Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012
Baroness Hanham
That the Grand Committee do report to the House that it has considered the Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012.
Relevant documents: 37th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, the purpose of these regulations is to set out the rules for the conduct of referendums in relation to excessive council tax increases set by authorities in England. Noble Lords will know that the coalition programme for government included a commitment to abolish the centralised capping regime and give council tax payers the final say on excessive increases through a referendum. We have delivered that commitment. The Localism Act means that from 2012-13 onwards, when an authority sets an increase in excess of principles proposed by the Secretary of State and approved by the other place, a referendum will have to be held. The 2012-13 principles were approved by the other place on 8 February.
These regulations largely replicate the Local Authorities (Conduct of Referendums) (England) Regulations 2007, which the Committee has recently considered in updated form. Council election officers are familiar with those. However, these regulations reflect the specific subject matter of council tax referendums.
Where a council tax referendum is to be held, the authority triggering the referendum must pay for it. It must also notify voters that a referendum will be held and inform them of the potential impact on their bill, and the cost of the referendum. The authority cannot campaign in relation to the question to be asked, but it can publish a statement setting out the reasons for its excessive increase and the consequences if the increase is not approved.
Organising the referendum will be the responsibility of billing authorities. These are the authorities that have the expertise and experience in organising polls. Where a major precepting authority has triggered a referendum, separate polls will be organised by each of the billing authorities in its area. The major precepting authority will appoint a chief counting officer to determine the overall result, with powers to ensure that the poll is run effectively.
Referendums will generally be held by the first Thursday in May to coincide with local elections. At the discretion of counting and returning officers, these can be held in combination with other polls, if appropriate. The referendum could also be held up to 28 days later to coincide with another poll.
The regulations make special provision for the particular circumstances of the Greater London Authority, which calculates two different amounts of council tax that are potentially subject to a referendum.
There will be a restriction on the amount individuals or bodies can spend on a referendum campaign. This is £2,362 plus 5.9 pence for each entry in the relevant electoral registers. Breach of the limit in certain circumstances will be a criminal offence.
Consistent with existing electoral practice, a referendum may be questioned by petition to the court. Until a court hears a petition from four of more voters, the result of the referendum will stand. A court may uphold the result, declare it void or reverse it on the grounds that the result was not in accordance with the votes cast. In the event of a void result the authority’s substitute calculations will take effect. To avoid uncertainty for bill payers, there is no authorisation for a referendum to be rerun.
The Government have looked carefully at the question to be asked at the council tax referendum. As noble Lords will see from briefing provided by the Electoral Commission, we have to date, unfortunately, not been able to reach agreement with the commission on the precise form of words to be used. However, recognising the important role which the commission has in commenting on referendum questions and the need to ensure that questions are neutral and comprehensible, we will continue to work with the commission in the coming weeks and intend to come forward with updated proposals in due course.
For this year, we need to make progress to deliver the council tax freeze and to ensure that council tax payers have the right to decide on any excessive increases. The Government’s offer of grant to support a council tax freeze in 2012-13 makes it unlikely that a council tax referendum will be held this year. However, if authorities choose to ignore the freeze and go on to set an excessive increase, we need these regulations to be in place. I commend the regulations to the Committee.
Lord Jenkin of Roding
My Lords, I am grateful to my noble friend for her careful explanation. Of course, as she will be aware, this is a very substantial volume of regulations. It runs to over 120 pages. It contains a huge mass of detail and therein lies my reason for rising to my feet. Let me say straight away that I am totally convinced about the Government’s policy of getting rid of rate-capping—and no one did more rate-capping than I did between the years of 1983 and 1985—and substituting for that the right of the public to decide whether a rate is excessive or not. I have made no secret that I totally support that. It is exactly the right procedure, which we need to do. It is in line with the devolution of power to local communities and giving the people the right to have their say.
However, I find the detail—the mass of prescriptive detail—in these regulations extremely difficult to accept. One must ask why it has to be set out in such minute detail. After all, the regulations try to prescribe the question to be asked. That may be quite reasonable and I heard what my noble friend said about that. There has been a considerable correspondence with the Electoral Commission on that and it has a good deal of wisdom on this. I think that it is right that it should be listened to. It is not wholly satisfied with the question that appears in the regulations, but I will not pursue that question.
My question relates to the rest of the prescriptive detail, which has to be asked. For instance, why do the regulations have to set detailed limits on the amount that may be spent in the course of the referendum? Why does it set a limit on campaign expenses? Why are these things necessary? We are supposed to be devolving power to local authorities and to local communities. Why does it need to set the time when a referendum has to be held? Why does it put in place procedures for challenging and questioning results and so on? It seems that these are all details which local authorities should be perfectly capable—with their local communities —to decide. Of course, there are the massive detailed rules on the conduct of referendums when there is already procedure in existence under earlier legislation and, indeed, the regulations are based on this
I appreciate what the Minister said about the matter having been approved by another place, although the exceedingly short debate, which was held on this in the other place on 2 February, began at 8.55 am and finished at 9.08 am. According to my calculation, that was about 13 minutes, and that was for a matter that is right at the heart of the Government's devolution policy. They want to ensure that local authorities and local communities have a say and I am astonished that, at the other end, they felt it necessary to devote so little time to what I see as a substantial issue.
Matters do not stop there. The Government have sought to prescribe in some detail what is to be regarded as an excessive rate proposal. Of course, it is complicated if you try to set out all the details and if you set them out centrally, which is what my noble friends seem to have decided to do. Even the departmental officials have recognised that there are some very peculiar anomalies in the way in which the system will work.
I have here an annexe which was attached to a letter from the Local Government Association, but I also have an annexe which was attached to a letter to chief executives and a number of others from an official, Mark Rickard, in the Department for Communities. That letter sets out the situation, without any apparent apology or understanding of the unreasonableness of it. To put it very briefly, a local authority can determine, in an extreme case, a nil increase in its own rates and yet still, as a result of the levies, be subject to a referendum. Why? No doubt my noble friend will want to answer that. Others may have a substantial increase which ought to be the subject of a referendum but, because various adjustments are made, lo and behold, it is not.
When one looks at the list of authorities, based on a calculation made by the Local Government Association of some 31 authorities, where there will be an effective tax increase by the local authority of below 3 per cent, it ranges from 2.05 per cent for Manchester to 2.99 per cent for Wolverhampton; 31 authorities could set a rate below the 3.5 per cent limit which the Government have prescribed in the order and yet still be liable to face a referendum. Why should that be so?
I have tried to get to the bottom of this. I have tried to look through various papers and so on to get to grips with this to see what has happened and why it has to be like that and I confess to my noble friend that I have not found an explanation that would seem to justify these extraordinary figures. I think it stems from the fact that the Government are trying to spell this out in a mass of prescriptive detail; but this is a Government who, as we debated at some length during the passage of what is now the Localism Act, are supposed to be devolving authority to local authorities and to local communities.
It is to my noble friend's great credit that she and her colleagues in the department accepted a good many of those arguments and the result was that we sent back to the other place 100 pages of amendments. When I met the Secretary of State, I said to him, “I am sorry that we are sending you back a great many amendments”. He said, “I know, they’re absolutely splendid”. I said, “But Eric, it was your Bill”. That is extraordinary. They went through the other place without any opposition at all and nothing came back, but here we are at it again.
During the debates on the Bill, a great deal was said about dealing with a very deep-rooted attitude of mind which certainly is to be found in departments and also, as my noble friend Lord Tope said, within local authorities themselves. Many of them expect to be told what to do. It may take a generation before we grow out of this excessive dependence on detailed central government regulation. It is probably too late to think of changing this order now. I do not know what the noble Lords opposite may want to do when this order has to be taken on the Floor of the House. I certainly would not think there was any point in trying to vote it down or anything. I simply mark a note of protest. Why does it have to be like this, producing such extraordinarily anomalous results? It is largely because everything is being prescribed centrally.
Lord Rennard
My Lords, I, too, am a vice-president of the Local Government Association and I very much share the reservations and concerns just expressed by my noble friend Lord Jenkin in relation to these measures. Some of the particular difficulties with these regulations highlight some of the general difficulties with referendums. On 12 October 2010, the House debated the report of the Select Committee on the Constitution on the subject of referendums. There was clear agreement in that committee and no dissent in that debate that referendums are generally appropriate only for issues of major constitutional significance. In my contribution to that debate, reported at col. 428, I expressed my unhappiness at the idea of referendums being considered appropriate for much more widespread use.
One of the areas of difficulty with referendums is the potential level of disagreement about the wording of any question, which is the matter that I particularly wish to address in the Committee this afternoon. The Political Parties, Elections and Referendums Act 2000 established the Electoral Commission and gave it a role in considering questions to be put in referendums so that they are considered to be fair and intelligible. The Government followed the Electoral Commission’s advice in relation to the referendum about the AV voting system last year. They changed the proposed question when the commission put forward a clearer and simpler alternative wording.
Who sets a referendum question is currently a matter of major contention in relation to Scotland and the referendum on independence or an alternative form of further devolution. The Westminster Government have adopted the position that it is only proper legally for the Electoral Commission to be involved in framing that question, with the implication that the commission’s view may prevail over that of the Scottish First Minister, who may want what many people consider to be a less clear, less fair and potentially loaded question. However, in relation to questions on this issue, the Government have not yet agreed that the view of the Electoral Commission on the question to be put should prevail. Indeed, they may defy the views of the Electoral Commission on this matter.
I think that that is probably why your Lordships’ Select Committee on the Constitution recommended that the Electoral Commission should be given statutory responsibility to formulate referendum questions, which should then be presented to Parliament for approval. The Government did not accept that position and perhaps these regulations and the arguments over the wording of the questions illustrate why. The Government have accepted only that the commission’s view should be taken into account in framing the question included in regulations such as those being considered today, so I hope that the Minister will give us a clear account of the process that will be involved in agreeing the final wording of the questions. We would like to know how it might be agreed what the role of the Electoral Commission will be. In particular, I would like to know that the specific wording of the questions will be tested properly with voters and with plain language experts, as was the case with the referendum question last year when the Government insisted that the question to be put to people should be properly tested in that way. We would like to know that the questions proposed will be clear, simple and neutral, as the Electoral Commission insists.
Lord Grocott
My Lords, I am the first person to speak who is not an honorary vice-president of the Local Government Association, but I find myself in complete agreement—it is a new coalition—with the noble Lords, Lord Jenkin and Lord Rennard. I come to this entirely fresh because I did not take part in the Localism Bill; I was completely exhausted after taking part in the Parliamentary Voting System and Constituencies Bill, in which much of the time was spent trying to persuade the Government not to spend £100 million on a referendum on the alternative vote system. I am not sorry now that we had the referendum because I was very pleased with the result, but that does not justify the expenditure.
To pick up on the point made by the noble Lord, Lord Rennard, although we argued about pretty well everything else, there was no argument, so far as I can recall, about the decision that it should be the Electoral Commission that decided the language of the referendum. You have to have a neutral body deciding what question is going to be put.
As I said, I have come to this absolutely clean, but with a certain scepticism about new-fangled constitutional arrangements. When I started reading the detail of this—and, in particular, when I saw this document priced at £18.50—my reaction was, “What a spectacular waste of money, time and energy”. I would love to know how many hundreds if not thousands of hours of Civil Service time were spent producing this—they are looking weary behind the Minister, though no doubt they are 100 per cent loyal—not to mention the cost of the referendum. I would like the Minister to tell us, should there be a referendum, what the estimated cost would be for the average local authority to carry it out. We are all strapped for cash at the moment.
I hear a great deal about the need to consult the local electorate. I can only say that my experience of local government, not only as a councillor but also as someone who took a tremendous interest in local government in my area in all the time I was a Member of Parliament, has been that councillors of all parties spend inordinate amounts of time angst-ing—if that is a word—about the level of council tax, about whether it would be acceptable to the electorate and about what would be the likely outcome of a future election if they did not listen to what the electorate were saying. Councillors are usually in a pretty good position to make that assessment. Why we need this other, elaborate structure grafted on top of the established principles of local accountability I really do not know, particularly when it is likely to be at considerable expense—and then when I read the details, this almost defies satirical comment.
“It is possible for multiple council tax referendums”,
we are told in the advisory note,
“to be held within the same area … a billing authority could have to hold a referendum on its own excessive increase as well as that of a Police Authority, Fire and Rescue Authority, County Council and a number of local precepting authorities in its area”.
I cannot believe that I am reading that. Is it actually possible that there could be six, seven or eight referendums in the same area at the same time? I am coming to it fresh, so maybe there is a point that I have overlooked. I cannot believe that anyone is seriously advocating that as a sensible way of proceeding locally.
I cannot see what this is doing that cannot be done through the normal local electoral process. I am sure that it will cost money—perhaps the Minister can tell us. I am particularly concerned—I will not spell out again what the noble Lord, Lord Rennard, said, because he said it very effectively—about the fire that the Government are playing with, in the light of all that might be happening in Scotland, by saying that they will not accept what the Electoral Commission is saying about the wording of a referendum. That is a pretty risky route to follow. I do not know how they would explain to the Government in Scotland, let alone anyone else, why it is right for the Electoral Commission or other neutral body to determine the wording of the referendum there when they have blood on their hands by apparently disregarding the Electoral Commission’s advice here. It is a route that I would strongly advise them not to pursue.
I have not heard the Minister’s passionate advocacy of why this will transform life as we know it and bring happiness to local areas, which is usually what you hope for when you see new legislation coming along. This seems to me a waste of time and a waste of money.
Lord Smith of Leigh
My Lords, I have to confess that I am another honorary vice-president of the Local Government Association. I am also leader of a council. I declare those interests.
I agree entirely with what the previous three speakers have said. The noble Lord, Lord Jenkin, said that he approved of a new capping. We were one of the first authorities to be capped, in 1990-91, when we were cunningly capped by a Government who did not tell us the rules before we set a council tax and we suddenly found that we had done it outside the rules—but never mind, we got over that. We then had to set another, lower council tax, and of course the democratic influence came around and we got a much increased majority on the council as a result.
I have also been a passionate advocate for localism and I fought my Government on many occasions when I felt that they were being too centralist. I really welcomed the principle of the Localism Bill when it came through. Unfortunately I was not able to attend any of those debates, but with this measure the fundamental business of localism is undermined because it says that the Secretary of State will decide the council tax. As a practical local politician for many years—too many years, people may think—I would ask: which authority is actually going to go to its electorate and say, “We think that we should have a much bigger increase than the Government do”? Have we any evidence of anybody ever voting for an increase in taxes? They do not do that, but this will be on a specific item of tax and it is a question of the words.
What is surprising to me is the use here of “excessive” regarding a council tax rise, because “excessive” is pejorative. You are assuming that it is beyond what it ought to be. No local politician wants to set an excessive council tax but, looking at the local problems in their area, they will want to think, “What are the issues in the set of problems that we have to address?”. What worries me is that, in a sense, we are creating a problem of the democratic mandate. I have a democratic mandate; I am elected by people in my ward. Come next November, we will have police commissioners who will have their own mandate. Somebody may stand as a police commissioner in Greater Manchester on this platform: “There are not enough police on the beat, and we need to put more on the beat”. That will cost more money and therefore the increase in their precept next year may well exceed what the Government think is reasonable. As a billing authority, we will have to cope with that situation. The police commissioners probably will be not too worried if it costs us more money, because they will say that they have a mandate to do it. A referendum is a slightly different form of mandate.
The Minister mentioned that this year there will in most places be a council tax freeze—as there will be in my authority. However, we had to make sure that all the precepting authorities were also going to freeze their tax. There would be no point in me saying that there would be no increase in council tax if the precepting authority had not done that. As she said, the Government have given a grant for one year, but next year that grant drops out, so without anything being done at all the council tax in areas that have had a zero increase will increase simply to pay for the loss of the grant in year one. Is that going to be deemed excessive or not, as part of the principles? It does not matter what I think we need next year; in 2013-14, we will have to make an increase for what would have been there in 2012.
The noble Lord asked about the cost of the referendum. If we are having a referendum only on the first Thursday in May, when most billing authorities will have wanted to send out bills well before the end of March, so that the cash flow begins early in April, the serious cost will be that not of the referendum but of the loss of income if there is no determined council tax. There are so many different issues here. I know that the Minister understands from her own experience the intricacies of local government. However, despite having this wonderful set of regulations, if we think about them I cannot believe that they are ever going to be used. It will be an interesting historic document. We should hang on to it and say, “Here are the regulations for council tax referendums which were never used”. It is really not in anybody’s interest, particularly not that of local authorities, to have all the costs not just of the referendum but of the loss of income.
Lord Beecham
My Lords, whenever I speak in this Room, the pictures on the wall prompt me to make a connection with the subject we are discussing. Today, we have Moses bringing the tablets down—as I understand it, there was no referendum on the 10 commandments—but we also have Daniel, who I suppose could be described as a bit of a returning officer. Noble Lords will recall that “You have been weighed in the balance and found wanting” was the interpretation he gave Nebuchadnezzar. Such divine and semi-divine inspiration apart, we have today to deal with an important set of regulations.
This Government are addicted to referendums. We have had one, as my noble friend Lord Grocott has reminded us, on AV. They are compelling 11 councils to hold one on elected mayors. They are keen to have one in Scotland, perhaps rightly so, and the Localism Act provides for referendums in the context of local plans. Oddly, the Government have not yet indicated whether they plan one on House of Lords reform—precisely the kind of constitutional issue to which the noble Lord, Lord Rennard, referred when he spoke of the Constitution Committee’s thoughts and recommendations on what would be an appropriate subject for a referendum. Today, however, we debate council tax referendums.
There are, in fact, only two things wrong with council tax referendums and the regulations before us. The first is form; the second is substance and effect. Let me, in my perhaps typically perverse fashion, deal first with substance and effect. Rather than rely on their former powers to cap individual authorities, a power to which local government has always objected—and here I suppose that I ought to follow others in declaring an interest as an honorary vice-president of the Local Government Association—the Government are, in effect, capping every authority by stealth. The Government have determined an arbitrary figure for different classes of authority beyond which a council will be compelled to hold a binding referendum to coincide with the date of council elections in May. By this time, of course—as my noble friend Lord Smith has already reminded us—the bills will have gone out. If the referendum rejects the council's proposal, the council will have to re-bill. This in itself, combined with the cost of the referendum, will, as no doubt intended, deter many councils, especially small councils, from proceeding down that route. I recall an incident—I cannot remember which council it was—where the cost of re-billing exceeded the saving that would have been made in terms of the difference to council tax.
It should be noted that the definition of excessive increases—and, again, I concur with the scepticism of my noble friend Lord Smith about the use of the adjective there—is simple and crude. There is no scope to differentiate between authorities, or groups of authorities, with particularly challenging problems—financial or otherwise. There is no scope, as under the previous system, for any representations to be made to the Secretary of State or any accommodation reached. Instead, there is a flat target—a referendum irrespective of whether there is any local demand for one—and a plethora, as the noble Lord, Lord Jenkin, has rightly described it, of tightly prescribed rules and regulations about how to conduct a referendum. There is page upon page of precisely that kind of prescription. This is all before the so-called localisation of business rates impacts, as it will, differentially between councils and their council tax payers, with its own impact on the level of council tax to be levied.
Consider the background. As Professor Tony Travers pointed out recently, the Government's VAT increase of 2.5 per cent last year cost households 20 times as much as an equivalent percentage increase in council tax. Many council tax benefit recipients will find their council tax going up sharply in the wake of the cut that the Government are imposing on benefit just as council tenants have suffered rent increases of around 8 per cent. However, there is no thought of a referendum about any of those burdens on households. When the department wrote to council chief executives last week, it became apparent that the way the system will actually work is far from the simple, albeit misguided, impression that one would gain from the headlines, as the noble Lord, Lord Jenkin, has pointed out. The rubric looked as though an increase would be excessive if it exceeded 3.5 per cent. It now appears, however, that certain councils could, depending on circumstances, levy a 5 per cent increase without having to hold a referendum. As the noble Lord said, 31 others might find themselves required to hold a referendum if they increase council tax by less than 3.5 per cent; indeed, as he said rightly, if they increase it by less than 3 per cent. Manchester, to which he referred, would have to have a referendum with a 2.05 per cent increase, Sheffield with a 2.7 per cent increase and Newham with a 2.79 per cent increase. All this is after the council tax freeze that we have already had and which, at some point, will have to be made good. In case my noble friend Lord Smith does not know it, I should perhaps advise him that the effective referendum limit in Wigan will be 2.83 per cent.
As usual, the authorities worst affected are those most heavily dependent on formula grant, particularly in the north, the Midlands and in some London boroughs. It is a measure of the problems that they face that the cut in formula grant as a percentage of council tax is as high 18.8 per cent in Manchester and 22.7 per cent in Newham, while their permitted increase will be around an eighth of that amount, not that those councils would be envisaging increases big enough to close the gap fully as that would be a very high council tax increase indeed.
However, there is an even more startling potentially perverse outcome, referred to by the noble Lord, Lord Jenkin, for it is possible that, due to the arcane working of the system, a council might have to hold a referendum even if it freezes its council tax. So it would go to the public with the question: “Do you agree that the excessive council tax increase of nil should be supported or not?” What a ludicrous procedure that would be.
As my noble friend Lord Smith has said, no council enjoys increasing council tax or does so willingly. It is noticeable that, this year, even a number of Conservative councils have felt compelled not to observe the freeze that the Government have called for, paid incidentally for those councils that accept it, from money which would have gone to local government anyway in the distribution of formula grant. Those Conservative councils have, no doubt, taken this course because freezing the base will make future financing more difficult. Alas, they have incurred the wrath of Mr Pickles accordingly.
Making a council budget is a difficult and protracted process at the best of times. Making it at a time when demand for services is growing, partly as a function of the state of the economy and the fact that people's capacity to pay is shrinking, is even more difficult, despite local government's outstanding record in increasing efficiency, which is much the best across the whole of the public sector. Extremely hard choices between competing demands have to be made by every council. These are not easily mediated by a simplistic choice between different levels of council tax. The proper way to come to a decision locally is for councils to consult widely on a range of options and then to determine the budget and set the tax. The Government’s covert capping undermines representative local democracy by proposing the veneer of democratic engagement in the form of a single question about the level of an increase. The proper occasion for judgment about a council’s policy and record is at local elections, not in the form of ad hoc referendums.
That brings me to the question of form. The Electoral Commission which, as we have heard, has responsibility for these matters, consulted widely last year and commissioned research on, in particular, the question to be asked. Instead of accepting the commission’s proposed question, the Government produced an alternative, embodied in the regulations, on which they neither consulted nor conducted research. The commission states that it is not possible properly to assess whether the question is clear, simple and neutral. The commission concludes that the question,
“risks introducing an unknown level of complexity and potential bias”,
to these referendums. I note, parenthetically, that the whole problem is caused by reducing complex choices and deliberations to the form of a simple question in the first place. Somewhat disingenuously—of course this is not the responsibility of the Minister—the Explanatory Notes for the regulations refer to the Electoral Commission’s position, saying, that the Government consider that,
“the alternative question proposed by the Commission did not make it sufficiently clear that voters are voting on a council tax increase that has already been set”.
The next paragraph says:
“The commission also offered views on the draft regulations and raised a number of points of detail which informed the drafting of the regulations”.
I find that an extraordinary assertion in the light of the explicit recommendation that the Electoral Commission made in a document circulated recently, in which it says,
“The Government should withdraw these draft Regulations and lay new draft Regulations specifying a revised referendum question which more fully reflects the recommendations”,
which it made in December. It is quite extraordinary that the Explanatory Notes should be published with no reference at all, either in the original or, if the response of the Electoral Commission came in later, by way of a supplementary note.
The noble Lord, Lord Rennard, is quite right to emphasise the importance of respecting the views and recommendations of the Electoral Commission. I concur with him that the setting of questions should be entirely a matter for the Electoral Commission, and that is not the position at present. The Government are within their rights to ask about the question posed. Sticking to those rights does not answer the problem that we are facing and that is posed by the Electoral Commission.
Baroness Hanham
My Lords, I thank everybody who has taken part in this short debate. I am asking for approval of these orders today, but equally, as I made clear in my opening remarks, we understand and recognise the important role the commission has in commenting on the referendum questions and the need to ensure that the questions are neutral and comprehensible. We will therefore go back and work with the commission over the coming weeks, and we intend to come forward with updated proposals in due course. However, as the noble Lord said, we need the regulations to go ahead as they are in case any council is moving to have an excess council tax this year. We think that that is probably unlikely, but the Government have made a commitment to discuss further with the Electoral Commission what the question should be. I hope that that is helpful.
I thank noble Lords for all the criticisms. I am not sure that I can say anything other than that. I can still hear my noble friend Lord Jenkin saying all that when we were debating this subject during the passage of the Localism Act. The concern there was over heavy regulation. I think everybody heard that. I understand that the regulations are not welcome, but I think that they are good guidance about how things should be run and managed. If anybody is in any doubt, they are there in print so that they can be used.
It is correct that capping was not a well-loved system. I do not think that it was well loved by anyone, but there is a way that we need to limit—for local people apart from anything else—any council that thinks it will go on a Swanee and raise its tax above a certain extra amount each year. That is why the Secretary of State has taken powers to limit any access and then put it into the hands of local people to decide whether that excess is accepted or not. It is excess as well as excessive—it is over and above what is considered a reasonable amount extra for people to have to spend. They are then asked whether or not they agree with that.
The noble Lord, Lord Smith of Leigh, raised the question of council tax freeze. This comes up pretty regularly, and I should like to explain that this is the second year of a grant for the freeze. Last year the money went into the base. So the base is already there, and it has been raised because of that freeze. It has always been made clear that from this year the freeze money would not go into the base. Local authorities have known that all along. They might think that the concerns that have been raised are justified, but they are justified only because they wanted to say them and not because they did not know. That has been the case right from the start.
The noble Lord, Lord Grocott, asked me how much local authorities would have to spend on the referendum. I did have that information on a piece of paper. The amount varies, but I think that it is around £850,000. I should not have so many bits of paper. It would have been so helpful not to have them. I know that I have that information—I will find it as I go through what I am saying.
On the question of the amount that will trigger a referendum and why local authorities should not have the right to put tax up to any amount without having that tested, Governments always have to have some control over expenditure and over the amount that will be raised from council tax and the general grant. No Government, including the previous one, can be in the position of allowing councils to let rip with what they want to raise. There has always been concern about how much council tax will have to be raised at any one time. As I say, if local authorities do that, they will then have to test it out with their local electorates; and if the local electorate thinks that it is a good idea, then it can go ahead.
The other question was about whether a council tax freeze might trigger a referendum. I do not think that that is the case. I do not think that a freeze in council tax can generate one. What would generate a referendum —and I must put this carefully because I had to work at it very hard all morning—is where a levying authority lowered its council tax demand and a local authority had not reached freeze level but decided to take up the slack. So it would be a situation in which the levying authority had lowered its rate and the local authority then had a gap of the difference between the previous rate and the new rate. If it decided that it would still not be in breach of the 3.5 per cent and it would put in extra expenditure that then tipped it over 3.5 per cent, there would have to be a referendum. But that is not a freeze that would trigger a referendum. If that is still wrong, somebody will come back to me, but I think I am reliably informed that that is the situation.
I heard what my noble friend Lord Jenkin said about the excess of regulations. I am afraid that, at this stage, that is what they are. I am asking the Committee to approve the regulations so that we can go ahead.
I think that I have picked up all the points raised. If I have not, I will make sure that I let noble Lords know. In answer to the noble Lord, Lord Grocott, I was right that the likely cost of holding a council tax referendum will be between £85,000 and £300,000 depending on the size of the authority.