Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012

Baroness Hanham Excerpts

Tuesday 14th February 2012 Grand Committee

Moved by

[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.

--- Later in debate ---

This is a very sorry saga, and I hope that in the light of what has been said here today and, more importantly, by the Electoral Commission and others outside, the Government will take the opportunity to rethink their position completely. I hope that the Government will withdraw the regulations at this stage and, preferably, not bring them back; but if they are brought back, I hope that they are brought back along the lines of the Electoral Commission’s suggestion.

[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.

Motion agreed.