Council Tax (New Valuation Lists for England) Bill

– in the House of Lords at 3:30 pm on 8th March 2006.

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Clause 1 [Dates on which new valuation lists must be compiled for England]:

Photo of Baroness Hanham Baroness Hanham Deputy Chief Whip, Whips, Shadow Minister, Scotland, Shadow Minister, Transport, Shadow Minister, Communities and Local Government

moved the amendment:

Page 1, line 7, leave out from "on" to end of line 8 and insert "a date prior to the making of any order under section 5(4) and (4A) of that Act.""

Photo of Baroness Hanham Baroness Hanham Deputy Chief Whip, Whips, Shadow Minister, Scotland, Shadow Minister, Transport, Shadow Minister, Communities and Local Government

My Lords, so far as we are concerned, this is the remaining part of this legislation. I am moving just one amendment to this very small Bill, which has engaged us all in a great deal of interesting discussion.

The remaining matter on the table today relates to the possibility that the Government may wish to make amendments to council tax banding without a revaluation having taken place or before it takes place. Under the Bill, revaluation is being postponed for a number of very good reasons, not least of which is the fact that Sir Michael Lyons has yet to report. We do not disagree that there should be a postponement. In fact, we think that postponement should be eternal and that, if revaluation goes, it should never come back, but that will remain a disagreement between us and the Government.

However, one area is already a legislative possibility—that is, that council tax banding can be changed and amended within the period before revaluation. The amendments that could be made to council tax value were agreed under the Local Government Act and are now on the table. But it is inconceivable that council tax banding could be done without current and real valuations, and in this amendment we say that no changes should be made to council tax banding unless and until there is revaluation. That is the purpose of the amendment. It is short and to the point. I beg to move.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Office of the Deputy Prime Minister, Parliamentary Under-Secretary (Office of the Deputy Prime Minister)

My Lords, I wish I could be as short and as succinct as the noble Baroness. I appreciate, as she said, that this is a short Bill, but it has given rise to significant and very helpful debates. For that reason I am very grateful that we have had the opportunity to return to this matter at Third Reading. I am afraid that I shall have to reiterate some of the arguments I put in Committee and on Report about this amendment because it remains technically unworkable and, in effect, unnecessary. I believe that in concept it is unwanted not just by the Government—noble Lords would expect me to say that—but also by the noble Baroness's own party and by local councillors and taxpayers who, as a result, would find themselves with a council tax system that is tied for ever to increasingly out-of-date valuations with no legislative scope for reform.

Again, I have to explain, as I did in Committee and on Report, why the amendment leaves us with an unworkable system. Two major flaws are at issue and I shall deal with each of them in turn. The first relates to the concept of a compiled list and what it means specifically as defined in the Local Government Finance Act 1992. The amendment is based on retaining that notion. The second flaw is the removal by this amendment of any mechanism for a specific date to be set for revaluation.

Through this amendment, subsection (1A) of the Bill would read:

"A new list must be compiled, in relation to billing authorities in England, on a date prior to the making of any order under section 5(4) and (4A) of this Act".

The essential point is that "compilation" means in law the coming into force of the list. It is followed up by a very strict process and a timetable which attaches, not least, to the publicising of the list. That is the problem. In layman's terms, it means not simply that the Valuation Office would be required to revalue properties at the prevailing values at the time, without there being at that stage any changes to bandings, but that a new statutory valuation list must come into force for each billing authority in England before any changes can be made to the band values, to the number of bands or to the proportions across bands. The new compiled list would have legal force, and properties would have to be reascribed at their new values to the existing council tax bands, and council tax paid accordingly. That is what the law requires us to do.

The effect would be disastrous. As I explained both in Committee and on Report, this would inevitably mean that the vast majority of properties would move up the bands, probably by more than one band, by the pure virtue of house price inflation. More than that, we would see a bunching of properties towards the top end of the scale, dramatically reducing the level of differentiation between properties of different values and people of different means. I know that noble Lords opposite are very concerned about that. Inevitably, it would build inequity into the system and would penalise many of our most vulnerable taxpayers.

The logical sequence of the process should be revaluation to give us up-to-date values, reform informed by that and reflecting changes which in banding are necessary and fair, and then compilation, the coming into force of the list. Almost perversely, the amendment dictates revaluation, compilation and then reform and I am sure that is the opposite of what the noble Baroness intends. The technical effect of the amendment is perverse; compilation is surely the culmination of the process and not the mid-point.

I remind the noble Baroness that on Report she said,

"I believe that it would be short-sighted in the extreme to plan to have reforms as an afterthought to revaluation." [Hansard, 1/3/06; col. 264.]

I agreed then and I agree again because reforms should not and cannot be an afterthought to revaluation. That is the situation that this amendment would predicate. It would require new, revalued lists to be compiled and bills to be issued to taxpayers, because the legislation says they must be, before any reforms could be implemented or, if I understand the intention behind the amendment, even contemplated. The noble Baroness went on to say that the amendment was,

"intended to bring an order to [revaluation], starting with the basic value and proceeding to the banding and then to the issuing of bills." [Hansard, 1/3/06; col. 265.]

That may be the intent, but it is not the effect.

The second, and very significant, technical drawback to the amendment is its removal of any provision to set a specific date for a future revaluation. The current drafting of new subsection (1A) reads:

"A new list must be compiled, in relation to billing authorities in England, on 1 April in each year specified by order made by the Secretary of State."

This amendment removes the concluding phrase,

"specified by order made by the Secretary of State".

As other parts of the Bill remove the previously planned revaluation date of April 2007 and the 10-year maximum cycle of revaluation after that, we are left with no mechanism through which any future revaluation can be initiated; and because of the link that the amendment makes between revaluation and reforms, there is no possibility of ever reforming the system in the very way that the intention behind the amendment envisages. So if we were to accept the amendment, far from bringing certainty to the process—we spent some time talking about the need for that in Committee and on Report—it would lock up the present system for ever, with no possibility of either revaluation or reform at any time in the future.

Beyond those technical problems, why do I suggest that the amendment is unnecessary? I recognise the noble Baroness's true intent and what she is seeking to achieve. She said on Report :

"The whole point of the amendment was to ensure that the council bands could not be changed between now and a revaluation, or unless a revaluation was proposed". [Hansard, 1/3/06; col. 264.]

The idea is to ensure that revaluation and reform always go together as one package with reform being informed by a prior revaluation.

I tried my hardest during that debate to reassure the noble Baroness that I cannot see that there would be a situation where the two would not go hand in glove. To revalue without reforms would lead to perverse changes in the balance of the system of the sort I have just described, and to reform without revaluation would be extremely difficult as the necessary information on which to make informed decisions would not be available. The amendment is unnecessary because it does not add anything useful. It takes away valuable flexibility in the system that may, in some unforeseen circumstance, be needed in the future.

Finally, I also said that the amendment was unwanted; not just by the Government but by the noble Baroness's own party. In Committee, I quoted Mr Pickles, who was speaking from the Opposition Front Bench on Second Reading in the other place. He was espousing his party's belief that revaluation is unnecessary and that inequities in the system could be remedied, if need be, without revaluation. He said that matters relating to council tax banding and people's ability to pay, for example,

"could be taken care of by adjusting the banding".—[Hansard, Commons, 7/11/05; col. 45.]

I am afraid that this amendment directly contradicts, and renders unworkable, the policy which Mr Pickles described.

I have repeated myself, and I hesitate to go on doing so, but I must stress once more that the Government have always been clear about the link that they see between reform and revaluation. It was expected that Sir Michael Lyons's work looking at reforms to local government finance would be fed into the 2007 revaluation.

Photo of Baroness Scott of Needham Market Baroness Scott of Needham Market Spokesperson in the Lords, Office of the Deputy Prime Minister

My Lords, I am grateful to the Minister. Before she sits down, will she take the opportunity to put on the record how she sees proceedings over the next six months, as regards the results of the Lyons review, and how they are going to feed into processes for council tax? The nub of the concerns expressed from both sides of the House during the passage of these Bills has been a combination of uncertainty over local government finance because of the Lyons review, and the absence of parliamentary scrutiny of any future revaluations by this House. While I understand and have a certain amount of sympathy with the amendment, with the Conservative Benches seeking more reassurance, they are misguided in seeking revaluation in this case because they leave no power in place to order a subsequent one. Noble Lords will know that, while we on these Benches do not support this tax, if we are to have it, then power to revalue is going to be necessary at some point.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Office of the Deputy Prime Minister, Parliamentary Under-Secretary (Office of the Deputy Prime Minister)

My Lords, I am grateful for that intervention and will address that point in what I have to say. I am coming to the broader politics now.

To finish my thought on the link between having gone ahead with revaluation and the way it would have fed into the Lyons report, as originally conceived—as strictly about local government finance—it would have informed that procedure, and there would have been that link. When his remit was extended, in our statement on 20 September on the way forward we emphasised that there was a need to postpone revaluation to give time for his recommendations to be properly considered, consulted on, and for a properly developed package of reforms to be brought forward with a date for revaluation. In a shorthand way, that explains what we think will happen. The remit was extended for good reason. As Sir Michael recognised and explained in his interim report, there have been such a lot of changes in structure and organisation, not least the financial arrangements for local authorities' three-year budgets and so on, that it was logical to extend the remit. Having done so, it made perfect sense to postpone revaluation so that it can be informed.

We cannot predict what Sir Michael Lyons will come forward with. It will happen at the end of the year and may well involve primary legislation. We cannot possibly know that at this point. But, whatever happens, it will precede an open debate on revaluation and the implication of what he comes forward with. Running alongside that—he is looking at local government functions, as the noble Baroness knows—we are conducting a much wider debate on local government as a whole and the whole set of relationships, not least with neighbourhoods.

We will bring forward a White Paper in July, which will be part of this wider debate, into which Sir Michael will feed his own thoughts, obviously reflecting on where he has reached with his deliberations. But the two processes will go side by side. I am absolutely confident that it will be an open process. The noble Baroness has expressed concerns about the nature of the debate. It will be addressed by debates not only with all partners in local government but in this House and in the other place, alongside what we intend to do.

I conclude with one final important matter. I believe that because of the nature of the amendment the noble Baroness should be reluctant to return this to the other House in this way. She is a very credible politician. I hope that the arguments I have brought forward, which have been across the spectrum, will have convinced her and that she will feel we have had a good debate on the Bill, as I would have intended. But I believe that the amendment is unworkable and unnecessary and I hope very sincerely that she will agree with me on that point.

Photo of Baroness Hanham Baroness Hanham Deputy Chief Whip, Whips, Shadow Minister, Scotland, Shadow Minister, Transport, Shadow Minister, Communities and Local Government 3:45 pm, 8th March 2006

My Lords, I thank the Minister very much for her reply. It is very much along the lines that we have heard throughout the course of this legislation. My concern remains that without an amendment such as this there is still the possibility of tinkering taking place with council tax bands in a way which is not coherent with the future consideration of local government finance.

It is essential that a sustainable long-term solution to local government finance is found. We are in the middle of an enormous amount of consideration about the way local government is going, about its structures and functions and its finance. If we are postponing the revaluation—which we are in this Bill—it seems to me to be perfectly logical that we say for the other element of the value of property, which as far as concerns local government finance is the council tax bands, that nothing should be done to those until this whole mess of pottage is sorted out. For those reasons I seek to test the opinion of the House.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 95; Not-Contents, 186.

Division number 1 Private Parking: Ports and Trading Estates — Council Tax (New Valuation Lists for England) Bill

Aye: 93 Members of the House of Lords

No: 184 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Resolved in the negative, and amendment disagreed to accordingly.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Office of the Deputy Prime Minister, Parliamentary Under-Secretary (Office of the Deputy Prime Minister)

My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Baroness Andrews.)

On Question, Bill passed.