Earl Attlee
My Lords, I am grateful to my noble friend Lord Shipley for giving me the opportunity to promote the principle of council tax referendums. We have several interesting amendments to debate later on, including some government ones.
Clause 59 gives effect to Schedule 5, which inserts a new Chapter 4ZA into the Local Government Finance Act 1992. This enables local electors to approve or veto excessive council tax increases in a referendum. It also gives effect to Schedule 6, which removes the Secretary of State’s powers to cap council tax in England and makes consequential amendments to various Acts as a result of the provisions for council tax referendums. The clause will ensure that excessive council tax increases occur only where they have a clear mandate from local people. This is in contrast to capping, where Ministers take the decisions and local people have no say at all. It will strengthen local democracy and ensure councils are more accountable to their electorates, but it will allow the electorate to vote for increased expenditure if they want it.
A set of principles defined by the Secretary of State will be used by authorities to determine whether their council tax increases are excessive. These principles must be submitted in a report to the House of Commons for its approval. A comparison of basic amounts of council tax could be the only principle, but the Secretary of State can include other principles as he sees fit. It is necessary for the excessiveness principles to be determined by the Secretary of State with the approval of the House of Commons.
The noble Lord, Lord McKenzie, touched upon the wider economic issues of council tax expenditure. It would be impractical and excessive to require a referendum for every single council tax increase. The flexibility allows for different sets of principles for different categories of local authorities. For example, principles relating specifically to town and parish councils could ensure that the great majority of councils—indeed, all but large, high-spending parish councils—would not be required to hold referendums. The report for the House of Commons must be laid before the date on which the local government finance report for the year is approved. Authorities will therefore know, when setting their council tax, whether or not they have exceeded the principles, so they will go into this process with their eyes open.
Where an authority determines that its council tax is excessive, it will normally hold a referendum no later than the first Thursday in May—the usual date of local elections. However, the Secretary of State can specify a different date by order, such as to allow the referendum to be held on the same day as local government elections if this date is not the first Thursday in May. Entitlement to vote in the referendum is based on the register of local government electors and entitlement to vote in local government elections for a particular area.
Where an authority sets an excessive council tax increase, it must also make substitute calculations to determine a basic amount of council tax which does not exceed the excessiveness principles. The substitute calculations would take effect in the event that the authority’s increase is rejected in a referendum or the authority fails to hold a referendum by the required date. The Secretary of State may make regulations concerning the conduct of referendums, which would include such matters as the wording of the question to be asked in the referendum, the publicity to be given and expenditure limits. There are obvious reasons why this may be necessary.
The noble Lord, Lord McKenzie, asked whether authorities can campaign for the proposed increase in council tax. No, it is intended that they cannot. They must put the facts to the electorate and leave them to decide but individual councillors will be free to campaign.
The Secretary of State will have the power to direct that the council tax referendum provisions should not apply. The power could be exercised only where it appears to the Secretary of State that unless the authority is allowed to increase its tax excessively, the authority will be unable to discharge its functions in an effective manner or be unable to meet its financial obligations. This is a reserve power and the expectation is that this would be used only in exceptional circumstances, such as where the High Court has exercised its powers to appoint a receiver where an authority has failed to service its debt within a set time period.
This clause is long and detailed but it is not as complicated as capping legislation, which has such concepts as budget requirement, designation, nomination, designation after nomination and vice versa, notional budget capping as well as actual capping and so on. And I have not got the foggiest clue what that is about. It replaces all that with a simple concept; namely, that local people and not Ministers should take the decision to approve or veto excessive council tax increases.
Sadly, council tax has more than doubled since 1997. If councils want to set excessive council tax increases—that is, those that exceed the norm—in future they will have to prove their case to the electorate. I urge that Clause 59 should stand part of the Bill.
Lord McKenzie of Luton
I touched on non-domestic rates and localisation, and how that regime would sit alongside the regime proposed in the Bill. In particular, I should like to know whether there would be equivalent capping powers on the business rate because that has ramifications for council tax levels as well.
Earl Attlee
My Lords, that is a weensy bit technical for me. Some amendments deal with non-domestic rates. If the noble Lord’s point does not get covered, I will of course write to him.
Lord Greaves
The Minister mentioned parish and town councils. I think he said that only a small number would be caught by the referendum provisions and that there would be those which are very large and would have large levels of spending. He is nodding so I remember correctly. What sort of scale does he expect this to be? Would it be three or four, half a dozen, or 30 or 40? The Government must have some idea.
Earl Attlee
My Lords, the noble Lord has asked an important question. There will be provisions to ensure that small parish councils do not get caught by these provisions. They will be for only the larger authorities. I am sure that we will either get to a suitable amendment or I can write to the noble Lord and other members of the Committee with full details of how that important issue is addressed.