Council Tax Valuation Bands Bill [HL]
Debate between Lord Butler of Brockwell and Viscount Younger of Leckie
Lord Butler of Brockwell (CB)
My Lords, I support one of the main elements of the Bill of the noble Lord, Lord Marlesford—namely, the suggestion that the basis for taxing property should be the price at which it last changed hands. Where I depart from him is in agreeing with the noble Lord, Lord True, that it would not be practicable or fair for the Bill to apply to all properties bought from 2000, when the purchase price was entered in the register, because it would be unfair if two identical properties in the same street were taxed at different rates depending on whether they were bought before or after 2000. That would be tolerable for somebody who had bought the property since then with their eyes open. However, if I had bought a house before the change, I would not have known that and the difference between the tax on my house and that on the identical house next door would not be fair. Therefore, I conclude that the noble Lord, Lord True, is correct that the change proposed in the Bill could not fairly come into effect before the passing of the Act, so that people who buy properties in the future will know on what basis they are buying them and what liability they are entering into. As far as the noble Lord, Lord Marlesford, is concerned, that would delay the raising of the revenue and the application of the system that he has proposed. I realise that that is unwelcome. However, I do not think there is any other basis on which the measure can be brought into effect.
However, I agree with the noble Lord, Lord Marlesford, that a scheme based on the purchase price of properties in actual fact—which are now recorded in the register—would greatly ease the future administration of this tax. It would also get rid of the requirement for revaluations, which was always a problem with the local rates and would be a problem if the existing system was used and the bands were revalued. As I say, it would greatly reduce administration. So that is an idea that is well worth pursuing.
I agree with others that it will not be practicable for a Bill based on the idea proposed by the noble Lord, Lord Marlesford, to come into effect during this Session of Parliament. However, I hope very much that the Government will look at the basic idea of his Bill. It would have the advantage of dealing with a problem of the present council tax—namely, that it is not sufficiently progressive—and would raise the prospect over a period of giving more revenue to local authorities, which is greatly needed at this time. Therefore, it is an idea well worth working on.
Viscount Younger of Leckie (Con)
My Lords, I thank my noble friend Lord True for his work on, and engagement with, this Bill. He has brought to the debate his customary passion and commitment. I am sure that everyone agrees with me that this House benefits from his experience as a council leader and the expertise which he brings to the subject.
I will not repeat all the points made by my noble friend Lady Williams at Second Reading. However, the Government have a firm commitment to keep council tax low for taxpayers, which we have successfully delivered and continue to deliver. I express my reservations that either with or without this amendment, the Bill would not support that aim.
My noble friend Lord True and the noble Lord, Lord McKenzie, raised this matter and I agree with them that operating two parallel systems for council tax valuations would risk introducing new costs and confusion into the system. I note that my noble friend Lord Marlesford himself acknowledged that a new system should be administratively easy. In the protracted transition period during which these systems would need to operate, residents could face dramatically different council tax bills, based on the arbitrary distinction of when their home was last sold. The Government believe that it is fairer, as well as simpler, to band properties in a single list on the basis of a common date.
Furthermore, the present system of council tax provides stability and certainty for households, helping them to manage their finances. It is well understood, which is evidenced by the very high collection rate of 97%. Ultimately, people know that they will be charged on the same consistent basis as their neighbours. I should add that council tax in England has fallen by 9% in real terms since 2010-11. The Government see no need to introduce turbulence and uncertainty into households’ financial management by changing the council tax bands. This uncertainty about council tax bills could generate further risk to the Government’s aims to see 1 million new homes built in England over this Parliament.
I note and appreciate the remarks made by my noble and learned friend Lord Mackay of Clashfern, who alluded to some interesting experiences in Scotland. In particular, he suggested the introduction of a new band at the top. But he also noted, in his informed contribution, that many properties in the higher bands are occupied by cash-poor households. That, in a nutshell, is the issue and the Government have no plans to introduce a new band.
My noble friend Lord Skelmersdale raised the issue of whether a property has to be registered at the Land Registry. It is indeed the case that properties purchased before 1990 might not be registered, so he makes a valid point.
The present system gives taxpayers confidence and stability. It is widely understood and payment rates are high. I hope that noble Lords will understand that, for those reasons, the Government cannot support the Bill.
Lord True
My Lords, I am grateful to those who have spoken and to my noble friend on the Front Bench for the kind things that he said. They are entirely unjustified: I can assure him that there are many, many people—leaders and former leaders of local authorities—who have far greater expertise than me. We heard from one of them, the noble Lord, Lord McKenzie of Luton, with whose intervention I very much agreed. His extremely pertinent point about disguised ownership was touched on also by my noble friend Lord Cormack. The massive capital inflows to the country are an issue and we heard, in the Chancellor’s recent forecast, the expectation of the scale of future inflows of individuals and capital that are distorting the market. Attempts are being made to chase, capture and tax that money, but it is difficult. This matter might need to be examined but it is not necessarily a matter for this Bill. Neither is it necessarily a matter that would defeat the Bill, but it is an interesting, separate point of detail.
I was grateful for what the noble Lord, Lord Butler of Brockwell, said, not least because he agreed with me in detail while making a point on substance. One difficulty with taking the value of a property at a particular time is that it is a snapshot. The current council tax system, albeit based on 1991 values, has benefits. There is a separate argument about revaluation, and I said at the outset that this debate is about my noble friend’s Bill, not about whether we should have higher bands. My noble and learned friend Lord Mackay of Clashfern made a very important intervention on that. A property changing hands is a snapshot of its value at a time, whereas the council tax basis is an assessment of relative values across the country. Although there will be anomalies in it, it is broadly—and certainly at the time it was introduced it was intended to be—fair and accurate.
I said in my opening remarks that my noble friend Lord Marlesford brought forward an interesting point and the noble Lord, Lord Butler, supported him. I understand the logic of this. But if you just take individual snapshot values you will get the variations that the noble Lord, Lord McKenzie, referred to, which will be frozen in two parallel bands. And it will not reflect the fact of market change.
Relatively, all houses in an area will go up and down with the market. There will be variations. But let us say that there is a property crash, which is quite possible with some of the excessive values we have now. Under my noble friend’s scheme, if you have scrimped and saved to buy a house worth £525,000 and the market goes down, you will find yourself paying a council tax which is twice that paid by people who paid £495,000. If it is on the excessive value that has been charged before, what does the person do when the value goes down and they find themselves paying twice as much as their neighbours who have just bought the house next door?