The valve regulates the pressure available to the rear brakes.
It is set at the factory, and requires a full blown rolling road with pressure testers on the front and rear brakes to re-set it.
The reason for this is to maximise the rear braking under extreme conditions I.E. light weight driver only, no load in the back, to 4 rugby players, max load in back plus full roofrack and a caravan on the back.
To do this the pressure available for scenario (1) is a lot less than scenario (2). Without modifying the control rod you have effectively reduced the pressure to the point that the rear brakes don't work, at all.
Because the load in the back of my LC is basically static, I removed all the control rods (look at the state yours are in) and converted the valve to a manual setting. I tested this out by adjusting the pressure to not quite lock up under full braking I.E. locking the front brakes. The MoT inspector was surprised at just how good the whole set-up is.
Modifying the valve is quite simple, but does require general mechanical knowledge and brazing skills.
Roger