Local Authority Spending (Hansard, 22 October 1990)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)
My Lords, the straight answer is yes. The new arrangements are already increasing public awareness of local authorities' spending and making them more accountable to their charge payers. As with any new 1138 system there are detailed improvements that can be made. Her Majesty's Government set out a number of proposals for this in a recent series of consultation papers. We shall be announcing our final conclusions on these shortly, in the light of consultations and in good time for the 1991–92 settlement.

§ Lord Dean of Beswick
My Lords, is the Minister aware that I and many other people await the Government's conclusions with interest, especially bearing in mind that the latest figures show that at the present rate of payment local authorities will be owed £4 billion in respect of the non-payment of the unified business rate at the end of the financial year and £1.7 billion in respect of non-payment of the poll tax, mainly by people who wish to pay but who cannot do so and also by a minority who choose not to pay?
Is the Minister saying that the Government are satisfied with the situation? If that is the case, how do they expect local authorities to function as regards their responsibilities in respect of housing, education and looking after some of the more unfortunate members of our society?

§ Baroness Blatch
My Lords, the noble Lord exaggerates the amount of money which has been collected; indeed, 85 per cent. of people across the country have paid something. However, he raised an important point. I hope that he will join with me in condemning those who can pay but who choose not to do so. In defence of the Government, I must point out that a raft of measures have been put into place—amounting to £2 billion—in order to abate the difficulties for people at the lower income end of the scale.
However, the shortfall in income and the question of those who do not pay—the matters mentioned by the noble Lord—impact on the provision of services and that in turn impacts upon the most vulnerable in the land. The cost of non-payment will fall upon those who do pay.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that whereas the community charge is carefully calculated to enable people to vote or not to vote regarding expenditure which they will have to meet, the same is not true of the unified business rate which falls very heavily on small businesses, especially those in the south of England?

§ Baroness Blatch
My Lords, my noble friend makes an important point about the community charge; namely, that accountability is increased. As regards the uniform business rate, he will know that business and commerce across the country were treated very unfairly—some more unfairly than others—and that the people concerned called for stability. I should point out that revaluation, which accounts for much of the distortion during the interregnum, has been dealt with by promising regular updating of revaluation. There is no increase of yield in real terms from the business community.
By law, rate poundage cannot be increased to a greater extent than the rate of inflation; indeed, it can be decreased. During one year in my own authority business and commerce had a rate increase of 33 per 1139 cent. which raised the annual business and commerce bill from £40 million to £60 million. Under the new arrangements that could not happen.

§ Lord Stallard
My Lords, how does the Minister equate her policy of accountability and fairness with the fact that she has just said that the shortfall will fall on those who pay? Further, how does she equate the same two items—that is, accountability and fairness—with the Government's current policy of capping those authorities who go against the wishes of the electorate?

§ Baroness Blatch
My Lords, the noble Lord misinterpreted my answer. I said that the charging system was fair but that not paying was decidedly unfair and impacted on the most vulnerable and those who pay. I hope that all noble Lords will join me in condemning those who do not pay.

§ Baroness Seear
My Lords, will the Minister advise me what should be done about Lambeth Council, to which I have applied at least five times to be sent the poll tax bill and which will not send it?

§ Baroness Blatch
My Lords, I understand that Lambeth is now sending out its bills for the reduced level of community charge. Of course there is an obligation upon all people to meet their community charge even during the interregnum when that case was before the court. The Government have not yet taken a final decision on what to do about Lambeth.

The Earl of Selkirk
My Lords—

§ Lord Mulley
My Lords—

§ Lord Tordoff
My Lords—

§ The Lord Privy Seal (Lord Belstead)
My Lords, perhaps I may suggest first my noble friend Lord Selkirk, then the noble Lord, Lord Mulley, and then the noble Lord, Lord Tordoff.

The Earl of Selkirk
My Lords, in so far as the tax falls on houses rather than people, at what stage in the building of a house does liability for community charge arise?

§ Baroness Blatch
My Lords, my noble friend appears to have it wrong. The tax liability falls on people and not on houses.

§ Lord Mulley
My Lords, what consideration are the Government giving to the problem faced by many district councils which are not getting money in at the rate that they expected and are having to borrow substantially at high rates of interest to meet the precepts? As she is well aware, the biggest local authority spenders are the county councils, which are not the rating authorities. I am told that the district councils are having to borrow, and those interest charges are adding to the bill.

§ Baroness Blatch
My Lords, charge payers who owe local authorities money continue to have a liability to pay. Local authorities continue to have the responsibility for collection. I understand that there have been numerous scare stories about the levels of collection. While they are not ideal, they are not much worse than the level of rate collection this time last year. The more efficient local authorities, and the more 1140 responsible people paying the charge will, I hope, ensure that that is not a problem at the end of the financial year.

§ Lord McIntosh of Haringey
My Lords, does the Minister recall that during the passage of the poll tax Bill last year the Government's official estimate was that the cost of collection would be roughly twice that of the rating system? Will she tell us what the up-to-date figures are? Does she agree that the cost of collection is a major criterion for deciding whether the system is working?

§ Baroness Blatch
My Lords, it is true that the Government said that collection would cost twice as much, and that was recognised when provision was made for local authority spending. Some local authorities are making a more efficient attempt at introducing the community charge. Of course in the early stages the costs of introducing such major changes will inevitably be greater than they will when the system settles down. The greater the efficiency the lower the cost.

§ Lord McIntosh of Haringey
My Lords, that was not an answer to my question. The question was: what is now the official estimate of the cost?

§ Baroness Blatch
My Lords, we have talked about the estimated figure, which was twice as much. We do not have the actual figures. For those figures we shall have to await the outturn from local authorities.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that the unified business rate is causing a great deal of unease because of the difference in payment for identical places? Is it possible to have a more detailed explanation as to the way valuations are arrived at and the formula to be applied so that people can see how the result is achieved?

§ Baroness Blatch
My Lords, the valuation system is applied in all parts of the country in the same way. There is of course a system of appeal against revaluation and many business people have taken that up. The area of anxiety about the business rate that we share is that of the small businesses where the owner may live over a shop. That issue is under consideration at present.

§ Lord Williams of Elvel
My Lords, will the Minister kindly answer the question put by my noble friend Lord McIntosh of Haringey? What is the current cost of collection relative to the cost of collection of the rates?

§ Baroness Blatch
My Lords, I do not detract from my first answer, that the estimate at the beginning of the year was that it would cost twice as much to introduce the charge. We do not indulge in speculation beyond that point. We are now interested in the actual expenditure of local authorities. We know that some local authorities have laboured the introduction of the charge while others have made an effective and efficient start towards introducing the changes.

§ Lord Dean of Beswick
My Lords—

§ Lord McIntosh of Haringey
My Lords, perhaps I may intrude upon my noble friend's question. Is not the department putting forward—

§ Lord Belstead
My Lords, the noble Lord is doing his noble friend out of his question, if I may say so. The noble Lord, Lord Dean, was on his feet. Perhaps I may suggest that the noble Lord stays on his feet and then we will hear from the noble Lord, Lord McIntosh.

§ Lord Dean of Beswick
My Lords, when answering my first Question the Minister implied that the Government were satisfied with the rate of collection. The figures that I have show that for the first quarter there was a deficit of £1 billion in the amount expected by local authorities due to the non-payment of the unified business rate. The point I was making was that if that goes on for the rest of the year local authorities will be £4 billion in deficit. Is the Minister aware that tens of thousands of small businesses have already been driven into bankruptcy due to their inability to pay the charge? That is not because they will not pay it but because they cannot pay it. Is it the Government's intention to drive tens of thousands more small businesses to the wall? If it is not, will they do something about it?

§ Baroness Blatch
My Lords, the Government have determined that the new rates system for the business community is much fairer than the old one. However, there is an interregnum which is difficult for business and commerce. To allow for easier implementation of the new system, a gradual move towards it over a period of five years has been determined. That will help businesses to absorb the changes. When that system is in place, it will be fairer than any system that has preceded it.