Lord Marlesford
Main Page: Lord Marlesford (Conservative - Life peer)Council Tax Valuation Bands Bill [HL]
Lord Marlesford Excerpts
Lord Marlesford (Con)
My Lords, it is one of the great privileges of being a Member of your Lordships’ House to be able to initiate legislation through Private Members’ Bills. It is even better to be able to get one’s Bill debated, but that is now a matter of luck. I introduced this Bill in the previous Parliament but it never got to the top of the queue for a Second Reading. This time I was lucky in the ballot, with my Bill coming seventh out of 42 Bills. So, of course, I am now a supporter of House of Lords reform—at least as far as procedure goes.
Let me say straight away what this Bill is not. It is not a new system of local government taxation. The Bill seeks, quite simply, to update the system of council tax in England. I emphasise England because, as drafted, it covers Scotland and Wales and, as they are covered by devolution, my first amendment would be to confine it to England.
Local government taxation has always been a tricky matter. The old rating system fell into disrepute, as had the schedule A income tax on imputed rental value of owner-occupied housing, which was the system from 1918 to 1952. The 1990 poll tax lasted rather less time; it was, of course, a political disaster for the Tory party. In 1993 it was replaced by council tax, introduced by my noble friend Lord Heseltine. It has served us well, but it needs refreshment. Five years of coalition government did nothing to help. I suspect that we will hear from the Minister that this Conservative Government will oppose my Bill, but that they have nothing new to offer either.
My Bill does not seek to change the two basic principles or the design of the council tax. Those principles are: first, to divide residential properties into eight bands of value labelled A to H; and, secondly, to apply a different level of taxation to each band with progressive levels of taxation for each band.
In 1991 the bottom band A was for properties worth up to £40,000 and the top band H for those worth more than £320,000. Those are the same today. The ratio of tax was set at the figure of six for band A and 18 for band H. For some arithmetical reason, six was chosen to start with. Thus the most expensive properties paid, and still pay, three times those of the lowest value. There are some differences between the rates at which different local authorities level council tax, but they are not very great overall. Give or take a couple of hundred pounds, band A properties attract council tax of about £1,000 a year. Thus the most expensive of all properties attract only about £3,000 a year. This is, I believe, no longer either fair or publicly acceptable.
It was, indeed, endless bad publicity for the small amount paid by those buying properties for many tens of millions of pounds that tempted the Lib Dems into inventing their mansion tax, which was a wealth tax on only one form of asset. The Lib Dems wisely dropped it; Mr Miliband unwisely scooped it up. He made much of it during the election campaign. Practically every desirable policy from health to education was to be financed from this miraculous pool of wealth. My Labour friends tell me that it did them little good on the doorstep. Many marginal Labour voters, who individually would have been most unlikely to reach the £2 million mansion tax threshold, rejected what they saw as a vindictive “soak the rich” policy.
There has long been a need to update the council tax to reflect current market values. The inhibiting factor has always been the task of revaluation: colossal in both cost and human resources, and controversial in that all valuations tend to be—must be—subjective and therefore result in expensive argument and dispute. The most accurate value of a property at any point in time is obviously the price actually paid for it. Fortunately we now have the Land Registry, one of the most efficient and respected public bodies in the whole public sector. Since April 2000 it has recorded all prices for the transfer of ownership of dwellings. Well over half of all dwellings are now on the register. The register is completely transparent.
My Bill does two things: it updates the prices in the bands and it increases the rate of progression. In the Explanatory Notes, which I hope your Lordships have with you, illustrative tables show the bands that I propose and the rate of progression that I suggest. I say at once that both the bands and the rates of progression are amendable as far as I am concerned. They merely represent my own view of what seems sensible, after quite a lot of consultation.
I have used the existing denominator—the ratio figure of six—as the starting point for band A, which would now cover properties of up to £250,000 in value. I have made band B properties up to £500,000. That will be slightly more progressive than the old system, at eight instead of seven, thus a 33% increase rather than 17% above band A. Thus, existing band A properties would continue to pay exactly the same—about £1,000—and band B would pay about £1,300. My suggestion is that it would get more progressive towards the top, with the new band H properties worth more than £20 million paying £42,000 council tax rather than the present £3,000. Again, I emphasise that this is not introducing a new element into the existing system, which has always been progressive and never made any attempt to limit the charge on expensive properties to any relative use made by households of local government services.
I also emphasise that my proposals are no more a wealth tax than is the present system. The £42,000 charge for band H is a mere 0.21% of £20 million, while £8,000 is a mere 0.16% of £5 million. We were never really told the details of the mansion tax, but at 1% on all properties worth more than £2 million, a £5 million property would have paid £50,000 a year and a band H property would have paid £200,000 a year. There may be some danger that stamp duty, to some extent increased to meet public concerns, may be becoming counterproductive to retaining London as a magnet for wealth, which we wish it to continue to be. Perhaps key to my Bill, enabling updating to be introduced in a timely manner, is Clause 1(2), which states that any property that has not been bought or sold since 1 April 2000 will continue to be subjected to council tax in exactly the same way as at present. All such properties would migrate to the new system of bands and charges when they change hands. Meanwhile, there will be two scales operating side by side.
To those who say that it is inequitable for similar properties to pay different rates of council tax I say only that there has always been a differential between the tax liabilities of similar properties that are in different locations, bought at different times and subject to different economic and social influences. The only way to counter that would be to revalue all properties, not only at frequent intervals but when any significant change affecting them took place. That could be anything from a development, a new road, mining, fracking, or even the waxing or waning of local schools—or perhaps a change of neighbours. But it would be quite impossible for officialdom to take account of all such factors. That is the job of the market, which is why tying council tax to the price actually paid for a property is sound economics.
A crucial point is that the purchaser of a property will know exactly what the financial implications are of a transaction. To some extent that would make market prices more realistic. There is good evidence that buyers already take account of stamp duty, as well as legal and financing costs, in what they are prepared to pay a seller. They would also want to take account of council tax bills. In this sense it is the seller who pays part of such costs.
I have had much encouragement after discussing the Bill with many colleagues. Sadly, not everyone has skipped back to enjoy the delights of a sunny Friday in September at Westminster. Three who are not able to be here but who have been particularly supportive of what I am trying to do are my noble friends Lord Lawson of Blaby and Lord Baker of Dorking and the noble Lord, Lord Butler of Brockwell.
In summary, I am proposing a practical, cost-effective and much overdue refurbishment of council tax. It will use up-to-date values of houses as determined by the market and recorded by the Land Registry. Those who live in modest dwellings will pay no more than they do now. It will increase considerably but not excessively the contribution to local government revenues from the most expensive houses, especially in the London area. There will be no need for widespread and costly bureaucratic revaluations. I beg to move.
Lord Marlesford
My Lords, I thank everybody who was kind enough to take part in this debate. I very much appreciated the general feeling that it was worth proceeding along the sort of lines that I have been thinking on. I felt particularly encouraged by what the noble Lord, Lord Desai, and indeed the noble Lord, Lord Kennedy, said: that it is worth considering in this way.
I was much more disappointed than I expected to be by what the Minister said. It was really rather sad. A lot of quite irrelevant points were made. I do not blame her; she was saying what she had been told to say. I quite understand the way that the system works.
I will not go into all the inaccuracies, but there is no question of forming a new band. Other points were made which we will discuss in Committee, because they are mainly Committee points.
The point about stamp duty is a valid one. I made it myself to some extent—I think that there is a need, as with all taxes, to get that balance right, as my noble friend Lord Flight said. My noble friend Lord Sherbourne gave a general welcome to the Bill, but he is right that we need to go into considerably more detail. It was good to be signed off on the economics of it by as distinguished an economist as the noble Lord, Lord Desai. He and I came into the House on the same day, in the same list. In those days, the great and the good were put here for what they had done, and there were others who had no particular merit but were put here for what they might do, and he and I were in that list. In those days, there were 10 a year of those people. The system has grown in rather a different direction in rather a large way since then.
I was very grateful for what my noble friend Lord Brooke of Sutton Mandeville said. We must progress it along the sorts of lines that he is talking about. My noble friend Lord Wasserman has considerable experience of the sorts of things that I am trying to do, in devising methods to improve technical aspects of government. In fact, one of his great achievements is the invention of the police and crime commissioner system, which is not relevant to the Bill but, despite what people say, is working extremely well, particularly in Suffolk, where I come from.
My noble friend Lord True knows an enormous amount about local government, and I take very seriously the points that he made. I do not think that there is an element of retrospection, in the sense that at any moment, when a system is introduced, it will apply to people in the form that it is introduced. Rather luckily, the date on which the Land Registry started to have its full record was April 2000, which means basically that—
Lord Trefgarne (Con)
I am sorry to interrupt, but if my noble friend would point forward, rather than addressing my noble friend Lord True directly, we could hear what he was saying.
Lord Marlesford
I am so sorry. It is rather fortunate that the date of 2000 was the date when the full Land Registry started, because that is basically before the big explosion in prices. Therefore, there would, in practical terms, be a very limited element of retrospection.
Lord True
I should explain retrospection, since my noble friend Lord Marlesford is on the point—and my noble friend on the Front Bench made the same point. What is proposed, if it is going to look back to anybody who bought a house before 2000, is to tax people on their past choices and on potentially capricious values. I do not think that that is a very fair way in which to proceed. In that sense, it is retrospective but, obviously, it would come into force and go forward.
Lord Marlesford
The point that I was trying to make on that is that, for many people already on the register, there would probably be very little difference in bands, because they would have bought their property before the big explosion. To be honest, I think that the people who had just bought a property at a huge price would be among those who I would be content to pay a much higher tax. So, yes, of course it would apply. Indeed, from now on until this measure comes into force, which I hope that it will, people will be able to say to themselves, “Well, if this comes into force, it will do so on the price that I am paying now”. Therefore, people can take it into account. I do not feel that the oligarch who bought a £20 million house in Smith Square with his jacuzzi and swimming pool can really have an enormous amount to complain about if he pays £42,000 rather than £3,000 in council tax. I think that he will be very pleased to be living in this country, with all the benefits that go with it, compared to his own country, perhaps, and pleased to pay that small ticket.
Most of these points need to be dealt with in Committee, but I would just say to my noble friend Lord True that yes, indeed, prices of houses are registered when ownership is transferred—and, indeed, death is a transfer. The valuation made in that case is, of course, made by a valuer. But the number of dwellings transferred at death are very few compared to those transferred by market transactions, so a valuation is required then. That value is often argued about with the capital taxes office, and all the rest.
Lord Flight
On both death and gifting, valuations are required for IHT and capital gains tax reasons, so it is going to happen automatically, anyway.
Lord Marlesford
Exactly, there are valuations in those cases. But there is a very big difference between doing it just for those and doing it for everything. The argument has always been that we cannot have a complete revaluation. The Minister used again that very old argument, which I reject, and I have tried to meet it by saying that, fortunately, we have the Land Registry and, fortunately, for well over half of dwellings at the moment, we have the actual prices that have been paid. As for the poorer people at the bottom of the market, very few people at that end will find that they pay a higher council tax. The movement in my banding from £40,000 to £250,000 would include virtually all the people in band A anyway—it is very unlikely that people would find themselves in band B. Quite a lot of the people currently in band B will remain in band B, because that goes up to £500,000. So there is a certain automatic adjustment from the price mechanism and the market in that respect.
I shall not continue now, because a lot of these points need to be studied in detail. I hope that the Government will show themselves perhaps a trifle more open-minded, rather than merely trying to produce old and jaded arguments and persuade some unfortunate Minister to put them forward for them. I ask the House to be graciously prepared to give this Bill a Second Reading.