Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill Debate
Full Debate: Read Full DebateLord Shipley
Main Page: Lord Shipley (Liberal Democrat - Life peer)Department Debates - View all Lord Shipley's debates with the Wales Office
(6 years, 2 months ago)
Lords ChamberMy Lords, I will speak to Amendment 4, on which my name appears, and remind the House that I am a vice-president of the Local Government Association. The case was very well put by the noble Earl, Lord Lytton, a moment ago. I am struck by the fact that this amendment, in the names of the noble Lord, Lord Kennedy of Southwark, and myself, seems to contain a reasonable set of proposals. I am particularly concerned by the noble Earl’s assertion that the professional bodies are saying that there has been little assessment of the impact and that we ought to know more. I have a particular concern about the authorities that are piloting the 100% retention of business rates. I very much hope that they will not be put in a position of having to refund more money than they originally gained. So this amendment—a probing amendment, in my view—seeks to ensure that the consequences of the Bill are well understood and reported to Parliament.
My Lords, I remind the House of my relevant interest as a vice-president of the Local Government Association. Amendment 2 in the name of the noble Earl, Lord Lytton, goes to the heart of the first part of the Bill, namely the positions some local authorities find themselves in—having to make refunds and potentially being out of pocket. In the 2017 Autumn Budget we heard the Chancellor of the Exchequer announce, following the decision of the Supreme Court, a return to the previous practice, and Clause 1 does just that. Business would further be allowed to ask the Valuation Office Agency to recalculate valuations so that business rate demand would be based on the previous practice, backdated to April 2010.
The Budget papers confirmed that the Government would fully compensate local government for loss of income—but then they had a change of heart and decided that if they had the extra money it was an unexpected windfall. The council would be very pleased about that, but if it had to pay anything back there would be no compensation for the authority concerned. The noble Earl’s amendment would require the Government to do exactly what they said they would do in the first place, and it has my full support.
Amendment 4 in my name and that of the noble Lord, Lord Shipley, would place in the Bill a requirement for the Government to undertake a review of the impact of the provisions in Clause 1. That seems a sensible and proportionate thing to do. The amendment would require the Government to have a review, sets out what it should cover and requires that the Government should lay it before both Houses of Parliament—but nothing beyond that. They would have to do nothing other than lay the review.
I hope that when the noble Lord, Lord Bourne, responds to this probing amendment and the noble Earl’s amendment he will see the point that we are trying to highlight. We are trying to give the Government the tools to do the analysis to make sure that they have got this right.
My Lords, this part of the Bill is about empty dwellings. My noble friend Lady Pinnock asked some important questions about the meaning of “unoccupied” and “substantially unfurnished”. I want to address a crucial, related issue: second homes that are substantially, although not completely, unoccupied. The Minister may be aware of a parliamentary petition to close the loophole that allows second home owners to pay business rates rather than council tax. The petition states:
“In England, second home owners can avoid council tax by claiming to be a business if they say they are available for letting for 140 days a year—they do not have to actually let at all. As their rateable value is below £12k, they also qualify for 100% small business rate relief—so pay nothing”.
In Southwold on the Suffolk coast, where many houses are second homes, research by Liberal Democrat colleagues suggests that this loophole may cost the local council about £500,000 a year in lost revenue. Crucially, second home owners in England only have to say that their properties are available for letting to qualify as a business, even if they are not actually let.
However, in Wales—the Minister will know that many good ideas come out of Wales—it is a requirement that any house designated as a business, rather than being liable for council tax, must be let for a minimum of 70 days. In one sense, that number is comparatively low, amounting to just over two months a year. However, it is a very important figure because it effectively prevents a second home owner avoiding paying council tax by registering the house as a business and then falling below the small business threshold.
In discussion on the Bill, the Member of Parliament for Totnes, Sarah Wollaston, asked:
“Will the Minister also use this opportunity to ensure that those who own second homes are contributing their fair share through council tax, and that they are not able to sidestep that by opting to pay business rates and then claiming eligibility for small business rate relief?”
Dominic Raab, the Minister of State for Housing, Communities and Local Government, replied:
“We have also made changes on holiday homes in the context of council tax and stamp duty. We will keep the point she raises under due consideration”.—[Official Report, Commons, 23/4/18; col. 649.]
Indeed, the Government have done that, but I hope that they will review this issue in much greater detail because the impact of both the reforms I mentioned—council tax and stamp duty—has been limited. I also hope that, when the Minister said that the Government would give it due consideration, it was not an attempt to push the issue into the long grass, but rather an acknowledgement that the department is indeed giving it due consideration.
Returning to Suffolk for a moment, I want to pay tribute to the work of local campaigners there for what they have undertaken so far. The Suffolk coastal communities embrace some of the largest proportions of second home owners in the United Kingdom. This impacts on the cohesion of these communities and pushes up house prices, reducing the available housing stock for local people.
I want to acknowledge that many second home owners do pay council tax. They can contribute to community life and they might hold a property as part of their future retirement plans to live in the area. However, business rates relief exists to help struggling businesses, not second home owners. Will the Government look at this issue in much closer detail and order an urgent review of the whole system? It is not that I am against second home owners: I am not against them. However, it does seem to be unfair that people who can afford two homes are subsidised by people who cannot afford to own one home.
My Lords, I support the comments that have just been made. As the former Member of Parliament for Suffolk Coastal and as someone of whom, if you asked him where he really lived, the answer would be in Suffolk—although not coastal Suffolk—I am the owner of a second home. It is a situation in which I am happy to pay my council tax in full, as I do in on my small flat in London. That is how we operate, and I think that is right. One just has to recognise that there are circumstances in which people have to work in one place and live in another, and that is absolutely acceptable.
I emphasise the point about the coastal communities of Suffolk, which I represented for so long. I saw the change; it was fascinating. Southwold was but latterly added to my former constituency—as they moved me closer and closer to the sea, people said that they were trying to tell me something. It has very largely become a place of second homes, and so has Aldeburgh and, increasingly, many other villages round about. It is a real problem for community cohesion; I understand that, having committed myself to the view that people should be allowed to have—and very often need—a second home. However, I do not support the idea that people can avoid their proper contribution to the community by using what has elegantly been referred to as a loophole. It is worse than that, because they are telling a direct lie. They are not running a business; they have no intention of running a business. They are trying to get the business rate and then not to pay it because they have the small business special arrangement. Of course, however, you can be a small business even if you do not let anything. It is not difficult. We could all be a small business if making nothing were the purpose of being a small business. With my family, I own and run small businesses, but we intend to make a profit, otherwise there is not much point in us doing it. However, to run a small business in order not to make a profit and to get the profit from the community is entirely unacceptable.
I want to make some difficult comments. I have now been in one or the other House of Parliament for a very long time. It does not matter which Government are in power—or which mixture, as sometimes it is a coalition—when they want to avoid dealing with something, they always promise the most careful consideration and the most urgent assessment of the real issues that may well arise. They warn that there may be other unintended consequences, meaning that one should not move too quickly. Sometimes they suggest that, although they have looked at it, they have not found quite the right answer, but the House can be assured that such an answer will be found, but not yet. I say to my noble friend, whom I respect enormously, as he knows—I have told him so from time to time—that Wales is right on this. Wales is right on quite a number of things in the climate change committee. I have to remind the United Kingdom Government how much better in some things Wales and Scotland are at moving on climate change. It is not surprising that Wales is right on this.
We have to deal with this for a reason that is not just about equity—although that is very important—or the resources of Suffolk Coastal District Council; I do not have to declare an interest there because I live in the Mid Suffolk District Council area. That reason is social cohesion, in the sense that it annoys, upsets and very often angers people that their neighbours are not paying what they are paying for local services. I do not think it is acceptable or reasonable and it seems something very simple to change. All we have to do is what the Welsh have done. It would be jolly nice to acknowledge that the Welsh got there first and that we in the rest of the United Kingdom are following suit.
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.
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.