Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 23rd April 2018
(6 years, 7 months ago)
Commons ChamberRating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 1st May 2018
(6 years, 6 months ago)
Public Bill CommitteesRating (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)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 15th May 2018
(6 years, 6 months ago)
Commons ChamberRating (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)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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 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.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 4th June 2018
(6 years, 5 months ago)
Lords ChamberRating (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)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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 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
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 19th June 2018
(6 years, 5 months ago)
Lords ChamberRating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Amendment Paper: HL Bill 107-I Marshalled list for Committee (PDF, 75KB) - (15 Jun 2018)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
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This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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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.
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.
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.
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.
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.
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.
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.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 4th July 2018
(6 years, 4 months ago)
Lords ChamberRating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Amendment Paper: HL Bill 107-R-I Marshalled list for Report (PDF, 61KB) - (2 Jul 2018)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 18th July 2018
(6 years, 4 months ago)
Lords ChamberRating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Amendment Paper: HL Bill 107-TR(a) Amendment for Third Reading (PDF, 53KB) - (9 Jul 2018)
This text is a record of ministerial contributions to a debate held as part of the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
“(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 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.