Council Tax

Baroness Taylor of Stevenage Excerpts

Tuesday 19th November 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

My Lords, I shall now repeat an Answer to an Urgent Question that was given in another place:

“Mr Speaker, to be clear, we are not increasing the council tax referendum thresholds. The Secretary of State sets thresholds, known as referendum principles, for different classes of authority. Within these referendum principles, local authorities do not need to seek consent from their residents to increase council tax. The Government will maintain the previous Government’s policy on council tax, in line with the OBR forecast made in March 2024.

The OBR forecast of the last Government assumed that council tax would increase by a 3% core, plus an additional 2% for local authorities with adult social care responsibilities, for the entirety of the forecast period. We are continuing with the policy set by the previous Minister for Local Government for 2025-26. In 2025-26, this will raise £1.8 billion. The purported figure used by the shadow Communities Minister failed to account for the new homes being built or other local government income, such as retained business rates, which accounts for an additional £600 million. That is why at the Budget we announced over £4 billion in new local government funding, including an additional £1.3 billion in the local government finance settlement. This has been welcomed by the sector. Indeed, the Conservative chair of the County Councils Network, Tim Oliver, said that:

‘Today’s announcement of £1.3 billion in new core funding for councils offers some welcome relief to the day-to-day financial pressures’.


Decisions on the council tax level to set, or whether to hold a referendum to go beyond the referendum principles, sit squarely with councils. The Government, however, are committed to limiting increases to the 5% principle and will not raise any taxes on working people. We continue to remain committed to the single person council tax discount and local council tax support schemes. We will set this out fully in the local government finance settlement, which will be presented to Parliament in the usual way”.

[Baroness Scott of Bybrook (Con)]

My Lords, when it comes to local government, the Chancellor is giving with one hand and taking away with another. The increase of employer national insurance contribution will hit local government hard, particularly through its contracted services. Can the Minister explain how the Government expect councils to cover their increased costs without raising council tax, or are His Majesty’s Government happy to see yet another tax increase on working people as a result of their Budget?

[Baroness Taylor of Stevenage (Lab)]

My Lords, the Government have committed to provide support for departments and other public sector employers for additional employer national insurance costs. This applies to those directly employed by the public sector, including local government. We will set out further details of how this support will be delivered in due course.

[Viscount Hailsham (Con)]

My Lords, given that the Government remain committed to the principle that public opinion should be tested before an excessive council tax is levied, would it not be consistent for the Minister to step outside and ask the farmers how they react to the imposition of inheritance tax on agricultural land, which they were promised would not happen and which manifestly has an excessive impact on agricultural values and their businesses? Incidentally, I declare an interest: I have no agricultural land myself, but numbers of my family do.

[Baroness Taylor of Stevenage (Lab)]

My Lords, it is quite a stretch from council tax to farmers’ inheritance tax. However, we are listening closely to farmers’ concerns. In fact, the Environment Secretary met the NFU to clarify the changes in the Budget, and he met representatives again yesterday. The approach we have taken is fair and balanced, and the majority of farms will remain unaffected. Currently, 40% of agricultural property relief goes to 7% of the wealthiest claimants. That is not fair or sustainable and has been used by some to avoid inheritance tax. That is why we are maintaining the 100% relief up to £1 million and 50% after, which is an effective 20% tax rate, half the normal 40% rate. We have ensured that tax due can be paid over a 10-year period, interest free, and if land is transferred seven years before death then farmers pay no inheritance tax. I am assured that my colleague the Secretary of State for the Environment is listening to farmers and will continue to do so.

[Baroness Pinnock (LD)]

My Lords, I have relevant interests in the register. Since 2016, the previous Government imposed the social care precept on councils which have those responsibilities, and this nearly doubles the council tax rise each year. In my council, the social care precept accounts for over £220 of the council tax on average. Given that council tax is regressive, does the Minister agree that this is not a fair way to fund social care?

[Baroness Taylor of Stevenage (Lab)]

My Lords, the noble Baroness makes a good point. We have all seen the crisis in social care caused by the previous failure to face up to the issues that were confronting that sector, and we heard earlier from my noble friend Lady Merron about some of the steps that have been taken to address it. This year, the Government are providing at least £600 million of new grant funding for social care as part of the broader estimated real-terms uplift to core local government spending power of around 3.2%. We are committed to reforming adult social care and improving the quality of care for people in need, and that is why we have invested an additional £86 million next year for the disabled facilities grant, to enable people to stay well, safe and independent at home for longer. In October, we introduced legislation to bring in the fair pay agreement to ensure that those vital care workers, who we know so many of our vulnerable residents rely on, are recognised and rewarded for the important work that they do.

[Lord Clarke of Nottingham (Con)]

My Lords, the most obvious problem with the council tax system in this country is that it is based on a hopelessly out-of-date valuation which no Government have dared to address in recent years. It produces great anomalies in the council tax levied in different parts of the country. As this new Government have a big parliamentary majority and this is the early stages of the Parliament, will they not have the courage to address this obvious anomaly, so that at least the basis for council tax can be fairer in future years and we can begin to establish a system of revaluing, from time to time, to keep it a defensible system?

[Baroness Taylor of Stevenage (Lab)]

As a former Chancellor, the noble Lord will have detailed knowledge of this, and I am sure he made similar representations to his own Government. We all know that problems are caused by outdated valuations and the regressive nature of council tax. However, widescale reform of the council tax system at this stage would be time consuming and complex. We would still have winners and losers whichever way we did it. Instead, this Government are committed to fairer funding. We will start it in this year’s funding settlement, with a further review in the 2025 spending review.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, does my noble friend agree that it would have been great if we had had a much higher threshold in the European referendum so that we could have avoided the disaster of Brexit? It has been particularly disastrous for farmers.

[Baroness Taylor of Stevenage (Lab)]

I hear my noble friend’s point, which he has made in the House several times before. The impact of Brexit is widespread, and I completely understand his point.

[Lord Tyrie (Non-Afl)]

My Lords, will the Minister return to the point that the noble Lord, Lord Clarke, made a moment ago? Unless we address the gross imbalance in the amount of money taken from various groups in society in council tax, we will never make any progress on the other side of ledger, which is how to spend the money on social care. The Government must grasp this nettle. Is now not the best moment to do it, when the Government have a large majority and a long Parliament ahead to achieve their aims?

[Baroness Taylor of Stevenage (Lab)]

I thank the noble Lord for his comments. My honourable friend Minister McMahon is very clear that we need to set up a fairer funding settlement for local government. It is our choice to do it this way, rather than by a complicated and time-consuming reform of council tax. In this year’s funding settlement, the noble Lord will hear news about reshaping the way that funding is distributed, and there will be further news on it in the spending review next year.

[Lord Young of Cookham (Con)]

My Lords, further to the questions posed by the noble Lords, Lord Clarke and Lord Tyrie, if the Government are not prepared to do a wholesale revaluation, and I understand why, could they not at least introduce two new higher bands of council tax to produce more revenue for social care?

[Baroness Taylor of Stevenage (Lab)]

The noble Lord has made this point in the House before. It is a good point; it needs to be considered alongside further reform of council tax. That is not our priority at the moment, but when it comes to be done, I am sure that his point will be taken on board.

[Lord Bailey of Paddington (Con)]

My Lords, for the last few years, at the insistence of a Labour mayor, Londoners in council tax bands D and B have had an extra £60 added to their bill to pay for Transport for London. Yet the mayor is about to enter negotiations with the unions for a four-day week and an inflation-busting pay rise. What is the referendum policy for London? With the charges that the mayor keeps heaping on people and these raises in mind, will the Government ask him to give taxpayers in London an opportunity to have their voices heard?

[Baroness Taylor of Stevenage (Lab)]

My Lords, the citizens of London had a chance to express their view in the recent election for the Mayor of London, and they did so resoundingly.

[Lord Wallace of Saltaire (LD)]

My Lords, are the Government turning their backs on the idea of tax reform for local government or as a whole? Of course it is time consuming, but tax reform is fundamentally important. We have an extremely complicated and unjust tax system. I declare an interest, as I have lived between Yorkshire and London for the last 40 years and, more years than not, I have paid higher council tax on a house in Bradford than in London. That is absurd and it is one of the things that tax reform ought to cope with.

[Baroness Taylor of Stevenage (Lab)]

I can only reiterate my earlier statement: there are no current plans to reform council tax.

[Lord Bellingham (Con)]

My Lords, I declare my interests as in the register. Further to the noble Viscount’s question, the Minister might be aware that nearly a year ago at the Oxford Farming Conference, Steve Reed said, “Let me assure you that Labour will not alter the IHT treatment for agricultural land. We recognise that such a move would be damaging to the farming sector”. Does the Minister agree with what he said then?

[Baroness Taylor of Stevenage (Lab)]

Again, that is quite a stretch from council tax. We constantly hear calls from the other side that they do not like the steps we had to take to fill the £22 billion black hole they left. Public services are crumbling, including in local government. I have heard lots of suggestions from that side about what we should not be doing; what I have not heard is what they think we should be doing to fill the £22 billion black hole. I have looked very closely at the issues around inheritance tax. An individual can still pass up to £1.5 million, including personal allowances, and a couple can pass up to £3 million tax free. We have concern for how the farmers are feeling, but some steps had to be taken to fill that black hole. This Government have done so. We need to stabilise the foundations of the economy and fix our crumbling public services.