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

Earl of Lytton Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 19th June 2018 Lords Chamber

Moved by

[The Earl of Lytton]

1: Clause 1, page 2, line 30, at end insert—
“( ) Any change made in the 2010 Rating Lists to the existence or extent of a hereditament by virtue of this section applicable on 31 March 2017 must also be given effect by the Valuation Officer in the 2017 Rating Lists, unless physical circumstances affecting the constitution of the hereditament changed on 1 April 2017.”

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[The Earl of Lytton (CB)]

My Lords, I know that after Brexit, the question of business rates and council tax must be one of the high points of your Lordships’ week. With that in mind, I start by declaring my interests as the owner of business property and the occupier of business premises, my professional interests, and the fact that I am a vice-president of the Local Government Association. Although business rates, the subject of this amendment, do not quite have the pull of Brexit, they are nevertheless of great significance to businesses. I suspect that, like Brexit, they will be a matter that we will still be debating long after the initial dust has settled. Moreover, the issue will be debated whatever the outcome of our relationship with Europe.

I pay a brief tribute to my two external advisers who have been helping me with these amendments, and to staff in the Minister’s department for their willingness to discuss, both formally and informally, matters to do with business rates that have concerned me over many months. I have a sort of private pact that I have just agreed with the noble Lord, Lord Kennedy of Southwark, to keep things brief, and I will do my best in that regard.

I hope Amendment 1 will be seen for what it is: a means of preventing unfairness and an aid to streamlining. I should explain that the Bill provides for business rate payers to seek to amend principally the 2010 list and later assessments, to which the Bill applies, affected as they were by the Supreme Court case of Woolway v Mazars. However, while under the Bill the facility to amend appears on the 2010 valuation list, a successful application under that list does not automatically translate into the assessment in the 2017 list. To me, this seems an oversight. In the absence of a material change of circumstances, the 2017 list should use the same general basis, valuation levels apart, as that which applied to the 2010 list.

This matters to ratepayers, billing authorities and business rates administration more generally. Amendment 1 seeks to remedy the matter by allowing the automatic carryover of an adjustment made pursuant to the Bill on a 2010 list assessment or assessments into the 2017 list. Without this provision, the business rate payer will have to make a de novo application under the 2017 list using the government portal that operates the system known as “check, challenge, appeal”. Noble Lords will know that I have raised significant concerns about the “check, challenge, appeal” procedure, principally at the end of last summer in a debate I secured for the purpose. Although it has improved, and I acknowledge that improvements continue to be made, for appellants it remains a barrier to fair access in terms of both the need to register the timeframes and the complexity of sorting out the various stages, especially if the matter is not considered clear-cut or is contested by the Valuation Office Agency. I once had the privilege of working for its predecessor organisation, the Inland Revenue Valuation Office, for nearly seven years.

I do not believe it should be necessary to jump through these hoops under the 2017 “check, challenge, appeal” process where a simple administrative adjustment would suffice. That is the purpose of the amendment and I beg to move.

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[The Earl of Lytton]

My Lords, I thank the Minister for that very helpful reply. From what he has said, I appreciate that making these consequential amendments is a matter of the general duty of the Valuation Office Agency, as it deems necessary. I certainly did not intend to press my amendment at this stage. I will simply say this: resources that are destined to continue being cut year on year as part of a planned resource reallocation are of concern to practitioners who have to deal with the Valuation Office Agency. I hope these cuts will not mean that it is unable to make these sorts of consequential changes. On the basis of the Minister’s reassurance, I beg leave to withdraw my amendment.

Amendment 1 withdrawn.

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Moved by

[The Earl of Lytton]

2: Clause 1, page 2, line 30, at end insert—
“( ) Any refunds payable by a billing authority by virtue of assessment alterations directly consequential upon this section must be reimbursed to that authority by the Exchequer.”

[The Earl of Lytton]

My Lords, I shall speak to Amendment 2, which is grouped with Amendment 4. In a sense, it is covered partly by subsection (2)(d) of the proposed new clause in Amendment 4 in the name of the noble Lord, Lord Kennedy. I will let him speak to that at the appropriate moment.

I fully expect the Minister to say that under no circumstances will the sort of refunds that I am looking for be refunded to billing authorities. As I understood it—perhaps I used a somewhat extreme example at Second Reading and I will not use that one again—it is assumed that immediately after the Supreme Court case of Woolway v Mazars, billing authorities somehow swept into action like avenging angels to deal with all the various assessments that would have qualified under that, and therefore it is supposed that they might have made some sort of gain. I do not believe that has actually happened, or that billing authorities banked this dividend to any significant extent. That is a matter that perhaps warrants further investigation as to exactly what the situation is financially, but they might none the less find, as the effects of the Bill work their way through the system under the 2010 valuation, that they face some sort of deficit. I felt it was unreasonable that billing authorities should suffer a material loss in that respect, so that is what Amendment 2 would deal with.

I support the noble Lords, Lord Kennedy and Lord Shipley, on Amendment 4, which is grouped with my amendment, because one of the points made to me by the Institute of Revenues Rating and Valuation was that there has been very little assessment of the precise impact of much of this. That is a mistake and a lacuna. Local government finance—from what I can gather, not being directly involved with it myself—is in many cases in a critical situation. Budgets are on a knife edge and even seemingly small amounts—we do not really know what the magnitude is of all this—need to be dealt with. I therefore support that amendment, and in doing so I must declare that I am an honorary member of the Institute of Revenues Rating and Valuation, having been, for much of my working lifetime, an ordinary subscribing member. I beg to move.

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[Lord Bourne of Aberystwyth]

My Lords, from what I can gather—admittedly, it is anecdotal, from speaking to local government and getting a feel for this—this position is relatively evenly spread across the country, although focused more in the urban areas, as your Lordships would expect. Again, I cannot give a precise number but I do not think it is a massive one. If I can give a more precise indication, perhaps I will do that in a letter to noble Lords ahead of Report. I do not think it is a massive number, from what I can gather.

[The Earl of Lytton]

My Lords, I thank all noble Lords who have spoken, and the Minister for his response. In defence of any appearance of lack of numeracy on my part, I say in connection with whether or not billing authorities have gained some windfall that the point outlined by the noble Lord, Lord Kennedy, is correct; namely, the budgetary process does not arise evenly or as an even offset or indeed even in a comparable year. But I do not proclaim to be an expert on local government budgeting and finance—thank goodness. I am only a humble valuer and therefore doomed to perdition for having only managed to get an O-level in ordinary maths. With that in mind, I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

Moved by

[The Earl of Lytton]

3: Clause 1, page 2, line 30, at end insert—
“( ) The Valuation Office Agency must forthwith upon the coming into force of this section publish on its website such advice and guidance as to the provisions of this section, and such means of identification of the hereditament, as to enable a ratepayer by accessing the online Rating Lists readily to check the status of their assessment and whether the provisions of this section apply to it.”

[The Earl of Lytton]

My Lords, this is another tidying-up amendment, which is really to ensure that there is adequate publicity for people wishing to avail themselves of the facility under the Bill, bearing in mind that there are a number of very complex matters involved in business rates. The amendment is intended to ensure that the Valuation Office Agency places on its website adequate,

“advice and guidance as to the provisions of this section”,

and the means whereby a business rate payer can make the necessary identification so that they can ascertain whether—and, if so, how—the provisions apply to this.

The wording is deliberate in setting out the publication process,

“forthwith upon the coming into force of this section”.

The reason why I say so is that at the end of last summer, when we discussed matters to do with business rates, I was given to understand that there would be guidance—for instance, on the question of how fines would be applied for misdeclarations of fact in going through the “check, challenge, appeal” process. I have not seen that information yet and I do not know whether it is available. I am not voicing this as a criticism; I am just saying that because of the particularly time-limited nature of the way in which the provisions will apply—particularly looking back into the 2010 list—it will be important that this information is published in a timely and reasonably prominent manner and, I hope, written in plain English. That is the purpose behind Amendment 3. I beg to move.

[Lord Kennedy of Southwark]

I fully support the noble Earl in his Amendment 3. I think we all deal online very much more now in our work and in terms of official and unofficial things, so this is a very sensible amendment.

[Lord Bourne of Aberystwyth]

My Lords, with the indulgence of the House, I would like to pick up a point from the last group. I failed to address a point made by the noble Lord, Lord Shipley, on the pilot business rate retention issue. We are speaking to the Local Government Association and others about that. It is not straightforward but we are not convinced that there is any loss. Still, I shall seek to address that in more detail in the letter. I apologise to him for not picking that up earlier.

I thank the noble Earl for moving this amendment, which would require the Valuation Office Agency to publish on its website guidance and advice on the effect of Clause 1. I understand and appreciate the motivation behind the amendment, backed by the noble Lord, Lord Kennedy. Business rates can be a complex area and confusing to ratepayers, and of course we support ideas that would give ratepayers more information to help them to plan for their business rates liability.

On Clause 1, I agree that it is especially important that the VOA provide clear guidance to ratepayers on when they may be affected. Clause 1 concerns contiguous properties that are assessed for rating in more than one part, but there are many reasons why a ratepayer may have seen their property split into two or more rating assessments. That will include properties whose rating assessments have split because of the Supreme Court decision in Mazars, but will not be limited to that. Clause 1 will change the law to mirror the practice of the VOA prior to the Supreme Court decision. Those ratepayers may therefore fall within Clause 1. However, there will be many other reasons why a rating assessment may have been split into several parts. A property may have seen physical change requiring it to have more than one rating assessment, for example, or part of the property may have been sublet. These splits are unlikely to be related to the Supreme Court decision, and those ratepayers will not be affected by Clause 1.

It is therefore important that we explain this to ratepayers. The VOA already has clear guidance on its website explaining in simple terms how the law currently applies under the Supreme Court decision, including some clear examples. I assure the Committee that once the Bill receives Royal Assent, the guidance will be quickly changed so that it explains the operation of the new law under Clause 1. I further assure the noble Earl that the VOA will share that guidance in draft with the professional bodies, including the Rating Surveyors’ Association. The noble Earl will therefore have the opportunity to consider this guidance from his expert perspective before it is published. I appreciate that we are very fortunate in having him look at this legislation in some detail because of his professional understanding of it. This, together with the information that ratepayers can already access about their own property on the VOA website, will provide ratepayers with the information that they need to decide whether they fall within Clause 1.

I hope that with these assurances the noble Earl will agree to withdraw his amendment.

[The Earl of Lytton]

My Lords, I thank the Minister for that reply and the noble Lord, Lord Kennedy, for his support. The Minister probably credits me with a great deal more expertise than I feel I actually possess, but that is probably because, the more one knows about something, the more one realises one does not know. That seems to be one of the facts of life that one has to face. But I am reassured by what he said in terms of making sure that the information is readily available on the Valuation Office Agency’s website. Obviously, I am aware of some of the advice generally on that website, which for the most part seems to me to be clear. I thank the Minister for the assurances that he has given and I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

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[The Earl of Lytton]

My Lords, I have some mixed feelings about the amendment moved by the noble Baroness, Lady Pinnock. In my own mind, I cannot quite get my head round whether this is to be a charge to discourage long-term empty properties as defined in the Bill or, in effect, an escalating fine. It seems to me that the two are slightly different.

At Second Reading, I highlighted the fact that there is a general lack of information about the reasons for long-term vacancy, and the high probability is that it varies quite a lot from one area to another. For instance, in some former industrial cities, whole streets of Victorian housing may have lain empty for some time because no one wants to occupy them.

On the definition of “empty dwelling”, it is a moot point, as far as I can see, as to the ease or difficulty of chasing the sums of money involved, as is the likelihood or otherwise of the “empty dwelling” label simply evaporating. I think that I may have used the example of an itinerant with a van load of cheap second-hand furniture going around populating odd properties that might otherwise be subject to this. The point is made not entirely in jest, because there is no plumbing the ingenuity of people who wish to avoid some impost or other.

Another point is that there is a reputational risk if one is not careful here. I seem to remember that, not very long ago, one local authority was said to be investigating the contents of people’s refuse bins, and I would hate to think of local government being again painted into that sort of scenario. One needs to be careful to ensure that there is a justifiable reason for an escalator.

If we are talking about what is in effect a fine, there would need to be a clear and justified framework as to how that would apply, possibly with provision for making an appeal against the charge. Now, I am not clear what happens about appeals against things like this. I am clear what happens with an appeal against one’s business rate assessment, and I am clear what happens with an appeal against a council tax banding. What I am not clear about is, where something like this comes in by dint of this type of legislation, if someone thinks that it has been unfairly applied, where do they go? I hope that a noble Lord, or a noble Baroness, with better knowledge than I have will tell me what the situation is.

I rather took to Amendment 7 in the name of the noble Lord, Lord Stunell. As we heard at Second Reading, there can be a number of different reasons why vacancy and long-term empty property status can apply. I think of the minimum energy standards regulations which came into force only a couple of months ago, making it impossible to let a property with an EPC of less than E. I think of the many hard-to-insulate properties—those Victorian properties with nine inch solid walls or suspended floors, where it is difficult to get insulation to the required standard.

In essence, the noble Baroness, Lady Pinnock, is right: there is often a local need to take a differential approach. I would appreciate the Minister saying how differential he thinks that that needs to be, or can be: whether it is endless or will be circumscribed in some way. I think of areas I know well in national parks, where you occasionally come across properties that are long-term empty, but also in former industrial cities, to which I referred. One needs to be careful about that. I do not have a solution, but I simply flag up those issues for further consideration.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate. I am most grateful to those noble Lords and the noble Baroness, Lady Pinnock, who tabled the amendments on the level of the empty homes premium, as they allow us to discuss the factors we have to consider in deciding the maximum charge on empty homes in setting the framework for local authorities. I reiterate that, once we have set the framework, this is a discretionary measure for local authorities: something we are giving local authorities discretion to administer, according to their local needs and personalised or very localised factors affecting particular properties.

I think we all agree that there is a clear case for increasing the cap on the premium that applies to long-term empty properties. The noble Lord, Lord Stunell, gave distinguished service in the coalition Government—I think in my current role—and rightly referred to the importance of the issue. We have borne down on it. My noble friend Lord Patten, who is not in his place, referred at Second Reading to how the number has reduced—we have squeezed it very effectively—but there is still more to do.

The debate is about the level to which we should take this charge and the circumstances in which it should apply. These are the difficult judgments we face. We propose through the Bill that owners of long-term empty homes should see their council tax bills double. This is a major step in allowing local authorities to incentivise such owners to bring their homes back into productive use.

One amendment tabled by the noble Lord, Lord Kennedy, would mean that owners of empty homes would be paying triple the level of council tax payable on occupied homes within two years, or within one year if his other amendment were to be enacted. In fairness, that is from the Labour Party manifesto. Perhaps it is all the more surprising that nothing happened in the other place on the Bill: no amendment was proposed, still less debated. That said, it is something we should discuss.

Under the amendments supported by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, properties empty for between five and 10 years could face premiums of up to 200%, and those empty for more than 10 years could be subject to 300% premiums. I of course understand the rationale behind the amendments, and as homes are remaining empty for longer and longer, the logic of that is obvious: the figure goes up after five years and after 10 years. In addition, empty properties can be a nuisance to local residents, and potentially sites of crime or squatting. I share the concern about the need for robust measures to tackle what may become, and often are, blots on the landscape, to the benefit of those seeking a place to live as well as of local communities as a whole. I think we all understand that.