Council Tax Valuation Bands Bill [HL]

Baroness Williams of Trafford Excerpts

Friday 11th September 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)]

My Lords, first, I apologise to my noble friend Lord Marlesford and other Members of your Lordships’ House that I entered the Chamber after my noble friend had started speaking. I was in fact dealing with another matter of interest to him, but I apologise.

I thank my noble friend for setting out the purpose of his Bill, for his interest in the fairness of the council tax system, and for providing the Government with an opportunity to set out their position on the subject of council tax revaluation. I also congratulate him on giving a bit of a warm-up act during the passage of the Cities and Local Government Devolution Bill, as other noble Lords mentioned, and wish him a happy birthday.

I know that these are matters about which my noble friend has been concerned for some time and I congratulate him on his determination to bring a Bill before this House. He will not be surprised to hear that the Government have reservations about the Bill, and I would like to explain them for the benefit of the whole House.

First, the Bill’s proposals would require the formation of a second council tax list based on Land Registry values, to which properties would transfer from the valuation list as they were sold, the start date being 2000. My noble friend envisages that eventually this would be the only property list for council tax. However, I fear that he overlooks the protracted transition period in which two parallel council tax lists are likely to require maintenance and use.

Not only would this extended period place a heavy and potentially complex administrative burden on those administering the tax but it would lead to confusion and an understandable sense of unfairness among taxpayers. Residents in similar houses on the same street could face radically different council tax bills purely on the basis of when they had bought their property. Council tax is used to pay for local services, and to charge one household significantly more or less than another according to arbitrary parameters set out in the Bill may rightly be considered unfair.

The use of Land Registry values throws up another issue. The provisions in this Bill would mandate the use of property values across a range of years going back to 2000. Placing properties in bands on the basis of different valuation dates does not strike me as particularly progressive. Indeed it leaves banding at the mercy of fluctuations in the market across time.

The Government believe that it is fairer and more consistent to have properties banded in a single list, on the basis of their value at a common date. The current council tax system already offers a means of updating a property’s band if it appears incorrect. Council tax payers have the right formally to challenge whether their home is in the correct band within six months of becoming liable for the council tax on a property for the first time. This council tax band may increase on sale if this operation is clearly understood by those selling and buying properties, and avoids an arbitrary distinction between pre-2000 properties and post-2000 properties. The band may also be changed to reflect significant changes in the locality—for example, if a motorway has been built nearby.

The other aim of the Bill is to make a very large adjustment to the council tax banding charge ratios. The suggested ratios show a steeper progression than those currently in place. On Report of the Cities and Local Government Devolution Bill on 15 July, my noble friend accepted that the increase from band A to band B under his proposals would produce an increase of 33%, compared to only 17% under the existing arrangements. That does not strike me as an increase in fairness. At the top end of the scale, for the highest value properties, the tax paid would be 42 times the value of a band A property. I know that my noble friend may disagree, but that creates the very picture of a punitive mansion tax, penalising those households living in larger homes simply because they have been bought or sold since 2000. That is of course something which the Government have long opposed, and we see no reason to change our position.

Looking beyond the numbers, however, I remind my noble friend that council tax is intentionally not a wealth tax. It is not the domestic rates but rather a hybrid property and personal tax. It is a tax which aims to raise income for the council to help to fund services, taking account of the value of a person’s home and their personal circumstances. Local council tax support goes even further and takes account of their income. Council tax is deliberately not a version of the old domestic rates, and the use of bands, rather than point values, and the moderate ratios between bands reflect that as much as the inclusion of personal circumstances.

A number of noble Lords have talked about an additional band, band H, for expensive properties, and it seems an attractive proposition. It would cost less than a full revaluation and it would get at the highest-value homes. However, there are a number of logistical problems with such an approach, even beyond the principle that more bands are not needed.

The Valuation Office Agency does not hold specific information on the precise value of properties in any band, only that they fall within that band. It would therefore need to reach a view about the actual point value of properties before they could be ascribed a new band. It would need to undertake a substantial data enhancement exercise to ensure that its physical property data were sufficient for the task and undertake an analysis of sales evidence.

Newly valued properties could also be subject to appeals, causing lack of certainty for all involved. The revaluation in Wales in 2005 prompted overall appeal rates of about 5% of all properties. We would expect similar or increased levels of appeals following a revaluation and the implementation of a new band in England.

Although the above costs might not be huge, they are significant, and in a time when money is tight and households are hard pressed, such a voluntary cost is unacceptable for the marginal change that it would bring about.

However, the main issue for me with the idea of an additional band is that if we were to set in train a revaluation of one set of properties, it would be likely to raise questions about the integrity of other bands. Any change that creates a two-tier system will increase the sense of unfairness rather than diminish it, and, as I have explained, the Government have no intention of conducting a full revaluation during this Parliament.

Above all, we must bear in mind that, despite arguments set out today, there is no public clamour for change in the bands of council tax or for a new revaluation. Collection rates remain extremely high, at 97%, which does not create the picture of a population that considers it unfair and in need of fundamental reform.

Given the unfairness of the proposed changes to council tax and the logistical difficulties of implementation, I must express my reservations with regard to the Bill and reiterate the Government’s firm and abiding commitment to protecting hard-working taxpayers from the financial pressures of high council tax bills.