Non-Domestic Rating (Preparation for Digital Services) Bill

Earl of Lytton Excerpts

Tuesday 11th June 2019 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, in welcoming the Bill I draw attention to my profession as a chartered surveyor, with a career-long involvement, on an off, in the business rates system. I am also an honorary member of the Institute of Revenues Rating and Valuation—the professional body most closely involved with business rates—and a vice-president of the LGA. My observations, I suspect, will be on principles that the Minister may feel are perhaps to one side of the Bill, and I have alerted him to some of the points that I shall raise. I make these comments because promises such as predictability, fairness and improvement have been made in the past and have certainly not appeared as the jelly bean at the bottom of the machine in the way that businesses expected. Therefore, my comments are fairly broad.

The Bill is the first stage that will lead to a logical extension of the online payment system that HMRC already has for dealing with things such as PAYE, VAT and tax returns. I agree with the Minister that it makes sense to have a single payment portal for a supermarket chain, mobile mast or ATM operator, to give just three examples. However, the recent introduction of digital tax returns under the Making Tax Digital initiative, characterised by truncated lead-in times, inadequate information for taxpayers and a lack of provision of properly tested online software systems rightly attracted the criticism of your Lordships’ Economic Affairs Committee. The system for rating appeals against rating assessments—check, challenge and appeal, or CCA—also shows that HMRC is capable of producing some poorly designed systems that fail basic tests of user interface, coherence of IT architecture and operational competence. Even now, that system is short of what was intended and what was promised.

As if mistakes applied only to fallible taxpayers, HMRC has failed to address customer service and allied issues, which are the very basics of justice, transparency and fair treatment for ratepayers. Rather, barriers of complexity and underresourcing, and the principles of the Court of Star Chamber, appear to prevail.

HMRC sometimes appears to forget that it has a concurrent duty to treat the taxpaying public and businesses in a reasonable manner and with a degree of humanity. They are human beings, not automatons. This means having an intelligible tax code with proper back-up and operational judgment while it is being managed, and proper resourcing of new tax initiatives with adequate access to a system of redress. HMRC’s priority in recent times seems to be to protect itself rather than delivering services to taxpayers.

A demand for business rates might, on the face of it, be a simple multiplication of rateable value and a non-domestic multiplier, were it not for the extensive range of reliefs and exemptions—so the geometry is not quite the same as for other taxes. Business rates also depend on the government valuers’ increasingly questioned opinion of the annual value of the property. So the tax base at the moment does not command universal confidence.

There are some key issues. Study after study has revealed that digitising an already overcomplicated system will not help, and attaching a new payment system to an inadequately resourced tax base does not do so either. HMRC presides over a very complex series of systems, but this also creates vulnerability to evasion, cyberattack and software malfunction and, ultimately, to the simple inability of staff to deal with the monster that has been created. If, on top of this, systems are introduced with half-baked design that use the taxpaying public as a guinea pig, what the chief executive of the IIRV dubbed the “test and learn” approach is unacceptable. By all means let HMRC devote time and energy to researching and developing framework systems, but it should not impose them without prior testing. That, necessarily, must be part of the budget and the specifications submitted to Ministers for approval.

Again using the example of CCA, it is clear how system overload, resource cuts and poor design, compounded by what I believe is a rather disgraceful gaming of the business rates revaluation process, lead to wholesale mistrust. This comes at a time of acute vulnerability for, in this case, high-street retailing—all of which was foreseeable but was largely ignored. So I am afraid that I do not absolve HMRC of throttling the goose that once laid if not golden eggs then at least a regular and highly cost-effective supply of cheaper ones. This suggests that there needs to be a steadying hand somewhere on the tiller. Spending money on a payment system when the tax base management is still wanting puts the cart before the horse. I can never overlook an opportunity to quote a dictum of Jean-Baptiste Colbert, who observed:

“The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”.


To that I say, “Hear, hear”—but I question whether HM Treasury can tell the difference between a hiss and a last gasp.

Although I am now reasonably clear about how the exercise authorised by the Bill will be funded, I would like to know the cost. If the payment system is to be operated by HMRC instead of the billing department of the local authority, what are the employment and ratepayer inquiry implications? How are reliefs, both discretionary and mandatory, to be given, and what will be the process of transmitting information on exemptions, vacancy and occupation? Further, how does a business rates retention system apply if all the money goes to HMRC in the first instance, and what implications would there be for refunds and responsibility for errors? I cannot expect answers at this stage but I hope that the Minister has noted those questions and that in due course we will get clear explanations.

It has frequently been made clear that any change to the business rates system must be fiscally neutral; in other words, that the cost of adjustments must be met by countervailing ones to ensure equality of the tax yield—or, to put it more cynically, that the taxpayer funds HMRC’s mistakes. Can we be assured that any system eventually proposed as a result of the Bill will, as a minimum, be as efficient to operate as the current one and, further, that the costs of any changeover will be funded from other HMRC sources or from demonstrable savings and not loaded on to businesses by dint of fiscal neutrality or laid at the door of billing authorities?

What I am really asking for is proper parliamentary scrutiny of the activities of a department of state that does not always get it right first time—or at all—and should not be left entirely on its own to design, specify, construct and operate a new system without external overview. I also suggest that, having delved further, it should report to Parliament with a proper cost-benefit analysis and options paper before implementing anything. I would certainly be very grateful for the Minister’s reassurance to that effect.

Residential Construction and Housing Supply

Earl of Lytton Excerpts

Wednesday 24th April 2019 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I declare my interest as a property professional and vice-president of the LGA and the National Association of Local Councils. I certainly welcome this debate and the introduction given by the Minister. After all, decent housing, along with education, health and access to justice, is something of a post-war birthright that we should respect.

Report after report, certainly since the beginning of 2016, has identified shortcomings in the construction and housebuilding sectors. I do not want to dwell too much on those, but traditional construction is certainly likely to be with us for some time, not least because we already have over 20 million houses that are built largely on traditional lines.

The sector is dominated by a few large players, and of course that has prompted suggestions of monopolistic characteristics. However, exploitative behaviour has been evident right across the sector, not just in directors’ bonuses bolstered by Help to Buy. Housing delivery remains complex, adversarial, long-winded, costly and uncertain. Unsurprisingly, that gives rise to sub-optimal outcomes, dissatisfied communities, poorly designed environments and disgracefully low-quality homes in some areas, and a range of complaints about defects in many more that are supposed to be good quality. Slow build rates, referred to by the noble Lord, Lord Palmer, and large allocation sites often dictate local supply and local pricing for years.

But there are well-designed housing developments and virtually fault-free homes in settings that give general satisfaction. It does not require new towns with long bedding-in timeframes or amorphous strategic sites, but rather, smaller, discrete adjuncts to settlements where people want to live and work and where there is some sense of community that best suits work/life balance, and environmental and green travel options. Lifetime homes, acceptable environments, low-maintenance design and robust technology should sit with adequate space standards in settings that are attractive, and I hope provided by a raft of small and medium-sized housebuilders who do not just produce standardised layouts.

There is nothing wrong with modular construction, as anyone who has inspected a Colt timber-framed house of the 1930s can attest. But modern ones are not as tolerant of DIY alterations or abuse, nor are they as easy to alter. So if that matters to people and what they expect of their homes, then rethink the design. There are problems with overprescriptive design when it comes to dealing with very high technological outcomes. Ours is a high-humidity island, and it may take many years for a problem with, for example, vapour barriers or the way components interact with each other to show up. So real-life testing of designs must, in my opinion, be absolutely exhaustive if we are to get lots of good life cycles.

More widely, we could certainly do more to decarbonise and harness renewable energy. On decarbonisation, using timber instead of cement and concrete is what I would be thinking of. Instead of having to change not just the bulb but the entire fitting and the housing—to use the old light fitting analogy—we need buildings, modern or otherwise, that last for decades and are extensively repairable and serviceable. Designing in potential for reuse and recycling, as well as durability, and reducing obsolescence, means a degree of harmonisation. Those factors, along with resilience to known risks caused by weathering and other deterioration, would serve to enhance homeowner and lender confidence. Meanwhile, there is absolutely no justification for sub-standard housing converted from unsuitable commercial buildings.

We have to address industry shortcomings. They were addressed in the Farmer report so I will not repeat them here, but there is a fragmentation of skills, an ageing workforce and a loss of experienced manpower—never mind things such as gender imbalance. I hope that modern apprenticeships will recognise that not every plumber, carpenter or electrician needs to have a higher education or, for that matter, is suited to academic endeavour.

Good design and durable outcomes also need competent professional skills, and we will need to refocus what we do to deal not only with traditional construction but with new forms. At present, we are cutting corners. The Building Research Establishment’s finding of poor thermal efficiency in many modern homes is something I still encounter in new housing today. Local government and housing associations should build more social housing. It will take time to create volume, though perhaps modular construction can help in that respect.

I agree with the Local Government Association that retaining right-to-buy receipts is essential. I despaired of the unfulfilled commitment in the Thatcher years to use receipts to build more social housing—only for a Labour Government in 2002 to pocket the accumulated fund for other purposes.

Ethical behaviour and corporate social responsibility must form part of what we do, and that means starting at the top. Nowhere is abusive behaviour better illustrated than in some modern ground rent practices, referred to earlier, and in poor construction quality. One change might be to attach some sort of more direct liability to house purchasers for the products that are produced or, for that matter, to social landlords who acquire blocks, so that it cannot be a question of hiding behind a construction warranty provided by somebody else. That might take things somewhat further than the new home ombudsman idea advocated so ably by my noble friend Lord Best, but it is worth thinking about.

Business Rate Appeals

Earl of Lytton Excerpts

Monday 25th February 2019 Lords Chamber

[Lord Bourne of Aberystwyth]

My Lords, I anticipate that questions will arise regularly, as they rightly should. We have always been clear that the review will happen in 2019, and I have reiterated that today. There is no doubt on the position: we want to let the new system operate fairly. As I said, it only started in the spring of 2017, it is making progress and we are having regular meetings to update. I think that is a fair position.

[The Earl of Lytton (CB)]

My Lords, while drawing the House’s attention to my professional interest in business rates matters, I put it to the Minister that the Government’s response indicated a review by, not during, 2019. Problems with “check, challenge, appeal” have been ongoing since the beta test stage two years ago and, despite the intervention of HMRC’s digital team in the summer of 2017, far too many glitches, impediments, shortcomings and so on persist. Given the continuing criticism of CCA’s functionality, will the Minister undertake as part of any review to have the system independently audited and the findings published?

[Lord Bourne of Aberystwyth]

My Lords, I pay tribute to the noble Earl, who has been very active in this area. Two hours ago, he sent me a list of issues he is concerned about, which I will ensure that officials address. In the process of reading it, I noted his acknowledgement that the system has improved. More work needs to be done, as I said, but we hold regular meetings to review progress and speak to chief executives and officials to ensure that it continues.

Tenant Fees Bill

Earl of Lytton Excerpts

Report stage (Hansard): House of Lords
Tuesday 11th December 2018 Lords Chamber

[Baroness Thornhill (LD)]

My Lords, I declare my interest as one of the happy band of vice-presidents of the Local Government Association. I agree with much of what the Minister has said, but with specific reference to Amendment 48 I thank the Government for listening and accepting our amendment, moved in Committee, regarding letting agents and landlords receiving multiple holding fees from several people for one property. The arguments for this were well made in previous stages of the passage of this Bill. It has been recognised by pressure groups, by the industry itself—interestingly enough —and now by the Government that taking financial advantage of prospective tenants is totally unacceptable and bad practice. This simple but significant amendment corrects an injustice and will help many for whom navigating the private rental market is already a stressful and expensive business. We look forward to a speedy implementation, which I believe will be in May 2019.

[The Earl of Lytton (CB)]

My Lords, I declare my interests as a vice-president of the LGA and also as a practising chartered surveyor and private rented sector landlord. Mercifully, I have managed to steer clear in a personal capacity of managing agents—at least for the last many years.

I have one query on the way in which the holding deposit arrangements are intended to function. I quite understand the geometry that sits behind this and the reason for it, so I will not go over it again. But let us suppose that a prospective tenant, having been provided with all the relevant information, pays a holding deposit and then, through some reason of default which would allow the agent to retain part or all of that deposit, there develops an argument as to what proportion—perhaps the whole—should be retained or not. That could take some while to resolve. Meanwhile, the agent is debarred from taking a holding deposit from anybody else, even though it may be clear beyond peradventure that the original deal with, and intention of, the tenant, whose holding deposit is still being hung on to, will not go ahead.

I can see that this could put an undesirable element of drag into the situation. I can also see that it might be the godmother of unforeseen consequences, in that the agent may feel that it is becoming a problem—a rather metropolitan problem, if I may say so; I think of zones 2, 3 and 4 of central London as the areas where a lot of this goes on, although I know it is not unique to there. The corollary to that is that the agent may say, “I’m not going to take a holding deposit at all. It is on a first-come, first-served basis. I have various people interested and the first who comes through my door with the relevant boxes ticked gets it”. That does not seem at all helpful either. That does not happen in my part of leafy Sussex, because we do not deal with things in that way and do not have that sort of high-pressure tenant demand. But I can certainly see it happening in zones 2 and 3 and I wonder what the Minister has to say about how he sees that working in practice, without having some perverse effects on the market.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness, Lady Thornhill, and the noble Earl, Lord Lytton, for their contributions to the debate on this part of the Bill. I thank the noble Baroness very much for her comments and support.

I thank the noble Earl very much for his support and for raising the issue relating to holding deposits. First, as he will be aware, there is no obligation upon an agent or a landlord to operate a holding deposit system if they do not want to do so. It is optional. But where it applies and there is a dispute, if the two parties agree that there is no chance of pursuing the tenancy, it would obviously be open at that stage for the landlord or agent to take another holding deposit in relation to the land in question, as it were, where that matter is truly settled. If it is not settled, a lot will turn on the particular circumstances of the case. If the noble Earl feels that he would like to discuss this further, I will ensure that officials are available to discuss possible scenarios with him. It may be that he wishes to discuss a particular scenario, but in the meantime I commend these amendments to the House.

--- Later in debate ---

[Lord Shipley]

My Lords, if I might, I will intervene at this stage to speak to Amendment 43, which is what we are currently talking about. In the flurry of amendments not being moved, no debate took place, but the issue has now been raised by two noble Lords.

My name is attached to the amendment that refers to five weeks, and I think it is the right conclusion. I want to thank the Government for having agreed a change from six weeks to five. At Second Reading and in Committee, we went through every option: from the Scottish model of eight weeks to my probing amendment proposal of four weeks. As I recall, the Government at that stage said the figure would be between the four weeks we requested and the eight weeks that apply in Scotland.

There is a lot of money at stake here for tenants. Having heard from the perspective of landlords, I would like to speak on behalf of tenants. For a large number of poorer people, a change from five to six weeks could make finding that level of deposit a strain. Anything that can be done to minimise that strain is a good thing. The figure was described as being “up to” six weeks, but the fact that it is now five weeks will be of benefit to a large number of tenants. Because it covers the difficulty that, in some months, four weeks may not be a month and many people operate tenancy agreements on a monthly not weekly basis, it is legitimate for the Government to propose that we go to five weeks. I want to express our support for the Government’s decision.

[The Earl of Lytton]

My Lords, I beg to differ slightly from the conclusions of the noble Lord, Lord Shipley, although I well understand that this involves a cash-flow issue for tenants. I pay tribute to the noble Baroness, Lady Gardner, for bringing us back to this set of amendments. The Minister himself defended the Government’s long-standing line that a six-week deposit was fair. However, as the noble Lord, Lord Flight, said, we seem to have moved away from that without apparent pause for breath.

I declare a non-interest here, as I do not charge deposits for tenants and have not done for a number of years due to special personal circumstances. The industry standard has been six weeks for a considerable time. In my part of Sussex, six weeks’ rent represents a figure between £1,200 and £1,800 in general terms. That does not go a long way if, in addition to non-payment of rent—bear in mind that defaults tend to have many heads—the tenant also leaves the property in a damaged condition, including damage to carpeting, kitchen units and electrical wiring.

Given that situation, can the Minister explain why it is now five weeks? If you strip out non-payment of the last month’s rent, under this proposal you are left with a single week’s rent to cover any other form of loss. Does that represent a fair balance? I am not sure that it does.

[Baroness Grender (LD)]

Perhaps I may ask for clarification: are we now talking about five weeks, or about default?

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[Baroness Grender]

My Lords, there is an expression about having your cake and eating it, and this is my attempt to get a little extra icing on the top. It is a modest amendment which would ensure a £50 cap when there is a change of tenancy and the sharers recruit the new tenant. I wrote to the Minister yesterday to explain my rationale for this. In Committee, we attempted to change a bit more with regard to this cap, which is a floor rather than a ceiling at the moment; we would like it to be a ceiling rather than a floor. But I have now pared it down to have one single purpose.

In a home of multiple occupation—HMO—where people are sharing, when one of the tenants drops out and a new person comes in, they will be charged a sum. Let me give you an example from Generation Rent:

“Each tenant swap included a massive fee for a new tenant of £250”.


To us that may sound modest, but when young people are sharing and counting the pennies, it is a heck of a lot. The case study continues,

“hence making it difficult for us to find people to move in. We had to do everything, advertise and do 9 interviews”.

Students were not accepted,

“as they did not fulfil agent’s criteria to move in unless they have a UK based guarantor”.

The fee of £250,

“did not even include a reference check of £90”,

or £180 with a guarantor. The case study concludes the fees were,

“£430 in total for a new sharer”.

The sharers do the vast majority of the work—people do not want to share with someone they know nothing about, without checking them out, and checking they can pay the rent—and then have to pay for the pleasure of it. This is a tiny, modest amendment, but it recognises that when people share a place and they do the donkey work, there should be a £50 cap on the charge for the change in sharer.

[The Earl of Lytton]

My Lords, the noble Baroness, Lady Grender, may be pleasantly surprised by the fact that I agree with the vast majority of what she says. She does not need to express too much surprise. However, she will need to define the term “suitable” further. To give her a clue, in commercial landlord and tenant agreements, there is very often an assignment, or something similar, and there is usually a formula of words about an incoming tenant or the assignee being of no lesser standing legally than the outgoing tenant. There will need to be some formula of words there.

The noble Baroness is absolutely right about this issue. I support her on the principle of this because I have children who have rented accommodation in London and I know exactly what goes on, so I can relate to it. But we need a formula that can be defined in law and determined in some way. It should be determined pretty promptly; it is no good if this goes into some sort of arbitration situation for weeks on end. These things need to be sorted out quickly in the interests of everybody.

That is the only reservation I have: the term “suitable” needs better clarification and definition. The question of suitability to whom and in whose eyes needs to be capable of some sort of resolution.

Tenant Fees Bill

Earl of Lytton Excerpts

Monday 5th November 2018 Grand Committee

Amendment 21, also in my name, would prohibit a holding deposit being requested where the person being asked for payment has not been provided with a copy of the draft tenancy agreement. This seeks to address another problem where people are not given what they are expected to sign up to. I hope everyone would agree that is not reasonable. If you are asked to pay a deposit, you should at that point at least be given the agreement you are expected to sign up to. I look forward to the Minister’s response to the points raised.

[The Earl of Lytton (CB)]

My Lords, as I have not spoken at all on this Bill, perhaps it is right that I declare my interests. I do not in principle have an objection to quite a lot of what is in it. My interest is as a private rented sector landlord, but my involvement with the sector from when I was renting property in London as a student to the present day spans more than 50 years. For part of that, I have been involved professionally with the management and letting of residential property on behalf of others.

I share noble Lords’ views that we should make sure not only that we do not have bad landlords but that we do not encourage bad tenants. My principled objection to this Bill, if I have any, is that it does not provide that balance. It is entirely about the effects on landlords, not on controlling the activities of tenants. As with much legislation, the mechanisms chosen tend to be extremely blunt instruments. We are dealing with high levels of disparity across the country, including some acute hot spots in London. I know that that is the case there—one of my children is just finishing renting a property with others and has been renting for some time—as against, say, in the West Country, where I also have an interest. There, it is quite difficult to find a tenant in some instances. This legislation needs to cover the entire spectrum.

I will limit my comments during the debate on this part of the Bill to areas where I feel that amendments either would not have the intended effect or highlight aspects of the Bill that should be the subject of further consideration. On Amendment 1, I simply say to the noble Baroness, Lady Grender, that tenants can, and do, take things to the wire as far as landlords are concerned. By then, much of the work to check them out and make the arrangements of the tenancy has already been done, at which point they can walk. There is no contractual bond. As I understand it, the holding fee is to secure the tenancy, rather in the same way, I suppose, as asking a shopkeeper to reserve an item in their shop window. The only difficulty is that the fee given rise to by part of the activity has already been incurred.

The noble Lord, Lord Kennedy, mentioned that. It is not so much a question of whether a fee is charged but whether the fee is reasonable. The geometry of the Bill says that the fees are, in principle, unreasonable. That is how it comes across to me and, I think, to many other people. In passing, I have read briefings from Shelter and Citizens Advice but I have not received or read a briefing by ARLA or any other body representing landlords’ interests, so my views at this juncture are entirely my own, based on my experience.

The noble Baroness gave the example of where somebody, for perfectly understandable health reasons, feels that they cannot go ahead so the entire consortium of renters falls apart. I understand that because it has happened to my offspring, but I ask myself whether it is the landlord’s fault, or that of their agent, that circumstances have given rise to that situation and an inability to proceed.

[Baroness Grender]

In this case, it is not a question of fault. The tenants have offered to pay the cost of the reference checks but they want the remainder of the holding deposit back. I suggest that in previous instances, agencies might have been more flexible; I think they are getting slightly less so. I cannot talk about the specifics of this case, obviously, but there is less flexibility on holding deposits at the moment. There is no opposition from the amendments to the fact that a holding deposit is a good thing; the question is whether there is clarity and transparency when it is not returned. That is the issue.

[The Earl of Lytton]

I accept entirely what the noble Baroness said; I am glad that we are probably much more ad idem in our approaches than I had thought from her earlier comments.

There must be some process for identifying what is a reasonable cost. I am not close to open-market lettings any more—I used to be—so I do not know precisely what goes into drawing up the agreement, checking references, doing credit checks or establishing from some government department whether somebody is entitled to be in the country or to rent property, but there are probably costs beyond the simple act of picking up the phone and checking a reference.

My fear—here I address my comments to the Minister—goes back my point about legislation being a blunt instrument. Unless things are reasonably black and white, administratively you are dealing with myriad shades of grey and trying to work out which point on the spectrum is the right one. The Bill does not contain an adjudication provision. I have pointed out, in a memo to the Minister, a suggestion that I think came originally from the noble Lord, Lord Beecham, who is not here today, which had some merit. The only provision is a fine and an appeal to the First-tier Tribunal if the imposition of that fine is disagreed with. There is no other surefire, reasonably cheap and cheerful adjudication provision. Were that to be put in place by a one-liner and means could be found to fund that in the same way as some other things are dealt with, a number of these things would disappear by virtue of there being that fallback. But so long as there is not, it is more like the law of the jungle.

Turning to Amendment 18, I did a little calculation and worked out that a rent of £5,000 per calendar month would produce a holding deposit of £493 and one of £800 per calendar month would produce one of £78 under the three-day provision. That £78 is much nearer the sort of figure you might get outside the larger and more hotly contested metropolitan areas, and seems quite a slight amount of money. As I have said, tenants could take the matter to the wire and walk away knowingly having run up costs. But landlords might be unlikely to offer premises on the same basis as before the Bill came into force and might simply not undertake to retain via a holding deposit at all, in the same way as some landlords have decided that the whole business of holding rental deposits has got too difficult, and do not hold deposits but make exhaustive checks on the nature and attributes of their proposed tenants. This means that the better parts of the market—the better landlords, perhaps with better properties, looking for the better tenants—occupy one part of the space and the rest are in the same difficulties as before. The people who might be in difficulty are those who really need to get into rented accommodation because they stand no chance of getting a mortgage. This is why this sector is so important. I worry that tenants at that end of the spectrum—I will not call it the bottom end: the less well financially appointed end—will suffer more. That would be a mistake.

However, I said I was not here to cause trouble. I have just outlined some of the things associated with this group of amendments that may have long-term consequences contrary to those that the tablers suggest they ought to have. Apart from that, I shall not resist whatever the Minister may feel, in his wisdom, is appropriate here, given what I have said.

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[The Earl of Lytton]

My Lords, I am very pleased that these amendments have been tabled. They enable me to make one or two comments. On Amendment 2 on transferable deposits, moved by the noble Lord, Lord Kennedy, what he has set down might make for an awkward arrangement requiring quite a raft of safeguards so that landlord one can transfer a tenant’s deposit out of their account into the account of landlord two, which, as I see it, is what happens.

I am a practising chartered surveyor. Those involved in residential property management have to accord with all sorts of professional regulations, including rules on holding clients’ money. Tenants’ deposits would certainly come in that category. They have to be very punctilious about what they do and very transparent about the process. I know that not every agent or, for that matter, landlord holding a deposit is a member of the Royal Institution of Chartered Surveyors. It might be different if they were, but that will never be likely. I am saying that there are two parallel sets of requirements. It will be interesting to know what discussions or information had been obtained from others such as ARLA on this sort of transfer, how it would be documented and how we would ensure it was seamless.

The noble Lord, Lord Kennedy, raises a valid point. For tenants to have to wait for a deposit to come back to them and to pay another deposit at the same time—in other words, a double overhead—is awkward, but other things lurk here. The noble Lord, Lord Shipley, mentioned one, but there is the other question of whether any unpaid services and outgoings lurk there. Sometimes these do not come through for some particular period. Noble Lords will know from dealing with utility companies and this sort of thing, including some of the cut-price ones, which seem extremely difficult to deal with at times—no names mentioned here, though—that it can be quite difficult to make sure that you have closure on the amount of money for which a tenant might be responsible. There is an issue relating to the period to which the amount might apply. That might depend on the circumstances, such as whether it was a furnished or unfurnished letting, or fully equipped as well as being furnished. Obviously, the amount of damage that can be done and what might become apparent would not necessarily be known until right at the end of the lease. While I am pleased to confirm from my experience that the majority of tenants have been absolutely excellent people, the odd ones are feckless, overload electrical systems and do other damage that is not immediately apparent.

I wish there was a better way of dealing with this. I can see where the noble Lord, Lord Kennedy, is coming from. It is a valuable thing to raise because of the rigidity it creates within the tenant cohort. We should be doing things to make sure that there are not those rigidities because that, in effect, is a barrier to them renting property in the first place. However, I see a number of technical difficulties with the amendment. I hope that the Minister will comment on some of them.

[Lord Best]

I support the amendment on transferable deposits. It is an absolutely commendable concept. How can people possibly find a second fat deposit when they have not had the first one back? This proposal would be a really helpful move, and I hope the Minister will take it very seriously and look at it in some depth.

On the question of a six-week, five-week, four-week or eight-week period, I was impressed by the Citizens Advice survey, which indicated that only a very small percentage of tenants—2%, I think—did not pay their last month’s rent, the deposit being absorbed or used for that purpose. However, I asked Citizens Advice about its survey and discovered that it was exclusively of tenants. I suspect that the percentage might have been different if it had been a survey of landlords or agents. This is bad news for landlords but I am told by agents that, naughty as it is, a lot of students will not pay the last four weeks’ rent because they fear that there will be a big dispute about their deposit at the end. Especially if the student has come from overseas and is returning, they will have no trouble over the deposit because they will instead have withheld their last month’s rent. I suspect that landlords would always be very hostile to the idea of a limit of just four weeks’ rent when students behave like that.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

I thank noble Lords for those points. The consideration was around the notion of an upper limit, not a norm. As I say, there are difficult cases where a four-week limit may not be appropriate. I have outlined some of those and we have to think about the consequences for tenants. It was that which motivated the reconsideration.

On the point made by the noble Lord, Lord Shipley, about Bob Blackman in the Housing, Communities and Local Government Committee, it is true that different periods were talked about—of four, five, six and eight weeks, as we have already rehearsed—but it is important to note that this was not pressed to a vote in the other place. We have considered the element of flexibility. We are not mandating that it has to be eight weeks; that is far from the case. The evidence from Scotland is that it has not gone to eight weeks; rather it has not really budged. However, it gives flexibility, and that has influenced us. We cover in the guidance the point that we do not expect it to reflect anything other than the loss on the deposit.

[The Earl of Lytton]

My Lords, in connection with what was mentioned earlier about tenants who do not have a particularly good track record or who come from abroad, perhaps I may pick up on one point. One of the bones of contention is that the tenant pays a not insubstantial deposit and it is held by and on behalf of the landlord. Is there not an opportunity to have a third-party deposit holder who, in effect, would hold the money and provide a guarantee of the tenant’s performance so that it does not become a bone of contention for students, those from abroad and people with no track record? Could we break that particular logjam so that it is not seen as the landlord accruing a sum of money and hanging on to it as a sort of financial bludgeon? Could this be defused in some way? Perhaps the working group could look into the possibility of something along these lines.

[Lord Bourne of Aberystwyth]

My Lords, I am happy to pass that on to the working group, but one has to be careful what one wishes for. As we know, there are all sorts of issues around deposit protection and to disturb the existing relationship may well be dangerous. However, I will ensure that the message is passed back to the group so that it can consider it if appropriate.

--- Later in debate ---

[Lord Shipley]

My Lords, I will briefly express my support for the amendment. It seems to be extremely helpful. Perhaps there could be a discussion about how it would be implemented. I say this because it is one thing for Parliament to pass legislation, but it is another for it to be actually understood in the wider world. For tenants and landlords to understand their rights and responsibilities, it is very important that the publicity is good. A lot of it can be standard wording. It does not have to be originated by every individual. It may need to be amended by individuals, but generally it can be the same. That leads me to remind the Minister of my view that the £500,000 allocated for enforcement—perhaps we will come to that in the next group—is a welcome sum, but probably not enough. Providing the necessary resource for this to work seems to be very important. Ultimately, this should be self-financing. Ensuring that there is the right level of publicity, particularly for tenants, is particularly important.

[The Earl of Lytton]

My Lords, the first part of this amendment is, to put it bluntly, a no-brainer. It is perfectly right and proper that there should be clear and comprehensive information. If I have any reservations, one is a very small item in proposed new subsection (4)(b), which refers to a website. Given that a significant proportion of landlords are individuals with perhaps only one or two properties, they may not have a website. Perhaps a tweak of the wording might be needed there.

On proposed new subsection (6)(a) and (b), there is a duty on the landlord or prospective landlord to,

“have regard to the likely needs and characteristics, in respect of the provision of information, of persons to whom the information in question is to be provided”.

It goes on to refer to the provision of that information,

“otherwise than in the way in which it would normally be provided”.

I scratch my head a bit about this, because I was beginning to try to work out what I, as a landlord in the middle of Sussex, might need to acquaint people with. It seemed to me that one characteristic might be a physical disability and another might be linguistic—those two immediately came to mind. I would be interested if the noble Lord, Lord Kennedy, could actually spell out what he intends from those two provisions. It might be a bit of a hostage to fortune in either providing something unnecessary or having to try to second-guess what the particular characteristics and the method of delivery might need to be in any given instance. That said, in an area where people come from an Asian heritage background, I can see no objection to publishing it in languages other than English. That would be perfectly possible. However, to do it as a generality would be difficult. Therefore, putting this in guidance and providing for what the Secretary of State will do with it might be a hazardous operation.

--- Later in debate ---

[Baroness Grender]

Amendment 23 takes us to the default payments issue, which, as the Minister is aware, we have discussed in considerable detail. And I am sure we are about to discuss it in considerable detail again. In summary, Amendment 23 removes the provision that would allow default payments, and in Amendment 24 we explore the option that prohibited default payments should be included in the Bill.

We welcome the greater transparency as a result of proceedings in the Commons, but still argue that this is unnecessary and that current legislation will cover all worst-case scenarios. We have had quite a debate about whether or not there could be anything other than a lost key or security device, or the late payment of interest. I have gone to great lengths to consider as many scenarios as possible to get us beyond a lost key or security device or the late payment of interest.

Imagine the following scenario: a decent landlord or a decent, fully accredited lettings agency running a block of 10 flats. Nine of the households are good, law-abiding tenants but one tenant is a problem. They park their car in front of the fire escape, and the lettings agency has to move it, and they leave rubbish and old food to mould on the carpets in common parts, incurring a cost to the lettings agency. Here, I am trying to imagine as much as possible beyond what seems to me to be a very small cost—such as a lost key—which could be borne by the landlord, but I will come on to that.

If we remove default fees from the Bill then the following will happen. First, if an agent incurs costs for these actions, they would be able to recharge these to the landlord immediately. The landlord could then recover the costs via the deposit, provided they could show evidence that the tenant had caused the damage, and evidence of the additional cost and the reasonable costs incurred. Secondly, if a landlord incurs these costs, the landlord would incur the cost initially and then recover this via the deposit at the end of the tenancy. Again, they would need to be able to provide evidence to the Deposit Protection Scheme that the tenant had caused the damage and of the reasonable costs incurred as a result. If this results in the landlord or agent incurring vast costs as a result of the tenant’s actions—although we have very little evidence to that effect so far, and the Minister would agree that we do not yet know about this—the landlord could use a Section 8 notice to evict the tenant for breaching the terms of their tenancy agreement for damage to the property or even potentially for being involved in antisocial behaviour. I fully recognise that landlords have concerns about the court system and that there are frustrations over the current Section 8 process, but that is not something that this Bill is expected to fix. We welcome the fact that the housing call for evidence announced by James Brokenshire is taking place.

It is important to remember that in the current draft of the Bill, default fees must be written into the tenancy agreement in advance if they are to be permitted. It is quite unlikely that the potential breaches I have described—or have tried to imagine on behalf of noble Lords—would be written into the tenancy agreement with an associated fee for breaching them. Therefore there is no guarantee that a landlord or an agent would be able to charge a default fee for these offences anyway. This scenario is about compensation, damages and losses caused to the landlord or the agency by the tenant’s misbehaviour. A no fees clause could fairly cover that situation as the amount of the loss has to be assessed according to the facts of each case.

There might be a way for these defaults to be written into a tenancy agreement, but that is likely to be part of a broad catch-all term such as, “You will be charged the reasonable cost to the landlord or letting agent for failing to act in a tenant-like manner in relation to common parts of the building”. But including default fees in this way is unfair because it is difficult for a tenant to assess what is expected of them. It would be better for these sorts of charges to come from the deposit where there is independent arbitration. Such a catch-all clause would also be an unfair contract term under the Consumer Rights Act 2015 because it purports to give the landlord a power to charge costs for damages without any control or adjudication by a court or an alternative dispute resolution scheme.

Overall, even if default fees were allowed, they would never be a remedy for these scenarios anyway. These examples are about damages claims and, if serious enough, they will become the basis for possession claims as well as money claims. If we remove default fees and rely on deposits, does that become an unbearable cost to the agency or landlord with too long a gap because a deposit can be recouped only when there is a change of tenancy? It could be argued that there is some tension between putting all defaults through the deposit system on the one hand while on the other hand encouraging longer tenancies than the usual six or 12-month assured shorthold tenancies. We think that there are a couple of strong arguments against this.

First, the aim of the Bill is not to encourage longer tenancies, but about ensuring fairness in the lettings market and making sure that tenants are protected from unfair charges. Ensuring that landlords can charge tenants for additional costs they incur during the tenancy, as opposed to waiting until the end of the tenancy to recover such costs from the deposit, is not an effective way of giving renters more security. If the Government genuinely want to ensure that renters are given more security, they need to change the law to give them longer tenancies. I am delighted that they are looking into that.

Secondly, most of these costs, such as replacing a key or the interest due on late rent, are small ones that a landlord should be able to cover for the duration of the time the tenant lives in the property. If the costs are so high that a landlord feels the need to end the tenancy so that they can recover them from the deposit, it is likely that this will stray into the territory where the landlord will have a ground for possession of the property. In those circumstances, the landlord is likely to want the tenancy to end as soon as possible. I go back to my scenario of the 10 flats. Even if landlords charge for these defaults during the tenancy, they will probably be keen for the tenancy to end as soon as possible if the tenant is causing them to incur such high costs. It seems unlikely that they would renew the tenancy when the initial fixed term comes to an end or continue with the statutory periodic tenancy.

With smaller costs, we see it as appropriate that a landlord should absorb them or a letting agent should charge them to the landlord as a business cost. This is particularly relevant to my example of 10 flats as the landlord will have nine other reliable streams of income which should allow for some short-term absorption of costs before recovering them from the deposit. This brings me back to the point already raised: why is this section necessary when Section 213 of the Housing Act 2004 and possession under Section 8 of the Housing Act 1988 already exist? In Scotland there is no default fee. On Shelter Scotland’s website it says:

“Legislation explicitly prohibits charging a tenant for drawing up a lease or requiring a ‘premium’ for the granting or renewal of an assured or short assured tenancy. See section 82 of the Rent (Scotland) Act 1984—applied to assured tenancies by section 27 of the Housing (Scotland) Act 1988. Section 90 of the 1984 Act defines a ‘premium’ as ‘any fine, sum or pecuniary consideration, other than the rent, and includes any service or administration fee or charge’”.


The more I look at this, the more I am tempted to believe that this is merely a compensation device for an industry that has had fair warning for years and has simply failed to be ahead of the legislation—with significant exceptions. I have already mentioned OpenRent, which started in 2012 and is now the largest lettings agency in England and Wales. It says:

“We’re against any back-door tactics or loopholes that agents/landlord could use to continue charging tenants huge fees when letting properties. Tying any payable default fees to specific costs that the agent/landlord incurs, and also requiring evidence (e.g. receipts) was a crucial move and we are glad the Government made this provision last month. We’d like this to be as strong as possible, i.e. to be statutory instead of merely being guidance. Charging more than the true cost of a default is clearly a fee and against the spirit of ‘banning tenant fees’. Our Assured Shorthold Tenancy is used in thousands of tenancies in England and Wales and it doesn’t include any default fees, including late payment fees”.


So it is possible to provide a good, responsible service, make a profit, and not charge any default fees at all.

I applaud the Government for changing their mind and banning letting fees but this Bill is here and now. This is the moment to end the loopholes that have always been exploited—to the cost of the family on a low income, the young person saving to one day own their own home or the older person who rents. Default clauses will end up being something like, “Maintain the garden”, with no clear indication of who judges that, or, “Take your shoes off in the property”, violating a tenant’s right to peaceful enjoyment and to wear whatever they like on their feet. In a worst-case scenario, it might be requiring a tenant in a poorly insulated, damp building to prevent mould through heating and keeping the windows open or to pay £100 per room to repaint mouldy rooms. It then becomes a moral question, not to mention a paternalistic one, about letting agents presuming that tenants are unable to keep a home in good condition without the threat of penalties.

All these issues can be judged fairly through the current tenancy deposit route, which has independent arbitration outside the courts. Tenants are much more able to challenge and get a fair ruling on deposit deductions than they would be on contractual default fees, which they may not understand or know how to challenge. Default is too much of a loophole. It will become a judgment call, and those who can be exploited the most will be protected the least. I thank noble Lords for bearing with me on all these arguments. I beg to move.

[The Earl of Lytton]

My Lords, I am grateful to the noble Baroness, Lady Grender, for raising this. I wondered slightly about the procedure of deletion and adding in, but I will leave that to others. I will touch on one or two things.

We must start from the standpoint that under the terms of a lease, a tenant is provided with exclusive possession of and control over the property of their landlord within the terms of the lease. It is perfectly possible for tenants to do a lot of damage in a short period of time. Mercifully, very few of them do, but the occasional one does, because they are ignorant, because they have strange lifestyles, or for whatever reason. I thought, when I looked at this part of Schedule 1, that the default, defined as performing an obligation or discharge of a liability, was probably too wide. It did not surprise me that the noble Baroness has picked up on that. To that extent, she has a point. First, the landlord absolutely must substantiate the amount in question. The noble Baroness would introduce the concept of fair condition, then limit fair condition to two items. She has explained that, but I can think of eight or 10 others that I could add to the mix, all of which could objectively be seen as fair conditions of properly occupying and generally looking after the premises by a tenant.

Non-Domestic Rating (Nursery Grounds) Bill

Earl of Lytton Excerpts

2nd reading (Hansard): House of Lords
Tuesday 24th July 2018 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, it is a great privilege to follow the Minister and, as it were, to open the batting order of discussion on this important Bill. Before going any further, I declare a number of interests as a landowner but not a grower, a property valuer, a one-time employee of the then Inland Revenue Valuation Office and a vice-president of the Local Government Association. That said, I welcome this Bill, which quite properly remedies the outcome of the decision in Tunnel Tech Ltd v Reeves (Valuation Officer) and I applaud the Government on finding a slot to bring this forward in times of considerable legislative congestion.

The pivotal point here is that the decision meant that the operation of Tunnel Tech would have been regarded as some sort of industrial enterprise rather than in the nature of agriculture or a horticultural nursery ground. However, the effect of rating buildings being used as nursery grounds but without other land would have put the company in very considerable contrast and at a disadvantage to an identical building occupied by, say, a market garden or a conventional farm. I am glad that the effects of this decision were not much more widespread than has in fact been the case.

I have to admit to being slightly astounded by the process whereby a court today has been asked to overturn the practice and understandings which have prevailed since 1928. I understand of course that changes in the methods of husbandry have to be taken into account, but I see this as an example of an overly literal interpretation of the present being applied to the legislation of yesteryear. This, coupled with the adversarial arts of legal practice, highlights the dangers of taking a position-based approach as against the broader consideration of intentions and public policy.

I believe that it was not Tunnel Tech which sought to have the additional burden of a business rates assessment placed on it, but the interpretation of the Valuation Office Agency, no doubt backed by the advice of the Treasury Solicitor. Much time and treasure have been expended on taking this case to the Court of Appeal and then further resource expended on the parliamentary processes necessary to reverse what I believe would have been a highly damaging outcome for an important sector of an ostensibly agricultural type of activity. At any moment the department or the Valuation Office Agency could have desisted. Can the Minister inform us as to why that did not happen?

While I welcome the Bill, I further ask the Minister to ensure, along with his departmental colleagues, that before his or any other department or agency embarks on a process of forensically dissecting bits of legislation, all concerned with agriculture and business more widely, they should make a special effort to avoid upsetting generations of established practice unless there is a very good public interest reason to do so.

In recent times, the Valuation Office Agency has been criticised about many things, not least by me in this House. In this instance, the criticism might be that it allowed the administrative role of being the government valuer to merge with and become some sort of proxy for HMRC’s role as the taxman. This of course skews the fair and consistent administration of the property valuation system. This is not the stuff of some intellectual plaything. There should be a far clearer differential between the activities of HMRC and the role of the VOA. Sadly, and here I speak from some direct experience, the ill-effects of the present arrangement continue to spread. The risk is therefore of opportunistic excursions into novel interpretations of established practice that may then have to be reversed by Parliament on public policy grounds. To my mind, that is an extremely unwelcome process causing interim uncertainty and damage to cash flow in both the private and local government sectors, and being potentially hazardous to investment and employment. This should be the subject of better oversight. I encourage the Minister to comment. I mention this because there is a potentially very rich seam of trouble to be mined in this area by anyone with disruptive feelings or tendencies. The unplanned and often unforeseen effects on business can be considerable—it would not require any of your Lordships to devote much imagination to it.

Looking forward, if I have any advice for a Government contemplating a post-Brexit Britain—this might be the only pronouncement on Brexit that your Lordships will hear from me, for which you are doubtless very grateful—it is to ensure greater simplicity, transparency, fairness and balance to all our laws and regulations governing business and commerce, in taxation especially. If we want to be internationally slick and competitive, this is where I would start. So far, the Bill represents a welcome if small attempt to roll back the tide, but one can usually be sure that any claim to provide a better, fairer and more transparent regime will, on past performance, produce precisely the opposite.

I wish the Bill well and certainly have no intention to seek to amend it in any form. It has limited application and I hope it has a speedy journey on to the statute book, but let it also be a warning to better manage affairs in our great departments of state.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Earl of Lytton Excerpts

3rd reading (Hansard): House of Lords
Wednesday 18th July 2018 Lords Chamber

[Lord Campbell-Savours (Lab)]

My Lords, I was having a conversation the other day in which a matter arose that we did not consider when we were dealing with the provision at earlier stages. Today we are setting out the council tax premiums payable on empty property. The Explanatory Notes state that:

“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 that have been unoccupied and substantially unfurnished for two years or more. This premium is in addition to the usual council tax charge that applies to that property”.


It is a power, not a requirement—but that is not strictly true. The assumption that we have all been making is that within the first two years the council tax remains the same as payable at the moment—but that is not strictly true. If you have a single person discount, which is 25%, then the council tax you will pay once your property is empty is not based on the single person discount at all; it is based on dual occupancy.

I will give an example of that, which I have taken from Windsor & Maidenhead. For band G properties the full council tax is £1,767.67 per annum. With the 25% discount it is £1,325.75 per annum. In the current year the total council tax on a band G property is £1,855. After two years, that council tax will double to £3,712, as against £1,325 at the moment. That is nearly a tripling of the council tax payable on that property, because the single person concession is not carried forward. To take the current year, someone in a band G property in Maidenhead will currently pay £1,325, but if they empty it their council tax will immediately increase by a third, to £1,855. That is a 33% increase, because they have emptied the property and, again, because they lose the single person discount.

I raise this because in the Minister’s presentation to the House he mentioned that guidelines would be issued. Can we deal with this issue in guidelines? Can local authorities be advised that when they send out those council tax demands for an empty property subject to a single person discount, the new rate will be based on the council tax payable with the discount, not on the rate payable in the event that the property has been occupied by two persons or more?

[The Earl of Lytton (CB)]

My Lords, I am pleased to follow the noble Lord, Lord Campbell-Savours, although I have different reasons for wanting to know what might be included in the guidance. As we are at this stage of the Bill I reiterate my declarations of interest: I am a vice-president of the Local Government Association and a professional who deals with rating, as well as an owner-occupier of residential property.

My concern goes back to a point I made at Second Reading: namely, that we do not always know the full range of circumstances which lead to long-term vacancy. It is probably generally true to say that owners of residential property do not deliberately leave it vacant long term; it simply deteriorates. But there are reasons why it occurs, notwithstanding what one would reasonably suppose is owners’ innate desire to make best use of the asset. I am thinking of areas subject to some sort of wholesale blight; those might be areas which are destined for redevelopment and which are held in that form. If they are held by a developer, good luck to them, but if you happen to be a private owner of property that is in part of an area which is destined for long-term redevelopment, you are stuck with it, possibly with none of the end benefits.

Could the Minister therefore give us some clarification and reassurance that where there is an impact of some planning or public policy—perhaps including a local authority’s policy for an area—that results in genuine reasons for vacancy, this sort of thing will be covered by the guidance? If it is not, it does not matter how genuinely you are in the market and with what rent or other terms you might wish to let or sell the property; if it is in an area that is subject to serious blight, first, nobody will get a mortgage for it, and secondly, maybe nobody will want to live there. Crime, deprivation and so on are part and parcel of that algorithm. We therefore need to be careful that where there are genuine reasons, not all of which can be imagined at this juncture, provision in the guidance will cover that sort of thing. Can the Minister also say whether the guidance will be subject to wider public consultation than perhaps between just the professions—the sort that I belong to—and local authorities?

[Baroness Pinnock (LD)]

My Lords, I remind noble Lords of my relevant interests, which are in the register, as a councillor and a vice-president of the Local Government Association.

I thank the Minister for accepting the principle of the amendment that I and my Liberal Democrat colleagues tabled both in Committee and on Report. That amendment has now been transformed into a fully fledged amendment, and I thank the Minister for tabling it on behalf of the Government.

We fully support the amendment before us today. Its purpose is clear: to significantly reduce the number of homes that lie empty and unused, which some reports say is as high as 200,000. This is at a time when all agree that there is an urgent need to increase the supply of housing. This amendment is one way of making the most of the housing stock that we have. There are, rightly, exemptions to this policy, and the Minister has outlined what they are. Implementation of the legislation is at the discretion of local authorities, and I hope and expect they will take into account areas that are destined to be redeveloped, and where the sale of a house would be very difficult.

I also welcome the Minister’s comment that there will be a review of the guidance attached to the Bill. Like the noble Earl, Lord Lytton, I raised concerns about that guidance in the Bill’s early stages, namely that it probably lacked the clarity to ensure that the legislation was properly and fairly implemented.

As I said before in discussion on the Bill, there are some owners who, to my personal knowledge, leave properties empty for no other reason than that they do not want to sell them. One property that I mentioned before has been empty for 29 years. I asked the local authority concerned what action it has taken. It said that it has discussed the matter with the owner, who simply does not want to sell the property. So it is left there like a historic relic of 30 years ago. There are instances of that happening. My hope is that with an escalation of the premium on council tax, it will be a financial disincentive to leave homes empty for so long.

That is why I am totally supportive of this amendment, based on the principle that I and others laid before the House in Committee and on Report. I thank the Minister for the discussions we had and for his positive reaction to the principle that I set out. I am also grateful for the help I received from the Liberal Democrat Whips’ office in formulating this idea as an amendment. We fully support the amendment.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Earl of Lytton Excerpts

Report stage (Hansard): House of Lords
Wednesday 4th July 2018 Lords Chamber

Hence, the version in front of your Lordships today is different. The amendment would insert “normally”. It says that normally the percentage increase shall be 75%. That gives local authorities a clear steer about the intention, and what their duty is, but it does not compel them. I believe that this revised amendment entirely meets the only credible reason that the Government gave in Committee to oppose the original amendment. I look forward to the Minister taking a more open approach than last time to this amended version and turning it from a “noble concept” into a practical reality.

[The Earl of Lytton (CB)]

My Lords, I, too, thank the Minister for his clarification on the first part of the Bill and the non-domestic rating. Nobody has been beating a path to my door since the last time we discussed the Bill, and I take it from that that this is as good as it gets. I thank him very much for clarifying that.

I would like to make a couple of comments on the amendments that we are discussing, starting with Amendments 1 and 3. It seems that we do not fully know the reasons for long-term vacancies. What concerns me is that the amendments have the potential to make a blunt instrument. I always think that legislation is about as blunt as it gets, but this risks making it blunter still. I understand the point made by the noble Lord, Lord Shipley, about overseas owners; there is such a problem in certain areas, just as there is with certain other reasons for people deliberately holding property vacant.

We have to be clear whether this is some sort of fine or sanction for a socially reprehensible practice of deliberately keeping property empty, or whether it performs a legitimate housing stock amenity consideration. Is it something aimed at preventing the deterioration of neighbourhoods through some sort of social objective? In that case, I suspect that there are other measures. We need to be clear about how this is to be used if it is not to fall rapidly into some sort of disrepute. If it is used as a means just to bolster revenues for a billing authority, we would probably collectively feel that it was not quite the right way in which to do things. I declare my interest as a vice-president of the LGA; no doubt I will get a dart or a brickbat from that quarter if it thinks that I am speaking out of turn.

Either way, at the levels of escalation that we might be talking about, the question is whether we leave things to the sole discretion of billing authorities with a challenge, as I understand it, only by means of judicial review. Other noble Lords will correct me if I have got that wrong. If that is the case, I would regard it as a very significant impediment, because of the cost and time involved in embarking on that course of action—to challenge the views of a local authority by saying that no reasonable authority could have reached that decision, which I understand is the test. As an alternative, I suggest that we need to introduce a properly, but doubtless locally, codified method of application, exemptions and, possibly, appeals. In that case, a lot more needs to be sitting somewhere in the Bill—perhaps the Government will produce regulations or something like that—which is not in it at the moment. I leave your Lordships with those thoughts.

I absolutely get the purpose that sits behind Amendment 2, moved so eloquently by the noble Lord, Lord Stunell. I would hope that the rationale behind saying, “We’re improving the energy efficiency of the Bill”, is not going to be capable of being spun out as some sort of pretext to prevent the core principle behind this, which I accept—namely, that there should be some sort of escalator—from kicking in at all. I think that would be a mistake.

I have a concern about the word “normally”. I seem to remember that it has rather unfortunate antecedents. I am probably going back about 30 years here, but I recall that there were a series of measures whereby it was suggested that “normally”, or something that sounded rather like it, was insufficiently clear or distinct in how it would be applied. The question was whose norm and who would be the judge of that. So, while I support the noble Lord, I am not absolutely sure that “normally” will be sufficiently targeted to achieve what he wants. With that, I will listen with great care to what the Minister has to say.

[Baroness Pinnock (LD)]

My Lords, I apologise for being late. I was watching the screen avidly and then, all of a sudden, it turned to this item of today’s business. I remind noble Lords of my interests as a councillor and as another vice-president of the Local Government Association.

I thank my noble friend Lord Shipley for moving Amendment 1 in his name, my name and that of the noble Lord, Lord Kennedy, and giving ample expression to our proposal for adding the premium to be paid on council tax, to be dependent on the length of time for which the property is left empty. In doing so, I shall speak to Amendment 3, a technical amendment in the names of the same noble Lords that supports the principle of Amendment 1.

In Committee, when we first moved an amendment relating to an escalator in the premium on council tax, the Minister was kind enough to give us some warm words of encouragement in response. Subsequently, a couple of weeks ago, we had a meeting where we discussed that. I thank him for saying the Government would be willing to support the principle of the idea but that there may be some necessary refinements when it came back at Third Reading. I am very pleased that that has happened, because it shows how this House can work in making amendments to Bills and trying to improve them before they become full legislation.

The basis of our amendment is, of course, a premium of 200% after five years and 300% after 10 years for those properties that are empty for 10 years or more. Any financial incentive to get more properties into use by families and individuals who desperately need a hand is one that we can all support. At the same time, it stops empty homes from being a blot on their communities—and we all know examples of that. The third reason is that it means that, if we can bring empty properties into use, we do not have to release so much greenbelt land to developers.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Earl of Lytton Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 19th June 2018 Lords Chamber

Moved by

[The Earl of Lytton]

1: Clause 1, page 2, line 30, at end insert—
“( ) Any change made in the 2010 Rating Lists to the existence or extent of a hereditament by virtue of this section applicable on 31 March 2017 must also be given effect by the Valuation Officer in the 2017 Rating Lists, unless physical circumstances affecting the constitution of the hereditament changed on 1 April 2017.”

--- Later in debate ---

[The Earl of Lytton (CB)]

My Lords, I know that after Brexit, the question of business rates and council tax must be one of the high points of your Lordships’ week. With that in mind, I start by declaring my interests as the owner of business property and the occupier of business premises, my professional interests, and the fact that I am a vice-president of the Local Government Association. Although business rates, the subject of this amendment, do not quite have the pull of Brexit, they are nevertheless of great significance to businesses. I suspect that, like Brexit, they will be a matter that we will still be debating long after the initial dust has settled. Moreover, the issue will be debated whatever the outcome of our relationship with Europe.

I pay a brief tribute to my two external advisers who have been helping me with these amendments, and to staff in the Minister’s department for their willingness to discuss, both formally and informally, matters to do with business rates that have concerned me over many months. I have a sort of private pact that I have just agreed with the noble Lord, Lord Kennedy of Southwark, to keep things brief, and I will do my best in that regard.

I hope Amendment 1 will be seen for what it is: a means of preventing unfairness and an aid to streamlining. I should explain that the Bill provides for business rate payers to seek to amend principally the 2010 list and later assessments, to which the Bill applies, affected as they were by the Supreme Court case of Woolway v Mazars. However, while under the Bill the facility to amend appears on the 2010 valuation list, a successful application under that list does not automatically translate into the assessment in the 2017 list. To me, this seems an oversight. In the absence of a material change of circumstances, the 2017 list should use the same general basis, valuation levels apart, as that which applied to the 2010 list.

This matters to ratepayers, billing authorities and business rates administration more generally. Amendment 1 seeks to remedy the matter by allowing the automatic carryover of an adjustment made pursuant to the Bill on a 2010 list assessment or assessments into the 2017 list. Without this provision, the business rate payer will have to make a de novo application under the 2017 list using the government portal that operates the system known as “check, challenge, appeal”. Noble Lords will know that I have raised significant concerns about the “check, challenge, appeal” procedure, principally at the end of last summer in a debate I secured for the purpose. Although it has improved, and I acknowledge that improvements continue to be made, for appellants it remains a barrier to fair access in terms of both the need to register the timeframes and the complexity of sorting out the various stages, especially if the matter is not considered clear-cut or is contested by the Valuation Office Agency. I once had the privilege of working for its predecessor organisation, the Inland Revenue Valuation Office, for nearly seven years.

I do not believe it should be necessary to jump through these hoops under the 2017 “check, challenge, appeal” process where a simple administrative adjustment would suffice. That is the purpose of the amendment and I beg to move.

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[The Earl of Lytton]

My Lords, I thank the Minister for that very helpful reply. From what he has said, I appreciate that making these consequential amendments is a matter of the general duty of the Valuation Office Agency, as it deems necessary. I certainly did not intend to press my amendment at this stage. I will simply say this: resources that are destined to continue being cut year on year as part of a planned resource reallocation are of concern to practitioners who have to deal with the Valuation Office Agency. I hope these cuts will not mean that it is unable to make these sorts of consequential changes. On the basis of the Minister’s reassurance, I beg leave to withdraw my amendment.

Amendment 1 withdrawn.

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Moved by

[The Earl of Lytton]

2: Clause 1, page 2, line 30, at end insert—
“( ) Any refunds payable by a billing authority by virtue of assessment alterations directly consequential upon this section must be reimbursed to that authority by the Exchequer.”

[The Earl of Lytton]

My Lords, I shall speak to Amendment 2, which is grouped with Amendment 4. In a sense, it is covered partly by subsection (2)(d) of the proposed new clause in Amendment 4 in the name of the noble Lord, Lord Kennedy. I will let him speak to that at the appropriate moment.

I fully expect the Minister to say that under no circumstances will the sort of refunds that I am looking for be refunded to billing authorities. As I understood it—perhaps I used a somewhat extreme example at Second Reading and I will not use that one again—it is assumed that immediately after the Supreme Court case of Woolway v Mazars, billing authorities somehow swept into action like avenging angels to deal with all the various assessments that would have qualified under that, and therefore it is supposed that they might have made some sort of gain. I do not believe that has actually happened, or that billing authorities banked this dividend to any significant extent. That is a matter that perhaps warrants further investigation as to exactly what the situation is financially, but they might none the less find, as the effects of the Bill work their way through the system under the 2010 valuation, that they face some sort of deficit. I felt it was unreasonable that billing authorities should suffer a material loss in that respect, so that is what Amendment 2 would deal with.

I support the noble Lords, Lord Kennedy and Lord Shipley, on Amendment 4, which is grouped with my amendment, because one of the points made to me by the Institute of Revenues Rating and Valuation was that there has been very little assessment of the precise impact of much of this. That is a mistake and a lacuna. Local government finance—from what I can gather, not being directly involved with it myself—is in many cases in a critical situation. Budgets are on a knife edge and even seemingly small amounts—we do not really know what the magnitude is of all this—need to be dealt with. I therefore support that amendment, and in doing so I must declare that I am an honorary member of the Institute of Revenues Rating and Valuation, having been, for much of my working lifetime, an ordinary subscribing member. I beg to move.

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[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.

Amendment 2 withdrawn.

Moved by

[The Earl of Lytton]

3: Clause 1, page 2, line 30, at end insert—
“( ) The Valuation Office Agency must forthwith upon the coming into force of this section publish on its website such advice and guidance as to the provisions of this section, and such means of identification of the hereditament, as to enable a ratepayer by accessing the online Rating Lists readily to check the status of their assessment and whether the provisions of this section apply to it.”

[The Earl of Lytton]

My Lords, this is another tidying-up amendment, which is really to ensure that there is adequate publicity for people wishing to avail themselves of the facility under the Bill, bearing in mind that there are a number of very complex matters involved in business rates. The amendment is intended to ensure that the Valuation Office Agency places on its website adequate,

“advice and guidance as to the provisions of this section”,

and the means whereby a business rate payer can make the necessary identification so that they can ascertain whether—and, if so, how—the provisions apply to this.

The wording is deliberate in setting out the publication process,

“forthwith upon the coming into force of this section”.

The reason why I say so is that at the end of last summer, when we discussed matters to do with business rates, I was given to understand that there would be guidance—for instance, on the question of how fines would be applied for misdeclarations of fact in going through the “check, challenge, appeal” process. I have not seen that information yet and I do not know whether it is available. I am not voicing this as a criticism; I am just saying that because of the particularly time-limited nature of the way in which the provisions will apply—particularly looking back into the 2010 list—it will be important that this information is published in a timely and reasonably prominent manner and, I hope, written in plain English. That is the purpose behind Amendment 3. I beg to move.

[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.

Amendment 3 withdrawn.

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[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.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Earl of Lytton Excerpts

2nd reading (Hansard): House of Lords
Monday 4th June 2018 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I welcome the opportunity to debate this Bill, narrow though its objectives are. In doing so I declare my interests as a member of RICS and the IRRV and the RSA—the very bodies that the Minister referred to. I also declare a one-time interest as a former employee of the Inland Revenue Valuation Office; I stand before noble Lords guilty as charged. I am also a vice-president of the LGA and a recipient of a small business exemption on one small hereditament down in the West Country.

I thank the Minister for meeting me and a couple of other professionals a few weeks ago to discuss the wider issues of business rates. I was tempted to follow what was said by the noble Baroness, Lady Pinnock, but she has covered most of what I needed to say on that issue, so I will follow the noble Lord, Lord Patten, in not dwelling on it. There is a bigger issue that perhaps needs to be addressed, but this may not be the right place to do so.

The intentions behind the Bill are worthy and its logic, while in some aspects questionable, is clear. The only thing I would say is that getting the implementation correct may be a great deal less straightforward. To put it another way, there is more in this can than is apparent from what is written on the label.

What has become known rather rudely as the staircase tax, otherwise the case known as Woolway v Mazars, has been one of the recent diversions for someone brought up in the traditions of what amounted to the extent of the rateable hereditament. I had that drummed into me by a very eminent rating academic called Roger Emeny, alas now deceased. I was always clear about that and I was also pretty clear that the decision was an aberration that went against the practices that had been created before. It was one of those things that became a really quite unnecessary additional piece of grit in the oyster, because we were dealing with an awful lot of uncertainty and churn as well as a whole new system of handling things as they came on stream. It is right to put that right. The Mazars case was in September 2015 and it has taken us until now to deal with it, while in the meantime the new list came into force in 2017. The system we now have is not well attuned to the rate of churn, change and alteration that is taking place not only on our high streets and the balance between various different categories of business premises but also in our regulatory environment. I do not think that the system is sufficiently fleet of foot, and that is where we need to take a further look.

The right of the ratepayer to ask for the split assessment to be looked at again is welcome and I do not think that anyone would disagree with the principle. However, it does mean that there is the selective reopening of parts of the 2010 rating list which would otherwise effectively be closed. More to the point, as I understand it—the Minister will doubtless correct me if I am wrong—the Government have declined to fund any losses that would be borne by billing authorities as a result of appeals coming through on the old list. This seems a trifle unreasonable, especially in the light of the financial constraints imposed on the billing authorities. I detect a sense that the billing authorities have somehow garaged the winnings of the windfall that came out of Woolway v Mazars, and have them sitting in a shed at the end of the garden for the rainy day when the thing is reversed. Forgive me, but I do not think that local government finance operates in that way, and nor do I think that it is possible for shedloads of money to be stashed away for that purpose. Perhaps the noble Lord, Lord Kennedy, will be able to enlighten me because I am not close to finance at billing authority level. I hope that I will be corrected if I have got that wrong.

A criticism that I have heard on more than one occasion is that billing authority requests for alterations of assessments are often denied or not dealt with quickly enough, so that needs to be looked at. If there is a resource implication, that must be considered quite critically because billing authorities are probably the first port of call, other than the aggrieved ratepayer themselves, for getting assessments put right. If their requests are not being dealt with, there is a risk of unfairness and of loss to local authority coffers.

For ratepayers, the situation is scarcely better in that a successful application under the 2010 list, as proposed in the Bill, does not automatically get translated into the 2017 list, as I understand it. Although the Government say that they will prioritise those 2010 list applications, they clearly do not propose to do so for the 2017 list, for which a de novo registration and an application under the check, challenge and appeal system—I have raised this in the House before—will be necessary, along with all its complexity, systemic drag and uncertainties for billing authorities and ratepayers alike. We should not allow that to happen. Mercifully, even if the Minister is correct, the numbers involved are relatively few, but I am not sure that an audit has been done to identify what is involved in both the 2010 and 2017 lists. That is why the problems with the CCA system are mission critical and why they produce such tremendous negative comment from business sources.

I am sure that the Minister has seen the press reports following the statistics released last week on the numbers of appeals. The Government are extolling the virtues of a 90% reduction in the number of cases under check, challenge and appeal, while rating experts say that that is not surprising because the system is so labyrinthine, complex and liable to error that it is an impediment and effectively a denial of service—a denial of reasonable and fair rights to challenge an assessment. Something needs to be done.

One of the things we were promised is that the new check, challenge and appeal system would squeeze out cowboy rating firms. Last week I received some information and I will be writing to the Minister in response to his very kind letter to me following our meeting. I believe that, unfortunately, the cowboys are still alive and kicking, particularly in the north-west. Why do these people prosper? It is because many businesses cannot get their head round the CCA system. They look for advice and either go to one of the big specialist practices or someone comes along and says, “We can do this for you”. They submit their bill and expect to be paid long before the case gets to the appeal stage, so these people are still creating just as much of a problem as before and getting away with it. I am afraid that they have not been squeezed out of the system; it is a complex factor that ultimately boils down to the resources available to carry out management of the tax base and to deal with appeals.

On council tax, I have no complaint about the theory, especially if owners are gaming the system by maintaining vacancy or through sheer inertia. Housing should not be considered the same as a white-goods product that can be hoarded. The Institute of Revenues, Rating and Valuation and others encapsulated the issue in pointing out that the Bill is yet another attempt to fix a much deeper problem. The causes of long-term vacancy have not been looked into. There does not appear to me to be a robust evidence base behind this, but I am very happy to be told I am wrong if that is the case.

I have in mind cases where property is held for renovation or as part of a redevelopment, vested in trustees in bankruptcy or executors of a deceased’s estate, or the subject of a legal dispute. As the noble Lord, Lord Patten, was speaking, I made a mental calculation. I believe that there about 25 million residential properties in council tax assessment across England and Wales. Given the number of things that can cause churn, 250,000 represents about 1%. From what I generally know of property markets—I have dealt with them on and off all my life—that percentage does not seem very high at all. It is a bit like people who are between jobs: technically, they are jobless, but it is part of the churn and part of the process where things are vacant. We need to be careful about this. The noble Lord, Lord Patten, was trying to say that we need better information and we should be judged by the evidence base. I agree with that; perhaps the evidence base is lacking here.

Those very prosaic cases are probably much more common than people with a certain type of investment approach, who want to keep properties vacant just for the heck of it, out of sheer caprice and fancy. There is no obvious match between the empty homes and where homeless people or people on housing lists want, or need, to live, nor between the revenues raised by the provisions in the Bill and the necessary relief for those who need to benefit from this. There is a disconnect, both geographically and financially. I would like that to be explained.

I think it was the noble Baroness, Lady Pinnock, who expressed the point about what “substantially furnished” means. I had a mental image of a vanload of stuff going up and down the country, doing a bit of temporary furnishing all the while. Years ago, I attended an event, held by a local authority, where the subject of additional charges for people with second homes came up. I asked a question, naive as I was at the time—I probably still am—as to why this differential was necessary. At that stage, people were getting a discount for having a second home. I was told that it was one of the few ways a local authority had of identifying whether it had second homes on its territory and how many there were. I wonder whether one of the perverse effects of this measure will be to cause a rapid evaporation of the number of empty homes as far as the statistical evidence is concerned. That said, I follow the noble Lord, Lord Patten, in saying that the Bill is welcome, in its broad terms. Yes, there are difficulties with the fine-tuning of implementation, but in general terms I hope that we can see it through to a successful conclusion.