§ 12.40 p.m.
§ Baroness Blatch
My Lords, I beg to move that this Bill be now read a second time.
The Bill is a technical measure which will nevertheless be welcomed by the substantial number of holiday caravan owners who, as the law now stands are, contrary to our intention in 1988, liable to the standard community charge. During consideration of the Local Government Finance Bill 1988 we gave a commitment that holiday caravans and the pitches on which they stand would be in non-domestic rating. It subsequently emerged that an amendment that we made in your Lordships' House to the 1988 Bill did not have the desired effect and that as a result the owners of many holiday caravans were subject to the standard community charge.
This Bill therefore removes all standard charge liability from the owners of caravans which are not used as sole or main residences. It makes all caravan pitches and any caravans occupying them subject to the non-domestic rates provided that they are not in use as sole or main residences. As we announced on 936 30th March, the provisions will have effect from 1st April 1990 and anyone who has paid the standard charge in respect of their caravan will be entitled to have it refunded.
The Bill includes separate provisions which have the same effect in Scotland as south of the Border. Two further provisions are proposed which are specific to Scotland. First, because some caravan owners paid the standard charge last year, provision is made for repayment of half the amount paid, this being broadly equivalent to the difference between the burden of rates and the standard charge. Secondly, a small change is needed to the existing provisions on the derating of caravans to permit my right honourable friend the Secretary of State for Scotland to deal with the fact that the rateable values of caravans in Scotland are in general higher than in England and Wales.
Moved, That the Bill be now read a second time.—(Baroness Blatch.)
§ 12.42 p.m.
§ Lord McIntosh of Haringey
My Lords, this is a strange little Bill which comes before the House in a very strange way. I do not think that the Government can deny that they were given adequate warning when the Local Government Finance Bill was going through this House and another place, where these provisions were debated very fully, that their measures for charging the standard community charge for caravans and many other marginal properties would not work. The Government were told that the provisions would not work but they insisted that they would. They put through amendments which do not work now. As I have said, in a very strange way the Government are proposing to put the matter right.
I make it clear that we are not opposed to the Bill and we shall not seek to defeat it. I think it will be agreed that it is curious that the recognition of something being wrong came as early as March this year and yet legislation could not be produced until the end of November. In addition, it had to be considered in another place between 10.15 p.m. and a quarter-past midnight, with the measure going through all stages at the same sitting. That is a very curious way to deal with legislation. It led to a debate which was somewhat confused. It was not confused because those who criticised the measures were confused but because the Government's answers were unsatisfactory.
I refer in particular to the comments made about the difference between chalets and holiday caravans. It was pointed out by a number of Members of another place, including my honourable friend Mr. Wilson in particular, that in many cases holiday chalets were worth far less than holiday caravans and that they were just as much depreciating assets. The Minister in another place called them chattels, yet they were still to be subject to the standard community charge. The answers given by the Minister to those who criticised this point were totally inadequate. They were based on 937 a legalistic distinction between property and chattels which I do not think would stand for one moment in the light of reason.
Before the Minister finally moves for a Second Reading, I should be grateful if she could indicate whether the Government's thinking has advanced on this issue. On 3rd December when the matter went through another place there was no indication of any coherent thinking on the part of the Government. It is not simply the issue of caravans, because clearly the Government are attempting to put right one of the marginal injustices of the poll tax legislation. However, the measure fails to recognise entirely that the poll tax legislation is itself inherently unjust, not simply because of the complications of the standard community charge which has to be added to the personal community charge but because the theory of applying local government taxation to individuals on a single assessment basis with no concern for ability to pay is inherently unjust.
This Bill recognises only 1 per cent. of the injustice of the poll tax, and at a time when even Ministers to a greater or lesser degree appear to be recognising that it is unjust and seen to be so. It is because it is seen to be unjust that the present Secretary of State for the Environment is seeking a radical review. Since other Ministers have taken part in the debate on the injustice of the poll tax, I wonder whether the Minister in her reply will add her two pennyworth. It would he helpful to know whether what we are doing in considering the Bill is simply to assuage one of the detailed criticisms which Pave been made or whether this is the first step towards a more radical review of the poll tax operation and that we can expect further legislation this Session. The Minister will understand that she will get a great deal more sympathetic consideration of the Bill if she indicates that it is part of a general review and we can expect legislation in time to correct more of the injustice which is undoubtedly going to take place when the poll tax bills go out for 1991–2.
§ 12.46 p.m.
§ Lord Tordoff
My Lords, I am not going to follow too far down that road. It will soon be Christmas. If discussions are taking place, as suggested by the Prime Minister, I must point out that we have a great many ideas a bout local income tax which will solve many of the problems. The Bill is going to go through your Lordships' House because it is necessary to redress the anomalies in the Local Government Finance Act 1988. It will go through without much interference.
The noble Lord, Lord McIntosh of Haringey, was quite right in saying that the Bill was whistled through all its stages in another place without much notice that that was to happen. As my honourable friend the Member for Berwick-upon-Tweed indicated, there was very little time for Members of another place to table amendments or even to consider the need to do so. In the light of that, I wonder whether the Government have given any more thought to the matter and whether they intend to table amendments as the Bill passes through your Lordships' House.
938 As the Minister indicated, before the 1988 Act the arrangements for caravan sites were that the site owner very often paid the rates due. He would then either include the cost in the fee payable by holiday owners or bill the permanent residents for their rates. It was only after the 1988 Act that this procedure was changed. An attempt was made to prevent holiday caravan owners being liable for the community charge. The Government have got themselves into a mess because they did not recognise that there were mixed sites. That was not for want of being told but because the Government did not accept the fact.
We now have this little Bill to try to put matters right. It was not realised until March of this year that something would have to be done and therefore a problem arose. Some local authorities had set their budgets and charges before March and in theory those arrangements did not include any revenue from holiday caravan owners in the estimated charges. I say "in theory" because I suspect that some of them, though not all, realised that there was a loophole and made a calculation.
The Government recognise that, because of its retrospective nature, the Bill will, as is said in the Explanatory and Financial Memorandum, reduce authorities' income from the standard community charge in England and Wales and in Scotland. District councils will lose income which their budgets had assumed. Although my honourable friend in another place obtained some reassurance, local authorities need further reassurance that, with the present rate-capping arrangements and all the restrictions on local authorities, the loss of income will be taken into account.
Site owners have been in a difficult position. It is possible that, in order to protect their position in relation to planning laws, some of them have fudged the issue as to whether they have fixed sites, holiday sites or mixed sites. That remains a problem. One caravan site owner sought to get around this problem by putting up a notice indicating that if holiday caravans are to be used on the site they should not be registered for the community charge. Accordingly, any registration for the community charge of a caravan on the holiday caravan park would be a breach of the agreement and the caravan would be disconnected and would have to leave the park.
My honourable friend Mr. Beith wrote to the Minister at the time, Mr. Chope, and was reassured that where a person considered that he might be subject to a charge he must comply with the community charge regulations; in other words, the regulations should take priority over the statement of the site owner. That may be the law but it is possible to use leverage on people in those situations who do not have a great deal of security. Although some reassurance was given to my honourable friend in another place, I wonder whether the Government have had any further thoughts in depth on this rather difficult subject. Can further reassurance be given, or will it be necessary to include a provision on the face of the Bill to cover that point?
939 I do not wish to prolong our activities today and I do not wish to twist the noble Baroness's tail too hard. We support the Second Reading of the Bill.
§ 12.53 p.m.
§ Baroness Blatch
My Lords, I thank noble Lords for their welcome for the Bill, albeit that the noble Lord, Lord McIntosh, predictably said, "I think I told you so". When we announced that we would legislate to correct the position and provide that any sums of standard charge already paid would be refunded, the news was warmly welcomed by the caravan industry and caravan owners in general. Caravanners in Scotland will also welcome the part repayment of any standard charge paid in the last financial year so that it is as though the caravans had remained subject to rating. They should also greet warmly the powers for my right honourable friend the Secretary of State for Scotland to extend the derating of caravans as part of the process of harmonising rateable values throughout Great Britain.
The noble Lord, Lord McIntosh, asked whether the Bill was the first part of the process of reviewing the community charge. The Bill was in train before the present review was announced. But I extend to him a very real welcome if he would like to make a contribution to the debate on the review of the community charge. We look forward to his contribution. He has much to offer in that way.
I say in response to the question asked by the noble Lord, Lord Tordoff, that no government amendments to the Bill are planned. The noble Lord asked about the shortfall in revenue to local authorities. It has to be said that, at the time they set their community charges, most charging authorities were unaware that they had access to standard community charge revenue from holiday caravans. In such cases the question does not arise.
However, we are aware that one or two authorities took account of such widening of their community charge base, so that they were able to set the level of their community charges lower this year than it would otherwise have been. As a result of the Bill, there will be a shortfall in community charge income for these authorities in 1990–91 which will have to be made up by setting community charges higher than they would otherwise have been in 1991–92. All this really means is that next year charge payers will be paying slightly more for the benefit of having had an artificially lower charge this year. There may also be some slight additional cost to charging authorities by way of extra interest charges to cover this year's shortfall, but the amounts are unlikely to be significant.
In those circumstances the Government do not believe that it would be fair to pay grant to these few authorities because it would do little more than compensate them for losing their advantage over authorities that did not take account of standard charge revenue from holidays caravans.
§ Lord Tordoff
My Lords, I do not have all the detail but the figures in some of these cases are not insignificant. My honourable friend's local authority 940 believes that it will have lost around £333,000 of income this year as the amount is not made up by the increase in the standard rating charge.
§ Baroness Blatch
My Lords, if the noble Lord will accept the answer that I have given him today on that point, he can return to it at the Committee stage. There will be a Committee stage unless the order of commitment is discharged.
The noble Lord, Lord McIntosh, was concerned about the definition of chalets and implied that we were not clear on the matter. A caravan is a chattel and is not itself subject to rating. It is the pitch on which a caravan stands that is rateable because it is non-domestic property. It is assessed, like other rateable property, on its notional annual rental value, and the presence of a caravan on a pitch will contribute to its value.
The owner of a chalet comprising a self-contained unit of living accommodation may be liable for the standard charge if it is a building used as a second home; for non-domestic rates if it is available for letting for more than 140 days in a year for short periods to people whose sole or main residence was elsewhere; or for the personal charge if it is his sole or main residence. The owners of certain chalets, like some beach huts, that are not buildings consisting of units of self-contained living accommodation and that are not let for short periods will be liable for neither the standard charge nor rates. The particular liability will be decided by the facts of the case and any dispute over the treatment of specific properties may be resolved in valuation and community charge tribunals if need be.
§ Lord McIntosh of Haringey
My Lords, I am grateful for that response but it does not take us much further. A purely legalistic distinction is still being made between what is called a chattel and something serving the same purpose which does not happen to have wheels. That is the problem. Behind that lies the far more important problem, which is that the same charge—the personal or the standard community charge—is being levied on a person living in a chalet worth a few thousand pounds as on a Member of your Lordships' House more fortunate than me and living in a house worth £500,000. That is the fundamental absurdity. All this does is show the tip of the iceberg of absurdity in this legislation.
§ Baroness Blatch
My Lords, the noble Lord makes the case for me. Each case has to be considered on its merits. The generic term "chalet" can cover a wide variety of accommodation, from structures which are little more than wooden huts at one extreme to very substantial houses at the other. Many such chalets are indistinguishable from other second homes and it is reasonable that the standard charge should apply to them. At the bottom of the range, chalets which are simply huts without basic facilities may well not be living accommodation within the meaning of the 1988 Act. In that case, the standard charge would not apply.
941 I have covered the points that were raised during the debate. I now wish to commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.