Local Government Finance Bill

Baroness Hanham Excerpts

Tuesday 10th July 2012 Grand Committee

[Lord Beecham]

My Lords, I envisage that “all interested parties” will include business. However, for the avoidance of doubt it would be helpful if—assuming that the Minister gives her blessing to the amendment in one form or another—she would confirm that that is the case. Clearly, since the rationale of the proposal in the first place is to incentivise local government and its business development policy, however valid that may be, it would make sense to involve business in any consultation about changes to the policy.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I thank the alliance for its comments on the amendment. In particular I thank my noble friend Lord Jenkin for his explanation of the proposed new clause. I do not suppose that any noble Lord will be surprised to hear me say that I do not consider that such a provision is appropriate or necessary.

I fully understand that in the current system, where business rates are not retained locally, changes to national business rates policy do not affect the level of funding that authorities receive. However, in future such changes could impact on the level of funding available to a local authority. I am sure that Members of the Committee will understand that the Government may need at some stage to make changes to the national business rates policy for a variety of reasons. In the majority of cases it is likely that any changes will have been consulted on, but this may not always be the case. Changes to reliefs are a matter for the Chancellor, and a deferral system that gave businesses the opportunity to defer payment of 60% of the increase in their 2012 business rate bills as a result of the RPI uprating was announced in the autumn Statement. If the Government had consulted on that, businesses would have had to wait at least two or three months longer to receive the benefit, which in some cases could have meant the difference between shutting or remaining open. I use that as an example.

I assure my noble friend that where the Government implement a change to national business rates policy that will involve a net additional cost to local government—a point that was raised by my noble friend Lord Tope—this will be picked up through the new burdens policy. It will be treated as a new burden in line with our commitment to keeping the downward pressure on council tax as far as possible. Given this clear commitment that provides an assurance to local government, I hope that my noble friend will feel able to withdraw his amendment.

[Lord Jenkin of Roding]

My Lords, I am grateful to my noble friend for that explanation. Of course I understand that the change may work both ways. If local authorities are going to benefit from the change, the argument not to have consultation but to get on and make the payments is much stronger. However, if there is a change that will increase the burdens on a local authority, my noble friend gave an undertaking that there would be consultation—so I cannot understand why this should not go in the Bill. It would be very reassuring to local authorities and would not place an undue burden on central government. If the Government were going to change the policy to the disadvantage of local government, there is no reason why a three-month delay should not be a perfectly satisfactory way of dealing with the statutory obligation to consult. Of course we do not vote in Grand Committee, but there is a stronger argument for this amendment than perhaps my noble friend acknowledged. Perhaps she might like to look at it again.

[Baroness Hanham]

My Lords, I made the point, which the noble Lord accepted, that there may need to be flexibility on this. I gave the example of changes in the autumn Statement that would have been delayed if there had been consultation. It was a perfectly reasonable point. Without exception, the Government will want to consult where appropriate and where time allows, but there will be occasions when it is not in anybody’s interests to do so for reasons of speed. The proposed new clause would just constrain their ability to do that. Putting it in the Bill would be less than helpful.

[Lord Jenkin of Roding]

My Lords, I hear what my noble friend says and we would wish to consult those advising us on that. I take the point that this is a wide-ranging amendment but, with different drafting to which we could return on Report, we might be able to write something in on this. Having said that, I beg leave to withdraw the amendment.

--- Later in debate ---

[Earl Attlee]

To make a quick comment about my intervention on the noble Earl, I was merely observing that he had been speaking for 20 minutes. I allowed for the fact that he was probably coming to the end of his remarks. Also, this is a self-regulating Committee. If the Committee wants to take a longer speech, the Committee can do so.

[Baroness Hanham]

My Lords, I am not sure that I can wind this up in 20 minutes, but I will do my best, gracefully, as I go along. I first thank the noble Earl for raising this subject in the way that he has. I am also extremely grateful to him for the discussions that we have had following the previous day, when I pointed out to him that if I had to answer every amendment one by one I would have 30 pages of speaking notes, which might take us longer than 20 minutes.

With the noble Earl’s agreement—and, I now hope, the Committee’s—I propose to tell the Committee what the noble Earl’s four main themes are, and will then write on each of the specific amendments so that the Government’s answer to each is there. That will help the Committee at the next stage. I am manifestly not going to be able to answer all the points today.

The answers are grouped under the noble Earl’s points about the valuation system not being well managed; that it should be independent of the Treasury; that the Valuation Office Agency and the Valuation Tribunal Service have been adopting, as the noble Earl put it, several bad practices; and that there are abuses by a small number of rating advisers. Those are the four themes that I will go through and, following the Committee sitting, we will make sure that every Member of the Committee and the Library has a response to each of the amendments. I thank the noble Earl for grouping them together, as it could have been even longer had he chosen to speak only to two or three at the same time.

First, on the resourcing and management of the rating and appeals system, ratepayers expect their rating assessment to be correct, and for appeals to be resolved quickly. This will always be the case, but under the rates retention system it would become increasingly important that the rating system delivered a good service for both ratepayers and local government. I appreciate the noble Earl’s concerns regarding the backlog of appeals in the rating system. We share those concerns. The Valuation Office Agency is working flat out to clear over 250,000 appeals by the end of March 2013, including the majority of the outstanding appeals against the 2005 rating list. It has recruited additional front-line staff and has transferred staff from other work areas to speed up the clearance times for these outstanding appeals. Around 75% of all appeals on the 2010 list to date have resulted in no change to the rateable value, but we are well aware of how significant business rates are to all businesses and that this makes the fast and efficient processing of appeals vitally important. Likewise, the Valuation Tribunal Service is proactively working to ensure that appeals that cannot be resolved through initial discussions with the Valuation Office Agency are listed and dealt with by the tribunal. In fact, only some 2% of listed cases result in disputes being brought before a tribunal panel, with the rest being settled between the parties.

I hope that I have been able to offer some comfort to the noble Earl that the valuation and appeal system will be able to cope with the rates retention. Let me also assure him that the resourcing and performance of the Valuation Office Agency and valuation tribunal are a matter for regular discussion in the Government, especially now as we move into the rates retention system. As with all public bodies, the Valuation Office Agency and valuation tribunal have to deliver their services in challenging financial circumstances, but we are fully aware of the important role that they will play in the rates retention system and we will ensure that they have the necessary capabilities to meet these objectives.

The second theme of the noble Earl, Lord Lytton, is the Valuation Office Agency’s response to rates retention. An example of those capabilities is the way in which the Valuation Office Agency has responded to the planned introduction of rates retention. Since as early as late last year, the Valuation Office Agency has been working with local government to understand what local authorities will need to budget effectively under rates retention. It recognises that there will be step change in its relationship with local government and it has established a dedicated project team for rates retention. This has already led to several discussions with local government and with the Local Government Association. While I understand the concerns of the noble Earl, I hope that he will agree that to date the Valuation Office Agency has responded well to the rates retention scheme and is working with local government to ensure its smooth implementation.

The Valuation Office Agency is independent. An essential part of any system of tax is that the public have confidence in their tax assessments—not only in the accurate level of those assessments but in the manner in which they have been reached. I agree with the noble Earl that the independence of the Valuation Office Agency is important. That is why valuation officers who perform their statutory functions, such as the assessment of individual rateable values, act independently of Ministers. In this respect they have to answer to the courts rather than to the Government.

We also have to recognise that the Valuation Office Agency is a public sector body, spending public funds, and is part of the delivery system for business rates and council tax. That is why it is right that the Valuation Office Agency should answer to the Government for its overall performance. As such, the Valuation Office Agency forms part of Her Majesty’s Revenue and Customs and reports to Ministers in the Treasury for its work. It also accounts to Parliament—this is the point about the report—in the form of an annual report, and senior officials in the Valuation Office Agency can be called to give evidence to Select Committees.

While I appreciate the noble Earl’s point, in practice we have to strike a balance to preserve both the independence of the Valuation Office Agency’s statutory functions and the need to maintain the accountability of public servants. The noble Earl’s amendment would prevent the Valuation Office Agency from reporting to either the Treasury or the Department for Communities and Local Government, and under those circumstances I do not believe that we could deliver that accountability.

The noble Earl also raised concerns about some of the practices and procedures of the Valuation Office Agency and the valuation tribunal. Having just stressed the importance of the independence of the Valuation Office Agency when exercising its statutory functions, I think that the Committee would be disappointed if I signalled a willingness to interfere in its day-to-day work. I appreciate the concerns that the noble Earl’s amendments have raised in such areas as invalid appeals and the use of a strike-out by the valuation tribunal. We have powers to make regulations on any matter relating to the valuation tribunal and we have made regulations under those powers that describe when a strike-out can be used. However, in line with other tribunals, we do not describe all the necessary procedures in those regulations, but instead allow the valuation tribunal to make directions. Those directions describe the procedures that must be followed in taking an appeal through to a valuation tribunal hearing. The Secretary of State has given the valuation tribunal, in line with other tribunals, the power to strike out appeals where the appellant has failed to follow the directions.

This is not a matter that we take lightly. It is important for the effective operation of a fair judicial system that a valuation tribunal is able to set directions and enforce them through the use of a strike-out. The tribunal will consult its users before it introduces any standard directions, and any parties will be made fully aware of the requirements, by means of practice statements and information leaflets, when they make an appeal. Therefore, while noting the noble Earl’s concerns, I do not believe that we should change the current system. Allowing these matters to be set out in directions rather than regulations will ensure that the tribunal can lay down procedures that reflect the nature of the court and are responsive to changing circumstances. The system would not be improved through our direct intervention or by bringing all the procedures into regulations.

The noble Earl referred also to abuses by some agents. He raised valid points about abuses of the system by ratepayers’ representatives. I know that he works closely with the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Both organisations have clear professional standards. The Valuation Office Agency includes guidance on its website about employing a rating agent and how to contact these organisations for advice, so it would not be appropriate to regulate in this area. I hope that the noble Earl will agree that by stringently and consistently applying professional standards, the professional bodies and the Valuation Office Agency can address some of the abuses that he mentioned.

I have not addressed every amendment—as I said I would not. However, I thank the noble Earl for the knowledge he brought. I hope that he will feel able not to press his amendments on the basis of the explanations provided and of the assurance that, before Report, he will have a reply to each one.

I was asked by the noble Lord, Lord McKenzie, whether under the current system local government pays all costs of mandatory reliefs. It pays between 0% and 75% of the costs of reliefs for eligible businesses and some not-for-profit agencies. If a local authority chooses to go beyond the existing rate reliefs to grant extra relief using the business rate discount powers in the Localism Act, it can meet the cost locally. If not, the cost will be reimbursed. However, from next April the system of funding business rate reliefs will change as part of wider reforms. We will shortly publish a consultation paper setting out the details of this. The basic principle is that changes in rates income, including changes in relief, will be shared 50:50 with central government. I hope that that answers the noble Lord’s question.

There may be other points that noble Lords wish to pursue with me. I think that I answered the point of my noble friend Lord True about the fact that a number of important issues have been raised, and individual replies will be given on all the amendments so that we can consider them further at a later stage.

[Lord McKenzie of Luton]

Perhaps the noble Baroness is in a position to answer the question about how a system of central lists would work alongside local and central shares for business rate retention purposes.

[Baroness Hanham]

I would rather leave that and answer all the questions together, so that there will be a composite answer to all the points raised.

--- Later in debate ---

Amendment 71A withdrawn.

[Baroness Hanham]

My Lords, this may be a convenient moment to adjourn the Committee until 3.30 pm on 16 July.

[The Deputy Chairman of Committees (Viscount Ullswater)]

The Committee stands adjourned until 3.30 pm on 16 July.