Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Earl of Lytton Excerpts

2nd reading (Hansard): House of Lords
Monday 4th June 2018 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I welcome the opportunity to debate this Bill, narrow though its objectives are. In doing so I declare my interests as a member of RICS and the IRRV and the RSA—the very bodies that the Minister referred to. I also declare a one-time interest as a former employee of the Inland Revenue Valuation Office; I stand before noble Lords guilty as charged. I am also a vice-president of the LGA and a recipient of a small business exemption on one small hereditament down in the West Country.

I thank the Minister for meeting me and a couple of other professionals a few weeks ago to discuss the wider issues of business rates. I was tempted to follow what was said by the noble Baroness, Lady Pinnock, but she has covered most of what I needed to say on that issue, so I will follow the noble Lord, Lord Patten, in not dwelling on it. There is a bigger issue that perhaps needs to be addressed, but this may not be the right place to do so.

The intentions behind the Bill are worthy and its logic, while in some aspects questionable, is clear. The only thing I would say is that getting the implementation correct may be a great deal less straightforward. To put it another way, there is more in this can than is apparent from what is written on the label.

What has become known rather rudely as the staircase tax, otherwise the case known as Woolway v Mazars, has been one of the recent diversions for someone brought up in the traditions of what amounted to the extent of the rateable hereditament. I had that drummed into me by a very eminent rating academic called Roger Emeny, alas now deceased. I was always clear about that and I was also pretty clear that the decision was an aberration that went against the practices that had been created before. It was one of those things that became a really quite unnecessary additional piece of grit in the oyster, because we were dealing with an awful lot of uncertainty and churn as well as a whole new system of handling things as they came on stream. It is right to put that right. The Mazars case was in September 2015 and it has taken us until now to deal with it, while in the meantime the new list came into force in 2017. The system we now have is not well attuned to the rate of churn, change and alteration that is taking place not only on our high streets and the balance between various different categories of business premises but also in our regulatory environment. I do not think that the system is sufficiently fleet of foot, and that is where we need to take a further look.

The right of the ratepayer to ask for the split assessment to be looked at again is welcome and I do not think that anyone would disagree with the principle. However, it does mean that there is the selective reopening of parts of the 2010 rating list which would otherwise effectively be closed. More to the point, as I understand it—the Minister will doubtless correct me if I am wrong—the Government have declined to fund any losses that would be borne by billing authorities as a result of appeals coming through on the old list. This seems a trifle unreasonable, especially in the light of the financial constraints imposed on the billing authorities. I detect a sense that the billing authorities have somehow garaged the winnings of the windfall that came out of Woolway v Mazars, and have them sitting in a shed at the end of the garden for the rainy day when the thing is reversed. Forgive me, but I do not think that local government finance operates in that way, and nor do I think that it is possible for shedloads of money to be stashed away for that purpose. Perhaps the noble Lord, Lord Kennedy, will be able to enlighten me because I am not close to finance at billing authority level. I hope that I will be corrected if I have got that wrong.

A criticism that I have heard on more than one occasion is that billing authority requests for alterations of assessments are often denied or not dealt with quickly enough, so that needs to be looked at. If there is a resource implication, that must be considered quite critically because billing authorities are probably the first port of call, other than the aggrieved ratepayer themselves, for getting assessments put right. If their requests are not being dealt with, there is a risk of unfairness and of loss to local authority coffers.

For ratepayers, the situation is scarcely better in that a successful application under the 2010 list, as proposed in the Bill, does not automatically get translated into the 2017 list, as I understand it. Although the Government say that they will prioritise those 2010 list applications, they clearly do not propose to do so for the 2017 list, for which a de novo registration and an application under the check, challenge and appeal system—I have raised this in the House before—will be necessary, along with all its complexity, systemic drag and uncertainties for billing authorities and ratepayers alike. We should not allow that to happen. Mercifully, even if the Minister is correct, the numbers involved are relatively few, but I am not sure that an audit has been done to identify what is involved in both the 2010 and 2017 lists. That is why the problems with the CCA system are mission critical and why they produce such tremendous negative comment from business sources.

I am sure that the Minister has seen the press reports following the statistics released last week on the numbers of appeals. The Government are extolling the virtues of a 90% reduction in the number of cases under check, challenge and appeal, while rating experts say that that is not surprising because the system is so labyrinthine, complex and liable to error that it is an impediment and effectively a denial of service—a denial of reasonable and fair rights to challenge an assessment. Something needs to be done.

One of the things we were promised is that the new check, challenge and appeal system would squeeze out cowboy rating firms. Last week I received some information and I will be writing to the Minister in response to his very kind letter to me following our meeting. I believe that, unfortunately, the cowboys are still alive and kicking, particularly in the north-west. Why do these people prosper? It is because many businesses cannot get their head round the CCA system. They look for advice and either go to one of the big specialist practices or someone comes along and says, “We can do this for you”. They submit their bill and expect to be paid long before the case gets to the appeal stage, so these people are still creating just as much of a problem as before and getting away with it. I am afraid that they have not been squeezed out of the system; it is a complex factor that ultimately boils down to the resources available to carry out management of the tax base and to deal with appeals.

On council tax, I have no complaint about the theory, especially if owners are gaming the system by maintaining vacancy or through sheer inertia. Housing should not be considered the same as a white-goods product that can be hoarded. The Institute of Revenues, Rating and Valuation and others encapsulated the issue in pointing out that the Bill is yet another attempt to fix a much deeper problem. The causes of long-term vacancy have not been looked into. There does not appear to me to be a robust evidence base behind this, but I am very happy to be told I am wrong if that is the case.

I have in mind cases where property is held for renovation or as part of a redevelopment, vested in trustees in bankruptcy or executors of a deceased’s estate, or the subject of a legal dispute. As the noble Lord, Lord Patten, was speaking, I made a mental calculation. I believe that there about 25 million residential properties in council tax assessment across England and Wales. Given the number of things that can cause churn, 250,000 represents about 1%. From what I generally know of property markets—I have dealt with them on and off all my life—that percentage does not seem very high at all. It is a bit like people who are between jobs: technically, they are jobless, but it is part of the churn and part of the process where things are vacant. We need to be careful about this. The noble Lord, Lord Patten, was trying to say that we need better information and we should be judged by the evidence base. I agree with that; perhaps the evidence base is lacking here.

Those very prosaic cases are probably much more common than people with a certain type of investment approach, who want to keep properties vacant just for the heck of it, out of sheer caprice and fancy. There is no obvious match between the empty homes and where homeless people or people on housing lists want, or need, to live, nor between the revenues raised by the provisions in the Bill and the necessary relief for those who need to benefit from this. There is a disconnect, both geographically and financially. I would like that to be explained.

I think it was the noble Baroness, Lady Pinnock, who expressed the point about what “substantially furnished” means. I had a mental image of a vanload of stuff going up and down the country, doing a bit of temporary furnishing all the while. Years ago, I attended an event, held by a local authority, where the subject of additional charges for people with second homes came up. I asked a question, naive as I was at the time—I probably still am—as to why this differential was necessary. At that stage, people were getting a discount for having a second home. I was told that it was one of the few ways a local authority had of identifying whether it had second homes on its territory and how many there were. I wonder whether one of the perverse effects of this measure will be to cause a rapid evaporation of the number of empty homes as far as the statistical evidence is concerned. That said, I follow the noble Lord, Lord Patten, in saying that the Bill is welcome, in its broad terms. Yes, there are difficulties with the fine-tuning of implementation, but in general terms I hope that we can see it through to a successful conclusion.