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

Lord Bourne of Aberystwyth Excerpts

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

Moved by

[Lord Bourne of Aberystwyth]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

I am grateful to the noble Lords who have given up their time to discuss the Bill. Their engagement is a recognition of how important these measures will be for people across the country. I am looking forward to hearing the considered and expert views of the House. These views are always welcome, as we work together to ensure our laws are both fair and robust. The Bill is much needed, something recognised in the Commons, where it passed without amendment. We have moved quickly to introduce it, to ensure that ratepayers receive the urgent help that it will provide, and it is designed to address two basic needs. First, it restores previous valuation practice for those hard-working business ratepayers affected by the so-called staircase tax. Secondly, it aims to reduce the number of empty and unused homes, helping those who are struggling to find a place to live.

I turn to the detail of the Bill’s first measure, which relates to the so-called staircase tax. Clause 1 provides clarification to the rates bill for businesses that occupy or own several adjoining properties. Noble Lords will be aware that, for more than 50 years, businesses operating in adjoining units or rooms—accessed from a common corridor or staircase—were assessed as a single property for business rates. This practice was widely understood and accepted by the Valuation Office Agency and rating surveyors. A 2015 Supreme Court decision, in Woolway v Mazars, found this rule to lack a legal basis. Instead, it found that each unit of a property accessed from common areas should have its own rating assessment, regardless of whether the properties are adjoining or part of the same business.

The unexpected consequences of the 2015 judgment have brought unwelcome change and uncertainty for business ratepayers. Some businesses which previously had one rating bill now receive several. In most cases, this has not led to a change in what businesses pay overall, but in two circumstances bills have increased, leading to what has been described by some as a staircase tax. First, when some properties were broken down into individual units, the total rateable value of their holdings also increased as a result. This led to an unexpected increase in bills, which was backdated to 2010 in some cases. Secondly, the change saw some ratepayers lose their small business rate relief, which helps ratepayers who own properties with rateable values of up to £15,000. It ensures that over 600,000 small businesses pay no business rates at all. To ensure that it only helps small businesses, it is targeted at ratepayers with only one property. However, with businesses operating in adjoining units or rooms now receiving two or more rates bills, some ratepayers also lost some or all of their relief. We estimate that the numbers affected are relatively low—fewer than 1,000—but they deserve to have their relief reinstated.

Therefore, Clause 1 restores the widely accepted and understood practice of the Valuation Office Agency, and those affected will be assessed as a single property once again. This will ensure that these businesses, which have already paid their fair share, do not continue to suffer from the unexpected burden imposed by that judgment. This will be a key outcome of Clause 1, and we are implementing change retrospectively—to as far back as 1 April 2010—to ensure that the earlier provision remains throughout. We have been able to bring forward this measure without amendment because of the support we have received in drafting the clause from the Rating Surveyors Association, the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Their expertise has been invaluable and I am grateful for their assistance, as are the Government.

The second measure of the Bill relates to empty dwellings. A shortage of housing continues to be a barrier to progress in this country, at a time when the average house price in England is almost eight times the average income, and when over 1 million households are on social housing waiting lists. For this reason, the Government are taking action on many fronts. Tackling empty homes is essential to bring more properties on to the market so that we make the best use of the homes we already have.

Clause 2 follows the commitment we made in last year’s housing White Paper to continue to support councils as they encourage efficient use of existing housing stock. As announced in the Autumn Budget, the Bill increases the maximum level of council tax premium that local authorities can charge on long-term empty homes from 50% to 100%. This means that local authorities will have the discretion to double the council tax bills of properties that have been empty for two years or more. This measure adds to existing powers we have given to local authorities to bring homes back into use. These include the 50% council tax premium, the new homes bonus scheme and the ability of councils to charge the full rate of council tax on empty homes.

Following these important interventions, I am pleased to report to the House that the number of properties empty for six months or longer has dropped by a third since 2010, from 300,000 to just over 200,000. In addition, the power to charge a 50% council tax premium has been taken up by nearly nine out of 10 councils, all but three of which applied the full 50% rate in 2017. Where councils have used the power every year since 2013, the number of properties subject to a premium has fallen by 9%. This is welcome, but we can do more. That is why, through the Bill, we are allowing local authorities to strengthen the incentive to bring empty homes back into use.

It is right that decisions on whether to apply a premium and at what rate remain with the local authority concerned. We are not changing these arrangements. Councils know their areas best and will take local priorities into account when deciding whether a premium would be appropriate. There will of course be individual circumstances where to apply a premium would not be right. Under current arrangements, homes that are empty due to the occupant living in Armed Forces accommodation for job-related purposes, for example, are not subject to these rules. They may also be exempt due to annexes being used as part of the main property, as they cannot be separately let.

There are statutory exemptions for properties left empty for a specific purpose, such as the owner going into care. Councils can also apply discretionary discounts as they see fit in cases such as hardship, fire or flooding. Where home owners are struggling to rent or sell a property in a challenging market, I do not doubt that local authorities will wish to reflect carefully when deciding whether to issue a determination, and then to reflect on what that determination should be. Our guidance on this issue, published in 2013, made it clear that the premium should not be used to penalise owners of homes that are genuinely on the market. Only properties that would already have been potentially liable for a premium will be affected by this clause. It will not bring any additional properties within the scope of the premium; it merely increases the potential of the premium.

The Bill is about fairness for business affected by the so-called staircase tax, and about increasing the incentive to bring long-term empty homes back into productive use. I look forward to hearing from noble Lords and I beg to move.

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[Lord Campbell-Savours (Lab)]

My Lords, in the gap I want to embroider a comment made by the noble Earl, Lord Lytton. As I understand it, since 2013 local authorities in England have had the power to charge a council tax premium of up to 50% on long-term empty dwellings—that is, homes which have been unoccupied and substantially unfurnished for two years or more. This premium is in addition to the usual council tax charges applied to such a property.

I want to go to the mathematics of this. If the council tax is £1,500, at the moment the charge would be £2,250 if the local authority took the option up. If the charge was at 100%, it would be £3,000 and if it was at 200% it would be £4,500, so we would be talking about the tripling of council tax on a property—from £1,500 to £4,500. I wonder whether the Government have thought through the consequences of that.

Many home owners, or people who own property, will think, “I’m not going to pay £4,500 whereas at the moment I’m paying £2,250”—if it has been declared, because obviously, local authorities will be quite diligent in gathering this revenue—“I’ll turn my property into a second home. All I have to do is meet the term ‘substantially unfurnished’”, which two Members of this House have asked to be qualified. Is there not a danger that a very large number of people owning property that is empty will say, “My property is no longer unoccupied; it is a second home property”? They have a real incentive because the full council tax payment at the moment is going to be tripled. I see the Minister is shaking his head. I asked one of my colleagues on this side of the House, and he agreed with me that it would be tripled. That is how the mathematics work out because of the word “premium”. It is a premium over and above the existing council tax rate, so 200% takes us from £1,500 to £4,500. I am perfectly prepared to be corrected.

[Lord Bourne of Aberystwyth]

The noble Lord is right that it is a premium but it is a 100% premium, not 200%.

[Lord Campbell-Savours]

I think that should be clarified because that is the way it is going to be read outside the House. Anyone listening to the debate, given the reference to 200%, would think that it was going to be tripled. If the consequence is property being turned over to second homes, does that not mean that local authorities need clarification as to what “substantially unfurnished” means in law? Otherwise, there may well be a major shift of property from unoccupied to second homes.

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[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the Second Reading debate on this important, though short and focused, Bill. It seems to me, hearing the productive and helpful speeches from noble Lords around the House, that it has strong support. In so far as there was criticism—there was a little bit—this focused on the things that the Bill does not do. There are an awful lot of things that it does not do, because it is a very short, focused Bill. As the noble Lord, Lord Kennedy, rightly said, it is essentially a three-clause Bill.

I will deal with contributions from noble Lords in the order in which they were made. I will follow up the debate with a letter on points which I have missed—I am sure that there will be some—and where there are things where I do not have the answer to hand. There are some things which we will probably want to develop in Committee and thereafter.

I thank the noble Baroness, Lady Pinnock, for her contribution. I agree that there are some council areas where this will not make any difference to current practice. I bow to her superior knowledge of Kirklees which, based on what she said, is one of those areas. In general terms, there will be many councils in the north of England, though not all of them by any means, that will not see any difference from this and will not want to proceed from a 50% premium to a 100% one. That is a matter for them; this gives discretion. Similarly, there will be many councils in the south of England that do want to use it, but by no means all. This is patchy; there will be parts of southern England where this will not be helpful, just as there will be parts of northern England where it is.

The noble Baroness and other noble Lords referred to the issue of the high street and online businesses. She and others will know, from previous contributions, that the Government are looking at this. Had we sought to bring it into this legislation, it would have made the Bill much later arriving because we would have had to do consultation and so on. This Bill is focused and we want an immediate change. So far as I can gauge, the House is very supportive of that, for which I am grateful.

To clarify a point on which there was some confusion, we are talking about an increase in a premium of 50% to 100%, based on a 100% charge already—it takes it to 200%, not 300%.

[Lord Campbell-Savours]

I got my maths wrong—it was based on an amendment, which I thought had been carried in the Commons but was not. However, the principle still stands on the switch to second homes.

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[Lord Bourne of Aberystwyth]

I thank the noble Lord for his disarming contribution. I fully accept that various figures have been bandied about.

The noble Baroness and other noble Lords asked for information on the definition of “empty home” and “substantially unfurnished”. I will ensure that that is covered in the write-round letter, but the Bill does not alter that—it leaves it as it was. There will be substantial case law on those issues which will have an impact in this area, but it is not changed by this legislation.

I thank my noble friend Lord Patten for his contribution. He is absolutely right that this legislation did command all-party support in the Commons, where no amendment was moved, let alone made to it. He is absolutely right that this is a work in progress. We have got the figure down over six months from 300,000-plus empty dwellings to about 210,000. There is much work to be done. If we can squeeze it further and get more out of that, it would mean additional homes for people: this is the pot of gold. I am not suggesting that this is a silver bullet, but it makes a significant contribution. We can do much better than a 200,000 target. I think we are looking at something like 100,000, but I will cover that in the write-round letter.

My noble friend referred to the possibility of an escalator, depending on how long a property was vacant. Other noble Lords, including the noble Lord, Lord Kennedy, also touched on that, and I have no doubt that we will be coming back to it. I am also grateful to my noble friend for his general encouragement.

I thank the noble Earl, Lord Lytton, for his kind comments about our meetings on broader issues to do with valuation and the valuation office. I reassure him that I also have a meeting coming up with my honourable friend Rishi Sunak to talk to the valuation office about some of those broader issues. He is absolutely right when he referred to the decision in Woolway v Mazars as an aberration—that is how everybody has regarded it. All political parties and all the relevant bodies and practitioners in this area have regarded the decision as an aberration. Against that background, we would say that we have indicated that we will reverse this decision.

On shedloads of money, I do not think that anybody has referred to that. I have been very much at pains to say that a small number are affected, and again, in the write-round letter I will try to address how we can look at the numbers affected. However, we are not looking at shedloads of money, and it will be fairly evenly spread around the country. The noble Baroness, Lady Pinnock, suggested that they might all be in the same constituency. I would be a little surprised if that were the case, but in any case, we will look at that to provide some reassurance on the issue.

On the point the noble Earl made about cowboys, I very much look forward to joining a posse with him to see how we can deal with that issue, and I am sure that that will be subject to discussion. I come back to the point that this is not a silver bullet but that it will make a difference, which is what we are seeking to do here.

I turn to the noble Baroness, Lady Thornhill, with her experience of Watford and of leading that council. I take seriously what she says, and she was generally supportive of what we are trying to do. She suggested a suite of fiscal measures which, again, I will try to deal with in the write-round. Again, as she will know, that would involve much more engagement with the Treasury and much more consultation. It is therefore well beyond this piece of legislation, as I have no doubt she appreciates, but nevertheless, based on her experience, I take very seriously what she said. In particular, when we all go canvassing, we always come across an example that is very much live in one’s mind. I note what she said about the six years’ probate issue—the Jarndyce v Jarndyce of Watford. We will see whether we can say something in the write-round about how that probate operation works.

I thank the noble Earl, Lord Listowel, very much for his support and his kind words. He reminded us of the late-lamented Lady Farrington and all the work she did in this area. It was indeed considerable and we miss her contributions, as we miss her. I thank him very much for what he said about the importance of noting the impact this will have on families and children, the wider issue of local authority funding of children’s services, and the difference between statutory and non-statutory—which again, I take seriously, and which I will take back.

As always, the noble Lord, Lord Campbell-Savours, comes forward with something incisive about the issue of second homes and the definitions of “substantially furnished” and “empty” properties. As I say, I will seek to cover those in the letter; although it is unaffected by the legislation, it is nevertheless an important issue. On that issue of interaction with second homes, we are not seeking to deal with second homes here. This is somewhat different; indeed, this could be about a building owned by an institution, and essentially, it might not be anybody’s home at all, although empty. In the Commons, my honourable friend Rishi Sunak said that we would make a Statement on the second homes situation, because there is an issue with people using empty homes as something of a tax loophole, so we will want to say something about our future intentions. I hope to say something about that no later than Committee, but it will not affect this legislation. It is the subject of a much broader issue about second homes and how we deal with that issue.

As always, I thank the noble Lord, Lord Shipley, very much for his helpful comments and his indication that this is—to use his words—the right sense of direction. He referred to the question of judgment here about what is the right level of premium. Some people suggested a 300% premium, or I think they did, which would make a 400% charge, as it were, which would be significant. The noble Lord was much more modest in his contribution with regard to what we are looking at here. Again, I am sure that that is something that we will engage in as we go forward to Committee and beyond.

The noble Lord asked for a breakdown of the reduction of approximately 90,000 empty homes in the six-month figure. He will not be surprised to hear that I do not have the figures to hand, but I will seek to provide further information to noble Lords on those issues ahead of Committee.

There was also a question about empty dwelling management orders, which I have no doubt we will also be discussing in Committee.

I thank the noble Lord, Lord Kennedy, very much for his supportive comments and for raising the important question of how these measures will operate. He also talked about what the Bill does not do and about the need to get the level of premium absolutely right—I understand that—as well as the effect of Mazars. As I said, I am sure we will want to come back to those matters in Committee.

[Lord Campbell-Savours]

Perhaps I may raise with the Minister a concern that I have. We are entering a very difficult market in some parts of the country. What will happen when a property has not been sold after two years? If the owner of the property is driven into selling it, they may well end up in negative equity. It might be better for them to retain the property and avoid a substantial loss. Has that sort of problem been thought through in deciding on all this?

[Lord Bourne of Aberystwyth]

I thank the noble Lord for a very helpful intervention. One exemption which currently applies with regard to the 50% premium and will apply similarly with the 100% premium is that a local council does not need to apply the premium to people who are seeking to sell their property. There is considerable discretion as to how local councils can apply the premium, and obviously circumstances will differ from area to area. Therefore, I think that the noble Lord will find that that has been taken account of.

With that, I am very grateful to noble Lords for their contributions.

Bill read a second time and committed to a Committee of the Whole House.

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

Lord Bourne of Aberystwyth Excerpts

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

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, briefly, the amendment in the name of the noble Earl raises an important point and I am happy to support it. As he said, this is a simple administrative change that could help people.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I am grateful to the noble Earl, Lord Lytton, for his amendment and the noble Lord, Lord Kennedy, for his contribution.

The measure we will deliver through Clause 1 has been welcomed by stakeholders. It will return the practice of the Valuation Office Agency back to the position that applied before the Supreme Court decision in Woolway v Mazars. As highlighted by the noble Earl, Lord Lytton, it is important that we still consider how this measure will be implemented. In December last year, my department issued a consultation document that contained a draft of Clause 1 and set out how we plan to implement this change in the law. As we explained in that consultation, to protect ratepayers from unwanted backdated bills on the 2010 rating lists, we will allow ratepayers to choose whether they want their bill changed before 1 April 2017. We will achieve this by allowing a new right of appeal on the 2010 rating list for those ratepayers affected by Clause 1. I understand that my officials are already working with the Rating Surveyors Association and other professional bodies on the regulations to deliver this new right of appeal on the 2010 rating list.

For the 2017 rating list—about which I think the noble Earl, Lord Lytton, is concerned—the Valuation Office Agency will update the list as it becomes aware, through ratepayers and local authorities, of assessments impacted by the change in the legislation. Keeping an accurate rating list in this way is a normal part of the business rates system. Where appeals on the 2010 rating list mean that the valuation officer believes that the 2017 rating list also requires changes, I assure the Committee that these will be resolved by the Valuation Office Agency as part of its normal duty to maintain the list. Ratepayers will also be able to request a prioritised check of their 2017 rateable value if they believe it has been affected by the ruling.

From the consultation, we have seen widespread support for this approach to implementation. The amendment before us would require the valuation officer to make consequential changes to the 2017 rating list after they have resolved a case on the 2010 rating list. As I have said, it is the intention of the Valuation Office Agency to make these necessary changes. What is more, the requirement of the Valuation Office Agency to correct the 2017 rating list is already captured in primary legislation. That is significant. Under Section 41 of the Local Government Finance Act 1988, the valuation officer is required to compile, and then maintain, local rating lists. Therefore, if through the settlement of an appeal on the 2010 rating list the valuation officer concludes that the 2017 rating also needs to be changed, they are duty bound to make that change. I can offer that legislative assurance. With those assurances, I hope the noble Earl, Lord Lytton, will agree to withdraw his amendment.

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[Lord Bourne of Aberystwyth]

My Lords, I am most grateful to noble Lords who have spoken on this amendment and for that very considerate point from the noble Lord, Lord Kennedy, that he is trying to help the Government. I shall ensure that that is underlined when I get my copy of Hansard, and I appreciate his general approach on these issues.

I am grateful to noble Lords for raising this matter. The amendments before us would require a review of the impact of Clause 1. I agree with the point made many times by the noble Lord opposite; we probably have rather too many reviews, and this can sometimes get a little top-heavy. However, such a review would require compensation to be paid to local authorities for any refunds made to ratepayers as a result of Clause 1.

To assist the Committee in considering this, I will explain a little about how Clause 1 will be implemented by the Valuation Office Agency. Before I do, I remind the Committee that, as the noble Earl quite correctly anticipated, the Government do not intend to compensate local government for the reductions in rateable value that will flow from the implementation of Clause 1. This is not because we cannot estimate or measure those impacts—although there are considerable challenges in doing that. We are not compensating local government in this instance because the revenue it might have received from the Supreme Court decision in Woolway v Mazars was unexpected. Indeed, all professional bodies involved with rating, including the Rating Surveyors’ Association, viewed the Supreme Court’s decision as a surprise and an aberration: indeed, neither party to the case was arguing for it. It came as a surprise to political parties, too.

The decision disturbed the settled practice of rating as understood by valuation officers and ratepayers alike for decades. Therefore, any additional income was indeed a windfall. The noble Earl seemed perhaps to suggest that, if there had not been a refund or reduction, there was still the prospect of some obligation to repay. That is not the case. If the money has not been expended, there can be no question of any repayment. We are merely returning this windfall to ratepayers—something that I think is widely welcomed. In some cases these ratepayers have also lost small business rate relief as a result of having their property split. We do not believe that it is fair for these hard-working small businesses to be hit by large backdated bills, and we do not believe that it would be right for local government to benefit from revenue accrued in this way.

The amendments would require a review of the impact of Clause 1 and compensation for any refunds under it. Put simply, the impact of Clause 1 is to return the law to what it was always understood to be before the decision of the Supreme Court. It follows that, taken together, the combined financial impact of the Supreme Court decision and Clause 1 will therefore be neutral. So, in looking at just the impact of Clause 1 we are, in fact, looking at only part of the picture.

For those businesses whose rateable values were not adjusted by the Valuation Office Agency following the Supreme Court decision in Woolway v Mazars, there will be no change. The only situation in which there will be a repayment of business rates as a result of Clause 1 is where the Valuation Office Agency has amended rateable values to reflect the Supreme Court decision. That will be reversed.

The Bill will also allow those rateable values to be changed so that they once again reflect the practice of the Valuation Office Agency before the court decision. The way in which this will be implemented in practice by the Valuation Office Agency will be different in respect of the previous 2010 rating list compared to the current 2017 rating list. I will go into that in a bit more detail in a minute. I will ask the Valuation Office, because it does seem reasonable, to publish information as a consequence of Clause 1. I will make sure that any information that is readily to hand is published, that noble Lords receive a copy and that we leave a copy in the Library—because that will not involve any unreasonable burden at all.

Since 1 April this year the Valuation Office Agency has been unable to amend the 2010 rating list, other than as a result of an outstanding appeal. These rules protect ratepayers against very long periods of backdating, but they mean that, in this instance, ratepayers would see the benefit of the Bill in respect of the 2010 rating list only if they still have an outstanding rating appeal. Therefore, we will, through regulations and existing powers, allow a new right of appeal on the 2010 rating list for those ratepayers affected by the Bill. I assure noble Lords that it will be possible for local authorities and the Valuation Office Agency to identify these new appeals made as a result of the Bill and see the resulting change in the rateable value on the 2010 rating list. As I say, I will endeavour to ensure that information on that is passed to noble Lords.

These new 2010 appeals will, in part, provide the information sought in this amendment. However, they will not provide a complete picture of the impact, as some ratepayers will choose to use existing 2010 appeals, some of which may also deal with other, unrelated changes to the property or valuation. Therefore, the resulting change in rateable value will not always be an accurate reflection of the impact of Clause 1 alone—it is not necessarily that straightforward. Nevertheless, local authorities will be able to identify the new appeals on the 2010 rating list and see the resulting change in rateable value, and we expect these new appeals will, in part, give a reasonable guide to the impact of Clause 1 on the 2010 rating list.

I fear that it will be much more difficult to track the impact of Clause 1 on the current 2017 rating list. The Valuation Office Agency will implement Clause 1 on the 2017 rating list in the normal course of its business. For example, it may apply the new rules in Clause 1 in the course of putting new properties into the rating list, when correcting rateable values or when reflecting improvements or demolitions to the property. It may do this following a request from a local authority, following a check made by the ratepayer or using its own notices to amend the rating list. Within these different types of cases and different reasons for altering the rating list, the Valuation Office Agency cannot statistically isolate those which are due to Clause 1 alone. To resolve this, the VOA would have to manually examine each change and each valuation and calculate how much was due to Clause 1. Bearing in mind comments made with some justification about the financial impact of some of this on the VOA, this is not something we would want to do: it would be extremely resource intensive. Since this is an organisation responsible for clearing a backlog of 2010 appeals—something it is doing—implementing a new check, challenge and appeal system and delivering a revaluation in 2021, I am sure noble Lords will agree that we should not add to its burden in this way.

I fully understand that local government and others want an accurate view of the impact of Clause 1. I share that desire and have explained to noble Lords why this is so difficult on the current 2017 list. I hope I have reassured the Committee that some information will be made available in respect of the new appeals on the 2010 rating list that will be allowed once the Bill receives Royal Assent. As I said, I will ask the Valuation Office Agency to publish that information.

With regard to the Government’s stance on compensation, this does not signal any departure from the normal approach to compensating local government for changes to business rates introduced through the Budget. In this year alone, we expect to compensate local government to the tune of £1.5 billion for changes to the business rates system announced in previous Autumn Statements and Budgets. I hope the Committee will recognise that the circumstances of the Mazars Supreme Court decision and Clause 1 are very different in respect of so-called compensation. With all this in mind, I hope the noble Earl will agree to withdraw his amendment.

[Lord Kennedy of Southwark]

Is the Minister saying that the Chancellor did or did not say in the Budget that the Government were going to reimburse local government on these matters? I understood that the Chancellor had announced that the Government were going to reimburse local government but then the Government changed their mind.

[Lord Bourne of Aberystwyth]

My Lords, I say this with some hesitation because the noble Lord seems relatively certain about what he is saying, but I think I am right that in the 2017 Budget the Chancellor said that we were not going to reimburse local government in relation to this. I do not think that statement had been made before; or if it had, it was only shortly before. But I think in the 2017 Budget he made it clear that we would not be doing so. But that can be checked. As I say, I might be wrong on that.

[Lord Kennedy of Southwark]

That would be very helpful. Does the Minister have any estimate of the amount of money involved for local government? I accept that people have had the benefit of these sums of money for a period of time but, equally, everyone was surprised by the judgment of the Supreme Court. What are the sums of money involved for local government? They may be negligible or huge. We all know that local government is really pressed in terms of budgets and finance, and things are very difficult, with many competing demands. If it was a large amount of money, that could cause problems.

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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.

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[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.

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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.

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[The Earl of Listowel]

I thank the noble Baroness for her intervention and I very much take note of what she says. I will try to be a bit more careful. There are certain places in this country where it is more difficult to let private property, and that is what I might have said.

What comes out of the debate is the question of how we make private rented property more attractive in those areas where it can be difficult to let. This might be a bit off the board but, as there are not enough properties to buy, it seems very important that rental property is made a more attractive option. I believe that the Government had been thinking of introducing new tenure arrangements so that tenants could have a minimum of three years’ security of tenure. If the Minister can say what progress there has been on that, or perhaps write to me with the information, I shall welcome hearing from him.

It also occurs to me that the private rented sector might benefit from some sort of arm’s-length body to oversee security of tenure and fair rents so that the winds of politics do not intervene in the market too much, making long-term investment unattractive and putting people off becoming tenants. That is another issue on which I would be interested to hear from the Minister, and, again, he might like to write to me about that rather than respond now. The Government are introducing an ombudsman with responsibilities in these areas, and people might have recourse to him or her if they experience unfair treatment. Perhaps the Minister can respond on that as well.

Finally, I might not have declared my interest as a landlord, as listed in the register.

[Lord Bourne of Aberystwyth]

I thank noble Lords very much for their contributions. I appreciate that the noble Lord, Lord Bird, is not in his place at present but he lobbed in a hand grenade, as it were, before departing the scene. I appreciate the point made by the noble Lord, Lord Kennedy, and will try to address some of the suggestions from the noble Lord, Lord Bird. He is always worth listening to on this area in particular, but he always has some innovative ideas.

I am grateful to noble Lords for raising the question of how the legislation will apply. The noble Lord, Lord Kennedy, is suggesting a one-year vacancy. I am also grateful for the cross-party support that we have received in both Houses for the measure that we are bringing forward, and I appreciate the points about possible refinements.

We are not seeking to alter the circumstances in which the premium is applied. Ninety per cent of local authorities applied a premium in 2017-18, and we are not aware of widespread concern that the two-year period is inappropriate. I feel that one year might be far too short a period in many circumstances. There are some exceptions where the premium does not apply, one of which is people going into social care, which the noble Earl, Lord Listowel, raised. However, situations that are not exceptions include that of people who might be adapting a property and trying to sell it. I fear that in those circumstances a year would be too short a period, and I have no doubt that there are other situations where that would be the case as well.

I understand the rationale for decreasing the qualifying period at a time of great concern about empty properties, but I remind the House that we have squeezed the number of empty properties down to a low level—a level that it has not been at for a long time, if at all. We have to make a judgment about how long the timeframe should be. I know from correspondence that the department has received that some home owners take longer than expected to sell or rent out their properties in a challenging local market. In such circumstances, retaining the two-year qualifying period therefore strikes the right balance. I understand the point that the noble Lord, Lord Kennedy, made about his desire to strengthen the incentive.

The amendment in the name of the noble Lord, Lord Bird, would allow councils to decrease or increase the qualifying period as they see fit. Local authorities would be given complete freedom to remove the requirement that a property be substantially unfurnished in order to be considered empty. I am happy to address those points. Although we should support giving councils as much discretion as is reasonable, the noble Lord’s amendment could lead to a confusing situation where the property, depending on where it is located, could attract premiums after just a few months or after quite a few years.

The principle of specifying that an empty property is one which is substantially unfurnished is well understood, and we will come on to amendments addressing that issue later. The risk of the amendment proposed by the noble Lord, Lord Bird, is that it would give local authorities an open door to extend that definition to types of properties that are not genuinely empty. Premiums could be applied to furnished properties that are periodically occupied either because they are someone’s second home or a job-related home or simply because the owner is away on holiday. I know there are views about second homes and properties that might be considered to be underoccupied, but this legislation is about long-term empty properties, which is a different matter. The design of the system already provides the right balance of flexibility for local authorities.

On the points raised by the noble Earl, Lord Listowel, about the impact of these provisions, I remind the House that local authorities have a discretion they can apply either in relation to excluding properties along the energy-efficiency line suggested by the noble Lord, Lord Stunell, or in terms of something highly personalised which relates to a particular property and the person in it. That is why it is best left to the local level to determine this issue.

The noble Earl also asked about the private rented sector and three-year leases. We are committed to dealing with this issue, which has strong support from the sector, and we are making progress. He will be aware that the private rented sector has grown significantly, and continues to grow. We are putting in place a framework that will apply in a reasonable way, with tenant fees proposals—which we will be looking at shortly—and that addresses the control of deposits, requires client money protection and so on. I will cover that in the normal write-round letter that I will issue to pick up the points made by the noble Earl.

With the comments I have made about how we are not persuaded of the need to alter the minimum period from two years to one year or anything below two years, I urge the noble Lord, Lord Kennedy, to withdraw his amendment.

[Lord Kennedy of Southwark]

I thank all noble Lords who have spoken in this short debate. I am happy to withdraw my amendment at this stage. This amendment and those in the previous group were designed to explore whether we have got this right. I may wish to come back to these amendments—particularly those in the previous group—on Report, but I am happy to withdraw this amendment given what I have heard from the noble Lord.

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[Lord Kennedy of Southwark]

My Lords, briefly, I endorse the comments made in the debate so far, particularly those from the noble Lord, Lord Deben. He is absolutely right. Suffolk is a beautiful part of the world. I know that as well as him; I spend a fair bit of time down there. It is a wonderful place. He is absolutely right that people should not be allowed to pretend to have businesses and to take advantage of these things to avoid paying what they are supposed to pay to provide for local services. That is completely wrong. I hope that when the Minister responds to the debate he can give us some comfort that the Government will look at this. It is totally out of order. If someone lives in an area they should contribute to the services provided by the local authority.

[Lord Bourne of Aberystwyth]

I thank noble Lords very much indeed for what has been an interesting and diverting debate on this amendment. I will seek to deal with all the points that have been made. I will deal with the points made by the noble Baroness, Lady Pinnock, relating to the definitions of “unoccupied” and “substantially unfurnished”; then I will seek to deal with the issues relating to second homes brought up by the noble Lord, Lord Shipley, reinforced by my noble friend Lord Deben and briefly addressed by the noble Lord, Lord Kennedy.

The definitions are clearly important to the successful operation of the premium. Indeed, they are already important to its successful operation because it already uses these terms. It is something that more than 90% of local authorities are already doing. In so far as I can see, none of them is having difficulty interpreting these terms. If anyone can come forward with some issue they feel needs addressing I would be very happy to look at it. It is of course right that local authorities must understand the meaning of these terms and that they are applied consistently across England, as I said on an earlier group of amendments. I certainly share that view.

It might assist noble Lords if I explained a little about these terms. I do not want to repeat what the noble Baroness said about the information letter of 2014, although the more she said the more I felt that we have covered these points. You cannot produce a 100% reliable definition by saying how many cups and saucers you can have left in a cupboard or how many forks and spoons can be in the drawer. To say that these furniture items would normally be there—a bed, chairs, a table, a wardrobe, a sofa, and white goods such as a fridge, freezer or a cooker—is as good as it gets for guidance.

I think that the noble Baroness said at one stage that it was not always possible to have utility bills and that some people were overseas and so on. If that is the case, it will be very difficult for them to reinforce the fact that the property is being used. That is the whole point: these people might seek to have their property as occupied so that they do not have to pay the empty home premium. If they cannot establish it, because they are overseas or so on, that seems absolutely correct. As I say, I am very happy to engage with the noble Baroness and others to look at this issue if they can bring forward evidence that local authorities are having particular difficulties with this. However, in the light of the letter and in the light of case law, I do not think that this is an issue.

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[Lord Shipley]

My Lords, the noble Lord, Lord Deben, explained what could happen. It is not complicated to do; the question at issue is probably simply whether the law in Wales is working effectively. At 70 days proof of letting, that ought to be easy to demonstrate, because evidence will have to be produced. I hope that the Government will speak urgently to the Welsh Government and assess what evidence they have, and, as a consequence of that, possibly organise a meeting of all parties involved in this issue to see whether legislation could be introduced in both Houses which would help to solve this problem. To help this along, I plan to table a set of Written Questions later this week, because securing an even better evidence base than we have at the moment would be helpful. This is not a problem just of east Suffolk, parts of Cornwall and one or two other places. I think it is quite a general problem now, or at least it seems to be, in many parts of the country which are attractive holiday areas.

[Lord Bourne of Aberystwyth]

I thank the noble Lord very much for putting down lots of Questions: my officials will be doing cartwheels at the news. However, there is a serious point behind what he is putting forward and I absolutely accept that this is a national issue. Our officials will certainly be speaking, if they have not already—I suspect they may have done—to Welsh and Scottish officials to see what is being done there. We are taking it urgently. I will cover this in more detail in a letter: it is certainly very much on the radar though I had not expected that it would come up in this context—and I should have. I will make sure that we get some more detail in the letter and I thank noble Lords for raising this. I realise now that the noble Lord, Lord Campbell-Savours, who is not in his place, raised a similar issue in Questions today. I could not quite understand what he was getting at but I understand now and I apologise to him. We will make sure that he gets the letter as well.

Given that, and the fact that I and my department take this seriously, I ask the noble Baroness, Lady Pinnock, to withdraw her amendment.

[Baroness Pinnock]

I thank everybody for a really interesting and stimulating debate. My noble friend Lord Shipley raised some issues. I am glad that my proposal has gained support because this affects all areas of the country that have large numbers of second homes, including in the north—the Lake District, for instance. We have all noted the new definition of “seriously considered”. I look forward to this being seriously considered.

I brought the definition of “unoccupied” and “substantially unfurnished” to the attention of the Committee because, with the rise in the premium, it is more likely that there will be challenges from owners that their homes are furnished and all the rest of it. Therefore, it would be helpful to local authorities to have more definite clarity on this, rather than an information letter. I think that could be achieved. I know that from time to time the department sends guidance notes to local authorities, which have greater import than information letters. That would give them something to fall back on if they are challenged, as I think may well happen. Those are the reasons for my endeavours this afternoon but I beg leave to withdraw the amendment.

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[Baroness Thornhill (LD)]

My Lords, I declare my interest as a vice-president of the Local Government Association. I fully support the words of the noble Lord, Lord Kennedy. I thank the Minister for the very detailed and informative letter he sent all of us after Second Reading; in particular, his response to my comments on fiscal incentives and deterrents with regard to empty homes. I really appreciated that and took on board what he said. Perhaps he will indulge me by allowing me to hang on to the one measure that he did not elaborate on—that is, the matter of penalties.

It is probably little known that councils actually have the ability to levy a civic penalty on an owner for not informing councils that their home is empty. It is not surprising that it is little known; the maximum penalty for doing so is actually £70, so it is no surprise that it is rarely, if ever, used, and that the general public are oblivious to it. In fact, I suspect that if we talked to the general public we would find they believed that by informing the council that their home was empty they would actually pay less or no council tax, so that shows that we have a long way to go. As the average council tax, the band D monthly payment, is now around £165 a month, a penalty of £70 is nothing—it is neither a penalty nor a deterrent. So this is a small matter but I feel that the two should have been taken together. If we are going to, justifiably and rightly, hike up council tax premiums, the penalty that goes with not informing the council should send the same level of message—£70 is, frankly, derisory.

I see both these measures—the penalty and the increased premiums—as really important in motivating councils to move this up their agenda. I say this with a degree of experience in local government, particularly in district councils where this is not a priority, largely because of costs. At Second Reading we heard a lot about powers not being used because of costs, but I think that together these two things would encourage councils to publicise the need to not leave homes empty, and to make it a publicly unacceptable issue so that people would be enraged by it and want us to do something about it. If there were to be a review, would we also review penalties in this regard, as I feel that it would be a missed opportunity if we did not? I beg to move.

[Lord Bourne of Aberystwyth]

I am very grateful to the noble Lord, Lord Kennedy, and the noble Baroness, Lady Thornhill, for their contributions on this group of amendments that relate to how we seek to address the penalty point just covered by the noble Baroness and the issue of the review, which was raised by the noble Lord.

The amendments would require the Government to review the impact of the increase in the maximum permitted level of the empty homes premium. I pause briefly to say that I think I am going to organise a list of all the things that the noble Lord, Lord Kennedy, has asked us to do reviews on. I know that he very often says that we have so many things out for review and then we have a critique of that, but we have had a couple of issues today at least where he has asked for reviews. I am only teasing.

[Lord Kennedy of Southwark]

I am very happy that the department does this. My issue with the reviews is that the Government never come to a conclusion.

[Lord Bourne of Aberystwyth]

I think the noble Lord’s issue has been that there are so many of them that there is a bit of a logjam. Anyway, we could perhaps debate that on some other occasion.

The amendment tabled by the noble Baronesses, Lady Pinnock and Lady Thornhill, would also require the Minister to determine whether the review should also consider the impact of any penalties on council tax payers who fail to tell their local authority that their property is empty. The review would need to be undertaken within two years of the legislation being enacted, with a report laid before both Houses of Parliament.

I am afraid that the Government are unable to accept the amendments. First, the Government are clear that the use of the premium and the consideration of its impact and enforcement are best undertaken by local authorities. As I have said, we are giving a discretion to local authorities; some local authorities do not apply the premium at all while others apply it in its totality. We have provided local government with complete discretion on whether to introduce the premium. Noble Lords will recognise that local government has been running the empty homes premium now since 2013, with a steady year-on-year growth in the number of councils making use of the power. Fewer than 30 councils have no premium in place at all. That gives a very clear indication that councils across the country consider this to be a useful power to drive behavioural change in owners of long-term empty properties.

In considering the Bill’s proposal to increase the maximum level of the premium from 50% to 100%, I have been struck by the widespread support from across the House—admittedly with variations, but there has been support for that increase. There is clear confidence that this is a sensible step to take. Given that, I am not persuaded that we should introduce uncertainty into the process by committing the Government to a review within two years. That could be perceived as demonstrating a lack of faith in the measure which, of course, is not the case.

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

Lord Bourne of Aberystwyth Excerpts

Report stage (Hansard): House of Lords
Wednesday 4th July 2018 Lords Chamber

[Lord Beecham (Lab)]

My Lords, I will further add to that by declaring my own interests as a vice-president of the association, and also as a serving councillor in Newcastle. I rise to present the views of these Benches in the absence of my noble friend Lord Kennedy, who is en route to Birmingham for the Local Government Association conference.

I have had some experience of dealing with, or attempting to deal with, the problems of empty houses in the ward I represent in Newcastle. It has been impossible, eventually, either to persuade the owners to do the necessary work or, in one case, to acquire the property. While I certainly support the amendments before us, and I understand that they are likely to receive a reasonably warm response from the Minister, it occurs to me that perhaps the aspect of acquiring properties is a matter that should be given further consideration. It is an alternative approach that might well result in a quicker resolution of the problem, and enable the availability of a usable home, than simply collecting money by way of an incentive, as it were, for owners to do something, which may not be all that effective. I would be grateful if the Minister would indicate whether the Government will look again at the powers of local authorities to acquire in these circumstances, and whether these need to be enhanced, particularly in terms of the timescale involved. On the ground, it would probably make a greater difference than these measures, welcome though they are as an additional arm in trying to deal with this situation, which is, at a time of housing shortage, really quite disgraceful and should not be tolerated.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank noble Lords who have participated in the debate on Report. I shall, if I may, give the Government’s response and then try to pick up some of the points that have been raised by noble Lords during the debate. I am grateful, first, to the noble Lord, Lord Shipley, as the noble Baroness, Lady Pinnock, obviously is, for moving the amendment, to the noble Baroness, Lady Pinnock, and to the noble Lord, Lord Beecham, for speaking on behalf of his noble friend Lord Kennedy, who is on his way to the LGA conference.

I turn first to the amendment relating to the escalator. The noble Baroness and the noble Lord, Lord Shipley, were kind enough to say that his amendment has received government support as well as support from the Labour Benches—we have obviously involved the noble Lord, Lord Kennedy, in discussions on this, and others as well. This would mean that properties empty for between five and 10 years could face premiums of up to 200%, and homes empty for more than 10 years could be subject to 300% premiums. I stress that that is a matter of discretion for local authorities, which is written through all of this legislation. It is something that I and the Government have not been keen to depart from. It is a matter of localism—the noble Lord, Lord Stunnell, used that word several times.

I indicated in Committee that I had some sympathy with the suggestion that was brought forward and that I would reflect on it. The Government have reflected carefully on the arguments advanced by noble Lords at Second Reading and in Committee, and accept that there is a strong case for even higher premiums than those originally mentioned for homes that have been empty for an extended period of time. While we are unable to accept the amendment as it is currently drafted, I hope that noble Lords and the noble Baroness will be pleased to hear that we intend to bring forward a government amendment with the same effect at Third Reading.

Properties that have been empty for more than five years are likely to be few in number. I say to the noble Earl that this is not a revenue-raising measure: the intent is to free up properties for housing where they have been empty for a protracted period of time and to improve the amenity of a given area. It is not about raising a significant amount of revenue: I do not think that it will. It will raise some, but not a significant amount. However, such properties are often a blight on local communities and a nuisance to local residents. I accept that a strengthened incentive of a 200% or even 300% premium may prove more effective in such difficult cases, and could therefore ultimately bring benefits to the wider local community.

As I have mentioned in previous debates, we have to strike a balance in making this judgment, and ensure that no one is subject to the tripling or even quadrupling of their council tax bill without due consideration to the particular circumstances of the case. In relation to points first raised by the noble Lord, Lord Shipley, about the broader social issue of property that people buy intending to leave it empty, I accept that that concern goes well beyond this targeted piece of legislation. I do not disagree with the general thrust of what he said at all. We will no doubt want to look at that. It will rightly remain up to local authorities whether and how to implement any higher premium based on local circumstances. That is important. Local authorities will know their circumstances best and how to target the premium in whatever way they want within the general broad framework that we have set out. We must ensure that higher premiums are applied fairly, but that will be done through the mechanism of the local authority.

We will, however, take the opportunity to revise the guidance issued in 2013 on the use of the premium to ensure that the additional powers are exercised with due consideration to issues facing low-demand areas and cases of hardship. We will have the benefit of today’s and earlier debates to look at when we consider how that is best done. We will also look to ensure that home owners have sufficient notice to prepare themselves for this change. That is something that I have shared with the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy. We anticipate that the higher premiums would come into force in 2020 for 200% premiums—anything that had been vacant since 2015, could in 2020 attract that higher premium—and in 2021 for 300% premiums, so that anything that had been vacant since 2011 could then attract that 300% premium. We are not convinced that local authorities have reliable statistics about empty properties longer ago than 2011, but they should have them from 2011 onwards because of current policy. That is a further consideration but not the only one. We were wary about the retrospective effect of this provision and felt that we should give appropriate notice, which noble Lords will understand.

I now turn to the second amendment tabled by the noble Lord, Lord Stunell, and the noble Baroness, Lady Pinnock. As the noble Lord indicated, there was a similar amendment in Committee. This is slightly different with the insertion of the word “normally”, but that should not disguise the fact that this is still a directive to local authorities with the addition of “normally”. I hesitate to throw compliments the way of the noble Lord so I had better not call it a noble concept, but I admired the way that he sought to indicate that this amendment was different from the one in Committee. I am tempted to say “nice try”, but I am not convinced that it is different in kind.

The current system allows local authorities to take into account such considerations. Indeed, if they want to, they can go further than the noble Lord’s amendment and be more generous. There is nothing to prevent them exercising their discretion in this way, as well as for other good reasons—this is not the only good reason, although it is undoubtedly one. However, fundamentally these sorts of decisions are best made locally by those who know the challenges and demands of a given area. As already mentioned, it should remain a matter for local authorities to decide not only whether to charge a premium but the exact rate at which it should be charged.

I shall try to pick up the other points that were made. First, the noble Lord, Lord Shipley, made a point about probate. I think that property that has not yet had probate is exempted anyway, although I accept that thereafter the period would kick in, so it is a relevant point.

In relation to most of the rest of the questions raised, I am afraid that I cannot read my own writing. I have made a note that the noble Lord, Lord Beecham, made some good points but I have not put what they are—nor should that be a surprise to anybody because he always makes good points. However, we will pick up the good points that require an answer and respond in writing.

[Lord Beecham]

If it is any consolation, my handwriting is even worse.

[Lord Bourne of Aberystwyth]

My Lords, it is an affliction that lawyers, along with doctors, bear, so I understand the point that the noble Lord is making.

To sum up, we accept that there is a strong case for a higher premium, and I thank noble Lords who worked with us on the so-called escalator. I am pleased to say that the Government intend to bring forward their own amendment at Third Reading to the same effect. On the second amendment, although the Government recognise and understand the positive sentiment behind the noble concept of reducing the premium, it is a matter that we feel is best left to local authorities, as they have that discretion. Therefore, I hope that noble Lords will agree not to press their amendments on the basis that I have outlined.

[Lord Stunell]

Does the Minister have any news whatever on the biennial review of the Sustainable and Secure Buildings Act, as required by statute and now 18 months overdue?

[Lord Bourne of Aberystwyth]

My Lords, I had not anticipated that the noble Lord would go in that direction—more widely than the debate. I hope he will accept that I will pick up that point and try to get an expeditious response to him, but I cannot give him any assurance beyond the fact that it is something that we realise is due. I will write to him and copy the letter to other noble Lords.

[Lord Shipley]

My Lords, I thank the Minister very much for what he has said and beg leave to withdraw the amendment.

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

Lord Bourne of Aberystwyth Excerpts

3rd reading (Hansard): House of Lords
Wednesday 18th July 2018 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

Clause 2, page 2, line 33, leave out from beginning to “effect” in line 36 and insert—
“(1) Section 11B of LGFA 1992 (higher amount for long-term empty dwellings: England) is amended as follows.(1A) In subsection (1)(b)(maximum percentage by which council tax may be increased)—(a) after “that day” insert “(“the relevant day”)”, and(b) for “50” substitute “the relevant maximum”.(1B) After subsection (1) insert—“(1A) For the financial year beginning on 1 April 2019 the “relevant maximum” is 100.(1B) For the financial year beginning on 1 April 2020 the “relevant maximum” is—(a) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is less than 5 years, 100;(b) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 5 years, 200.(1C) For financial years beginning on or after 1 April 2021 the “relevant maximum” is—(a) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is less than 5 years, 100;(b) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 5 years but less than 10 years, 200;(c) in respect of any dwelling where the period mentioned in subsection (8) ending on the relevant day is at least 10 years, 300.”(2) The amendments made by subsections (1) to (1B) have”

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, this amendment, which allows for increases to the council tax empty homes premium cap according to how long a property has been empty, follows amendments with the same effect moved in Committee and on Report. I am grateful to the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy, for bringing forward this so-called escalator amendment.

As noble Lords will undoubtedly be aware by now, this amendment will allow local authorities to charge premiums of up to 200% on homes empty for at least five years and less than 10 years, and to charge premiums of up to 300% on homes empty for at least 10 years. It will not change the provisions for homes empty for at least two years and less than five years. The maximum rate for such homes will remain at 100%, as proposed by the original Bill. Neither does the amendment fetter the discretion of local authorities, which will retain the right to decide on the precise level of premium charged, taking into account local circumstances, guidance and the maximum thresholds set by government.

--- Later in debate ---

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I draw the attention of the House to my relevant interest as a vice-president of the Local Government Association. I do not intend to detain the House for very long as there is widespread support for the amendment. I am very happy to support the amendment tabled by the noble Lord, Lord Bourne of Aberystwyth, which, as we have heard, came out of a proposal from the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley. The proposal introduced the concept of having an increasing scale of how much council tax can by charged on an empty property. It was a very good, sensible idea. This government amendment looks at the practicalities of delivering it and has my full support.

My noble friend Lord Campbell-Savours raised the issue of the single person’s discount, and I hope that the noble Lord will address that in his response to the debate. The noble Earl, Lord Lytton, and the noble and learned Lord, Lord Mackay of Clashfern, raised the issue of the blight of empty properties. I hope the noble Lord can confirm that that will be addressed in the guidance that comes on the back of this Bill. As I said, I am very happy to support the amendment, and I thank the noble Lord and the Government for listening to the concerns that have been raised.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate on this amendment. If I may, I will deal with the contributions in the order in which they were made, and turn first to the noble Lord, Lord Campbell-Savours. I understand where he is coming from on this, but the essential point, as was just made by my noble and learned friend Lord Mackay of Clashfern, is that the premium is payable on the value of the property and not on the circumstances of the person or persons who happen to be there at the time. I can provide him with the precise provision that makes this absolutely clear.

[Lord Campbell-Savours]

We are talking here about an incidence of empty properties which may well increase in times of a depression in property prices. In parts of the country now, property prices are collapsing. The danger is that people will go into negative equity in the event that they are driven into selling because they are faced with what might appear to be extremely high increases in their council tax where they have been living as a single person in a property. I understand what the noble Lord said about the rateable value but I wonder whether it might be possible to detach from that formula and move to the actual sum payable, which is what really affects the council tax payer more than anything else.

[Lord Bourne of Aberystwyth]

I understand the point that the noble Lord is making but, if he will forgive me for saying so, it is a somewhat different point. I will come on to the hardship issues and the guidance, because hardship could attach to a couple or to a family as much as to a single person. The premium is payable in relation to the rateable value of the property and not the circumstances of the person who was last there. For example, it could be that a single person dies and then a family inherits the property, and so it would be complicated if it were otherwise. It also applies the council tax in the relevant year, and I fully concede that it is more likely to go up than go down. However, it is conceivable that it could go down and, if that happens, that is just the way it is, if the noble Lord will forgive me for saying so.

As I think I said in relation to the point raised by the noble Earl, the guidance we issue will be subject to full consultation and will take care of hardship cases. Hardship is a circumstance that I am very keen we address in the guidance, which will be open to full public consultation for anyone who wants to participate. Ultimately—

[Lord Campbell-Savours]

My Lords—

[Lord Bourne of Aberystwyth]

Forgive me, but I will just finish this point and then give way briefly to the noble Lord. Ultimately, this is a matter for the discretion of the local authority. We have been very keen to ensure that that is the case, as the local authority will know of the hardship more than anybody else in the local area.

[Lord Campbell-Savours]

On exactly that point, according to the statistics that the noble Lord gave the House when we last considered the matter, 90% of local authorities are now choosing this option. It may well be that local authorities feel under pressure, irrespective of the hardship criteria that the Minister may lay down in the guidelines. That is why I want something a little firmer. They are taking the money because it is available, and 90% is the noble Lord’s own figure.

[Lord Bourne of Aberystwyth]

If the noble Lord looks at what I said, I also said that they are exercising their discretion, and there is evidence of that, too. This is not a revenue-raising measure, as is borne out by the statistics. It is very much to deal with the specific case of blight on the local landscape and, as the noble Baroness, Lady Pinnock, said, freeing up homes. That is what is behind this. There is not a great incidence of cases, as the figures will bear out, but it makes a real difference in communities up and down the country.

As the noble Earl, Lord Lytton, said, this is something best left to the local authority. I am grateful for having my powers exaggerated but I cannot enumerate in a list what they may be. They are things for the local authority to look at. We will approach the guidance in such a way that we can give clear indications of the sort of factors that local authorities will want to bear in mind. Once again, it is important that we give the local authorities that discretion and trust them in the exercise of that locally. I stress that this will be subject to full consultation.

I am very grateful to the noble Baroness, Lady Pinnock, who first came up with this escalator amendment and for the work we have done on this together and, indeed, across parties, with the Labour Party as well. We have come to a very happy conclusion on this. As I say, the review of the guidance is the next stage in this process, and I expect us all to engage in that together as well. I am very grateful for the contribution of my noble and learned friend Lord Mackay of Clashfern on compulsory purchase. There are compulsory purchase powers in relation to planning blight. They might not cover every conceivable instance that the noble Earl was thinking of, but that certainly would be part of the solution to that quandary. I am very grateful to the noble Lord, Lord Kennedy, as always, for being supportive and constructive in contributions as we have developed this escalator amendment. It has been a very useful exercise and we have, as is appreciated in government, come up with something that has improved the Bill before us, so I am very grateful for that. With that, I beg to move this amendment.

Amendment agreed.

--- Later in debate ---

Moved by

[Lord Bourne of Aberystwyth]

That the Bill do now pass.

[Lord Bourne of Aberystwyth]

My Lords, in moving this Motion, I express my thanks to noble Lords for their helpful insight and support throughout proceedings. I especially thank the noble Baroness, Lady Pinnock, and the noble Lords, Lord Shipley and Lord Kennedy. I am grateful to the noble Earl and other noble Lords who have participated in our discussions. For example, the noble Lords, Lord Campbell-Savours, Lord Stunell and Lord Best, and my noble friend Lord Deben, who is not in his place at present, have contributed as this has gone forward.

I also thank the Local Government Association for its engagement with my officials during the passage of the Bill—indeed, even before it was introduced in the other place. The conversations were constructive, and we will continue these as the Bill takes effect. Additional thanks are due to the Federation of Small Businesses, the Rating Surveyors Association, the Royal Institution of Chartered Surveyors and the Institute of Revenues, Rating and Valuation. Their expertise has been invaluable, and I am grateful for their assistance in developing the solution to the staircase tax, which has enjoyed wide support across both Houses.

I would also like to thank officials and the Bill team who have contributed to the Bill: Joshua Hardie, Gareth Adams, Shaun Morroll, Nick Cooper, John Hutchinson, Peter Bates, Thomas Adams, Antony Henderson and Hannah Ram—my cheerful, charming and efficient private secretary; that has earned me some Brownie points—who has worked incredibly hard on this Bill.

In summary, the Bill is much improved and has enjoyed broad support across the House. I beg to move.

[Lord Kennedy of Southwark]

My Lords, I join the Minister in thanking everyone in the House for their contributions to the Bill. It is a small, three-clause Bill, but an important Bill, which, as we know, deals with the staircase tax among other things. I also thank the department officials for their work, other colleagues around the House and all the organisations that the Minister listed, including the Local Government Association. Though small, the Bill is useful and will make a difference. I also thank the Minister, as always, for his management of the House.