Clause 78 - Power to change number of valuation bands
Local Government Bill
11:00 am
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I beg to move amendment No. 163, in
clause 78, page 39, line 18, at end insert—
'(4B) 'Any order made under this section may apply to a Billing Authority or any number of Billing Authorities.'.
Mr Win Griffiths (Bridgend, Labour)
With this it will be convenient to discuss amendment No. 147, in
clause 78, page 39, line 18, at end add—
'(4B) The power under section (4)(a) above includes power to make provision for different proportions for different areas of England and Wales.
(4C) The power under section (4)(b) above includes power to make provision for different valuation bands for different areas of England and Wales.'.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
We now come to a controversial clause. There are currently eight bands known as bands A to H. They are as follows: band A goes up to £40,000; band B goes from £40,000 to £52,000; band C goes from £52,000 to £68,000; band D goes from £68,000 to £88,000; band E goes from £88,000 to £120,000; band F goes from £120,000 to £160,000; band G goes from £160,000 to £320,000 and band H is for values exceeding £320,000. Amendment No. 163 is a probing amendment. It would allow the Secretary of State to designate valuation bands by individual groups of billing authority. We believe that that would allow local authorities to apply for different valuation bands for their locality, while retaining the power with the Secretary of State.
Council tax was working quite well up to the inception of this Government. Unfortunately it has now become one of the largest stealth taxes of all. In the Government's White Paper of December 2001 ''Strong Local Leadership - Quality Public Services'', I found the following extraordinary statement:
''We think local people will refuse to accept that their authorities need to increase council tax by more than twice the rate of inflation.
It is therefore in local authorities' own interests to establish their taxpayers' views on council tax increases before they take budget decisions. Evidence of how an authority has engaged local taxpayers in these difficult trade-off decisions will be an important part of the authority's performance assessment.''
I am glad to hear that. The problem is that local authorities have little choice. Because of the gearing effect of council tax as opposed to the centrally funded part of the rate support grant and non-domestic rates—
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I happily give way to the hon. Gentleman. Perhaps he will enlighten us.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
A tax may be perfectly acceptable when the increases are small but when they are in double digits each year, as they have been for many authorities for the last three or four years, and when some council taxpayers have seen increases of over 40 per cent., the tax is brought into disrepute. Indeed, this Government are bringing it into disrepute through the local support grant that was recently announced.
Mr David Borrow (South Ribble, Labour)
Does the hon. Gentleman accept that following the introduction of the council tax the Government's policy was to ensure that a larger proportion of the revenue spent by local authorities was raised locally? That was a deliberate policy of the then Government to ensure that council tax increased by more than the rate of inflation because they felt that council taxpayers should pay a greater proportion and thereby reduce the gearing effect.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
As my hon. Friend the Member for New Forest, West, said from a sedentary position, it is raised by the council tax on southern local authorities and spent by inefficient northern authorities. If hon. Members opposite dislike council tax so much, which seems to be the tenor of what they are saying, they have had six long years in which to abolish it and replace it with a different system.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I think that the council tax system works quite well but it has been brought into disrepute by the large increases imposed on local authorities by this Government. That is brought about by the system of funding of local authorities. For every three parts paid by central Government from non-domestic rates and the rate support grant, one part is raised locally. Therefore, for every pound that the Government do not give to local authorities they have to raise four pounds from council tax. That is the difficulty that many southern authorities face in setting their budgets. They have two choices: either to cut back services or to increase council tax in double digits to maintain those services.
It is all very well to say that it is for the local authority's discretion, but the councils forced to impose such great council tax increases are some of the best star-rated authorities under the Government's rating system. There is something wrong somewhere,
and the only explanation is the shortage of money from central Government.
Mr Win Griffiths (Bridgend, Labour)
I would appreciate it if you could relate what you are saying to what is on the Amendment Paper, Mr. Clifton-Brown.
Mr Phil Sawford (Kettering, Labour)
For those of us who have served as leaders in local government, as I did from 1991 to 1997, the recognition of the impact of the gearing phase on local taxpayers is something of a road to Damascus. We suffered year on year through the years when we received less and less money from the then Government. Will the hon. Member for Cotswold comment on the problems that we experienced during those years when his Government were hammering our local authorities?
Mr Win Griffiths (Bridgend, Labour)
If you can relate that to your amendment, Mr. Clifton-Brown, I will be happy for you to do so.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I can sort of reconcile the logic into which the hon. Gentleman is trying to tempt me. Suffice it to say that the Government are bringing this Bill before the Committee and therefore they have it in their power to alter the system of council tax in this country. They have had six long years in which to do so. They obviously like the present system of council tax, otherwise they would be abolishing it under the Bill.
I make no apology for what went on in the past. This Government have had six years in which to put all the sins right.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
The hon. Gentleman says that he makes no apology for what happened in the past. The hon. Member for Wycombe whispered earlier from a sedentary position the magic words ''poll tax''. Would the hon. Gentleman care to qualify that statement?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
That would certainly be tempting me down an unnecessary and undesirable path, even if it were in order, which I am sure it is not. You would save me from doing so, Mr. Griffiths. The point has been made.
The amendments deal with the power to vary council tax bands. I probe why the Government think they are necessary. Where will it stop? How many different bands will there be? Are we going to try to equate the larger number of bands to a form of property wealth tax, because that is where we seem to be heading? When the council tax was introduced, it was part property tax and part individual tax. When I asked whether it is now being steered towards a property wealth tax, one of the Labour Members said, ''Why not?'' That gives a clue to what Labour Members might want future changes to the council tax to do, perhaps in increasing the number of bands.
Mr Andrew Turner (Isle of Wight, Conservative)
My hon. Friend referred to the remarks of the hon. Member for Kettering (Phil Sawford), who said that it would be right to move to a property wealth tax. Does he agree that it was the unfair nature of the property wealth tax called the rates that led previous Governments to move away from them and settle on a combination of a property and individual tax, which is the council tax?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
There seems to be some hilarity about my hon. Friend's remark. He is 100 per cent. right; we are playing with fire.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
The amendments are playing with fire, too, as is the substance of the clause, which would increase the number of bands. I want to probe the Under-Secretary on how far the Government intend to go down the road. We have eight bands; will we have 26 bands—one each for the letters of the alphabet? That would align the value of property more with the council tax, but we would have altered the entire nature of the tax. As my hon. Friend the Member for Isle of Wight (Mr. Turner) said, it would move away from being part property and part personal tax, to being an almost entirely property, and wealth, tax.
Once one has released the tiger from the cage, one never knows where it will run. We do not know what will happen as a result of the changes introduced by the Government. Are they aiming the changes at the top or bottom of the scale? At the bottom of the scale, there is the real problem of those in mobile homes, which every Member will see in their constituency. There are several in my constituency, and I enjoy visiting them. They are not worth a lot of money, but they can be nice places in which to live.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
Yes, that is why I regularly visit them, although I would visit them even if they were not full of Conservatives. I may be doing them an injustice, but I doubt whether any in my constituency would equal the value of houses in band A, and it would be useful to have a separate band for mobile homes. If the Government considered that, they would be doing a great favour to some of those on the lowest incomes and living in the more modest accommodation. However, with what they have, the mobile home owners in my constituency have done an incredibly good job at refurbishing them, with some immaculate little gardens. They are proud home owners, but they do not like being equated with someone who has a permanent home. The point is justified, and I hope that if the Under-Secretary will not accede to it now, he will do so in the future.
There are several areas in which homes are of low demand and value. I was in Newcastle recently, and—I do not know if this still applies—in the past, the local authority in Newcastle used to give away flats for £1 because they were so bad. We know that there is low demand in areas such as Bolton. The hon. Member for Bolton, South-East (Dr. Iddon) always makes the point that houses in his constituency are in low demand, and I thoroughly sympathise with him. We want to encourage such areas to be regenerated and for people to live and buy houses there. I have seen some excellent regeneration schemes, where no doubt the council tax bands will come up. One example would be the Hulme estate on Moss Side in Manchester, where the whole area has been transformed. That is the sort of thing that we want to see happening in our inner-city areas.
We want to see properties moving up the bands, particularly in some of the areas of low demand. Before the debate on the clause is finished, I hope that we will hear from the hon. Member for Bolton, South-East (Dr. Iddon) about how he envisages some of the houses in his constituency moving up the bands. I understand from what he has said in the past that some areas have been regenerated and have moved up in the bands quite nicely. It is other areas, with large terraces, where the demand is low, that need regeneration.
Mr Andrew Turner (Isle of Wight, Conservative)
Does my hon. Friend agree that there is an incentive to buy very inexpensive property, but that that incentive is greatly dissipated if the tax payable on the property is at four or eight times the purchase price of that property?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
My hon. Friend makes a good point. Clearly there must be a disincentive effect if a property is worth so little that the tax as a proportion of the value of the property is higher. Will the Minister tell us how he envisages the provisions working for properties at the bottom of the scale?
I have no doubt that the real purpose of the clause is to increase the number of bands at the top. If that is what the Minister has in mind, perhaps he will tell us how he expects the re-banding to work at the top of the scale. At present, property values exceed £320,000 in many areas in the south, and so a large proportion will fall into the top band.
When we originally introduced the council tax system, there was a relationship between each of the bands. For example, band A would pay two thirds of the band D tax, and band H properties would pay double the band D tax. With a shift in property values, I wonder whether that relationship still holds, and whether the Minister, in designating new bands, still expects there to be any form of linear relationship between the bands. Will he comment on that?
Mr Patrick Hall (Bedford, Labour)
With regard to how the system was originally designed, as the hon. Gentleman has just said, there is a requirement for someone in band H to pay three times more than someone in band A, but the difference in value between those two positions is eightfold. How can that have been seen to be fair from the start?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
Before you rule me out of order, Mr. Griffiths, I shall not follow the path of temptation to comment on what happened in the past. This Government are in power and are altering the system, so we want to hear their proposals from them. The Government are the ones who are letting the tax fall into disrepute. How will it be seen to be fair by ordinary people if it becomes a stealth and wealth tax on large property?
Having established the linear relationship between bands A and H, according to this analysis from a library note:
''The regressive nature of the tax is exacerbated by the distribution of property prices in some parts of Great Britain.''
That is exactly the point that I was making. We would like to know from the Government where they expect the re-banding to go. What new bands do they
envisage being implemented? Will they, for example, have new bands H, I and J for properties with values from £320,000 to £500,000, £500,000 to £750,000, and more than £1 million, respectively? Before disposing of the clause, we need to know precisely what the Minister has in mind.
Mr John Pugh (Southport, Liberal Democrat)
Our amendment is a probing one. The initial Government proposal has nothing to do with the amount of council tax raised. It is a simple matter of reconsidering the distribution of the burden. If the
distribution is based on property, a case exists for doing it now. Since the original bands were defined, property values have increased enormously and the range of values in the country has changed with massive regional variations between—
It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at half-past Two o'clock.