All 3 Rishi Sunak contributions to the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018

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Mon 23rd Apr 2018
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Commons Chamber

2nd reading: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Tue 1st May 2018
Tue 15th May 2018
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill
Commons Chamber

3rd reading: House of Commons & Report stage: House of Commons

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

Full Debate: Read Full Debate
Department: Department for Levelling Up, Housing & Communities

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

Rishi Sunak Excerpts
2nd reading: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd April 2018

(5 years, 11 months ago)

Commons Chamber
Read Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts
Rishi Sunak Portrait The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
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I thank the hon. Members for Denton and Reddish (Andrew Gwynne) and for Oldham West and Royton (Jim McMahon) for their constructive comments on the Bill, and I will address some of their specific points shortly. We have had an incredibly interesting and entertaining debate, and one of the more succinct that I have heard in my time at the Dispatch Box. It has been extremely helpful to hear Members’ views today, ahead of further scrutiny of the Bill in Committee. It was great to hear some thoughts on what we can do to make progress on this issue.

The Bill will take forward two specific, short and important measures to promote fairness. It will provide fairness for hard-pressed businesses facing an unjustified tax hike, backdated where necessary. Those businesses have already paid their fair share, and deserve our support rather than being burdened by sudden and unreasonable demands. The Bill will deliver the Government’s goal of supporting those businesses, by restoring accepted and understood practice in the business rates system.

The Bill will also help those seeking a place to call home. It cannot be right that so many in our society are struggling to find somewhere to live while properties lie empty across the country.

Scott Mann Portrait Scott Mann
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My hon. Friend is aware of the challenges that we face in rural areas, especially in Cornwall, where we welcome the vacant homes premium, but how will local authorities be able to differentiate holiday homes and vacant properties? Some holiday lets are not let for a long period of the year.

Rishi Sunak Portrait Rishi Sunak
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My hon. Friend makes an excellent point and the issue of housing in rural areas was also raised by my hon. Friend the Member for Copeland (Trudy Harrison). He is right to highlight the issue. Legislation makes a distinction between long-term empty homes, which have been unfurnished and unoccupied for two years—those that the Bill seeks to address—and homes that are considered to be second homes, which are at least partially furnished and occupied on occasion. My hon. Friend the Member for North Cornwall (Scott Mann) will know that the coalition Government ended the presumption of a council tax discount for such second homes and levied a stamp duty surcharge on them. I will return to those measures when I respond to some of the other points raised.

My hon. Friend the Minister for Housing deserves enormous credit for the energy with which he has approached his new portfolio to make good on the Government’s commitment to fix our broken housing market, and the Bill is a small part of the process of doing that. Since 2010, we have introduced measures, including the £7 billion new homes bonus scheme, that have reduced the number of properties empty in England for six months or longer by a third, as we have heard tonight. But there is more to do, and the Bill will allow councils to levy an additional 50% premium on long-term empty homes, leaving the discretion on that decision with local authorities for all the reasons hon. Members have mentioned.

I pay tribute to my hon. Friend the Member for Harrow East (Bob Blackman), who has incredible experience of local government and brings it to bear on these matters. I join him in paying tribute to the hon. Member for Sheffield South East (Mr Betts), who we were all happy to see back in his place tonight. My hon. Friend raised the issue of pre-legislative scrutiny of the Bill and I am grateful for his comments. I also put on record my thanks for the work of the Housing, Communities and Local Government Committee in engaging extensively me with and my officials on the various technical issues raised. In particular, the Committee was right to pick up on the issue of voids and whether the Bill would capture the definition accurately. As my hon. Friend will have seen, the Bill takes into account the question that the Committee raised and we have worked with experts in the sector to tweak the definition. I think that will address the Committee’s concerns.

My hon. Friend rightly highlighted the issue of small businesses and cash flow, and urged us to press on as fast as we can. That is what we are trying to do. In response to letters from the Committee questioning the timing of the pre-legislative scrutiny, I said—and I repeat to the House tonight—that that is why we moved as quickly as we did. Instead of the normal process of 12 weeks, we had a slightly shorter process of eight weeks for that scrutiny, so that we could get the Bill on to the statute book as soon as possible and bring some relief to the small businesses facing cash-flow issues.

I turn to the oratorical tour de force from my hon. Friend the Member for Walsall North (Eddie Hughes). He said that the Bill is not sexy, but on the contrary these are the matters that keep local government Ministers, and the hon. Member for Oldham West and Royton, up at night. My hon. Friend will be pleased to know that we are focused on the detail. He was right to highlight to all hon. Members the particular delights of Beechdale, which they will all want to join me in visiting at the earliest opportunity, not least to shop the delights of Rob Mullett Butchers and the grocery store run by Jane and Phil. My hon. Friend also made a broader point about the importance of regenerating our urban centres, which was picked up by my hon. Friends the Members for Cheadle (Mary Robinson) and for South Suffolk (James Cartlidge). I can assure my hon. Friends that the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), who has responsibility for high streets, will have listened carefully to everything they said and will use their remarks as he develops policy to benefit our high streets around the country.

My hon. Friend the Member for Walsall North asked specifically about exemptions. I am pleased to tell him that council tax exemptions are already in place for people living in service accommodation or for those in the armed forces who are serving elsewhere and whose homes are therefore empty. Indeed, there are specific statutory exemptions for properties left empty for a purpose, for example when a person goes into care. There are also discretionary discounts for houses that are empty because of special circumstances such as hardship, fire or flooding, and I hope that addresses Members’ concerns on that point. My hon. Friend also kindly paid tribute to the drafting of the Bill, for which I cannot take enormous credit—I pay tribute to the officials, the ratings agencies and other experts who helped to draft the legislation to make it ready for today.

My hon. Friend the Member for Chippenham (Michelle Donelan) outlined yet again why she is a strong champion of small business in her constituency and around the country. She talked about entrepreneurship, and it is exactly right that our tax system and our policy supports the entrepreneurs not just of today, but of tomorrow. Supported by my hon. Friend the Member for Havant (Alan Mak), she, as ever, made a compelling case for why this Government and this measure will continue to support entrepreneurship across our nation.

I turn to some of the questions raised by the hon. Member for Oldham West and Royton. He asked specifically about the amount that will be raised from this measure. The stats are that 60,898 properties were subject to the measure in the last year, and 291 of 326 local authorities—90%—levied the premium. All but three of those levied the full 50%. That raised about £38.7 million, so an additional 50% would obviously double that. Just so that he has the full picture, if all local authorities used the full premium, that would equate to about £42 million and therefore, in total, £84 million.

Huw Merriman Portrait Huw Merriman
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Does the Minister agree that the true test of this policy will be if council tax amounts actually go down? That will mean that individuals are not behaving in the manner that we just described and will be paying less, thus freeing up the property for those who need it.

Rishi Sunak Portrait Rishi Sunak
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My hon. Friend makes an excellent point: that should be the long-term test of this policy. It is there to provide an incentive for individuals to bring those homes back into use and indeed, that is what we have seen. Empty properties overall have fallen in the last few years from 300,000 to 200,000, but in areas that are specifically subject to this levy, we have seen a 9% reduction in long-term empty homes since the measure was introduced. Hopefully, we will keep seeing that rate of reduction increase to eliminate as many empty homes as possible. My hon. Friend also raised the topic of foreign ownership. I am pleased to tell him that the Minister for Housing heard what he said and is aware of the issues. In his new portfolio, he is looking into that matter.

My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), who is not in his place, touched on the importance of open spaces. Indeed, the new national planning framework particularly encourages increasing density where possible so that we can do exactly that and preserve our wonderful open spaces. My hon. Friend the Member for Harborough (Neil O’Brien) made so many excellent and insightful points that I do not have time to review them all, but I join him in paying tribute to the campaign groups that have brought the Bill about.

Bob Blackman Portrait Bob Blackman
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My hon. Friend is giving good answers to many of the questions, but there is one outstanding question on the staircase tax. Because individual businesses are going to have to apply for a revaluation, there is a risk that they may end up paying more money if they make an application for revaluation and the rateable value increases. Will he look sympathetically at a view that people should not suffer as a result of applying for the revaluation? Otherwise, businesses may choose to say, “This will be too dangerous and risky to our cash flow.”

Rishi Sunak Portrait Rishi Sunak
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My hon. Friend makes a very good point. I am pleased to tell him that when businesses that have their valuation changed on the historical 2010 list come to appeal that decision, they will have the choice of seeing whether to take that appeal forward, once the Valuation Office Agency engages with them. If, for whatever reason, it decided that there were some other measure that it needed to change that caused an increase in the valuation, they could then choose not to pursue that matter, so they would not suffer from any increased rating. Of course, the current rating list is dynamic, as he will know. Changes good and bad will be relevant for the life of that list, as is the normal course of business.

Lastly, the hon. Member for Oldham West and Royton raised the issue of the Government’s broader support for business rates and for business across this country. He will know that the Government stand on the side of small business. The combination of measures announced in the last Budget and subsequently to the tune of £10 billion to help businesses up and down the country facing the revaluation included bringing forward the indexation to CPI; extending the £1,000 pubs discount, which I know many hon. Members across the House welcomed; doubling small business rate relief; and providing a £300 million discretionary fund for local authorities to apply in cases where there was particularly difficulty.

In conclusion, this important Bill will deliver widely supported measures to tackle an unfair and unintended rates increase for certain businesses and support the Government’s efforts to bring empty homes back into use. I appreciate all the comments from hon. Members this evening—no doubt we will return to some of them in Committee—but I am glad that we can all agree that the overall aims of the Bill and the positive impact that it will have for businesses and families seeking to call a place home should be welcomed. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

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

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 3 May 2018.

(3) The Public Bill Committee shall have leave to sit twice on the first day in which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Kelly Tolhurst.)

Question agreed to.

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

Motion made, and Question put forthwith (Standing Order No. 52 (1)(a)),

That, for the purposes of any Act resulting from the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill, it is expedient to authorise:

(1) the payment of sums to the Secretary of State in respect of non-domestic rating, and

(2) the payment of those sums into the Consolidated Fund.—(Kelly Tolhurst.)

Question agreed to.

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

Full Debate: Read Full Debate
Department: Department for Levelling Up, Housing & Communities

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

Rishi Sunak Excerpts
None Portrait The Chair
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Copies of written evidence that the Committee receives will be made available in the Committee Room.

We will now begin line-by-line consideration of the Bill. No amendments have been tabled, so we will proceed by considering in turn whether each clause should stand part of the Bill. There will be an opportunity to debate each clause. I suggest that the Minister should start the debate on each clause. Other Members will then be free to catch my eye and speak to that clause. A Member may speak more than once in a single debate. I hope that explanation is helpful.

Clause 1

Hereditaments occupied or owned by the same person

Question proposed, That the clause stand part of the Bill.

Rishi Sunak Portrait The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
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It is a pleasure to serve under your chairmanship, Mr Wilson. I thank all Committee members for being here promptly to discuss this technical but important Bill, which I hope will not detain us for too long.

Clause 1 delivers on the commitment made by the Chancellor at last year’s autumn Budget to address what became known as the staircase tax. The clause will restore the previous practice of the Valuation Office Agency from before the Supreme Court decision in respect of contiguous properties in the same occupation or ownership. We discussed on Second Reading the background to why the measure is necessary, and I have provided more detail about the measure in correspondence with the Select Committee on Housing, Communities and Local Government. I will not repeat that background, other than by saying that the clause is welcomed by the rating surveyor profession and supported by the Federation of Small Businesses.

The clause amends section 64 of the Local Government Finance Act 1988 to provide that, in a defined set of circumstances, two or more hereditaments shall be treated as one. Those circumstances, which are described in new subsections (3ZA) and (3ZB) of section 64, are: where the hereditaments are occupied by the same person or, if they are empty, owned by the same person; where the hereditaments are contiguous—that is defined later in the clause, and I will come to it shortly—and, in respect of occupied hereditaments, where none is used for a wholly different purpose. That will restore the rule that applied before the Supreme Court decision that contiguous hereditaments are assessed as one.

In preparing the clause, we had to ensure that we replicated previous practice in respect of the meaning of “contiguous”. The clause therefore introduces new subsection (3ZD), which defines what is contiguous for these purposes. New subsection (3ZD)(a) provides that

“two hereditaments are contiguous if…some or all of a wall, fence or other means of enclosure of one hereditament forms all or part of a wall, fence or other means of enclosure of the other hereditament”.

That ensures, for example, that two adjacent rooms on the same side of a common corridor separated by a wall are contiguous, but that two rooms on opposite sides of a common corridor are not. It also ensures that two buildings on the same side of a road that share a common party wall are contiguous, but that two buildings on opposite sides of a street or common access road are not. Importantly, that replicates the previous accepted practice of the VOA.

New subsection (3ZD)(b) provides that hereditaments on consecutive storeys of a building are contiguous if

“some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other”.

That ensures that consecutive storeys of a building are contiguous but excludes non-consecutive storeys where the intervening storey is in a different occupation or ownership. Again, that replicates the previous practice of the VOA.

We believe that this approach ensures that hereditaments would still be contiguous, even if a wall or floor plate separating the hereditaments contained a space such as a service void occupied by the landlord. However, respondents to the consultation and the Select Committee were less certain on that point. We therefore decided to put that beyond doubt by adding the words at the end of subsection (3ZD) that make it clear that hereditaments

“are not prevented from being contiguous…merely because there is a space”

such as a service void between them in a different occupation or ownership.

Finally, new subsection (3ZC) ensures that chains of contiguous hereditaments in the same occupation or ownership will still meet the tests. For example, it will ensure that floors 3, 4 and 5 of a building in the same occupation are treated as contiguous and as one hereditament, even though floors 3 and 5 are not themselves contiguous.

The change in the VOA’s practice following the Supreme Court decision affected the 2010 rating list as well as the current 2017 list. That has led in some cases to sudden and dramatic backdated rate demands, which have been of particular concern to the estimated 1,000 small businesses that, as a result of the decision, have lost the generous small business rate relief they rely on. Clause 1(2) therefore ensures that the measure applies retrospectively to 1 April 2010 in support of affected ratepayers.

That is why it is so important that the Bill does not go beyond the objective of restoring the previous practice that applied. I am pleased to say that, by working with organisations such as the Rating Surveyors Association, we are confident that we have met that objective, which the Select Committee confirmed in its report on the Bill.

Jim McMahon Portrait Jim McMahon (Oldham West and Royton) (Lab/Co-op)
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It is a pleasure to serve under your chairmanship, Mr Wilson. I repeat my thanks to the Minister for making the effort to meet before the Committee to go through some of the technicalities of the Bill. That will save the Committee from a headache. However, there are still some questions outstanding, including about the loss of income to local authorities. The autumn Budget book said:

“Local government will be fully compensated for the loss of income as a result of these measures.”

That was stated by the Chancellor, but it is not what is being offered today. Local authorities are being told that they will not be compensated because in effect they are in no worse a position had the High Court ruling not been made. That point was raised by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee, and we know from his subsequent contributions that the Select Committee continues to have those concerns.

Nor do we know yet what the impact will be across different local authorities, because that information has yet to be provided. We have not been provided with data to understand the local authority-by-local authority impact, so we do not know, for instance, how many are caught in 100% rate retention schemes, where they will have to pay costs. Nor do we know whether there are particular concentrations of properties in local authorities or whether they are spread evenly throughout the country, where such an impact would be marginal. We should endeavour not just to make legislation that we believe to be in the public interest—of course, that is important—but to make good legislation, with a solid, tested evidence base and with any necessary questions asked at the appropriate time. I would say now is the appropriate time to ask such questions. Let us see the detail on the local authority-by-local authority impact, particularly as the Government do not seem to be honouring the commitment they made in the autumn Budget.

The other, broader point—I will be careful not to stray too far from the Bill—is that the Government have taken into account what the business community told them and the Bill reflects that. I welcome that. The Government have been flexible and considered the impact of unintended consequences, which is a measure of good government. It is not a measure of bad government that could be perceived as, for instance, a U-turn. I recognise that our politics sometimes supports that type of language. In that context, I find it difficult to understand why other concerns raised following the revaluation and technical fall-outs of the business rate system have not been taken into account, such as the impact on cash machines in convenience stores.

In my town of Royton, the last bank is due to close. It will be the sixth bank to close in the town centre. The convenience store stepped up and provided a cash machine, so that people in the town could access money to do their shopping and, of course, support the market on the precinct, which relies heavily on cash transactions. A cash machine in the town is very important, but the turnover of that cash machine now contributes to the rates liability of the premises. A convenience store that would previously have been under the small business rates relief threshold, and would probably not be paying business rates at all, will in some situations now pay business rates because the turnover of the cash machine takes it over the threshold.

Good government means taking into account the impact of that and recognising that if convenience stores are stepping up when the banks are pulling out of towns, they ought to be supported, not be at a financial disadvantage as a result. That is just one example, but there are others that have been raised by the business community, the Federation of Small Businesses and the Association of Convenience Stores. We ought to reflect on that.

I would welcome some detail on that, even if provided at a late stage, after Committee, and I know that the Chair of the Select Committee would too. Many of these issues are not politically contentious—that is the spirit in which we made our previous offer and in which we are working today. There is broad support for them in the community, and we ought to work together to try to see them through. There were a number of items in the Local Government Finance Bill, which fell when the election was called, that need to be progressed, because local government is asking for them to be progressed. We ought to get together, see which of those elements have cross-party support and take them forward sooner rather than later.

Rishi Sunak Portrait Rishi Sunak
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Let me put on record my thanks to the hon. Gentleman for, as ever, the constructive way in which he approaches our discussions on this and other measures.

To turn to his first point on compensation for local authorities and what was said in the Budget document of last year, the reference to compensation in that document specifically related to the switch to the consumer prices index in business rates indexation and the extension of the pubs relief scheme. I fully appreciate that the document could have been clearer on that point. As a result, my Department issued a letter to all local authorities two days after the Budget to make it clear that local government would not be compensated for this specific tax measure. As we have previously reiterated, we consider those extra revenues to be a windfall that came as a result of a Supreme Court decision.

The new legislation will ensure that the position is restored to where we were beforehand, so there should be no net loss to local authorities. That said, the hon. Gentleman raised the issue of rates retention. We are aware of his point—that under the rates retention scheme, some local authorities may see a small impact on their overall retained business rates. That would potentially occur in pilot areas, where the percentage of rates retained locally is different in the year that the refund will be paid, compared with the year in which the authority first received the windfall from the Supreme Court decision. We have previously said that it is very hard, if not impossible, for us in the Department to quantify that impact, but officials believe that it is small. That said, we are considering the points made in the submission by London Councils and the Greater London Assembly on that issue.

On the broader support for businesses through the business rate scheme, I am delighted that hon. Gentleman welcomes our support of small business. This is one measure, but there are others. I point to the Budget last year and the year before that, where we doubled small business rate relief, which was widely welcomed by businesses, including the FSB. We took almost 600,000 smaller business out of rate relief. In addition, there was a £435 million package to target ratepayers who face the steepest bills as a result of the revaluation. That included something that was warmly welcomed in my constituency and I am sure many others: the £1,000 pub discount voucher, which has also been taken up.

Lastly, we brought forward by one year the indexation of business rates from the retail prices index to the consumer prices index, which is worth some £2.3 billion over five years. Hopefully, the hon. Gentleman will agree that that shows strong support for small business. Another measure that the FSB has welcomed, and which was part of the Local Government Finance Bill that fell at the last election, was business rates relief for plant nurseries—a measure that was also the result of a Supreme Court decision that changed settled practice and which had cross-party support. He will be aware that we recently laid a written ministerial statement recommitting the Government to legislate to reverse that decision. Indeed, that decision will be made retrospectively, so that plant nurseries will be exempt from business rates and treated as agricultural property. I look forward to working with him on that, and hopefully getting his support when the time comes.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Higher amount for long-term empty dwellings

Question proposed, That the clause stand part of the Bill.

Rishi Sunak Portrait Rishi Sunak
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As we have discussed in the past, our housing market is not working as well as we would like. Young people are struggling to get on the property ladder, and to enjoy the same opportunities as their parents and grandparents. Today, the average price of a house in England is almost eight times the average income, compared with four times the average income in 1999.

The Government are committed to boosting housing supply to ensure that hardworking people have a secure place to call home. Our reforms put us on track for an average of 300,000 homes to be delivered per year by the mid-2020s. Although building new homes is undoubtedly a fundamental part of fixing a dysfunctional market, we must also make more use of the our existing stock. It cannot be right that while many are waiting for a house to call home, thousands of properties stand empty, some for years. Homes left empty for the long term can be a blight on a neighbourhood, as well as the site of crime and antisocial behaviour.

Scott Mann Portrait Scott Mann (North Cornwall) (Con)
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I have spoken to the Minister about this several times, and I know he understands the challenges we face in Cornwall with second home ownership and vacant properties. How will the Bill differentiate a second home and a vacant home?

Rishi Sunak Portrait Rishi Sunak
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My hon. Friend has raised second home ownership in his rural constituency many times with me and other colleagues, and he is right to do so. Rural areas face challenges with second home ownership—coming from a rural constituency myself, I fully sympathise with some of his points.

Current legislation makes a distinction between second homes and empty homes. We are considering long-term empty homes, which are defined as homes which are “substantially unfurnished” and have been unoccupied for two years. Second homes are covered by a different part of council tax legislation, and the Government previously removed the necessity for local authorities to charge a discount on council tax. They are now allowed to charge the full amount. My hon. Friend will be aware that the Department is considering the treatment of second homes and business rates—he and other colleagues have asked me whether it is appropriate for some second home owners registered for business rates to benefit from small business rate relief and therefore pay no taxes, and whether our legislation captures fair use of that provision correctly. I am currently investigating that.

Before 2013, councils could not collect council tax from properties that had been empty for up to six months. Since then, we have ensured that councils can charge the full rate of council tax on such properties. That same year we enabled local authorities to charge a council tax premium of up to 50% on long-term empty homes. That power has been taken up by nearly 90% of councils, all but three of which applied the full 50% premium in 2017. The number of long-term empty properties subject to a premium has fallen by 9% among those councils that have used the power every year since 2013.

There are carrots as well as sticks. The new homes bonus scheme gives local authorities the same financial reward for bringing an empty home into use as for building a new one, and the Government have allocated £7 billion in new homes bonus payments to local authorities since 2011. Following those interventions, the number of properties left empty for six months or more has reduced by a third since 2010, from 300,000 to just over 200,000. The Bill goes even further, and doubling the cap on the empty homes premium will allow local authorities to strengthen the incentive to bring empty homes back into use.

Different areas will have different housing needs and different numbers of long-term empty homes. It is therefore right that decisions on whether to apply a premium and the exact rates to be charged are taken at local level as before. Councils are acutely aware of the needs and demands of their areas. We recognise that local authorities will want to reflect carefully on the local housing market in deciding whether to issue a determination: for example where a homeowner is struggling to rent or sell a property in a challenging market. We are clear that the premium should not be used to penalise owners of homes that are genuinely on the market for sale or rent. We published guidance to that effect in 2013, reminding local authorities to take into account the reasons why a property is empty.

Hon. Members may finally wish to note that this provision would not bring any additional properties within scope of a premium. Only properties that could have been liable might be affected by the new higher premium.

Jim McMahon Portrait Jim McMahon
- Hansard - - - Excerpts

The Labour party supports the Bill, but our manifesto suggested going further. Rather than a 200% premium, there would be a 300% premium and consideration of bringing the empty period to a year. There is a reason for that: the housing markets across the country are very different. The Bill will not address the problem of the concentration of empty homes in London. Figures provided by the House of Commons Library show that 20% of City of London properties are empty. In Westminster and in Kensington and Chelsea, one in 10 properties are empty.

Such properties are owned by people who think nothing of paying twice the amount of council tax that a usual resident does because they have the financial means to pay it without that having an impact on their pocket. I am not sure that this measure goes anywhere near where it needs to go to address the region of the country with the largest housing demand. We know about the housing pressures in London and that many of the properties are held by property investors, a number of which are foreign-based. The measure will not address that, and the Government have not made a determined effort to address it.

It is bad enough that properties that have been in the community for some time are being bought up, but it is a scandal that brand-new properties—whole tower blocks in some cases—are built, but in the evening there are no lights on because not many people live there. They are built but held as investments with no intention of people living there. The Government need to think about what financial measures they can use to encourage owners of properties in that very particular market to bring them back into use. We build houses for people to live in, not for wealthy institutions to hold with no intention of anybody ever living in the property.

In some housing markets—we experience this in the north of England—empty homes are the result of a broken housing market. The Labour Government introduced the housing market renewal project to address a fundamentally broken housing market in which there was no latent demand from local people to buy the properties, and those who were able to buy a property did not want to live in the areas where properties were empty. When the housing market renewal scheme was cancelled in 2010, the Government turned their back on those areas.

Some areas have been brought back into use, and many local authorities are introducing innovative schemes. In Liverpool and Stoke, local authorities are selling empty properties for £1 as a way to encourage people to get on to the housing ladder. We know from reports that the people who have benefited respect the schemes. The properties would not have been on the housing market had it not been for those schemes, so it is a double win. The initiative enables empty properties to be brought back into use and gives somebody the chance to get on the housing ladder when in other circumstances they would not be able to afford to do so.

In other areas with similar housing characteristics, a number of properties were earmarked for demolition under housing market renewal—the properties were purchased and the windows boarded up—but the Government removed the money in 2010. The boards came off the windows and the properties were sold to private landlords. Taxpayers are paying through the housing benefit bill for what is generally substandard accommodation in areas with a broken housing market, and are doing so for properties that generally do not meet the decent homes standard. In Greater Manchester, 40% to 50% of the £350 million a year we pay in housing benefit to private landlords is for properties that do not meet a decent standard.

The country could use that money better to provide decent, safe properties with good solid tenures where people enjoy living, in areas where there is a high-quality environment and the roads are safe, and where play areas provide a safe place for children to play, not just terraced streets that were built to support mill workers. Now that the mills have closed, those houses are just not desirable for many people. The Government need to take a broader view of how empty homes affect different parts of the country, and they must bring forward more active proposals for London, given how wealthy investors are holding properties. We also need a plan for areas where the housing market is weak. These measures will go some way to addressing that problem, but they will not address the inherent weakness in the local housing market where the owner-occupier element is weak.

We need a genuinely joined-up plan. This is not about a sticking plaster to support local authorities that have had their budgets cut dramatically, or about raising tax; this is about bringing empty homes back into use. The Government’s response, particularly since the empty homes fund was deleted, seems to be: “Well, if local authorities bring homes back into use, they will be the beneficiaries because they will get a new homes bonus payment”. However, the new homes bonus payment is retrospective, and we would be expecting local authorities to find money from their base revenue budget to bring empty homes back into use at a time when many of them cannot afford to pay for social care and children’s safeguarding. The Government need to come forward with a plan and funding to support local authorities to bring empty homes back into use. Taxing people who own those properties is one element of that, but in some cases direct grant funding will be needed to bring accommodation back into use.

Rishi Sunak Portrait Rishi Sunak
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I thank the hon. Gentleman as always for his thoughtful comments. The two substantive points he mentioned were whether the level of the premium is too low at 100%, and whether two years is too long as a measure for an empty property. On whether the premium is too low, we need to strike a careful balance between providing a strong incentive for bringing empty homes back into use, and not disproportionately penalising homeowners who may be struggling to sell or rent out a property or to complete any major renovations that might be required. We believe that doubling the premium cap strikes the right balance. Scotland and Wales also have a premium of 100%, but I understand the hon. Gentleman’s point.

On whether the qualifying period for an empty home should be less than two years, it is worth noting—I know this from the correspondence that the Department receives—that some owners of empty homes face circumstances that make it difficult for them to bring their empty homes back into use quickly. That could be a renovation or the time taken to put something on the market with a difficult set of conditions. There may also be delays as a result of the probate process, for example. Again, I think the two-year period strikes the right balance.

Jim McMahon Portrait Jim McMahon
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Any scheme, even with a 12-month qualifying period, can have exemptions that take into account individual circumstances. There is already a scheme to deal with properties that are under probate, which is clearly outside the control of the executors who are trying to dispose of it. That can be managed. However, a number of landlords own properties and have no intention of letting them out. They will simply flip them over into different names to avoid paying the tax, and a more concerted effort to deal with such issues is important. The truth is that it would be much more difficult for people to keep flipping the property if we had a 12-month period—they can currently do it every 24 months.

Rishi Sunak Portrait Rishi Sunak
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The hon. Gentleman is right that there are exemptions. For example, there is a six-month council tax free period for probate, and then the clocks starts. The problem is trying to define ex ante the individual circumstances in which it might be fair to have a period of more than one year. That is why we believe two years is the right amount of time—it provides flexibility but also serves somewhat as an incentive to bring homes back into use—but I understand his point, and why people would take a different view on what the right period should be.

On the broader strategy for empty homes and local authorities, I agree with the hon. Gentleman that there are examples of individual local authorities coming up with good, innovative ways to tackle to problem of empty homes. He mentioned some, but I am aware of examples in Bolton and Kent where local authorities have come up with successful ideas, whether loans, discounts or other schemes, to bring empty homes back into use. That is why our approach is the right one. He might disagree with the quantum of funding but, at £7 billion, the new homes bonus is substantial and acts as an incentive to local authorities to come up with schemes to bring homes back into use. They will be financial rewarded—I appreciate that that will be after the fact, but that is as it should be—for success in bringing empty homes back into use. That serves as a carrot, which is the right approach. Rather than the Government telling each local authority exactly what to do, we provide a framework for rewarding good behaviour and let individual local authorities innovate. Hopefully, increasing the premium today will serve only to improve the situation.

The hon. Gentleman is right to point out that, in the long term, we should not rely on that as a source of funding. We would rather not have empty homes, and want to ensure that everybody who wants a home has one to live in. The fewer empty homes there are, the better.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Extent, interpretation and short title

Question proposed, That the clause stand part of the Bill.

Rishi Sunak Portrait Rishi Sunak
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This is a standard clause on the jurisdictional application of the Bill. My officials are in contact with their counterparts in the Welsh Government, who are considering whether to request that we extend the Bill to Wales. As soon as we hear from them, I will inform the Committee and the House and adjust as required.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Bill to be reported, without amendment.

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

Full Debate: Read Full Debate
Department: Department for Levelling Up, Housing & Communities

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

Rishi Sunak Excerpts
3rd reading: House of Commons & Report stage: House of Commons
Tuesday 15th May 2018

(5 years, 10 months ago)

Commons Chamber
Read Full debate Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 May 2018 - (1 May 2018)
Rosie Winterton Portrait Madam Deputy Speaker (Dame Rosie Winterton)
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As indicated on the Order Paper, the Speaker has certified that the Bill relates exclusively to England on matters within devolved legislative competence. As the Bill has not been amended, there is no change to that certification.

Under Standing Order No. 83M, a consent motion is required for the Bill to proceed. It has been tabled and is available in the Vote Office. Does the Minister intend to move the consent motion?

Rishi Sunak Portrait The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
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indicated assent.

The House forthwith resolved itself into the Legislative Grand Committee (England) (Standing Order No. 83M).

[Dame Rosie Winterton in the Chair]

--- Later in debate ---
Rishi Sunak Portrait The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
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I beg to move, That the Bill be now read the Third time.

This Bill, above all, promotes fairness; it promotes fairness for hard-working business rate payers hit by a tax hike that they could not have anticipated—the so-called staircase tax—and fairness for those who struggle to find somewhere to live while properties lie empty for years. That was why we moved quickly to introduce the Bill and ensure that ratepayers, in particular, receive the urgent help that it will provide. I thank hon. Members on both sides of the House for their contributions and support in helping us to achieve this aim.

Tim Farron Portrait Tim Farron (Westmorland and Lonsdale) (LD)
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The Minister is making important points and the Bill does some important things. However, it could do something important that it does not—it does not allow local authorities, such as his and mine, in very rural areas to vary council tax on second homes. He will be aware that in the Yorkshire dales and the Lake district, vast percentages of communities are empty most of the year round because homes are not lived in. That undermines schools, public transport and the sustainability of such communities. Will the Government listen to local authorities and local communities and allow council tax to be raised to tackle the problem of excessive second-home ownership?

Rishi Sunak Portrait Rishi Sunak
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I thank the hon. Gentleman, my constituency neighbour, for his intervention. He is right to point out the issue of second homes in rural areas, which he and I have local familiarity with. I gently disagree when he says that nothing is being done. As he will be aware, the Government introduced a stamp duty surcharge for second homes. Much of the funds raised from that have gone to schemes, perhaps in his constituency and certainly in mine, in areas with high second-home ownership—for example, in Hudswell in Richmondshire, where community land trusts have been funded to create affordable housing for local occupancy. Beyond that, local plans, which no doubt will be discussed in the forthcoming debate, also allow local communities to have control over who is living in new build properties.

Work is being done, and all that followed the work done by the coalition Government to remove the automatic discount for second homes. The hon. Gentleman will be aware that that was in place for many years. The coalition Government removed the necessity for the discount to apply, and now the vast majority of second homes are not eligible for a council tax discount, but he is right to point out the issue. The Department is looking more broadly at the loophole with regard to business rates applying to second homes and them then qualifying for an exemption through small business rates relief. This has been raised by hon. Members, including my hon. Friend the Member for St Austell and Newquay (Steve Double) and others from Cornwall, so the hon. Member for Westmorland and Lonsdale (Tim Farron) can rest assured that I am keeping an eye on this issue.

I return to the Bill, which deals with empty homes. I thank our partners in the rating sector for their invaluable help with the draft provisions, together with the very detailed and technical work that was done by officials, to whom I pay thanks. This has helped us to bring effective legislation to the House that navigates the intricacies of ratings law.

I also pay tribute to the work of the Housing, Communities and Local Government Committee. Not only did its comments on the definition of a void find their way to the language in the final Bill, but I noted the points raised on Second Reading by the Committee Chair, the hon. Member for Sheffield South East (Mr Betts). He is not in his place, but I thank him and assure him that I look forward to working with him in future to ensure that Bills from my Department and in my brief go through the adequate legislative scrutiny process that we were fortunate to enjoy doing with the Committee. Lastly, I thank the hon. Member for Oldham West and Royton (Jim McMahon) for his input and constructive attitude in the Bill Committee. I very much look forward to working with him on future local government measures.

In conclusion, this Bill delivers on our commitment to fairness and supports those in our country who want to build a better life. It is a Bill for those looking for a place to call home. It is a Bill for small businesses. It is a Bill that I hope we can all welcome, and I commend it to the House.