunals. What is being 10 Appropriate steps are being taken to maintain lists up to date. But property values done to maintain are likely to change over time and it may become increasingly difficult to band complete and new properties accurately, particularly if they are of innovative style and accurate lists? construction. Although there are presently no plans for a rebanding exercise, the Valuation Office are well placed to monitor changes in national and regional property values to help to determine whether a revaluation might be required in the future. Did the tendering 11 There was significant competitive tendering for work between the Valuation and contract Office and private sector valuers, and between private sector firms. The Valuation arrangements Office took a number of steps to ensure that tendering would result in satisfactory secure proper work and provide value for money. These included a detailed pre-qualification controls and value process, an independent unit to evaluate tenders, and a computer model to identify for money for the the cheapest combination of Valuation Office and private sector bids. taxpayer? 2 COUNClLTAXVALUATlONSINENGLANDANDWALES 12 The tendering generated a high level of competition which indicates, in general, that the Valuation Office will have secured the lowest cost for much of the work carried out, without sacrificing standards. The average cost of winning private sector bids was El.58 a property. The estimated Valuation Office cost - produced on a full cost basis and therefore not directly comparable with the private sector bids was El.81 a property. 13 The Valuation Office estimated that in England competition produced savings of between E3.9 million and fZ4.5 million when compared to the estimated costs of having the work done by either the private sector or the Valuation Office alone. A comparable estimate could not be produced for Wales, where 50 per cent of the work was allocated to the Valuation Office at the start of the exercise and they did not compete with the private sector for any of the remaining work. i 3 COUNCILTAXVALUATIONStNENGLANDANDWALES Council Tax Valuations in England and Wales Background 1 The Council Tax came into effect on 1 April 1993. The tax liability for each household depends on a number of factors but varies according to a band based on the capital value of the property. To provide the basis for the tax, around 21 million domestic properties in England and Wales had to be valued and assigned to one of eight broad bands (Table 1). The bands ranged in England from under E40,000 (Band A) to over E320,OOO (Band H) and in Wales from under f30,OOO (Band A) to over !Z240,000 (Band H). Figure 1 opposite shows the number of properties in each band at 1 April 1993 and the way in which the amount of tax for each band varies. Table 1: Ranges of