Treasury Committee
Oral evidence: The work of the Valuation Office Agency, HC 1291
Wednesday 19 April 2023
Ordered by the House of Commons to be published on 19 April 2023.
Members present: Harriett Baldwin (Chair); Rushanara Ali; Mr John Baron; Emma Hardy; Danny Kruger; Andrea Leadsom; Siobhain McDonagh; Anne Marie Morris.
Questions 1 - 102
Witnesses
I: Jonathan Russell CB, Chief Executive, Valuation Office Agency; Alan Colston, Chief Valuer and Head of Surveying Profession, Valuation Office Agency.
Witnesses: Jonathan Russell and Alan Colston.
Q1 Chair: May I welcome you to the Treasury Committee evidence session on the work of the Valuation Office Agency? I am very grateful to you for coming in and giving us one of your periodic updates. Can I start by asking you to introduce yourselves?
Jonathan Russell: Thank you very much for inviting us. I am Jonathan Russell, CEO of the Valuation Office Agency.
Alan Colston: I am Alan Colston, chief valuer of the Valuation Office Agency.
Q2 Chair: Jonathan, I think this is the first time you have come to talk to us in your capacity as chief executive. I think you were acting chief executive last time you were here. Could you give us a sense of your first period in the full-time role as chief executive and what you have been focusing on in terms of the strategic priorities for your organisation?
Jonathan Russell: I came here last time in the midst of covid, so I was responsible for it on an interim basis. Since then, for the last two years I have been responsible overall. Our objectives set out three key objectives. The first one is to deliver an excellent customer service. We realise that there is a customer or ratepayer at the end of everything we do, so we need to make sure we are operating with their thoughts in mind and that we are not just doing things because we think it is the right thing to do. We have a customer at the end of it, so we are making sure we deliver excellent customer service. That is a key part of what we are trying to do. Our performance reflects the fact that we are taking customer service very seriously indeed.
Obviously, one of our key objectives is to make sure we produce trusted valuations and do that efficiently. We need to make sure that the taxpayers trust what we do, that we are transparent about what we do and that they have overall faith in the system. Again, that is about working closely with customers, but also making sure we are transparent with agents who might represent customers as well. We have taken the step to make sure we see the business rate system as a partnership. We are part of that partnership. Agents are part of that partnership, as are customers, so we need to make sure we are producing trusted valuations. Again, it is key that we do so efficiently because, at the end of the day, we are spending taxpayers’ money, so we need to make sure we are spending it wisely and properly.
Q3 Chair: Last time you were here, you were telling us about the rollout of “check, challenge and appeal”. Most of our constituents will come across you when they are surprised or challenging a valuation, so could you tell us how that is going?
Jonathan Russell: We think “check, challenge and appeal” is going very successfully. It has certainly had the policy impact it was intended to have, in terms of reducing the number of people who came through and did a check. Over the lifetime of the list, we have had 850,000 checks. Just so you know, the list started in 2017 and it finished in March this year, so it was a five-year list. We have had 850,000 checks. We have resolved 750,000 of those, and 94% of those were resolved in three months. Statutory duty is to do that in 12 months, so we do not see the statutory duty as a target; we see that as the deadline. We have to make sure we do it more quickly than that.
Regarding challenges, we had 140,000 in total. We resolved 130,000, and 77 were resolved in four months.[1] The average time over the lifetime of the list was nine months to get that resolved. We are aware that we need to try to do better, so in the last year we have got the average time for challenges down to eight months.
Q4 Chair: Challenges are often quite successful. I understand that about one in five of the challenges have resulted in a downward valuation, so you were effectively overcharging before. What have you learned from that experience?
Jonathan Russell: The whole purpose of the system is that, on the check stage, people can make sure we have got the facts of their property right, which we do, and we do that very quickly. Then the challenge point is about understanding why they may think we have not got the valuation correct in terms of the market. Again, it is about a partnership approach. Often, they are represented by agents. Something in the region of 90% of people who put through a check or a challenge are represented by agents. We discuss with the agents and explain why we think the valuation is right. Then they will go and say, “No, we think it is something different” and we try to reach mutual agreement.
Q5 Chair: But 20% of the time they are wrong.
Jonathan Russell: I think it is about 20% of the time, yes.
Q6 Chair: Do you learn anything from that?
Jonathan Russell: Yes, absolutely, because we operate in a very dynamic system where the property market is changing continually, in terms of the properties that are being built, how properties are being used and how properties are being let. It is important that we learn as we go along. We learn from discussing with agents, customers and ratepayers. Eventually, if it goes to litigation, we learn from that as well.
Q7 Chair: Are there any other strategic objectives that you have set for the organisation that you are particularly concerned about at the moment?
Jonathan Russell: I am not concerned about them. We only have three. I have mentioned the first two. The third is to make sure that VOA is a great place to work because, at the end of the day, whether we are delivering for our customers or providing trusted property valuations efficiently, we cannot do that without people who are engaged, are motivated and want to be there. I am very proud of the people we have working in the agency. They do a great job. It is a very complicated job and they do it very well.
Q8 Chair: You do not have vacancies that you are concerned about in the organisation.
Jonathan Russell: No, we do not have vacancies we are concerned about. If you take the metrics about how we are performing as an agency with people, our engagement scores have gone up by 22% in the last five years. Our completion rate for the people survey is the highest it has ever been, so people have high morale and there are no vacancy problems at all.
Q9 Chair: There is high morale, with no risk of any strike action.
Jonathan Russell: There have been strikes. We had one day of strike action last month, with a further three coming. I think there will be one next month from the PCS and two more from Prospect, so, yes, there are some strike actions, but that is not about a particular VOA issue.
Q10 Chair: Could you tell us what it is about?
Jonathan Russell: I obviously cannot talk for the trade unions. My understanding is it is about pay, conditions and pensions across the civil service.
Q11 Chair: That is not something you have any ability to affect as chief executive of the organisation.
Jonathan Russell: I have to comply with the Cabinet Office guidance on pay remit that was published last week, and that is what I do. Within that, I need to make sure that we are delivering the best we can for our people. There is some scope for me to do what I can, and I do the best I can for my people.
Q12 Chair: What change in the performance of your organisation can our constituents expect to see as a result of the strike action that is planned?
Jonathan Russell: We have very robust and detailed plans in place. You mentioned learning earlier. We have learned from the day’s strike we had previously. We have made sure we are realigning resources to deal with the immediate customer inquiries and responses, so we have answered those. There was limited impact on overall service, so we have learned from that. We have made sure that we continue to provide a service for our customers.
Q13 Chair: The Non-Domestic Rating Bill is about to have its Second Reading. Obviously, that is going to require quite a lot of work for your organisation. Can you let us know whether you are ready for it?
Jonathan Russell: Yes, you are quite right that the Second Reading is coming up. We have been working closely with DLUHC and HMT. We do not have policy responsibility, but we are working closely to make sure that, when legislation comes in, we can operationalise it. We are working closely with them. Yes, we are ready for it. We are prepared for it. We know that it is going to make sure that we can deliver more frequent revaluations because we are requesting more data from ratepayers. It will enable us to gather up-to-date data, so, yes, we are prepared for it. We are looking forward to it. It is a good change in the system.
Q14 Chair: That is all ready to go. What about the complaints that you inherited when you became chief executive? How are you doing in terms of the pipeline of complaints about the performance of the organisation?
Jonathan Russell: We take complaints very seriously indeed. Since I took over as CEO, I have made sure that there is a direct line of reporting between me and the people who deal with complaints. We have had 779 over the last 12 months, 99% of which were dealt with within the 20-day target we set ourselves, and 33 have been to the adjudicator.
Q15 Chair: Are there any older complaints in the system?
Jonathan Russell: No. We deal with them very swiftly, but we need to learn from them because, even though it is a very small number of 779, it is still too many. We need to be learning from them and putting in place procedures to make sure they do not happen again. We take them very seriously.
Q16 Siobhain McDonagh: I want to look at the issues of houses in multiple occupation. I feel very torn; I want you to charge for each tenant and I want you to charge the landlord, because I believe HMOs are a complete blight on most communities. What is generally your attitude when councils refer properties to you and ask you to rerate because they have been converted?
Jonathan Russell: Just to make it clear, we do not bill; we just carry out evaluation in line with internationally recognised policies and procedures and the legislation. We just carry out the valuation and then it is the local authority that does the billing.
In terms of houses in multiple occupation, it is an interesting area. Basically, it is about looking on a case-by-case basis at how well they have been adapted for self-contained living. On one end of the scale, you might have a Victorian house that has four bedrooms, with four separate people in the bedrooms all sharing the same kitchen, living room and toilet. That is probably one property for terms of taxing. On the other hand, it may have been adapted so that there is more self-contained living. That could be the situation whereby there is a separate toilet and separate facilities. They might be four self-contained units for council tax purposes.
There is consultation going on. I think the consultation has just finished. We are not making any pre-emptive changes to how we carry out valuations until the Government have decided what they want to do with HMOs. At the moment, we are still looking at it on a case-by-case basis, following recognised procedures.
Q17 Siobhain McDonagh: Do those cases come to you from particular local authorities? Are you aware of any geographical pattern of where they are?
Jonathan Russell: They do come to us from local authorities. They come to us from a range of sources. Local authorities will tell us where there have been changes. Again, ratepayers will tell us where there have been changes. I am not aware of any specific geographical spread, but you can take it that we probably get most of our work from the large conurbations rather than the small rural areas.
Q18 Siobhain McDonagh: I have a very local issue that I hope nobody else has ever experienced. Last September, there was a fatal gas explosion in my constituency where a little girl died and the council had to evacuate almost 500 people. Unfortunately, 19 of those families are still unable to return to their homes because of the amount of damage that was done or the works required through insurance. They have rented properties through their insurance in other boroughs, but are continuing to have to pay their council tax on their home that they cannot occupy because the works are still outstanding. In four cases, the properties have been demolished. My constituents are very worried about coming to the VOA and that you will just say, “Sorry, you have to continue paying council tax on both properties”.
Jonathan Russell: Obviously, in the first instance, my condolences to those 19 families who lost their homes, particularly the fatality. It is terrible. In terms of billing, we do not do the billing. The clue is in the title: dwelling fit for occupation. If it is not a dwelling that is fit for occupation, then council tax will not be appropriate. Most local authorities will give 12 months’ relief, and then they will contact us in most circumstances and say whether it should or should not be on the list. If it is not on the list, then it does not pay council tax.
Q19 Siobhain McDonagh: Merton Council is certainly saying that the individual residents should contact you rather than the council.
Jonathan Russell: Yes. They can happily contact us. Alan, do you want to say anything from your perspective?
Alan Colston: In those instances, they can make a proposal to alter the list and get the property deleted.
Q20 Siobhain McDonagh: Is that the individual or the council?
Alan Colston: The individual council tax payer.
Q21 Siobhain McDonagh: What is the process like?
Alan Colston: It is digital and online, or we can help them with it. We have an assisted service if necessary. It is fairly quick and straightforward.
Q22 Andrea Leadsom: Good afternoon. One of your strategic objectives is trusted valuations done efficiently and the other is excellent customer service. Mr Colston, you have indicated to the Chair and to Ms McDonagh that an awful lot is not your problem. You are just doing the job. Someone else decides the policy, but many constituents of mine—and all of our constituents—feel their valuations are unfair and that the VOA is impossible to deal with.
I could give you a number of examples of a retirement home setting that has effectively been given a huge council tax banding because there happens to be a hairdressers and a restaurant within the retirement home. Tiny properties are being treated as if they were five-bedroom properties in a town setting. Constituents have reported to me that trying to deal with the VOA is incredibly difficult. They are saying that customer service is poor, that the willingness of the VOA to engage with them is very low and that the valuations are simply not trustworthy. That is at least two of your objectives not being met. What would you say about that, Mr Colston?
Alan Colston: I believe our valuations are as accurate as they can be at the point in time that we undertake them. There are 2 million valuations on the current non-domestic rating list. We have just undertaken a revaluation and gathered an awful lot of information on which to base those valuations. In some instances, we are very happy to hear from customers if they believe they have relevant evidence that means our valuation is not accurate. We have heard earlier that we deal with the vast majority of our customers within three months of receipt of a check.
When we get into the challenge stage, again, we take quite a long time to exchange evidence and discuss with the taxpayer, to make sure they understand the make-up of the valuation and the evidence that sits behind it, and we deal with those as quickly as we can. We prioritise cases where there is hardship involved, so we will deal with those much more quickly than other cases. I believe we offer a really good service and I am happy to hear from any customer if they feel that we are not giving them a good service, because it is very important to us.
Q23 Andrea Leadsom: As a matter of fact, over the years I have written to the VOA a number of times and I have not found that you are happy to hear when homeowners are unhappy. I would be interested if you can just talk through the actual customer experience if a homeowner wants to challenge their rateable value.
For example, I have another constituency case where their house is being compared to another in the same street. One has a conservatory and a roof conversion, and has been upgraded, whereas theirs six doors away looks similar from the street, but does not have an extra bedroom, a nice landscaped garden at the back or a conservatory. What would you say to that individual, who says that they have tried to challenge why they are rated the same as that clearly upgraded house and that you just say, “No, that is it; we are sticking with what we have said”? What comeback do they have?
Jonathan Russell: Can I give the overview of what we are trying to do? Is that okay?
Q24 Andrea Leadsom: I would really like to understand the process for the customer, because you say you give excellent customer service. How does it feel for the customer?
Alan Colston: There are 26 million properties on the council tax lists in England. The valuations are based on 1 April 1991. This came into effect on 1 April 1993. We deal with approximately 50,000 inquiries and proposals every year. There are limited grounds on which you can challenge. If you are a new occupier, you can make a proposal. We are happy to review inquiries, but there is not necessarily a right of challenge in those circumstances. Where they have proposal rights, they can make a formal challenge.
In the example you cite, it is difficult for me to be specific, but the legislation is quite tricky in this area. For example, for homeowners who improve their properties by adding extra bedrooms and extensions, we do not review those bands until there has been a relevant sale. They can often be in a band for a considerable time as the house existed before, so it is quite difficult sometimes to compare what is actually on the ground now. If they have not sold the property, we would not review the band in those circumstances. I am certainly happy to hear from council tax payers if they believe that we have got something wrong.
Q25 Andrea Leadsom: That is painting a picture very similar to what my constituents over the years have said to me, which is that they are just batted back. Again, to this particular example, I completely understand that you cannot check everybody’s new roof conversion, but this was indeed a newly sold home given a council tax banding, so it was quite clearly up to date as far as you are concerned. Then my constituent, who a few months later bought a house on the same street that had not been converted and did not have the loft conversion or the conservatory, was given the same council tax banding. Indeed, houses next door that were not converted had a lower council tax banding. He challenged why his home was being compared to this newly revalued higher grade and was told, “No, that is it; you are stuck with it”, and there is no right of appeal. Is that correct?
Alan Colston: It would depend on the circumstances of the case. I do not know the individual case.
Q26 Andrea Leadsom: Is there a right of appeal then?
Alan Colston: There are certain appeal rights in certain circumstances. There is an inquiry route for those who cannot make an appeal and we will review the band, but there is no right of appeal to that decision if you have no appeal rights. That is right. There are only limited circumstances in which you can challenge your existing council tax band at the moment.
Q27 Andrea Leadsom: What do you say then, again, more generally? Away from the specific, where I think you are basically agreeing with the experience of my constituents that it is just tough luck for them, if you go to the bird’s-eye view, what would you say to somebody who has a £30-million property in Westminster and is paying £1,500 a year council tax versus somebody in County Durham whose property is valued at £130,000 and is paying £1,700 of council tax per year? Are those trusted valuations? Can they possibly be trusted comparators?
Alan Colston: I do not believe that is to do with the valuations. We have a banded system in council tax, and each local authority is responsible for the charges and the recovery of the bills.
Q28 Andrea Leadsom: That is not what I am asking you. I understand that you are saying, “It is not my problem; it is their problem”, but you are claiming your target is trusted valuations. To any normal person sitting in this room, that is appalling. How can it possibly be that someone in a £30-million mansion in central London is paying less council tax than someone in what would be a modest home in County Durham? How can that then be a trusted valuation? Before you say, “That is not us; that is the Government. We do not do the policy”, just saying, “I only work here” is never good enough. If you are the VOA, you are a non-departmental body. That does not make you not accountable for what goes on on your watch.
I would like to know how frequently you feed back to policymakers the heinous examples that you must come across day after day, so that you change the system for the better. While on the subject, what about the fact that you are using valuations from 1991? In Wales, they are using valuations from 2003. How many drums are you banging to say, “This is completely ludicrous; this system has to change”?
Jonathan Russell: In terms of trusted valuations, it is about trust in the valuation. You are quite right: the valuation date is 1991. My colleagues are experts in getting evidence to compare and making valuations based on the price of sale in 1991. They are experts in it and they do a fantastic job of making sure the valuations they do are accurate and are trusted. I am not abdicating responsibility in any way for what happens with those valuations, but that is set by someone else who determines what bands they fall into.
To the question of how closely we work with our colleagues in the policy teams, be that in HMT or DLUHC, there was a meeting only yesterday between policy officials looking at the NDRR regulations, for example. In those conversations, we will put to them our experience of dealing with the legislation, be it council tax or non-domestic rating.
Q29 Andrea Leadsom: All of those are technical points that you have just raised. All of them are technical comments on technical issues. I am raising a bird’s-eye view of how it can be right that a property worth £30 million in central London pays less council tax than a modest small home in County Durham. That is the general point I am making and I am asking how hard you are fighting for a restoration of land and property values from 1991. The world has changed. In 1991, how old were we? In my case, and yours, Harriett, we were very young. The world has completely changed. It is completely ludicrous, so you cannot just abdicate and say, “That is the Treasury” or “That is DLUHC”, can you?
Jonathan Russell: I cannot answer for Departments whose jobs it is to determine that. That is what I am saying.
Q30 Andrea Leadsom: Of course you cannot, but you can bang a drum. I am asking you: how many times do you say to them, “This is not right”?
Jonathan Russell: We are in constant dialogue with them about how their overall system works, be it for non-domestic rating or council tax.
Q31 Mr Baron: Can I just turn to the plan by the VOA to modernise, improve or upgrade the IT system and data collection, particularly when it comes to our business rates and so forth? Your annual report says that the business systems transformation programme is “redesigning and simplifying all our core systems”. Those are fine words, but you will appreciate that, when it comes to Government Departments, IT upgrades and the phrasing “gone to plan and budget” rarely sit in the same sentence. Your parent Department, HMRC, does not have a good track record when it comes to ICT systems and delivering them. How is the VOA going to do things differently so that you surprise everybody who is sceptical, including myself?
Jonathan Russell: We are making sure that, in designing the new system, rather than completely outsourcing it to contractors, we have people embedded in the team, so that the people who are designing the system are those who use it. For example, with the council tax system, there is close working between the IT specialists, the designers and our own colleagues inside the VOA who are telling them how to do things. That is part of the way of making sure that it will deliver what we want it to deliver, rather than something that may only be theoretically appropriate.
We are working very closely with that. We have oversight in Government to make sure that it is delivering in the way we want it to, and we are confident that by the summer we will be able to do some of the council tax work on the new IT system. Then next year we will be able to do the next revaluation 2026 on the new system as well.
Q32 Mr Baron: That all sounds very logical, but can I suggest that you are missing one essential component? Why are you not including the end user as part of the development programme?
Jonathan Russell: We certainly will be. We are already talking to local authorities in terms of how they bill and how they provide information. That might be about what it is going to look like, because one of the key things is making sure that people can upload information to our website without having to go through the current system. We are already talking to local authorities and billing authorities about how we are designing the system and what they want to see from it, and we are talking to agents about what they want to see from it as well.
Q33 Mr Baron: You would agree that that has to be central. It has to work from their point of view if it is going to work at all.
Jonathan Russell: Yes, absolutely.
Q34 Mr Baron: What is the timetable on that, as a matter of interest?
Jonathan Russell: As I say, we are looking to introduce the first element, a process called CR03 that relates to council tax, which is putting on the system a new property or new home. We are looking to put that into user testing in the next month or two and then implement that. Obviously, there is some training demand as well, so it may be ready before summer but, because of school holidays et cetera, we may decide to put it into testing and training for our people in the autumn. That is the immediate timeline for the council tax process.
Before then, we are looking to introduce a geospatial element of the system. At the moment, we have to rely on maps and hardwired stuff, so we are looking to introduce some geospatial techniques before the summer. Then there comes a time when we need to make the decision about whether we can do the next reval, reval 2026, for non-domestic rating on the new system. That should be in March next year.
Q35 Mr Baron: When would you expect this to be fully operational?
Jonathan Russell: It will be next year, 2024.
Q36 Mr Baron: Do you have any idea of when next year?
Jonathan Russell: To deliver reval 2026 on it, it will need to be operational by March or April next year, but it is a system we can evolve and develop, whereas the old system is hardwired. The new system can be tweaked and evolved as we go along, so we will improve it over time as well. While it might be operational next year, we will continue to engage with users, and indeed our own people, to see how we can make it even better.
Q37 Mr Baron: Moving on, HMRC recently concluded a consultation on the digitalising business rates programme, and the consultation talked about the Government’s planned new duty on ratepayers, requiring them to supply certain types of information to the VOA. Again, hairs rise on the back of the neck, in the sense that what we must not do is make this too bureaucratic or increasingly bureaucratic for the end user. It is very easy to do this from the centre. I take on board that you are incorporating the end user in the design of the programme, but can you just tell us a little bit more about your efforts to minimise bureaucracy?
Jonathan Russell: I will talk about it in relation to the non-domestic rating review as well as DBR if that is possible. DBR is HMRC’s policy issue. The plan at the moment is to use BST as a front door for the ratepayer or customer to input and get their unique customer reference from that, but with NDRR as well we are going to be asking the ratepayer—
Q38 Chair: Forgive me for interrupting, but you are slightly falling into acronym talk. There is a wide television audience out there who may not know what all those acronyms are, so could I just ask you to try to translate for us?
Jonathan Russell: I will do my best. DBR is digitalisation of business rates, which is making sure that we link a business’s tax history and tax profile with the property. We value properties, and it is about making sure those two are linked, so that is the digitalisation of business rates. HMRC is doing that.
The NDRR is the non-domestic rating review, and that is regulation that is going through at the moment, with Second Reading later this month. That will put a requirement, if it goes through, on ratepayers to provide us with information. Again, in doing that, we want to make sure it is easy for the ratepayer to do that. They are not surveyors. They are not qualified like my colleagues are.
Q39 Mr Baron: You have asked for additional information, but you have not justified why you need the additional information. You are telling us you need it but not justifying it. Why are you making additional requirements of the end users?
Jonathan Russell: I will let Alan come in on that in a second, but a lot of it is about making sure we can carry out more frequent revaluations. At the moment, a lot of our time is spent gathering information. In fact, for the revaluation 2023 we wrote to roughly a million ratepayers asking them for information. This is about making it more proactive so that we can carry out Government policy. They want us to make more frequent revaluations. We are moving to three-year revaluations, which we think is fairer, but, if we want to go beyond that, we then need the appropriate collection of data. Alan, do you want to say any more on that?
Alan Colston: We have an awful lot of interactions at the moment in collection of evidence. We have to send out lots of information to taxpayers, so hopefully the new system will reduce the burden in that sense. They will have a requirement to provide it to us when an event occurs, such as if their lease or rent changes, rather than our seeking it. That removes some of the lag in our gathering that data. There is an ambition in the reform package to go further and faster so that people’s rateable values are more up to date with their actual circumstances. Therefore, we need to remove that lag so that we can do three-year revaluations in a timelier manner.
Q40 Rushanara Ali: I have some questions about business rates. In 2023, the Government moved from six-year revaluation cycles to three-year cycles for business rates. How did the VOA go about implementing this change?
Jonathan Russell: We are implementing it now because we have started the reval for 2026, so we are in the revaluation phase now, information gathering, and the last reval we did in two years, so we have learned from that. We are making sure we plan properly and develop systems so we can get the information correctly. Business systems transformation, which we mentioned earlier, will be a part of that, but Alan is the programme director for reval, so I will let him talk about it.
Alan Colston: We have just published 2 million new valuations for the 1 April 2023 list. That replaces the previous list, which was 1 April 2017. That is the six-year difference that you were referring to, so we have just finished and completed that project and we are now starting on the 2026 revaluation.
Q41 Rushanara Ali: Can you talk us through the major changes in compressing it?
Alan Colston: In terms of the valuations, the valuations are based on a date of 1 April 2021, so we were updating the valuations for a six-year gap. The previous valuations were based on 1 April 2015, so we have had to undertake—
Rushanara Ali: Sorry, can you speak up please?
Alan Colston: The valuation date for the previous list was 1 April 2015. The new valuation date for the current list of 1 April 2023 is 1 April 2021. We have updated all the values that are shown in all the rating lists that local authorities bill on.
Q42 Rushanara Ali: What do more frequent revaluations mean for the VOA’s business model? What are the cost implications, as well as the benefits, of doing it more frequently?
Alan Colston: It means that we have to undertake 2 million valuations every three years rather than every five or six years, so it is a big change in the demand for our work. Clearly, we need to do that as efficiently as we can. The transformation programme that we are undertaking and some of the reforms that we were referring to earlier will help us to do that by gathering data more digitally, and more at the point in time that the change happens.
Q43 Rushanara Ali: What are the resource implications?
Jonathan Russell: We are fully funded for the changes we need to make to implement the more frequent revaluations. As we were talking earlier about asking ratepayers and customers for data, one thing that will happen as part of the non-domestic rating review is that there will be a change to the legislation. Because we are asking people for data, that means we already have it. That will mean the “check” part of the “check, challenge and appeal” will be dropped.
At the moment, we tend to do a revaluation, then spend two or three years checking it, challenging it and going through that process. By making sure we get data up front we will not need to do that. Having more up-to-date data will mean that people will be able to move straight from the “check” phase, which we will not need to do, into the “challenge” phase, so it will shorten the process for us and for ratepayers.
Q44 Rushanara Ali: On balance, is this change an improvement? What are the pros and cons?
Jonathan Russell: The improvement is based on consultations carried out both by this Committee and by Departments. The key thing that came out from that was that businesses wanted more frequent revaluations so that we can more accurately and frequently reflect the market conditions. At the end of the day, our valuations reflect the market conditions, so the more frequently we do it, the more able our businesses are to recognise the market in which they are operating.
Q45 Rushanara Ali: In the Committee’s 2019 report into business rates, it was said that methods of valuation applied to ostensibly similar businesses can lead to wildly varying rates bills. Are you confident that your valuations for 2023 will be consistent across businesses and the country?
Jonathan Russell: Yes. As I said at the outset, we are taking the view that, where we can, we work in partnership with agents and ratepayers. In a lot of cases, we will look to either use a pre-approved method of valuation or, indeed, pre-approve the valuation. We published the draft list in November last year and the compiled list was published at the end of March. The purpose of the draft list going out is to give people the chance to look at it, see if they recognise it and raise queries, so we are very confident we have enough evidence to make sure the valuations are based on sound evidence. About 90% of valuations are done using rent comparisons, so we have a lot of information for that. Yes, we are confident that the valuations are going to be accurate.
There will always be some areas where people will say, “You have not got it quite right”, and that is why the system is there for them to challenge us if they do not think we have got it right. Where they do that, we want to do it as quickly as we can, and, again, we do it in partnership. We want them to tell us why they do not think we have got it quite right, especially if it is a point of valuation rather than a point of factual accuracy.
Q46 Rushanara Ali: Picking up on Andrea’s point earlier, do they have right of appeal in those circumstances?
Jonathan Russell: Yes, they do. In terms of the lifetime of the list to date, the 2017 list, there has been something in the region of 3,300 appeals.
Q47 Rushanara Ali: How many of them were successful?
Jonathan Russell: I cannot remember off the top of my head. I can write to you and let you know that.
Q48 Rushanara Ali: Would you be able to write to us to give us the facts on that?
Jonathan Russell: Yes, absolutely.
Q49 Rushanara Ali: Thank you. Valuations carried out in 2023 have an antecedent date of 1 April 2021. Your most recent annual report states that you started carrying out the 2023 valuation in September 2021. Obviously, a lot has happened in that time. The economy has changed rapidly since 2021. How would you ensure that the valuations reflect the reality that businesses are facing?
Jonathan Russell: We go out and collect a lot of data, and we make sure that the antecedent valuation date is consistent across the whole of the business geography. We collect a lot of data. We wrote to about a million ratepayers this time and got a two-thirds response from that, so we got a lot of response about rate and rent information. We do a lot of conversation with agents and businesses as well. Alan is the person in charge of the revaluation. He has been dealing with it for a number of years, so he can provide more detail.
Alan Colston: The April 2021 date means that we treat everybody the same. We try to estimate a rental value as of that point. That is probably a low point in terms of market. If we think of what April 2021 was like, covid was ongoing and there were still some properties shut. If you look at some of the outcomes from the revaluation, licensed and leisure, for example, saw a 21% fall in rateable values, reflecting the state of the market at that point in time. We certainly engage with various industry groups, bodies and stakeholders to try to agree an appropriate basis of valuation, limiting the scope for future disputes.
Q50 Rushanara Ali: What is the changing economy doing to valuations? For the next business revaluation, which industries or properties will you be focusing on?
Alan Colston: We have to value all 2 million, so we have no choice other than to do all of them. The valuation date will be 1 April 2024. We are in the process of gathering that evidence now. It is too early to tell what the key changes between the next revaluation and this one will be because we have not started the valuation phase yet.
Q51 Rushanara Ali: Could you give us a sense of what you think the shifts might be between the pandemic economy and the next revaluation?
Jonathan Russell: It is a very complicated picture. It is about industry sector and geography. Also, within an area it can be very different in terms of retail from a market town to a large shopping centre, so it is a very complex picture. As I say, Alan has done a lot of research into what is going on across the country. Some areas, as you would expect, are doing well and some less so. At the end of the day, revaluations are meant to be revenue neutral. It is about redistributing liabilities to reflect those changes in markets. Do you want to say a few words about the key changes, Alan?
Alan Colston: I have learned that it is very dangerous to try to predict the outcome of the market, so I would rather not, if that is okay. We will need to see once we have gathered the evidence and undertaken the valuations.
Q52 Rushanara Ali: The Times has reported that the VOA has overestimated the rateable values for warehouses because the antecedent date on 1 April fell during the pandemic when high street retailers were struggling, as you know, and online retailers received a big boost. Now this position has changed, is 1 April not the wrong date on which to base business rates for the next three years?
Alan Colston: You are right that the market for warehouses, and distribution warehouses in particular, was very buoyant in April 2021. That has probably continued. There is still a very strong market for online retail and distribution. That is still a strong market, as far as I can tell at the moment.
Q53 Rushanara Ali: Why do you not put it factually? What is the difference between 2021 and now? Obviously, in lockdown, people were purchasing and delivering goods in a different way.
Alan Colston: Yes and no. The online trade continues to grow.
Q54 Rushanara Ali: It has not changed that much.
Alan Colston: It is too early for me to say in terms of gathering for the next revaluation, but it is certainly still a very buoyant market.
Q55 Rushanara Ali: If you saw quite a big difference, what would you do in that situation?
Alan Colston: We have seen big changes between the last revaluation and this one. As I said, licensed and leisure went down 21%. Shops went down 9%, but that is a huge range of shops. Some went down much more than that. Offices went up slightly. It depends very much on the market that we are talking about as to which properties would go up and down, so we will have to review the evidence for the next one, but we have seen big changes.
Q56 Rushanara Ali: You do not agree with this assertion that it would be wrong to use the 2021 date, because there has been some consistency.
Alan Colston: No, we are valuing at that date. That is what the Government have decided in undertaking the revaluation. In fact, they postponed the 2021 revaluation.
Q57 Rushanara Ali: I appreciate that, but the question is whether there is an issue with that. I appreciate that this is what the Government are doing.
Alan Colston: We have estimated the rental values for those properties. We have the evidence to support the valuation, so I do not believe there is an issue. There will no doubt be some challenges that we receive and some evidence that comes to light afterwards.
Q58 Rushanara Ali: Unlike households, they will have the right of appeal.
Alan Colston: At the start of a new list, you get the right to challenge, certainly. In terms of households, the council tax list has been in existence for over 30 years, so there are more limited rights.
Rushanara Ali: I was just picking up on the earlier point about big houses. Somebody who wants to put a lot of money into their fancy house can then inadvertently put their neighbours at a disadvantage.
Q59 Emma Hardy: Afternoon. Just to check something at the beginning of the session, is it right that, when you move into a house for the first time, you have only six months to challenge? I know that has come up as an issue, which I believe I have corresponded with your office about. Have you any plans to change that? In the first six months, you might not be fully aware of the rateable value of your house and how it compares with your neighbours. I wonder if you were looking at extending that right to appeal.
Jonathan Russell: When you move into a house, you have six months to lodge a formal appeal in line with the legislation. If after that you think there is something wrong, we will still look at it; we will not ignore it. We will take the evidence into consideration and see if there is a need to change it. That is the law, but we will go above and beyond the law to make sure we are looking at people’s council tax bills and reflecting the evidence they provide to us.
Indeed, when I said there were something like 55,000 band challenges, we also rely on people providing evidence to us. The overall proactive change is that we took about 75,000 band changes in total because local authorities and others would write to us, and we would act proactively on that to make sure we are changing the bands.
Q60 Emma Hardy: I have been supporting a constituent with this issue, and I know that they had to provide their own evidence of houses that look similar, taking photographs of other people’s houses and sending them through to you. Is that really the best way to request a valuation change? Apart from the fact that it might look slightly odd if your neighbour is photographing the outside of your property, is that the right way to go about it?
Jonathan Russell: We are trying to make it as easy as possible for people to challenge their council tax band, so we are revising the website regularly to make sure people understand what is required. We do not want them to go to too much effort. Sometimes people send us loads of comparisons that we just do not need. We are trying to make sure they do what is right and appropriate in terms of providing us with the information that we can use to go out and then make a change to the council tax, but we are not proactively going out inspecting, no.
Q61 Emma Hardy: I would gently suggest greater clarification on the website about the six-month rule and exactly what information is needed. That could maybe be made a bit clearer to people who are looking to challenge it.
Another issue on valuations that I have mentioned often on this Committee is flooding and climate change, and what impact that has. You will know that there are 2.6 million homes at risk of flooding in the UK, and that climate change is real and inevitable. When you are making your valuations, are you talking into account the valuation of properties that are in more flood-prone areas and are at risk?
Jonathan Russell: As with any valuation, we are looking at the market. We are following the market. We do not set the market. That is how we go about doing a valuation.
Alan Colston: We are basing our council tax values on 1 April 1991, so it is the extent to which the market would have reflected that you were in a flood zone as of that time, I am afraid.
Q62 Emma Hardy: That does feel like it is a real area of concern then, because we know the flood risk in 1991 is different from the flood risk in 2023. Are conversations going on about this?
Jonathan Russell: Again, when we meet with officials, we raise all sorts of issues around how the overall business rates and council tax system works, because we have to operationalise it. There is no point having policy that does not allow us to operationalise it, so we are in conversation, yes.
Q63 Emma Hardy: Just to push you a bit more on the issue of climate change, homes that are at risk now were not at risk in 1991. I understand that you are reflecting what the market is saying, but there is also the inevitability of how the market is going to react to homes that are prone to flooding. Is this on your radar?
Alan Colston: Specifically, if a house is flooded, then there is action we can take. If it becomes uninhabitable as a dwelling, then we will remove it from the list, but the council tax is a very old list. It is based on 1 April 1991 values, so we do not have a lot of discretion in terms of updating those values without a policy change.
Q64 Emma Hardy: Is that something you are seeking to reflect—the new reality?
Alan Colston: It is a matter for officials that have policy responsibility.
Q65 Emma Hardy: You are not allowed to say. Okay, I will not make you say that. I wanted to ask a little bit about film and TV because, as I am sure you know, Hull is now one of the best places to make films. In fact, it is now commonly known as Hullywood. Looking for Hullywood to continue to succeed, it is reported that the film and television production sector is worth £6.3 billion, but do your changes to valuations of studios risk damaging this industry?
Jonathan Russell: Again, we will reflect the market. You are quite right that it is an incredibly buoyant market, particularly film studios. We look at what the rents are and, indeed, film studios are being built in considerable numbers across the south-east in particular because the demand is so high. Our valuation will reflect that high demand. If you look not just at the builds but at how they are leasing the film studios rather than just leasing for one film, they are now doing leases for 10 years because they know they can occupy those film studios. Alan, you have been working with the film industry. Do you want to say anything more about that?
Alan Colston: We are continuing to discuss with the film industry those values and we are hoping to receive additional information to decide whether we have got it right or whether we need to make some changes.
Q66 Emma Hardy: Valuation is very specialist. Do you have enough specialists in that area? From the research I was looking at ahead of this session, there is huge concern from the studios that this could kill off a fledgling, successful industry. Do you have specialists and are you under a lot of pressure from the studios at the moment about this issue?
Alan Colston: There is not so much pressure. We have a range of specialists within the valuation office. In fact, we have a national valuation unit set up specifically to deal with specialist classes of property. There is no question but that we have the resource and the capability. The issue is receiving the information and discussing the relative values with the industry. We are in discussions with them. We do that with a range of industries. The pub industry is another that we meet regularly; the solar industry is another one. We meet all sorts of industries in undertaking our valuation work to make a measure of agreement in terms of the valuation scheme that we want to adopt for that particular industry.
Q67 Emma Hardy: The Financial Times reported that there have been discussions between you and the Department for Culture, Media and Sport, and that the Department for Culture, Media and Sport was supportive of the studios’ case. Are you feeling pressure from the Government as well here?
Alan Colston: Not particularly.
Emma Hardy: You are pressure proof.
Alan Colston: We have to take a valuation under the law as of 1 April 2021, and we have to look at the evidence as of that point. As I say, I am hoping to receive further information and to discuss further with the film industry, because we are acutely aware that there has been a big change. We need to ensure that we have those valuations as right as they can be.
Q68 Emma Hardy: There has been some speculation in the press that the valuations have been based on the longer-term leases such as the larger studios, like Disney’s decade-long agreement with Pinewood. The concern in the press speculation has been that you are potentially going to be overvaluing smaller studios because you are basing it on these large ones.
Alan Colston: There is quite a range of accommodation with studios. We cannot blanket them in terms of the design. You are right that there are some really specialist large studios that can undertake multiple films at the same time, but there is a lot of range. Some are more akin to offices, TV studios for example. Others are more akin to warehouses with specialist fit-out, so it is very difficult. I would not say we adopt a blanket approach in the valuation of film studios. We look very much to the evidence and the type of property in its locality in arriving at the valuation.
Q69 Emma Hardy: What is your timescale? It seems to have gone on for quite a while, so when are you expecting to conclude this?
Alan Colston: It is not solely our responsibility to engage and provide the relevant information but, of course, now that the list is live, each individual taxpayer has a right to check and challenge their figure as well as the ongoing discussions we are having with the more representative trade body. There is an opportunity to query your actual valuation almost immediately and for us to handle that.
Q70 Anne Marie Morris: My constituency is in Devon in the south-west, and hospitality is absolutely fundamental, as you will appreciate, to our local economy. Therefore, the valuation of pubs is something that really matters. One of the challenges that we are all facing is how we revalue following the pandemic. As I understand it, in theory you value on the basis of fair, maintainable turnover. However, we have had some unusual years, so what is fair, maintainable turnover? I understand that you were looking at the trading year of 2019-20. Why does that seem right? Then in practice, I understand that you are using April 2021, so I am a little confused as to what you are actually doing and how you are going to deal with a challenging problem like this.
Jonathan Russell: You are quite right that pubs are something we take a special interest in. There is an agreed scheme of valuation with pubs and innkeepers, and their representatives, such as the British Beer and Pub Association. We work very closely with stakeholders to make sure we get it right. We are transparent about what we are doing. It is not just about the simple case of the area, but about that fair, maintainable trade and turnover. We have published guidance on our website so people can see what we are doing, but again, it is very much a detailed valuation area, so Alan can probably provide more detail on that.
Alan Colston: We discussed with a wide range of industry stakeholders, again, in coming up with that agreed scheme of valuation that we have published on our website. You are right that we use fair, maintainable trade of a reasonably efficient operator. It is not about the actual operator; it is about the level of trade that that particular property can sustain.
Q71 Anne Marie Morris: Forgive me, Mr Colston, but what are you doing with regard to the issue of the pandemic? All of that is a theory. We all understand that. I want to know what you are doing to deal with working out what that effectively means for this particular period.
Alan Colston: You are right that our valuation is April 2021. At that time, there was a roadmap out of covid, but leisure properties and pubs were not fully open at that point, so we could not rely on the trade for that trading year. Equally, when you look backwards at previous years’ trade, there is no guarantee that the trade would have recovered going forward, so what we have agreed with the industry is that we have taken the most recent trading year without the pandemic, and then we have given an allowance to reflect the fact that covid was present as of April 2021, so there is quite a large allowance.
Q72 Anne Marie Morris: How much of an allowance are we talking about?
Alan Colston: It is in the guide. Forgive me; I will search through it and find it for you, but it was something in the order of 20%, I believe.
Q73 Anne Marie Morris: You say that that has been agreed with the industry, but in the way you have articulated that it sounds like you are looking at the actual turnover if you are looking at historic figures rather than fair, maintainable, theoretical turnover, if you like.
Alan Colston: I can explain that. If there is a series of actual trading figures within the three years, we will look at those figures and decide whether that needs to be adjusted. Again, if it is a reasonably efficient operator that is running the establishment, it might be that the trade is very consistent, so there is no problem in assuming that that is the fair, maintainable trade. In other instances, particular operators may be overtrading or, indeed, undertrading, and we would adjust the actual trade. It is not the actual trade that we end up with. We end up with an adjusted fair and maintainable trade that we believe is right for that particular premises, having regard to its age, character and location.
Q74 Anne Marie Morris: Okay, but there is a challenge here. Certainly, I have been approached by a number of pubs in my local towns in Dawlish and Teignmouth. They are not at all happy with the approach that has been taken because while, in theory, as you said, it is fair, maintainable turnover in terms of an efficiently running pub, they say what is happening is that you are using the actual figures. Of course, that discriminates against anybody who is running a very successful business. Indeed, as I understand it, the Pubs Advisory Service has confirmed that that is its experience and its view. It has not been very complimentary about your approach to valuing pubs.
Alan Colston: Again, all I can reiterate is that, with the organisations that we work with in coming up with the scheme of valuation, that represents very small, individual licensees as well as the bigger companies or the small breweries, so we have a range of stakeholders on that forum in coming up with that approach. It is a recognised industry approach, not just for undertaking rating valuations, which we are doing, but also if you are valuing the pub for other purposes, whether that is to sell or to undertake a rent review. It is the same approach that the surveyor would use in arriving at a value.
Q75 Anne Marie Morris: It is not the theory that I have a problem with; it is the practice. My pubs are telling me that, while that may be the theory, the practice is that you are looking at the actual figures and the actual turnover. You are not making sufficient adjustment in the way you describe to try to make it neutral in terms of the actual efficacy of the pub.
Alan Colston: We certainly do gather information on the trade of the actual pub. That is the best starting point, in a way, to decide what is the appropriate level of trading for that particular pub in that particular location.
Q76 Anne Marie Morris: Then how can you adjust it? In a way, you are already starting with a bias towards actual.
Alan Colston: Not necessarily. You would then look more widely at other pubs in the area of a similar character and nature, and whether their turnover is similar or different and why. You would make an adjustment on that basis. It is not that we will not make an adjustment. We are happy to do so where the evidence supports it. In the circumstances you describe, if an individual publican is unhappy, I am happy for them to contact us to check and challenge that.
Q77 Anne Marie Morris: Can they contact you directly? I am conscious that going through the appeal procedure is long, tortuous, expensive and generally so painful that many feel the expense is not justified.
Alan Colston: They have to use the process. There are 2 million properties. There are 40,000 pubs. I am not sure I can deal individually with every single one, but certainly we deal with over 90% of checks within three months. We will deal with most challenges within eight or nine months of the receipt.
Q78 Anne Marie Morris: That is a long time, Mr Colston.
Alan Colston: It sounds like a long time, but when you are exchanging evidence and information, and the documentation that the publican is providing to us as well as what we might provide to them, there is a to-ing and fro-ing in the process. That means that we do not end up forcing an individual or taxpayer through to an appeal process. We would rather resolve it at the point that they have challenged and queried with us.
Q79 Anne Marie Morris: You have guessed right that it is the small independent pub that has a bigger problem than the chains, not least because they do not have big pockets to have a go at contesting what has actually happened. As I understand it, the last time you came before the Committee, you agreed and have therefore delivered on involving the Federation of Licensed Victuallers and the Guild of Master Victuallers, which indeed represent that small group, but it is quite recent. How has their membership impacted and changed the way that you look at this? It still sounds like there is a pretty standard practice that is being used.
Alan Colston: They have been involved for a number of years and we very much welcome their engagement in their process. We meet them every three months or so and discuss valuations, both for the current list and for future lists. They are active members of that association.
Q80 Anne Marie Morris: What have you done differently in your approach as a result of their membership?
Alan Colston: We have made a number of changes to the guide from the previous guide that we published, reflecting both the change in market circumstances and the feedback from individual stakeholders in that group. We have made a number of changes to the percentages that we use to adjust, but also for the covid situation that you discussed earlier.
Q81 Anne Marie Morris: How many complaints have you had with regard to pubs specifically, and how many of them have been successful?
Alan Colston: I do not know the answer to that. I am afraid I need to write to you on that.
Q82 Chair: Just to clarify for the Committee, you have made it clear throughout the evidence session that you do not do policy, and that there is very little interaction with policymakers in terms of where you think things are perhaps not being done the right way. You did not say that you were raising the issue of climate change, for example. Yet it sounds as though, on the subject of pubs, there is some sort of adjustment that you make. Is that a policy that you have had to agree with ministerial input, or is that something you have done independently as an organisation? It sounds awfully like policy to me.
Jonathan Russell: As I say, there is a valuation policy and technique in how we carry out valuations, which we can determine to a large extent. We follow the Royal Institution of Chartered Surveyors red book, and we also work with agents. We follow international practice in our valuations, so we can work with stakeholders. We have agreed schemes of valuation across a variety of industries. Just to clarify, we do not have policy responsibility. HMT has policy responsibility for the tax base overall and DLUHC has policy responsibility for the legislation that then deals with and implements business rates.
Q83 Chair: This adjustment approach that you are using with pubs sounds to me awfully like policy. Did you have to agree that with Ministers?
Jonathan Russell: You mentioned earlier that you do not see much interaction. There is constant interaction between us, at an official level, and HMT and DLUHC. I just want to make sure you do not go away thinking that we are not having conversations with our policy colleagues. We are. On the specific point about pubs, as I say, there are schemes of valuations approved across a whole range of sectors. We will agree those and then inform people what we are doing.
Alan Colston: Yes, so it is an adjustment to the valuation.
Q84 Chair: You do do policy.
Alan Colston: It is not a policy. It is an adjustment to the valuation.
Jonathan Russell: It is technical valuation.
Chair: Are any of my colleagues finding that that sounds awfully like policy to them?
Andrea Leadsom: I agree.
Jonathan Russell: We do not do policy in terms of setting business rates, the frequency of revaluations or, indeed, when to call a new council tax revaluation. We do not do policy like that, but we do influence how we do the valuations, because we are doing the valuations. It is technical policy rather than legislative policy, if you like.
Q85 Chair: Which specific interest groups are you doing these adjustments for? We have heard about pubs.
Alan Colston: We have looked at the circumstances for every industry in valuing as of 1 April 2021, so we have discussed with quite a range of groups. It would depend on which industry you want me to talk about, but certainly we have a range of stakeholder groups. We have published something like 200 practice notes on our website that set out how we value each individual class of property, and we have looked at the circumstances for each class.
Q86 Chair: This is within business rates. Then within council tax is there any forum for aggrieved residents?
Andrea Leadsom: What about retirement homes?
Alan Colston: For council tax, we publish a manual. We publish our guidance online, but there has been no council tax revaluation, so we are still based on the old system.
Q87 Chair: Where do Andrea’s constituents get together to lobby? Where do Emma’s constituents who have issues around property that might be affected by climate change, or Siobhain’s constituents who are in homes in multiple occupation, engage with you?
Alan Colston: In terms of the policy, you will notice that, on HMOs, DLUHC has launched the consultation, so DLUHC is responsible for the legislation.
Q88 Chair: They do not engage with you. Is the short answer that they do not?
Alan Colston: No. We talk to them regularly.
Jonathan Russell: DLUHC will have the policy responsibility in terms of how we deal with homes in multiple occupation and, indeed, whether there is a new council tax revaluation. We do not set that policy. We do not set the legislation.
Q89 Chair: You do make special adjustments to other business industries, such as pubs and film studios, that perhaps are more effective at organising and engaging with you.
Jonathan Russell: We will agree schemes of valuation.
Q90 Andrea Leadsom: To take the example of a retirement home, it may be a lovely retirement home with an onsite café, a restaurant, a bar and a hairdressers, and maybe a wet room that is for the shared use of residents. Were they around in 1991?
Jonathan Russell: In terms of valuation, we will have to look and do the best comparison we can with 1991. I agree that it is a challenge because the list is so old.
Q91 Chair: You are not engaging with an industry group from the retirement home sector particularly.
Alan Colston: I am not aware that we are. I do not know that there is an industry group that wants to discuss anything with us.
Andrea Leadsom: It might be a residents group.
Q92 Chair: Could you perhaps follow up with the Committee as to which groups you are regularly engaging with for special adjustments on their rates?
Jonathan Russell: Would it be helpful if we separated the council tax approach from the non-domestic rating and how we operate with those? We will do both, but we will try to make it clear for you where our responsibility lies.
Q93 Danny Kruger: This is nothing to do with policy; it is all about your internal management. I have some questions about people. According to the people survey that you did last year, the responses from your employees suggest an improvement in attitudes to the office on the year before. Do you recognise that, and how do you think that improvement was achieved?
Jonathan Russell: There has been a gradual improvement over the last five years in engagement scores, both in terms of how people have responded and how we are going about it. People say that it is just a snapshot in time. I, the executive committee and the senior leadership team have been very keen to go out and engage with people because, at the end of the day, they are the ones dealing with customers and agents, so we need to understand from them how it is operating and working. We have a conversation so that they feel part of it. They can see that, as a result of those conversations, we are making changes where we can, based on what they said. It is far more conversational and a partnership approach to running the agency.
Q94 Danny Kruger: That is very encouraging. You apparently have 3,800 staff and 35 offices, so that is an average of just over 100 people in each office. How occupied are those offices? What is the working from home policy at the moment?
Jonathan Russell: In terms of our hybrid working and working from home policy, we set it in terms of the business need because, at the end of the day, we are here to run a business. There is no point having a working from home policy or hybrid working policy if it means you cannot run the business.
We look at it on the basis of location and what that location is doing. For example, in Plymouth and Durham, which are our customer service centres, there is a lot of call handling. We will have a policy whereby people will be in the office three or four days a week. In other offices, where they are going out and doing inspecting, talking to our clients and customers, they will probably be in two or three days a week. It varies in terms of the office location and the actual activity being carried out in those offices.
In terms of our customer service centre, I am very proud of the work my colleagues do there because the average call waiting time is five minutes. Call handling time is 40 minutes, so we are delivering in terms of our targets to make sure we are meeting customer needs, while at the same time allowing some flexibility in the working practices.
Q95 Danny Kruger: Why has the headcount increased by 12% over the last year?
Jonathan Russell: Since we started off on the 2021 spending review, we have been asked to do additional work. Additional work has come in, so we need to recruit to make sure we are doing that within all our funding envelopes and funding arrangements. We have had to do some work with Wales, for example, on looking at its potential to do a council tax revaluation. We are helping with that. We are also looking at holiday lets et cetera.
We are getting additional work and for that we need some additional staff. Also in terms of how we are operating throughout the year of the spending review, if you look at our demographic profile, we have a large number of people who are approaching the time where they could choose to retire. We need to make sure we are getting new people in who can learn from their experience so we can continue to offer a good customer service.
Q96 Danny Kruger: There is presumably going to be further growth as you move on to the three-year cycle. Is that going to require additional recruitment?
Jonathan Russell: Over the lifetime of the spending review up to 2025, we are going to keep within budget and make sure we are spending the money we have been given by Parliament. There are no plans to recruit more people. At the moment, for the current year we find ourselves in, we have a flat profile of FTE, so it is going to be maintained at around £3,770 for the remainder of the year, and then when business system transformation comes in, there should be some productivity dividend from that, which may mean we actually go down and reduce the headcount.
Q97 Danny Kruger: Okay, but you are not confident that that is necessarily going to happen.
Jonathan Russell: We would look at what is happening with BST, both in terms of how it is implemented and additional work we may be asked to do. I cannot foresee what is going to happen in terms of policy changes that may require us to do more work.
Q98 Danny Kruger: Okay, but, in terms of business as usual and current workload, you would predict that productivity gains would result in a reduction in headcount. Is that mapped out? Is that forecast?
Jonathan Russell: It is not mapped out in detail because we do not know what the scenario is going to be, but that is the whole point of investing the money to make sure we can do things more quickly and more speedily, reacting to Government policy changes more efficiently. That may mean doing more work with the same number of people or doing the same work with slightly fewer people. We have not worked that through yet.
Q99 Danny Kruger: It is a related question, but you are probably the largest employer of chartered surveyors in the country. Is that fair?
Jonathan Russell: We are the largest employers of valuation surveyors in the country, yes.
Q100 Danny Kruger: I would be interested in your thoughts on the impact of your existence, as it were, on the industry and on the profession. What is the effect? Presumably, you are poaching from the private sector all the time but you are also returning people into the private sector the whole time. How do you operate as a very significant player in this profession?
Jonathan Russell: I would not think we poach from the private sector. I think last year we recruited—I can correct this—in the region of 30 to 35 people. Some of those would be from the private sector; some of those would be from elsewhere, who are qualified surveyors at the senior executive officer grade.
Some will leave us to go to the private sector. Again, I can check the figures. Over the last 10 years, something like 70% of those people who qualified with us are still with us. We are quite a good employer in that sense; people like to stay with us, but it is a dynamic system. Yes, there will be some osmosis between the various camps rather than poaching, but people can go and get good experience in the private sector and come back to the Valuation Office Agency. It is beneficial both ways because it leads to a better understanding of the process from both sides.
Alan Colston: The vast majority of our recruitment is actually through our apprenticeship schemes and graduate schemes. We have 470 or so on training to be surveyors of the future because of the age profile that Jonathan alluded to earlier. We will lose some of those to the private sector once they qualify, I am sure, but the vast majority tend to stay with us. We are very keen to offer opportunities to people. We mainly grow our own. We find difficulty recruiting directly sometimes because of the salary differences.
Q101 Danny Kruger: This is my last point. It is relevant to the conversation we were just having, which was about the degree to which you are properly reflecting reality on the ground in the different sectors that you are responsible for or have an influence in. Do you think there is more that can be done to harness expertise from the real world, as it were? You are growing your own staff, which is tremendous. I appreciate the point about retention, but you do not want to become a closed caste of priesthood that is not related to the real world.
Jonathan Russell: Absolutely, there is no point being in an ivory tower with no real-life experience. We have a commercial arm called the District Valuer Services, which does contractual private work for public sector employees. They get into things such as inheritance tax and compulsory purchase, so they are engaging in a very commercial way. We are looking to work more closely with agents, reaching out to them to do partnership working. Indeed, one head of valuation—an agent—is doing a video for us to show to our people so that they can begin to explain what it is like from their side, but I am more than happy to think about exchanges and how we can share expertise and people between the two to get that better knowledge.
Danny Kruger: It will be interesting to see what we hear from you in terms of the stakeholders you are engaging with.
Q102 Chair: This has been a very interesting session. We have taken on board your strategic objectives. You are a part of the UK economy that operates fairly invisibly most of the time. We do take it on trust that you achieve your strategic objectives and do things efficiently and effectively.
One thing that has been flagged up to us by this session is a situation where some groups are potentially getting more access to question valuations than others in your organisation. You have committed to following up with us in terms of which those groups might be that manage to persuade you to do special adjustments that are not considered policy, and how you deal with that where it does become policy.
I just want to say that, given that you do want to provide trusted property valuations, my sense is that the Committee members may want to see a little bit more on that, so I will probably expect a letter from you on that. We will clarify exactly how we are going to do that and then we may have some further questions after we have seen your response to that. In terms of today’s oral evidence session, I want to thank you for your time and declare this session over.