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

Lord Patten Excerpts

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

[Lord Patten (Con)]

My Lords, following what the noble Baroness said, I do not think that this is a missed opportunity; rather, it is a pretty big incremental step in dealing with the issue. That is why, during debates in another place, the Bill received all-party assent and agreement—and I congratulate my noble friend and his colleagues on getting that. Having said that, I do not want to alarm the noble Baroness but I agreed with much of what she said—but that is business for another time. This sort of cross-party agreement is not without precedent. It is reasonably rare, but I hope it will be followed by your Lordships, because this is a good, if short, Bill that addresses two exceptional issues. I will concentrate on the second: empty dwellings.

For a long time in England it has seemed that having at least 300,000-plus empty houses was accepted as being structurally the natural figure needed to balance the housing market. I do not agree with that. It should not have been so and it is good that, since 2010, a concerted effort has resulted in the figure of empty homes being greatly reduced to a bit above 200,000, as the noble Baroness has just said. However, I do not think that that should suddenly be accepted as the new normal, and with these new powers there is absolutely no reason to accept any figure much above 100,000 as the likely structurally reasonable figure at any one time to take into account the needs of people moving in and out, service men and women, the settlement of inheritances, delays in selling due to market conditions and regional differences in those conditions, and all the rest. I wonder whether my noble friend has some such end target clearly in mind or whether the Government accept that 200,000 is about as far as we should go—I must say, I hope not.

Even so, eternal vigilance will be necessary to stop the problem re-emerging. After all, it seems that, as my noble friend said in his excellent introductory speech, about 10% of councils in England today have yet to shake their local stumps and even take up the powers to use the existing premium on empty homes of just 50%, let alone go any further. I say to my noble friend that I trust that they will not be allowed to carry on like this for much longer or be dilatory with the new higher figure of 100%, as proposed in the Bill, which in effect would allow a maximum council tax charge of 200%.

Equally, too few councils—perhaps as low as one in 10—are making use of the empty dwelling management orders that I am told can be used in respect of properties that have been empty for a long period. I am not quite sure why this is: I believe that experts are useful sometimes and I am sure experts will come up with reasons as to why this is. Perhaps it has something to do with the typical English reserve about using powers that may be thought of as confiscatory of property—I do not know. It seems that there may also be striking differences between location to location in the publicly owned stock of councils and housing associations and the percentages of empties in their ownership. Again, I do not understand the reasons for this.

Nor do I understand the surprising spike in the number of empties in areas of very great pressure in the London commuter belt, in council areas such as Harrow, Brentford or Three Rivers—these being exactly where, at the same time, the green belt is under the greatest pressure. It may be a case of that buy-to-leave phenomena, with owners waiting for land values to increase, again promoting redevelopment.

So I conclude that greater, more effective and uniform pressure on all local authority areas would be brought about by the regular six-monthly publication of centrally collected data on these critical aspects of public information, without the need for campaigning bodies to resort to freedom of information requests, the media, me or whoever else to get the facts in front of them. I do not believe that that is right. Facts are of great value and, once published and regularly available, speak for themselves. That is when councillors might shake their stumps in this area. It is not a matter of naming or shaming but rather of naming to inform.

Others would argue that it is a pity that the Bill does not contain provisions for what might be thought of as a later escalator of the maximum council tax charge, pushing it up by another 50% or 100% in areas of extreme pressure. I would have liked to have seen that order-making power in this Bill. But I shall not seek to disturb the smooth surface, for the reasons that the other place concluded. We must always be on guard. Just when public policy seems to be incrementally dealing with an issue such as this, other unforeseen problems may pop up to disturb the surface and increase the number of empties. Let us look at the huge structural changes in retail that are currently overwhelming shops and shopping, devastating high and side streets alike in cities large and market towns small. This may well lead to a new increase in empties suddenly hitting us among the often interconnected residential properties when it is least expected, because of redevelopment in areas where shopping has collapsed. I have seen this myself in a small Somerset town near where I live, where there are many empty shops and many empty residential properties among them.

So eternal policy vigilance is imperative in the never-ending problem of vacant and residential homes. I have thought this for a long time, from when I was first on the old Oxford City Council, as it was then called. Across that chamber, the then yet-to-be-ennobled Lords, Lord Hunt, Lord Liddle and Lord Oakeshott of Seagrove Bay, were busy cutting their ruthless interrupting and barracking teeth on me. It was a problem then and so it remains.

There was a drive in this direction by the Chancellor in his excellent Budget last November to increase the empties premium, which will be combined with whatever action he may take following the conclusions of the review currently being conducted by Sir Oliver Letwin from another place on how to bring forward homebuilding on lands with valid planning permission that are vacant and being hoarded. Indeed, land being hoarded and vacant is the exact mirror image of the empty homes that have already been built. They are part of the same problem that the noble Baroness, Lady Pinnock, has just referred to. If we get those two streams of public policy action in tandem, there will be a clear twin-track more-homes approach by the Government that should be widely welcomed—just like, to me, this Bill should be welcomed.

--- Later in debate ---

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. Like colleagues on these Benches, I welcome the Bill and the steps it takes, both the business rates element and the increased powers proposed for local authorities on the amount of council tax that they can levy on an empty dwelling. I agree with the noble Lord, Lord Patten, who reminded us that the House of Commons did not propose any amendments to the Bill and that there was all-party agreement. Indeed, the Bill has benefited from the pre-legislative scrutiny that took place at that stage. It raised a number of issues, for example the potential financial loss for local billing authorities and whether rarely occupied second homes should be treated in the same way as empty homes. Given the role of this House as the scrutiny Chamber, I hope that it may be possible in Committee to look at a number of these issues. My noble friend Lady Thornhill talked about whether two years should be the limit or whether another figure might be appropriate, and whether the figure of 200%—that is, 100% plus 100%—is the maximum that a local authority could apply. There is a case for looking at whether the total might well be 300%. I look forward to that discussion in Committee. The noble Lord, Lord Campbell-Savours, made a very interesting point about the legal definition of a second home, should someone seek to transfer their primary home to become a second home. That is something that I would like to think about further.

As the Minister has explained, the basic aim of the Bill is to discourage home owners from leaving properties empty for long periods without penalising those who are unable to sell as a result of market conditions or who face genuine delays in probate. For that reason, it is welcome. As several noble Lords, including my noble friend Lady Pinnock and the noble Earls, Lord Lytton and Lord Listowel, have pointed out, the context is the state of local government finance, the future organisation of business rates, and funding local services. There are now clear difficulties in the retail sector over business rates. There is a fair funding review, and inevitably the Government are now reviewing the future of business rates. However, the noble Earl, Lord Lytton, pointed out that the system is not fleet of foot, and indeed it is not.

Clause 1 relates to the rating of property in common occupation. It rightly corrects the problems caused by the 2015 judgment, which has cost some businesses not only a backdated increase in their bills but, in some cases, the loss of their small business rate relief. The Bill is the correct response to that judgment. Put simply, contiguous hereditaments should be counted as a single hereditament.

I join the noble Earl, Lord Lytton, in saying that it is a trifle unreasonable—I think those were his words—for the Government to assume that building authorities have put away shedloads of money, given the 2015 judgment. He is right; I am sure they have not been putting away shedloads of money. However, there is a discussion to have about this issue, and it was raised several times during the passage of the Bill in the other place, not least at Third Reading. I hope very much that the Government will be able to come forward, perhaps in Committee, with a greater clarification that local building authorities are not going to suffer from the Bill becoming law.

I have four very brief points towards the conclusion on the council tax issue. First, I think it is right to raise the maximum premium on council tax that can be levied by a local authority to 100%, making 200% in total, where a property has been empty for two years or more. I want to associate myself at least with the definition of “long-term” as two years or more. If we get agreed definitions like that, it makes our discussions much easier.

My noble friends Lady Pinnock and Lady Thornhill both said the Bill would probably not make a great deal of difference in terms of council tax. I want to agree with them but I also want to agree with the noble Lord, Lord Patten, who was right when he said that this is a big incremental step. The sense of direction is the right one and a clear message is being sent. In future, therefore, there may need to be further fine-tuning of the law. However, the principle that the Government are trying to get across is important. It is not just that empty properties need services—they do; they need policing and they may need fire services if they are empty—but they can also cause a nuisance to neighbouring properties, so the steps taken since 2013, in the days of the coalition Government and after, to introduce both the 100% charge and the principle of a premium on properties that are unoccupied and substantially unfurnished, have been the correct ones.

The Minister reminded us about the total number of homes empty for over six months, which is not long-term. Six months is a comparatively short period in reality. I associate myself again with the comments of the noble Earl, Lord Lytton, when he said that we need to be a bit clearer about what the problem is that we are trying to solve with regard to empty properties. The figure of 205,000 is a comparatively low percentage, at around 1% of the 20 million-odd properties in the country. It is the case that since 2010 the total number of homes—

[Lord Patten]

I am so sorry to interrupt, particularly as the noble Lord has just been so charming about me. It may be a very small percentage of houses that are vacant but the number of 205,000 or so is what we are struggling to build in England in any one year, so it is a year’s worth of new homes.

[Lord Shipley]

My Lords, I would like to agree with the noble Lord: it is. However, that is still only 1% and the figure is for six months, not two years. In my view, the real problem is not the six months, which can often be the consequence of genuine delays of probate. The important thing is that the sense of direction is right. We need to end the scandal of empty homes deliberately left empty when they could be occupied by someone. Often, that relates to the buy-to-leave-empty market.

Does the Minister have figures—if not now, perhaps later in writing—for the breakdown of the reduction by 90,000 or so empty homes from 300,000 in 2010 to 205,000 in 2017? How many of those are in social housing, where empty homes are often referred to as voids; how many of them are owner occupied; how many are in the private rented sector; and how many are in the buy-to-leave-empty sector? That is important because when we consider whether there should be a rate of 300%, not just 200%, I would be thinking of those who have bought to leave empty as an investment to attract a higher level of taxation. I hope that we can discuss that in Committee.

Finally, I hope that we shall have a discussion on second homes in Committee. We have been reminded of the difficulty of identifying what is an empty home and what is a second home. If people do not tell you which they are, it is hard to find out. We need to explore in greater detail how the Government might manage to do that. As the noble Baroness, Lady Thornhill, pointed out, this is a resource-intensive exercise and we need to know better why the empty dwelling management orders do not work as well as we thought they would when they were introduced.

Despite these caveats, which I hope that we can discuss in Committee, the Bill should command the support of your Lordships’ House, and I hope that it gets a fair wind, and quickly.