Peter Ainsworth (East Surrey, Conservative)

No nuggets of hope here, I am afraid. The purpose of clause 6, as originally drafted, was to end the anomalous position whereby people or businesses who improve their properties through the installation of micro power technologies may suffer on revaluation an increase in their tax. It strikes me as logically the case that this acts as a disincentive to people and businesses who want to do the right thing. It therefore struck me that this Bill was the right vehicle in which to raise this matter, to test the Government’s thinking on it. I confess I had no great hope of a positive outcome. An unseen hand drafted me a speaking note on this issue, and the fact is that I have conceded that clause 6 will probably not form part of the Bill.

The unseen hand drafted the following:

“This deletion is clearly the idea of counter-revolutionary forces in the civil service. However, who am I to oppose the forces of reaction?”

The Minister, I am afraid, finds herself in the position of the forces of reaction this afternoon.

I do accept that where households are concerned—because revaluations are, thankfully, pretty rare—a relatively small number of people might be affected by this. But there may be consequences for small businesses, particularly where revaluations are rather more common. So I do remain concerned about the principle at stake here: we should not be penalising people who are doing the right thing. For the sake of the rest of the Bill, however, I am reluctantly prepared to ditch clause 6, but not until I have heard the Minister produce a halfway decent, plausible excuse for the Government’s approach to this important matter.

Colin Challen (Morley & Rothwell, Labour)

It is a slight matter of regret that that little speech had to be made, but I will go along with the proposer of the Bill in his conclusion on that. I do hope that we will get a very positive reply from the Minister, because we are considering—at the same time as we are looking at this Bill—other possibilities for changing council tax to recognise energy efficiency measures, and some local authorities and British Gas and others have participated in pilots where people have been rewarded for energy efficiency in their homes with reductions in council tax. This proposal is exactly of that order. If people are going to go out spend money on good things, they should be rewarded for it. I hope that the Minister will be able to tell us how the Government are going to approach this in the absence of this clause.

Martin Horwood (Cheltenham, Liberal Democrat)

I have always wanted to stand against the forces of reaction and I am happy to join the hon. Member for East Surrey on the barricades in favour of many revolutionary measures, but this one in particular, any day. It seems like an eminently sensible measure to introduce. I have heard the Government’s excuses and none seems very convincing. One such excuse is that energy efficiency and mircrogeneration is unlikely to sufficiently increase the value of a property to push it beyond a particular council band boundary. I cannot see how the Government could possibly know that, because if it had only been marginally below it to start with, the prospect of buying a property with much lower energy bills than its neighbour seems to be eminently likely to push it over a small marginal increase that would take it into a higher band.

Another excuse has been that the council tax system already disregards improvements until a property is sold. This is a long-term piece of legislation and one that not only applies when a property is first sold, but in subsequent sales as well. As the hon. Member for Morley and Rothwell quite rightly said, we ought to reward and incentivise such improvements and not, potentially, punish them.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

There is no challenge there then, is there? I just say to the hon. Member for East Surrey that, as well as the unseen hand, this will not be the first time that he has accused me of being the forces of reaction, but I remain named as such because of what I have to say.

Peter Ainsworth (East Surrey, Conservative)

I do not know who the hon. Lady is referring to. I was very careful to read out a redacted version of what the unseen hand had written.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

Let me just say that my colleague, the former Minister of State for Energy and Climate Change, my right hon. and learned Friend the Member for North Warwickshire (Mr. O'Brien), made it clear on Second Reading that the Government could not support the inclusion of this clause in the Bill. I guess that the hon. Member for Cheltenham may be, in listing the so-called excuses, quoting from my right hon. and learned Friend. I will, I am afraid, have to make the same arguments today that were made by right hon. and learned Friend on Second Reading, because of course these matters have not changed. Therefore, we have to oppose, as the hon. Member for East Surrey anticipates, that clause 6 should stand part of the Bill.

Clause 6 requires that an increase

“in the value of a property arising from the installation of an energy efficiency measure or a microgeneration system after the day on which this Act is passed shall be disregarded for the purpose of assessing council tax or non-domestic rates payable on that property.”

Council tax, as we all know, is a property tax based primarily on the value of a person’s home. There are no plans to link the level of council tax that a person has to pay to how energy-efficient their home and property is. At present, making changes or improvements to a property that increases its value cannot result in a higher council tax band until the property is sold, as the hon. Member for Cheltenham said. An increase in the band will take place only if the alterations add sufficient value to the property to move it into a higher band. He disputes that that is likely; the advice that we have from the Department for Communities and Local Government is that that is the case.

The value of a dwelling depends on a number of factors, including its size, lay-out, character and locality. Generally, any improvements made to a property will not be taken into account for banding purposes unless, as I said, the property is sold. Even then, the alterations will not necessarily mean an increase in the council tax band. That will happen only if the alterations have added sufficient value—reflecting 1991 values—to push the property into the higher band.

Colin Challen (Morley & Rothwell, Labour)

If somebody were to consider purchasing a house that may fall into a higher property band, then that would act as a disincentive—a perverse disincentive, in fact—because they might choose another property which may not fall into that category. This needs careful re-examination.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

The argument is that people choose properties for a huge variety of reasons. Location is normally a prime issue and, as the hon. Gentleman rightly suggests, people will be influenced by have a whole list of subsidiary factors. If they have the prospect of buying an energy-efficient home, they might well way weigh in the balance the comparison between the cost of their energy and the cost of their council tax. They might still favour the more energy-efficient home, even though there might be a slight difference in the council tax band. It is a relatively small factor. I do not think we can anticipate its being such a major one as to determine council tax banding, as opposed to energy-efficiency being a significant factor in people’s choice of home. Clearly, we are not going to agree.

I will say to all hon. Members, that, having worked on a variety of issues across Government to try to apply positive measures to homes, there is always the call to use the council tax system as a means of rewarding people. I understand that people who have to deal with financial matters are reluctant to pile more and more factors into how council tax banding should be set. It is extraordinarily complex and there can be rewards that are quite different and separate.

However, that said, if local authorities want to incentivise the use of microgeneration in homes, they can use their own existing powers. Those are the council tax discounts powers, under section 13A of the Local Government Finance Act 1992, for properties with higher standards of energy performance. The council would set a level of council tax reflecting that, which would then be revenue neutral to the authority. Taxpayers not qualifying for the discount would, effectively, subsidise those that do, providing a further incentive for people to act.

Peter Ainsworth (East Surrey, Conservative)

I hope that the Minister will come to the issue of non-domestic rates, where what she has said will not apply.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I will conclude on the matter of local authorities and the scope they have. We are aware that, already, some local authorities, with assistance from British Gas, have provided a one-off rebate on council tax bills to council taxpayers who have taken certain measures to improve energy efficiency in their homes. So there is some scope—there is a means of councils incentivising, and, consequently, encouraging other home owners to do the same as those being rewarded.

On non-domestic rates, microgeneration equipment is already ignored in the assessment of rateable value until the next revaluation. The exemption was introduced on 1 October 2008. It will also apply to any 2010 rating list, so that equipment fitted between 1 April 2010 and 31 March 2015 will not be assessed for rates until 2015.

I am told it is unlikely that fitting microgeneration equipment at business premises would lead to a reassessment of their rateable value. Nevertheless, the exemption was introduced to remove uncertainty, and provide clarity and reassurance to businesses working to reduce their carbon footprint.

I know that what I have said will not meet with favour in the Committee, but that is the position of the Government, it will not change. We are opposed to clause 6 standing part of the Bill.

Charles Hendry (Shadow Minister, Energy and Climate Change; Wealden, Conservative)

I am very uneasy about what the Minister has said. I should have thought that one of the reasons people install microgeneration, and the sort of technology under discussion, is that it will increase the value of their homes—and not just because they want to do the right thing. What the Minister proposes could be an absolute block on the sale of such houses. Even if it were a small minority of houses, it might become known that they have moved into a higher council tax band. That extra payment in council tax might negate the feed-in tariff benefits that the householder derives. Therefore, many people choosing between two houses—one that has been equipped with these technologies and one that has not—will say, “I will go for the one that has  not, because there is no risk that I will then be put into a different council tax band.” We could put a black mark on houses which have done the right thing. That seems a peculiar situation to be in.

The other thing—and this is a practical point—is that the Minister talks about the council tax being based on the 1991 valuation of those properties. It is therefore expected that a valuation from 1991 will be required, based on technology which was not invented until 10 years later. What is the 1991 value of an air source heat pump? There cannot be one because it was not invented. How, in practice, is this going to work?

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

In posing the last question, he has answered the case. It will not be possible for them to put a value on it and that would preclude raising the council tax level. The hon. Gentleman spoke about people having a block on doing the right thing and doing what we would want them to; that is, installing microgeneration and making use of feed-in tariffs where possible and appropriate. I believe that the major motivation is that it will save people money on their energy bills in the long term. Given the very high price of energy and the unlikelihood of energy prices ever returning to previous levels, that will be the motivation. People looking at property will see that and when they buy it, they will know what the council tax band is. They are not going into a risk situation because the council tax band is established and the microgeneration is in place. The savings to them will be obvious.

It is a matter of opinion. There are no absolutes. It is a small part of what is going to influence people in their purchasing patterns. For other reasons which I have just hinted at, I have to say that the fact that there are so many demands to link so many policies to reductions in council tax means that the Government will continue to resist, I am afraid.

Peter Ainsworth (East Surrey, Conservative)

What a very disappointing but not wholly unexpected response from the Minister. She is clearly uneasy and her body language said more than the script. I hope she will take this up with the place where I have no doubt this probably started: Her Majesty’s Treasury, where most of our problems begin and end. I hope she will do what she knows is the right thing, which is take this issue to the heart of Government and make sure we do not penalise people for doing the right thing themselves.