Council Tax and Stamp Duty Alternatives

Andrew Griffith Excerpts

Wednesday 17th May 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to see you in the Chair, Mrs Harris, and to serve under you today. Let me join others in congratulating my hon. Friend the Member for Barrow and Furness (Simon Fell) on securing this well-attended debate. I note the largely cross-party nature of the contributions—with the exception of the speech by the hon. Member for Ealing North (James Murray)—and I will try to reflect that in my tone. We welcome this opportunity to discuss the important issue of property taxation, including the current status of council tax and stamp duty. I have heard the concerns that have been articulately put on behalf of Members’ constituents in many different parts of the country, and those concerns have been thoughtful and constructive.

For many people, council tax is the most fundamental tax: we pay it every month, it is highly visible, it has an impact on all sorts of important decisions and, when we pay it, we know what services we are getting for it. It has the strength unique in the taxation system of being local and personal. That is not to say that it is perfect, and we have heard today about some of the difficulties manifested in some communities.

Importantly, council tax is set, collected and retained by democratically elected local authorities, and I ask colleagues to think about that as we think about potential reforms. It ensures that households contribute to the cost of local services, whether that is fire and rescue, refuse collection, transport, libraries or—this is a particular passion for my constituents in Arundel and South Downs—dealing with potholes.

Council tax is a well-understood tax and has a high rate of collection and a stable base. It does not, for example, go up and down with property prices, as some potential alternatives might. Therefore, it gives local authorities a strong degree of certainty in their financial planning. On aggregate, it raises about £36 billion for local councils in England. That is about 57%—very importantly, the majority—of their core spending power. Council tax is the largest single source of revenue for local authorities. To ensure fairness, it is mitigated—we heard a little about this—through a range of reliefs, such as support for those on low incomes, a reduction for those with a disability and an exemption for students.

Stamp duty is an efficient tax to administer and collect. It raises a really substantial sum—£14 billion that the Government use to pay for essential services, such as the NHS, schools and police.

So these are not easy issues. For all of us thinking about the best way forward and about how to chart a course for reform, this issue does pose questions that are worth thinking about. Notwithstanding the advocacy of the proposal from many hon. and right hon. Members in the debate, neither the Opposition Front-Bench spokesman, the hon. Member for Ealing North, nor the distinguished hon. Member for Westmorland and Lonsdale (Tim Farron) actually went to the point of committing to make this change, so I would contend that there is a little more work to do.

[Peter Grant]

Will the Minister give way?

[Andrew Griffith]

Although the hon. Member does not represent England, perhaps he would like to make that commitment.

[Peter Grant]

At least we agree that we are no longer a United Kingdom—I am pleased to agree with the Minister on that.

Given the increasing complexity and scale of services that local government in Scotland and England has to provide, does the Minister see any benefit in giving councils the power to raise taxes based on something other than simply property values? Is it time to broaden the base so that they can raise their own incomes tax, VAT, sales tax or tourist taxes—or are the Government obsessed with the idea that their core tax will always be based on imaginary property values?

[Andrew Griffith]

In the interests of trying to reflect the views of hon. Members, I will not be distracted by that interesting idea. Again, the proposal that has been put forward does acknowledge the opportunity for local authorities to diversify their sources of revenue. One of the issues that, as a democrat, I find most problematic with this proposal is the impact it would have on local authorities. Their ability to raise revenue for themselves would be taken away, which would be one of the single biggest—and adverse, in my view—issues for local government. The system is often accused of being overly centralised, but this proposal would absolutely remove any ambiguity whatever, and that is something that the advocates of this proposal may want to think about.

[Helen Morgan]

Will the Minister give way?

[Andrew Griffith]

I will give way—sparingly.

[Helen Morgan]

I am grateful to the Minister for giving way. On the point about stability, surely a simple step to address some of the inequality in the current system would be to reassess the valuations and introduce higher bands of council tax.

[Andrew Griffith]

Higher bands have been introduced over time. It has been a long time—just as a point of fact—since there has been a revaluation. I note that both the Labour party and the Liberal Democrat party served in Government for significant periods during that time, so it is not just among Government Members that there is caution about some of the unintended consequences of doing something that affects so many people. The impact on those with low and fixed incomes of moving any sort of basis of property tax should be thought about carefully.

The hon. Member for Leeds East (Richard Burgon) was candid about his desire to soak the rich with wealth taxes. What we are talking about would effectively be an imperfect wealth tax, because it would be a tax on that proportion of wealth that relates only to residential property and it would not be comprehensive. For that reason, there would be people who were asset-rich but cash-poor, such as widows, who would have to think through the consequences.

Moving towards a more periodic review of values poses the question of how that revaluation would take place. Certainly, some of us are shy of algorithms, but in all likelihood, unless we were to recruit an army of estate agents-meet-inspectors, we would be using some algorithmic method. In fairness, colleagues on both sides have talked about the status quo, but there would also potentially be unfairness in a mechanistic approach.

[Tim Farron]

The Minister is being incredibly generous in giving way. In the short time available to him, he is providing a thoughtful critique of the proposal that has been put to him, and he is entitled to do that. He correctly says that none of the parties represented here is saying that this will definitely be in their manifesto, although I think we should all consider it. However, I would love him to consider the fact that the Fairer Share approach is cross-party. The people who have been advocating for the Government to think about this have made an extensive critique of council tax and how unfair and outdated it is. On the table is something that is potentially better. I would love the Minister to look again at council tax to see whether there are ways in which he could make it fairer.

[Andrew Griffith]

I hear the hon. Gentleman, and I look forward to reading his manifesto—whether it is for his party or for the coalition that his party and the Labour party both seem very keen on.

As we think about proposals, we must think about democracy and about the potentially disempowering impact on local government, of which I suspect that most colleagues are strong advocates. There is also the issue of accountability. My hon. Friend the Member for Hartlepool (Jill Mortimer) talked about the debate going on in Hartlepool, and I suspect that it is one of the livelier debates that local people are having. However, it would not be able to take place if these things were simply set in Whitehall and the money was distributed algorithmically.

My hon. Friend the Member for West Dorset (Chris Loder) talked a little about the compensating mechanisms of revenue support grant. The Government are levelling up in many ways, but that is another way in which we can seek a fairer outcome for our constituents.

[Chris Loder]

Will the Minister consider reviewing that for the Dorset Council area so we have fairness for our constituents?

[Andrew Griffith]

I am quite sure that my hon. Friend, who is an effective champion for his constituents, will continue to prosecute his case, but he will understand if I do not give that commitment here and now.

My hon. Friend the Member for Barrow and Furness and others talked about second home ownership. We understand that, and I have a proportion of second homes in my own constituency. As colleagues know, proposals on the table in the Levelling-up and Regeneration Bill would allow councils local and democratic discretion to attract a council tax premium that goes some way to address that issue. However, we should be cautious. Those homes already bring a disproportionate amount of net benefit to local councils, simply because they pay the full rate of council tax, but do not consume at the same intensity. The ability to have them pay double will increase that further.

Let us remember that this is not a simple issue. The work-from-home, hybrid economy blurs the line. Hon. Members—probably almost uniquely as a group—understand that people may work in one place and live in another, so the line between a first and a second home can be blurred. We should be cautious about discriminating on tax grounds against the person who chooses to work and rest in two different places, in two small homes, rather than in a single home of equivalent value. I offer that to hon. Members as a potential mitigant as we think about this issue.

Today, we have heard some thoughtful proposals, and a number of points have been made on both sides. In conclusion, these issues are important, and there are real consequences not only for our constituents, but for the housing market, in which, as one hon. Member said, there is already substantial intervention. We need to think through the unintended consequences at every point. Help to downsize would be one potential benefit for us all.

The Government will continue to act where appropriate to do so. I thank hon. Members for their thoughtful contributions. In securing the debate, my hon. Friend the Member for Barrow and Furness has allowed us to hear a variety of different contributions from all parts of the House. The Government will keep listening on this important topic.