Council Tax Banding

Brandon Lewis Excerpts

Tuesday 25th February 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

It is a pleasure to serve under your chairmanship, Mr Walker. I thank my hon. Friend the Member for Sherwood (Mr Spencer) for securing the debate, as it provides an opportunity to discuss the council tax banding system and the processes of the Valuation Office Agency. My hon. Friend has, as always, fought hard in his speech to ensure that he gets the best result for the residents of Sherwood. I know that he does that on a daily basis across the House, lobbying myself and other Ministers. He is right to do so.

I want to be clear: I am keen that the council tax banding process is seen to be open, fair and transparent, and that council tax payers are clearly able to see and know their rights if they want to challenge those bands. It goes without saying that a person’s council tax bill should be based on the correct council tax band for their property. None of us could possibly want to argue against that.

I want to reiterate the Government’s position that we do not plan at the moment to make any changes to the banding system; I appreciate that that is not the point my hon. Friend was making. We are looking to do nothing of the sort, either by adding more bands or splitting them, but I appreciate that there has been a lot of talk about that. We are aware of media reports calling for extra bands to cover higher-value properties. Just a couple of weeks ago in the Chamber, Labour refused to rule out adding more bands and increasing council tax.

We have no plans to introduce anything such as a mansion tax or anything else, and we have made it abundantly clear that there will be no general revaluation during the lifetime of this Parliament, because that would be costly and increase council tax bills. We have seen how that worked in Wales in 2005, when four times as many people moved up the bands as down. Wholesale revaluation is simply not the answer; it just causes more problems.

[Jonathan Lord (Woking) (Con)]

Like the Minister, I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing the debate. I am delighted that the Minister is ruling out any further council tax bands. Our hard-pressed council tax payers are paying quite enough as it is.

This debate is timely; in my constituency of Woking, we have a number of new developments—by the way, I thank the Minister for ensuring that some of the new homes bonus money is going to local authorities rather than to local enterprise partnerships. The debate is timely and important. Thousands of houses are coming on stream in Woking and there must be an absolutely transparent process that works, so that people are allocated to the right band and those bands are of equivalence to the other properties in my constituency.

[Brandon Lewis]

My hon. Friend makes a valid and fair point, particularly regarding transparency. It would be useful for me to set out how the system works, how bands are assigned—which will help deal with the direct point raised by my hon. Friend the Member for Sherwood—and what the taxpayer can do to challenge their banding.

In England, the main role of the Valuation Office Agency—or the VOA, as we all know it—is to provide the valuations and property advice required to support taxation and benefits. There are eight bands—A to H—and every single one of the 23 million properties in England that are subject to council tax is assigned one of those bands by the VOA. They are based on the open market value as of 1 April 1991, as my hon. Friend mentioned.

Each band has a range of values. For example, band D is for properties valued between £68,001 and £88,000 in 1991. That highlights that a property could have its value changed and still not change bands. It could be valued at £87,999 and be in band D, then it could be reassessed and revalued, and considered to be worth £70,000—more than a 10% change—but still stay in the same council tax band. That could be one reason why residents can see no change in band despite a review on value, but I shall come back to that.

The common valuation date of 1991 means that all properties, including newly built properties, are valued on a fair and consistent basis. That applies equally to all homes, regardless of general fluctuations in the property market since then. The banding system provides a link between the value of a dwelling and the level of council tax. Homes will vary according to a range of factors; some are obvious and some not so. If we think about the value of a property that any one of us may own, its age and size will all have an effect on the value, as might the level of modernisation and improvement. That can again lead to a variation in valuation between two properties that, at first glance, may look very similar— or, indeed, the same.

The VOA looks at the property details for a property, and then looks at sales that took place on or around the valuation date of 1991. Sales from around that time on comparable properties are the strongest indicator of value. As the bands cover a range of values, many different types and styles of property can fall in the same band. Equally, fairly similar properties can fall into different bands, depending on their value in 1991. For example, if the band level is £68,001, the property could be in a different band for the sake of being £10 or £15 apart in value, in theory.

When council tax was introduced in 1993, the Government of the day did not want to discourage people from improving their properties for fear of incurring additional council tax liability. Council tax is not, and should not be, a tax on home improvement or extensions, but such changes are taken into account when a property is sold. That is intentional and there are no plans to change it.

[Mr Spencer]

I am grateful for the Minister’s time and for his explanation. I hope that he recognises that I am talking about brand new properties on the same housing estate, built to the same set of drawings, using the same bricks and the same tiles—they are identical apart from the fact that they are 100 yards apart—that are in a different band. That is what is causing the frustration.

[Brandon Lewis]

I understand my hon. Friend’s point and I will turn to that specifically in a moment. Having said that, in various parts of the country, literally being a few yards apart on opposite sides of the road can make a difference in valuation, even for the same properties. I appreciate that that can be frustrating for residents, but it can have an impact—it is about the valuation. It is important to be clear about how the system works, as that will feed through to give a better understanding, enabling me to give a clearer answer to where we are and what my hon. Friend’s residents can do.

As my hon. Friend rightly pointed out, there can be inconsistencies. Taxpayers can at times find themselves living in properties, new or old, that seem identical or even smaller than a neighbour’s that is in a lower band. The property has a different band level because improvements have been made to it, or there are changes that are not clear at first. Even if it is only because it is on the other side of the road, there can be a difference in valuation.

It is clear from my hon. Friend’s comments that he has called today’s debate because there is a specific issue around new-build properties for his constituents, who find themselves in a situation in which the bandings are different for similar or, as he outlined, effectively identical properties nearby. I can understand why that would be frustrating not only for them, but for him in his work to represent them.

If council tax payers believe that their band is incorrect, they can contact the VOA with their concerns—I appreciate that there is an issue with that, which I shall come to—and the VOA will review a property’s banding and amend it if the evidence suggests it is incorrect. While I am here on the record—this is not so much for my hon. Friend’s benefit—I want to be clear that council tax bandings can be challenged in two ways. First, the council tax payer has formal challenge rights in the first six months of either becoming the taxpayer of a property, or against a change made by the VOA, or where a material reduction in the value of the property or locality has happened since council tax was introduced.

When council tax payers do not have those formal rights, taxpayers can have their band reviewed by the VOA for free, if there is something to suggest that the banding might not be right. The VOA uses its statutory duty to maintain fair and accurate bandings as the means to provide a free banding review service, which applies to all occupiers, whether or not they have proposals rights.

I make that point clear because I know that some agencies out there—an increasing number of companies acting as agents—are promising council tax payers that they can get their bands reduced. I want to be clear: although some of those are charging up-front fees, I am keen for taxpayers to know that they can approach the VOA directly to challenge their banding. Full details are on the VOA’s website.

There is also the ability to have the case appealed to the valuation tribunal when the taxpayer and the VOA cannot agree. It seems to me, from the comments made by my hon. Friend the Member for Sherwood, that that is where the crux of the issue in his area may lie. The valuation tribunal is independent from the VOA and will hear evidence from both sides before making a final decision. That can then be appealed to the High Court on a question of law, but that does not necessarily help the residents.

I say to my hon. Friend that after listening to what he said, he has outlined a potentially apparent inconsistency in the valuation tribunal decisions, rather than in relation to the VOA. I would like to invite him to come and see me, and I will arrange for him to have a meeting on behalf of his residents to look at that specific issue.

If there is an inconsistency, we want to make sure that that is driven out; if there is not, we want the residents to have a good understanding of why they have been banded differently. It may be for some of the reasons that I outlined in the past few minutes, about differences that are not necessarily apparent at first between properties. If there is an inconsistency, we can make sure we drive to the bottom of that and deal with it for my hon. Friend’s residents. I have also written to all billing authorities to remind them of their statutory duty to include the VOA contact details on council tax bills.

This is a complex system. It can be daunting and frustrating, as we have heard this afternoon. However, it is also very important. That is why I am so determined that we will ensure that it is as open and transparent as possible and why I very much welcome today’s debate and look forward to my hon. Friend coming and having a conversation with us about the specifics of his case.

Question put and agreed to.