Lord True
Main Page: Lord True (Conservative - Life peer)Council Tax Valuation Bands Bill [HL]
Lord True Excerpts
Lord True (Con)
My Lords, in moving this amendment I should like to make two things absolutely clear. The first is that the question before us is not whether there should be a principle of higher rate bands within the council tax system. There are perfectly legitimate arguments either way on the point, and this Bill specifically does not address it, although it touches on the question. In my submission, any such proposal should be brought forward as part of a wider reform of council and property tax proposed by whoever is in government at the time, so that is not a principle or a reason for either opposing or supporting the Bill.
The second point is one I made clear at Second Reading. It is also not really about the narrow principle of whether the point of sale of a house should be used for upgrading council tax or changing the banding of a property. That is an interesting and ingenious proposal by my noble friend which might or might not be considered, but again it would have to be considered in the light of all the consequences and in the context of reform. My noble friend has perfectly understandably put forward a Bill that touches on those questions, but from my standpoint there is an unfortunate issue. I declare an interest as the leader of a local authority in London with an extremely high number of higher banded properties and higher value properties. I saw in the Evening Standard earlier this week that 400,000 properties in London alone are valued at more than £1 million, but they are not necessarily occupied by wealthy people. I can testify to that in my area, where property is very highly valued.
I have made the point in other debates in your Lordships’ House that at the moment we have a very artificial market in property where, because of the policy of effectively printing money and depressing interest rates, capital values are excessively high, and even more so in London because of a huge inflow of capital from abroad. Therefore a lot of people, particularly in the London area, find themselves trapped in high-rated properties which was not necessarily the case when they moved in. That is another factor in the background.
The question before us is whether it is wise to put on the statute book this Bill and its proposed mechanisms. In my submission, the answer is no, and I shall seek to persuade noble Lords of that, although I am sure that they will be interested to hear what my noble friend has to say. In seeking to remove subsection (1), I am addressing a number of questions that are serious and problematic.
The first is in a sense a minor point, but it has been drawn to the attention of noble Lords by the Delegated Powers and Regulatory Reform Committee. What regulations does my noble friend have in mind? The committee has pointed out that the Secretary of State already has the power to alter valuation bands and proportions. This point needs to be clarified, and I agree with the committee that if orders are laid under this Bill, they should be considered under the affirmative procedure. That is because the way the Bill would work would be strange and very difficult for local authorities to operate.
I know that my noble friend disagrees with me on this, but the introduction of legislation that takes a value from 2000—the worst-case scenario that he cites—to replace a value set in 1991, as under the current system, is retrospective and perpetuates the anomaly. If council tax is based on 1991 values, I am not sure how that issue is addressed by introducing a system based on values at 2000. That was 16 years ago and over that period there have been many changes in housing values both up and down. At the moment we are in a boom. I am therefore unhappy about the idea of enhanced bills plonking through the letterboxes of people who bought a house 16 years ago; some may well be elderly widows. I know that elderly widows always come up in our debates, but they actually exist: property rich but cash poor. I see this proposal as retrospective and potentially very troublesome.
The second point arising from Amendment 1 that I would like my noble friend to explain is this. What does he mean by “bought or sold”? We touched on this briefly at Second Reading. As it is written, the Bill would apply simply to the act of purchase or sale, whereas the Explanatory Notes refer to “changing hands”. Properties can change hands in many ways other than through being bought or sold. They may be inherited. If a spouse or partner dies, a new title of ownership may be issued when, as happens in most cases, the property is transferred to the surviving partner. For inheritance tax purposes, a value of that property would be established and would have to be vetted. Does my noble friend see that sort of transfer or one for inheritance tax purposes being captured by his Bill, or not? As drafted, the Bill simply refers to purchase and sale. This needs to be clarified by amendment on Report if this Bill is to go forward.
It may not be necessary to go through all my amendments because it might be possible to cover several of them in this debate. However, my third point is that the proposition of the Secretary of State setting out the new set of bands in the Bill would sit alongside the existing set of bands, so all local authorities would need to operate two sets of council tax bands, which is an administrative burden in itself. To operate the second band, they would have to access real-time data from the Land Registry. I do not know whether my noble friend has consulted the LGA—it would be interesting to hear in his response—but the technical capacity for scooping those data for every real-time sale from the Land Registry does not currently exist. There would be administrative costs and, potentially, IT costs to make this double system operate.
I have a further point. These are all practical points that need to be addressed—we are making proposals for legislation here; this is not a jolly idea that one discusses over the farm gate. My noble friend’s proposition would produce a system where people living next door to each other could pay wildly disproportionate amounts of council tax at the upper ends of his register. That is not a justifiable or sensible way to go forward.
If we are to reform council tax—I repeat, that is not the subject before the House on this Bill—it surely cannot introduce more anomalies and more perceived injustices, as this would. Personally, I have spoken strongly against the excessive rates of stamp duty we have at the moment. My right honourable friend the Chancellor is going too far in that and it is having a distorting effect on the market. Where people risk going into a much higher rate of council tax simply by moving from one road in one area, from the preserved band into the new band, my noble friend risks creating even further distortions in the property market, which is already absurdly rigged by the many interventions of the Government, and there are obviously risks of fraud, disincentives and all the other things that happen. That can also apply to the transfer of title.
I hope that my noble friend will not proceed with this legislation. I understand the principles, but I had hoped that he would have been persuaded of this after Second Reading. If he wishes to proceed, this will need very radical amendment that will go into much greater detail than I have been able to set down in Committee to enable debate in your Lordships’ House. We would need very substantial amendment on Report after having benefited from advice from the Government and the local government bodies.
I understand where my noble friend is coming from, but this is not a good Bill to put on to the statute book. I do not intend to divide your Lordships’ House—that is not something one would wish to do—but I hope that my noble friend will be able to give a little more clarity and may be prepared to reflect on some of the points I have put forward. As I say, I am not ruling out a debate on higher bands, nor discussion on one of the mechanisms he has put forward. I just think it is difficult in the way he proposes it will operate. I beg to move.
The Lord Speaker (Baroness D'Souza)
My Lords, if this amendment is agreed to, I cannot call Amendments 2, 3 and 4 by reason of pre-emption.
Lord True
My noble friend raises a very important point. He says there will not be a lot of complications. Is he not saying that, once his new post-2000 system comes in, each time the house is sold thereafter there will not be an alteration? That seemed to be the implication of what he said. If this system is to have the logic that I think it might well have, clearly at each point of sale—not, as he said, interestingly, of inheritance or gift—the system must, surely, generate a new council tax, whereas he seemed to be saying the opposite.
Lord Marlesford
Of course it does: it is the actual price paid. If somebody buys a house, they will know the band in which it will be according to what they are paying. Of course it is the case. At present, if there are major alterations made to a house, there will be an assessment made by local government of whether it should move into a different band.
Lord Marlesford
I want to say a word on the retrospection point. Recently, the Chancellor of the Exchequer reduced the rate of capital gains tax from 28% to 20%. That new rate will apply to gains which are realised after, I think, 5 April this year on gains which have already been made which, if the sale of the asset subject to capital gains tax had been made earlier, would have been at 28%. So changes in tax rates do have an element of retrospection.
I do not believe, frankly, that we are going to have a lot of widows who bought a house since the year 2000 finding that they are paying enormous new sums, as my noble friend mentioned. The big increases have probably been in the last five years and it is very unlikely that widows have paid millions of pounds for houses in the last five years or so and therefore suddenly find that they are put on to a new rate. I think it would be perfectly reasonable that they should be put on to a new rate if that were the case.
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?
Lord Butler of Brockwell
I am grateful to the noble Lord for giving way. I see the anomaly that he refers to. However, is it not the case that the person who bought the house before the value crashed did so with their eyes open? They knew what their tax liability would be. Is it not fair that that liability is maintained, even though the value of the property may have changed?
Lord True
The noble Lord makes a perfectly reasonable point. However, although you can appeal to the valuation tribunal on the valuation of the house, there is a risk that there would then be a cry that the value was no longer fair. Revaluations and appeals on business rates can sometimes take years to determine. I was pointing out that there are potential anomalies and the noble Lord makes a perfectly reasonable point. However, there is a risk of creating new industries and new administrative costs.
I should not, in this response to the debate, have gone into a new detailed point. I apologise to the Committee.
Lord Marlesford
I do not think that any of us envisage a system in which each time people think the value of their house has gone down they can apply to be put into a new band. That does not apply at the moment and it would not apply under the new system in my Bill. With great respect, that argument is pretty irrelevant.
Lord True
No, but the noble Lord is replacing a system which is based on a consistent set of valuations with individual snapshot valuations, so he is creating potential new anomalies and concerns.
I do not wish to detain the Committee. This has been an extraordinarily interesting debate. I have esteemed my noble friend for decades, not just in recent times. He has one of the most innovative and illuminating minds we have seen, both as a commentator and as a parliamentarian. My respect for him is absolutely enormous. However, I do not think that this is a practical or sensible way to proceed. I have tried to deal with this extremely kindly. I have not troubled the Committee with some of the range of anomalies, although some of them have come up in the debate. We are not debating the issue of higher bands—although we could on another occasion—or the property thing. We are debating the Bill which is before us. My noble friend dismissed the idea that there might be administrative costs and anomalies. He was not too worried about that, but I have to be and I stand by it. Many local authorities are making massive savings in personnel. We have taken £35 million out of a budget of under £200 million. We are taking another £25 million out of it. This is what is expected of us by the country. With respect to my noble friend and my friends on the Front Bench, one must be careful about adding new burdens to local authorities, particularly when they come up with these kinds of anomalies.
I will study Hansard very carefully, but, with respect, I do not think that my noble friend properly addressed the points put by the noble Lord, Lord McKenzie, about parallel registers, the two bands, the issues of inheritance, gift inter vivos, disguised nominee ownership and IT requirements. Retrospectivity was perfectly skewered by the noble Lord, Lord Butler. There is a tremendous amount here which needs to be clarified.
There is also a fundamental point, which I know that many people may not agree with or have forgotten. Council tax is supposed to be a tax levied to pay for council services. It was not created to be a tax on wealth or property. We can have one of those if we want. We have inheritance tax and graded stamp duty. There have been proposals for a mansion tax. Others have proposed a wealth tax. At one time, Mr Healey was going to build an office with staff to do that. Council tax is intended to be a tax which raises—
Lord True
My Lords, there is a principle of progression: the landowner will have more dustbins than the person at his gate in the cottage. But the question is whether council tax should be the means of levying an enormous amount of tax on immobile wealth—whether that is the right way to go after that wealth. If we had a Government who wanted to go after people with more money than the average, I have been long enough in policy-making to suggest that there might be better ways of doing so than by using council tax. It is a perfectly legitimate argument that has raged between my good socialist friends and others through all my life, but I would not do it this way.
I wish to conclude and make it clear to the House before I do, in case any noble Lord wants to intervene on me again, that I do not propose to move my further amendments because we have had an extremely interesting and valuable debate and I do not wish to detain your Lordships. I hope that I have made it clear that if my noble friend wished to bring this Bill forward on Report, I would not only lay a number of amendments but make them more detailed amendments. The local authorities and the householders of Britain would deserve no less. I beg leave to withdraw the amendment.