§ '.—(1) Before specifying substituted valuation bands pursuant to section 5, and before making a local government finance report under section 78A of the Local Government Finance Act 1988, the Secretary of State shall consider the effects in each region of England and in Wales of the amounts of council tax liability brought about by:
- (a) valuation bands in England;
- (b) valuation bands in Wales; and
- (c) the distribution of revenue support grant.
§ (2) In this section "region" shall have the meaning of the standard economic region, except that Greater London and the rest of the South East shall be treated as separate regions.'.—[Mr. Blunkett.]
§ Brought up, and read the First time.
Mr. Deputy Speaker
With this it will be convenient to take the following: new clause 15—Discontinuation of valuation bands—
§ '.—(1) The Secretary of State may by order discontinue the system of valuation bands established under this Act.
§ (2) For the system of valuation bands there may by order be substituted lists which show for each dwelling its valuation.
§ (3) The liability to council tax in respect of each dwelling shall be in direct proportion to the dwelling's value.
§ (4) No order under this section shall be made unless a draft of the order has been laid before and approved by resolution of the House of Commons.'.
§ Amendment No. 111, in clause 5, page 3, line 23, after 'England' insert 'apart from Greater London'.
§ Amendment No. 86, in page 3, line 24, leave out from 'following' to line 40 and insert—89
|Range of values||Valuation band|
|Values not exceeding £52,000||A|
|Values exceeding £52,000 but not exceeding £68,000||B|
|Values exceeding £68,000 but not exceeding £88,000||C|
|Values exceeding £88,000 but not exceeding £120,000||D|
|Values exceeding £120,000 but not exceeding £160,000||E|
|Values exceeding £160,000 but not exceeding £210,000||F|
|Values exceeding £210,000 but not exceeding £420,000||G|
|Values exceeding £420,000||H|
§ Amendment No. 3, in clause 5, page 3, leave out lines 39 to 40 and insert '240,000
|Range of values||Valuation band|
|Values exceeding £240,000 but not exceeding £320,000||H|
|Values exceeding £320,000 but not exceeding £480,000||I|
|Values exceeding £480,000 but not exceeding £640,000||J|
|Values exceeding £640,000 but not exceeding £800,000||K|
|Values exceeding £800,000||L'.|
§ Amendment No. 112, page 3, line 40, at end insert—
§ '—(3) The valuation bands for dwellings in Greater London are set out in the following Table—
|Range of values||Valuation band|
|Values not exceeding £52,000||A|
|Values exceeding £52,000, but not exceeding £68,000||B|
|Values exceeding £68,000, but not exceeding £88,000||C|
|Values exceeding £88,000, but not exceeding £120,000||D|
|Values exceeding £120,000, but not exceeding £160,000||E|
|Values exceeding £160,000, but not exceeding £210,000||F|
|Values exceeding £210,000, but not exceeding £420,000||G|
|Values exceeding £420,000||H'.|
§ Amendment No. 16, page 4, line 1, leave out subsection (3) and insert—
§ '(3) The valuation bands for dwellings in Wales shall be as specified in the following Table—
|Range of values||Valuation band|
|Values not exceeding £15,000||A|
|Values exceeding £15,000 but not exceeding £30,000||B|
|Values exceeding £30,000—£37,000||C|
|Values exceeding £37,000—£45,000||D|
|Values exceeding £45,000—£55,000||E|
|Values exceeding £55,000—£70,000||F|
|Values exceeding £70,000—£90,000||G|
|Values exceeding £90,000—£120,000||H|
|Values exceeding £120,000—£150,000||I|
|Values exceeding £150,000—£180,000||J|
|Values exceeding £180,000—£210,000||K|
|Values exceeding £210,000—£240,000||L|
|Values exceeding £240,000—£300,000||M|
|Values exceeding £300,000||N.'.|
§ Amendment No. 4, in page 4, leave out lines 17 and 18 and insert '£150,000
|Range of values||Valuation band|
|Values exceeding £150,000 but not exceeding £200,000||G|
|Values exceeding £200,000 but not exceeding £275,000||H|
|Values exceeding £275,000 but not exceeding £350,000||I|
|Values exceeding £350,000 but not exceeding £425,000||J|
|Values exceeding £425,000 but not exceeding £500,000||K|
|Values exceeding £500,000||L'.|
§ Amendment No. 5, in page 4, line 24, at endinsert—
§ '(4A) The Secretary of State shall establish an additional band to those set out in subsection 2 above that shall be for dwellings provided and occupied solely in respect of a person's employment.'.
§ Amendment No. 32, in page 4, line 24, at end insert—
§ '(4A) The Secretary of State may by Order, as regards financial years beginning on or after such date as is specified in the Order, make provision in respect of the Council of the Isles of Scilly—
- (a) substituting another proportion for that which is for the time being effective for the purposes of subsection (1) above;
- (b) substituting other valuation bands for those which are for the time being effective for the purposes of subsection (2) above.'.
§ Amendment No. 33, in page 4, line 25, after '(4)', insert 'or (4a)'.
Amendment No. 93, in clause 74, page 49, leave out lines 5 to 8 and insert—
'shall be based upon the value given to that dwelling in the valuation roll.'.
§ Amendment No. 94, in page 49, line 11, at beginning insert
§ 'Values not exceeding £15,000 AA'.
§ Amendment No. 10, in page 49, line 11, leave out 'Values not exceeding £27,000' and insert
|'Values not exceeding £20,000||AA|
|Values exceeding £20,000 but not exceeding £27,000'.|
§ Amendment No. 95, in page 49, line 22, at end insert—
|'Values exceeding £212,000 but not exceeding £260,000||I|
|Values exceeding £260,000 but not exceeding £320,000||J|
|Values exceeding £320,000 but not exceeding £400,000||K|
|Values exceeding £400,000 but not exceeding £500,000||L|
|Values exceeding £500,000||M.'.|
§ Amendment No. 11, in page 49, leave out lines 23 and 24 and insert '£180,000
|'Values exceeding £180,000 but not exceeding £250,000||H|
|Values exceeding £250,000 but not exceeding £400,000||I|
|Values exceeding £400,000 but not exceeding £500,000||J|
|Values exceeding £500,000||K'.|
§ Amendment No. 96, in page 49, line 23, leave out £212,000'and insert'£150,000'.
§ Amendment No. 97, in page 49, line 24, leave out '£212,000' and insert
§ '£150,000 but not exceeding £212,000'.
Amendment No. 12, in page 49, line 30, at end insert—
'(3A) The Secretary of State shall establish an additional band to those set out in subsection 2 above that shall be for dwellings provided and occupied solely in respect of a person's employment.'.
§ Mr. Blunkett
I had intended to appeal tonight to the massed ranks of Conservative Members representing seats 92 in London and the south-east, who I thought would be here to protect their constituents' interests and to press for a change in the banding structure, Unfortunately, however, there are fewer than a dozen of them here.
Mr. Robert G. Hughes
On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Member for Sheffield, Brightside (Mr. Blunkett) to make comments and tell stories about Conservative Members when there is only one—Scottish—Labour Back Bencher present—and certainly none of those whose constituencies will be affected?
§ Mr. Blunkett
When all the jollity is over, the fact remains that the Labour party is committed to a fair system of taxation that would ensure the protection of those in high-price areas who happen to be on low incomes, and that, come 10 o'clock, Conservative Members will vote for a system that does not do that. That is why I had intended to appeal to Conservative Members representing constituencies in London and the south-east who it might be thought would have wanted to debate the issue.
§ Mr. John Marshall (Hendon, South)
I note with interest the hon. Gentleman's concern for the charge payers of Barnet. Does he accept that, under Labour's local government reform proposals, my constituents would end up paying more than they would under the proposed council tax? Is that the sort of concern that the hon. Gentleman shows for my constituents?
§ Mr. Blunkett
I should certainly be concerned if, under the proposed banding system, 46 per cent. of my constituents fell into the top band whereas only 6 per cent. fell into the bottom three bands, which is the case in the hon. Gentleman's constituency. Such a situation is designed to make people in the area rightly feel that, having rid themselves of the poll tax, under which everyone was taxed the same amount, they are now to have a system under which nearly everyone is taxed the same amount. On those grounds, I should expect the hon. Gentleman vigorously to promote, and vote for, amendment No. 112.
The Government's proposed system of valuation bands is likely to lead to greater unfairness, unworkability and unsustainability than the system that the Government are removing—and that is saying something. The proposed valuation system will lead to confusion and administrative difficulty. It is a Mickey-Mouse valuation system which taxes families whilst protecting individuals living alone, and which is based on the false premise that if one can make something cheap and make it look simple, it will be better. We do not believe that that is the case. We believe in fairness and equity and we want people to understand clearly the basis on which they are taxed. That is the principle that should be applied to any form of property tax, and it requires that people should have the right to 93 immediate access to information about the valuation of their property rather than having to appeal to find out the amount that they are to be charged.
We believe that a valuation system whereby an average of £1.58 is paid out for the valuation of a property—with some people finding that the valuation of their property is costing less than the price of a KitKat—is a system open to considerable ridicule. We also believe that a system that does not take into account the circumstances of a property is likely to lead to the kind of upheaval that we witnessed under the poll tax.
The fact that there are so few hon. Members in the Chamber tonight indicates that Conservative Members have learnt few lessons. They showed the same indifference to the difficulties and dangers and to the warnings that we gave when the poll tax was introduced. I exempt those representatives of the media who are present tonight when I say that the media—particularly the broadcast media—show the same indifference to the council tax as they did to the poll tax. That does not mean that, in its anomalies, difficulties and silliness, the council tax is not as dangerous as the poll tax; it clearly is. That is why we are intent on developing the debate tonight and on exposing some of those anomalies.
If individual valuations do not take place and if properties are not treated fairly, we are bound to get the kind of anomalies that we exposed in Committee. Houses in the same street will be valued in the same way because they happen to be the same type of property, even though their environment and circumstances are completely different. One might expect a family living in a property located next to a discotheque to pay less in tax, because the value of occupation is less, than one living in a property of the same type in the same street overlooking the local park. With valuers undertaking valuations from their desks or by driving down the street, there is no way in which the valuation process can be undertaken fairly.
There is no fairness in a system that fails to take into account the substantial differences that exist within properties—in terms of value of occupation or, for example, improvements, such as rear extensions. Such factors are very important in ensuring that people pay according to their means—in so far as that is possible with any property tax. The cost of the dwelling and the value of occupation of the dwelling relate to ability to pay, which is a firm and fair basis for levying a local tax.
Under the Government's proposals—and the Minister of State boasted about this on the radio this morning—valuers will not have access to the properties.
Under the valuation process that has just begun, valuers will be prevented from entering properties to undertake the valuation. They are discouraged from getting close to the property. Indeed, it is welcome if they do not actually see the property. If there is any doubt about whether there is an unfairness in looking only at the front of a property as the valuer passes in his car, the Minister told us in Standing Committee that valuers will be able to take aerial photographs. The Minister this morning claimed that he did not say that, but he did say it. He did not say, as he claimed this morning, that valuers will be able to use old mythical aerial photographs of houses which may no longer exist or may have been altered since the photograph was taken.
The Minister said that, if there was any doubt, the old rating valuation list would be used. That is a real giveaway because that is what we proposed to ensure that we could 94 have got rid of the poll tax by April 1992. However, the Government rejected that and refused to accept our interim solution while a thorough individual revaluation of property took place.
In parliamentary language, there has been a degree of duplicity. The valuers are not supposed to take a detailed look at the property. However, they are supposed to use old photographs or information on the rating list. Presumably, if that information is not available, they will take to a hot air balloon. They will not get much of a hot air balloon for an average of £1.58 a property, although there might be plenty of hot air from the Conservative Benches. If the council tax is ever implemented, the balloon will go up.
The more we delve into the proposal, the less credible and more questionable it appears. Over the past few days, Ministers have boasted that they have saved £100 million because they had intended to spend £120 million on the valuation process. It will cost only £21 million because the guidelines were such that valuers were told that they had to undertake the process as cheaply, simply and as quickly as possible using as little information as possible. That is why we are not spending money that should be spent to save some people from being taxed unfairly.
People will find that their properties will he placed in bands, but they will not be aware of the subtle differences in the valuation process. In areas such as London and the south-east, those differences might mean that a person with a property valued at £161,000 instead of £159,000 could be in the top valuation band together with someone with a house valued at £319,000. One cannot imagine a less fair system. In order to get the information to challenge that valuation and be put back into band G, and therefore save considerable sums of money, someone would have to appeal. However, that person will not be allowed to appeal until January 1993.
The Government's proposal for the banding valuation process is likely to lead to a disastrous situation in which thousands of appeals will be made within three months of the system being brought into operation. There will be great disgruntlement and disagreement. Local authorities will be seeing the back of the poll tax and experiencing collection problems. They will also be trying to implement the new tax and having to deal with people who are aggrieved and concerned about the bands in which they have been placed.
In addition, there is the inherent unfairness of the compression of the bands and the way in which in many areas—and I have already referred to London and the south-east—people will find that there are not really eight bands but only two, three or four bands for their area. In some areas nearly all properties fall into three rather than eight bands. Together with the discount system to which my hon. Friend the Member for Dagenham (Mr. Gould) will refer tomorrow, people will face a property poll tax, not a new system. The hon. Member for Hendon, South (Mr. Marshall) referred to Barnet, which is a classic example of an area in which nearly half the properties fall within the top band.
§ Mr. Portillo
I know that the hon. Gentleman would not want to mislead the people of Barnet. Will he confirm that, as he does not believe in compression, someone in a £200,000 property in Barnet would be asked under 95 Labour's system to pay five times as much as someone in a £40,000 house? Under our system, we believe that it should be limited to two and a half times because we recognise that some people in higher valued properties may not have the income to allow them to pay those high rates of tax.
§ Mr. Blunkett
That shows that the Minister is allowing his antagonism to the old rating system to—and I am one of the people who can say this in the Chamber—blind himself to the reality of a normal individual valuation process.
A valuation process should be linked to the amount that people will be expected to pay to the valuation placed on their property, not in bands or ratios to each other, but in relation to the worth of occupying that property. The spread of properties across a high-value district in England would ensure that people paid what was fair in terms of the differences between the prices of the properties. Some of us agree that there is a need for the relationship between districts and regions to be brought into line with each other.
§ Mr. Blunkett
As the hon. Member for Hendon, South is suggesting that the Minister is right, someone in Barnet in a £200,000 house would not pay five times as much as someone in a £40,000 house under our proposed valuation process. The Minister knows that that is the case.
§ Mr. Marshall
In answer to my hon. Friend the Minister, the hon. Member for Sheffield, Brightside (Mr. Blunkett) said that the ratio would not be five times as much. He has obviously calculated the figure. What is it?
§ Mr. Blunkett
It is a graduated rateable value. One cannot simply pluck figures out of the air. Our system involves carrying out a proper valuation of properties that would ascertain the resources base in the area. That base determines the pence in the pound that can be levied under a property tax system. That is fairly basic local government finance. It is not clever or something which must be invented at the Dispatch Box—we all know about it—and had the old rating system been updated, modernised and made fairer we would not be debating this nonsense now because we would never have had the poll tax. My colleagues and I know that not before too long we will be able to implement a much fairer system.
I have been diverted from the compression of bands and the property poll tax that goes with it. That involves the unfairness inherent in pushing together people with very different incomes and types of property into sequence with each other so that they end up paying much the same. Westminster is a good example of that because the maximum that anyone can pay is three times the amount of the lowest band.
The figures that have been predicted in Westminster are very low. People in properties worth £1 million will pay only £273 while people in the lowest band with properties under £40,000–I imagine that that would be a rabbit-hutch in Westminster, if people were lucky enough to have one—would pay £91 a year. If the person in the £1 million house happened to be living alone, he or she would receive a 25 per cent. discount. That person would not pay 96 much more than £2 a week extra in comparison with someone on the lowest income scraping to make ends meet. Nobody can truly defend a system that is as unfair as that, nor can a system be defended which ends up with regional disparities which have been recognised in the case of Scotland and Wales but not in the case of English regions.
Although in London only 1 per cent. of households find themselves in band A—the bottom band—16 per cent. of Londoners find themselves in the lowest income bracket. Of course, in the north, the reverse is true—46 per cent. find themselves in band A. That is grossly unfair on people who live in a high property price area such as London. That is why some of us expected that hon. Members who represent London and south-eastern constituencies would have taken much more interest in what is going on tonight.
The compression of bands is unacceptable and unfair. The 3:1 ratio to protect the rich at the expense of the rest of us is unacceptable and unfair. The process of valuation itself is cheap and nasty, and unacceptable and unfair. The whole predication of a tax which fails to recognise the ability to pay as a key principle, and fails to understand the importance of individual valuation for ensuring that people know, understand and accept the basis on which they are to be taxed locally is flawed and unacceptable. We need to return to a system that allows for sensitivity and for an equal share of the local tax burden to be carried by those who can afford it.
At the beginning of the year, we understood that the Government appreciated the need—if they were to have a banding process, which we do not agree with—to have a wide spread of bands. On 22 February—I make no apology for repeating this, because it clearly has not got through to the media or to Conservative Members—the Government issued rating circular No. 53. They gave valuers five working days to come up with the spread of properties if 14 bands were to be used—14 bands which ensured that there were six bands at the top, that is, six additional bands to the seven bands that they told the public they were going to use—which would increase the spread to £500,000-plus, instead of the £160,000 that they were then proposing to use. They had an additional band at the bottom to protect the very poorest. In Committee, we dealt with the issue of people in many parts of the country who have very low-rated property, those who live in very small terraced houses, or those who live in caravans.
That system at least had the merit of some sort of fairness, but, unfortunately, fairness smacked of socialism. The idea of 14 bands was rejected, presumably on the same principles as the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) rejected progressivity when debating the poll tax. It is no wonder that the Minister for Local Government and Inner Cities, who adheres to the principles of the poll tax, was keen to get rid of the 14 bands. The 14 bands went, even though they brought greater fairness and would have protected in some measure the people in the areas that I have described, as well as some people in some northern constituencies where the banding system again clusters in an unacceptable way.
Band A residents in Wigan will be paying £339 a year, which is more than the top band in Westminster. [Interruption.] I hear a sedentary intervention, the text of which, unfortunately for me, I missed. It was from the hon. Member for Lancaster (Dame E. Kellett-Bowman). I think that she mentioned 15p cemeteries as an example of 97 a valuation system done on the cheap. That is certainly less than the price of a KitKat and less than the price of a Mars bar, I should have thought. But that is par for the course. "If it is public, value it and sell it cheap," has been the attitude of Conservative Members on every occasion when they have privatised everything that had been built up over the years.
So there we have people in Wigan—or, as the Minister reminds me, there we have it. That is a favourite phrase. We had it noted and published in The Daily Telegraph—one of the few points from the Committee that reached The Daily Telegraph, or, with the honourable exception of The Scotsman and the Financial Times, many other newspapers.
The system is clearly at fault in the way that I have described. I mentioned circular No. 53. It would be remiss of me not to mention what happened after that. We then had rating circular No. 58, which was issued towards the end of April and which, having rejected 14 bands, did an exercise on nine bands. Nine bands were at least an improvement on seven bands, but, when we revealed that a nine-band system was being valued, the Secretary of State immediately denied it. In fact, Downing street took the trouble to deny that it existed. It was then found that it did exist, so it was admitted that it was actually happening, but, because it was an embarrassment, it was withdrawn.
Fourteen bands embarrassed the Government because they were fair, we had nine bands because we were only a week from the local elections, and they were embarrassed that they had told an untruth and been found out, and we then went back to seven bands. Seven bands were immovable, in the words of the Secretary of State. If only memories were as long as the banding system that the Government had originally proposed, we would not be in quite this state. Seven bands were immovable. The Government then invented eight bands. However, during Question Time one Wednesday afternoon, the Secretary of State admitted that it was only a psychological measure and would not make that much difference anyway.
So there we have it—again. Fourteen, nine, seven and—eight—we have been through it all, but we have not had any acknowledgement that the banding system itself is at fault and simply will not work and that the whole system is a mess. It does not matter how many hon. Members are present, the reality will be outside the House. The reality would be—if they ever had the chance—for the Government to implement the system. The reality will be that local government finance, instead of being a bore on the sidelines and much less exciting than some other things that go on, such as Esther Rantzen's quarter of a million or the important issues that pass for news, will be recognised as a critical issue that will affect people and British politics in the same way as the poll tax did.
Local finance is a minefield, and all of us must tread carefully through it, but some of us have ensured that we have a map and that we shall use it. We advise very strongly that Conservative Members think carefully before they vote for their proposals and reject our new clause.
§ Mr. David Harris (St. Ives)
I am delighted that you are in the Chair, Mr. Deputy Speaker, because I want to address my remarks to a part of the country which you know well—the Isles of Scilly. If I may say so—and I thank 98 you for it—you are one of our regular holidaymakers to the islands. I have tabled amendment No. 32, which is an attempt to recognise a unique feature of the island—second homes—and the possible effect that they will have on the council tax and the amount borne by the Isles of Scilly. There are 933 domestic properties on the islands, 300 of which—nearly one third are second homes. In addition, 183 homes receive the one-person discount. That means that no fewer than 450 of the 933 homes—almost half—will be left to pay the standard rate. That means an extra burden on those who pay the standard rate.
However, the position is even worse than that. As a result of the prevalence of second homes on the islands, there is a completely artificial market in property prices. I am told that the cheapest property that one could buy is a one-bedroom flat costing £100,000. The difficulty posed by those high property prices is compounded by the fact that the islands have a low level of income. That presents particular problems for the islanders and makes the island unique for council tax purposes.
I have argued that case with my hon. Friend the Minister of State. I took it up with him in correspondence as soon as I was approached by the Council of the Isles of Scilly. My hon. Friend responded in a long letter on 18 October in which he looked sympathetically at the matter, clearly recognising the problems facing the islands. However, he said that, rather than deal with the problem through legislation, he thought that the right way to tackle it was through the grants system. The concluding paragraph of his letter states:The Department is, as you know, always willing to consider the individual circumstances of different areas; and the Island's Standard Spending Assessment does contain a number of adjustments to reflect factors where we recognise that special provision is needed. I do not believe, however, that we would be justified in making special provisions in the council tax legislation for the Scilly Isles.With respect to my hon. Friend, I must disagree with him on that point.
I heartily acknowledge that the Government have been generous—that is the right word—to the islands in making special grant provisions to take account of their unique position. That is reflected to some extent in the present community charge rates for the islands. The community charge is £105 whereas the charge for the neighbouring district councils on the Cornish mainland are £225 for Penwith and £247 for Kerrier. On the whole, therefore, the islanders have done very well in terms of grant, and extremely well with European grants.
However, the difficulty with grants is that there is no guarantee that they will be maintained in the future. If there were a different Administration, heaven forbid—I do not think that this will happen, but let us suppose that it did—that Administration might not be so sympathetic to the islands or recognise the problems that are faced by island communities. A new Administration's approach to grants might be somewhat different from that of this Administration. It is important, therefore, that the islands' position is recognised in the legislation.
Despite the assurances that my hon. Friend the Minister of State has already given me, I hope that he will look sympathetically at the amendments that I have tabled. I accept that the new clause that I tabled and the amendment that has not been selected are probably defective, but I look to my hon. Friend to recognise the problems of the islands and for assurances that he will 99 return to the issue in another place and will not rule out at this stage the possibility of including some special provision for the islands in the Bill.
It is worth pointing out that the islands have a remarkable record on community charge collection. I think that I am right in saying that about 99 per cent. of the money has been collected. That is an extremely good record and shows that the islanders are law-abiding people. Although there was a problem because some people thought it unfair that the outer islands should pay exactly the same as the main inhabited island, St. Mary's, people nevertheless paid their community charge in remarkable numbers.
For that reason, as well as for all the others that I have outlined, I hope that the Government will look again at this issue. Perhaps at the very least one of the Ministers would like to come to the Isles of Scilly——
§ Mr. Harris
I see that my hon. Friend the Under-Secretary of State is volunteering. As he told me earlier that his late father was a former Bishop of Truro, who probably confirmed half the population of the islands, my hon. Friend might well be the appropriate Minister for such a visit.
I ask my colleagues on the Treasury Bench to acknowledge that, in this respect as in so many others, the Isles of Scilly are a unique case and should be dealt with accordingly in the Bill.
§ Mr. Bellotti
Banding is at the heart of the Government's attempts in the council tax proposals to modernise what is really a property-based tax. In all attempts, they have failed. It is interesting that the Government have introduced different bands for Scotland and Wales. In Committee, we invited the Minister to explain why different bands were thought necessary for Scotland and Wales. Unfortunately, very little was forthcoming on that subject, but the answer that one would have expected to that question would have given the reasons why banding should be regionally varied throughout England. They are exactly the same reasons. The Government have failed in their attempt to make the property tax fair, because they have failed to examine the case for some form of regional banding for England.
As has already been stated, the number of bands is not sufficient to meet individual cases in some regions. In London and the south-east, for example, many local authority property values enable the local authorities to use only the top two or three bands. It would be extremely helpful in such cases if the bands could be extended to a higher level. In other regions, property values are extremely low and the reverse applies. In those areas, it would be extremely helpful to have more bands at the lower end so that those with a property that should be valued at a price below the lowest band would pay less.
I thought that the arguments that were advanced in Committee were fairly persuasive, but the Government did not change their proposals. They failed to make any response on the issue of regional banding. We encouraged Conservative Back Benchers in Committee to speak up, but it seemed that the hon. Members who had been chosen or who had volunteered to serve in Standing Committee 100 were singularly unable to do so. I hope that, during the debate tonight, some Conservative Back-Bench Members will comment on that. Indeed, one Conservative Member put a similar point in the previous debate on behalf of his local authority.
The consequence of not creating more bands, with people in properties in the bottom bands paying less and people in properties in the bands at the top end paying more, is that the council tax hinges on the average-priced property. It hits the very people who may be less able to pay. The gearing of the tax means that a millionaire in an extremely expensive property will pay only three times what a person in the same local authority area will pay who occupies perhaps a one-bedroomed flat of low value.
One must ask whether a millionaire has the ability to pay more than three times the bill of two people in a household on a fairly low income but who nevertheless pay some tax. The answer must surely be that the millionaire could well afford to pay more than three times what a standard couple on a fairly low income pay. That demonstrates why we need more property bands.
§ Mr. Ian Taylor (Esher)
The hon. Gentleman and I both have constituencies in the south-east. Does he think that all people with properties worth more than £320,000 are millionaires? Do not those few people who earn a great deal of money pay a disproportionately larger amount through the tax system? Only a small amount will be collected through the council tax.
§ 9 pm
§ Mr. Bellotti
We gave the hon. Gentleman the opportunity in a Division earlier this evening to show that people who live in high-priced property do not necessarily have such high incomes. He did not support that principle then. I agree with him if his point is that property can be expensive but that the person who occupies it might not have a high income on which to pay tax.
I and my hon. Friends have tabled amendment No. 86, which sets out a different approach to regional banding in England. We have not yet heard an answer to our proposals. As the hon. Member for Esher (Mr. Taylor) said a moment ago, London and the south-east would be hit hard by the Government's proposals in the Bill.
In Committee we heard from one of the Ministers the argument that regional banding in England might create difficulties between one region and another. I failed to understand the logic of that argument, and it was probably the only argument we heard. Such difficulties will exist around the boundary between England and Wales, where there will be a tremendous variation between properties which are just a couple of miles apart. As a result of the Government's proposal to have a different banding system in Wales, people on the Welsh side of the border will pay a low council tax, and people on the English side will pay a high council tax.
§ Mr. Alan Beith (Berwick-upon-Tweed)
Is my hon. Friend aware that many of my constituents will be able to look out of their window and see properties within a short distance on the other side of the river or just up the road in Scotland which are on a different and more favourable banding system?
§ Mr. Bellotti
I am grateful for another example from a different part of the country of large variations between 101 properties. I suspect that there are many such examples. I hope that other hon. Members will shortly contribute their experiences and understanding.
§ Mr. Bowis
The hon. Gentleman will not know my constituency, because it is a long time since Liberals were seen there, but he might know some of the outer ring of London constituencies. If he would go on a journey through the royal borough of Kingston upon Thames, down the road through Surbiton towards Thames Ditton, he would find a road where there are houses next door to each other of the same size, occupied by the same sort of people on the same sort of income. Under his scheme, one would be in the London region and the other would be in the south-east region. The hon. Gentleman proposes a different band for those two houses. Can he explain the justice in that?
§ Mr. Bellotti
That is exactly the same as the problem that will arise under the Government proposals on the boundaries between England and Wales and between England and Scotland. Once one starts on the road of a property-based tax, one always hits such problems.
We are attempting to make an unfair system marginally fairer at every opportunity. There is no doubt that our amendment would more than marginally help a large number of people. Indeed, it would be seen to be fairer. I am sure that as people come to understand how the council tax will affect them, they will be annoyed when, as my hon. Friend the Member for Berwick-on-Tweed (Mr. Beith) said, they look out of their window and see a household at a huge advantage to them. The dilemma is real. There is no doubt that more bands would mean a fairer system. The Government should accept that when they set out their proposals for Scotland and Wales.
Amendments Nos. 5 and 12 are designed to help those who occupy tied or similar property through their work. If we assigned such people to a separate band, it would bring them the relief they need. That band could apply to ministers of religion, who often occupy by virtue of their job houses which they would be unable to afford to purchase on their own disposable income. A school caretaker may enjoy the benefit of a large house in the corner of his school grounds. Given the value of such a property and the relative size of a caretaker's income, it is clear that he would be unable to purchase such a house out of choice. That argument could apply to a number of other people—for example, police officers. A separate band for such people would bring enormous benefit.
The banding proposals have been supported by many people outside the House and by some hon. Members of all parties. I hope that the Government will appreciate that the council tax, which they believe to be fair, could be made much fairer if they conceded the regional banding proposals. I look forward to hearing the reasons for the Government's eventual decision on the proposals.
Mr. Robert G. Hughes
The hon. Member for Eastbourne (Mr. Bellotti) was right to say that the idea of regional banding has attracted support from hon. Members of different parties. However, when one studies the detail of what is proposed, the scheme starts to fall to pieces. The speech by the hon. Member for Sheffield, Brightside (Mr. Blunkett) on behalf of the Labour party was very similar to someone jumping on a bandwagon and discovering that it had cracked wheels.
102 The idea of a regional hand for London and the south-east, or for London alone, is misconceived. I do not believe that it would work, because it would change the nature of the proposed tax, which is a property tax with a personal element. It is important to keep in mind precisely what we seek to establish.
§ Mr. Ian Taylor
What my hon. Friend says causes me some concern, in addition to my hesitation about the merits of regional banding. I hope that my hon. Friend would not propose that there should be any regional banding to favour London. As my hon. Friend the Member for Battersea (Mr. Bowis) has pointed out, my constituency abuts on London, and such a proposal would cause great dismay to my constituents, who already believe that London has too good a deal.
I am not sure that I can agree with the last sentiment that my hon. Friend expressed. We have been offered a pot-pourri of amendments—some favour London, some favour London and the south-east and others suggest carving up the country into all sorts of different regions.
§ Mr. Wilkinson
My hon. Friend and I are, in political terms, territorially contiguous. Does he at least recognise that there is a particular difficulty for outer London and the south-east where property values are high and where disposable incomes may not be commensurately great? Is it not the case that all the constructive criticism of the Bill has, by and large, come from right hon. and hon. Friends who represent outer London and the south-east? It is no accident that that is so.
It is no accident that that is so, but my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson), who is a respected neighbour, is wrong.
I wish to make some progress, because there are many points that I wish to raise. If we are to have a property tax, it must be logical, and the logic is clear.
§ Mr. Couchman
I had not intended to intrude on my hon. Friend's speech, but does he consider that a schoolteacher, whose salary is fixed through national wage agreements by the independent pay review body for teachers and who lives in my hon. Friend's or my constituency in the south-east, is better able to afford the council tax on a higher band than a teacher who lives in Darlington or elsewhere in the north?
I do not share my hon. Friend's contention that one should support national wage bargaining. I support bargaining for London. My hon. Friend's point is interesting, but the argument for it does not lead one to support any of the amendments that have been selected. Regional banding could not be agreed to simply on the basis of national wage bargaining. That suggestion would distort a property tax with a personal element, because the aim of the amendment is that people living in an £80,000 house in the north should pay more than those living in an £80,000 home in the south.
I do not understand the fairness of that. People should pay according to the value of their property, and it is therefore reasonable that there should be one national 103 band. If there were significant differences between regions, there might be an argument, but we all know that that simply is not the case. There is no typical region.
There were two Yorkshire Members present when I began my speech, and there are now three. The number is growing by the minute. Property values in Yorkshire alter according to the part of the county. A single regional band could not be applied to Yorkshire, with council tax prices set against a regional band for, say, London and the south-east. A few weeks ago, several of us went to Langbaurgh, for obvious reasons. Those of us who visited the lovely market town of Guisborough know that the values of property there are very similar to those in my constituency of Harrow. How could Yorkshire be placed in a different regional banding structure from the one that applies in my constituency?
§ Mr. Paul Murphy (Torfaen)
Does the hon. Gentleman agree that the Government have agreed on a separate system for Wales and Scotland and that, within Wales and Scotland, there are considerable disparities in property prices? How, then, can Yorkshire be any different?
I am part Welsh and part Scot, and I had understood that the argument was that Wales and Scotland are nations and therefore entitled to a different national system.
As my hon. Friend rightly interjects, they have a different finance system. An argument must be made for that—it is not a reason to mess up the rest of the country.
If the hon. Lady is simply trying to cause arguments within my family, she will not succeed. I am sure that she knows what I mean.
Although only a few miles separate Richmond from Leeds and Beverley from Hull, prices differ enormously. Prices in north Yorkshire in general are very similar to those in outer London, but those in Leeds and Hull are not. Regional banding would distort the system, and produce many illogicalities and unfairnesses.
I can make some revealing comparisons between my constituency and the neighbouring borough. Conservative Members may be in danger of creating an issue where none exists. My postbag, and trips around the constituency, suggest to me that—in general—people are relieved that the community charge is going, and consider the council tax fair, reasonable and decent.
The last rates bill received in Harrow, in 1989–90, by a couple living in a 1960s-built, three-bedroomed semi averaged £549. This year's community charge bill for two people is £506: according to the indicative figures, this year's council tax bill will be £441. I do not consider that a ground for complaint.
The last rates bill for a similar house in Brent, the neighbouring borough, was £1,550. This year's two 104 community charges come to £656, while this year's council tax bill will amount to £517. Again, I see no room for complaint.
§ Mr. Blunkett
We had all this jiggery-pokery in Committee. I do not want the comparative figures to be distorted. The hon. Gentleman has not taken into account the £280 that a couple will have received this year because of the so-called flat-rate £140 poll tax reduction. Surely any comparison between past and present must take into account the £4.25 billion that was added to value-added tax.
I am grateful to the hon. Gentleman, for two reasons. I always wondered what made the big difference between the last rates bill for Brent and the present arrangements; now I understand that it was the £140 reduction. Personally, I had thought that it was the bunch of madmen from the Labour party who ran the borough in the old days.
The hon Gentleman has described my figures as jiggery-pokery. That is all very well, but why does he not come clean and give us Labour's figures? I have challenged the prospective Labour candidate in Harrow, West to do so, but he has not bothered to reply.
That will come as a terrible shock to him.
Labour will not come clean with its figures, so it is bound to describe ours as jiggery-pokery. Labour is simply trying to hide the awfulness that lurks behind its so-called fair rates system
All the concern felt in local authorities in London and the south-east—which I well understand—really relates to grant. Two so-called alternative schemes have been suggested. [Interruption.] I am sorry that hon. Members whose constituencies are some distance from London are not interested in London's problems; they can continue to talk among themselves.
§ Mr. Enright
It most certainly is not. If the hon. Gentleman, from a London constituency, would pay some attention to the problems that we face in Hemsworth, such as those with RECHAR, which is helping to keep rates in his area down, he would be doing us a service.
I referred to Yorkshire six minutes ago—it has taken the hon. Gentleman that long to work up a head of steam. The problem of RECHAR is that his political friends are stopping the money coming to this country. I refer to Bruce Millan, for instance.
It has been suggested that a London equalisation scheme could be brought back. It could not be; it was predicated on the business rate. The London discount scheme would just be regional banding in another guise. We need to look at needs multipliers and area cost adjustments, particularly for outer London—they are not very generous this year. We want them improved for the coming year and certainly by the first year of the council tax.
105 We must always remember what people will have to pay. Judged by that, the council tax will be seen as a fair system.
§ Mr. Harry Cohen (Leyton)
The hon. Member for Harrow, West (Mr. Hughes) has been arguing against a regional band for London, thereby costing his constituents about £66 a year, based on average house prices in London.
I had to cut short my attendance at the Hairdressing Council dinner to speak in this debate—[HON. MEMBERS: "A fringe benefit?"] I can only say that the parting was such sweet sorrow.
I am in favour of a regional band for London, based on average house prices. The application of the Government's national bands will mean a loss of grant for London of about £300 million a year, which works out in terms of people's bills at about £60 per adult per year and £100 in some constituencies. Such a loss of grant for local authorities will mean either a higher council tax in London or more cuts in services. The assumption behind the Government's imposition on London of a national band is that Londoners can afford to pay more, which is not true. That assumption does not take into account Londoners' real disposable income. They have high mortgage costs, high rents, high transport costs and high bills of many varieties. House prices are about 45 per cent. higher than the national average, and that should be taken into account.
Londoners will be disadvantaged by the national band. It has been estimated that about 15.7 per cent. of them will be in the top two bands, compared with only 5.6 per cent. elsewhere. In the top three bands the contrast is even more stark: an estimated 55.1 per cent. are in this category in London and only 23£1 per cent. elsewhere. That means that Londoners will face higher council tax bills. The relationship between the council tax and people's ability to pay it was always shaky, and the imposition of a national band on London will make it even weaker. The very idea is absurd.
The end result will be that Londoners and London local authorities will pay millions more each year. That will hit Conservative and Labour areas in London. If the Government go ahead with the legislation, Conservative Members in London and the south-east will find that it will be difficult to reverse after the general election no matter which party is in power. Now is the time to put the case for a special banding system for London. London's case is being ignored by the Government. Its special factors should be recognised and it should have a regional banding system more reflective of its house prices.
§ Mr. Wilkinson
We have been privileged in the debate to hear some widely contrasting contributions. It is clear that the timetable is quite inadequate to deal with such important matters. I did not support the timetable motion and believe that my decision was right. It is quite preposterous that in 35 minutes we shall reach the end of this debate on banding, a matter of considerable interest to my constituents and, I suspect, to many other constituents in London and the south-east.
The speech by the hon. Member for Leyton (Mr. Cohen) was trenchant and honest, as one would expect from the hon. Gentleman. It was also clear and to the point, the simple point being that property values are so high in London and the south-east that in all equity there 106 must be some special weighting to account for them. They are by no means compensated for by a disproportionately high level of real disposable income.
People in outer London have high commuting costs. Many of them have inordinately high mortgages around their necks and they are finding it extremely difficult to service them in this unusually long period of high interest rates. Instead of taking a Gadarene rush at this important matter of the reform of local government finance, the Government should have taken more time. They could have published a White Paper or set up a commission of inquiry. They should have taken account of all representations and consulted adequately. That would have enabled us to announce in our manifesto that when we were returned to office at the election we would take the most sensible course of action.
I am not expert enough to say which of the banding systems best fits the bill. Valuations should be individually conducted and a proper length of time should he taken over each one. If that were done, there would be far fewer appeals. There should be a weighting system to account for variations in house prices in different parts of the country and within different districts of the same region. The Department of the Environment purports to have knowledge enough at its fingertips to enable a standard spending assessment to be made that takes account of all sorts of individual circumstances in each local authority area. It is not beyond the wit of man to introduce a weighting system to deal with local variations.
In all logic we have already sold the pass by having separate bands for Scotland and Wales, and I am most worried about the current matter. Not only do we have inadequate time to deal with important issues, but there is a real risk that unless the other place does its job properly the measures will reach the statute book fundamentally flawed in terms of banding and the special problem of high property values in London and the south-east.
Unless my right hon. and hon. Friends on the Treasury Bench can produce a new formula to deal with this problem, I shall have to support the new clauses and I shall vote against the Government. I shall consider my position tomorrow on Third Reading in the light of what transpires when the House divides this evening.
§ Mrs. Fyfe
There are some who think that there is no fun to be found in local government finance, but they can be proved wrong by this debate. I was at one stage tempted to forgo my chance to contribute to it because of the fascinating speeches of Members representing inner and outer London constituencies as they struggled to find some fairness, justice or logic in the banding system.
There are to be different banding systems for Scotland, Wales and England to take account of the fact that they are separate nations. That is all well and good, but if separate nationhood is to be recognised when it comes to banding, the wishes of the separate nations should be heeded when it comes to the taxation that they want. The proposed tax will take no account of regional variations. It is clear that London is out of kilter with much of the rest of England, if not the whole of it.
No hon. Member can pretend to be ignorant of London prices. After all, we all have to live in London in some form of property. My very ordinary London flat costs about half as much again as my flat in Glasgow, which is an 107 infinitely superior building in which to live in every respect. Everybody knows that London prices are out of line with prices in the rest of the country.
The same could be said for many a flat in many English provincial cities. I am making a comparison not between Scotland and London but between London and most of the rest of the country. As I have said, London prices are out of line with those that prevail elsewhere. The answer does not lie in saying that London has some advantages that other parts of the country do not enjoy. Surely we should treat the entire country fairly when introducing a local taxation system. That fairness would ensure the awarding of Government grant on the basis of genuine calculated need and not on political prejudice against some local authorities while favouring others. If the Government were concerned to arrive at a proper system, they would accept that fairness was the answer.
In Committee, the Government rejected our fair rates proposals. Our response was, "What about having more bands to take account of the difficulties that arise because of the differences in property prices in London compared with other parts of the country?" That approach was also rejected, because it was getting too close to a rating system, but it would have had some logic, a factor that is entirely outwith the system with which we are now confronted.
In Committee, we asked how properties could be properly valued in the haphazard way that the Government proposed. We were told that properties would be valued a street at a time in England and Wales by estate agents. The Minister of State told us that aerial photography was the answer. He was talking about photographs that happen to be in the file, as it were. He did not propose that new photographs should be taken. I am not sure whether a distinction can be made between the two. The Minister seems to think that one can and that it is important, and I hope that he will explain his position this evening. Perhaps the explanation is that he does not want to have to face the electorate if it thinks that there is a spy in the sky taking photographs of people's properties. He knows that the public are likely to be more tolerant of existing photographs than the taking of new ones and the involvement of estate agents, for example.
It is clear that aerial photographs would be useful if they showed, for example, that a property had been extended at the back, but we have still to hear how such photographs would tell anyone how a property had been divided internally. There has been no explanation. As we pointed out, behind the frontage of a street of typical Victorian terraces, there may be properties of widely differing sizes, yet estate agencies may value them alike because they look alike.
My hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) said that there may be environmental differences even within the same street—one house may be opposite a gas works and another opposite a park. The Minister smiled then, but will he reply to that point? Any member of the public might say to him, "If you had to choose between two properties in one street which were described in an estate agent's window, one of which faced the gas works and the other the park, and both were the same price, which would you choose?" He would not have to think long. It is obvious that what we are saying is common sense which everyone understands.
108 There are bound to be many appeals. The Government have denied that and said that that is not likely, given the number of bands and the wide differences between them. People who have worked for years in assessors' departments know better than that. They expect a large number of appeals to be made.
The banding system in Scotland is not adequate to meet property needs. Band H covers properties of £212,000 and upwards. Anyone can glance at the posh Sunday newspapers in Scotland and see the flattering photographs of the properties which get the biggest advertisements. Many are valued at about £150,000. Few people with properties in band H will pay three times as much as people with properties in the lowest band. This system is a tiny improvement on the poll tax. As the Secretary of State pointed out, the poll tax is unjust because a duke pays as much as a dustman. Now, that duke is to pay three times as much, but I do not think that many people will be impressed by that footling improvement.
§ Mr. Ian Taylor
Not having sat through the hours that the Committee spent upstairs, I am slightly timorous about raising this subject on the Floor of the House but, having listened to speeches by some members of the Committee, I am glad that I did not sit through those hours.
When the council tax was proposed, many of my constituents and I were worried about the impact on the south-east. Yet the more I examine the subject, the more I feel that it would be a mistake to introduce a regional banding system and that it would certainly not address my constituents' concerns. I am delighted that my right hon. Friend the Secretary of State is on the Treasury Bench, because I was one of those who pressed him in the early days to introduce a higher band. I am pleased that that has happened, and feel that, to a great extent, that has met some of my constituents' concerns. The hon. Member for Sheffield, Brightside (Mr. Blunkett) said that people in the top band were "compressed"—I am happy with that word—in relation to lower bands. The limitation on the multiple which they will pay is sensible.
The point that I made in an intervention is equally important. Through the income and direct tax system, the people who earn the most will contribute more to the funding of local government than they have in the past. The amount raised locally through the council tax will be a relatively low percentage, and will certainly be lower than the percentage paid under the rates. That is important in an area such as mine.
We have had a continual problem in constituencies in the south-east in persuading my hon. Friend the Minister how to treat higher regional costs in relation to standard spending assessments. He has always been willing to meet delegations, but the problems will continue, despite the introduction of the new tax. Nevertheless, I am satisfied with the way in which the county of Surrey has come out in the calculations for the forthcoming year, and I am sure that that will continue under the council tax. I am delighted that in areas such as mine the system of rebates for those on low incomes will continue.
It is important to bear in mind that the differences between various parts of the country are often not as great as those within a particular constituency and we should consider that issue in our deliberations on the council tax. The ability to treat local variations is very important, especially in the current process of valuations, and I hope 109 that the amenity and other values of various local residences will be taken into account. Again, that is more in the interests of my constituents than the imposition of a regional system.
A regional banding system would contain enormous anomalies. I represent a constituency outside London and I am glad that no part of it was under the old Greater London council. If the royal borough of Kingston will take its dirty hands off houses in Long Ditton which it is now trying to claim under the Boundary Commission, no part of my constituency will ever be within boundaries of the old or any new GLC.
As the Minister rightly said in a statement on 20 November, there is no doubt thatin Kingston-Upon-Thames a couple in a four bedroomed house would pay £88 less than their equivalents in next door Elmbridge",part of which is in my constituency. That would be the effect of the proposals put forward by the hon. Member for Eastbourne (Mr. Bellotti) on behalf of the Liberal Democrats. Such a difference is not acceptable. They are not the issues that we should discuss when considering the way in which the council tax will be implemented.
It is important that a house worth, say, £200,000 should have the same bill throughout the country for a given level of services. I am not interested in the situation in Wales or Scotland as they have their own systems of delegated government and their own systems of finance. [Interruption.] I would not presume to speak on behalf of any Members of Parliament from Scotland. Therefore, I am not sure that I would wish them to presume to speak on my behalf.
As a Member of Parliament for a constituency in the south-east, I believe that the main problems that I identified in the council tax and the way in which it would be implemented have been met by my colleagues on the Front Bench. The problems were of immense concern to my constituents. I have gradually been able to convince them that the issues that I have raised this evening—such as the new band of £320,000—were the correct ones to be resolved.
When the council tax comes to be implemented, I beg my colleagues on the Front Bench to remember that we do not want any last-minute changes, such as extra help for London. Many of my constituents believe that Londoners get a good deal in many ways, as I said in an intervention on my hon. Friend the Member for Harrow, West (Mr. Hughes). That may not necessarily be appreciated by hon. Members whose constituencies are in London, but it is certainly appreciated by hon. Members whose constituencies border on London.
The key issue for any Government is to ensure that local councils do not overspend and the key issue for any local Member of Parliament is to ensure that the efficiency with which councils deliver services is of the highest quality. I believe that we can achieve that through Conservative councils across the south-east and I oppose the system of regional banding.
§ Mr. Portillo
My hon. Friend the Member for Hendon, South (Mr. Marshall) has failed to catch your eye, Mr. Deputy Speaker, but let it stand on the record that he has pursued privately with Ministers the interests of his constituents most assiduously.
My hon. Friend the Member for St. Ives (Mr. Harris) has pursued his constituents' interests by urging Ministers to visit the Isles of Scilly, which I had the pleasure of doing 110 recently. He believes that the problems of the Isles of Scilly, which have high property prices due to people coming in from outside, are unique. I am not sure that they are unique, but we are aware of them.
I can tell my hon. Friend that, where a number of properties are owned by people from outside the islands and if those properties are second homes, the fact that only half of the tax will be payable by those taxpayers will be taken into account in the assessment of the tax base of the authority. That will, of course, be reflected in the amount of grant that the Isles of Scilly can receive. I hope that that will be some consolation to him.
I say to the hon. Member for Eastbourne (Mr. Bellotti) that ministers of religion and the Churches in general have made representations. Some of the Churches have suggested that they should be able to pay the council taxes of ministers of religion en bloc and then divide that by equal amounts among the ministers of religion so that people would not pay more for living in an especially large vicarage. We shall be interested in pursuing that point with them.
The hon. Member for Berwick-upon-Tweed (Mr. Beith), who is meant to be the finance spokesman for his party, showed a 100 per cent. misunderstanding of the system when he said that his constituents would look across to Scotland and see there a more favourable banding system. The system in Scotland is less favourable in that people will reach the higher band at a lower value of property, because there are more people in the lowest bands. The important point is that the amount that is contributed from local government finance in Scotland is less, and the amount contributed from local taxation in Wales is less again. Different bandings in those different places are therefore appropriate.
A £50,000 house in Scotland would be in band D, but it would be in band B in England. However, the house in Scotland would pay £270, and the one in England would pay £311 because of the difference in the amount that is raised locally.
My hon. Friends the Members for Harrow, West (Mr. Hughes) and for Esher (Mr. Taylor) were right to point out the difficulties of a regional banding system. How right they were to point out that it is not only in the south-east that there are expensive properties, and that there are often variations within regions which are as striking and as dramatic as the variations between them.
If we gave discounts in London, that would be unfair. It would mean that in every band there would be lower bills for a standard level of service. It would mean, for example, that in the lowest band, in London, there would be lower bills for a standard level of service than there were anywhere else. It would mean that we would sweep to one side the fact that the variations within London are as dramatic as the variations between London and other places.
Within one borough, between Mayfair and Paddington, for example, the difference in property prices is enormous. From the east of London to the west, the difference is enormous. I ask, for example, my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) whether it would be fair to give all Londoners a discount on that basis and for the people of London, uniquely, to pay less for their services in the lowest band while no one else had that benefit.
§ Mr. Portillo
I argued in a letter to my hon. Friends that there are higher disposable incomes in London. My hon. Friend the Member for Ruislip-Northwood, who spoke in a previous debate, was kind enough to put part of that letter on the record.
There used to be a rateable value discount in London, and I know that some of my hon. Friends hanker to go back to that. In the proposed council tax, we have put in place the idea that the amounts of tax that are paid should be compressed. We propose that only three times as much should be payable by those who live in the most valuable properties as by those in the least valuable properties in any area. The effect of the compression of ratios is expecially helpful to all the places, whether London or the Isles of Scilly, where property prices are unusually high.
I sometimes think that my hon. Friends have not fully recognised the effect of that compression of the tax rates, although clearly my hon. Friend the Member for Harrow. West, when he began to compare the council tax bills that are in prospect with the very much higher rates bills that used to be paid by his constituents and, even more, by the constituents of my right hon. Friend the Member for Brent, North (Sir R. Boyson), he was firmly on to the point that the council tax achieves what is necessary—that is, higher bills for people who live in higher-valued properties, but not bills that are disproportionate or excessive, such as we had under the rating system and such as those to which the Labour party wishes us to return.
§ Mr. Portillo
I am afraid that we are under a time limit.
The hon. Member for Sheffield, Brightside (Mr. Blunkett) was less than straightforward with us this evening. He told us that he was committed to a system of fairness. As far as I am aware, the Labour party is not committed to a system of regional banding. The Labour party is certainly committed to the principle of unlimited tax bills in respect of the more expensive properties, and longs for a return to the sort of envy tax that we had under the rating system, whereby people in more expensive properties—whether they are widows or people living on their own and irrespective of whether or not they have high incomes—are made to pay in relation to the value of their properties.
Not only does the Labour party propose an unlimited tax; it proposes an additional tier of government at regional level, and says that that regional tier of government should be able to raise income tax. God help us if we ever have the Labour party imposing regional income tax and unlimited bills on higher valued properties and—what is more—if we have no capping on local authorities, so that any authority is free to set whatever level of taxation it chooses.
The hon Member for Brightside was very cross about the valuation exercise that we propose to conduct. He was cross that we intended to save £100 million on the valuation process because he loves public spending; anything that is good value for money is a disappointment to him. Just as he loves public spending, so he hates the private sector. Therefore, the idea that valuers should be 112 chosen from the private sector to conduct the valuation and so save the taxpayer money is anathema to him, and has excited him more than somewhat.
The hon. Gentleman caricatured the valuation process as broad-brush. It will not be broad-brush. It will take account of local factors and of the difference between properties that overlook the park and properties next to the disco. By using private sector valuers who have local knowledge, we shall make it possible for such factors to be taken into account, to achieve value for money and to conduct the process quickly. That means that, for the Conservatives, the introduction of a new system of taxation in 1993 is a reality, whereas for the Labour party it is cloud cuckoo land, and Labour Members know that perfectly well.
The hon. Member for Brightside was less than straightforward with the people of Barnet. I can tell him that they will not be consoled by his promise that they would not all be in the same band if they knew the truth, which is that he would sting them for vast sums of the sort that were dragged out of people under the rating system—the sums which brought the rates system down and which at one stage led his party and himself to denounce the rating system as unfair. We stuck to the belief that that system was unfair whereas the Opposition have jettisoned it.
Let there be no doubt about it: the system that the Labour party proposes is massively unfair. The hon. Member for Brightside can only say that, for a property worth five times as much, the Bill would not be five times as high, just as he told us before that the number of Labour Members advocating non-payment was not 30. He cannot tell us how many times it was, and he cannot tell us how many times greater the bill would be in Barnet. He is the "not 30, not five" shadow spokesman. He cannot produce more precise figures than that.
The tax that we propose is partly a property tax and partly a personal tax, and we believe that the property element should be a tax on the enjoyment of property, which can only be related to the actual value of property. We propose a fair system, with discounts to single people, students and student nurses and rebates for people on low incomes. We propose a comprehensible system and one that recognises that, while there should be a relationship to the value of the property, there should also be a compressing of the tax bands so that we ask more of people in higher-valued properties, but do not subject them to the excessive bills to which the Labour party would have us return. For all those reasons, I ask my hon. Friends to reject the new clause.
§ Mr. Murphy
Not so long ago, the Minister spoke with equal passion about the merits of the poll tax. Even he has now accepted that the poll tax in Britain and Wales was an abject and complete failure because it was unfair and was unrelated to people's ability to pay. Worse still, from the Government's point of view, it was perceived by the majority of the people as being unfair and that, essentially, was its downfall.
Earlier this evening, the hon. Member for Harrow, West (Mr. Hughes) said that the question of valuation bands was not an issue. What is an issue, of course, is the unfairness of any local government tax. The tax that the Government introduced three years ago was above all unfair and unrelated to people's ability to pay. With its banding and valuation lists, the council tax is equally 113 unfair. I am afraid that the credibility of local government will be put at risk because of the constant changes in local government finances that have occurred over the past few months and years.
The eight bands that the Government have proposed for Wales are disproportionate. The highest band pays only three times more than the lowest band—although one property may be worth £240,000 compared with £30,000. We are proposing a 14-band system for Wales that reflects the ability to pay and is more closely linked to people's income. More importantly, it also follows the changeability of the housing market in England and Wales. The only fair answer to the question of valuation is that each property should be individually valued. That is the fairest way.
In Britain, all the professional bodies, including the Chartered Institute of Public Finance and Accountancy, the Royal Institute of Chartered Surveyors arid the Institute of Rating and Valuation, have all said that the valuation and banding system proposed by the Minister for Local Government and Inner Cities is wrong. All the local authorities in Wales have said that the bands are unfair and unjust. That view was echoed by the Assembly of Welsh Counties and the Council of Welsh Districts. They specifically wanted a band lower than the £30,000 band and more bands between £90,000 and £120,000 and above £240,000.
What logic and fairness is there in the present system which doubles from £120,000 to £240,000 in respect of the commencement point of the top band in Wales while only increasing the range of payment by one fifth between the bottom and the top bands? There is nothing logical or fair in that ludicrous system.
The councils in Wales asked the Government to undertake a study of the relationship between capital values in Wales and household gross and disposable incomes. That study could easily have been carried out with the assistance—if they had agreed—of the Building Societies Association, the Inland Revenue and the valuation office. They could have compared purchase prices, incomes, deposits and capital values. However, the Government decided to ignore the wishes and fears of the local authorities in Wales and elsewhere.
The Welsh Office refused to carry out the studies purely for electoral and dogmatic reasons. The Government still maintain the view that they held when the poll tax was introduced. The council tax is no different. Under both taxes, the rich will get richer and the poor will get poorer.
There are no practical problems with the introduction of 14 bands in Wales. There would be no increase in the workload of local authorities and there would be no delay in introducing a new system. The system would be fairer and there would be fewer appeals.
The poll tax failed essentially because of its unfairness. It also failed because of the cost to people of this country. In Wales alone, £100 million was squandered on the poll tax to set it up, to maintain it, and to sweeten it. That was a disgraceful squandering and waste of public money. The Government might as well have dumped £100 million in the Bristol channel for what good it did to the people of Wales. The Prime Minister said that the poll tax was bad because of its uncollectability. The same can be said of the council tax.
As the Government prefer to listen to their party managers rather than to local authorities, they are failing 114 to listen with regard to the council tax. As a consequence, they will fail to win the general election. I urge the House to support new clause 9 and the consequent amendments.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 233, Noes 329.118
§ Question accordingly negatived.
§ It being after Ten o'clock, further consideration of the Bill stood adjourned.
§ Bill, as amended in the Standing Committee, to be further considered tomorrow.