Baroness Hollis of Heigham
Main Page: Baroness Hollis of Heigham (Labour - Life peer)Cities and Local Government Devolution Bill [HL]
Baroness Hollis of Heigham Excerpts
Baroness Eaton (Con)
Will the Minister confirm that if an area currently without a combined authority agrees a devolution deal that involves the creation of a combined authority, without Amendments 62 and 77 it could be at least a year, if not two, before any powers could begin to be devolved?
Baroness Hollis of Heigham (Lab)
My Lords, I, too, take this opportunity to raise again an issue covered in Amendments 62, 63, 64 and 65, on which I am still not sure we have got to the right position. Is there any flexibility here? I think we all recognise that the Minister has been extremely helpful to the House, but she is still holding to the view that you can belong to only one combined authority: therefore, I address the issues in Amendment 64. That is fine if you are part of Greater Manchester and a whole big combined metro authority. It is also fine when you want a combined authority of adjacent urban unitary authorities with shared goals and objectives. However, I think the Minister was the first to recognise that there are very real problems where you have an urban unitary area surrounded by rural areas. Plymouth may be an example of that, although I am not speaking for it as I do not know whether it shares my views. Equally, where you have shire districts, as with Norwich and Cambridge—I am speaking for them—possibly Exeter, and many other medium-sized cities of England, there is a complexity because they are, if you like, islands of urban economic generation. Therefore, it makes sense not to have that one-size-fits-all version of a combined authority.
For example, my city produces economic growth. We have only about 20% or so of the relevant population but produce more than 50% of the relevant jobs. We want city and district partners for what we have now— that is, a greater Norwich partnership for economic development, travel to work and issues of connectivity. However, it would be desirable to have a wider geography with which to tackle the bigger issues of public sector reform, and integrated NHS and social care, for example, which cannot be done on a sub-county basis, and where it may make sense to go beyond a county basis and link across counties. How do we do this? I have just received an email from the leader of Cambridge City Council—not my own, so it offers a different view. We have been trying to see where the voices lay on this. Mr Herbert states that a growing number of councils want to create city-district partnerships for economic development and travel to work, while being part of a larger geography for public sector reform and tackling care and the NHS jointly. He says that the ideal solution might be,
“to have different combined authorities for those different functions, bringing together the partners who it makes most sense to work with on these different issues. That is particularly true for the largest county towns/cities and the new unitaries who have a strong common cause with immediately adjacent authorities, but not necessarily with all authorities in a county or LEP area”.
Mr Herbert adds, however, that the problem is that,
“the current legislation around Combined Authorities, and the draft Bill the new Government has brought forward, seemingly do not allow for this—insisting on a single Combined Authority”.
He talks of addressing the issue:
“While the Bill is still in draft, and before we get forced into arrangements”,
which I maintain do not work for a large chunk of the country, such as urban authorities surrounded by rural authorities, unitaries surrounded by shire districts and district cities, which provide the energy for their counties, which are surrounded by other districts. The proposed single combined authority that the Minister has laid down will cramp the contribution that such areas can make to economic growth. I absolutely understand that this has to be negotiated in a bespoke way with the Secretary of State and am perfectly happy that that should be the case, following the thrust of what the Minister has argued in the past. Will the Minister or the Secretary of State therefore meet the leaders of such authorities in such situations for whom the single combined authority—the one-size-fits-all approach—does not work? If it is too late for this Bill and if the Government are willing to expand the remit, perhaps amendments to that effect could be tabled in the other place.
Baroness Jenkin of Kennington (Con)
My Lords, can my noble friend clarify that Amendments 71 and 72 are necessary to put all local areas on a level playing field, and to enable a devolution deal in local authority areas such as Cornwall?
Baroness Williams of Trafford
My Lords, I thank all noble Lords for the comments that they have made. My noble friend Lady Eaton talked about the problems of delay, which are very real. The noble Baroness, Lady Jenkin, talked about Amendments 71 and 72 being necessary for places such as Cornwall. She is absolutely right.
My noble friend Lady Eaton asked whether an area that is not currently a combined authority can access the powers of devolution. She asked about areas without combined authorities. Again, without Amendments 71 or 72 it is not possible to confer powers on, say, Cornwall. Places such as Cornwall would be very concerned if the Bill did not have that power.
The noble Baroness, Lady Hollis, asked why you cannot be in two combined authorities. Councils can be constituent members of one combined authority and non-constituent members of another. That is quite possible. I will give the noble Baroness an example before she gets to her feet. In Greater Manchester, Cheshire East is a non-constituent member of the Great Manchester Combined Authority for the purposes of, I think, business rates.
Baroness Williams of Trafford
No, it is not an opt-out but it is a non-constituent member for the purposes of some of the powers the combined authority might get for business rates. I think that is the reason that it is a non-constituent member. I apologise if the noble Baroness is still confused.
The noble Lord, Lord Woolmer, asked several pertinent questions, as always—
Baroness Hollis of Heigham
Will the Minister come back to the substance of the questions I asked? She may well do later in her wind-up to this bundle of amendments but, if that is all she is going to say, forgive me, she has not addressed the issues. We share the same wish for outcome but can she come back to some of the other issues I raised?
Baroness Williams of Trafford
I was trying to say to the noble Baroness that for one purpose a local authority might be a constituent member of a combined authority; for another purpose—I gave the example of Cheshire East—it may be a non-constituent member of a combined authority. In other words, it has involvement with more than one combined authority but on a different basis, which I thought was the point she was making.
Baroness Hollis of Heigham
If the Minister could write to me more fully, that would be helpful and then perhaps we can follow it up. I do not want to waste the time of the House.
Baroness Williams of Trafford
I have just been passed another note about this. Another example is that York is a non-constituent member of West Yorkshire Combined Authority. In fact, I think that is why the noble Lord, Lord Woolmer, was nodding so readily.
“Combined authority and local authority functions: report on additional council tax bands
The Secretary of State shall, following consultation with local authorities, lay before each House of Parliament a report on the introduction of additional higher bands of council tax in England for the areas of combined or local authorities which may assume additional functions under the provisions of this Act, with the number of bands and the tax rate for each band to be specified in regulations which would be made by the Secretary of State.”
Baroness Hollis of Heigham
My Lords, this is a probing amendment, for obvious reasons, and it has slightly awkward wording to put it into the scope of the Bill, for equally obvious reasons. Quite simply, it asks the Secretary of State to discuss with local authorities and return with a report on the financial impact and desirability of additional council tax bands, perhaps to have two or three above the current band H.
This issue is not going to go away—we are, I think, heading into a perfect storm. Local authorities and combined local authorities are rightly taking on greater functions for economic growth, for which they need enhanced resources. Yet in the past five years, our finances have been cut by some 40% while needs such as social care have grown. Those needs will increase even further when 50p an hour is added to the minimum wage for domiciliary care. That is highly desirable, but how is it to be funded? We need more money in the system.
On Saturday 11 July, the Guardian showed that in 2010 we had some 200,000 houses worth more than £1 million but that, just five years later, the figure is 525,000. The huge price distortion in housing over the past 20 years, with vast capital gains which are neither earned nor taxed, means that there is a widely shared recognition that our council tax bands which are levied on such property take a far higher proportion of lower rather than of higher incomes. The bands are highly compressed; therefore they are regressive and unfair, and therefore they should be modified—which, in turn, would generate more income.
Those bands were devised in the 1991 revaluation for the new council tax which replaced the Tory poll tax. I was among those who worked on that Bill, and we all agreed that we needed to revalue every 10 years or so. The longer you leave revaluation, the more problematic it is—and no Government, including my own, have had the guts to do it. It is precisely because the problem gets worse that no Government will step in to stop it getting even worse than it is. I fear that a full revaluation seems unlikely unless the Bill of the noble Lord, Lord Marlesford, goes for it. However, one quite modest piece of tinkering—adding on extra bands at the top—would be a useful way forward. It would do two things: it would bring in extra income to the local authority, and it would be fairer to individual families. There are 13 streets in London where the average house price is £10 million. No one in this House thinks it right that a property worth £2 million, let alone £10 million or £20 million, should be in the same band as a property with one-third or even 1/10th of its value.
Just to remind ourselves, band D is the fulcrum point of the eight bands. Dwellings in the top band H are rated at three times the bottom band A. The entire width between the bands is 3:1, so if band D is one, band C is eight-ninths of that, band B is seven-ninths and band A is six-ninths. There is a one-ninth drop for every band below D. Above band D, band E is 11/9ths, band F is 13/9ths, band G is 15/9ths and band H is two. Of course the higher bands cover a wider range of property price ranges, but even so, they have a more generous ratio to band D than smaller homes in lower bands. It is not a flat tax but it comes pretty close to one because the top band pays only three times as much as the bottom band, even though the property may be worth 30 times as much. This is profoundly unfair and regressive. We have a 3:1 ratio in our property taxes while the old rating system offered a far greater stretch—something like 20:1, I think—until it was abolished for the poll tax. In some countries, the property tax ratio is nearer to 20:1, and as far as I can tell, we have in this country one of the most compressed sets of local property tax bands in Europe and compared to the USA.
If one driver of this amendment is fairness for hard-pressed families, who need public services more than the wealthy, the second is income for equally hard-pressed local authorities. In the north-east, half of all properties are in band A and only 3% or 4% are in bands F and G, so the levy at band D is usually well above the English average. London and many parts of the south-east are the mirror opposite, with only 3% or 4% of properties in band A and 20% in bands F, G and H, so their band D is much lower still.
What are the implications? The result is that not only do the very affluent in London not pay a fair property tax within London but neither is it fair when compared to authorities outside London. Families in the lowest band A in Nottingham, Hartlepool and Walsall pay around one-fifth more in council tax than the residents of Kensington Palace Gardens, whose properties are valued at more than £40 million apiece. To take another example that the Minister may be familiar with, families in band A properties in Trafford paid almost the same in council tax—£736 —as families in band H properties across Wandsworth and Westminster.
Baroness Williams of Trafford
My Lords, I thank the noble Lords who have spoken this evening, particularly my noble friend Lord Marlesford, who has given a good warm-up act for his Bill, which we will discuss on 11 September and to which I will respond. I will return to the matters he has raised this evening when we consider that Bill.
Amendment 75A would require the Secretary of State to lay a report in Parliament on the introduction of higher bands of council tax in the areas of both combined and local authorities. The Government have stated their determination to keep council tax bills low. The last five years of council tax increases are the lowest since council tax was introduced in 1993 and have even been lower than inflation. We already provide local referendums, triggered at a threshold of a proposed increase over 2%, so that people can have a say on the levels of their council tax.
The noble Baroness, Lady Hollis, compared different areas. Of course, councils will ultimately have a say on the level of council tax that they raise. Many councils have frozen their council tax over the last few years. We do not support higher council tax bands, or a council tax revaluation which would be required to implement them. Revaluation and higher council tax bands can lead to higher council tax bills for hard-working people. We are clear that council tax is not a wealth tax but a charge for the use of local services.
The current banding system reflects the fact that many larger homes make slightly greater use of local services, but it intentionally is not a poll tax or a domestic rate. The Government have already taken a number of steps to tackle property tax avoidance by a small minority of wealthy people, and also increased stamp duty on the highest valued homes.
Given these explanations, I hope that the noble Baroness will be content to withdraw her amendment.
Baroness Hollis of Heigham
The reply I was disappointed in was actually that of the Minister. She knows, as does everyone here who has spoken in this debate and has a local authority background—I could not speak for the noble Lord, Lord Marlesford—that what effect there is on local authority revenues can be entirely neutral. It is a way of distributing the load. Therefore, to say that if you are in favour of having extra bands at the top in the name of greater fairness, that is unfair to the very rich, is itself a bit rich, given that at the moment, many of them are paying council tax of £20 a week. That is less by far than what people on one-fiftieth of their income, with a property value of one-tenth of theirs, are paying in their local patches. My amendment is cost-neutral, in the sense that the impact depends entirely on where the individual local authority pitches its band D. It can collect exactly the same money as it collects now but in a fairer way or, going back to the point made by the noble Lord, Lord True, it can decide that it wants to use it to raise more resources, primarily from those who can most afford to pay—the broader shoulders of those who are multimillionaires, many of them billionaires—towards the cost of the additional functions of economic growth such as connectivity, transport and building our infrastructure. A lot of that will rightly be carried by local government, but it does not have the revenue to do it and has no means of finding it.
You can approach it whichever way you like. You could use it to raise more revenue or you could decide, if you are of a more conservative disposition, that you do not want to raise any more revenue but none the less, you are mildly troubled by the fact that someone in a property worth £400,000 is paying the same as someone in a property worth £40 million. I myself would be mildly troubled by that, and I am surprised that that view is not shared more widely by some of your Lordships.
The noble Lord, Lord Marlesford, has given us a much more ambitious plan than I was proposing. What I am trying to do is simply to keep this issue in people’s minds. The longer you leave it, the worse the problem becomes. We can either try for a big bang down the road in which you will hear from the losers but not from the winners, or we can start making some incremental adjustments. The easiest way to start doing that is at the very top, where most people have a pervading sense of the unfairness of the extent to which council tax bands have outgrown the value of house prices. There is no longer the co-terminosity that existed when we devised this system—in which I was a player—back in the early 1990s.
The time is late, and I will stop there. Obviously, I will withdraw the amendment, but I say to the noble Baroness that it is rubbish to say that this is all about trying to raise council tax—and she knows it. She knows from her local government experience that this provision could be neutral in terms of the money it raises, or it could not be neutral and you could raise more money. It is about rebalancing in a fairer and more equitable way the relativities of property values within any local authority—full stop. If she is on the side of not balancing those relativities in a fairer way, I can only say that I am deeply disappointed in her response tonight. None the less, I beg leave to withdraw the amendment.