Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Monday 23rd April 2018
(6 years, 7 months ago)
Commons ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts
The Minister for Housing (Dominic Raab)
I beg to move, That the Bill be now read a Second Time.
The Bill takes forward two important measures to promote fairness derived from the autumn Budget: fairness for hard-pressed businesses that face an unjustified tax hike because of the so-called staircase tax; and fairness for the families, young people and many others who see properties lying empty while they struggle to find somewhere to live. On the first issue, we are determined to support the occupiers of business premises in multiple occupation and to ensure that they do not face unfair penalties. For more than 50 years, businesses that operated in adjoining units or rooms accessed from a common corridor staircase received one rates bill. That applied, for example, if a business occupied three consecutive floors in an office block or if a business occupied two rooms separated, let us say, only by a wall.
The rule was widely understood and accepted among all ratepayers, rating professionals and the Valuation Office Agency. No one was looking to change that approach. However, as a consequence of a Supreme Court decision in 2015 concerning an office block occupied by the accountancy firm Mazars, the situation was put in some doubt. After considering the Supreme Court judgment, the Valuation Office Agency concluded that it had to change its long-standing practice. As a result, each unit of property accessed from common parts has to have its own rating assessment, regardless of whether the properties are adjoining or associated with the same business. So, for an office block housing more than one business, each floor will now typically need to have its own rating assessment, even if successive floors are occupied by the same business.
We are not criticising the Supreme Court for reaching that judgment or the Valuation Office Agency for changing its practice as a result, but we have monitored the impact of the changes and it is clear that they have had troubling and damaging implications for ratepayers. First, moving from rating assessments that cover several floors to individual floors has increased some rateable values and rates bills, even when there has been no change to the property or locality. That is because the rateable value per metre squared is sometimes lower for larger properties, reflecting the normal practice in the market whereby landlords will offer discounts on rents for occupiers willing to take more space. This left some ratepayers suddenly facing a backdated increase in their overall rates bill.
Secondly, some businesses have lost small business rate relief as a consequence of the changes. That is not what we wanted to see, given its role in supporting the small independent businesses that are vital contributors to local economies and communities. As hon. Members will be aware, small business rate relief is a generous measure providing relief for ratepayers of property up to £15,000 in rateable value, and as a result more than 600,000 small businesses, occupiers of a third of all properties, pay no business rates at all. It is targeted at ratepayers with only one property and one rates bill to ensure that it benefits small independent businesses, which are very much the lifeblood of our local economy.
As a result of the change in practice that has seen some single rating assessments split in two, some ratepayers who were previously eligible for small business rate relief have lost some or, in some instances, all, of that relief. We understand that the number of small businesses affected by the loss of relief is relatively low, at fewer than 1,000, but that is still about 1,000 too many.
These businesses already pay their fair share. They deserve our support and this Bill will make sure that they get it. That is why we have decided to restore the previous practice of the Valuation Office Agency under clause 1. This will again see adjoining properties that are part of the same business receiving one rating assessment and paying one rates bill. We have decided to do this retrospectively. It is important that we get the process right, so we carried out a technical consultation on draft provisions over eight weeks after Christmas, supported by workshops held by my officials with the ratings sector. Indeed, there were meetings with expert valuation surveyors, too.
The Minister for Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), answered detailed questions from the Chair of the Select Committee. I am pleased to say that a good response to the consultation has helped us to improve some of the draft provisions. We published a summary of those responses and an explanation of the improvements on the Ministry’s website. I want to take this opportunity to express my appreciation on behalf of my Department and the Valuation Office Agency for the help we received from the Rating Surveyors’ Association, the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation in this work. It is probably worth saying that the Federation of Small Businesses supports the measure, too. As a result of this work, I am confident that the provisions we are introducing in clause 1 are technically sound and meet the Government’s aims, and that they will be welcomed not just by ratepayers but by everyone who wants to see British businesses thriving, especially small businesses and those on our precious high streets.
We are also determined to deliver a fairer deal for the many people who want and need decent, secure and affordable homes. We are straining every sinew to build more homes. Last year, we saw 217,000 new homes delivered, the highest number in all but one of the past 30 years.
John Redwood (Wokingham) (Con)
I am a strong supporter of what the Minister is trying to do but, on the question of a more penal tax on empty properties, will he assure me that, if a property is empty pending permissions for subdivision or improvement to get it into a better state so that it can be enjoyed as a home, there will be some flexibility so that people are not being taxed while they are trying to do that work?
Dominic Raab
My right hon. Friend is absolutely right, and that is precisely why we have a minimum period of two years, to ensure that we strike the right balance and encourage the use of existing resources in our housing stock without penalising those who want to get their housing stock on to the market but are taking a bit of time to do so, for whatever reason—perhaps because of renovations or the challenges of the local market.
Mr Betts
I want to return to the issue of the staircase tax, which the Committee looked at when we examined the draft Bill. We were generally content with the objectives and policy goals, but we raised a particular issue to which we have not yet had a satisfactory answer. It relates to the Government’s commitment that local authorities would be compensated for any financial costs incurred due to this measure. That was what the Government said they would do when they announced that they were bringing in this legislation but, since then, all we have had from them is, effectively, a nil. It seems that they are going to do nothing whatever about this, even though they accept that there could be an impact on individual authorities. We do not know what that impact will be because the Government have not given us their workings on this, but can the Minister at least give us an indication that he is prepared to look at this again and give us his assessment of the impact on individual authorities? Will he give us an indication that he is prepared to do something about this?
Dominic Raab
The Chair of the Select Committee makes an important point. We clarified the situation for local authorities after the Budget and we have written to them. I do not think it would be right to compensate local authorities for what would effectively be an inadvertent windfall resulting from a judicial determination. From the point of view of Government policy, that was not something we wanted to see, and we have moved as swiftly and reasonably as we can to correct this.
Mr Betts
We accept that the legislation takes the position back to what people thought it was before the court decision. In the meantime, however, we have had the court decision and local authorities will have done their estimates based on that decision, so the Government are effectively changing local authorities’ financial positions from what they thought they would be a few months ago. Given that the Government initially said they were going to compensate local authorities, why have they gone back on that commitment?
Dominic Raab
We did tell local authorities about this as soon as was reasonably possible and, as I mentioned in my previous answer to the hon. Gentleman, I do not think it is right for local authorities to gain from an inadvertent windfall at the expense of small businesses in our local communities.
I shall return to the second aspect of the Bill: council tax on empty dwellings. We are straining every sinew to build the homes that this country needs but, at the same time, we must make the best use of our existing housing stock, and that is what the second clause of the Bill is designed to achieve. It sets out an adjustment to the council tax empty homes premium, which will help to deliver on that.
Wera Hobhouse (Bath) (LD)
In coalition, the Liberal Democrats allocated more than £200 million to the empty homes programmes. However, in 2015, under the Conservative Government, that funding was completely cut. Is it not important to reinstate that money in order to bring empty properties back into use as affordable homes?
Dominic Raab
Of course, that was a period of coalition government. In our judgment, that method does not provide the best value for money, which explains why we are taking the approach that we are taking in this Bill.
Doubling the council tax on empty dwellings is just part of a range of measures that we are taking to fix the housing market, but it is an important step. The average house price in England is currently almost eight times the average income, compared with four times the average income in 1999. Families in their early thirties are half as likely as their parents to own their own home, and the same challenge faces private renters, whose housing costs now typically account for just over a third of their spending. This Government are committed to turning that around by taking action on all fronts. Fundamentally, that must mean making more homes available by building and delivering more homes, but we are also committed to making better use of the stock that we already have, including by supporting local authorities to use their stock efficiently and ensuring that they are doing all they can to bring homes that have remained empty for an extended period back into use.
Councils already have some powers and incentives in this area. In 2010, we inherited a situation in which council tax discounts were applied to all empty homes. That was not right because 300,000 properties were left empty while many hard-working families were struggling to find homes. Owners of long-term empty homes should be incentivised to bring them back into use and that was why in 2013 we enabled councils to charge the full rate of council tax on empty properties. We have also put in place powers for local authorities to charge a council tax premium of up to 50% on homes that had been vacant for two years or more.
Eddie Hughes (Walsall North) (Con)
In Walsall, we have seen a 40% reduction in the number of long-term empty properties since 2010. Does my hon. Friend anticipate the measures in the Bill helping us to tackle that still further?
Dominic Raab
The progress that has been made in my hon. Friend’s constituency is hugely welcome. If we look at the behavioural change across the board as a result of previous measures, we can see that 90% of councils have taken up the powers to apply the premium and that all but three of those councils are charging it at the maximum level of 50%. This has resulted in a 9% fall in the number of properties subject to a premium in those areas using the premium every year since the power was introduced.
Jim Shannon (Strangford) (DUP)
In Northern Ireland, measures have been taken in relation to accommodation above shops that is not being used for commercial purposes. The Minister has referred to rates relief for shops, and there is also a way of doing that in relation to the space above the shops in order to provide accommodation. Has he given any consideration to that possibility?
Dominic Raab
I am not quite sure what means the hon. Gentleman has in mind for achieving that, but perhaps we can thrash that out in more detail in Committee. Of course we will always remain open to adopting the smartest ways of doing things to ensure that we get the right balance.
Dr Sarah Wollaston (Totnes) (Con)
I welcome the Bill and its measures to give councils the tools they need to ensure that we drive down the number of empty properties. Will the Minister also use this opportunity to ensure that those who own second homes are contributing their fair share through council tax, and that they are not able to sidestep that by opting to pay business rates and then claiming eligibility for small business rate relief? If we are to achieve our goals on decent, affordable homes, it is important that everybody should pay their fair share.
Dominic Raab
My hon. Friend makes a powerful point. The situation to which she refers is slightly different from that of vacant homes, but I would say that we need to balance the economic impact of any measures in that area with the underlying public policy imperative that she has rightly referred to. We have also made changes on holiday homes in the context of council tax and stamp duty. We will keep the point she raises under due consideration and I have also discussed it with the Minister for Local Government.
In addition, our new homes bonus scheme provides a financial reward for councils that bring empty homes back into use, so this involves a carrot as well as a stick. This has generated £7 billion in new homes bonus payments to local authorities since 2011. Since these measures took effect, the number of properties left empty in England for six months or longer has fallen by a third since 2010, from 300,000 to just over 200,000. So these measures can work and they can deliver changes in behaviour.
Justin Tomlinson (North Swindon) (Con)
I wholeheartedly support these announcements. Only this weekend, I was talking to some very angry residents who have had to live for decades next door to empty properties owned by one individual who does not wish to bring his houses back on to the market. This is blighting residents’ housing in those neighbourhoods and there are even rats escaping from the abandoned houses. I wholeheartedly support any measure to protect the existing residents.
Dominic Raab
My hon. Friend makes a powerful point and I suspect that that situation is reflected much more broadly, both regionally and nationally.
Based on our experience as of today, we will go further in the Bill by doubling the premium’s maximum level to 100% and by allowing councils to charge double the rate of council tax on homes standing empty for two years or more. We are trying to strike the right balance between respecting the legitimate interests of those who own property with the overriding imperative in my Ministry to make the best use of existing housing stock, to ensure that we provide the homes that people in this country need.
Of course, given the demand for housing, we cannot just leave properties lying empty for years and the Bill will provide a positive incentive to avoid that. If vacant homes lay empty for too long, not only is that a waste of a much-needed resource, but they can become a blight on the local community, as my hon. Friend the Member for North Swindon (Justin Tomlinson) said, whether through squatters, vandalism or other forms of antisocial behaviour. Different areas will have different housing needs and different numbers of long-term empty homes, and the legislation will respect the fact that local authorities know their communities and their areas best, which is why we will keep the premium as a discretionary discount, allowing councils to decide whether it is appropriate for their communities and enabling them to set the level of premium that should be charged.
We understand that local authorities will want to reflect carefully on the local housing market in deciding whether to issue a determination when, for example, a homeowner is struggling to rent out or sell a property in a challenging market, which was a point made by my right hon. Friend the Member for Wokingham (John Redwood) earlier. For that reason, we published guidance in 2013 to remind local authorities to consider the reasons why a property may lie empty in particular circumstances. The guidance makes it clear that the premium should not be used to penalise owners of homes that are genuinely on the market for rent or sale. I should also say that the Bill will not bring any extra properties within the scope of a premium; it simply applies to those properties that might already have been affected by a higher premium.
In taking these measures to help to secure homes and to lift an unreasonable burden on business, the Government are delivering on our commitments to support the enterprise economy and to build a fairer society, backing small businesses and backing working families who dream of getting on to the housing ladder. I commend the Bill to the House.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
Happy St George’s day to you and to the rest of the House, Madam Deputy Speaker.
I thank the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), for meeting me last week to go through some of the Bill’s more technical aspects, which will save other Members the headache of hearing some of them today.
The Opposition broadly welcome both of the changes in the Bill. Clause 1 seeks to address the Supreme Court’s decision on the staircase tax, relating to how unconnected units occupied by the same business are treated. The measure will put businesses in no worse position than they would have been before the court ruling. Clause 2 will give local authorities the power to increase council tax on homes that are deemed to be long-term empty.
While the Opposition support clauses 1 and 2, we need assurances from the Government that they will not cause detriment to local authority finances. That is particularly the case with clause 1, which will reinstate features of business rates valuation practice that applied prior to the Supreme Court case. The Housing, Communities and Local Government Committee has been clear that the effects of the provision on individual local authorities ought to be quantified and supported. The Government have not been clear about how individual local authorities will be affected or about those that will be picking up the tab as a result of the reforms. It has therefore been difficult to give the measures adequate scrutiny at this stage, so we hope to explore some of them in Committee.
Some wider issues also need consideration. The Federation of Small Businesses has illustrated the problems facing smaller firms that necessarily operate in large premises but do not qualify for small business rate relief. For example, childcare providers require space by the nature of their activity, but that takes them above the small business rate relief threshold. Far more also needs to be done to protect the high street, and town and city centres. Business rates are a significant cost and can be the difference between surviving or failing. We recognise that a taxation system cannot sit in isolation and must support the Government’s broader policy objectives, and we have seen some of the largest corporations get away without paying their fair share of tax while premises—the property-based businesses that are the lifeblood or foundation of many of our communities and are essential for town centres to thrive—are taxed through business rates before they earn a single penny.
Turning to clause 2, we welcome the move to bring long-term empty properties back into use by incentivising the owners of such homes to act, but we are also keen to tackle the shortage of available housing in some areas. It has been Labour policy for some time now—the Government’s policy falls short of this—to see 300% council tax charged under the measures that are being put forward today. There are currently 200,000 empty properties in England, and we have seen homelessness increase steadily over the past eight years. As we speak, 120,000 children have nowhere to call home. They are staying with friends and family, and many of them do not have a bedroom of their own. Meanwhile, the evidence of rough sleeping and homelessness is plain to see in towns and cities up and down the land. Councils, particularly in London, which has the highest concentration of empty properties, are battling to meet their statutory obligations and housing duties due to increasing demand, rising unaffordability and the effects of eight years of Government cuts to local authority revenues. It is absolutely right that owners of empty properties pay a premium if their property is suitable to let but they fail to do so. However, any move must form part of a wider strategy to bring empty homes back into use, including positive, proactive support to get homes back on the market.
We welcome the Government’s acknowledgement of some of the faults in the system and their move towards adopting Labour’s policy on empty homes, but they could of course have gone further. Housing is one of the most pressing issues facing this country, and eight in 10 people think the Government ought to do more to address the housing crisis. We know that, which is why my right hon. Friend the Member for Wentworth and Dearne (John Healey) has launched a Green Paper on affordable housing—a framework to change the country’s approach to affordable housing—as part of a new national mission to solve the country’s housing crisis. From planning to funding right through to delivery, we need a comprehensive, joined-up strategy to tackle the housing crisis.
The Conservative-chaired Local Government Association —I declare an interest as one of its vice-presidents—agrees that there is more to be done. It would like the Government to go further and give councils greater power to borrow, to build and to deliver the homes that we need—not on a case-by-case basis, but by trusting local authorities to understand their areas and to get homes built quickly.
Mr Jim Cunningham (Coventry South) (Lab)
Like me, my hon. Friend has experience of local government, and he will know that if the Government are serious about dealing with this country’s housing crisis, they would free local government to build social housing on a major scale. That would determine the Government’s level of commitment. So far, however, they have not shown that commitment. There are families in my constituency in Coventry who cannot get accommodation, which is a terrible situation for people to find themselves in.
Jim McMahon
Absolutely. In some areas, the housing crisis was a significant factor in why people voted to leave the European Union. People do not feel confident about this country’s future, and housing is a vital part of that. If people do not have the security of a home or a secure tenure, they will rightly be nervous about what the future may bring, so the Government need to do much, much more. However, the idea that they can command and control from Whitehall and expect every community to benefit has been disproven time after time. As my hon. Friend pointed out, we should empower local government to get on. Councils know their areas. They have the local partnerships and know the sites. They have planning departments that need greater support. If they were given the resources, they could do far more, but this must be about giving them independence and freedom, not making them wait for the Government to offer crumbs from the table, which is how many councils feel.
Justin Tomlinson
I agree with much of that principle, but that is what local plans are for, and we have cross-party support in my patch of Swindon. This Government are empowering local communities to shape future development if they choose to engage with the opportunities.
Jim McMahon
I accept that point, but we also need to accept that local plans are limited in that, by and large—of course they do more than this—they are about land supply to support the number of housing units that will be built. They do not discuss the mixture of tenure or go into detail about the funding plan that will support the proposals. A local authority could identify, based on its population and demographics, that it needs a certain proportion of affordable or social housing, for example, but there will be no funding plan to deliver on that. A local plan could sit on a shelf for 10 years, but if the council’s ability to borrow is curtailed, it cannot lay the bricks to build social housing. Like the hon. Gentleman, I know my local area and the council knows the area too, but it is constantly under the cosh of funding cuts. It does not have the capacity and it needs it to be freed up.
Mr Jim Cunningham
My hon. Friend is generous in allowing me to intervene again. If the Government really believe in local democracy and want to encourage a property-owning democracy, they should do what used to be done. Local authorities used to give out mortgages and build houses for sale, and they used to build social housing. That is how to do it if the Government really mean to tackle the problem, and that is what they are not doing.
Jim McMahon
That is a fair point and, bringing it back to the Bill, we will see the rigour that local authorities apply to understanding what clause 1 means for their base funding requirements and what clause 2 means for how much money can be generated to support bringing more rental homes back into use. We know local government will deliver because, time after time, it has really stepped up and done what is asked of it.
Finally, the Bill feeds into the wider debate about the viability of local government finance. Issues such as the staircase tax have raised important points, but we need to move away from the uncertainty and the reliance on favourable Government decisions to fund local services. Any new responsibilities must be backed up with the resources to guarantee that councils can meet their statutory duties.
By the end of the decade, local government will be facing a funding gap of £5 billion which, time after time, the Chancellor seems to be wilfully ignoring. I understand that Ministers have been trying to get an audience with him, but they have failed. The consequence is that our councils often face financial uncertainty.
As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), my boss, says, you cannot empower local government if you impoverish it.
Bob Blackman (Harrow East) (Con)
It is a pleasure to follow the hon. Member for Oldham West and Royton (Jim McMahon). I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a vice-president of the Local Government Association.
As I said last week, it is a pleasure to see the Chair of the Select Committee on Housing, Communities and Local Government, the hon. Member for Sheffield South East (Mr Betts), back in his place for this debate. During his absence, the Committee has had to deal with many of the issues we are discussing tonight. I thank my hon. Friends on the Front Bench for coming before the Committee to update us on the Government’s proposals and to give us a chance to comment before the Bill came before the House.
In many ways, that is something from which all Departments could learn. Using Select Committees to do pre-legislative scrutiny is a good way of making sure we get legislation as close to correct as possible before it is presented to the House, rather than requiring the House to develop it further. My Homelessness Reduction Act 2017 went through the same process, so it is clear that the Ministry of Housing, Communities and Local Government is leading the way in government, and we should congratulate it on doing so. However, I will outline some criticisms of the proposals, because there are some concerns.
The staircase tax came as a bolt out of the blue to some 30,000 small businesses in this country. We cannot criticise Supreme Court rulings, but this one was a massive shock to small businesses across the country that have paid their business rates for many years—there was a settled position. The Supreme Court ruling ended that, and I will pay particular attention to what has happened across the country in the past couple of years as a direct result.
My constituent Anthony Broza is the chief executive of Wienerworld, the UK’s leading independent music publisher and distributor. Given that his company is competing against Amazon and other such companies, the staircase tax has a direct impact on his business. He is my constituent—he lives in my constituency—but he runs his business out of an office just across the border in the London Borough of Brent, and therefore the levying authority is Brent Council.
Mr Broza owns an office block that I think is on four floors. He uses the ground floor for distribution and to allow the public to come to see his goods and services, and he uses the fourth floor for administration purposes. He quickly realised that he would not need the other floors so, rather than keeping them empty, he not unreasonably rented them out to other businesses. The floors are connected by a common staircase, hence the staircase tax.
Mr Broza runs a small business and, because he was getting small business rates relief, his rates were effectively zero. Suddenly, after returning from a good holiday, he received a 22-page document from the Valuation Office Agency and no less than nine rates bills from the London Borough of Brent demanding payment within five months. As might be imagined, it came as a bit of a shock to put it mildly. The sole reason for the shock is that the offices are split over different levels, and they have been that way for many years.
Michelle Donelan (Chippenham) (Con)
Does my hon. Friend agree that such shocks can deter the very entrepreneurial spirit we need to ensure that the small business economy thrives under this Government?
Bob Blackman
Mr Broza’s view is that he might have to close his business as a direct result of this completely unreasonable demand and, as I have said, his is one of 30,000 businesses in that position.
Obviously, the various different charges levied on Mr Broza covered a number of years going back to 2015-16 and 2016-17. The 2017-18 rates bill was even more aggressive, because it took account of an increase in rateable value and the loss of transitional relief and business rates relief. He was placed in a position in which he was suddenly presented with a bill for £8,344.59 in one go, to be paid within the year, when he had previously been paying the princely rates of about £370 a month on one property and only £50 a month on the other. He was clearly encountering a draconian position.
When Mr Broza came to see me, I was shocked that he was being placed in that dreadful position. Clearly, overall, the Government were going to gain from this Supreme Court decision. Whether it is local government or national Government, overall the taxpayer was going to gain some £3,040.95 in one hit that was completely unbudgeted for.
Worse still for Mr Broza, he had budgeted that his business rates bill for the 2017-18 tax year would be zero. Of course, he was then told that he would have to pay £5,365.07 within five months of receiving the bill. I took up this case with the Chancellor, and I am pleased to say that the Chancellor saw the right way to proceed: small businesses in such a situation that have acted in a perfectly reasonable and lawful way should not be penalised by suddenly being hit with a dreadful windfall tax.
However, we have a number of problems still to resolve. I welcome the Bill, under which businesses such as Wienerworld will be returned to their previous position. However, the current position is that the London Borough of Brent, and other councils across the country, are still levying these punitive tax rates and demanding payment. So businesses are having either to find money out of their revenue to pay local authorities—to keep paying the business rates as they are—or to borrow the money in the hope and expectation that it will be returned to them. Either way, this seems unsatisfactory, given that the Government have made it clear they are going to correct the position for those businesses.
Simon Hoare (North Dorset) (Con)
My hon. Friend is making a powerful case on behalf of his constituent. Does he agree that quite a lot of these things illuminate the disconnect between decision making and policy making, and an understanding of how the business world, particularly the small, local business world, works? If there was better knowledge and understanding of that, some of these cases, to which he has rightly been drawing the House’s attention, would not arise.
Bob Blackman
I thank my hon. Friend for that intervention. Clearly, Government policy should always be driven in an evidence-based way and be sympathetic, particularly to small businesses, which are the lifeblood of our economy. However, we are dealing with a Supreme Court ruling here, as opposed to Government policy. I am pleased that the Government are trying to put it right, which is how this should work. The advice being given by officials from the Department is less than helpful in its current guise, because the correspondence we have had from the Department says that it cannot do anything until the law is corrected. That means that businesses are still being charged these business rates while the law is being changed. One thing the Government need to look at is finding a way of ensuring that people are not having to pay huge sums only for the valuations to be redone and for them to claim the money back, together with interest—there is also the bureaucracy to consider. Businesses just want to get on with their business, rather than sorting out the mess that has been created with their business rates.
The attitude of the London Borough of Brent to Wienerworld—I suspect this is shared by all local authorities across this country—is, “This is the decision. You are due to pay this money. You must pay it or else we will distrain against you to get that money off you.” That means small businesses in this country will go under as a result, and that is the concern. Obviously, the Government are moving as fast as they can to correct this position, but guidance needs to be given by the Department to local authorities on businesses that are suffering financial hardship as a direct result of a decision that was nothing to do with them, is not Government policy and needs to be corrected.
This is a problem in many parts of London, and it has been drawn to my attention that one area that will suffer heavily is Tower Hamlets, which has a number of businesses in respect of which the staircase tax is operational. This is one area where I have criticisms on this issue. Once the Bill becomes an Act and the law is corrected, the businesses will apply for revaluation. As I understand it, their revaluation will go back to 2010 if they so wish—it will probably go back at least to 2015. They will then get a revised bill, and probably a return of money and of interest, which is going to come from the local authority. I noted the Minister’s comment in reply to the Chair of the Select Committee that the position would be that local authorities have experienced a windfall. They have, but many local authorities are now going to have to repay that money once the law is changed back again and they have used that money. It is not money that they were not expecting, because they have had a judgment, and they have used this money in their budget. If the Government now say, “You’ve got to repay the money but we are not going to compensate you for that repayment”, that is a windfall to the Government—
James Duddridge (Rochford and Southend East) (Con)
I apologise for not being here for the whole debate, Madam Deputy Speaker—I have been chairing a Bill Committee. What my hon. Friend is saying is worrying me, because a problem of this nature may arise in Southend and we are running a fine budget. Has he quantified, by area, how much money is involved? Finances are already troublesome in terms of local councils trying to deliver the best services locally.
Bob Blackman
All local authorities across the country which have had to issue these revised bills over a three-year period on business rates will be looking right now at what the bottom line is for them. The worrying factor about the way the Bill is being introduced is that the repayment is not automatic; each business that may have been affected will have to apply for revaluation. They will then be revalued and finally a bill will be decided, for potentially a three-year period, together with interest. Some businesses may not gain anything, but some will gain a substantial amount of money, with interest, and the local authorities will have to repay that. The current position, as I understand it—we need to press our Front Benchers on this issue—is that local authorities repaying that money would not have had this money if this judgment had not been made. However, they have applied that money to their budgets and they will have to find the money from within their budgets as one-off, windfall damage to their bottom line. That is unfair on the local authorities concerned. They have not taken the decision—this was not a decision any local authority took—so they should not be financially penalised as a result of this. I hope we can move to a position whereby the Department will agree to compensate all local authorities that are out of pocket as a direct result of these decisions, once we have got to a conclusion.
Mr Betts
I thank the hon. Gentleman for the work he did in scrutinising this legislation in my absence, and I agree with the point he is making now. Would it not be a lot more convincing from the Government when they say they are not going to compensate because the likely effect is small overall if they were to release to us their detailed calculations, which presumably they have done, about the impact on individual authorities?
Bob Blackman
I thank the Chair of the Select Committee for raising that issue. We are talking about 30,000 businesses, many of which will be concentrated in particular areas. We know that there will be a hit for some local authorities, which could be considerable. Hon. Members from across the House will not necessarily be aware of the potential hit for local authorities as a result.
Simon Hoare
My hon. Friend will know—if he does not, I will tell him—that I spent seven years doing the finance portfolio on a district council. When a local authority suffers from a flood, there is a Department-run fund they can make a bid to in order to cover the costs they have incurred due to those exceptional circumstances. Might that be an avenue for those local authorities? Might they be able to make such a bid in order to fill this black hole created in their local finances, which was not of their fault and which was unable to be predicted in their budgeting process?
Bob Blackman
Clearly, the Government and the Department have figures they can use to evaluate which local authorities are most affected in this way. It may well be that a threshold should be imposed, whereby if only a relatively small amount of money is involved a local authority could not claim it back. However, if a substantial sum is involved, as could happen in many of these cases, we should get to a position where the local authority is returned to where it should have been in terms of the expectation in its budget. My hon. Friend may know that I was in charge of the London Borough of Brent’s finances for many years, so I know the way the finances of that local authority work extremely well. The reality is that this will create a hole in Brent council’s budget, and I do not see why Brent should suffer as a result.
Let me turn to the empty homes premium. My hon. Friend the Member for North Swindon (Justin Tomlinson) asked in an intervention how we can ensure that local authorities can encourage empty homes to come back into operation, but without unfairly penalising those homeowners who are refurbishing their homes or converting them for other purposes, thereby making them temporarily empty for an extended period. We do not want those people to suffer any damage or be charged any financial premiums, but at the same time we do not want unscrupulous homeowners or landlords to keep a property empty, only to do some work when the local authority investigates, just to demonstrate that they are doing something, but still keeping the property empty for longer.
Michelle Donelan
Does my hon. Friend agree that that is why the two-year period is a fair benchmark and why the 2013 guidelines on assessing why a home is empty are important in protecting people?
Bob Blackman
Clearly, different local authorities have interpreted the rules in different ways. One of the concerns is that owners should not be penalised for refurbishing properties and bringing them back into use, but it must be genuine refurbishment, rather than people artificially refurbishing properties and keeping them empty. That is a very difficult test, and it must be left to local discretion, rather than trying to formulate a detailed law that will not necessarily provide the answer, but will allow learned lawyers to gain from trying to interpret it.
James Duddridge
My hon. Friend anticipates me, because at one stage he said there was perhaps no requirement to change the law, and I was about to leap to my feet. The reason I hesitated was that I was going to support him in any amendment he might table to look at not only existing residential property during that period, but shops above flats. In Southend High Street there are many properties that many years ago—more than two years ago—used to be residential properties, and it is not in the interests of the freeholders or lease- holders on the ground floor to open up those spaces. In Southend that is blocking 800 to 1,000 units, yet it was always the intention of the Victorian architects that they should be occupied. If my hon. Friend tables any amendments, I would be more than happy to add my name if they extend the Bill to cover those important points.
Bob Blackman
I hesitate to get into a battle about tabling amendments to the Bill, because we want the Government to reflect on tonight’s debate. We want incentives to bring forward housing and ensure that it is not kept unoccupied unnecessarily for an unreasonable length of time. Flats above shops are an example of the many properties that we can bring back into use. Many are disused or used for storage. Often, they were intended for the owner of the shop to have a residence and to run his or her retail outlet down below, but they moved away from that type of operation many years ago.
Eddie Hughes
Has my hon. Friend seen examples, as I have in my constituency, of accommodation above shops being left empty for a considerable period, thereby lowering the tone of the area and leading to antisocial behaviour and an unfortunate downward spiral in the general feeling of the community?
Bob Blackman
Clearly, we want our town centres and shopping areas to be revitalised through people living in them and going to them. If people live in the flats above shops, that brings life to the area 24 hours a day, rather than for maybe 12 hours a day, and that must be to our advantage.
Neil O’Brien (Harborough) (Con)
Further to the point made by our hon. Friend the Member for Walsall North (Eddie Hughes) about empty shops, I am aware of a house in Huddersfield, where I grew up, that was empty for literally decades on end. It was not just a waste of space and precious land; it was a huge eyesore that dragged down property prices all around. It was deeply ugly and people wanted shot of it. Does my hon. Friend agree that bringing those kinds of properties back into use is the first place we should go to, rather than necessarily building on greenfield sites?
Bob Blackman
I am sure that colleagues across the House could come up with example after example of empty homes that could have been brought back into use many years ago. Some should possibly have been demolished and replaced—I have those in my constituency —but the sad reality is that we still have far too many empty homes that should be brought back into use. Those that are derelict and have not been used for literally decades are the first that we should penalise and look to bring back into operation.
Let me end by asking Ministers to look sympathetically at how we can compensate local authorities for the loss of revenue—we have suggested a means by which that could be done—how we can get guidance to local authorities so that they do not penalise small businesses because we are correcting the law in the interim, and how we can get to a position whereby some sensible decisions can be taken as quickly as possible and small businesses that face difficulties meeting their finances are given help and advice, rather than being closed down by banks and other operations that may wish to penalise them in that way. If we can do those things, this will be a good Bill.
Simon Hoare
My hon. Friend is being characteristically generous with his time. Does he agree that as all of us, as parliamentarians across the House, work with our local authorities to seek imaginative ways to address the shortage of housing, we need to be absolutely certain that those buildings that could readily be converted from retail to residential use, or in which the residential element could be extended, are not saddled with debts, burdens, judgments or whatever, which could preclude the successful delivery of that opportunity to increase the housing stock in sustainable locations in our town and city centres?
Bob Blackman
My hon. Friend draws the House’s attention to another unintended consequence of the decision to implement the staircase tax, which could preclude people who may wish to bring a retail unit into operation as a housing unit, which is something we should all welcome. That demonstrates that we have an opportunity across the House for improvement in both these areas.
Finally, I hope that we can look sympathetically at introducing the empty homes premium in a way that does not penalise those who are improving properties, but does penalise those who are deliberately keeping them empty for no good reason, so that we bring homes back into use and they are used properly, as we would all like.
Eddie Hughes (Walsall North) (Con)
It is a pleasure to follow my hon. Friend the Member for Harrow East (Bob Blackman). It is obviously a particularly great pleasure to speak on St George’s day and as we in this House celebrate the birth of a new member of the royal family, so today’s speech will certainly be memorable for me. And boy have we got some exciting stuff to discuss today!
If I remember correctly, clause 2 amends section 11 of the Local Government Finance Act 1992. It is perhaps not particularly sexy, but I hope that it will be effective—and boy does it need to be effective. At the moment, we have approximately 200,000 empty properties. In fact, if I remember correctly from the briefing, it is 205,593 empty properties. I do not know who comes up with these statistics, but I think that they should be slightly vaguer, unless they put a time stamp on them. Anyway, there are approximately 200,000 properties in this country that have been empty for a substantial period of time.
Neil O'Brien
My hon. Friend will be aware that the number of empty homes—more than 200,000 of them—is down from nearly 300,000 in 2010, so there has been a huge improvement. We have 100,000 more homes for families as a result of the changes that we have already made, which has avoided 100,000 extra homes being built. Many people in green-belt areas will welcome that change. Does he agree that the progress that we have already made on empty homes will be further boosted by the measures that we are discussing today?
Eddie Hughes
I agree entirely. When we talk, as we frequently do, about the housing crisis in this country, we can see that there are many elements to it. Of course, it is incredibly laudable that this Government have an ambition, which I am sure they will achieve, to build 300,000 houses per year, but it is also incredibly important that we make the best use of our existing housing stock.
David Linden (Glasgow East) (SNP)
The hon. Gentleman talks about the housing crisis in this country, but does he agree that we would better solve the housing crisis if we abolished the right to buy?
Eddie Hughes
The hon. Gentleman makes a powerful intervention given the fact that yesterday, only 24 hours ago, he ran 26.2 miles, and look at the man we see before us this evening—not a break of sweat on him. Clearly, he is not just an incredible athlete, but a gifted intellectual, and I acknowledge what he says, but completely disagree with him.
As I was saying, we have moved from 300,000 empty properties down to 200,000 empty properties, and that is, in no small part, owing to the fact that we previously introduced this council tax premium.
Scott Mann (North Cornwall) (Con)
I am aware that the issues in Walsall North might not be the same as those in Cornwall, but I do appreciate and share the view that we have a mutual interest in making sure that these vacant properties are brought back into use. Does my hon. Friend think that his local authority, like mine, will appreciate these changes?
Eddie Hughes
I agree entirely with my hon. Friend, not least because this Government, being the free-thinking Government they are, are not imposing this duty on councils, but giving them the opportunity to apply this measure should they choose to do so, so they will have the opportunity to increase the premium from 50% to 100%. No doubt, Madam Deputy Speaker, you are thinking, “What might they do with that extra money?” I personally suggest that they use that extra money for services for their local constituents in order to drive down bills, increase efficiency and make sure that they either optimise their use of council tax, or possibly decrease their council tax in order to ensure that hard-working families benefit from the change to the law.
Alan Mak (Havant) (Con)
My hon. Friend is making a powerful speech. Does he agree that as many councils, including my own, are reviewing and updating their local plans to make sure that we have the housing that we need for the future, this would be a good opportunity to analyse and evaluate whether the council tax premium could be used, accelerated and deployed efficaciously to ensure that we have the right housing in local areas such as mine?
Eddie Hughes
My hon. Friend makes an important point, not least because he uses the word “efficaciously” so skilfully. I hope that Walsall adopts that very approach, because, since 2010, we have seen a 40% decrease in the number of empty properties, owing in no small part to the actions of this Government.
Mary Robinson (Cheadle) (Con)
I am grateful to my hon. Friend for giving way and for his eloquent and wide-ranging speech. Does he agree about what is at the heart of this matter? He talks about Walsall, but in my constituency, in Cheadle and Cheadle Hulme and the surrounding districts, we also want to see some regeneration of our centres. We want to see people going into the centres, living there, and opening up businesses that can thrive. We want the district centres to look appealing and attractive and have people living and shopping there and utilising them.
Eddie Hughes
I am simply amazed. My hon. Friend is blessed either with psychic ability or intuition. That is the very point that I was about to move on to. In Beechdale, one of the wards in my constituency—
Simon Hoare
My hon. Friend seems to be saying something very nice and flattering to anybody who intervenes on him. As I have not had anything nice and flattering said to me today, I just thought that I would give him the opportunity to do so.
Eddie Hughes
All I can say is that I have been in the House for less than a year and I hope that, over the passage of time, I will develop the insight and eloquence of my hon. Friend. Unfortunately for the moment, Madam Deputy Speaker, you have to put up with this stuttering Brummie trying to work his way through his speech, and taking yet another intervention.
Neil O'Brien
I am not in search of flattery. Does my hon. Friend agree that, as well as bringing empty residential properties back into use, it is strategically important to bring into use buildings that are not currently registered as residential properties? Is he aware that the number of conversions and change-of-use properties has increased from 17,000 in 2010 to 43,000 last year—from 12% of all new supply to 20%? As well as turning old houses back into homes that people are occupying, it is also important, as part of the same strategy, that we go further and liberalise change of use.
Eddie Hughes
Were it not for the fact that I am speaking totally extemporaneously, I would have thought that my hon. Friends had read my speech, but, as I have already pointed out, in order to do so they would have had to read my mind. I will indeed be coming on to that very point subsequently, in talking about the excellent period that I spent working for YMCA Birmingham.
For the moment, Members will no doubt remember that I was about to talk about Beechdale, and we should return there immediately. Beechdale housing area, which was built in the ’50s and ’60s in my constituency, has Stephenson Square, a row of shops, and, above the shops, 10 flats that had remained unoccupied for 10 years. Beechdale Community Housing group took the opportunity to refurbish those flats, creating nine self-contained properties that could then be let to members of the local community. However, one flat has been retained for the use of the House to Home project, facilitated by the amazing Jemma Betts, who works for Beechdale Community Housing. Her role is to ensure that, when people move into those newly refurbished, previously vacant properties, they can be helped to sustain their tenancies. Of course it is our objective to bring empty homes back into use, but they must be used by people who can maintain the tenancy for a protracted period. It is difficult for some people who have had previously chaotic lives to develop the skills to enable them to sustain that tenancy. Jemma’s work is to help them understand how they can, for a reasonable price, furnish that property, access rent statements online and therefore maintain that tenancy.
What is also important about this particular area is the fact that there are shops beneath the flats that have been brought back into use. I am thinking particularly of Rob Mullett Butchers, which I thoroughly recommend that you visit, Madam Deputy Speaker, if ever you are in Beechdale, or W.E. Whitty’s grocery, which has been run by—[Interruption.] I am embarrassed. It has been run by Jane and Phil for a number of years. As I mentioned in an earlier intervention, Phil recently said to me, “When you bring properties back into use, particularly those properties that are above shops, you regenerate the entire area. People are living there 24 hours a day and they are making use of the shops.” This has caused a general lowering in the incidence of antisocial behaviour in the area. But it is not just that. Jemma has also taken the opportunity to create a community garden to the rear of the flats now that they have been brought back into use, having been vacant for 10 years. This facility allows children the opportunity to learn how to grow vegetables.
Neil O’Brien
I am lucky to represent Market Harborough, which has seen the fastest growth in the number of new shops anywhere in the east midlands, but many retail centres are suffering from the growth of the internet. In future, this country will probably have more retail space with potential homes above than it needs. Does my hon. Friend agree that local government must play a strong role in helping to consolidate those retail centres into housing, so that they can become vibrant places where people want to hang around?
Eddie Hughes
I agree entirely. We are seeing a shift in the profile of our town centres. Of course, many people are keen to shop online these days, so there are some empty properties. Unfortunately, there is a particular example of empty shop units in Walsall, where the Labour-led council has decided to spend £13 million buying a shopping centre with empty units and a leaking roof. I hope that the vociferous campaigning of local Conservatives will ensure that we take back control of the council.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Empty shopping units are not really covered by the Bill. I am sure that the hon. Gentleman realises that the legislation is about residential properties and he will be coming to that.
Eddie Hughes
Of course, Madam Deputy Speaker; I was merely responding to my hon. Friend the Member for Harborough (Neil O’Brien), who suggested that there might be a change-of-use opportunity for empty commercial properties. Hon. Members will no doubt remember that when the Government provided £100 million of funding through their empty homes programme, they were not only targeting empty residential properties, but allowing organisations to have the facility for a change of use from commercial to residential. I was just about to come to an example of that.
Madam Deputy Speaker, I do not know whether you have ever been to watch Aston Villa play football in Birmingham. I would suggest that you do not come at the moment; we are hoping for promotion, but it can be a bit hit and miss. Anyway, YMCA Birmingham took the opportunity of taking over Harry Watton House in Aston, which was previously a social care building that had been used for residential purposes occasionally, but was left empty for a considerable time. YMCA Birmingham took the opportunity of approximately £450,000 of Government funding to convert that building back into use as 33 self-contained flats. YMCA Birmingham has been in existence since 1849 and currently offers 300 units of accommodation for young, previously homeless people; bringing empty properties back into use has to be the best use of that Government money.
Neil O’Brien
I thank my hon. Friend for his patience. There are currently around 400 empty properties in the Harborough district, and there are also occasionally homeless people in the district. All my constituents would want those homes brought back into use so that we can tackle the problem of homelessness that my hon. Friend mentioned.
Eddie Hughes
My hon. Friend makes a valid point, although there are occasional cases where people who appear to be homeless are not open to the good will and hospitality of neighbouring organisations. YMCA Birmingham was given £1 million to create new residential accommodation at its Erdington site, which was only about 20 or 30 metres away from a Tesco store. Some people used to turn up and beg outside that store, which was very bad for the credibility of the YMCA as an organisation seeking to home homeless people. Despite our best efforts, they would never be removed and come into our accommodation.
Let me return to the matter of how empty homes can be brought back into use. There is a block of flats on Henrietta Street in Birmingham that was owned by somebody who failed to develop it over a sustained period of time, but thanks to money through the empty homes programme—YMCA Birmingham was allocated a total of £890,000—we were able to bring those flats back into use. The block is now excellent accommodation for young people in Birmingham, on the edge of the Jewellery Quarter, which is quite a prestigious address these days. The units of accommodation are relatively small at approximately 25 to 30 square metres, so they are perhaps not palatial.
Michelle Donelan
Does my hon. Friend agree that the issue of empty properties—commercial and residential —exists not just in certain parts of the country, but all over the country? It is a particular problem in my constituency, which is actually quite rural.
Eddie Hughes
As I mentioned previously, there were 300,000 empty properties, so they were clearly spread broadly across the country.
Madam Deputy Speaker, if you will forgive me a small indulgence, I just want to mention some research. I would not normally refer to Lib Dem research but, according to a Guardian article in January this year, 11,000 properties in this country have been vacant for more than 10 years. Incredible! I can see the look on your face, Madam Deputy Speaker. Another 23,000 properties have been empty for five years. What are we doing as a society? How can we talk about this housing crisis when we have 11,000 properties that have been vacant for more than 10 years?
Wera Hobhouse
The hon. Gentleman is making a very entertaining speech. Does he agree that there are so many thousands of empty homes because councils do not have the funds to bring these empty properties back into use? We need funds for councils to make that happen, but the money that was allocated under the coalition Government has been cut.
Eddie Hughes
I am not sure that the hon. Lady has been paying attention to the entirety of my speech. I have mentioned many millions of pounds that this Government have given to address the issue of empty homes.
David Warburton (Somerton and Frome) (Con)
Surely one of the huge benefits of the empty homes premium is that it will mean that councils have more money, thereby reducing the burden on hard-pressed council tax payers. I also want to stress that one hon. Member for North Dorset is more than this House can take, never mind another, so I caution my hon. Friend about wanting to emulate certain people in this House too much.
Eddie Hughes
My hon. Friend makes a valid point. It is important to remember that the Bill will give councils the flexibility to apply that council tax premium, which is currently at 50% and can be increased up to 100%. But I would imagine that some constituents might want to challenge councils that do not take the opportunity to apply the full 100% because, as he said, it will give them the opportunity to bring in more income. As the hon. Member for Bath (Wera Hobhouse) said, councils will then have money that might facilitate their bringing those 11,000 empty properties back into use.
Michelle Donelan
The bulk of empty properties are actually privately owned. A key reason behind that is that people are trying to increase the monetary value of the home by sitting on it, and avoiding the hassle and potential pitfalls that could happen if they rented it out. It is that issue, not council-owned properties, that we are trying to target with this Bill. Does my hon. Friend agree?
Eddie Hughes
My hon. Friend brings me to a point that I had neglected to cover so far: the flexibility that is allowed because we absolutely do not want to penalise people who have genuine reasons for a having a property empty for an extended period. Those people should fear nothing from this Bill. My understanding—I may be incorrect; if so, I am sure that hon. Members will correct me—is that the Bill would not apply, Madam Deputy Speaker, if you were serving in our armed forces overseas and your property was therefore left empty for an extended period. Similarly, should you unfortunately need to go into hospital or respite care, leaving your property vacant for a two-year period, there would be the flexibility to ensure that this measure was not applied.
John Redwood
Does my hon. Friend agree, though, that quite a few of these empty homes are owned by the public sector, which may not respond to this incentive? If only my council had lots of empty homes, it would be much easier, but it does not, and we are under enormous pressure. Does he agree that where that is the case, we need something else as well in order to end the scandal of empty public-owned housing?
Eddie Hughes
This is dangerously close to becoming a debate with great interaction. I look forward to more comments from my right hon. Friend, because my understanding is that there was previously a tool that allowed compulsory purchase of properties that had been left empty for an extended period. Some might think that this Government would not apply such rules, which perhaps seem draconian.
Charlie Elphicke (Dover) (Ind)
My hon. Friend is making an impassioned, powerful and thoughtful speech. In October 2010, there were about 300,000 homes that had been empty for a long time. That number has come down to about 200,000. That is good progress, but does he agree that more needs to be done?
Eddie Hughes
I think that there are stats available for everybody in the Chamber. Perhaps they could celebrate, as I have, not only St George’s day, and not only the birth of a new member of the royal family, but a 40% decrease in the number of empty properties in Walsall. Those are, I suggest, three very good reasons for a party, or possibly another bank holiday—for St George’s day, I mean. I am not for one minute suggesting that we have a bank holiday just because the people of Walsall have reduced the number of empty homes by 40%.
Neil O’Brien
Much of the debate about empty homes assumes that the greater part of the problem is in the capital. While we must of course use measures like those in this Bill to bring more homes back into use in the capital, is my hon. Friend aware that the greatest proportions of empty homes are actually in the north, particularly the north-east? About 0.5% of homes in London are empty, whereas about 1.5% are empty in the north-east, where, I must say, we have largely Labour councils.
Eddie Hughes
One of the difficulties that I had when I first came to the House was recalibrating with regard to the intellectual ability of those with whom I spend time. My hon. Friend was, I believe, a policy adviser at No. 10, and he appears to know everything. I defer entirely to his encyclopaedic knowledge of housing issues, and I agree entirely with his point. When I sit in meetings, I have found that because so many people are focused on housing problems in London and the south-east, they sometimes fail to see that there could be any empty properties outside London. To be honest, I am not entirely sure they care about the rest of the country. It is a pleasure to be joined in the new 2017 intake by somebody with the gifts and abilities of my hon. Friend. As I say, he made a very important point.
Andrew Jones (Harrogate and Knaresborough) (Con)
I am greatly enjoying my hon. Friend’s speech. I can confirm that in my area we are struggling with properties that are empty. It causes a problem all over our country. One of the most positive aspects of this Bill is that a consequence of bringing properties back into use would be less pressure on developing our open spaces. People in Harrogate and Knaresborough are perfectly comfortable with the idea that we need to build more properties, but they are also concerned about the loss of open space. Having higher-density use of existing property goes some way towards protecting the green spaces that we all seek to protect.
Eddie Hughes
My hon. Friend makes a very valid point.
Let me borrow a slightly amended phrase from Shelter, which said, “The housing crisis isn’t about homes—it’s about people.” I agree with that principle completely. When people see that there is an increase in demand for property and know that properties in their neighbourhood have been left vacant for a long time, they are probably scratching their heads and thinking, “This Government are so progressive and so able in so many areas—why are they not tackling this issue?” Well, today they are.
Scott Mann
My hon. Friend talks about the individual. The property of an individual who fell on hard times might become run-down because they had run out of money. Does he think that at a later stage the Government might consider investing money to bring back into use vacant properties that have fallen into disrepair?
Eddie Hughes
My hon. Friend has suggested an innovative solution to some elements of the housing crisis. However, we should bear it in mind that there is flexibility with regard to the application of the enhanced rate. Whereas councils can currently apply a premium of 50%, clause 2, which amends section 11 of the Local Government Finance Act 1992, introduces the flexibility for them to apply a premium of between 50% and 100%. That flexibility with regard to the interpretation and application of this law will allow some scope to cover the sorts of cases that he mentioned.
Michelle Donelan
Does my hon. Friend agree that it also offers councils the flexibility not to charge any premium at all? Because this is done on a case-by-case basis, if there is a particular circumstance where somebody has fallen on hard times, is struggling to renovate their property and has just cause to vacate it, the council can assess that. That is why it is so important that local councils can make these decisions and that this Government are supporting localism.
Eddie Hughes
That is the brilliance of the drafting of this Bill. Clearly, whoever was associated with that in any way, shape or form was insightful, intuitive and gifted. I am hoping that the Minister was involved in some way with the drafting of the Bill and will remember the praise that I have heaped on the people who were involved.
Neil O’Brien
While I share the passion of everyone in this House who is keen to see empty properties brought back into use, does my hon. Friend agree that this measure, which is effectively a tax and incentives-based measure, takes the right approach, as opposed to a more dirigiste one? Although the empty homes development orders brought in by the Labour Government were a good thing, they led to only about 40 homes in England being taken into possession. Does he agree that we need a tax and incentives-based approach rather than trying to take people’s property off them?
Eddie Hughes
I am not sure whether you noticed, Madam Deputy Speaker, but I think that my hon. Friend might have tried to sneak in a French word, or possibly a Latin one, just to prove how clever he is and to completely wrong-foot me. But I am having none of it: I am going to ignore that part and just agree with the point that he made. Clearly, whatever legislation we introduce, it is important that it is efficacious. I think we heard that word earlier; it is not one I use frequently.
Simon Hoare
If there were a prize for modesty, my hon. Friend would be declared the victor ludorum.
Eddie Hughes
See, Madam Deputy Speaker, I told you—I have had to totally recalibrate with regard to the intellectual approach of other Members. We certainly do not use much Latin around the table in my house. It may not have been Latin; who knows? It is probably important that I return to the Bill.
Trudy Harrison (Copeland) (Con)
May I draw my hon. Friend’s attention to the need to deal with empty homes in rural areas? I refer particularly to my constituency, of which two thirds is in the Lake District national park. Empty homes are a blight on our society. They have a negative impact on rural schools and businesses, which is why it is so important to see empty homes being put to good use and filled with people in rural villages.
Eddie Hughes
It is fascinating how much we can learn in this Chamber. I have been walking in my hon. Friend’s constituency and have often thought how beautiful the properties and the scenery are. I cannot imagine that anybody would want to leave a property there vacant for any period, let alone an extended period of more than two years, such that it would cause elements of the Bill to be triggered. When we come to the Chamber, we get the opportunity to hear from Members representing constituencies across the country, and that is what makes this institution so great.
I can obviously only speak on behalf of and with regard to the good people of Walsall North, Willenhall and Bloxwich, so it is great to hear stories from around the country. The point is that if people are prepared to leave properties vacant in beautiful constituencies such as my hon. Friend’s, this is clearly a problem that the Government need to tackle, and I believe the Bill goes a long way to tackling it.
Michelle Donelan (Chippenham) (Con)
I am delighted to follow my hon. Friend the Member for Walsall North (Eddie Hughes), who gave an informed and energised speech. I cannot elaborate enough on how much we all enjoyed it. I reiterate his point about St George’s day and congratulate the royal family on the birth of another child.
I welcome the opportunity to speak about the Bill, which is pro-business and therefore will support job creation and which seeks to help to increase our housing stock. Those are two issues that my constituents regularly raise with me in my surgeries and when I am at events.
The staircase tax has been the top issue raised with me by a number of local businesses, including at events I have attended, such as at Corsham chamber of commerce, local Inspire events and other networking events around the constituency. I am delighted that the Bill seeks to rectify the bizarre situation that we have found ourselves in. Although we must not criticise the Supreme Court, I welcome the Government’s initiative to right a wrong today and to honour the commitment made in the autumn Budget. The Bill will mean that all ratepayers who lost small business rate relief directly as a result of the judgment will have their relief reinstated to their bills retrospectively.
As we all know, the staircase tax means that business rates in England and Wales are being set depending on how many rooms are being used and how they are linked. That really is arbitrary. Companies with offices linked by a communal lift, corridors or stairs are being charged. In fact, some of those businesses would have been eligible for 100% rate relief were the case different. That has led to an increase in bills, which concerns a number of businesses. Some have faced charges being backdated to 2010. If you owned your own business, Madam Deputy Speaker, can you imagine the shock and the horror of getting a massive bill that you had not budgeted or planned for and that could stifle your small business? That is what has happened in businesses in my constituency and up and down the country.
Neil O'Brien
While talking with the Market Harborough chamber of commerce just last Friday, I met a business owner in my constituency who runs a small fishmonger and has a whole set of offices connected by a staircase in a tall building in the most expensive part of the town. Were this ruling to have affected her, she would have been completely clobbered. In fact, even in the current business rates environment, because it is a rather archaic tax, she is already paying a lot, and without measures such as this, she could have been paying an awful lot more.
Michelle Donelan
I thank my hon. Friend for his very valid point and I completely agree. We all have sympathy with the case he outlines and have heard many similar examples throughout our constituencies. This is not just about existing businesses; it is also about people who are looking to get into business—the entrepreneurs and business owners of tomorrow, who will look at this tax and think the risk is too high.
Scott Mann
I appreciate that my hon. Friend represents a rural constituency similar to mine that is made up of small businesses, which are the lifeblood of our rural constituencies. She is laying out a futuristic vision of businesses cobbling together under the same roof. If this part of the Bill were not implemented, all those businesses would be charged retrospectively under a different format. The Bill is supporting our rural economy.
Michelle Donelan
I completely agree. It is true that the Bill will particularly help new models of business. It is also important that the Bill will have retrospective effect. Businesses that have been affected can have the amount owed to them recalculated and backdated.
Alan Mak
Will my hon. Friend join me in welcoming the Valuation Office Agency’s commitment to prioritise and fast-track reviews and recalculations, particularly for small businesses, if the Bill is passed, as I hope it will be? Will she also join me in urging the Minister to ensure that that happens, to help our small businesses across the country, including in my constituency?
Michelle Donelan
Yes. I completely agree. The point was made earlier that it is so important for these businesses to get back the money they are owed as soon as possible, so that they can continue to flourish. These changes will also reinstate small business rate relief for ratepayers who no longer met the conditions for the relief as a direct result of the VOA’s change in practice, and they can apply for that themselves. What will be really important in how successful the Bill proves to be is how much we spread the message out to the local business community about their option to ask for a recalculation and get this money back.
Mary Robinson
My hon. Friend is making such an important point, and it goes to the heart of what these small businesses are doing in our high streets and district centres. We want to support high street shops, which face such tough competition at the moment, and do anything we can do to help them, give them the reassurance they need and enable them to keep more of their hard-earned cash, because we know that, without those shops being successful, we will not have the bubbling and vivacious high streets that we need.
Michelle Donelan
I completely agree. My constituency has four market towns and our high streets have suffered. The Bill sends a message out to local high street business owners and all small businesses that this Government are behind them, supporting them, and recognise that they are the backbone of our economy.
Neil O'Brien
Does my hon. Friend agree that this is a good example of the Government addressing some of the most egregious problems with the business rates system, and that it is a further improvement following the revaluation, which has seen 5% cuts in the business rate bills of shops in the east midlands?
Michelle Donelan
I completely agree. As I said before, the Bill is righting a few wrongs.
Last Friday in my constituency, I met the regional director for the south-west of the Federation of Small Businesses, who estimates that, while the staircase tax has affected around 30,000 businesses, it has actually impacted around 80,000 properties. Sometimes we think too much about the number of businesses and do not think about the number of properties affected. These properties and businesses have been unfairly and illogically punished for sharing facilities such as communal staircases, corridors or even car parking with another business. In fact, Mike Cherry, the chairman of the FSB, said last September that some small business owners were knocking holes in their walls or trying to put staircases on the outside of their premises to try to get around these rules. That is a bizarre and ludicrous situation that we cannot tolerate any longer, so I am delighted that the Bill will rectify it and that we are sorting out a sensible solution.
Andrew Jones
My hon. Friend has made some valuable points about how the Bill will improve the business environment for entrepreneurs. She particularly highlighted start-up businesses. Does she agree that a group that will benefit is those who are seeking to scale up their businesses through extra space to cope with their expansion and business growth? They will now be more energised and empowered to seek that extra space and grow their businesses.
Michelle Donelan
I completely agree. The Bill is also about providing more business confidence and more confidence for entrepreneurs who want to grow their business and develop it, rather than the opposite. It is important to reiterate that small business is the lifeblood of our economy.
Neil O'Brien
Harborough is a place of small businesses and does not have one dominant employer. There is a lot of demand for large buildings which are broken up into much smaller office spaces. Does my hon. Friend agree that that would be much more difficult if we did not address the problems with the staircase tax that we are addressing and the absurdities that she has pointed out?
Michelle Donelan
I completely agree and I thank my hon. Friend for another interesting and to-the-point intervention.
My constituency, as I have said, has four market towns—Chippenham, Corsham, Melksham and Bradford on Avon—and the staircase tax has affected each one of them, as well as our villages. It has impacted on high streets. It is important to remember that there are office spaces above shops and that members of staff go out for lunch in the high street. If they are impacted, there are job losses and if there is no extra recruitment round, those people will not be out for their lunch in the high street. The tax has also affected some of our shops. Our high streets are suffering up and down the country, so we should do everything we possibly can to promote and support them to avoid having dormitory towns.
James Cartlidge (South Suffolk) (Con)
My hon. Friend is making a very good speech. I share her concern on that point. I think Members on both sides of the House are worried about the future of retail in the high street. The key point is that, on every aspect where such taxes are unfair—business rates in many ways are arbitrary and levied on companies without necessarily a reference to their profitability—we have to show that we are listening and making the system fairer.
Michelle Donelan
I completely agree and this is one example showing that the Government are listening and that there is a dialogue with businesses and business groups, which have been instrumental in discussing with the Government the formulation of the Bill. That is essential and we need to foster business confidence, especially with Brexit. Only the other week, the Chief Secretary to the Treasury pointed out that we have the highest internet penetration of the retail market in Europe, so this is a particular problem for the UK.
Trudy Harrison
Does my hon. Friend agree that this will be of particular interest and help to start-up businesses? They often initially occupy a small part of a building as an embryonic enterprise, but as they grow the measure will support them too?
Michelle Donelan
That is an excellent point, which has been a bit neglected in this debate. Start-ups and microbusinesses will benefit in particular from the Bill.
Clause 2 is another measure the Government are implementing to right a wrong. It is about helping to increase our housing stock. As we all know, we have a severe housing shortage in this country, yet thousands of homes are left empty, which is ludicrous.
The Bill will give local authorities the power to charge a 100% council tax premium on empty properties, rather than just the existing 50%. The charge is for homes that have been unoccupied and substantially unfurnished for two years or more. The number of homes that have been vacant for over six months in Chippenham has fallen by 12% since 2010, so one might ask whether the measure is necessary. It is, because we still have 1.16 million households on the social housing list and there is a housing problem, so it is important that we take measures such as this today. Further increasing the premium will, I strongly believe, incentivise owners to sell or rent their properties. I strongly believe that.
I also stress that this is only one action. We must not be under any illusion that the Bill will, in any circumstances, fix our broken housing market—it will not—but the solution has multiple parts and this is one of those answers and one of the measures that the Government are taking.
Alan Mak
I thank my hon. Friend for giving way—she is being very generous. Some of the funds raised by the premium could be used to reduce the council tax imposed on hard-pressed council tax payers, or could be invested in new social housing to help people who do not have a home. Does she agree that those are just two ways that the funds raised could be used to help to correct imbalances in our housing market, both in the south-east, where I am from, and in the midlands, where she is from?
Michelle Donelan
I agree. It is a two-point strategy: it is about the money that is raised and incentivising people to stop leaving those homes empty.
The point about exemptions has been made by other Members, but it is important to labour it, because I do not want my Chippenham constituents to be unduly concerned or worried that they might be penalised by the policy. They will not because it has exemptions for people in the military, for carers and for people who are going into hospital which are designed to help them. If a home is left empty because of probate, the people concerned will be protected. This is not an arbitrary measure—it is smart and fair.
Neil O'Brien
My hon. Friend is listing some sensible exemptions. Does she agree that it is important that we remain localists and do not impose the measure on every council? We should give them the power to make the decision for themselves.
Michelle Donelan
I completely agree and I will come on to deal with that point.
I want to reiterate the point that empty homes attract squatters, which can result in vandalism and antisocial behaviour. That helps to bring down areas and can be upsetting for local residents. Residents often come to my surgery asking, “Why is that property still empty and what can we do about it?” Today, we have an example of what we can do about it, with a measure to incentivise people to use those empty homes.
Scott Mann
I am interested in the point that my hon. Friend the Member for Havant (Alan Mak) made about local authorities ring-fencing some of the money for better use. We have a big problem in the south-west with affordability. Does my hon. Friend the Member for Chippenham (Michelle Donelan) agree that local authorities could consider ring-fencing some of this money so that we can deliver affordable houses for people who live and work in her constituency and in mine?
Michelle Donelan
I completely agree. The housing crisis is one of the biggest challenges that we face in this country, so it is right that local authorities would look to ring-fence funds. I am sure that a number of them appreciate the fact that this is a key issue for their residents and will prioritise this. They are best placed to understand their residents and to make decisions based on the local area, because every area is different.
I want to stress the point that locally people are sitting on properties, waiting for their value to go up. They do not want to rent them out because of the hassle, inconvenience or stress that that can cause. That is a problem because, if they are not selling them, those properties are left empty while people are waiting to get a property. That situation cannot continue. However, I think that the two-year period is fair.
Trudy Harrison
It is simply not fair for homeowners living next door to these properties, whose houses have been affected by damp and other problems resulting from those properties not being properly maintained. That devalues their homes, on which they have spent time and money. They have renovated them, but their pride and joy is being damaged by empty properties next door.
Michelle Donelan
I completely agree. I have said that these properties are more susceptible to vandalism and there is antisocial behaviour around them. It is uncomfortable for neighbours and people in those communities.
The two-year period is fair. It allows homeowners sufficient opportunity to sell the property, rent it out or complete major renovations that might be required. The Bill is an example of the Government supporting localism because local authorities, as has been mentioned by many hon. Members, will still make the decision on whether to apply the premium and the exact rate that is to be charged. They can review the empty housing stock and the housing supply and demand locally, and make an informed decision. That is an example of this Government trusting local authorities.
I am confident that the majority will continue to use that power. In fact, 2017-18 figures show that 291 of the 326 local authorities chose to apply the empty homes premium. In addition, there is scope for them to assess on a case-by-case basis—for example, where a homeowner is struggling to rent out or sell a property or to do the repairs. This is not a punitive measure, but a fair and measured one. The 2013 guidance will still stand, reminding local authorities to take into account the reasons a property is empty. As I have said, this is about protecting rather than penalising owners of homes. This Government do not want to stop or discourage people from getting into the property market and on to the housing ladder; it wants to encourage and facilitate them. That is the very nature and essence of this Bill.
I agree with my hon. Friend the Member for Harrow East (Bob Blackman) that we must be careful that this is not abused. We do not want people to find a loophole whereby they tinker with the property as they approach the two-year marker. I would like to hear the Minister explain how we will address that because it is very difficult to protect those homeowners who are doing the right thing, as opposed to those who are trying to avoid the rules. We need to seriously tackle our housing crisis.
My only ask of the Minister is to review the impact of the increase and to later look at increasing it again. I believe that, to truly incentivise homeowners to rent out or to sell their property, the cost must be quite high, especially in areas of London or other places where the housing market is very high, because people will sit on those houses and their value will go up considerably, month after month, and they can then write off the increase in the empty homes premium if it is not high enough. There is an argument to review it and increase it times five. If someone is doing the right thing and renting the property out, selling it or doing it up in a timely fashion, they will not be punished at all. There is an argument for looking at whether we have gone far enough today and whether in the future we could go further and build on this.
Neil O'Brien
My hon. Friend is making her case with great passion on an issue about which so many people care. Will she join me in congratulating the campaign groups that have worked so hard to put it on the agenda, in particular The Big Issue and its “Fill ’Em Up” campaign and Empty Homes?
Michelle Donelan
I completely agree with my hon. Friend that it is important to recognise the work done by campaign groups and all bodies with a vested interest in the issue. It is not just about urban areas. In fact, Graham Biggs, chief executive of the Rural Services Network, a body representing 143 rural local authorities in England, has said:
“Anything that enables councils to bring empty properties back into use is welcome.”
It is also interesting to discuss this Bill in relation to homelessness. We have an odd situation whereby there are thousands of empty homes in the country but also a dreadful and rising problem of homelessness, although the Government are tackling it. As the chief executive of Shelter has pointed out, addressing the situation is not as simple as swapping or flipping those two elements around, because often homes are in different areas from those with the core homelessness problem.
Alan Mak
Given that my hon. Friend has mentioned homelessness, it is only right that the whole House commends my hon. Friend the Member for Harrow East (Bob Blackman) for promoting the Homelessness Reduction Act 2017. Does my hon. Friend the Member for Chippenham (Michelle Donelan) agree that that Act’s powers could be used together with the powers in this Bill to tackle homelessness from many directions?
Mary Robinson
Following on from the point made by my hon. Friend the Member for Havant (Alan Mak), I also congratulate my hon. Friend the Member for Harrow East (Bob Blackman). We really need to concentrate on the value that we can put into this market, which can be filled by this Bill, and ensure that people who need those homes are given them in a way that suits them and fulfils their aspirations. The Government have announced £28 million of funding for the Housing First project, some of which will go to a pilot scheme in Manchester. Does my hon. Friend the Member for Chippenham (Michelle Donelan) agree that it will be interesting to see how the Mayor of Manchester approaches the issue and whether he will use that to fill those homes and to get homeless people into them?
Michelle Donelan
I completely agree that it will be very interesting to watch the actions of the Mayor of Manchester and the impact of his work, and to look at other cities around the country.
Neil O'Brien
I entirely agree with my hon. Friend’s point about the mismatch between empty properties and the homeless, but does she agree with me and the estimate by The Big Issue that in some parts of the country there are 10 empty properties for every homeless family, so surely the Bill can play an important role, along with other measures such as Housing First, in addressing the problem of homelessness?
Michelle Donelan
Yes, it will have an impact. It is one of a number of ingredients in a recipe for tackling homelessness, an issue on which my hon. Friend the Member for Harrow East has led considerably and on which I worked with him on the Homelessness Reduction Act. We also have the homelessness taskforce and Housing First. All of those together will help to tackle homelessness.
I want to air caution, however, because Opposition Members have talked frequently about seizing empty properties and giving them to the homeless. That is not a solution. The answer is about incentivising the owners of those empty properties and encouraging them to put them into the housing stock, not seizing them. We are not a Government who want to downgrade or derail property rights; we are a Government who want to promote and protect property rights, and also ensure that we can get that housing stock up and tackle the housing crisis.
Huw Merriman (Bexhill and Battle) (Con)
On incentivisation, does my hon. Friend agree that, when it comes to unoccupied properties in central London, some investment companies from overseas could just pay an extra amount? Does she think that the time is right to start looking at prohibiting foreign companies from purchasing investment in this country? Perhaps that is a radical step for me as a Conservative, but one wonders whether the time has come at least to have that conversation.
Michelle Donelan
I am a fan of localism and such decision making could be done on a local level, but I am not sure that I would be as radical as my hon. Friend. I think that the answer lies in increasing the premium rate to a point that makes it unaffordable not to sell the property or to rent it out. I would be interested to hear whether the Government will be commissioning any reviews or studies of the implementation of the measure and looking at potentially raising it further in the future, and whether this is the first step.
Bob Blackman
Does my hon. Friend agree that one of the issues is the starting point at which any multiples would apply? Obviously, property prices in London would start at £1 million-plus, so multiples of that sum, as premiums, would be extremely penal and would therefore lead to people thinking twice about leaving a property unoccupied.
Michelle Donelan
I completely agree. That is exactly what we need people to do: we need them to think twice about whether it is a sensible decision for their pocket, and then the issue can be resolved for our country.
Neil O'Brien
Further to the question asked by my hon. Friend the Member for Bexhill and Battle (Huw Merriman) about the role that corporately owned empty properties might be playing in the problem, does my hon. Friend the Member for Chippenham (Michelle Donelan) agree that the situation might be more severe than we think, given that previous measures against it, such as the annual tax on enveloped dwellings, brought in by this Government, have raised far more than we expected because there were more of them than we thought?
Michelle Donelan
My hon. Friend makes yet another very interesting point. He has made several interesting points and is very informed and articulate. I thank him for his contribution.
In conclusion, this Bill will be welcomed by my constituents in the Chippenham area, because it seeks to right two ludicrous wrongs. It seeks to support local businesses and to boost our housing stock. It will help our job creators and help to tackle our broken housing market. I urge the Minister to explore further the opportunity of increasing the empty housing premium in the future and I hope that this will act as a first step. I look forward to supporting the Bill tonight.
Andrew Gwynne (Denton and Reddish) (Lab)
I wish you a happy St George’s day, Madam Deputy Speaker, on England’s national day. To my dad, if he is listening, I say happy birthday.
So riveting and compelling were the opening speeches from both Front Benchers on this three-clause Bill—one of which is the short title—that the Benches filled and the interventions flowed. I thank the hon. Member for Harrow East (Bob Blackman) who has been right in his approach to the measures in the Bill, especially on the financial penalties for local authorities and the need for due compensation. We can examine that in more detail in Committee. As for the hon. Members for Walsall North (Eddie Hughes) and for Chippenham (Michelle Donelan), all I can say is that their oratorical skills are so fine-tuned that they were able to use more words in their speeches than the Bill itself contains. I congratulate them on their contributions.
Notwithstanding the issues raised in detail by the shadow Minister, my hon. Friend the Member for Oldham West and Royton (Jim McMahon)—including supporting the high street, tackling empty homes and seeking assurances on the baseline funding in the future—Labour will support the Bill tonight as it tries to iron out the current faults in the system. As my hon. Friend said, there is much more to be done. We would like councils to have more powers in both business support and tackling the housing crisis, but in the very narrow terms of the Bill, the Opposition will not seek to divide the House on Second Reading.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I thank the hon. Members for Denton and Reddish (Andrew Gwynne) and for Oldham West and Royton (Jim McMahon) for their constructive comments on the Bill, and I will address some of their specific points shortly. We have had an incredibly interesting and entertaining debate, and one of the more succinct that I have heard in my time at the Dispatch Box. It has been extremely helpful to hear Members’ views today, ahead of further scrutiny of the Bill in Committee. It was great to hear some thoughts on what we can do to make progress on this issue.
The Bill will take forward two specific, short and important measures to promote fairness. It will provide fairness for hard-pressed businesses facing an unjustified tax hike, backdated where necessary. Those businesses have already paid their fair share, and deserve our support rather than being burdened by sudden and unreasonable demands. The Bill will deliver the Government’s goal of supporting those businesses, by restoring accepted and understood practice in the business rates system.
The Bill will also help those seeking a place to call home. It cannot be right that so many in our society are struggling to find somewhere to live while properties lie empty across the country.
Scott Mann
My hon. Friend is aware of the challenges that we face in rural areas, especially in Cornwall, where we welcome the vacant homes premium, but how will local authorities be able to differentiate holiday homes and vacant properties? Some holiday lets are not let for a long period of the year.
Rishi Sunak
My hon. Friend makes an excellent point and the issue of housing in rural areas was also raised by my hon. Friend the Member for Copeland (Trudy Harrison). He is right to highlight the issue. Legislation makes a distinction between long-term empty homes, which have been unfurnished and unoccupied for two years—those that the Bill seeks to address—and homes that are considered to be second homes, which are at least partially furnished and occupied on occasion. My hon. Friend the Member for North Cornwall (Scott Mann) will know that the coalition Government ended the presumption of a council tax discount for such second homes and levied a stamp duty surcharge on them. I will return to those measures when I respond to some of the other points raised.
My hon. Friend the Minister for Housing deserves enormous credit for the energy with which he has approached his new portfolio to make good on the Government’s commitment to fix our broken housing market, and the Bill is a small part of the process of doing that. Since 2010, we have introduced measures, including the £7 billion new homes bonus scheme, that have reduced the number of properties empty in England for six months or longer by a third, as we have heard tonight. But there is more to do, and the Bill will allow councils to levy an additional 50% premium on long-term empty homes, leaving the discretion on that decision with local authorities for all the reasons hon. Members have mentioned.
I pay tribute to my hon. Friend the Member for Harrow East (Bob Blackman), who has incredible experience of local government and brings it to bear on these matters. I join him in paying tribute to the hon. Member for Sheffield South East (Mr Betts), who we were all happy to see back in his place tonight. My hon. Friend raised the issue of pre-legislative scrutiny of the Bill and I am grateful for his comments. I also put on record my thanks for the work of the Housing, Communities and Local Government Committee in engaging extensively me with and my officials on the various technical issues raised. In particular, the Committee was right to pick up on the issue of voids and whether the Bill would capture the definition accurately. As my hon. Friend will have seen, the Bill takes into account the question that the Committee raised and we have worked with experts in the sector to tweak the definition. I think that will address the Committee’s concerns.
My hon. Friend rightly highlighted the issue of small businesses and cash flow, and urged us to press on as fast as we can. That is what we are trying to do. In response to letters from the Committee questioning the timing of the pre-legislative scrutiny, I said—and I repeat to the House tonight—that that is why we moved as quickly as we did. Instead of the normal process of 12 weeks, we had a slightly shorter process of eight weeks for that scrutiny, so that we could get the Bill on to the statute book as soon as possible and bring some relief to the small businesses facing cash-flow issues.
I turn to the oratorical tour de force from my hon. Friend the Member for Walsall North (Eddie Hughes). He said that the Bill is not sexy, but on the contrary these are the matters that keep local government Ministers, and the hon. Member for Oldham West and Royton, up at night. My hon. Friend will be pleased to know that we are focused on the detail. He was right to highlight to all hon. Members the particular delights of Beechdale, which they will all want to join me in visiting at the earliest opportunity, not least to shop the delights of Rob Mullett Butchers and the grocery store run by Jane and Phil. My hon. Friend also made a broader point about the importance of regenerating our urban centres, which was picked up by my hon. Friends the Members for Cheadle (Mary Robinson) and for South Suffolk (James Cartlidge). I can assure my hon. Friends that the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), who has responsibility for high streets, will have listened carefully to everything they said and will use their remarks as he develops policy to benefit our high streets around the country.
My hon. Friend the Member for Walsall North asked specifically about exemptions. I am pleased to tell him that council tax exemptions are already in place for people living in service accommodation or for those in the armed forces who are serving elsewhere and whose homes are therefore empty. Indeed, there are specific statutory exemptions for properties left empty for a purpose, for example when a person goes into care. There are also discretionary discounts for houses that are empty because of special circumstances such as hardship, fire or flooding, and I hope that addresses Members’ concerns on that point. My hon. Friend also kindly paid tribute to the drafting of the Bill, for which I cannot take enormous credit—I pay tribute to the officials, the ratings agencies and other experts who helped to draft the legislation to make it ready for today.
My hon. Friend the Member for Chippenham (Michelle Donelan) outlined yet again why she is a strong champion of small business in her constituency and around the country. She talked about entrepreneurship, and it is exactly right that our tax system and our policy supports the entrepreneurs not just of today, but of tomorrow. Supported by my hon. Friend the Member for Havant (Alan Mak), she, as ever, made a compelling case for why this Government and this measure will continue to support entrepreneurship across our nation.
I turn to some of the questions raised by the hon. Member for Oldham West and Royton. He asked specifically about the amount that will be raised from this measure. The stats are that 60,898 properties were subject to the measure in the last year, and 291 of 326 local authorities—90%—levied the premium. All but three of those levied the full 50%. That raised about £38.7 million, so an additional 50% would obviously double that. Just so that he has the full picture, if all local authorities used the full premium, that would equate to about £42 million and therefore, in total, £84 million.
Huw Merriman
Does the Minister agree that the true test of this policy will be if council tax amounts actually go down? That will mean that individuals are not behaving in the manner that we just described and will be paying less, thus freeing up the property for those who need it.
Rishi Sunak
My hon. Friend makes an excellent point: that should be the long-term test of this policy. It is there to provide an incentive for individuals to bring those homes back into use and indeed, that is what we have seen. Empty properties overall have fallen in the last few years from 300,000 to 200,000, but in areas that are specifically subject to this levy, we have seen a 9% reduction in long-term empty homes since the measure was introduced. Hopefully, we will keep seeing that rate of reduction increase to eliminate as many empty homes as possible. My hon. Friend also raised the topic of foreign ownership. I am pleased to tell him that the Minister for Housing heard what he said and is aware of the issues. In his new portfolio, he is looking into that matter.
My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), who is not in his place, touched on the importance of open spaces. Indeed, the new national planning framework particularly encourages increasing density where possible so that we can do exactly that and preserve our wonderful open spaces. My hon. Friend the Member for Harborough (Neil O’Brien) made so many excellent and insightful points that I do not have time to review them all, but I join him in paying tribute to the campaign groups that have brought the Bill about.
Bob Blackman
My hon. Friend is giving good answers to many of the questions, but there is one outstanding question on the staircase tax. Because individual businesses are going to have to apply for a revaluation, there is a risk that they may end up paying more money if they make an application for revaluation and the rateable value increases. Will he look sympathetically at a view that people should not suffer as a result of applying for the revaluation? Otherwise, businesses may choose to say, “This will be too dangerous and risky to our cash flow.”
Rishi Sunak
My hon. Friend makes a very good point. I am pleased to tell him that when businesses that have their valuation changed on the historical 2010 list come to appeal that decision, they will have the choice of seeing whether to take that appeal forward, once the Valuation Office Agency engages with them. If, for whatever reason, it decided that there were some other measure that it needed to change that caused an increase in the valuation, they could then choose not to pursue that matter, so they would not suffer from any increased rating. Of course, the current rating list is dynamic, as he will know. Changes good and bad will be relevant for the life of that list, as is the normal course of business.
Lastly, the hon. Member for Oldham West and Royton raised the issue of the Government’s broader support for business rates and for business across this country. He will know that the Government stand on the side of small business. The combination of measures announced in the last Budget and subsequently to the tune of £10 billion to help businesses up and down the country facing the revaluation included bringing forward the indexation to CPI; extending the £1,000 pubs discount, which I know many hon. Members across the House welcomed; doubling small business rate relief; and providing a £300 million discretionary fund for local authorities to apply in cases where there was particularly difficulty.
In conclusion, this important Bill will deliver widely supported measures to tackle an unfair and unintended rates increase for certain businesses and support the Government’s efforts to bring empty homes back into use. I appreciate all the comments from hon. Members this evening—no doubt we will return to some of them in Committee—but I am glad that we can all agree that the overall aims of the Bill and the positive impact that it will have for businesses and families seeking to call a place home should be welcomed. I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 3 May 2018.
(3) The Public Bill Committee shall have leave to sit twice on the first day in which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Kelly Tolhurst.)
Question agreed to.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52 (1)(a)),
That, for the purposes of any Act resulting from the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill, it is expedient to authorise:
(1) the payment of sums to the Secretary of State in respect of non-domestic rating, and
(2) the payment of those sums into the Consolidated Fund.—(Kelly Tolhurst.)
Question agreed to.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Tuesday 1st May 2018
(6 years, 6 months ago)
Public Bill CommitteesRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 May 2018 - (1 May 2018)
The Chair
Before we begin line-by-line consideration, I have a couple of preliminary announcements. Please ensure that all electronic devices are on silent. We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication. I call the Minister to move the programme motion standing in his name, which was agreed by the Programming Sub-Committee yesterday.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 1 May) meet—
(a) at 2.00 pm on Tuesday 1 May;
(b) at 11.30 am and 2.00 pm on Thursday 3 May;
(2) the proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 3 May.—(Rishi Sunak.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Rishi Sunak.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room.
We will now begin line-by-line consideration of the Bill. No amendments have been tabled, so we will proceed by considering in turn whether each clause should stand part of the Bill. There will be an opportunity to debate each clause. I suggest that the Minister should start the debate on each clause. Other Members will then be free to catch my eye and speak to that clause. A Member may speak more than once in a single debate. I hope that explanation is helpful.
Clause 1
Hereditaments occupied or owned by the same person
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Wilson. I thank all Committee members for being here promptly to discuss this technical but important Bill, which I hope will not detain us for too long.
Clause 1 delivers on the commitment made by the Chancellor at last year’s autumn Budget to address what became known as the staircase tax. The clause will restore the previous practice of the Valuation Office Agency from before the Supreme Court decision in respect of contiguous properties in the same occupation or ownership. We discussed on Second Reading the background to why the measure is necessary, and I have provided more detail about the measure in correspondence with the Select Committee on Housing, Communities and Local Government. I will not repeat that background, other than by saying that the clause is welcomed by the rating surveyor profession and supported by the Federation of Small Businesses.
The clause amends section 64 of the Local Government Finance Act 1988 to provide that, in a defined set of circumstances, two or more hereditaments shall be treated as one. Those circumstances, which are described in new subsections (3ZA) and (3ZB) of section 64, are: where the hereditaments are occupied by the same person or, if they are empty, owned by the same person; where the hereditaments are contiguous—that is defined later in the clause, and I will come to it shortly—and, in respect of occupied hereditaments, where none is used for a wholly different purpose. That will restore the rule that applied before the Supreme Court decision that contiguous hereditaments are assessed as one.
In preparing the clause, we had to ensure that we replicated previous practice in respect of the meaning of “contiguous”. The clause therefore introduces new subsection (3ZD), which defines what is contiguous for these purposes. New subsection (3ZD)(a) provides that
“two hereditaments are contiguous if…some or all of a wall, fence or other means of enclosure of one hereditament forms all or part of a wall, fence or other means of enclosure of the other hereditament”.
That ensures, for example, that two adjacent rooms on the same side of a common corridor separated by a wall are contiguous, but that two rooms on opposite sides of a common corridor are not. It also ensures that two buildings on the same side of a road that share a common party wall are contiguous, but that two buildings on opposite sides of a street or common access road are not. Importantly, that replicates the previous accepted practice of the VOA.
New subsection (3ZD)(b) provides that hereditaments on consecutive storeys of a building are contiguous if
“some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other”.
That ensures that consecutive storeys of a building are contiguous but excludes non-consecutive storeys where the intervening storey is in a different occupation or ownership. Again, that replicates the previous practice of the VOA.
We believe that this approach ensures that hereditaments would still be contiguous, even if a wall or floor plate separating the hereditaments contained a space such as a service void occupied by the landlord. However, respondents to the consultation and the Select Committee were less certain on that point. We therefore decided to put that beyond doubt by adding the words at the end of subsection (3ZD) that make it clear that hereditaments
“are not prevented from being contiguous…merely because there is a space”
such as a service void between them in a different occupation or ownership.
Finally, new subsection (3ZC) ensures that chains of contiguous hereditaments in the same occupation or ownership will still meet the tests. For example, it will ensure that floors 3, 4 and 5 of a building in the same occupation are treated as contiguous and as one hereditament, even though floors 3 and 5 are not themselves contiguous.
The change in the VOA’s practice following the Supreme Court decision affected the 2010 rating list as well as the current 2017 list. That has led in some cases to sudden and dramatic backdated rate demands, which have been of particular concern to the estimated 1,000 small businesses that, as a result of the decision, have lost the generous small business rate relief they rely on. Clause 1(2) therefore ensures that the measure applies retrospectively to 1 April 2010 in support of affected ratepayers.
That is why it is so important that the Bill does not go beyond the objective of restoring the previous practice that applied. I am pleased to say that, by working with organisations such as the Rating Surveyors Association, we are confident that we have met that objective, which the Select Committee confirmed in its report on the Bill.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Wilson. I repeat my thanks to the Minister for making the effort to meet before the Committee to go through some of the technicalities of the Bill. That will save the Committee from a headache. However, there are still some questions outstanding, including about the loss of income to local authorities. The autumn Budget book said:
“Local government will be fully compensated for the loss of income as a result of these measures.”
That was stated by the Chancellor, but it is not what is being offered today. Local authorities are being told that they will not be compensated because in effect they are in no worse a position had the High Court ruling not been made. That point was raised by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee, and we know from his subsequent contributions that the Select Committee continues to have those concerns.
Nor do we know yet what the impact will be across different local authorities, because that information has yet to be provided. We have not been provided with data to understand the local authority-by-local authority impact, so we do not know, for instance, how many are caught in 100% rate retention schemes, where they will have to pay costs. Nor do we know whether there are particular concentrations of properties in local authorities or whether they are spread evenly throughout the country, where such an impact would be marginal. We should endeavour not just to make legislation that we believe to be in the public interest—of course, that is important—but to make good legislation, with a solid, tested evidence base and with any necessary questions asked at the appropriate time. I would say now is the appropriate time to ask such questions. Let us see the detail on the local authority-by-local authority impact, particularly as the Government do not seem to be honouring the commitment they made in the autumn Budget.
The other, broader point—I will be careful not to stray too far from the Bill—is that the Government have taken into account what the business community told them and the Bill reflects that. I welcome that. The Government have been flexible and considered the impact of unintended consequences, which is a measure of good government. It is not a measure of bad government that could be perceived as, for instance, a U-turn. I recognise that our politics sometimes supports that type of language. In that context, I find it difficult to understand why other concerns raised following the revaluation and technical fall-outs of the business rate system have not been taken into account, such as the impact on cash machines in convenience stores.
In my town of Royton, the last bank is due to close. It will be the sixth bank to close in the town centre. The convenience store stepped up and provided a cash machine, so that people in the town could access money to do their shopping and, of course, support the market on the precinct, which relies heavily on cash transactions. A cash machine in the town is very important, but the turnover of that cash machine now contributes to the rates liability of the premises. A convenience store that would previously have been under the small business rates relief threshold, and would probably not be paying business rates at all, will in some situations now pay business rates because the turnover of the cash machine takes it over the threshold.
Good government means taking into account the impact of that and recognising that if convenience stores are stepping up when the banks are pulling out of towns, they ought to be supported, not be at a financial disadvantage as a result. That is just one example, but there are others that have been raised by the business community, the Federation of Small Businesses and the Association of Convenience Stores. We ought to reflect on that.
I would welcome some detail on that, even if provided at a late stage, after Committee, and I know that the Chair of the Select Committee would too. Many of these issues are not politically contentious—that is the spirit in which we made our previous offer and in which we are working today. There is broad support for them in the community, and we ought to work together to try to see them through. There were a number of items in the Local Government Finance Bill, which fell when the election was called, that need to be progressed, because local government is asking for them to be progressed. We ought to get together, see which of those elements have cross-party support and take them forward sooner rather than later.
Rishi Sunak
Let me put on record my thanks to the hon. Gentleman for, as ever, the constructive way in which he approaches our discussions on this and other measures.
To turn to his first point on compensation for local authorities and what was said in the Budget document of last year, the reference to compensation in that document specifically related to the switch to the consumer prices index in business rates indexation and the extension of the pubs relief scheme. I fully appreciate that the document could have been clearer on that point. As a result, my Department issued a letter to all local authorities two days after the Budget to make it clear that local government would not be compensated for this specific tax measure. As we have previously reiterated, we consider those extra revenues to be a windfall that came as a result of a Supreme Court decision.
The new legislation will ensure that the position is restored to where we were beforehand, so there should be no net loss to local authorities. That said, the hon. Gentleman raised the issue of rates retention. We are aware of his point—that under the rates retention scheme, some local authorities may see a small impact on their overall retained business rates. That would potentially occur in pilot areas, where the percentage of rates retained locally is different in the year that the refund will be paid, compared with the year in which the authority first received the windfall from the Supreme Court decision. We have previously said that it is very hard, if not impossible, for us in the Department to quantify that impact, but officials believe that it is small. That said, we are considering the points made in the submission by London Councils and the Greater London Assembly on that issue.
On the broader support for businesses through the business rate scheme, I am delighted that hon. Gentleman welcomes our support of small business. This is one measure, but there are others. I point to the Budget last year and the year before that, where we doubled small business rate relief, which was widely welcomed by businesses, including the FSB. We took almost 600,000 smaller business out of rate relief. In addition, there was a £435 million package to target ratepayers who face the steepest bills as a result of the revaluation. That included something that was warmly welcomed in my constituency and I am sure many others: the £1,000 pub discount voucher, which has also been taken up.
Lastly, we brought forward by one year the indexation of business rates from the retail prices index to the consumer prices index, which is worth some £2.3 billion over five years. Hopefully, the hon. Gentleman will agree that that shows strong support for small business. Another measure that the FSB has welcomed, and which was part of the Local Government Finance Bill that fell at the last election, was business rates relief for plant nurseries—a measure that was also the result of a Supreme Court decision that changed settled practice and which had cross-party support. He will be aware that we recently laid a written ministerial statement recommitting the Government to legislate to reverse that decision. Indeed, that decision will be made retrospectively, so that plant nurseries will be exempt from business rates and treated as agricultural property. I look forward to working with him on that, and hopefully getting his support when the time comes.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Higher amount for long-term empty dwellings
Question proposed, That the clause stand part of the Bill.
Rishi Sunak
As we have discussed in the past, our housing market is not working as well as we would like. Young people are struggling to get on the property ladder, and to enjoy the same opportunities as their parents and grandparents. Today, the average price of a house in England is almost eight times the average income, compared with four times the average income in 1999.
The Government are committed to boosting housing supply to ensure that hardworking people have a secure place to call home. Our reforms put us on track for an average of 300,000 homes to be delivered per year by the mid-2020s. Although building new homes is undoubtedly a fundamental part of fixing a dysfunctional market, we must also make more use of the our existing stock. It cannot be right that while many are waiting for a house to call home, thousands of properties stand empty, some for years. Homes left empty for the long term can be a blight on a neighbourhood, as well as the site of crime and antisocial behaviour.
Scott Mann (North Cornwall) (Con)
I have spoken to the Minister about this several times, and I know he understands the challenges we face in Cornwall with second home ownership and vacant properties. How will the Bill differentiate a second home and a vacant home?
Rishi Sunak
My hon. Friend has raised second home ownership in his rural constituency many times with me and other colleagues, and he is right to do so. Rural areas face challenges with second home ownership—coming from a rural constituency myself, I fully sympathise with some of his points.
Current legislation makes a distinction between second homes and empty homes. We are considering long-term empty homes, which are defined as homes which are “substantially unfurnished” and have been unoccupied for two years. Second homes are covered by a different part of council tax legislation, and the Government previously removed the necessity for local authorities to charge a discount on council tax. They are now allowed to charge the full amount. My hon. Friend will be aware that the Department is considering the treatment of second homes and business rates—he and other colleagues have asked me whether it is appropriate for some second home owners registered for business rates to benefit from small business rate relief and therefore pay no taxes, and whether our legislation captures fair use of that provision correctly. I am currently investigating that.
Before 2013, councils could not collect council tax from properties that had been empty for up to six months. Since then, we have ensured that councils can charge the full rate of council tax on such properties. That same year we enabled local authorities to charge a council tax premium of up to 50% on long-term empty homes. That power has been taken up by nearly 90% of councils, all but three of which applied the full 50% premium in 2017. The number of long-term empty properties subject to a premium has fallen by 9% among those councils that have used the power every year since 2013.
There are carrots as well as sticks. The new homes bonus scheme gives local authorities the same financial reward for bringing an empty home into use as for building a new one, and the Government have allocated £7 billion in new homes bonus payments to local authorities since 2011. Following those interventions, the number of properties left empty for six months or more has reduced by a third since 2010, from 300,000 to just over 200,000. The Bill goes even further, and doubling the cap on the empty homes premium will allow local authorities to strengthen the incentive to bring empty homes back into use.
Different areas will have different housing needs and different numbers of long-term empty homes. It is therefore right that decisions on whether to apply a premium and the exact rates to be charged are taken at local level as before. Councils are acutely aware of the needs and demands of their areas. We recognise that local authorities will want to reflect carefully on the local housing market in deciding whether to issue a determination: for example where a homeowner is struggling to rent or sell a property in a challenging market. We are clear that the premium should not be used to penalise owners of homes that are genuinely on the market for sale or rent. We published guidance to that effect in 2013, reminding local authorities to take into account the reasons why a property is empty.
Hon. Members may finally wish to note that this provision would not bring any additional properties within scope of a premium. Only properties that could have been liable might be affected by the new higher premium.
Jim McMahon
The Labour party supports the Bill, but our manifesto suggested going further. Rather than a 200% premium, there would be a 300% premium and consideration of bringing the empty period to a year. There is a reason for that: the housing markets across the country are very different. The Bill will not address the problem of the concentration of empty homes in London. Figures provided by the House of Commons Library show that 20% of City of London properties are empty. In Westminster and in Kensington and Chelsea, one in 10 properties are empty.
Such properties are owned by people who think nothing of paying twice the amount of council tax that a usual resident does because they have the financial means to pay it without that having an impact on their pocket. I am not sure that this measure goes anywhere near where it needs to go to address the region of the country with the largest housing demand. We know about the housing pressures in London and that many of the properties are held by property investors, a number of which are foreign-based. The measure will not address that, and the Government have not made a determined effort to address it.
It is bad enough that properties that have been in the community for some time are being bought up, but it is a scandal that brand-new properties—whole tower blocks in some cases—are built, but in the evening there are no lights on because not many people live there. They are built but held as investments with no intention of people living there. The Government need to think about what financial measures they can use to encourage owners of properties in that very particular market to bring them back into use. We build houses for people to live in, not for wealthy institutions to hold with no intention of anybody ever living in the property.
In some housing markets—we experience this in the north of England—empty homes are the result of a broken housing market. The Labour Government introduced the housing market renewal project to address a fundamentally broken housing market in which there was no latent demand from local people to buy the properties, and those who were able to buy a property did not want to live in the areas where properties were empty. When the housing market renewal scheme was cancelled in 2010, the Government turned their back on those areas.
Some areas have been brought back into use, and many local authorities are introducing innovative schemes. In Liverpool and Stoke, local authorities are selling empty properties for £1 as a way to encourage people to get on to the housing ladder. We know from reports that the people who have benefited respect the schemes. The properties would not have been on the housing market had it not been for those schemes, so it is a double win. The initiative enables empty properties to be brought back into use and gives somebody the chance to get on the housing ladder when in other circumstances they would not be able to afford to do so.
In other areas with similar housing characteristics, a number of properties were earmarked for demolition under housing market renewal—the properties were purchased and the windows boarded up—but the Government removed the money in 2010. The boards came off the windows and the properties were sold to private landlords. Taxpayers are paying through the housing benefit bill for what is generally substandard accommodation in areas with a broken housing market, and are doing so for properties that generally do not meet the decent homes standard. In Greater Manchester, 40% to 50% of the £350 million a year we pay in housing benefit to private landlords is for properties that do not meet a decent standard.
The country could use that money better to provide decent, safe properties with good solid tenures where people enjoy living, in areas where there is a high-quality environment and the roads are safe, and where play areas provide a safe place for children to play, not just terraced streets that were built to support mill workers. Now that the mills have closed, those houses are just not desirable for many people. The Government need to take a broader view of how empty homes affect different parts of the country, and they must bring forward more active proposals for London, given how wealthy investors are holding properties. We also need a plan for areas where the housing market is weak. These measures will go some way to addressing that problem, but they will not address the inherent weakness in the local housing market where the owner-occupier element is weak.
We need a genuinely joined-up plan. This is not about a sticking plaster to support local authorities that have had their budgets cut dramatically, or about raising tax; this is about bringing empty homes back into use. The Government’s response, particularly since the empty homes fund was deleted, seems to be: “Well, if local authorities bring homes back into use, they will be the beneficiaries because they will get a new homes bonus payment”. However, the new homes bonus payment is retrospective, and we would be expecting local authorities to find money from their base revenue budget to bring empty homes back into use at a time when many of them cannot afford to pay for social care and children’s safeguarding. The Government need to come forward with a plan and funding to support local authorities to bring empty homes back into use. Taxing people who own those properties is one element of that, but in some cases direct grant funding will be needed to bring accommodation back into use.
Rishi Sunak
I thank the hon. Gentleman as always for his thoughtful comments. The two substantive points he mentioned were whether the level of the premium is too low at 100%, and whether two years is too long as a measure for an empty property. On whether the premium is too low, we need to strike a careful balance between providing a strong incentive for bringing empty homes back into use, and not disproportionately penalising homeowners who may be struggling to sell or rent out a property or to complete any major renovations that might be required. We believe that doubling the premium cap strikes the right balance. Scotland and Wales also have a premium of 100%, but I understand the hon. Gentleman’s point.
On whether the qualifying period for an empty home should be less than two years, it is worth noting—I know this from the correspondence that the Department receives—that some owners of empty homes face circumstances that make it difficult for them to bring their empty homes back into use quickly. That could be a renovation or the time taken to put something on the market with a difficult set of conditions. There may also be delays as a result of the probate process, for example. Again, I think the two-year period strikes the right balance.
Jim McMahon
Any scheme, even with a 12-month qualifying period, can have exemptions that take into account individual circumstances. There is already a scheme to deal with properties that are under probate, which is clearly outside the control of the executors who are trying to dispose of it. That can be managed. However, a number of landlords own properties and have no intention of letting them out. They will simply flip them over into different names to avoid paying the tax, and a more concerted effort to deal with such issues is important. The truth is that it would be much more difficult for people to keep flipping the property if we had a 12-month period—they can currently do it every 24 months.
Rishi Sunak
The hon. Gentleman is right that there are exemptions. For example, there is a six-month council tax free period for probate, and then the clocks starts. The problem is trying to define ex ante the individual circumstances in which it might be fair to have a period of more than one year. That is why we believe two years is the right amount of time—it provides flexibility but also serves somewhat as an incentive to bring homes back into use—but I understand his point, and why people would take a different view on what the right period should be.
On the broader strategy for empty homes and local authorities, I agree with the hon. Gentleman that there are examples of individual local authorities coming up with good, innovative ways to tackle to problem of empty homes. He mentioned some, but I am aware of examples in Bolton and Kent where local authorities have come up with successful ideas, whether loans, discounts or other schemes, to bring empty homes back into use. That is why our approach is the right one. He might disagree with the quantum of funding but, at £7 billion, the new homes bonus is substantial and acts as an incentive to local authorities to come up with schemes to bring homes back into use. They will be financial rewarded—I appreciate that that will be after the fact, but that is as it should be—for success in bringing empty homes back into use. That serves as a carrot, which is the right approach. Rather than the Government telling each local authority exactly what to do, we provide a framework for rewarding good behaviour and let individual local authorities innovate. Hopefully, increasing the premium today will serve only to improve the situation.
The hon. Gentleman is right to point out that, in the long term, we should not rely on that as a source of funding. We would rather not have empty homes, and want to ensure that everybody who wants a home has one to live in. The fewer empty homes there are, the better.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Extent, interpretation and short title
Question proposed, That the clause stand part of the Bill.
Rishi Sunak
This is a standard clause on the jurisdictional application of the Bill. My officials are in contact with their counterparts in the Welsh Government, who are considering whether to request that we extend the Bill to Wales. As soon as we hear from them, I will inform the Committee and the House and adjust as required.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Bill to be reported, without amendment.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Tuesday 15th May 2018
(6 years, 6 months ago)
Commons ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 May 2018 - (1 May 2018)
Madam Deputy Speaker (Dame Rosie Winterton)
As indicated on the Order Paper, the Speaker has certified that the Bill relates exclusively to England on matters within devolved legislative competence. As the Bill has not been amended, there is no change to that certification.
Under Standing Order No. 83M, a consent motion is required for the Bill to proceed. It has been tabled and is available in the Vote Office. Does the Minister intend to move the consent motion?
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England) (Standing Order No. 83M).
[Dame Rosie Winterton in the Chair]
The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Order. Will Members leaving the Chamber do so quietly?
David Linden (Glasgow East) (SNP)
I beg to move, That the Committee do sit in private.
The Second Deputy Chairman
I am afraid that that the hon. Gentleman cannot move that in this Committee.
I remind Members that if there is a Division, only Members representing constituencies in England may vote on the consent motion.
Motion made and Question proposed,
That the Committee consents to the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill.—(Rishi Sunak).
Pete Wishart (Perth and North Perthshire) (SNP)
Thank you ever so much for calling me to speak, Dame Rosie.
Is it not good to be back in the environs of the English Parliament, with all its tradition, with all its heritage and with all its history? We are at last back in the English Parliament, and is it not great that we are here today? It does not come any more important than the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill. These are critical English-only issues, dealing with important hereditaments occupied or owned by the same person—in England.
Although it is good to be back in the English Parliament, it is nothing short of a crime that this English Parliament has not met for weeks and months, meaning that English Members have not had their opportunity to meet in this English Parliament to discuss and debate critical English-only measures, which were certified as English-only in these previous Bills.
David Linden (Glasgow East) (SNP)
My hon. Friend is making a very powerful point. The Government talk on a regular basis about how Parliament is taking back control. Does he feel that that has been represented by the fact that this is the first time that the House has had the opportunity to take back control?
Pete Wishart
Let me say quite candidly to my hon. Friend that what we are waiting for is the moment when my English colleagues spring into action with this opportunity—perhaps this one-off opportunity—to meet in their English Parliament and to discuss the weighty issues of state that require that English-only attention.
Sammy Wilson (East Antrim) (DUP)
If the hon. Gentleman is so concerned about the absence of any opportunities for English Members to speak on English issues, why is he taking up all the time?
Pete Wishart
Let me say to the right hon. Gentleman that he may not take this seriously, and Conservative Members may not take this seriously, but I understand the importance and the significance of this English Parliament sitting in this House of Commons and I will not deride that opportunity. I stand here inviting English Members to get to their feet and to explain passionately and eloquently why they need this opportunity to debate these English-only Bills.
English Members have every right to be outraged that they have not previously had these opportunities. That is why, given that they have this opportunity today, I am fully expecting them to spring to their feet to ensure that this Parliament is properly respected. I will tell you something, Dame Rosie: Scottish National party Members fully respect the right of English Members to speak in their Parliament. We expect to hear speeches full of passion from hon. Members who have this fantastic opportunity in front of them, because we know that the English voice must be heard. It is a voice that demands its right, and today all of England will be hearing from its proud tribunes as they get to their feet in vast numbers to articulately and compellingly put that English voice. I remember why we have this Parliament, and I remember those speeches when we changed Standing Orders so that we could secure this Parliament. Can you remember, Dame Rosie, all these perfidious Scottish Members of Parliament coming down to this Parliament to make sure that that voice was going to be overridden by Caledonian votes; the hordes coming forth off that border to make sure that the outcomes were to be influenced by Scots Members of Parliament. I remember the eloquence with which that was put, why that had to be rejected, why the English Parliament was necessary, and why English votes for English laws had to be an enduring feature of this House.
Sir Edward Leigh (Gainsborough) (Con)
The hon. Gentleman protests too much. We all know that, deep in his heart, he loves being here. He loves engaging in the Union Parliament; he would be bored stiff in Holyrood.
Pete Wishart
I wholeheartedly congratulate the hon. Gentleman on being the first English Member of Parliament to speak in an English-only debate in a Legislative Grand Committee of the quasi-English Parliament who is not from the Scottish National party and is not a member of the Government. Well done to him; he is charting and pioneering a way for all his colleagues now to follow. Speak in your English Parliament and raise your English voice!
Andrew Percy (Brigg and Goole) (Con)
I just want to be the second English Member to speak in this important debate. I say gently to the hon. Gentleman that maybe the English are not rising to their feet in great numbers because we are so much more united and happy with our lot in life, and we are happy with this particular Bill. If he wants to visit my constituency to see how happy we are, he is welcome at any time.
Pete Wishart
I suspected that it might have been something like the situation that the hon. Gentleman describes. Conservative Members are just so united; of course there is no fissure within the ranks of the Conservative party on the big issues of the day. Here was I thinking that here were a party and a Government in crisis, who cannot determine a means of withdrawing from the European Union. But no, they are not in crisis. They are all quiet because they are all totally united on the big issues of the day. I am grateful to the hon. Gentleman for putting me right on that point.
This great Parliament, in this green and pleasant land, is free from Scottish intervention, even though every contribution is made by a Scot.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
I intervene for fear that people in the Chamber today think that the hon. Gentleman’s voice is for all of Scotland. It is not for all of Scotland—it is for a small part—and Scotland may not be proud of his behaviour in the Chamber today.
Pete Wishart
We have now heard from three Government Members. In fact, the hon. Gentleman is another Scottish Member to add to the growing list of people who are now prepared to participate in the English Parliament. I have a question for the hon. Gentleman, and I will give him an opportunity to think about it. We think that English votes for English laws is the most appalling measure, which makes second-class Members of Parliament out of him and out of us. It divides the House on geography and nationality, and is one of the most invidious measures that has been passed in this place. I am not prepared to accept this on behalf of my constituents. I wonder whether he is. That is the big question today.
Simon Hoare (North Dorset) (Con)
The hon. Gentleman is right to say that the measure divides the House on geography, but he is not right to say that it divides the House on nationality, because Members representing English constituencies who may not be English—I happen to be a Welshman—can take part in these debates and vote. The hon. Gentleman is right about geography, but wrong about nationality.
Pete Wishart
What we have, therefore, is a House that is divided upon nation. The last time I had a look, this was English votes for English laws. No other Parliament in the world divides its membership based on that type of geography. We are exclusively alone when it comes to conducting our business on such a basis. Lest the hon. Gentleman forgets, this is the united Parliament of the United Kingdom of Great Britain and Northern Ireland. To pursue a measure that divides us, based on constituency geography, is not only totally and utterly invidious, but ludicrous and unworkable.
So we have this wonderful Parliament, but England said, “No. Never again. We will make this Parliament ours. We shall banish these Scots.” And it did. England created this fine institution—this Legislative Grand Committee, the voice of England. And what a transformation.
Andrew Percy
I just want to be the third English Member to speak on this issue. The hon. Gentleman is not presenting a wholly correct picture. Those of us who actually support the principle of English laws did not want to ban anybody or see Scottish Members thrown out of here. This situation is a reaction to the fact that I, as an English Member of Parliament, have no say on the matters that only affect Scotland. For the purpose of fairness, given the devolution settlement that we have, it is therefore perfectly reasonable for only English Members to vote on certain matters that only affect England. There is nothing anti-Scottish about that, which is what the hon. Gentleman seems be trying to say; nor is there any attempt to divide. It is simply a response to the devolution settlement we have.
Pete Wishart
I am grateful to the hon. Gentleman, because there was quite a lot in what he said that I could go along with and almost support. I understand English Members of Parliament wanting that English voice. Of course they have constituents to represent who demand that they have their say in all this. There are a couple of elegant solutions that might actually deliver that.
The first is Scottish independence. The second is a little concept that seems to exist perfectly well in a number of parliamentary institutions the length and breadth of Europe and the rest of the world—it is called federalism, where the hon. Gentleman has his Parliament, we have our Parliament, and we all get together as equals to decide on the stuff that we are going to reserve. What we do not do is make the Parliament of the United Kingdom a de facto English parliament and think that there will be no issue with that. That is no solution. It is what we have just now—this unsatisfactory arrangement that divides this House, is unworkable, and is an embarrassment to this House in how it operates.
Let us have a look at how it operates, this fine institution—the English parliament; the voice of England.
Sammy Wilson
The hon. Gentleman has rolled out for everyone his grievance at being excluded from this discussion into which he wants to have some input. Perhaps he could tell us what it is in the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill that he finds so offensive that he wants to say something about it, because I have not heard anything about it yet.
Pete Wishart
I am just at the very beginning of my introductory remarks. I want to come to this fine Bill—this fine English Bill. I have lots and lots to say about the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill. Believe, me, the right hon. Gentleman will be more than satisfied when I get on to the substance of this Bill, because there is lots and lots that has to be properly—
Sammy Wilson
This right hon. Gentleman, along with most other people in this House, will be more than satisfied when the hon. Gentleman sits down.
Pete Wishart
Let me say to you, Madam Deputy Speaker, that the papers I have here are just a few of my brief speaking notes.
I am being very serious in all this. I know there can be a little bit of banter about English votes for English laws—how embarrassing, unworkable, stupid and ridiculous it all is—but this is a serious Bill that requires attention. The thing that surprises me more than anything else is the lack of interest from my English colleagues. We will do this job on their behalf. If they are not prepared to get to their feet to speak to this fine Bill, it will be left to Scottish National party Members—
Pete Wishart
But here is the genuine voice of England. I think the House awaits the right hon. Gentleman’s pronouncements with great interest.
John Redwood
I am grateful for the introduction from the hon. Gentleman. His misguided mockery serves his cause ill and serves this House ill. He well knows that we have had a proper constitutional debate about how some symmetry can be put into the asymmetric arrangements that we inherited so that each part of the United Kingdom can make its own decisions on its own measures, and this is the result. England now has the right to veto a measure that the Union Parliament wishes to impose on England if it does not meet with the approval of England. It is the weakest form of devolution of any of the four countries in our Union. The reason there are not English Members queuing up to speak on this measure is that we agree with it. We like this measure and we wish it to go through. If the hon. Gentleman is a true friend of England, he will now sit down and let this Bill pass.
Pete Wishart
I think I am grateful to the right hon. Gentleman. I would describe his intervention as half-hearted at best. His heart was not really in it, I do not think. He is one of the great defenders of the tradition of an English Parliament and English rights. Is he really satisfied with these woeful arrangements for this House? I am all for English democracy and making sure that English Members get the opportunity to design and progress their own legislation, as is required by their constituents, but to describe what we are doing today—this embarrassing mess—as a solution is below the right hon. Gentleman.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I have just heard the right hon. Member for Wokingham (John Redwood) invoke a fantastic principle: a member nation of the United Kingdom has the right to veto a measure of the Union Parliament. He said that English Members can veto what the Union Parliament chooses. Can Scottish Members have that right when it comes to Brexit? Can we veto the imposition on a country where 62% of people voted to remain in the European Union of being taken out of it?
Angus Brendan MacNeil
The right hon. Gentleman shakes his head—one principle for England, and another for Scotland.
Pete Wishart
My hon. Friend hits the nail right on the head. In this wonderful institution—the quasi-English Parliament—it seems to be all right for English Members to demand that they get their way and that they determine their legislation. But I remember the Scotland Bill 2015, as the right hon. Member for Wokingham (John Redwood) will too. I remember something like 97% of all Scottish Members of Parliament tabling amendments to that Bill, only for them to be overwhelmingly and comprehensively rejected because of the Government majority. It seems to be all right for English Members to get their own Parliament when it comes to these things, but when we have our say on important reserved issues in this House, it is completely and utterly ignored.
John Redwood
The hon. Gentleman must know that his colleague, the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), has completely misconstrued the arrangements. No member country of the Union has a veto over Union matters such as withdrawal from the EU. Scotland not only has a complete veto over Scottish legislation but is in sole possession of Scottish legislation in a way that we English Members are not for English legislation.
Pete Wishart
I will leave the right hon. Gentleman to take that up with my good friend from Na h-Eileanan an Iar, who I have to say I find much more convincing when it comes to some of the great constitutional issues of the day. I am more than persuaded by my hon. Friend’s eloquence.
Pete Wishart
I beg patience from the hon. Gentleman. There is so much to say. I have done my study on the Bill, and I think it is important. I have a list of 425 English towns where the Bill will have an impact—I have everything from Aylesbury all the way through to Witham and Wisbech—and I am going to go through every single one of those towns to speak about how some of the curtilage-related issues are being dealt with. I do not want to leave out any part of England. It is important that no part of England is left behind in these debates, and if English Members are not prepared to speak about their constituencies, it will be left to Scottish National party Members to do it. We will not shirk our responsibility to ensure that the English voice is heard. That is our job today, and I am determined that we will fulfil it.
Andrew Percy
I am sorry that I am not the real voice of England; I do not know what that makes me. The hon. Gentleman suggests two solutions to this problem: one is Scottish independence, which the people of Scotland have rejected, and the other is federalism, which the people of England clearly do not want, because all polling shows that there is not majority support for an English Parliament. So what is the SNP’s policy? Does it want to force independence against people’s will, or does it want to force a system on England against the will of the English? It would be nice to know which undemocratic solution it wants.
The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Order. The hon. Member for Perth and North Perthshire may have been drawn down certain paths. I have been listening carefully to what he has been saying, and I have given him some leeway, but I remind him that the motion before the Committee is that the Legislative Grand Committee (England) consents to the Bill. I hope he will not be drawn down other tracks and will confine his remarks to that proposition.
Pete Wishart
For that, I am very grateful. I cannot believe that I have been drawn down constitutional cul de sacs by the outrageous contributions we have had from hon. Members. I will now ensure that my remarks are confined to the Bill, which is very important.
We have to find out why the Bill is important. It is important because in 2017, in the autumn Budget statement, the Government said that they would legislate to give effect to two of the Chancellor’s commitments, one of which was to retrospectively reinstate particular features of business rates revaluation practice which applied before the judgment of the Supreme Court in Woolway (VO) v. Mazars UKSC 53. That is important, and it is one of the reasons why we are doing this. There is another probably much more important reason why we should consider the English-only parts of this important Bill and make sure that we understand and debate it properly during this Legislative Grand Committee. The Bill will give local authorities in England the discretion to charge a council tax premium of up to 100% on long-term empty dwellings.
Sir Edward Leigh
Is the hon. Gentleman seeking to take a leaf out of the book of the Irish nationalists in the 19th century and, by filibustering and talking complete rubbish, bore the Union to death?
Pete Wishart
I take great exception to what the hon. Gentleman has said. This is an important Bill; he may not be interested in the words of Denning LJ, but my colleagues and I are. We want to make sure that this House is aware of the weighty views of Denning LJ, whoever he may be.
So there is a general rule. It had been the practice of the Valuation Office Agency that where units of property were contiguous—that means “touching”, I believe—and in the same occupation, they received one rates bill. I think the Government have been really generous in offering examples of how all this might work. That is why, when considering a Bill such as this, it is very important that we take everything into account.
The exceptions are important. The general rule, obviously, is as well—because a general rule is a guiding principle on how we approach these issues. But the exceptions are also important because they could lead to precedents. This is where we start to get into dangerous territory. In elegant legislation, the general rule applies nearly universally. When legislation has a number of exceptions, we start to get into certain territory—I know how difficult it is for the Clerks to design legislation with too many exceptions. We have to be careful when designing legislation. When the generalities of rules and what we want to achieve in legislation tend to be universal in concept, it is important to understand exceptions and all the other things that may influence future legislation by becoming precedent.
Angus Brendan MacNeil
My hon. Friend is making a fantastic speech that legislators across the world should pay attention to. Will he expand on not the generalities but the exceptions? The House could really do with fully understanding how exceptions lead to further complications. Will he enlighten me?
Pete Wishart
I always enjoy enlightening my hon. Friend, although it is usually not necessary. I feel obliged to try to offer further enlightenment on these particular issues. There are other examples. I gave the example of my house, but my hon. Friend is a crofter, and I am pretty certain that his is a single dwelling on the isle of Barra—in fact, I know it because I have seen his place on several occasions. I know how he utilises his land and I am pretty certain that, when it comes to him, the generality of the rule applies. His dwelling is generally designed for the purpose of crofting and habitation. I am pretty certain that his property is not contiguous and that there is no such issue with his land. I am looking at my hon. Friend and—
The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Order. The hon. Gentleman must bear in mind that he should face the Chair. Although he likes looking at his hon. Friend, it is better to look at me.
Pete Wishart
It is always a joy to look at my hon. Friend, Dame Rosie, but I will try to resist for the purposes of my brief contribution to this Bill today.
Sammy Wilson
Has the hon. Gentleman noticed that the longer he goes on, the fewer of his hon. Friends he has to face when he turns around? Maybe that should be a lesson to him: he is getting a bit beyond what even his own hon. Friends will tolerate—let alone the rest of the House.
Pete Wishart
I am glad that I have been able to detain the right hon. Gentleman long enough to get his attention. I know he is very much enjoying this short contribution to the debate. Look at my hon. Friends, sitting here and making sure that this important issue is discussed and debated. They think that this is important, and that is the lesson that goes forward today.
David Linden
Does my hon. Friend think that if we encouraged our hon. Friends with £1 billion, even more of them might come into the Chamber and sit alongside the right hon. Member for East Antrim (Sammy Wilson)?
Pete Wishart
Actually, I am looking forward to seeing the right hon. Gentleman’s hon. Friends join him—it is always nice to see our friends from Northern Ireland here. We may not be as well endowed with largesse from the Government in order to secure a majority, but we will muddle through on what we secure from the Barnett formula.
The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Order. The hon. Gentleman will return to the subject of the debate.
Pete Wishart
I want to get back to the rule, Madam Deputy Speaker, because it is the key issue in the Bill, one that must consume and concern the House more than any other. The rule was widely understood and accepted by ratepayers. It was generally understood and I think everybody appreciated what was happening. Representatives in the Valuation Office Agency are responsible for assessing business rates. However, the rule received negative judicial treatment in the 2015 judgment of the Supreme Court in the Woolway v. Mazars case. As a result, the VOA has had to change its practice. The practice is now that separate units of property in a shared building should be treated as separate rating units and should therefore receive their own rules irrespective of whether they are in the same occupation and are contiguous.
That is what we are here today to consider properly. This is an important issue. I will try to list some of the towns and cities—hon. Members will represent some of them—throughout the United Kingdom where it will apply and where it is important. I will start with Abingdon-on-Thames, where there will be dwelling houses that are contiguous and which may or may not be part of the general rule and may have exceptions. There is Accrington, Acton, Alcester, Aldershot, Alnwick, Alston, Altrincham, Ambleside, Amersham—I think we can see where this is going—Andover, Arundel, Ashburton, Ashby-de-la-Zouch—[Laughter.] Hon. Members are laughing at my pronunciation. I challenge them to get to their feet and say Auchtermuchty. There is Axminster, Aylesbury, Bakewell, Bampton, Banbury—Madam Deputy Speaker, I could go on and go on.
Sammy Wilson
Since the hon. Gentleman is so concerned about those towns and wants to highlight the problems facing their residents, will he tell us whether he has visited any of them? Does he even know where they are?
Pete Wishart
Looking through the list, I spent a lovely hour in Berwick-upon-Tweed and I remember a lovely cup of tea in Bexhill-on-Sea in one of its very fine restaurants, but I am sure hon. Members do not want me to go through the whole list and describe the very many hours I have spent.
I shall spare the House the 35 pages of towns, villages and cities included in my list which are represented by English Members who are not doing their job. I will now give them the opportunity to get up and speak on behalf of their constituents. I hazard a guess that they are probably better at it than I am, as a Scottish National party Member of Parliament. I think that my English colleagues are probably just a little bit more qualified, experienced and skilled to speak on behalf of their own constituencies than I am, so I am perplexed as to why it has been left to me to do this job. So I will now, having provided a little bit of encouragement, give them to the opportunity to do it.
This is an absolute and utter farce, Madam Deputy Speaker. Regardless of anything else, this speech has pointed out just how ridiculous this practice is. I am just about the only Member of Parliament who has spoken in Legislative Grand Committee. I could speak for another hour if required, but I know Labour Members are keen to move on to the next business and I will accommodate that. We should be profoundly ashamed of the way we operate the English votes for English laws procedure. It has become an embarrassment to this House and makes this place look at its most ridiculous: bells ringing, maces going up and down, and nothing ever actually happening. It is time that we brought this farce to an end. I appeal to hon. Members from England. This has not worked. We have tried it. We have seen what it is like and nothing ever happens. Join us now to ensure that we rid the House of this embarrassment and go back to a united House with one class of MP where we can all have an equal say. Join us and let us end this farce.
Question put and agreed to.
Resolved,
That the Committee consents to the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill.
The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).
The Deputy Speaker resumed the Chair; decision reported.
Third Reading
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move, That the Bill be now read the Third time.
This Bill, above all, promotes fairness; it promotes fairness for hard-working business rate payers hit by a tax hike that they could not have anticipated—the so-called staircase tax—and fairness for those who struggle to find somewhere to live while properties lie empty for years. That was why we moved quickly to introduce the Bill and ensure that ratepayers, in particular, receive the urgent help that it will provide. I thank hon. Members on both sides of the House for their contributions and support in helping us to achieve this aim.
Tim Farron (Westmorland and Lonsdale) (LD)
The Minister is making important points and the Bill does some important things. However, it could do something important that it does not—it does not allow local authorities, such as his and mine, in very rural areas to vary council tax on second homes. He will be aware that in the Yorkshire dales and the Lake district, vast percentages of communities are empty most of the year round because homes are not lived in. That undermines schools, public transport and the sustainability of such communities. Will the Government listen to local authorities and local communities and allow council tax to be raised to tackle the problem of excessive second-home ownership?
Rishi Sunak
I thank the hon. Gentleman, my constituency neighbour, for his intervention. He is right to point out the issue of second homes in rural areas, which he and I have local familiarity with. I gently disagree when he says that nothing is being done. As he will be aware, the Government introduced a stamp duty surcharge for second homes. Much of the funds raised from that have gone to schemes, perhaps in his constituency and certainly in mine, in areas with high second-home ownership—for example, in Hudswell in Richmondshire, where community land trusts have been funded to create affordable housing for local occupancy. Beyond that, local plans, which no doubt will be discussed in the forthcoming debate, also allow local communities to have control over who is living in new build properties.
Work is being done, and all that followed the work done by the coalition Government to remove the automatic discount for second homes. The hon. Gentleman will be aware that that was in place for many years. The coalition Government removed the necessity for the discount to apply, and now the vast majority of second homes are not eligible for a council tax discount, but he is right to point out the issue. The Department is looking more broadly at the loophole with regard to business rates applying to second homes and them then qualifying for an exemption through small business rates relief. This has been raised by hon. Members, including my hon. Friend the Member for St Austell and Newquay (Steve Double) and others from Cornwall, so the hon. Member for Westmorland and Lonsdale (Tim Farron) can rest assured that I am keeping an eye on this issue.
I return to the Bill, which deals with empty homes. I thank our partners in the rating sector for their invaluable help with the draft provisions, together with the very detailed and technical work that was done by officials, to whom I pay thanks. This has helped us to bring effective legislation to the House that navigates the intricacies of ratings law.
I also pay tribute to the work of the Housing, Communities and Local Government Committee. Not only did its comments on the definition of a void find their way to the language in the final Bill, but I noted the points raised on Second Reading by the Committee Chair, the hon. Member for Sheffield South East (Mr Betts). He is not in his place, but I thank him and assure him that I look forward to working with him in future to ensure that Bills from my Department and in my brief go through the adequate legislative scrutiny process that we were fortunate to enjoy doing with the Committee. Lastly, I thank the hon. Member for Oldham West and Royton (Jim McMahon) for his input and constructive attitude in the Bill Committee. I very much look forward to working with him on future local government measures.
In conclusion, this Bill delivers on our commitment to fairness and supports those in our country who want to build a better life. It is a Bill for those looking for a place to call home. It is a Bill for small businesses. It is a Bill that I hope we can all welcome, and I commend it to the House.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
I thank the Minister for the constructive and positive way he has approached the Bill, from the early conversations about the technicalities to his contributions in Committee, and I repeat his thanks to the Committees that have worked in the background on this. It is clear that a lot of work has been done to engage and to iron out the wrinkles in the Bill. I hope this reinforces the offer we made some time ago that, where measures are not controversial and have the support of the sector, we will work constructively to take them through Parliament. I hope this will be the first of a number that local government wants to see come forward.
I do not know whether it is in order to refer to a previous stage, Madam Deputy Speaker, but I thought the hon. Member for Perth and North Perthshire (Pete Wishart), who is not in his place, took something of a liberty in the Legislative Grand Committee in trying to hijack a debate that affected English parliamentarians and English constituencies for what is an age-old debate about English votes for English laws. It almost belittles the detailed work done in many Committee sittings, where the hard work of making law has been happening but in a more constructive and mature way. I would not want us to lose sight of that. People watching on television—if anyone was watching it—might have been left with the inaccurate impression that Parliament was not doing its job and that this is a superficial way to pass laws, which is not the case at all.
Turning to the Bill, we support the measures relating to the staircase tax and the Supreme Court ruling. We recognise that it was a quirk of the system when the matter went to court and that it was not the original intention of legislation, but there remains concern about the financial impact on local authorities. In private meetings and in Committee, we requested a breakdown of the implications for each local authority in the country, but we have not to date had that information and so have not been able to assess the impact of this financial change on each local authority.
The Government will say that that is because the Supreme Court ruling meant that some local authorities were, for a short period, financially better off than had the ruling not been given, but many councils set their budgets based on that financial information, so some will face a net loss when, because of this change, money they were expecting from business rates does not come in. For some, the loss might be very minor, but for others it could be significant, depending on the make-up of properties within their local authority area. It would therefore have been reassuring to see that list today.
The agreement between central and local government is that, where central Government makes a change to the financial settlement and rules and regulations that has a net effect on local government budgets, councils ought to be compensated. Local Government and the Local Government Association—I declare an interest as vice-president of the LGA—are concerned about what it means when the Government make changes that can materially affect the financial base of local authorities but then do not provide financial compensation. Notwithstanding that, we recognise that the Government have heard the calls from business and ratepayers and have taken action. That should be welcomed.
Empty properties are a big issue. There are around 200,000 empty properties in this country at a time of a housing crisis. We know that 120,000 children in this country are without a permanent home and living in temporary accommodation. So the housing crisis is very real. Part of the problem with the Bill is that it addresses some types of empty property but not others. About 20% of properties in parts of London are empty. They are owned by wealthy individuals and institutions that will not be put off by a 100% additional council tax payment requirement, because that is pennies in the scheme of the wealth they hold. It might affect small landlords and people renovating properties, but it will not necessarily affect the part of the UK that arguably has the biggest housing crisis, and that of course is London. If the Government come forward with new proposals to address the problem of foreign individuals owning properties they have no intention of ever living in or allowing others to live in, the shadow Housing team would be open to a discussion on that.
I am aware that there is a housing debate to follow and that a great many Members have applied to speak in it. I repeat my thanks to the Government for being constructive and for engaging in the process at an early stage. I also repeat the offer of what we know local authorities want: far more cross-party working on matters that affect local government as a whole.
Bob Blackman (Harrow East) (Con)
I shall make just four brief points.
Along with the hon. Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee, I examined the Bill in draft. However, the staircase tax was drawn to my attention by my constituent Anthony Broza, who was faced with a swingeing rates demand for more than £8,500, to be paid in one go, which he had no way of paying. I hope that, as the Bill proceeds, the Government will find a way to return the money that has been taken from small businesses as swiftly as possible, because this has had a direct, demonstrable impact on the cash flow of 30,000 businesses across the United Kingdom.
May I issue a gentle reminder to the Minister? Our Select Committee wanted to subject the draft Bill to pre-legislative scrutiny, but because the Government published it long before we were allowed to do that, we were unable to contribute as effectively as we would have liked. I strongly suggest that in future, if the Government wish Select Committees to undertake pre-legislative scrutiny, they should allow them to do that work in advance.
As was mentioned by the hon. Member for Oldham West and Royton (Jim McMahon), local authorities will lose money as a direct result of this—necessary—correction of the law. I have yet to see a quantification of that. I have yet to find out how many local authorities will lose, and how much they will lose. However, given the Government’s clear commitment in the Budget to compensate local government for any losses that would result, I think that they owe a debt of honour to those authorities.
My final point, which I hope will be discussed in the other place, relates to the concerns raised by a number of small businesses about the double-jeopardy risk involved in requesting a review. Requesting a review of rateable value may cause it to increase dramatically, and there is a risk that by asking for a review, small businesses could lose out as a result of what is otherwise a very good measure. I ask the Government to consider how we can ensure that they will not have to pay large sums of money as a result of new valuations. However, I—along with, I am sure, all other Members—support the Bill. It is a very well-meaning measure, and I trust that it will become law as quickly as possible.
Question put and agreed to.
Bill accordingly read the Third time, and passed.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Wednesday 16th May 2018
(6 years, 6 months ago)
Lords ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 1 May 2018 - (1 May 2018)
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Monday 4th June 2018
(6 years, 5 months ago)
Lords ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 May 2018 - (1 May 2018)
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
I am grateful to the noble Lords who have given up their time to discuss the Bill. Their engagement is a recognition of how important these measures will be for people across the country. I am looking forward to hearing the considered and expert views of the House. These views are always welcome, as we work together to ensure our laws are both fair and robust. The Bill is much needed, something recognised in the Commons, where it passed without amendment. We have moved quickly to introduce it, to ensure that ratepayers receive the urgent help that it will provide, and it is designed to address two basic needs. First, it restores previous valuation practice for those hard-working business ratepayers affected by the so-called staircase tax. Secondly, it aims to reduce the number of empty and unused homes, helping those who are struggling to find a place to live.
I turn to the detail of the Bill’s first measure, which relates to the so-called staircase tax. Clause 1 provides clarification to the rates bill for businesses that occupy or own several adjoining properties. Noble Lords will be aware that, for more than 50 years, businesses operating in adjoining units or rooms—accessed from a common corridor or staircase—were assessed as a single property for business rates. This practice was widely understood and accepted by the Valuation Office Agency and rating surveyors. A 2015 Supreme Court decision, in Woolway v Mazars, found this rule to lack a legal basis. Instead, it found that each unit of a property accessed from common areas should have its own rating assessment, regardless of whether the properties are adjoining or part of the same business.
The unexpected consequences of the 2015 judgment have brought unwelcome change and uncertainty for business ratepayers. Some businesses which previously had one rating bill now receive several. In most cases, this has not led to a change in what businesses pay overall, but in two circumstances bills have increased, leading to what has been described by some as a staircase tax. First, when some properties were broken down into individual units, the total rateable value of their holdings also increased as a result. This led to an unexpected increase in bills, which was backdated to 2010 in some cases. Secondly, the change saw some ratepayers lose their small business rate relief, which helps ratepayers who own properties with rateable values of up to £15,000. It ensures that over 600,000 small businesses pay no business rates at all. To ensure that it only helps small businesses, it is targeted at ratepayers with only one property. However, with businesses operating in adjoining units or rooms now receiving two or more rates bills, some ratepayers also lost some or all of their relief. We estimate that the numbers affected are relatively low—fewer than 1,000—but they deserve to have their relief reinstated.
Therefore, Clause 1 restores the widely accepted and understood practice of the Valuation Office Agency, and those affected will be assessed as a single property once again. This will ensure that these businesses, which have already paid their fair share, do not continue to suffer from the unexpected burden imposed by that judgment. This will be a key outcome of Clause 1, and we are implementing change retrospectively—to as far back as 1 April 2010—to ensure that the earlier provision remains throughout. We have been able to bring forward this measure without amendment because of the support we have received in drafting the clause from the Rating Surveyors Association, the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Their expertise has been invaluable and I am grateful for their assistance, as are the Government.
The second measure of the Bill relates to empty dwellings. A shortage of housing continues to be a barrier to progress in this country, at a time when the average house price in England is almost eight times the average income, and when over 1 million households are on social housing waiting lists. For this reason, the Government are taking action on many fronts. Tackling empty homes is essential to bring more properties on to the market so that we make the best use of the homes we already have.
Clause 2 follows the commitment we made in last year’s housing White Paper to continue to support councils as they encourage efficient use of existing housing stock. As announced in the Autumn Budget, the Bill increases the maximum level of council tax premium that local authorities can charge on long-term empty homes from 50% to 100%. This means that local authorities will have the discretion to double the council tax bills of properties that have been empty for two years or more. This measure adds to existing powers we have given to local authorities to bring homes back into use. These include the 50% council tax premium, the new homes bonus scheme and the ability of councils to charge the full rate of council tax on empty homes.
Following these important interventions, I am pleased to report to the House that the number of properties empty for six months or longer has dropped by a third since 2010, from 300,000 to just over 200,000. In addition, the power to charge a 50% council tax premium has been taken up by nearly nine out of 10 councils, all but three of which applied the full 50% rate in 2017. Where councils have used the power every year since 2013, the number of properties subject to a premium has fallen by 9%. This is welcome, but we can do more. That is why, through the Bill, we are allowing local authorities to strengthen the incentive to bring empty homes back into use.
It is right that decisions on whether to apply a premium and at what rate remain with the local authority concerned. We are not changing these arrangements. Councils know their areas best and will take local priorities into account when deciding whether a premium would be appropriate. There will of course be individual circumstances where to apply a premium would not be right. Under current arrangements, homes that are empty due to the occupant living in Armed Forces accommodation for job-related purposes, for example, are not subject to these rules. They may also be exempt due to annexes being used as part of the main property, as they cannot be separately let.
There are statutory exemptions for properties left empty for a specific purpose, such as the owner going into care. Councils can also apply discretionary discounts as they see fit in cases such as hardship, fire or flooding. Where home owners are struggling to rent or sell a property in a challenging market, I do not doubt that local authorities will wish to reflect carefully when deciding whether to issue a determination, and then to reflect on what that determination should be. Our guidance on this issue, published in 2013, made it clear that the premium should not be used to penalise owners of homes that are genuinely on the market. Only properties that would already have been potentially liable for a premium will be affected by this clause. It will not bring any additional properties within the scope of the premium; it merely increases the potential of the premium.
The Bill is about fairness for business affected by the so-called staircase tax, and about increasing the incentive to bring long-term empty homes back into productive use. I look forward to hearing from noble Lords and I beg to move.
Baroness Pinnock (LD)
My Lords, I refer to my register of interests as a councillor on Kirklees Council in West Yorkshire and as a vice-president of the Local Government Association.
This short Bill will make two important changes to local taxation. First, there is the proposed change to the definitions of the qualification for business rates. As the Minister said, this is in response to a legal judgment. It is a pity that the Government have not used the opportunity of this minor reform to grasp the bigger nettle of a radical overhaul of business rates. This has been raised several times in your Lordships’ House over the last few years. Each time we are told that the Government agree that reform is needed but we are not getting a proposal for such radical change. The longer the Government delay, the more likely it becomes that high streets up and down the country will see more empty retail properties. What is desperately needed is a level playing field for retail businesses. Global online retailers currently enjoy a significant advantage over high-street retailers. This injustice urgently needs to be addressed and I wonder whether the Minister will be able to say when the Government intend to tackle this problem.
In a more direct response to the Bill, I acknowledge that it seeks to be crystal clear about the definition of “property in common occupation”. However, it may be that further anomalies will result from this definition. Is the Valuation Office Agency satisfied that the proposals will work in practice? Obviously, local authorities now rely on income from business rates in a way that they have not previously. Have the Government assessed the financial changes that might result, and are any individual local authorities significantly affected? Perhaps the Minister will be able to give some indication of the consequences for local authorities. For instance, he has said that about 1,000 businesses are affected. However, if these are all clustered in a couple of areas, that might have a significant impact on those local authorities.
Turning to the second element of the Bill, the proposal for a potential 100% premium on council tax for long-term empty properties is welcome. The huge need for more housing justifies this change. However, tackling the problem of empty homes effectively is more difficult than just making an additional charge on properties. There are too many empty homes, and that applies not just to the well-publicised issue of the buy-to-invest market in London. In some parts of the country—mainly former industrial heartlands—housing is not at a premium, and in these towns and cities additional council tax might not help the problem. In such a case, we seek further remedies which this proposal will not address.
Tackling the problem of homes left empty for more than two years needs more than this single approach. The empty homes development orders have not proved an effective tool for many councils because they are complex and costly to invoke. For example, in my own council area there were—I hope it is “were”— 2,113 empty properties recorded at the beginning of this year out of a total of nearly 200,000 properties. Of those, 722 have been empty for more than two years and 117 for more than 10 years. So the change proposed in the Bill, although an important measure, is applicable for Kirklees in only one-third of the empty homes, and I have seen no evidence that the proportion across the country is not similar. Therefore, the Bill will address the difficulty of tackling the problem of empty homes in relation to probably just one-third of homes that are indeed empty.
The next issue that requires a bit more clarification is the definition of an “empty home”. The Bill describes it as one that is unoccupied and substantially unfurnished for two years or more. Perhaps the Minister can describe in more detail what is meant by “substantially unfurnished” and “unoccupied”. For instance, there is a property in my council ward where the owner stays for the weekend perhaps once or twice a year. Throughout the rest of the year it remains unoccupied and totally unvisited, but furniture has been left in the property. I am told that this has been the case for more than nine years. There needs to be a recognition that, even with this additional council tax premium, it is probably financially beneficial for some properties to be kept empty because of property value increases. If your property is going to increase by more than, say, £2,000 or £3,000 a year, it is beneficial for you to leave it empty and pay the council tax premium.
There is broad support for both elements of this Bill but a feeling that, in both cases, it is a missed opportunity for more significant reform.
Lord Patten (Con)
My Lords, following what the noble Baroness said, I do not think that this is a missed opportunity; rather, it is a pretty big incremental step in dealing with the issue. That is why, during debates in another place, the Bill received all-party assent and agreement—and I congratulate my noble friend and his colleagues on getting that. Having said that, I do not want to alarm the noble Baroness but I agreed with much of what she said—but that is business for another time. This sort of cross-party agreement is not without precedent. It is reasonably rare, but I hope it will be followed by your Lordships, because this is a good, if short, Bill that addresses two exceptional issues. I will concentrate on the second: empty dwellings.
For a long time in England it has seemed that having at least 300,000-plus empty houses was accepted as being structurally the natural figure needed to balance the housing market. I do not agree with that. It should not have been so and it is good that, since 2010, a concerted effort has resulted in the figure of empty homes being greatly reduced to a bit above 200,000, as the noble Baroness has just said. However, I do not think that that should suddenly be accepted as the new normal, and with these new powers there is absolutely no reason to accept any figure much above 100,000 as the likely structurally reasonable figure at any one time to take into account the needs of people moving in and out, service men and women, the settlement of inheritances, delays in selling due to market conditions and regional differences in those conditions, and all the rest. I wonder whether my noble friend has some such end target clearly in mind or whether the Government accept that 200,000 is about as far as we should go—I must say, I hope not.
Even so, eternal vigilance will be necessary to stop the problem re-emerging. After all, it seems that, as my noble friend said in his excellent introductory speech, about 10% of councils in England today have yet to shake their local stumps and even take up the powers to use the existing premium on empty homes of just 50%, let alone go any further. I say to my noble friend that I trust that they will not be allowed to carry on like this for much longer or be dilatory with the new higher figure of 100%, as proposed in the Bill, which in effect would allow a maximum council tax charge of 200%.
Equally, too few councils—perhaps as low as one in 10—are making use of the empty dwelling management orders that I am told can be used in respect of properties that have been empty for a long period. I am not quite sure why this is: I believe that experts are useful sometimes and I am sure experts will come up with reasons as to why this is. Perhaps it has something to do with the typical English reserve about using powers that may be thought of as confiscatory of property—I do not know. It seems that there may also be striking differences between location to location in the publicly owned stock of councils and housing associations and the percentages of empties in their ownership. Again, I do not understand the reasons for this.
Nor do I understand the surprising spike in the number of empties in areas of very great pressure in the London commuter belt, in council areas such as Harrow, Brentford or Three Rivers—these being exactly where, at the same time, the green belt is under the greatest pressure. It may be a case of that buy-to-leave phenomena, with owners waiting for land values to increase, again promoting redevelopment.
So I conclude that greater, more effective and uniform pressure on all local authority areas would be brought about by the regular six-monthly publication of centrally collected data on these critical aspects of public information, without the need for campaigning bodies to resort to freedom of information requests, the media, me or whoever else to get the facts in front of them. I do not believe that that is right. Facts are of great value and, once published and regularly available, speak for themselves. That is when councillors might shake their stumps in this area. It is not a matter of naming or shaming but rather of naming to inform.
Others would argue that it is a pity that the Bill does not contain provisions for what might be thought of as a later escalator of the maximum council tax charge, pushing it up by another 50% or 100% in areas of extreme pressure. I would have liked to have seen that order-making power in this Bill. But I shall not seek to disturb the smooth surface, for the reasons that the other place concluded. We must always be on guard. Just when public policy seems to be incrementally dealing with an issue such as this, other unforeseen problems may pop up to disturb the surface and increase the number of empties. Let us look at the huge structural changes in retail that are currently overwhelming shops and shopping, devastating high and side streets alike in cities large and market towns small. This may well lead to a new increase in empties suddenly hitting us among the often interconnected residential properties when it is least expected, because of redevelopment in areas where shopping has collapsed. I have seen this myself in a small Somerset town near where I live, where there are many empty shops and many empty residential properties among them.
So eternal policy vigilance is imperative in the never-ending problem of vacant and residential homes. I have thought this for a long time, from when I was first on the old Oxford City Council, as it was then called. Across that chamber, the then yet-to-be-ennobled Lords, Lord Hunt, Lord Liddle and Lord Oakeshott of Seagrove Bay, were busy cutting their ruthless interrupting and barracking teeth on me. It was a problem then and so it remains.
There was a drive in this direction by the Chancellor in his excellent Budget last November to increase the empties premium, which will be combined with whatever action he may take following the conclusions of the review currently being conducted by Sir Oliver Letwin from another place on how to bring forward homebuilding on lands with valid planning permission that are vacant and being hoarded. Indeed, land being hoarded and vacant is the exact mirror image of the empty homes that have already been built. They are part of the same problem that the noble Baroness, Lady Pinnock, has just referred to. If we get those two streams of public policy action in tandem, there will be a clear twin-track more-homes approach by the Government that should be widely welcomed—just like, to me, this Bill should be welcomed.
The Earl of Lytton (CB)
My Lords, I welcome the opportunity to debate this Bill, narrow though its objectives are. In doing so I declare my interests as a member of RICS and the IRRV and the RSA—the very bodies that the Minister referred to. I also declare a one-time interest as a former employee of the Inland Revenue Valuation Office; I stand before noble Lords guilty as charged. I am also a vice-president of the LGA and a recipient of a small business exemption on one small hereditament down in the West Country.
I thank the Minister for meeting me and a couple of other professionals a few weeks ago to discuss the wider issues of business rates. I was tempted to follow what was said by the noble Baroness, Lady Pinnock, but she has covered most of what I needed to say on that issue, so I will follow the noble Lord, Lord Patten, in not dwelling on it. There is a bigger issue that perhaps needs to be addressed, but this may not be the right place to do so.
The intentions behind the Bill are worthy and its logic, while in some aspects questionable, is clear. The only thing I would say is that getting the implementation correct may be a great deal less straightforward. To put it another way, there is more in this can than is apparent from what is written on the label.
What has become known rather rudely as the staircase tax, otherwise the case known as Woolway v Mazars, has been one of the recent diversions for someone brought up in the traditions of what amounted to the extent of the rateable hereditament. I had that drummed into me by a very eminent rating academic called Roger Emeny, alas now deceased. I was always clear about that and I was also pretty clear that the decision was an aberration that went against the practices that had been created before. It was one of those things that became a really quite unnecessary additional piece of grit in the oyster, because we were dealing with an awful lot of uncertainty and churn as well as a whole new system of handling things as they came on stream. It is right to put that right. The Mazars case was in September 2015 and it has taken us until now to deal with it, while in the meantime the new list came into force in 2017. The system we now have is not well attuned to the rate of churn, change and alteration that is taking place not only on our high streets and the balance between various different categories of business premises but also in our regulatory environment. I do not think that the system is sufficiently fleet of foot, and that is where we need to take a further look.
The right of the ratepayer to ask for the split assessment to be looked at again is welcome and I do not think that anyone would disagree with the principle. However, it does mean that there is the selective reopening of parts of the 2010 rating list which would otherwise effectively be closed. More to the point, as I understand it—the Minister will doubtless correct me if I am wrong—the Government have declined to fund any losses that would be borne by billing authorities as a result of appeals coming through on the old list. This seems a trifle unreasonable, especially in the light of the financial constraints imposed on the billing authorities. I detect a sense that the billing authorities have somehow garaged the winnings of the windfall that came out of Woolway v Mazars, and have them sitting in a shed at the end of the garden for the rainy day when the thing is reversed. Forgive me, but I do not think that local government finance operates in that way, and nor do I think that it is possible for shedloads of money to be stashed away for that purpose. Perhaps the noble Lord, Lord Kennedy, will be able to enlighten me because I am not close to finance at billing authority level. I hope that I will be corrected if I have got that wrong.
A criticism that I have heard on more than one occasion is that billing authority requests for alterations of assessments are often denied or not dealt with quickly enough, so that needs to be looked at. If there is a resource implication, that must be considered quite critically because billing authorities are probably the first port of call, other than the aggrieved ratepayer themselves, for getting assessments put right. If their requests are not being dealt with, there is a risk of unfairness and of loss to local authority coffers.
For ratepayers, the situation is scarcely better in that a successful application under the 2010 list, as proposed in the Bill, does not automatically get translated into the 2017 list, as I understand it. Although the Government say that they will prioritise those 2010 list applications, they clearly do not propose to do so for the 2017 list, for which a de novo registration and an application under the check, challenge and appeal system—I have raised this in the House before—will be necessary, along with all its complexity, systemic drag and uncertainties for billing authorities and ratepayers alike. We should not allow that to happen. Mercifully, even if the Minister is correct, the numbers involved are relatively few, but I am not sure that an audit has been done to identify what is involved in both the 2010 and 2017 lists. That is why the problems with the CCA system are mission critical and why they produce such tremendous negative comment from business sources.
I am sure that the Minister has seen the press reports following the statistics released last week on the numbers of appeals. The Government are extolling the virtues of a 90% reduction in the number of cases under check, challenge and appeal, while rating experts say that that is not surprising because the system is so labyrinthine, complex and liable to error that it is an impediment and effectively a denial of service—a denial of reasonable and fair rights to challenge an assessment. Something needs to be done.
One of the things we were promised is that the new check, challenge and appeal system would squeeze out cowboy rating firms. Last week I received some information and I will be writing to the Minister in response to his very kind letter to me following our meeting. I believe that, unfortunately, the cowboys are still alive and kicking, particularly in the north-west. Why do these people prosper? It is because many businesses cannot get their head round the CCA system. They look for advice and either go to one of the big specialist practices or someone comes along and says, “We can do this for you”. They submit their bill and expect to be paid long before the case gets to the appeal stage, so these people are still creating just as much of a problem as before and getting away with it. I am afraid that they have not been squeezed out of the system; it is a complex factor that ultimately boils down to the resources available to carry out management of the tax base and to deal with appeals.
On council tax, I have no complaint about the theory, especially if owners are gaming the system by maintaining vacancy or through sheer inertia. Housing should not be considered the same as a white-goods product that can be hoarded. The Institute of Revenues, Rating and Valuation and others encapsulated the issue in pointing out that the Bill is yet another attempt to fix a much deeper problem. The causes of long-term vacancy have not been looked into. There does not appear to me to be a robust evidence base behind this, but I am very happy to be told I am wrong if that is the case.
I have in mind cases where property is held for renovation or as part of a redevelopment, vested in trustees in bankruptcy or executors of a deceased’s estate, or the subject of a legal dispute. As the noble Lord, Lord Patten, was speaking, I made a mental calculation. I believe that there about 25 million residential properties in council tax assessment across England and Wales. Given the number of things that can cause churn, 250,000 represents about 1%. From what I generally know of property markets—I have dealt with them on and off all my life—that percentage does not seem very high at all. It is a bit like people who are between jobs: technically, they are jobless, but it is part of the churn and part of the process where things are vacant. We need to be careful about this. The noble Lord, Lord Patten, was trying to say that we need better information and we should be judged by the evidence base. I agree with that; perhaps the evidence base is lacking here.
Those very prosaic cases are probably much more common than people with a certain type of investment approach, who want to keep properties vacant just for the heck of it, out of sheer caprice and fancy. There is no obvious match between the empty homes and where homeless people or people on housing lists want, or need, to live, nor between the revenues raised by the provisions in the Bill and the necessary relief for those who need to benefit from this. There is a disconnect, both geographically and financially. I would like that to be explained.
I think it was the noble Baroness, Lady Pinnock, who expressed the point about what “substantially furnished” means. I had a mental image of a vanload of stuff going up and down the country, doing a bit of temporary furnishing all the while. Years ago, I attended an event, held by a local authority, where the subject of additional charges for people with second homes came up. I asked a question, naive as I was at the time—I probably still am—as to why this differential was necessary. At that stage, people were getting a discount for having a second home. I was told that it was one of the few ways a local authority had of identifying whether it had second homes on its territory and how many there were. I wonder whether one of the perverse effects of this measure will be to cause a rapid evaporation of the number of empty homes as far as the statistical evidence is concerned. That said, I follow the noble Lord, Lord Patten, in saying that the Bill is welcome, in its broad terms. Yes, there are difficulties with the fine-tuning of implementation, but in general terms I hope that we can see it through to a successful conclusion.
Baroness Thornhill (LD)
My Lords, I declare an interest as a vice-president of the LGA. Given that Clause 2 is to increase councils’ ability to charge more council tax on empty homes in the light of the housing crisis, I could simply say, “What’s not to like?”, and sit down. I totally appreciate and acknowledge that the Government have made some headway in this area, so I rise instead to urge the Government to be bolder in tackling the problem of empty homes. Does the Minister really believe that this Bill will make more than a marginal difference, since councils can already increase council tax on empty homes by 50%—and most do, including my own?
I appreciate the Minister’s intention to give councils more autonomy in this matter, which is particularly welcome. Although this is a national issue—the figures leave us in no doubt of that—we are not looking at the problem enough, which is different in different parts of the country. Largely, in the north of England, whole communities are blighted by row upon row of empty, boarded-up terraced housing, with a few residents living in between, giving rise to the label of “rotten teeth roads”. These have become areas where people no longer want to live, largely due to the loss of jobs nearby. The sad thing is that they have become a symbol of the decline and dereliction of once-thriving communities.
In rural areas, as has been mentioned, the large number of second homes is a cause for concern, though perhaps different in nature and with differing consequences. The problem in prosperous parts of the country, in particular the capital and the south-east, is that of buy-to-leave, of which we are all aware. Then, of course, there are the sporadic properties present in every council area and ward. These add up to a significant number, but they are small in number, particularly for most district councils, which I suspect is why they are not always a top priority. It is inconceivable that a small rise in council tax will affect the oligarchs and multimillionaire investors, so please let us not claim that it will make a difference to the buy-to-leave empty homes. The problems of rotten teeth roads will not be solved either, as it requires considerable political will from councils and successive national Governments to reverse this serious decline in some parts of our country.
In my view, the rhetoric surrounding the Bill will not live up to the reality, although we do clearly support it. The onus for bringing empty homes back into use lies with councils, and some are undoubtedly doing an excellent job, particularly in the north, where the problem is far more acute. From my experience of running a council, I know that while it is easy to say that we must tackle the problems of empty homes, in practice doing so is massively resource-intensive and time-consuming, with no certainty that time, effort and money will lead to a positive outcome. All too often in the two-year battle with the home owner, councils have gone to court and come back disappointed. I will never forget a case we had, where the lady in question, who lived in a rather lovely farmhouse in Surrey, used to come back to her property in Watford and sleep there with no heating, electricity or water for a couple of nights a week a year. She made sure she knocked on her neighbours’ doors so they all knew that she was still coming back. We lost that one. I would like the Government to commit to exploring ways to secure better outcomes and look at why the empty dwelling management orders, or EDMOs—the intention of the Labour Government was correct: they were meant to be easier to administer and better than compulsory purchase orders—are not working.
The Bill proposes a fiscal measure regarding council tax, so what else could have been done fiscally? I believe the premium needs to be steeper to have any significant impact at all, increasing with the length of time that the property has been vacant. I hope it is not too late to consider that. Also, lowering the rate of VAT on refurbishment and renovations would incentivise owners to get on with bringing their property back into use. Would the Government consider ending the loophole in the compulsory purchase order process, where the owners of empty properties get a bonus of up to £75,000 if councils exercise compulsory purchase orders?
Would it be possible to rationalise the law to give councils simple, consistent rules that provide an unqualified right to recover taxpayers’ money spent on enforcement and the up-front costs associated with things such as EDMOs? Current rules for cost recovery vary from one piece of legislation to another. Surely the community interest in the property should take precedence over all others, so that any debt to the local authority arising from its intervention would have the first call on any equity should the home be sold. With an EDMO, local authorities turn an unproductive asset into one that earns money for the owners, yet council tax payers are unable to recover the up-front costs.
I also have doubts about whether the data on empty homes is actually correct. As has been mentioned, since the introduction of the premium rate in 2013, there is absolutely no incentive for a home owner to declare that a property is empty. Why would you if it meant you had to pay more council tax? Your Lordships may be surprised to hear that the current fine for not declaring your property empty is a hefty £75. Surely that needs a considerable hike. Is it not a form of tax evasion? In addition, the valuations office has the power to remove many homes from council lists altogether—thus taking them out of the figure—if they are deemed derelict and uninhabitable and therefore no longer eligible for council tax. So the figure is probably much higher, and some of the worst properties could lie empty for years, having been moved off the books. Whether these properties are counted in or out could account for the discrepancies in the figures we all look at when we are doing our homework, collected either by the ONS or through FoI requests. Perhaps it is time for this loophole to be closed. The danger here is that, the worse the property gets, the less pressure there is on the owners to do anything; in fact, they can be exempt indefinitely. There is no incentive at all to improve the property.
It is still the case that homes can remain exempt from council tax following the death of an owner until probate is granted. In my experience, some of the worst eyesore properties are in this category, as a result of deliberate inaction by whoever was responsible for securing probate. Coincidentally, I was door knocking in my patch on Friday night and a gentleman on Kingsfield Road said to me, “Don’t knock next door, the old lady’s died”. I said, “When was that?”. “Six years ago”. I inquired further, knowing that this is an interest, and it is a family dispute. They are not settling and they are not prepared to move things on. Is it time for a time limit for such situations, rather than allowing them to continue indefinitely?
Finally, does there not have to be an acceptance that housing is an essential part of the nation’s infrastructure and that maintaining it and improving it to an adequate standard in some cases requires central government investment—perhaps, in some parts of the country, significant investment? Otherwise, councils, particularly smaller district councils, at a time of severe budgetary pressures, will inevitably feel that tackling empty homes is a high-cost activity with low and uncertain rewards.
The Earl of Listowel (CB)
I declare my interest in the register as a property owner—commercial and residential—and a vice-chair of the Local Government Association. I thank the Minister for introducing the Bill and speaking about the several measures the Government are taking to address the housing crisis.
Baroness Farrington used to speak—on at least a couple of occasions, to my memory—about the impact on families of living in temporary accommodation, particularly on children, having to move from place to place and from school to school, suffering disruption to their vital education. I have spoken a number of times to mothers who live in temporary accommodation and heard about the misery of that experience, the uncertainty about where they will be living next and when they will next have to move, and the pressure on their families. I was speaking to a grandmother living with her teenage daughter and her infant granddaughter in one room; they were moved every two or three months in one year. Thankfully, she is settled now. Then there is the isolation that these parents—although I have spoken particularly to mothers—often experience, whereby they may be separated from their friends, family and community because of the shortage of housing.
Given the measures the Government are taking, I get the sense that they recognise the gravity of the problem and are trying to tackle it aggressively, which I warmly welcome. I noted that in the briefings, the Local Government Association highlighted the need to look again at whether councils might be allowed to borrow to build. I hope that the Minister is keeping that under consideration.
I want to say a little about local authority funding, which comes under the Bill. I welcome the fact that some additional funding may arise from Clause 2. I am not sure how significant that will be but any contribution is welcome. We will want to ensure that under Clause 1, we do not impose additional burdens on councils. As your Lordships are well aware, there has been a 30% to 40% cut in local authority funding in recent years. I know that has taken place in a difficult world economic context.
However, speaking as treasurer of the All-Party Parliamentary Group for Children, I point out that we have been taking evidence over the last two years about the impact on access to child protection services—the access to early and later intervention for children in vulnerable families. They are a small proportion of the whole local authority population, at 1% or 2%, but they demand huge inputs of investment from local authorities. Huge amounts of local taxpayers’ money are going to those children and families. The evidence we have heard over the last two years is that the non-statutory services—the ones which local authorities are not required to provide, such as early intervention—have inevitably been reduced. What have been maintained to a significant degree are the statutory services, which come in when the family is in deep trouble and the child may be seriously at risk and even be removed. Of course, that is exactly the opposite direction from where we really want investment to go. We want it to go into early intervention so that we never have to get to that later stage of a child needing intensive support or being taken into care. This is just one aspect of why it is so important to ensure that we keep looking at the funding of local authorities and why I welcome the opportunity in the Bill to increase to a degree that funding.
One example of the strain that local authorities are under is how often directors of children’s services are changing. On average, in that immensely challenging job, they change every three years. It is not all about money but a part of it is about trying to do the best for these families in a restrictive financial environment. I know that the Minister for Children is listening carefully to these concerns. The All-Party Parliamentary Group for Children will produce a report later this month, which I know he will look at carefully. I expect that the members and officers of the parliamentary group will wish to speak to the Minister, so I give him notice that we will contact him so that we can discuss these concerns.
I welcome the Bill and the work the Government are doing to increase the housing supply for all families and individuals in this country. I look forward to the Minister’s response.
Lord Campbell-Savours (Lab)
My Lords, in the gap I want to embroider a comment made by the noble Earl, Lord Lytton. As I understand it, since 2013 local authorities in England have had the power to charge a council tax premium of up to 50% on long-term empty dwellings—that is, homes which have been unoccupied and substantially unfurnished for two years or more. This premium is in addition to the usual council tax charges applied to such a property.
I want to go to the mathematics of this. If the council tax is £1,500, at the moment the charge would be £2,250 if the local authority took the option up. If the charge was at 100%, it would be £3,000 and if it was at 200% it would be £4,500, so we would be talking about the tripling of council tax on a property—from £1,500 to £4,500. I wonder whether the Government have thought through the consequences of that.
Many home owners, or people who own property, will think, “I’m not going to pay £4,500 whereas at the moment I’m paying £2,250”—if it has been declared, because obviously, local authorities will be quite diligent in gathering this revenue—“I’ll turn my property into a second home. All I have to do is meet the term ‘substantially unfurnished’”, which two Members of this House have asked to be qualified. Is there not a danger that a very large number of people owning property that is empty will say, “My property is no longer unoccupied; it is a second home property”? They have a real incentive because the full council tax payment at the moment is going to be tripled. I see the Minister is shaking his head. I asked one of my colleagues on this side of the House, and he agreed with me that it would be tripled. That is how the mathematics work out because of the word “premium”. It is a premium over and above the existing council tax rate, so 200% takes us from £1,500 to £4,500. I am perfectly prepared to be corrected.
Lord Bourne of Aberystwyth
The noble Lord is right that it is a premium but it is a 100% premium, not 200%.
Lord Campbell-Savours
I think that should be clarified because that is the way it is going to be read outside the House. Anyone listening to the debate, given the reference to 200%, would think that it was going to be tripled. If the consequence is property being turned over to second homes, does that not mean that local authorities need clarification as to what “substantially unfurnished” means in law? Otherwise, there may well be a major shift of property from unoccupied to second homes.
Lord Shipley (LD)
My Lords, I remind the House that I am a vice-president of the Local Government Association. Like colleagues on these Benches, I welcome the Bill and the steps it takes, both the business rates element and the increased powers proposed for local authorities on the amount of council tax that they can levy on an empty dwelling. I agree with the noble Lord, Lord Patten, who reminded us that the House of Commons did not propose any amendments to the Bill and that there was all-party agreement. Indeed, the Bill has benefited from the pre-legislative scrutiny that took place at that stage. It raised a number of issues, for example the potential financial loss for local billing authorities and whether rarely occupied second homes should be treated in the same way as empty homes. Given the role of this House as the scrutiny Chamber, I hope that it may be possible in Committee to look at a number of these issues. My noble friend Lady Thornhill talked about whether two years should be the limit or whether another figure might be appropriate, and whether the figure of 200%—that is, 100% plus 100%—is the maximum that a local authority could apply. There is a case for looking at whether the total might well be 300%. I look forward to that discussion in Committee. The noble Lord, Lord Campbell-Savours, made a very interesting point about the legal definition of a second home, should someone seek to transfer their primary home to become a second home. That is something that I would like to think about further.
As the Minister has explained, the basic aim of the Bill is to discourage home owners from leaving properties empty for long periods without penalising those who are unable to sell as a result of market conditions or who face genuine delays in probate. For that reason, it is welcome. As several noble Lords, including my noble friend Lady Pinnock and the noble Earls, Lord Lytton and Lord Listowel, have pointed out, the context is the state of local government finance, the future organisation of business rates, and funding local services. There are now clear difficulties in the retail sector over business rates. There is a fair funding review, and inevitably the Government are now reviewing the future of business rates. However, the noble Earl, Lord Lytton, pointed out that the system is not fleet of foot, and indeed it is not.
Clause 1 relates to the rating of property in common occupation. It rightly corrects the problems caused by the 2015 judgment, which has cost some businesses not only a backdated increase in their bills but, in some cases, the loss of their small business rate relief. The Bill is the correct response to that judgment. Put simply, contiguous hereditaments should be counted as a single hereditament.
I join the noble Earl, Lord Lytton, in saying that it is a trifle unreasonable—I think those were his words—for the Government to assume that building authorities have put away shedloads of money, given the 2015 judgment. He is right; I am sure they have not been putting away shedloads of money. However, there is a discussion to have about this issue, and it was raised several times during the passage of the Bill in the other place, not least at Third Reading. I hope very much that the Government will be able to come forward, perhaps in Committee, with a greater clarification that local building authorities are not going to suffer from the Bill becoming law.
I have four very brief points towards the conclusion on the council tax issue. First, I think it is right to raise the maximum premium on council tax that can be levied by a local authority to 100%, making 200% in total, where a property has been empty for two years or more. I want to associate myself at least with the definition of “long-term” as two years or more. If we get agreed definitions like that, it makes our discussions much easier.
My noble friends Lady Pinnock and Lady Thornhill both said the Bill would probably not make a great deal of difference in terms of council tax. I want to agree with them but I also want to agree with the noble Lord, Lord Patten, who was right when he said that this is a big incremental step. The sense of direction is the right one and a clear message is being sent. In future, therefore, there may need to be further fine-tuning of the law. However, the principle that the Government are trying to get across is important. It is not just that empty properties need services—they do; they need policing and they may need fire services if they are empty—but they can also cause a nuisance to neighbouring properties, so the steps taken since 2013, in the days of the coalition Government and after, to introduce both the 100% charge and the principle of a premium on properties that are unoccupied and substantially unfurnished, have been the correct ones.
The Minister reminded us about the total number of homes empty for over six months, which is not long-term. Six months is a comparatively short period in reality. I associate myself again with the comments of the noble Earl, Lord Lytton, when he said that we need to be a bit clearer about what the problem is that we are trying to solve with regard to empty properties. The figure of 205,000 is a comparatively low percentage, at around 1% of the 20 million-odd properties in the country. It is the case that since 2010 the total number of homes—
Lord Patten
I am so sorry to interrupt, particularly as the noble Lord has just been so charming about me. It may be a very small percentage of houses that are vacant but the number of 205,000 or so is what we are struggling to build in England in any one year, so it is a year’s worth of new homes.
Lord Shipley
My Lords, I would like to agree with the noble Lord: it is. However, that is still only 1% and the figure is for six months, not two years. In my view, the real problem is not the six months, which can often be the consequence of genuine delays of probate. The important thing is that the sense of direction is right. We need to end the scandal of empty homes deliberately left empty when they could be occupied by someone. Often, that relates to the buy-to-leave-empty market.
Does the Minister have figures—if not now, perhaps later in writing—for the breakdown of the reduction by 90,000 or so empty homes from 300,000 in 2010 to 205,000 in 2017? How many of those are in social housing, where empty homes are often referred to as voids; how many of them are owner occupied; how many are in the private rented sector; and how many are in the buy-to-leave-empty sector? That is important because when we consider whether there should be a rate of 300%, not just 200%, I would be thinking of those who have bought to leave empty as an investment to attract a higher level of taxation. I hope that we can discuss that in Committee.
Finally, I hope that we shall have a discussion on second homes in Committee. We have been reminded of the difficulty of identifying what is an empty home and what is a second home. If people do not tell you which they are, it is hard to find out. We need to explore in greater detail how the Government might manage to do that. As the noble Baroness, Lady Thornhill, pointed out, this is a resource-intensive exercise and we need to know better why the empty dwelling management orders do not work as well as we thought they would when they were introduced.
Despite these caveats, which I hope that we can discuss in Committee, the Bill should command the support of your Lordships’ House, and I hope that it gets a fair wind, and quickly.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, first, I draw the House’s attention to my registered interest as a vice-president of the Local Government Association. Generally, the Opposition support the changes proposed in this three-clause Bill. That is not to say that we do not have questions, and we will be moving amendments both in Committee and on Report as we consider it in your Lordships’ House.
As outlined by the Minister, Clause 1 addresses the Supreme Court decision on the staircase tax relating to how unconnected units occupied by the same business are treated. The measure will put businesses in no worse a position than they would have been in before the court ruling, by retrospectively reinstating the business rate valuation practice that applied prior to the Supreme Court judgment.
As we have heard, the practice of the Valuation Office Agency since the judgment has been that separate units of property in a shared building should be treated as separate rating units. In the autumn 2017 Budget, the Chancellor of the Exchequer announced the reversal of this position and the return to previous practice, and Clause 1 implements that.
Business would further be allowed to ask the Valuation Office Agency to recalculate valuations so that business rate demands would be based on previous practice and backdated to April 2010. The Budget papers confirm that local government will be fully compensated for this loss of income, but the Government have since changed their mind and view the extra income that local government may have received as an unexpected windfall, with no associated liability for compensation for councils.
Can the Minister set out how he will ensure that local government will be, at least, no worse off as a result of the Bill? What sort of assessment are the Government undertaking or have they undertaken of the impact on local authorities piloting the 100% business rate retention scheme in 2018-19? Can he confirm that those authorities will not have to refund money that they never gained as a result of the judgment? Can he also state clearly whether the Government are making any additional funding available to local government as a result of the consequences of this ruling? The Federation of Small Businesses has illustrated the problem facing smaller firms that necessarily operate in larger premises but do not qualify for business rate relief. Perhaps the Minister can comment on that in response to the debate.
Far more needs to be done to protect the high street in our town and city centres. Business rates are a significant cost and can be the difference between a business surviving or failing today. This is a matter we have discussed many times in your Lordships’ House. The noble Lord, Lord Naseby, who is not in his place, has raised it many times, particularly at Question Time, and I have supported him in his endeavours. The noble Baroness, Lady Pinnock, also referred to the issue in her remarks this afternoon.
We have seen some of the largest companies get away without paying their fair share of tax across a whole range of taxes, while high street-based businesses, which are central to our communities thriving, are taxed through business rates before they earn a single penny. That imbalance between companies is unfair and needs to be addressed.
The noble Earl, Lord Lytton, is very experienced in these matters, and his contribution to these debates will be invaluable. He raised a number of very important technical issues that need to be explored further as we consider the Bill. I certainly welcome his contribution at further stages.
Clause 2 will give local authorities the power to double the council tax premium on homes deemed long-term empty by increasing it from 50% to 100%, in addition to the usual council tax charge that applies to that property. That is a welcome move, and I hope it will prove an incentive to the owners of long-term empty properties to bring them back into use. I can see a case for increasing this further when properties have been left empty for two, five or maybe even 10 years. I shall move amendments to enable the House to debate that in Committee and on Report. Some of those concerns were outlined by the noble Baroness, Lady Pinnock, and raised by my noble friend Lord Campbell-Savours. It is an important area that we need to get right.
The noble Baroness, Lady Thornhill, referred to local government’s powers to charge additional council tax for empty properties. I very much agree with her comments about the difference between the north and south. There are issues in London and the south-east that may not apply in the north, and we need to explore those fully.
In this House, we regularly discuss housing, the shortage of housing, the failings of the Government and their continued resistance to local authorities to playing their full part in building homes. The Government will not meet their targets unless they get local government fully engaged in building. We have over 200,000 empty properties in England; I very much agree with the noble Lord, Lord Patten, that we should get it down to a much lower figure. I think he mentioned a figure of just over 100,000, and we need to get government working together to achieve that.
We also have 120,000 children not living in permanent accommodation. The noble Earl, Lord Listowel, made the important point about not placing additional burdens on councils, because of the importance of early intervention when dealing with children. Councils’ funding is now so stretched, and we know that many are already struggling to do all the things they need to do.
We are one of the richest countries in the world, and homelessness is at truly shameful levels. The Government have to do more to get a grip on the situation. While not part of the Bill, the Government should consider what they can do to allow councils to keep 100% of the capital receipts from the homes sold under right to buy to help to alleviate the problem by reinvesting that in new housing.
Housing is one of the most pressing issues facing this country—I think we all agree on that—and eight in 10 people think the Government ought to do more to address the housing crisis. Those calls are led by the Local Government Association, led by the Minister’s noble friend, the noble Lord, Lord Porter of Spalding, who agrees that more should be done. It would like the Government to go further and give councils greater power to borrow, build and deliver the homes that we need, not on a case-by-case basis, but by trusting local authorities to understand their areas and get homes built quickly. I agree with the Local Government Association’s comments on these matters.
This is a small, three-clause Bill, but it is important none the less. As I said at the start of my contribution, I am very happy to support it. We have some concerns and suggestions and will propose them in Committee and on Report, but we wish the Bill well at this stage.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have participated in the Second Reading debate on this important, though short and focused, Bill. It seems to me, hearing the productive and helpful speeches from noble Lords around the House, that it has strong support. In so far as there was criticism—there was a little bit—this focused on the things that the Bill does not do. There are an awful lot of things that it does not do, because it is a very short, focused Bill. As the noble Lord, Lord Kennedy, rightly said, it is essentially a three-clause Bill.
I will deal with contributions from noble Lords in the order in which they were made. I will follow up the debate with a letter on points which I have missed—I am sure that there will be some—and where there are things where I do not have the answer to hand. There are some things which we will probably want to develop in Committee and thereafter.
I thank the noble Baroness, Lady Pinnock, for her contribution. I agree that there are some council areas where this will not make any difference to current practice. I bow to her superior knowledge of Kirklees which, based on what she said, is one of those areas. In general terms, there will be many councils in the north of England, though not all of them by any means, that will not see any difference from this and will not want to proceed from a 50% premium to a 100% one. That is a matter for them; this gives discretion. Similarly, there will be many councils in the south of England that do want to use it, but by no means all. This is patchy; there will be parts of southern England where this will not be helpful, just as there will be parts of northern England where it is.
The noble Baroness and other noble Lords referred to the issue of the high street and online businesses. She and others will know, from previous contributions, that the Government are looking at this. Had we sought to bring it into this legislation, it would have made the Bill much later arriving because we would have had to do consultation and so on. This Bill is focused and we want an immediate change. So far as I can gauge, the House is very supportive of that, for which I am grateful.
To clarify a point on which there was some confusion, we are talking about an increase in a premium of 50% to 100%, based on a 100% charge already—it takes it to 200%, not 300%.
Lord Campbell-Savours
I got my maths wrong—it was based on an amendment, which I thought had been carried in the Commons but was not. However, the principle still stands on the switch to second homes.
Lord Bourne of Aberystwyth
I thank the noble Lord for his disarming contribution. I fully accept that various figures have been bandied about.
The noble Baroness and other noble Lords asked for information on the definition of “empty home” and “substantially unfurnished”. I will ensure that that is covered in the write-round letter, but the Bill does not alter that—it leaves it as it was. There will be substantial case law on those issues which will have an impact in this area, but it is not changed by this legislation.
I thank my noble friend Lord Patten for his contribution. He is absolutely right that this legislation did command all-party support in the Commons, where no amendment was moved, let alone made to it. He is absolutely right that this is a work in progress. We have got the figure down over six months from 300,000-plus empty dwellings to about 210,000. There is much work to be done. If we can squeeze it further and get more out of that, it would mean additional homes for people: this is the pot of gold. I am not suggesting that this is a silver bullet, but it makes a significant contribution. We can do much better than a 200,000 target. I think we are looking at something like 100,000, but I will cover that in the write-round letter.
My noble friend referred to the possibility of an escalator, depending on how long a property was vacant. Other noble Lords, including the noble Lord, Lord Kennedy, also touched on that, and I have no doubt that we will be coming back to it. I am also grateful to my noble friend for his general encouragement.
I thank the noble Earl, Lord Lytton, for his kind comments about our meetings on broader issues to do with valuation and the valuation office. I reassure him that I also have a meeting coming up with my honourable friend Rishi Sunak to talk to the valuation office about some of those broader issues. He is absolutely right when he referred to the decision in Woolway v Mazars as an aberration—that is how everybody has regarded it. All political parties and all the relevant bodies and practitioners in this area have regarded the decision as an aberration. Against that background, we would say that we have indicated that we will reverse this decision.
On shedloads of money, I do not think that anybody has referred to that. I have been very much at pains to say that a small number are affected, and again, in the write-round letter I will try to address how we can look at the numbers affected. However, we are not looking at shedloads of money, and it will be fairly evenly spread around the country. The noble Baroness, Lady Pinnock, suggested that they might all be in the same constituency. I would be a little surprised if that were the case, but in any case, we will look at that to provide some reassurance on the issue.
On the point the noble Earl made about cowboys, I very much look forward to joining a posse with him to see how we can deal with that issue, and I am sure that that will be subject to discussion. I come back to the point that this is not a silver bullet but that it will make a difference, which is what we are seeking to do here.
I turn to the noble Baroness, Lady Thornhill, with her experience of Watford and of leading that council. I take seriously what she says, and she was generally supportive of what we are trying to do. She suggested a suite of fiscal measures which, again, I will try to deal with in the write-round. Again, as she will know, that would involve much more engagement with the Treasury and much more consultation. It is therefore well beyond this piece of legislation, as I have no doubt she appreciates, but nevertheless, based on her experience, I take very seriously what she said. In particular, when we all go canvassing, we always come across an example that is very much live in one’s mind. I note what she said about the six years’ probate issue—the Jarndyce v Jarndyce of Watford. We will see whether we can say something in the write-round about how that probate operation works.
I thank the noble Earl, Lord Listowel, very much for his support and his kind words. He reminded us of the late-lamented Lady Farrington and all the work she did in this area. It was indeed considerable and we miss her contributions, as we miss her. I thank him very much for what he said about the importance of noting the impact this will have on families and children, the wider issue of local authority funding of children’s services, and the difference between statutory and non-statutory—which again, I take seriously, and which I will take back.
As always, the noble Lord, Lord Campbell-Savours, comes forward with something incisive about the issue of second homes and the definitions of “substantially furnished” and “empty” properties. As I say, I will seek to cover those in the letter; although it is unaffected by the legislation, it is nevertheless an important issue. On that issue of interaction with second homes, we are not seeking to deal with second homes here. This is somewhat different; indeed, this could be about a building owned by an institution, and essentially, it might not be anybody’s home at all, although empty. In the Commons, my honourable friend Rishi Sunak said that we would make a Statement on the second homes situation, because there is an issue with people using empty homes as something of a tax loophole, so we will want to say something about our future intentions. I hope to say something about that no later than Committee, but it will not affect this legislation. It is the subject of a much broader issue about second homes and how we deal with that issue.
As always, I thank the noble Lord, Lord Shipley, very much for his helpful comments and his indication that this is—to use his words—the right sense of direction. He referred to the question of judgment here about what is the right level of premium. Some people suggested a 300% premium, or I think they did, which would make a 400% charge, as it were, which would be significant. The noble Lord was much more modest in his contribution with regard to what we are looking at here. Again, I am sure that that is something that we will engage in as we go forward to Committee and beyond.
The noble Lord asked for a breakdown of the reduction of approximately 90,000 empty homes in the six-month figure. He will not be surprised to hear that I do not have the figures to hand, but I will seek to provide further information to noble Lords on those issues ahead of Committee.
There was also a question about empty dwelling management orders, which I have no doubt we will also be discussing in Committee.
I thank the noble Lord, Lord Kennedy, very much for his supportive comments and for raising the important question of how these measures will operate. He also talked about what the Bill does not do and about the need to get the level of premium absolutely right—I understand that—as well as the effect of Mazars. As I said, I am sure we will want to come back to those matters in Committee.
Lord Campbell-Savours
Perhaps I may raise with the Minister a concern that I have. We are entering a very difficult market in some parts of the country. What will happen when a property has not been sold after two years? If the owner of the property is driven into selling it, they may well end up in negative equity. It might be better for them to retain the property and avoid a substantial loss. Has that sort of problem been thought through in deciding on all this?
Lord Bourne of Aberystwyth
I thank the noble Lord for a very helpful intervention. One exemption which currently applies with regard to the 50% premium and will apply similarly with the 100% premium is that a local council does not need to apply the premium to people who are seeking to sell their property. There is considerable discretion as to how local councils can apply the premium, and obviously circumstances will differ from area to area. Therefore, I think that the noble Lord will find that that has been taken account of.
With that, I am very grateful to noble Lords for their contributions.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Tuesday 19th June 2018
(6 years, 5 months ago)
Lords ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 107-I Marshalled list for Committee (PDF, 75KB) - (15 Jun 2018)
The Earl of Lytton
“( ) Any change made in the 2010 Rating Lists to the existence or extent of a hereditament by virtue of this section applicable on 31 March 2017 must also be given effect by the Valuation Officer in the 2017 Rating Lists, unless physical circumstances affecting the constitution of the hereditament changed on 1 April 2017.”
The Earl of Lytton (CB)
My Lords, I know that after Brexit, the question of business rates and council tax must be one of the high points of your Lordships’ week. With that in mind, I start by declaring my interests as the owner of business property and the occupier of business premises, my professional interests, and the fact that I am a vice-president of the Local Government Association. Although business rates, the subject of this amendment, do not quite have the pull of Brexit, they are nevertheless of great significance to businesses. I suspect that, like Brexit, they will be a matter that we will still be debating long after the initial dust has settled. Moreover, the issue will be debated whatever the outcome of our relationship with Europe.
I pay a brief tribute to my two external advisers who have been helping me with these amendments, and to staff in the Minister’s department for their willingness to discuss, both formally and informally, matters to do with business rates that have concerned me over many months. I have a sort of private pact that I have just agreed with the noble Lord, Lord Kennedy of Southwark, to keep things brief, and I will do my best in that regard.
I hope Amendment 1 will be seen for what it is: a means of preventing unfairness and an aid to streamlining. I should explain that the Bill provides for business rate payers to seek to amend principally the 2010 list and later assessments, to which the Bill applies, affected as they were by the Supreme Court case of Woolway v Mazars. However, while under the Bill the facility to amend appears on the 2010 valuation list, a successful application under that list does not automatically translate into the assessment in the 2017 list. To me, this seems an oversight. In the absence of a material change of circumstances, the 2017 list should use the same general basis, valuation levels apart, as that which applied to the 2010 list.
This matters to ratepayers, billing authorities and business rates administration more generally. Amendment 1 seeks to remedy the matter by allowing the automatic carryover of an adjustment made pursuant to the Bill on a 2010 list assessment or assessments into the 2017 list. Without this provision, the business rate payer will have to make a de novo application under the 2017 list using the government portal that operates the system known as “check, challenge, appeal”. Noble Lords will know that I have raised significant concerns about the “check, challenge, appeal” procedure, principally at the end of last summer in a debate I secured for the purpose. Although it has improved, and I acknowledge that improvements continue to be made, for appellants it remains a barrier to fair access in terms of both the need to register the timeframes and the complexity of sorting out the various stages, especially if the matter is not considered clear-cut or is contested by the Valuation Office Agency. I once had the privilege of working for its predecessor organisation, the Inland Revenue Valuation Office, for nearly seven years.
I do not believe it should be necessary to jump through these hoops under the 2017 “check, challenge, appeal” process where a simple administrative adjustment would suffice. That is the purpose of the amendment and I beg to move.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, briefly, the amendment in the name of the noble Earl raises an important point and I am happy to support it. As he said, this is a simple administrative change that could help people.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I am grateful to the noble Earl, Lord Lytton, for his amendment and the noble Lord, Lord Kennedy, for his contribution.
The measure we will deliver through Clause 1 has been welcomed by stakeholders. It will return the practice of the Valuation Office Agency back to the position that applied before the Supreme Court decision in Woolway v Mazars. As highlighted by the noble Earl, Lord Lytton, it is important that we still consider how this measure will be implemented. In December last year, my department issued a consultation document that contained a draft of Clause 1 and set out how we plan to implement this change in the law. As we explained in that consultation, to protect ratepayers from unwanted backdated bills on the 2010 rating lists, we will allow ratepayers to choose whether they want their bill changed before 1 April 2017. We will achieve this by allowing a new right of appeal on the 2010 rating list for those ratepayers affected by Clause 1. I understand that my officials are already working with the Rating Surveyors Association and other professional bodies on the regulations to deliver this new right of appeal on the 2010 rating list.
For the 2017 rating list—about which I think the noble Earl, Lord Lytton, is concerned—the Valuation Office Agency will update the list as it becomes aware, through ratepayers and local authorities, of assessments impacted by the change in the legislation. Keeping an accurate rating list in this way is a normal part of the business rates system. Where appeals on the 2010 rating list mean that the valuation officer believes that the 2017 rating list also requires changes, I assure the Committee that these will be resolved by the Valuation Office Agency as part of its normal duty to maintain the list. Ratepayers will also be able to request a prioritised check of their 2017 rateable value if they believe it has been affected by the ruling.
From the consultation, we have seen widespread support for this approach to implementation. The amendment before us would require the valuation officer to make consequential changes to the 2017 rating list after they have resolved a case on the 2010 rating list. As I have said, it is the intention of the Valuation Office Agency to make these necessary changes. What is more, the requirement of the Valuation Office Agency to correct the 2017 rating list is already captured in primary legislation. That is significant. Under Section 41 of the Local Government Finance Act 1988, the valuation officer is required to compile, and then maintain, local rating lists. Therefore, if through the settlement of an appeal on the 2010 rating list the valuation officer concludes that the 2017 rating also needs to be changed, they are duty bound to make that change. I can offer that legislative assurance. With those assurances, I hope the noble Earl, Lord Lytton, will agree to withdraw his amendment.
The Earl of Lytton
My Lords, I thank the Minister for that very helpful reply. From what he has said, I appreciate that making these consequential amendments is a matter of the general duty of the Valuation Office Agency, as it deems necessary. I certainly did not intend to press my amendment at this stage. I will simply say this: resources that are destined to continue being cut year on year as part of a planned resource reallocation are of concern to practitioners who have to deal with the Valuation Office Agency. I hope these cuts will not mean that it is unable to make these sorts of consequential changes. On the basis of the Minister’s reassurance, I beg leave to withdraw my amendment.
The Earl of Lytton
“( ) Any refunds payable by a billing authority by virtue of assessment alterations directly consequential upon this section must be reimbursed to that authority by the Exchequer.”
The Earl of Lytton
My Lords, I shall speak to Amendment 2, which is grouped with Amendment 4. In a sense, it is covered partly by subsection (2)(d) of the proposed new clause in Amendment 4 in the name of the noble Lord, Lord Kennedy. I will let him speak to that at the appropriate moment.
I fully expect the Minister to say that under no circumstances will the sort of refunds that I am looking for be refunded to billing authorities. As I understood it—perhaps I used a somewhat extreme example at Second Reading and I will not use that one again—it is assumed that immediately after the Supreme Court case of Woolway v Mazars, billing authorities somehow swept into action like avenging angels to deal with all the various assessments that would have qualified under that, and therefore it is supposed that they might have made some sort of gain. I do not believe that has actually happened, or that billing authorities banked this dividend to any significant extent. That is a matter that perhaps warrants further investigation as to exactly what the situation is financially, but they might none the less find, as the effects of the Bill work their way through the system under the 2010 valuation, that they face some sort of deficit. I felt it was unreasonable that billing authorities should suffer a material loss in that respect, so that is what Amendment 2 would deal with.
I support the noble Lords, Lord Kennedy and Lord Shipley, on Amendment 4, which is grouped with my amendment, because one of the points made to me by the Institute of Revenues Rating and Valuation was that there has been very little assessment of the precise impact of much of this. That is a mistake and a lacuna. Local government finance—from what I can gather, not being directly involved with it myself—is in many cases in a critical situation. Budgets are on a knife edge and even seemingly small amounts—we do not really know what the magnitude is of all this—need to be dealt with. I therefore support that amendment, and in doing so I must declare that I am an honorary member of the Institute of Revenues Rating and Valuation, having been, for much of my working lifetime, an ordinary subscribing member. I beg to move.
Lord Shipley (LD)
My Lords, I will speak to Amendment 4, on which my name appears, and remind the House that I am a vice-president of the Local Government Association. The case was very well put by the noble Earl, Lord Lytton, a moment ago. I am struck by the fact that this amendment, in the names of the noble Lord, Lord Kennedy of Southwark, and myself, seems to contain a reasonable set of proposals. I am particularly concerned by the noble Earl’s assertion that the professional bodies are saying that there has been little assessment of the impact and that we ought to know more. I have a particular concern about the authorities that are piloting the 100% retention of business rates. I very much hope that they will not be put in a position of having to refund more money than they originally gained. So this amendment—a probing amendment, in my view—seeks to ensure that the consequences of the Bill are well understood and reported to Parliament.
Lord Kennedy of Southwark
My Lords, I remind the House of my relevant interest as a vice-president of the Local Government Association. Amendment 2 in the name of the noble Earl, Lord Lytton, goes to the heart of the first part of the Bill, namely the positions some local authorities find themselves in—having to make refunds and potentially being out of pocket. In the 2017 Autumn Budget we heard the Chancellor of the Exchequer announce, following the decision of the Supreme Court, a return to the previous practice, and Clause 1 does just that. Business would further be allowed to ask the Valuation Office Agency to recalculate valuations so that business rate demand would be based on the previous practice, backdated to April 2010.
The Budget papers confirmed that the Government would fully compensate local government for loss of income—but then they had a change of heart and decided that if they had the extra money it was an unexpected windfall. The council would be very pleased about that, but if it had to pay anything back there would be no compensation for the authority concerned. The noble Earl’s amendment would require the Government to do exactly what they said they would do in the first place, and it has my full support.
Amendment 4 in my name and that of the noble Lord, Lord Shipley, would place in the Bill a requirement for the Government to undertake a review of the impact of the provisions in Clause 1. That seems a sensible and proportionate thing to do. The amendment would require the Government to have a review, sets out what it should cover and requires that the Government should lay it before both Houses of Parliament—but nothing beyond that. They would have to do nothing other than lay the review.
I hope that when the noble Lord, Lord Bourne, responds to this probing amendment and the noble Earl’s amendment he will see the point that we are trying to highlight. We are trying to give the Government the tools to do the analysis to make sure that they have got this right.
Lord Bourne of Aberystwyth
My Lords, I am most grateful to noble Lords who have spoken on this amendment and for that very considerate point from the noble Lord, Lord Kennedy, that he is trying to help the Government. I shall ensure that that is underlined when I get my copy of Hansard, and I appreciate his general approach on these issues.
I am grateful to noble Lords for raising this matter. The amendments before us would require a review of the impact of Clause 1. I agree with the point made many times by the noble Lord opposite; we probably have rather too many reviews, and this can sometimes get a little top-heavy. However, such a review would require compensation to be paid to local authorities for any refunds made to ratepayers as a result of Clause 1.
To assist the Committee in considering this, I will explain a little about how Clause 1 will be implemented by the Valuation Office Agency. Before I do, I remind the Committee that, as the noble Earl quite correctly anticipated, the Government do not intend to compensate local government for the reductions in rateable value that will flow from the implementation of Clause 1. This is not because we cannot estimate or measure those impacts—although there are considerable challenges in doing that. We are not compensating local government in this instance because the revenue it might have received from the Supreme Court decision in Woolway v Mazars was unexpected. Indeed, all professional bodies involved with rating, including the Rating Surveyors’ Association, viewed the Supreme Court’s decision as a surprise and an aberration: indeed, neither party to the case was arguing for it. It came as a surprise to political parties, too.
The decision disturbed the settled practice of rating as understood by valuation officers and ratepayers alike for decades. Therefore, any additional income was indeed a windfall. The noble Earl seemed perhaps to suggest that, if there had not been a refund or reduction, there was still the prospect of some obligation to repay. That is not the case. If the money has not been expended, there can be no question of any repayment. We are merely returning this windfall to ratepayers—something that I think is widely welcomed. In some cases these ratepayers have also lost small business rate relief as a result of having their property split. We do not believe that it is fair for these hard-working small businesses to be hit by large backdated bills, and we do not believe that it would be right for local government to benefit from revenue accrued in this way.
The amendments would require a review of the impact of Clause 1 and compensation for any refunds under it. Put simply, the impact of Clause 1 is to return the law to what it was always understood to be before the decision of the Supreme Court. It follows that, taken together, the combined financial impact of the Supreme Court decision and Clause 1 will therefore be neutral. So, in looking at just the impact of Clause 1 we are, in fact, looking at only part of the picture.
For those businesses whose rateable values were not adjusted by the Valuation Office Agency following the Supreme Court decision in Woolway v Mazars, there will be no change. The only situation in which there will be a repayment of business rates as a result of Clause 1 is where the Valuation Office Agency has amended rateable values to reflect the Supreme Court decision. That will be reversed.
The Bill will also allow those rateable values to be changed so that they once again reflect the practice of the Valuation Office Agency before the court decision. The way in which this will be implemented in practice by the Valuation Office Agency will be different in respect of the previous 2010 rating list compared to the current 2017 rating list. I will go into that in a bit more detail in a minute. I will ask the Valuation Office, because it does seem reasonable, to publish information as a consequence of Clause 1. I will make sure that any information that is readily to hand is published, that noble Lords receive a copy and that we leave a copy in the Library—because that will not involve any unreasonable burden at all.
Since 1 April this year the Valuation Office Agency has been unable to amend the 2010 rating list, other than as a result of an outstanding appeal. These rules protect ratepayers against very long periods of backdating, but they mean that, in this instance, ratepayers would see the benefit of the Bill in respect of the 2010 rating list only if they still have an outstanding rating appeal. Therefore, we will, through regulations and existing powers, allow a new right of appeal on the 2010 rating list for those ratepayers affected by the Bill. I assure noble Lords that it will be possible for local authorities and the Valuation Office Agency to identify these new appeals made as a result of the Bill and see the resulting change in the rateable value on the 2010 rating list. As I say, I will endeavour to ensure that information on that is passed to noble Lords.
These new 2010 appeals will, in part, provide the information sought in this amendment. However, they will not provide a complete picture of the impact, as some ratepayers will choose to use existing 2010 appeals, some of which may also deal with other, unrelated changes to the property or valuation. Therefore, the resulting change in rateable value will not always be an accurate reflection of the impact of Clause 1 alone—it is not necessarily that straightforward. Nevertheless, local authorities will be able to identify the new appeals on the 2010 rating list and see the resulting change in rateable value, and we expect these new appeals will, in part, give a reasonable guide to the impact of Clause 1 on the 2010 rating list.
I fear that it will be much more difficult to track the impact of Clause 1 on the current 2017 rating list. The Valuation Office Agency will implement Clause 1 on the 2017 rating list in the normal course of its business. For example, it may apply the new rules in Clause 1 in the course of putting new properties into the rating list, when correcting rateable values or when reflecting improvements or demolitions to the property. It may do this following a request from a local authority, following a check made by the ratepayer or using its own notices to amend the rating list. Within these different types of cases and different reasons for altering the rating list, the Valuation Office Agency cannot statistically isolate those which are due to Clause 1 alone. To resolve this, the VOA would have to manually examine each change and each valuation and calculate how much was due to Clause 1. Bearing in mind comments made with some justification about the financial impact of some of this on the VOA, this is not something we would want to do: it would be extremely resource intensive. Since this is an organisation responsible for clearing a backlog of 2010 appeals—something it is doing—implementing a new check, challenge and appeal system and delivering a revaluation in 2021, I am sure noble Lords will agree that we should not add to its burden in this way.
I fully understand that local government and others want an accurate view of the impact of Clause 1. I share that desire and have explained to noble Lords why this is so difficult on the current 2017 list. I hope I have reassured the Committee that some information will be made available in respect of the new appeals on the 2010 rating list that will be allowed once the Bill receives Royal Assent. As I said, I will ask the Valuation Office Agency to publish that information.
With regard to the Government’s stance on compensation, this does not signal any departure from the normal approach to compensating local government for changes to business rates introduced through the Budget. In this year alone, we expect to compensate local government to the tune of £1.5 billion for changes to the business rates system announced in previous Autumn Statements and Budgets. I hope the Committee will recognise that the circumstances of the Mazars Supreme Court decision and Clause 1 are very different in respect of so-called compensation. With all this in mind, I hope the noble Earl will agree to withdraw his amendment.
Lord Kennedy of Southwark
Is the Minister saying that the Chancellor did or did not say in the Budget that the Government were going to reimburse local government on these matters? I understood that the Chancellor had announced that the Government were going to reimburse local government but then the Government changed their mind.
Lord Bourne of Aberystwyth
My Lords, I say this with some hesitation because the noble Lord seems relatively certain about what he is saying, but I think I am right that in the 2017 Budget the Chancellor said that we were not going to reimburse local government in relation to this. I do not think that statement had been made before; or if it had, it was only shortly before. But I think in the 2017 Budget he made it clear that we would not be doing so. But that can be checked. As I say, I might be wrong on that.
Lord Kennedy of Southwark
That would be very helpful. Does the Minister have any estimate of the amount of money involved for local government? I accept that people have had the benefit of these sums of money for a period of time but, equally, everyone was surprised by the judgment of the Supreme Court. What are the sums of money involved for local government? They may be negligible or huge. We all know that local government is really pressed in terms of budgets and finance, and things are very difficult, with many competing demands. If it was a large amount of money, that could cause problems.
Lord Bourne of Aberystwyth
My Lords, from what I can gather—admittedly, it is anecdotal, from speaking to local government and getting a feel for this—this position is relatively evenly spread across the country, although focused more in the urban areas, as your Lordships would expect. Again, I cannot give a precise number but I do not think it is a massive one. If I can give a more precise indication, perhaps I will do that in a letter to noble Lords ahead of Report. I do not think it is a massive number, from what I can gather.
The Earl of Lytton
My Lords, I thank all noble Lords who have spoken, and the Minister for his response. In defence of any appearance of lack of numeracy on my part, I say in connection with whether or not billing authorities have gained some windfall that the point outlined by the noble Lord, Lord Kennedy, is correct; namely, the budgetary process does not arise evenly or as an even offset or indeed even in a comparable year. But I do not proclaim to be an expert on local government budgeting and finance—thank goodness. I am only a humble valuer and therefore doomed to perdition for having only managed to get an O-level in ordinary maths. With that in mind, I beg leave to withdraw Amendment 2.
The Earl of Lytton
“( ) The Valuation Office Agency must forthwith upon the coming into force of this section publish on its website such advice and guidance as to the provisions of this section, and such means of identification of the hereditament, as to enable a ratepayer by accessing the online Rating Lists readily to check the status of their assessment and whether the provisions of this section apply to it.”
The Earl of Lytton
My Lords, this is another tidying-up amendment, which is really to ensure that there is adequate publicity for people wishing to avail themselves of the facility under the Bill, bearing in mind that there are a number of very complex matters involved in business rates. The amendment is intended to ensure that the Valuation Office Agency places on its website adequate,
“advice and guidance as to the provisions of this section”,
and the means whereby a business rate payer can make the necessary identification so that they can ascertain whether—and, if so, how—the provisions apply to this.
The wording is deliberate in setting out the publication process,
“forthwith upon the coming into force of this section”.
The reason why I say so is that at the end of last summer, when we discussed matters to do with business rates, I was given to understand that there would be guidance—for instance, on the question of how fines would be applied for misdeclarations of fact in going through the “check, challenge, appeal” process. I have not seen that information yet and I do not know whether it is available. I am not voicing this as a criticism; I am just saying that because of the particularly time-limited nature of the way in which the provisions will apply—particularly looking back into the 2010 list—it will be important that this information is published in a timely and reasonably prominent manner and, I hope, written in plain English. That is the purpose behind Amendment 3. I beg to move.
Lord Kennedy of Southwark
I fully support the noble Earl in his Amendment 3. I think we all deal online very much more now in our work and in terms of official and unofficial things, so this is a very sensible amendment.
Lord Bourne of Aberystwyth
My Lords, with the indulgence of the House, I would like to pick up a point from the last group. I failed to address a point made by the noble Lord, Lord Shipley, on the pilot business rate retention issue. We are speaking to the Local Government Association and others about that. It is not straightforward but we are not convinced that there is any loss. Still, I shall seek to address that in more detail in the letter. I apologise to him for not picking that up earlier.
I thank the noble Earl for moving this amendment, which would require the Valuation Office Agency to publish on its website guidance and advice on the effect of Clause 1. I understand and appreciate the motivation behind the amendment, backed by the noble Lord, Lord Kennedy. Business rates can be a complex area and confusing to ratepayers, and of course we support ideas that would give ratepayers more information to help them to plan for their business rates liability.
On Clause 1, I agree that it is especially important that the VOA provide clear guidance to ratepayers on when they may be affected. Clause 1 concerns contiguous properties that are assessed for rating in more than one part, but there are many reasons why a ratepayer may have seen their property split into two or more rating assessments. That will include properties whose rating assessments have split because of the Supreme Court decision in Mazars, but will not be limited to that. Clause 1 will change the law to mirror the practice of the VOA prior to the Supreme Court decision. Those ratepayers may therefore fall within Clause 1. However, there will be many other reasons why a rating assessment may have been split into several parts. A property may have seen physical change requiring it to have more than one rating assessment, for example, or part of the property may have been sublet. These splits are unlikely to be related to the Supreme Court decision, and those ratepayers will not be affected by Clause 1.
It is therefore important that we explain this to ratepayers. The VOA already has clear guidance on its website explaining in simple terms how the law currently applies under the Supreme Court decision, including some clear examples. I assure the Committee that once the Bill receives Royal Assent, the guidance will be quickly changed so that it explains the operation of the new law under Clause 1. I further assure the noble Earl that the VOA will share that guidance in draft with the professional bodies, including the Rating Surveyors’ Association. The noble Earl will therefore have the opportunity to consider this guidance from his expert perspective before it is published. I appreciate that we are very fortunate in having him look at this legislation in some detail because of his professional understanding of it. This, together with the information that ratepayers can already access about their own property on the VOA website, will provide ratepayers with the information that they need to decide whether they fall within Clause 1.
I hope that with these assurances the noble Earl will agree to withdraw his amendment.
The Earl of Lytton
My Lords, I thank the Minister for that reply and the noble Lord, Lord Kennedy, for his support. The Minister probably credits me with a great deal more expertise than I feel I actually possess, but that is probably because, the more one knows about something, the more one realises one does not know. That seems to be one of the facts of life that one has to face. But I am reassured by what he said in terms of making sure that the information is readily available on the Valuation Office Agency’s website. Obviously, I am aware of some of the advice generally on that website, which for the most part seems to me to be clear. I thank the Minister for the assurances that he has given and I beg leave to withdraw the amendment.
Baroness Pinnock
“(1) Section 11B of the LGFA 1992 (higher amount for long-term empty dwellings: England) is amended as follows.(1A) In subsection (1)(b) (maximum percentage by which council tax may be increased), leave out “of not more than 50 as it may so specify” and insert “as specified in subsection (1A)”.(1B) After subsection (1), insert—“(1A) If a dwelling has been empty for—(a) between two years and five years, the percentage is not more than 100;(b) between five years and ten years, the percentage is not more than 200;(c) more than ten years, the percentage is not more than 300.””
Baroness Pinnock (LD)
My Lords, I remind noble Lords of my entry in the register of interests as a vice-president of the Local Government Association and a councillor in the borough of Kirklees in West Yorkshire.
As I made clear at Second Reading, we are broadly supportive of the measures in this Bill. Clause 2 gives powers to local authorities to increase the financial incentive to owners who have empty properties to encourage those same owners to take action so that their empty property can be brought back into use. This financial incentive can, of course, also be seen as a financial penalty. The purpose is clear: to ensure that the many thousands of long-term empty homes become homes for families once more. As there is a crisis in the supply of housing, we think that penalty is justified. Indeed, local authorities have the discretion as to whether to take advantage of the powers in this Bill, and there are exemptions to safeguard owners where homes are empty for wholly understandable and legitimate reasons.
Nevertheless, we want to explore more variation of the additional powers in the form of an escalator. The proposals in the Bill provide for the power to impose a 100% premium for homes left empty for two years or more. The proposal in this amendment is to increase that premium up to 200% for properties that are empty between five and 10 years, and up to 300% for those properties that are empty for 10 years or more and do not obviously fall within the exemptions already described in the legislation—in other words, to increase the financial penalty or incentive, whichever way you look at it, the longer the property is kept empty. This amendment is tabled to explore the potential of this approach. Can the Minister indicate whether increasing the council tax premium in this way will have the desired effect of bringing more long-term empty properties back into use?
One reason for this approach is because previous government legislation has not been anywhere near as effective as it was hoped to be. The empty dwelling management order of 2006, then amended in 2011, is far too complex and costly for local authorities to implement, except in extremis, so it has been used on very few occasions, considering the extent of the problem of long-term empty properties. Local authorities have tended to use other less legalistic methods of tackling the scourge of empty homes. It is apparent from the statistics of longer term empty homes that more needs to be done—hence the proposals in the Bill and hence our amendment. We support the council tax premium way of doing this, but are proposing in this amendment to extend the variation to take account of the length of time in which a property has lain empty. I beg to move.
Lord Stunell (LD)
I will speak to Amendment 7, which looks at the same issue but with a different point in mind. The intention of tackling the issue of empty homes is laudable. I support the proposals in the Bill—I could hardly do otherwise, having been the Minister who introduced them in the coalition Government. The test of time over the last few years has shown that the escalation proposed here is a legitimate and practical measure and it is a good thing to expand it.
I support the amendment in the name of my noble friend on the Front Bench as well, but this amendment has a different perspective. It is a way of supporting improvement in the energy performance of buildings. The general aim of the Bill is clearly to get homes back into use as quickly as possible. That produces a risk of short cuts and of doing things the quickest and cheapest way possible, in order to avoid the penalty—or, as my noble friend said, the incentive—of the increased council tax payment by getting it done and let or sold as quickly as possible. That is the Bill’s general and laudable aim. The amendment aims to mitigate that risk in the situation where somebody is prepared to increase the energy performance of the home. It limits the additional payment that a local authority can charge if the developer or owner improves the energy performance of a property in refurbishing or redeveloping it.
That is the principle; Amendment 7 is just one simple illustration of how that might be done. The amendment says that there would be a 25% reduction in penalty if the energy performance of the home was going to be increased by at least two energy performance levels. In other words, if it is raised from level E to level C, or from D to B, there would be only a 75% increase replacing the numbers in the Bill. There are clearly plenty of other options. I have played around with a few of them, but just bringing forward the most simple and basic version allows the Committee to consider the general principle. I would be more than happy to discuss with Ministers the best way of introducing this approach before Report. It avoids, or at least lowers, the risk of cutting corners to get work finished at the expense of energy performance. It nudges those doing refurbishment to have more ambition in reaching energy performance without, at the same time, having to look at their back pocket and what might be lost if they take an extra few weeks to do the work.
More widely, this is a plea for joined-up legislation. The Government have decided not to proceed with the Green Deal or zero-carbon homes. On the other hand, they have introduced new rules for energy performance standards for lettings. This is a simple mechanism to produce a good outcome. I urge the Minister to adopt it, if not in the detail which I proposed then on the principle, which we can work on before Report.
Lord Kennedy of Southwark
My Lords, this is an interesting group of amendments. My amendment in this group is Amendment 6, which simply seeks to increase to 200% the amount of extra council tax that can be levied on an empty property. We all agree that we want to bring long-term empty properties back into use, and these amendments would give local authorities the discretion to use these powers.
Having said that, I very much like Amendment 5, moved by the noble Baroness, Lady Pinnock; it provides for an escalator, which I think works very well. The longer a property was empty, the more you would potentially pay, and that could be a good incentive to get people to bring their empty property back into use. I also like Amendment 7, in the name of the noble Lord, Lord Stunell, which would take account of whether people had spent money on their property to make it more energy efficient. The increase would be discounted or reduced to take account of that, and that seems a very sensible thing to do. Amendment 10 is just a tidying-up amendment.
I agree with the noble Lord, Lord Stunell, that these are interesting ideas. Perhaps if we could all get together and have a discussion and we brought something back on Report, the Government might support it. I think that there is something here that could improve the Bill dramatically.
The Earl of Lytton
My Lords, I have some mixed feelings about the amendment moved by the noble Baroness, Lady Pinnock. In my own mind, I cannot quite get my head round whether this is to be a charge to discourage long-term empty properties as defined in the Bill or, in effect, an escalating fine. It seems to me that the two are slightly different.
At Second Reading, I highlighted the fact that there is a general lack of information about the reasons for long-term vacancy, and the high probability is that it varies quite a lot from one area to another. For instance, in some former industrial cities, whole streets of Victorian housing may have lain empty for some time because no one wants to occupy them.
On the definition of “empty dwelling”, it is a moot point, as far as I can see, as to the ease or difficulty of chasing the sums of money involved, as is the likelihood or otherwise of the “empty dwelling” label simply evaporating. I think that I may have used the example of an itinerant with a van load of cheap second-hand furniture going around populating odd properties that might otherwise be subject to this. The point is made not entirely in jest, because there is no plumbing the ingenuity of people who wish to avoid some impost or other.
Another point is that there is a reputational risk if one is not careful here. I seem to remember that, not very long ago, one local authority was said to be investigating the contents of people’s refuse bins, and I would hate to think of local government being again painted into that sort of scenario. One needs to be careful to ensure that there is a justifiable reason for an escalator.
If we are talking about what is in effect a fine, there would need to be a clear and justified framework as to how that would apply, possibly with provision for making an appeal against the charge. Now, I am not clear what happens about appeals against things like this. I am clear what happens with an appeal against one’s business rate assessment, and I am clear what happens with an appeal against a council tax banding. What I am not clear about is, where something like this comes in by dint of this type of legislation, if someone thinks that it has been unfairly applied, where do they go? I hope that a noble Lord, or a noble Baroness, with better knowledge than I have will tell me what the situation is.
I rather took to Amendment 7 in the name of the noble Lord, Lord Stunell. As we heard at Second Reading, there can be a number of different reasons why vacancy and long-term empty property status can apply. I think of the minimum energy standards regulations which came into force only a couple of months ago, making it impossible to let a property with an EPC of less than E. I think of the many hard-to-insulate properties—those Victorian properties with nine inch solid walls or suspended floors, where it is difficult to get insulation to the required standard.
In essence, the noble Baroness, Lady Pinnock, is right: there is often a local need to take a differential approach. I would appreciate the Minister saying how differential he thinks that that needs to be, or can be: whether it is endless or will be circumscribed in some way. I think of areas I know well in national parks, where you occasionally come across properties that are long-term empty, but also in former industrial cities, to which I referred. One needs to be careful about that. I do not have a solution, but I simply flag up those issues for further consideration.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have participated in the debate. I am most grateful to those noble Lords and the noble Baroness, Lady Pinnock, who tabled the amendments on the level of the empty homes premium, as they allow us to discuss the factors we have to consider in deciding the maximum charge on empty homes in setting the framework for local authorities. I reiterate that, once we have set the framework, this is a discretionary measure for local authorities: something we are giving local authorities discretion to administer, according to their local needs and personalised or very localised factors affecting particular properties.
I think we all agree that there is a clear case for increasing the cap on the premium that applies to long-term empty properties. The noble Lord, Lord Stunell, gave distinguished service in the coalition Government—I think in my current role—and rightly referred to the importance of the issue. We have borne down on it. My noble friend Lord Patten, who is not in his place, referred at Second Reading to how the number has reduced—we have squeezed it very effectively—but there is still more to do.
The debate is about the level to which we should take this charge and the circumstances in which it should apply. These are the difficult judgments we face. We propose through the Bill that owners of long-term empty homes should see their council tax bills double. This is a major step in allowing local authorities to incentivise such owners to bring their homes back into productive use.
One amendment tabled by the noble Lord, Lord Kennedy, would mean that owners of empty homes would be paying triple the level of council tax payable on occupied homes within two years, or within one year if his other amendment were to be enacted. In fairness, that is from the Labour Party manifesto. Perhaps it is all the more surprising that nothing happened in the other place on the Bill: no amendment was proposed, still less debated. That said, it is something we should discuss.
Under the amendments supported by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, properties empty for between five and 10 years could face premiums of up to 200%, and those empty for more than 10 years could be subject to 300% premiums. I of course understand the rationale behind the amendments, and as homes are remaining empty for longer and longer, the logic of that is obvious: the figure goes up after five years and after 10 years. In addition, empty properties can be a nuisance to local residents, and potentially sites of crime or squatting. I share the concern about the need for robust measures to tackle what may become, and often are, blots on the landscape, to the benefit of those seeking a place to live as well as of local communities as a whole. I think we all understand that.
Baroness Pinnock
I thank everybody for contributing to this debate. The escalator idea was a bit of a shot in the dark and it has generated some useful comments. I am grateful to the Minister for responding relatively positively to the idea.
I absolutely support the energy performance amendment tabled by my noble friend Lord Stunell. It is a pity that the Minister thinks that it will be too difficult to pursue further. I thank the noble Lord, Lord Kennedy, for his supportive comments.
The noble Earl, Lord Lytton, said this was complex. He asked whether the escalator is a penalty and whether the 300% premium that I have proposed for very long-term empty properties goes too far. Right from the outset, it can be viewed as a penalty, because it is not related to service provision or the rateable value or banding of your house in the way that other council tax is. In that sense, it is a penalty—or it could be seen as an incentive because we are trying to bring more empty homes back into use.
Other methods have been tried—I referred to the empty dwelling management orders—and have not been successful in bringing empty homes back into use. There is a scourge of long-term empty properties across the country. My gut feeling is that local residents would support an escalator on the grounds that very long-term empty homes are a blight on their community. I have them where I live. There is such a property at the end of a terrace of homes. Everything is overgrown, with grass and trees beginning to grow out of the gutters. It has not been used for years. Nobody seems to know where the owner is. There is a problem that we ought to try to address, because from local residents’ point of view it is not just the blight on their community but the fact that they are seeing their usually much-loved green spaces built on to provide the homes this country needs, when at the same time they can see properties that have been empty and nobody seems to be able to do anything about it. Any measure that will provide greater incentives for owners to bring those dwellings back into use would be generally supported by council tax payers.
I think I have covered all the issues that have been raised. I thank the Minister for saying this is worth considering. As I said at the beginning, this was a bit of a shot in the dark. Let us have a think about an escalator rather than a set time limit, because the longer homes are empty, the worse they become for people who live around them. There should be a penalty in order to get some action to bring such dwellings back into use, so that people can live in them and the community in which other people live is not blighted in that way.
Given all that, and the fact that we are in Committee, I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
“( ) In section 11B of LGFA 1992 (higher amount for long-term empty dwellings: England), in subsection (8) (definition of a long-term empty dwelling), for “2 years” substitute “1 year”.”
Lord Kennedy of Southwark
My Lords, this amendment, which has already been referred to, seeks to change the length of time specified in the definition of a long-term empty property from two years to one. As with the amendments in the previous group, it is an attempt to improve the situation by reducing the number of empty properties and get more properties back into use by incentivising owners. It is in that vein that I move this amendment. In short, this probing amendment seeks to halve the amount of time required before a property can be considered a long-term empty dwelling.
The amendment tabled by the noble Lord, Lord Bird, who is not in his place, is grouped with mine. It is an interesting amendment because it requires local authorities to determine what constitutes a long-term empty property in their areas. Perhaps we can return to it on Report when the noble Lord is, I hope, in his place. I beg to move.
The Earl of Listowel (CB)
My Lords, I missed most of the earlier debate and the commencement of this one but I have two or three questions that the Minister might be able to help me with now or, if not, to write to me about. My questions arise after listening earlier to my noble friend Lord Lytton. I know of men, for instance, who care for their mothers who are getting frail and elderly, and I can imagine a man in a rather unattractive rental area in the north who has a property which he vacates so that he can live with his mother and look after her. It is all a bit too much to manage as money is short and there is not much demand by people wanting to use that property. I would not want someone like that to have to pay a fine. Local authorities are very tough on those who do not pay their council tax. I imagine that that may well have been dealt with in earlier debates, and I am sorry that I could not be here for those. However, that is an example of something that might happen.
I guess that this discussion brings up the question of how we make the private rented sector attractive so that there are not areas in the north of England where it is difficult to find people to rent properties.
Baroness Pinnock
I am just a bit concerned that we seem to think that all these problems are in the north of England, where I live. I would rather that we were all a bit more careful about how we describe the north of England. There are some wonderful places there in which to live and, like everywhere else, including this great city of London, there are some not so pleasant places in which to live. I hope that noble Lords do not mind me saying that we should not always use the north as an example of an area where there are difficult places to live.
The Earl of Listowel
I thank the noble Baroness for her intervention and I very much take note of what she says. I will try to be a bit more careful. There are certain places in this country where it is more difficult to let private property, and that is what I might have said.
What comes out of the debate is the question of how we make private rented property more attractive in those areas where it can be difficult to let. This might be a bit off the board but, as there are not enough properties to buy, it seems very important that rental property is made a more attractive option. I believe that the Government had been thinking of introducing new tenure arrangements so that tenants could have a minimum of three years’ security of tenure. If the Minister can say what progress there has been on that, or perhaps write to me with the information, I shall welcome hearing from him.
It also occurs to me that the private rented sector might benefit from some sort of arm’s-length body to oversee security of tenure and fair rents so that the winds of politics do not intervene in the market too much, making long-term investment unattractive and putting people off becoming tenants. That is another issue on which I would be interested to hear from the Minister, and, again, he might like to write to me about that rather than respond now. The Government are introducing an ombudsman with responsibilities in these areas, and people might have recourse to him or her if they experience unfair treatment. Perhaps the Minister can respond on that as well.
Finally, I might not have declared my interest as a landlord, as listed in the register.
Lord Bourne of Aberystwyth
I thank noble Lords very much for their contributions. I appreciate that the noble Lord, Lord Bird, is not in his place at present but he lobbed in a hand grenade, as it were, before departing the scene. I appreciate the point made by the noble Lord, Lord Kennedy, and will try to address some of the suggestions from the noble Lord, Lord Bird. He is always worth listening to on this area in particular, but he always has some innovative ideas.
I am grateful to noble Lords for raising the question of how the legislation will apply. The noble Lord, Lord Kennedy, is suggesting a one-year vacancy. I am also grateful for the cross-party support that we have received in both Houses for the measure that we are bringing forward, and I appreciate the points about possible refinements.
We are not seeking to alter the circumstances in which the premium is applied. Ninety per cent of local authorities applied a premium in 2017-18, and we are not aware of widespread concern that the two-year period is inappropriate. I feel that one year might be far too short a period in many circumstances. There are some exceptions where the premium does not apply, one of which is people going into social care, which the noble Earl, Lord Listowel, raised. However, situations that are not exceptions include that of people who might be adapting a property and trying to sell it. I fear that in those circumstances a year would be too short a period, and I have no doubt that there are other situations where that would be the case as well.
I understand the rationale for decreasing the qualifying period at a time of great concern about empty properties, but I remind the House that we have squeezed the number of empty properties down to a low level—a level that it has not been at for a long time, if at all. We have to make a judgment about how long the timeframe should be. I know from correspondence that the department has received that some home owners take longer than expected to sell or rent out their properties in a challenging local market. In such circumstances, retaining the two-year qualifying period therefore strikes the right balance. I understand the point that the noble Lord, Lord Kennedy, made about his desire to strengthen the incentive.
The amendment in the name of the noble Lord, Lord Bird, would allow councils to decrease or increase the qualifying period as they see fit. Local authorities would be given complete freedom to remove the requirement that a property be substantially unfurnished in order to be considered empty. I am happy to address those points. Although we should support giving councils as much discretion as is reasonable, the noble Lord’s amendment could lead to a confusing situation where the property, depending on where it is located, could attract premiums after just a few months or after quite a few years.
The principle of specifying that an empty property is one which is substantially unfurnished is well understood, and we will come on to amendments addressing that issue later. The risk of the amendment proposed by the noble Lord, Lord Bird, is that it would give local authorities an open door to extend that definition to types of properties that are not genuinely empty. Premiums could be applied to furnished properties that are periodically occupied either because they are someone’s second home or a job-related home or simply because the owner is away on holiday. I know there are views about second homes and properties that might be considered to be underoccupied, but this legislation is about long-term empty properties, which is a different matter. The design of the system already provides the right balance of flexibility for local authorities.
On the points raised by the noble Earl, Lord Listowel, about the impact of these provisions, I remind the House that local authorities have a discretion they can apply either in relation to excluding properties along the energy-efficiency line suggested by the noble Lord, Lord Stunell, or in terms of something highly personalised which relates to a particular property and the person in it. That is why it is best left to the local level to determine this issue.
The noble Earl also asked about the private rented sector and three-year leases. We are committed to dealing with this issue, which has strong support from the sector, and we are making progress. He will be aware that the private rented sector has grown significantly, and continues to grow. We are putting in place a framework that will apply in a reasonable way, with tenant fees proposals—which we will be looking at shortly—and that addresses the control of deposits, requires client money protection and so on. I will cover that in the normal write-round letter that I will issue to pick up the points made by the noble Earl.
With the comments I have made about how we are not persuaded of the need to alter the minimum period from two years to one year or anything below two years, I urge the noble Lord, Lord Kennedy, to withdraw his amendment.
Lord Kennedy of Southwark
I thank all noble Lords who have spoken in this short debate. I am happy to withdraw my amendment at this stage. This amendment and those in the previous group were designed to explore whether we have got this right. I may wish to come back to these amendments—particularly those in the previous group—on Report, but I am happy to withdraw this amendment given what I have heard from the noble Lord.
Baroness Pinnock
“Definition of long-term empty dwelling
In section 11B of the LGFA 1992 (higher amount for long-term empty dwellings: England), after subsection (8) insert—“( ) The Secretary of State must by regulations provide guidance to billing authorities on how to determine whether a dwelling is “unoccupied” or “substantially unfurnished”, under subsection (8).””
Baroness Pinnock
My Lords, this amendment seeks definitions of the terms “unoccupied” and “substantially unfurnished” dwellings. On the face of it, the descriptions pose no difficulties of interpretation—but in practice that is far from the position. Is a dwelling unoccupied if it is used for, say, all but two or three weekends in a year? Does that usage enable the property to be classified as, for instance, a second home? What does “unoccupied” mean? Under the Bill there would be a significant financial cost to the owner if the dwelling is deemed to be unoccupied—one that a homeowner might well challenge if there is no clarity as to the definition.
There is a similar fog around the meaning of “substantially unfurnished”. There must have been calls for clarity from the local government sector, because in September 2014 the DCLG, as it then was, sent a letter to local authorities headed:
“Council Tax Information Letter: Council Tax—Definitions of Empty Homes and Second Homes”.
In my view, the letter does little to clarify the definitions. It states, unhelpfully, that it,
“outlines the current situation and the Department’s informal view on these matters”.
In other words, the descriptions provided have no basis and are open to challenge. For instance, it states:
“There is a misconception that the premium”—
on council tax—
“is easy to avoid by simply placing some furniture into a property. We do not have evidence that this is the case. ‘Substantially unfurnished’ is not defined in council tax legislation, but is used for the purposes of the empty homes discount regime and the empty homes premium”.
So it says that, while there is no evidence that people are putting furniture into property, “substantially unfurnished” is not defined. I am seeking a definition. If these penalties or premiums on council tax are to be raised significantly, local authorities require further guidance on what “substantially unfurnished” means.
The letter further states:
“Local authorities will have formed their own views on the definitions”—
which of course may result in a multitude of definitions of “substantially unfurnished”, and that could lead in turn to disputes. I quote again from the letter:
“A property which is substantially unfurnished is unlikely to be occupied or be capable of occupation. A property which is capable of occupation can reasonably be expected to contain some, if not all, items from both of the following categories: furniture such as bed, chairs, table, wardrobe or sofa, and white goods such as fridge, freezer or cooker”.
Noble Lords will recognise that properties which are left unoccupied often contain such items as are listed, as they are nowhere near as valuable as they once were and so are not worth removing.
The letter goes on to explain further checks that can be made. For instance, it suggests that,
“it will be reasonable for the local authority to cross-check with the electoral roll, or ask for evidence, such as utility bills showing usage of services, driving licence as proof of address, or receipts or other proof of moving costs”.
Of course, that means that the owner can be traced—but in my experience of properties in the neighbourhood where I live, certainly long-term empty properties, that is often not the case. I am sure that the Minister knows that many property owners now live abroad and are difficult to contact. Certainly, my experience of the electoral roll is that it is not a sure test of occupancy in either direction.
In our view, the Government have a responsibility through regulations to provide guidance to billing authorities on how to determine whether a dwelling is unoccupied or substantially unfurnished. The financial cost to an owner of a dwelling that has been classed as unoccupied could be significant, so natural justice demands that local authorities have that legal guidance. Failure to provide such guidance may result in local authorities not using the powers provided for in the Bill, for fear of a legal challenge and the inability to get the supporting evidence. This would undermine the whole purpose of the Bill, the direction of which I support: namely, to try to get empty homes back into use by families, whether in the relatively short term or the very long term, and to cut the need for the building of even more homes on greenfield or green-belt land. I beg to move.
Lord Shipley
My Lords, this part of the Bill is about empty dwellings. My noble friend Lady Pinnock asked some important questions about the meaning of “unoccupied” and “substantially unfurnished”. I want to address a crucial, related issue: second homes that are substantially, although not completely, unoccupied. The Minister may be aware of a parliamentary petition to close the loophole that allows second home owners to pay business rates rather than council tax. The petition states:
“In England, second home owners can avoid council tax by claiming to be a business if they say they are available for letting for 140 days a year—they do not have to actually let at all. As their rateable value is below £12k, they also qualify for 100% small business rate relief—so pay nothing”.
In Southwold on the Suffolk coast, where many houses are second homes, research by Liberal Democrat colleagues suggests that this loophole may cost the local council about £500,000 a year in lost revenue. Crucially, second home owners in England only have to say that their properties are available for letting to qualify as a business, even if they are not actually let.
However, in Wales—the Minister will know that many good ideas come out of Wales—it is a requirement that any house designated as a business, rather than being liable for council tax, must be let for a minimum of 70 days. In one sense, that number is comparatively low, amounting to just over two months a year. However, it is a very important figure because it effectively prevents a second home owner avoiding paying council tax by registering the house as a business and then falling below the small business threshold.
In discussion on the Bill, the Member of Parliament for Totnes, Sarah Wollaston, asked:
“Will the Minister also use this opportunity to ensure that those who own second homes are contributing their fair share through council tax, and that they are not able to sidestep that by opting to pay business rates and then claiming eligibility for small business rate relief?”
Dominic Raab, the Minister of State for Housing, Communities and Local Government, replied:
“We have also made changes on holiday homes in the context of council tax and stamp duty. We will keep the point she raises under due consideration”.—[Official Report, Commons, 23/4/18; col. 649.]
Indeed, the Government have done that, but I hope that they will review this issue in much greater detail because the impact of both the reforms I mentioned—council tax and stamp duty—has been limited. I also hope that, when the Minister said that the Government would give it due consideration, it was not an attempt to push the issue into the long grass, but rather an acknowledgement that the department is indeed giving it due consideration.
Returning to Suffolk for a moment, I want to pay tribute to the work of local campaigners there for what they have undertaken so far. The Suffolk coastal communities embrace some of the largest proportions of second home owners in the United Kingdom. This impacts on the cohesion of these communities and pushes up house prices, reducing the available housing stock for local people.
I want to acknowledge that many second home owners do pay council tax. They can contribute to community life and they might hold a property as part of their future retirement plans to live in the area. However, business rates relief exists to help struggling businesses, not second home owners. Will the Government look at this issue in much closer detail and order an urgent review of the whole system? It is not that I am against second home owners: I am not against them. However, it does seem to be unfair that people who can afford two homes are subsidised by people who cannot afford to own one home.
Lord Deben (Con)
My Lords, I support the comments that have just been made. As the former Member of Parliament for Suffolk Coastal and as someone of whom, if you asked him where he really lived, the answer would be in Suffolk—although not coastal Suffolk—I am the owner of a second home. It is a situation in which I am happy to pay my council tax in full, as I do in on my small flat in London. That is how we operate, and I think that is right. One just has to recognise that there are circumstances in which people have to work in one place and live in another, and that is absolutely acceptable.
I emphasise the point about the coastal communities of Suffolk, which I represented for so long. I saw the change; it was fascinating. Southwold was but latterly added to my former constituency—as they moved me closer and closer to the sea, people said that they were trying to tell me something. It has very largely become a place of second homes, and so has Aldeburgh and, increasingly, many other villages round about. It is a real problem for community cohesion; I understand that, having committed myself to the view that people should be allowed to have—and very often need—a second home. However, I do not support the idea that people can avoid their proper contribution to the community by using what has elegantly been referred to as a loophole. It is worse than that, because they are telling a direct lie. They are not running a business; they have no intention of running a business. They are trying to get the business rate and then not to pay it because they have the small business special arrangement. Of course, however, you can be a small business even if you do not let anything. It is not difficult. We could all be a small business if making nothing were the purpose of being a small business. With my family, I own and run small businesses, but we intend to make a profit, otherwise there is not much point in us doing it. However, to run a small business in order not to make a profit and to get the profit from the community is entirely unacceptable.
I want to make some difficult comments. I have now been in one or the other House of Parliament for a very long time. It does not matter which Government are in power—or which mixture, as sometimes it is a coalition—when they want to avoid dealing with something, they always promise the most careful consideration and the most urgent assessment of the real issues that may well arise. They warn that there may be other unintended consequences, meaning that one should not move too quickly. Sometimes they suggest that, although they have looked at it, they have not found quite the right answer, but the House can be assured that such an answer will be found, but not yet. I say to my noble friend, whom I respect enormously, as he knows—I have told him so from time to time—that Wales is right on this. Wales is right on quite a number of things in the climate change committee. I have to remind the United Kingdom Government how much better in some things Wales and Scotland are at moving on climate change. It is not surprising that Wales is right on this.
We have to deal with this for a reason that is not just about equity—although that is very important—or the resources of Suffolk Coastal District Council; I do not have to declare an interest there because I live in the Mid Suffolk District Council area. That reason is social cohesion, in the sense that it annoys, upsets and very often angers people that their neighbours are not paying what they are paying for local services. I do not think it is acceptable or reasonable and it seems something very simple to change. All we have to do is what the Welsh have done. It would be jolly nice to acknowledge that the Welsh got there first and that we in the rest of the United Kingdom are following suit.
Lord Kennedy of Southwark
My Lords, briefly, I endorse the comments made in the debate so far, particularly those from the noble Lord, Lord Deben. He is absolutely right. Suffolk is a beautiful part of the world. I know that as well as him; I spend a fair bit of time down there. It is a wonderful place. He is absolutely right that people should not be allowed to pretend to have businesses and to take advantage of these things to avoid paying what they are supposed to pay to provide for local services. That is completely wrong. I hope that when the Minister responds to the debate he can give us some comfort that the Government will look at this. It is totally out of order. If someone lives in an area they should contribute to the services provided by the local authority.
Lord Bourne of Aberystwyth
I thank noble Lords very much indeed for what has been an interesting and diverting debate on this amendment. I will seek to deal with all the points that have been made. I will deal with the points made by the noble Baroness, Lady Pinnock, relating to the definitions of “unoccupied” and “substantially unfurnished”; then I will seek to deal with the issues relating to second homes brought up by the noble Lord, Lord Shipley, reinforced by my noble friend Lord Deben and briefly addressed by the noble Lord, Lord Kennedy.
The definitions are clearly important to the successful operation of the premium. Indeed, they are already important to its successful operation because it already uses these terms. It is something that more than 90% of local authorities are already doing. In so far as I can see, none of them is having difficulty interpreting these terms. If anyone can come forward with some issue they feel needs addressing I would be very happy to look at it. It is of course right that local authorities must understand the meaning of these terms and that they are applied consistently across England, as I said on an earlier group of amendments. I certainly share that view.
It might assist noble Lords if I explained a little about these terms. I do not want to repeat what the noble Baroness said about the information letter of 2014, although the more she said the more I felt that we have covered these points. You cannot produce a 100% reliable definition by saying how many cups and saucers you can have left in a cupboard or how many forks and spoons can be in the drawer. To say that these furniture items would normally be there—a bed, chairs, a table, a wardrobe, a sofa, and white goods such as a fridge, freezer or a cooker—is as good as it gets for guidance.
I think that the noble Baroness said at one stage that it was not always possible to have utility bills and that some people were overseas and so on. If that is the case, it will be very difficult for them to reinforce the fact that the property is being used. That is the whole point: these people might seek to have their property as occupied so that they do not have to pay the empty home premium. If they cannot establish it, because they are overseas or so on, that seems absolutely correct. As I say, I am very happy to engage with the noble Baroness and others to look at this issue if they can bring forward evidence that local authorities are having particular difficulties with this. However, in the light of the letter and in the light of case law, I do not think that this is an issue.
Lord Shipley
My Lords, the noble Lord, Lord Deben, explained what could happen. It is not complicated to do; the question at issue is probably simply whether the law in Wales is working effectively. At 70 days proof of letting, that ought to be easy to demonstrate, because evidence will have to be produced. I hope that the Government will speak urgently to the Welsh Government and assess what evidence they have, and, as a consequence of that, possibly organise a meeting of all parties involved in this issue to see whether legislation could be introduced in both Houses which would help to solve this problem. To help this along, I plan to table a set of Written Questions later this week, because securing an even better evidence base than we have at the moment would be helpful. This is not a problem just of east Suffolk, parts of Cornwall and one or two other places. I think it is quite a general problem now, or at least it seems to be, in many parts of the country which are attractive holiday areas.
Lord Bourne of Aberystwyth
I thank the noble Lord very much for putting down lots of Questions: my officials will be doing cartwheels at the news. However, there is a serious point behind what he is putting forward and I absolutely accept that this is a national issue. Our officials will certainly be speaking, if they have not already—I suspect they may have done—to Welsh and Scottish officials to see what is being done there. We are taking it urgently. I will cover this in more detail in a letter: it is certainly very much on the radar though I had not expected that it would come up in this context—and I should have. I will make sure that we get some more detail in the letter and I thank noble Lords for raising this. I realise now that the noble Lord, Lord Campbell-Savours, who is not in his place, raised a similar issue in Questions today. I could not quite understand what he was getting at but I understand now and I apologise to him. We will make sure that he gets the letter as well.
Given that, and the fact that I and my department take this seriously, I ask the noble Baroness, Lady Pinnock, to withdraw her amendment.
Baroness Pinnock
I thank everybody for a really interesting and stimulating debate. My noble friend Lord Shipley raised some issues. I am glad that my proposal has gained support because this affects all areas of the country that have large numbers of second homes, including in the north—the Lake District, for instance. We have all noted the new definition of “seriously considered”. I look forward to this being seriously considered.
I brought the definition of “unoccupied” and “substantially unfurnished” to the attention of the Committee because, with the rise in the premium, it is more likely that there will be challenges from owners that their homes are furnished and all the rest of it. Therefore, it would be helpful to local authorities to have more definite clarity on this, rather than an information letter. I think that could be achieved. I know that from time to time the department sends guidance notes to local authorities, which have greater import than information letters. That would give them something to fall back on if they are challenged, as I think may well happen. Those are the reasons for my endeavours this afternoon but I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
“Impact of the charging of a higher amount for long-term empty dwellings
(1) Within 24 months of the date on which this Act is passed, a Minister of the Crown must undertake a review of the impact of the provisions contained within section 2.(2) The Minister of the Crown must lay the review before both Houses of Parliament.”
Lord Kennedy of Southwark
My Lords, the previous couple of debates have highlighted why this amendment is needed. We have talked about the effects of the Bill—although it is a small Bill—particularly with regard to council tax payers and empty properties. I think it is worth having in the Bill a clause that enables the Government to review—my amendment suggests within 24 months—what has happened in respect of Clause 2 and the impacts of the decision. My amendment also requires that after the review a report is laid before Parliament.
The noble Baronesses, Lady Pinnock and Lady Thornhill, have tabled a very similar amendment. Subsection (2) of their new proposed new clause suggests that,
“the Minister may also consider the impact of any penalties imposed on persons for failing to register their dwelling as empty”.
I am happy to support that as well. Considering the debates we have had on the previous groups, having a mechanism whereby the Government can look at the effects of the Bill, small though it is, is a good thing to do. I beg to move.
Baroness Thornhill (LD)
My Lords, I declare my interest as a vice-president of the Local Government Association. I fully support the words of the noble Lord, Lord Kennedy. I thank the Minister for the very detailed and informative letter he sent all of us after Second Reading; in particular, his response to my comments on fiscal incentives and deterrents with regard to empty homes. I really appreciated that and took on board what he said. Perhaps he will indulge me by allowing me to hang on to the one measure that he did not elaborate on—that is, the matter of penalties.
It is probably little known that councils actually have the ability to levy a civic penalty on an owner for not informing councils that their home is empty. It is not surprising that it is little known; the maximum penalty for doing so is actually £70, so it is no surprise that it is rarely, if ever, used, and that the general public are oblivious to it. In fact, I suspect that if we talked to the general public we would find they believed that by informing the council that their home was empty they would actually pay less or no council tax, so that shows that we have a long way to go. As the average council tax, the band D monthly payment, is now around £165 a month, a penalty of £70 is nothing—it is neither a penalty nor a deterrent. So this is a small matter but I feel that the two should have been taken together. If we are going to, justifiably and rightly, hike up council tax premiums, the penalty that goes with not informing the council should send the same level of message—£70 is, frankly, derisory.
I see both these measures—the penalty and the increased premiums—as really important in motivating councils to move this up their agenda. I say this with a degree of experience in local government, particularly in district councils where this is not a priority, largely because of costs. At Second Reading we heard a lot about powers not being used because of costs, but I think that together these two things would encourage councils to publicise the need to not leave homes empty, and to make it a publicly unacceptable issue so that people would be enraged by it and want us to do something about it. If there were to be a review, would we also review penalties in this regard, as I feel that it would be a missed opportunity if we did not? I beg to move.
Lord Bourne of Aberystwyth
I am very grateful to the noble Lord, Lord Kennedy, and the noble Baroness, Lady Thornhill, for their contributions on this group of amendments that relate to how we seek to address the penalty point just covered by the noble Baroness and the issue of the review, which was raised by the noble Lord.
The amendments would require the Government to review the impact of the increase in the maximum permitted level of the empty homes premium. I pause briefly to say that I think I am going to organise a list of all the things that the noble Lord, Lord Kennedy, has asked us to do reviews on. I know that he very often says that we have so many things out for review and then we have a critique of that, but we have had a couple of issues today at least where he has asked for reviews. I am only teasing.
Lord Kennedy of Southwark
I am very happy that the department does this. My issue with the reviews is that the Government never come to a conclusion.
Lord Bourne of Aberystwyth
I think the noble Lord’s issue has been that there are so many of them that there is a bit of a logjam. Anyway, we could perhaps debate that on some other occasion.
The amendment tabled by the noble Baronesses, Lady Pinnock and Lady Thornhill, would also require the Minister to determine whether the review should also consider the impact of any penalties on council tax payers who fail to tell their local authority that their property is empty. The review would need to be undertaken within two years of the legislation being enacted, with a report laid before both Houses of Parliament.
I am afraid that the Government are unable to accept the amendments. First, the Government are clear that the use of the premium and the consideration of its impact and enforcement are best undertaken by local authorities. As I have said, we are giving a discretion to local authorities; some local authorities do not apply the premium at all while others apply it in its totality. We have provided local government with complete discretion on whether to introduce the premium. Noble Lords will recognise that local government has been running the empty homes premium now since 2013, with a steady year-on-year growth in the number of councils making use of the power. Fewer than 30 councils have no premium in place at all. That gives a very clear indication that councils across the country consider this to be a useful power to drive behavioural change in owners of long-term empty properties.
In considering the Bill’s proposal to increase the maximum level of the premium from 50% to 100%, I have been struck by the widespread support from across the House—admittedly with variations, but there has been support for that increase. There is clear confidence that this is a sensible step to take. Given that, I am not persuaded that we should introduce uncertainty into the process by committing the Government to a review within two years. That could be perceived as demonstrating a lack of faith in the measure which, of course, is not the case.
Lord Kennedy of Southwark
I am very happy with that explanation from the noble Lord and very happy to withdraw my amendment.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Wednesday 4th July 2018
(6 years, 4 months ago)
Lords ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 107-R-I Marshalled list for Report (PDF, 61KB) - (2 Jul 2018)
Lord Shipley
“(1) Section 11B of the LGFA 1992 (higher amount for long-term empty dwellings: England) is amended as follows.(1A) In subsection (1)(b) (maximum percentage by which council tax may be increased), leave out “of not more than 50” and insert “as specified in subsection (1A)”. (1B) After subsection (1), insert—“(1A) If a dwelling has been empty for—(a) between two years and five years, the percentage is not more than 100;(b) between five years and ten years, the percentage is not more than 200;(c) more than ten years, the percentage is not more than 300.””
Lord Shipley (LD)
My Lords, I thank the Minister for a very constructive discussion in recent days about the second part of the Bill and the proposed escalator, and for the helpful discussion and explanation that we have had on the first part, about the staircase tax. I am very grateful for the Minister’s letter sent earlier this week, which explains the issues that have to be addressed with valuation lists going back a number of years.
We proposed the escalator in Committee, and the conclusion reached here after all-party discussion has been extremely productive. Broadly speaking, a dwelling that has been empty for between two and five years can attract a 100% increase if a local authority decides it wishes to do so. Between five and 10 years of that property being empty, the percentage could, at local authority discretion, increase to 200%. After being empty for more than 10 years, the percentage could increase to 300%. I welcome the Government’s agreement to those figures.
Of course, there is a view, to which I subscribe, that the penalty could well be higher if those who live overseas buy properties to leave empty as investments. That is a particular problem in London. Clearly this amendment will help, but it does not solve the entire problem because to get to 300% requires 10 years to pass. I hope that the Minister will do what we discussed in Committee, which is to review this legislation very carefully over the next two to three years. We may well find that there is a gradual decrease in the number of long-term empty properties, but that the decrease is not as great as we would like it to be. There is a case for a penalty of 500% for those who have deliberately invested in property to leave it empty. There is a world of difference between that and properties which are empty for two years because of delays in probate, family disagreements or other reasons. Local authorities now have the power to do something about it, and as long as the Government are going to keep closely under review whether the figures of 100%, 200% and 300% are working effectively, we are content with outcome that the Minister has agreed with us. I beg to move.
Lord Stunell (LD)
My Lords, Amendment 2 in this group is similar to the amendment I moved in Committee, but it is not exactly the same. I draw noble Lords’ attention to the general background to this proposal. There are 20 million homes in England and they are responsible for more than 30% of the country’s carbon emissions. We have the worst housing stock in Europe as far as energy efficiency is concerned. Measures are in hand to improve the stock of new homes, but with 200,000 new homes a year it will take 100 years to replace the housing stock we have at the moment. At 300,000 homes a year, it will take only 66 years. Of course, both those dates are well past 2050, the date by which the Government have undertaken that there will be a substantial carbon reduction, but that can be achieved only if the energy performance of the housing stock is improved. Improving the energy performance of the existing housing stock is clearly essential. It is obviously an important government priority, and my amendment assists them in reaching that target.
By far the best time to improve the energy performance of any building is when it is not occupied. An empty home, which by definition is not occupied, is exactly the right place for energy improvements to take place. Whether the home is for sale or rent, then is the moment to strike. The Government have introduced proposals to make sure that rented accommodation achieves certain minimum standards of energy performance. However, for every step forward on energy improvements for homes, the Government have taken some steps back. Zero-carbon homes—a clear commitment of the coalition Government—have been abandoned, the Green Deal is no more and my Question to the Government about the application of the energy performance directive has been responded to in a very bland and potentially problematic way. The noble Lord, Lord Bourne of Aberystwyth, responded last week:
“The outcome of negotiations with the European Union … will determine what detailed arrangements apply in relation to EU legislation, including the Energy Performance of Buildings Directive, in future once the UK has left the EU”.
That left one reader of that response completely baffled. He said that,
“it seems to suggest that we can at present have no certainty about what if any directives will apply in eight months’ time. Can this be right?”.
The Earl of Lytton (CB)
My Lords, I, too, thank the Minister for his clarification on the first part of the Bill and the non-domestic rating. Nobody has been beating a path to my door since the last time we discussed the Bill, and I take it from that that this is as good as it gets. I thank him very much for clarifying that.
I would like to make a couple of comments on the amendments that we are discussing, starting with Amendments 1 and 3. It seems that we do not fully know the reasons for long-term vacancies. What concerns me is that the amendments have the potential to make a blunt instrument. I always think that legislation is about as blunt as it gets, but this risks making it blunter still. I understand the point made by the noble Lord, Lord Shipley, about overseas owners; there is such a problem in certain areas, just as there is with certain other reasons for people deliberately holding property vacant.
We have to be clear whether this is some sort of fine or sanction for a socially reprehensible practice of deliberately keeping property empty, or whether it performs a legitimate housing stock amenity consideration. Is it something aimed at preventing the deterioration of neighbourhoods through some sort of social objective? In that case, I suspect that there are other measures. We need to be clear about how this is to be used if it is not to fall rapidly into some sort of disrepute. If it is used as a means just to bolster revenues for a billing authority, we would probably collectively feel that it was not quite the right way in which to do things. I declare my interest as a vice-president of the LGA; no doubt I will get a dart or a brickbat from that quarter if it thinks that I am speaking out of turn.
Either way, at the levels of escalation that we might be talking about, the question is whether we leave things to the sole discretion of billing authorities with a challenge, as I understand it, only by means of judicial review. Other noble Lords will correct me if I have got that wrong. If that is the case, I would regard it as a very significant impediment, because of the cost and time involved in embarking on that course of action—to challenge the views of a local authority by saying that no reasonable authority could have reached that decision, which I understand is the test. As an alternative, I suggest that we need to introduce a properly, but doubtless locally, codified method of application, exemptions and, possibly, appeals. In that case, a lot more needs to be sitting somewhere in the Bill—perhaps the Government will produce regulations or something like that—which is not in it at the moment. I leave your Lordships with those thoughts.
I absolutely get the purpose that sits behind Amendment 2, moved so eloquently by the noble Lord, Lord Stunell. I would hope that the rationale behind saying, “We’re improving the energy efficiency of the Bill”, is not going to be capable of being spun out as some sort of pretext to prevent the core principle behind this, which I accept—namely, that there should be some sort of escalator—from kicking in at all. I think that would be a mistake.
I have a concern about the word “normally”. I seem to remember that it has rather unfortunate antecedents. I am probably going back about 30 years here, but I recall that there were a series of measures whereby it was suggested that “normally”, or something that sounded rather like it, was insufficiently clear or distinct in how it would be applied. The question was whose norm and who would be the judge of that. So, while I support the noble Lord, I am not absolutely sure that “normally” will be sufficiently targeted to achieve what he wants. With that, I will listen with great care to what the Minister has to say.
Baroness Pinnock (LD)
My Lords, I apologise for being late. I was watching the screen avidly and then, all of a sudden, it turned to this item of today’s business. I remind noble Lords of my interests as a councillor and as another vice-president of the Local Government Association.
I thank my noble friend Lord Shipley for moving Amendment 1 in his name, my name and that of the noble Lord, Lord Kennedy, and giving ample expression to our proposal for adding the premium to be paid on council tax, to be dependent on the length of time for which the property is left empty. In doing so, I shall speak to Amendment 3, a technical amendment in the names of the same noble Lords that supports the principle of Amendment 1.
In Committee, when we first moved an amendment relating to an escalator in the premium on council tax, the Minister was kind enough to give us some warm words of encouragement in response. Subsequently, a couple of weeks ago, we had a meeting where we discussed that. I thank him for saying the Government would be willing to support the principle of the idea but that there may be some necessary refinements when it came back at Third Reading. I am very pleased that that has happened, because it shows how this House can work in making amendments to Bills and trying to improve them before they become full legislation.
The basis of our amendment is, of course, a premium of 200% after five years and 300% after 10 years for those properties that are empty for 10 years or more. Any financial incentive to get more properties into use by families and individuals who desperately need a hand is one that we can all support. At the same time, it stops empty homes from being a blot on their communities—and we all know examples of that. The third reason is that it means that, if we can bring empty properties into use, we do not have to release so much greenbelt land to developers.
Lord Shipley
My Lords, I was reminded by the noble Earl, Lord Lytton, and my noble friend Lady Pinnock that I did not declare when I spoke earlier that I am a vice-president of the LGA. For the completeness of the record, I do so now.
Lord Beecham (Lab)
My Lords, I will further add to that by declaring my own interests as a vice-president of the association, and also as a serving councillor in Newcastle. I rise to present the views of these Benches in the absence of my noble friend Lord Kennedy, who is en route to Birmingham for the Local Government Association conference.
I have had some experience of dealing with, or attempting to deal with, the problems of empty houses in the ward I represent in Newcastle. It has been impossible, eventually, either to persuade the owners to do the necessary work or, in one case, to acquire the property. While I certainly support the amendments before us, and I understand that they are likely to receive a reasonably warm response from the Minister, it occurs to me that perhaps the aspect of acquiring properties is a matter that should be given further consideration. It is an alternative approach that might well result in a quicker resolution of the problem, and enable the availability of a usable home, than simply collecting money by way of an incentive, as it were, for owners to do something, which may not be all that effective. I would be grateful if the Minister would indicate whether the Government will look again at the powers of local authorities to acquire in these circumstances, and whether these need to be enhanced, particularly in terms of the timescale involved. On the ground, it would probably make a greater difference than these measures, welcome though they are as an additional arm in trying to deal with this situation, which is, at a time of housing shortage, really quite disgraceful and should not be tolerated.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I thank noble Lords who have participated in the debate on Report. I shall, if I may, give the Government’s response and then try to pick up some of the points that have been raised by noble Lords during the debate. I am grateful, first, to the noble Lord, Lord Shipley, as the noble Baroness, Lady Pinnock, obviously is, for moving the amendment, to the noble Baroness, Lady Pinnock, and to the noble Lord, Lord Beecham, for speaking on behalf of his noble friend Lord Kennedy, who is on his way to the LGA conference.
I turn first to the amendment relating to the escalator. The noble Baroness and the noble Lord, Lord Shipley, were kind enough to say that his amendment has received government support as well as support from the Labour Benches—we have obviously involved the noble Lord, Lord Kennedy, in discussions on this, and others as well. This would mean that properties empty for between five and 10 years could face premiums of up to 200%, and homes empty for more than 10 years could be subject to 300% premiums. I stress that that is a matter of discretion for local authorities, which is written through all of this legislation. It is something that I and the Government have not been keen to depart from. It is a matter of localism—the noble Lord, Lord Stunnell, used that word several times.
I indicated in Committee that I had some sympathy with the suggestion that was brought forward and that I would reflect on it. The Government have reflected carefully on the arguments advanced by noble Lords at Second Reading and in Committee, and accept that there is a strong case for even higher premiums than those originally mentioned for homes that have been empty for an extended period of time. While we are unable to accept the amendment as it is currently drafted, I hope that noble Lords and the noble Baroness will be pleased to hear that we intend to bring forward a government amendment with the same effect at Third Reading.
Properties that have been empty for more than five years are likely to be few in number. I say to the noble Earl that this is not a revenue-raising measure: the intent is to free up properties for housing where they have been empty for a protracted period of time and to improve the amenity of a given area. It is not about raising a significant amount of revenue: I do not think that it will. It will raise some, but not a significant amount. However, such properties are often a blight on local communities and a nuisance to local residents. I accept that a strengthened incentive of a 200% or even 300% premium may prove more effective in such difficult cases, and could therefore ultimately bring benefits to the wider local community.
As I have mentioned in previous debates, we have to strike a balance in making this judgment, and ensure that no one is subject to the tripling or even quadrupling of their council tax bill without due consideration to the particular circumstances of the case. In relation to points first raised by the noble Lord, Lord Shipley, about the broader social issue of property that people buy intending to leave it empty, I accept that that concern goes well beyond this targeted piece of legislation. I do not disagree with the general thrust of what he said at all. We will no doubt want to look at that. It will rightly remain up to local authorities whether and how to implement any higher premium based on local circumstances. That is important. Local authorities will know their circumstances best and how to target the premium in whatever way they want within the general broad framework that we have set out. We must ensure that higher premiums are applied fairly, but that will be done through the mechanism of the local authority.
We will, however, take the opportunity to revise the guidance issued in 2013 on the use of the premium to ensure that the additional powers are exercised with due consideration to issues facing low-demand areas and cases of hardship. We will have the benefit of today’s and earlier debates to look at when we consider how that is best done. We will also look to ensure that home owners have sufficient notice to prepare themselves for this change. That is something that I have shared with the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy. We anticipate that the higher premiums would come into force in 2020 for 200% premiums—anything that had been vacant since 2015, could in 2020 attract that higher premium—and in 2021 for 300% premiums, so that anything that had been vacant since 2011 could then attract that 300% premium. We are not convinced that local authorities have reliable statistics about empty properties longer ago than 2011, but they should have them from 2011 onwards because of current policy. That is a further consideration but not the only one. We were wary about the retrospective effect of this provision and felt that we should give appropriate notice, which noble Lords will understand.
I now turn to the second amendment tabled by the noble Lord, Lord Stunell, and the noble Baroness, Lady Pinnock. As the noble Lord indicated, there was a similar amendment in Committee. This is slightly different with the insertion of the word “normally”, but that should not disguise the fact that this is still a directive to local authorities with the addition of “normally”. I hesitate to throw compliments the way of the noble Lord so I had better not call it a noble concept, but I admired the way that he sought to indicate that this amendment was different from the one in Committee. I am tempted to say “nice try”, but I am not convinced that it is different in kind.
The current system allows local authorities to take into account such considerations. Indeed, if they want to, they can go further than the noble Lord’s amendment and be more generous. There is nothing to prevent them exercising their discretion in this way, as well as for other good reasons—this is not the only good reason, although it is undoubtedly one. However, fundamentally these sorts of decisions are best made locally by those who know the challenges and demands of a given area. As already mentioned, it should remain a matter for local authorities to decide not only whether to charge a premium but the exact rate at which it should be charged.
I shall try to pick up the other points that were made. First, the noble Lord, Lord Shipley, made a point about probate. I think that property that has not yet had probate is exempted anyway, although I accept that thereafter the period would kick in, so it is a relevant point.
In relation to most of the rest of the questions raised, I am afraid that I cannot read my own writing. I have made a note that the noble Lord, Lord Beecham, made some good points but I have not put what they are—nor should that be a surprise to anybody because he always makes good points. However, we will pick up the good points that require an answer and respond in writing.
Lord Bourne of Aberystwyth
My Lords, it is an affliction that lawyers, along with doctors, bear, so I understand the point that the noble Lord is making.
To sum up, we accept that there is a strong case for a higher premium, and I thank noble Lords who worked with us on the so-called escalator. I am pleased to say that the Government intend to bring forward their own amendment at Third Reading to the same effect. On the second amendment, although the Government recognise and understand the positive sentiment behind the noble concept of reducing the premium, it is a matter that we feel is best left to local authorities, as they have that discretion. Therefore, I hope that noble Lords will agree not to press their amendments on the basis that I have outlined.
Lord Stunell
Does the Minister have any news whatever on the biennial review of the Sustainable and Secure Buildings Act, as required by statute and now 18 months overdue?
Lord Bourne of Aberystwyth
My Lords, I had not anticipated that the noble Lord would go in that direction—more widely than the debate. I hope he will accept that I will pick up that point and try to get an expeditious response to him, but I cannot give him any assurance beyond the fact that it is something that we realise is due. I will write to him and copy the letter to other noble Lords.
Lord Shipley
My Lords, I thank the Minister very much for what he has said and beg leave to withdraw the amendment.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Wednesday 18th July 2018
(6 years, 4 months ago)
Lords ChamberRead Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 107-TR(a) Amendment for Third Reading (PDF, 53KB) - (9 Jul 2018)
“(1) Section 11B of LGFA 1992 (higher amount for long-term empty dwellings: England) is amended as follows.(1A) In subsection (1)(b)(maximum percentage by which council tax may be increased)—(a) after “that day” insert “(“the relevant day”)”, and(b) for “50” substitute “the relevant maximum”.(1B) After subsection (1) insert—“(1A) For the financial year beginning on 1 April 2019 the “relevant maximum” is 100.(1B) For the financial year beginning on 1 April 2020 the “relevant maximum” is—(a) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is less than 5 years, 100;(b) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 5 years, 200.(1C) For financial years beginning on or after 1 April 2021 the “relevant maximum” is—(a) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is less than 5 years, 100;(b) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 5 years but less than 10 years, 200;(c) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 10 years, 300.”(2) The amendments made by subsections (1) to (1B) have”
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, this amendment, which allows for increases to the council tax empty homes premium cap according to how long a property has been empty, follows amendments with the same effect moved in Committee and on Report. I am grateful to the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy, for bringing forward this so-called escalator amendment.
As noble Lords will undoubtedly be aware by now, this amendment will allow local authorities to charge premiums of up to 200% on homes empty for at least five years and less than 10 years, and to charge premiums of up to 300% on homes empty for at least 10 years. It will not change the provisions for homes empty for at least two years and less than five years. The maximum rate for such homes will remain at 100%, as proposed by the original Bill. Neither does the amendment fetter the discretion of local authorities, which will retain the right to decide on the precise level of premium charged, taking into account local circumstances, guidance and the maximum thresholds set by government.
Lord Campbell-Savours (Lab)
My Lords, I was having a conversation the other day in which a matter arose that we did not consider when we were dealing with the provision at earlier stages. Today we are setting out the council tax premiums payable on empty property. The Explanatory Notes state that:
“Since 2013, local authorities in England have had the power to charge a council tax premium of up to 50% on ‘long-term empty dwellings’—that is, homes that have been unoccupied and substantially unfurnished for two years or more. This premium is in addition to the usual council tax charge that applies to that property”.
It is a power, not a requirement—but that is not strictly true. The assumption that we have all been making is that within the first two years the council tax remains the same as payable at the moment—but that is not strictly true. If you have a single person discount, which is 25%, then the council tax you will pay once your property is empty is not based on the single person discount at all; it is based on dual occupancy.
I will give an example of that, which I have taken from Windsor & Maidenhead. For band G properties the full council tax is £1,767.67 per annum. With the 25% discount it is £1,325.75 per annum. In the current year the total council tax on a band G property is £1,855. After two years, that council tax will double to £3,712, as against £1,325 at the moment. That is nearly a tripling of the council tax payable on that property, because the single person concession is not carried forward. To take the current year, someone in a band G property in Maidenhead will currently pay £1,325, but if they empty it their council tax will immediately increase by a third, to £1,855. That is a 33% increase, because they have emptied the property and, again, because they lose the single person discount.
I raise this because in the Minister’s presentation to the House he mentioned that guidelines would be issued. Can we deal with this issue in guidelines? Can local authorities be advised that when they send out those council tax demands for an empty property subject to a single person discount, the new rate will be based on the council tax payable with the discount, not on the rate payable in the event that the property has been occupied by two persons or more?
The Earl of Lytton (CB)
My Lords, I am pleased to follow the noble Lord, Lord Campbell-Savours, although I have different reasons for wanting to know what might be included in the guidance. As we are at this stage of the Bill I reiterate my declarations of interest: I am a vice-president of the Local Government Association and a professional who deals with rating, as well as an owner-occupier of residential property.
My concern goes back to a point I made at Second Reading: namely, that we do not always know the full range of circumstances which lead to long-term vacancy. It is probably generally true to say that owners of residential property do not deliberately leave it vacant long term; it simply deteriorates. But there are reasons why it occurs, notwithstanding what one would reasonably suppose is owners’ innate desire to make best use of the asset. I am thinking of areas subject to some sort of wholesale blight; those might be areas which are destined for redevelopment and which are held in that form. If they are held by a developer, good luck to them, but if you happen to be a private owner of property that is in part of an area which is destined for long-term redevelopment, you are stuck with it, possibly with none of the end benefits.
Could the Minister therefore give us some clarification and reassurance that where there is an impact of some planning or public policy—perhaps including a local authority’s policy for an area—that results in genuine reasons for vacancy, this sort of thing will be covered by the guidance? If it is not, it does not matter how genuinely you are in the market and with what rent or other terms you might wish to let or sell the property; if it is in an area that is subject to serious blight, first, nobody will get a mortgage for it, and secondly, maybe nobody will want to live there. Crime, deprivation and so on are part and parcel of that algorithm. We therefore need to be careful that where there are genuine reasons, not all of which can be imagined at this juncture, provision in the guidance will cover that sort of thing. Can the Minister also say whether the guidance will be subject to wider public consultation than perhaps between just the professions—the sort that I belong to—and local authorities?
Baroness Pinnock (LD)
My Lords, I remind noble Lords of my relevant interests, which are in the register, as a councillor and a vice-president of the Local Government Association.
I thank the Minister for accepting the principle of the amendment that I and my Liberal Democrat colleagues tabled both in Committee and on Report. That amendment has now been transformed into a fully fledged amendment, and I thank the Minister for tabling it on behalf of the Government.
We fully support the amendment before us today. Its purpose is clear: to significantly reduce the number of homes that lie empty and unused, which some reports say is as high as 200,000. This is at a time when all agree that there is an urgent need to increase the supply of housing. This amendment is one way of making the most of the housing stock that we have. There are, rightly, exemptions to this policy, and the Minister has outlined what they are. Implementation of the legislation is at the discretion of local authorities, and I hope and expect they will take into account areas that are destined to be redeveloped, and where the sale of a house would be very difficult.
I also welcome the Minister’s comment that there will be a review of the guidance attached to the Bill. Like the noble Earl, Lord Lytton, I raised concerns about that guidance in the Bill’s early stages, namely that it probably lacked the clarity to ensure that the legislation was properly and fairly implemented.
As I said before in discussion on the Bill, there are some owners who, to my personal knowledge, leave properties empty for no other reason than that they do not want to sell them. One property that I mentioned before has been empty for 29 years. I asked the local authority concerned what action it has taken. It said that it has discussed the matter with the owner, who simply does not want to sell the property. So it is left there like a historic relic of 30 years ago. There are instances of that happening. My hope is that with an escalation of the premium on council tax, it will be a financial disincentive to leave homes empty for so long.
That is why I am totally supportive of this amendment, based on the principle that I and others laid before the House in Committee and on Report. I thank the Minister for the discussions we had and for his positive reaction to the principle that I set out. I am also grateful for the help I received from the Liberal Democrat Whips’ office in formulating this idea as an amendment. We fully support the amendment.
Lord Mackay of Clashfern (Con)
My Lords, I wonder whether the situation that the noble Earl, Lord Lytton, described would not be dealt with by the power to require the local authority compulsorily to acquire the property. If a property cannot be sold because of a planning blight implied by the actions of the local authority, this might be a way out of it. The noble Lord mentioned that the rating value of the property should be affected by the way it was occupied. I wonder whether the local authority can make that a matter of guidance, or whether it is part of the statutory provision that the premium is payable on the rateable value of a property, rather than on the way in which it was occupied before it became unoccupied.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I draw the attention of the House to my relevant interest as a vice-president of the Local Government Association. I do not intend to detain the House for very long as there is widespread support for the amendment. I am very happy to support the amendment tabled by the noble Lord, Lord Bourne of Aberystwyth, which, as we have heard, came out of a proposal from the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley. The proposal introduced the concept of having an increasing scale of how much council tax can by charged on an empty property. It was a very good, sensible idea. This government amendment looks at the practicalities of delivering it and has my full support.
My noble friend Lord Campbell-Savours raised the issue of the single person’s discount, and I hope that the noble Lord will address that in his response to the debate. The noble Earl, Lord Lytton, and the noble and learned Lord, Lord Mackay of Clashfern, raised the issue of the blight of empty properties. I hope the noble Lord can confirm that that will be addressed in the guidance that comes on the back of this Bill. As I said, I am very happy to support the amendment, and I thank the noble Lord and the Government for listening to the concerns that have been raised.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have participated in the debate on this amendment. If I may, I will deal with the contributions in the order in which they were made, and turn first to the noble Lord, Lord Campbell-Savours. I understand where he is coming from on this, but the essential point, as was just made by my noble and learned friend Lord Mackay of Clashfern, is that the premium is payable on the value of the property and not on the circumstances of the person or persons who happen to be there at the time. I can provide him with the precise provision that makes this absolutely clear.
Lord Campbell-Savours
We are talking here about an incidence of empty properties which may well increase in times of a depression in property prices. In parts of the country now, property prices are collapsing. The danger is that people will go into negative equity in the event that they are driven into selling because they are faced with what might appear to be extremely high increases in their council tax where they have been living as a single person in a property. I understand what the noble Lord said about the rateable value but I wonder whether it might be possible to detach from that formula and move to the actual sum payable, which is what really affects the council tax payer more than anything else.
Lord Bourne of Aberystwyth
I understand the point that the noble Lord is making but, if he will forgive me for saying so, it is a somewhat different point. I will come on to the hardship issues and the guidance, because hardship could attach to a couple or to a family as much as to a single person. The premium is payable in relation to the rateable value of the property and not the circumstances of the person who was last there. For example, it could be that a single person dies and then a family inherits the property, and so it would be complicated if it were otherwise. It also applies the council tax in the relevant year, and I fully concede that it is more likely to go up than go down. However, it is conceivable that it could go down and, if that happens, that is just the way it is, if the noble Lord will forgive me for saying so.
As I think I said in relation to the point raised by the noble Earl, the guidance we issue will be subject to full consultation and will take care of hardship cases. Hardship is a circumstance that I am very keen we address in the guidance, which will be open to full public consultation for anyone who wants to participate. Ultimately—
Lord Bourne of Aberystwyth
Forgive me, but I will just finish this point and then give way briefly to the noble Lord. Ultimately, this is a matter for the discretion of the local authority. We have been very keen to ensure that that is the case, as the local authority will know of the hardship more than anybody else in the local area.
Lord Campbell-Savours
On exactly that point, according to the statistics that the noble Lord gave the House when we last considered the matter, 90% of local authorities are now choosing this option. It may well be that local authorities feel under pressure, irrespective of the hardship criteria that the Minister may lay down in the guidelines. That is why I want something a little firmer. They are taking the money because it is available, and 90% is the noble Lord’s own figure.
Lord Bourne of Aberystwyth
If the noble Lord looks at what I said, I also said that they are exercising their discretion, and there is evidence of that, too. This is not a revenue-raising measure, as is borne out by the statistics. It is very much to deal with the specific case of blight on the local landscape and, as the noble Baroness, Lady Pinnock, said, freeing up homes. That is what is behind this. There is not a great incidence of cases, as the figures will bear out, but it makes a real difference in communities up and down the country.
As the noble Earl, Lord Lytton, said, this is something best left to the local authority. I am grateful for having my powers exaggerated but I cannot enumerate in a list what they may be. They are things for the local authority to look at. We will approach the guidance in such a way that we can give clear indications of the sort of factors that local authorities will want to bear in mind. Once again, it is important that we give the local authorities that discretion and trust them in the exercise of that locally. I stress that this will be subject to full consultation.
I am very grateful to the noble Baroness, Lady Pinnock, who first came up with this escalator amendment and for the work we have done on this together and, indeed, across parties, with the Labour Party as well. We have come to a very happy conclusion on this. As I say, the review of the guidance is the next stage in this process, and I expect us all to engage in that together as well. I am very grateful for the contribution of my noble and learned friend Lord Mackay of Clashfern on compulsory purchase. There are compulsory purchase powers in relation to planning blight. They might not cover every conceivable instance that the noble Earl was thinking of, but that certainly would be part of the solution to that quandary. I am very grateful to the noble Lord, Lord Kennedy, as always, for being supportive and constructive in contributions as we have developed this escalator amendment. It has been a very useful exercise and we have, as is appreciated in government, come up with something that has improved the Bill before us, so I am very grateful for that. With that, I beg to move this amendment.
Lord Bourne of Aberystwyth
My Lords, in moving this Motion, I express my thanks to noble Lords for their helpful insight and support throughout proceedings. I especially thank the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy. I am grateful to the noble Earl and other noble Lords who have participated in our discussions. For example, the noble Lords, Lord Campbell-Savours, Lord Stunell and Lord Best, and my noble friend Lord Deben, who is not in his place at present, have contributed as this has gone forward.
I also thank the Local Government Association for its engagement with my officials during the passage of the Bill—indeed, even before it was introduced in the other place. The conversations were constructive, and we will continue these as the Bill takes effect. Additional thanks are due to the Federation of Small Businesses, the Rating Surveyors Association, the Royal Institution of Chartered Surveyors and the Institute of Revenues, Rating and Valuation. Their expertise has been invaluable, and I am grateful for their assistance in developing the solution to the staircase tax, which has enjoyed wide support across both Houses.
I would also like to thank officials and the Bill team who have contributed to the Bill: Joshua Hardie, Gareth Adams, Shaun Morroll, Nick Cooper, John Hutchinson, Peter Bates, Thomas Adams, Antony Henderson and Hannah Ram—my cheerful, charming and efficient private secretary; that has earned me some Brownie points—who has worked incredibly hard on this Bill.
In summary, the Bill is much improved and has enjoyed broad support across the House. I beg to move.
Lord Kennedy of Southwark
My Lords, I join the Minister in thanking everyone in the House for their contributions to the Bill. It is a small, three-clause Bill, but an important Bill, which, as we know, deals with the staircase tax among other things. I also thank the department officials for their work, other colleagues around the House and all the organisations that the Minister listed, including the Local Government Association. Though small, the Bill is useful and will make a difference. I also thank the Minister, as always, for his management of the House.
Royal Assent
Thursday 1st November 2018
(6 years ago)
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