Penny Wise, Pound Foolish
By ANGUS MAUDE, MP TT is high time that the Government addressed 'themselves to the growing scandal of the com- pensation paid to holders of property compul- sorily acquired by local authorities. If it is too much to hope that they will do this on grounds of simple equity, then at least they should con- sider the extreme inefficiency resulting from the present system, which sometimes has the effect of frustrating the Government's own plans.
Five years' experience of the 'compensation and betterment' provisions of the 1947 Town and Country Planning Act made it abundantly clear that the 'development charge' system would not work. The nationalisation of land values had re- sulted in the sterilisation of land. Mr. Mac- millan's 1954 Act therefore restored a free market in land, with beneficial results. But it also provided that land compulsorily acquired by local authorities should not be paid for at current market values, but at the 'present user value' plus the amount of the admitted development rights claim under the 1947 Act. In other words, the de- velopment rights in compulsorily acquired land were frozen at their 1947 values.
During the debates on the 1954 Act, the Opposition insisted, with more than usual per- ception, that the anomaly of combining a free market for private sales with a falsely low price for land compulsorily acquired would in time make the new system unworkable. However, as their solution to this problem was to enforce a false price for private sales as well, they cannot be given much credit for their ideaS. Their prophecy, however, is coming true.
The true rental values of shops in improving urban areas, for example, are more than double what they were in 1947. As a result, the maximum price that a local authority may pay for property compulsorily acquired in the centre of a city is sometimes no more than half the present market value. It is *known that some Conservative councils have even refrained from carrying out certain needed improvements because of their unwillingness to perpetrate an obvious injustice. This is clearly a ridiculous situation : but the situation is often little less absurd where the local authority decides to go ahead with its scheme.
The absurdity is perhaps most glaring in cases of new road works, particularly road-widening in towns and cities. There is a fairly large pro- gramme of works of this kind to be carried out all over the country, and it is obviously desirable that it should be completed as quickly and cheaply as possible. Yet the financial arrange- ments for compulsory purchase have the effect both of delaying the work and of increasing the cost, to say nothing of the injustice suffered by owners and occupiers of property.
When a new road scheme is announced, and the local authority declares its intention to ac- quire the land involved, there is often a long argument (sometimes even between the local authority and the Ministry of Transport) about the proposed italic. In the end, it may be decided to alter the route. But from the moment when the original Scheme is announced, it is impossible for the owner of any property on the route to sell at market value. One day his property may be' worth £2,000 and the next day it may have fallen to f1,200 or less, supposing he can sell it at all. Clearly this may involve real hardship.
However, the loss to the community generally arises after the route has been agreed. The local authority tries first to buy the land it needs by agreement. In default of agreement, it makes a Compulsory Purchase Order and issues to the owner a `notice to treat.' The District Valuer is then asked to fix the price at which the com- pulsory purchase will take place, and often the District Valuer himself is responsible for con- siderable delays. But in any case he cannot fix a price greater than the sum of the existing user value and the 1947 development rights claim. The local authority can, at its own discretion, recog- nise a disturbance claim by people carrying on a business in a property to be acquired; the normal payment is one and a half or two years' purchase of a three-year average of profits, with an allowance in some cases for removal costs.
As often as not, however, the person carrying on the business is a tenant. The landlord gets no benefit from a disturbance claim, but bears the full loss involved in the forced sale of his property. He therefore generally lodges a notice of objection. The Minister usually orders a public inquiry, but in the case of road-widening schemes the Compulsory Purchase Order is almost in- variably confirmed. Now the local authority can, by serving notice of entry, take possession of the property in order to start work well before the District Valuer has fixed the price of acquisition. However, if the owner is at once angry, deter- mined and skilfully advised, he may succeed in keeping the local authority out (and thus holding up the start of the work) for a very long time. A case of this kind occurred over the present scheme for widening the Strand.
In fact, a property owner can, by taking full advantage of the processes of law, hold up the start of work for two years or more, instead of the preliminaries being completed in three months if all goes smoothly. But during those two years the process of inflation may have increased the ultimate cost of the road works by as much as a quarter. The local authority may also have suffered a considerable loss of rateable value, to say nothing of the waste of officials' time and the cost of legal proceedings. '
We therefore have the ridiculous situation in which the obligation to purchase land too cheap results in a huge increase in the cost of the scheme. The taxpayer and ratepayer suffer severely and a necessary road improvement gets held up for a quite unnecessary period of years. Since the cost of acquisition is often a relatively small proportion of the total cost of the scheme, the annual inflationary increase, of perhaps 10 per cent. or more, in construction costs far out- weighs the extra cost that would be involved in increasing the amount of compensation.
If we really want- to improve our roads quickly, there can be no justification for retain- ing a procedure which automatically involves delays. Obviously one should not exaggerate the benefits that would flow from a reform of the procedure. Even if the land were to be acquired at current market value, you would no doubt still, get the occasional objector who would hold out on principle or from sheer bloody-minded- ness. But there can be no excuse for perpetuating an injustice which makes all the owners bloody- minded from the start and determined to fight.
In addition, many local authorities themselves dislike the present system and would welcome a return to purchase at market values. They do not want to go back to the old system under which prices could be forced up against them to un- reasonable le'vels, and they admit that the sug- gested reforM would be subject to sonic risks of encouraging speculation. But they believe that this can be kept in check. In France, where a very big road programme is going through, acquisition is at market value plus disturbance allowance; the procedure involves ample safe- guards for the owner and is felt to be fair, and as a result it is remarkably speedy.
The Government have, therefore, three induce ments to act : the wishes of local authorities, the reduction of costs and delays and the obvious injustice of the present system. The Labour Party is most unlikely to initiate this reform if it should be returned to power, but a Conservative Gov- ernment surely cannot wish the present system to continue. if they want to get the reform through in this Parliament, they should start their discussions with local authorities right away.
Previous page
