§ 3.21 p.m.
§ Report received.
§ Clause 1 [Repeal of section 101 of Local Government Finance Act 1988]:
§ Lord McIntosh of Haringey asked Her No. 1:
§ Leave out Clause 1.
§ The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 2. It may contrast with normal procedure, but we have tried modest measures to deal with the atrocious proposal put forward by the Government; namely, that capping of local authority budgets should be extended from the large authorities covered by existing legislation to all local authorities, including the smallest. As I said, having made modest and reasonable proposals at Committee stage, which were rejected out of hand, we now have to take the more severe approach and propose that the entirety of the extension of capping should be taken wholesale out of the Bill.
We were wrong to be so accommodating and moderate at Committee stage. The Government are clearly determined that capping shall be an essential part of all local authority finance. The Minister made that absolutely clear in Committee when she said:
Experience has shown that strong capping powers are an essential aspect of any local government finance system. Sharpened accountability has not in itself provided sufficient incentive for local authorities to budget wisely, particularly during times of transition. We intend to ensure that there are strong and effective capping powers appropriate to the new council tax".—[Official Report, 8/7/91; col. 1215.]
§ There could not have been a more comprehensive statement of defeat after 12 years of local government legislation from this Government and their immediate predecessors. In total contrast to everything that they tried to say in the early years of Conservative rule in the 1980s, the Government now insist that central government are always right and local government always wrong. They assert that local people have no chance to exercise responsibility for choosing the services they want and deciding what they are willing to pay for them. We said in Committee that local people have a right to demand value for money. Whether or not they are satisfied with the value for money provided by their own local authority should be tested at the ballot box and not in Marsham Street. It is intolerable that as a matter of continuing policy covering all councils—not merely the few outstanding examples of extravagance, according to the 198 Government—central determination of what local authorities should spend will be for Marsham Street and Marsham Street alone.
§ It is not as though the determination of what local authorities should spend is based on a realistic assessment of local areas' needs. That argument has gone out of the window. The standard spending assessment, which is the basis for poll tax capping now and council tax capping in the future, no longer even pretends to be a true reflection of what local authorities need in relation to the resources that they have available to meet those needs. Central government now decide to allocate a certain amount of money to local authorities as a whole. On an increasingly arbitrary basis they decide—sometimes on political rather than economic or social grounds —how to divide it among local authorities, and then they impose that arbitrary assessment on each local authority.
§ It is beyond belief that the Government who introduced a poll tax system where the cost of collection, and indeed of failure to collect, amounts to an additional £800 million a year should seek to extend capping powers to local authorities which have budgets of less than £15 million a year and when the amount denied to the local authorities—in other words, the rights denied to local authorities to levy what they want from their own ratepayers with their agreement—is very often only a few hundred thousand pounds per council. Against that background the Government, who are recklessly spendthrift in their whole approach to local government, seek to claim that all wisdom lies at the centre and that no wisdom and no responsibility lie with local authorities.
§ In Clause 2, which we seek to delete, the Government seek to advance the same argument for Scotland. Since the 1987 Act, Scotland has had at least the escape route that local authorities should not spend more than what is reasonable. At least "reasonable" has some legal meaning and can be accepted in the courts. Instead, what is now proposed for Scotland is that the criterion for capping should be whether expenditure is excessive. "Excessive" is not a word with any legal meaning—"excessive" means above the standard spending assessment. With such a political basis for setting the standard spending assessment, such a political basis for the control of local authority expenditure and such a narrow view of the public interest, as has been evident in local authority legislation over the past few years, is it any wonder that we have no alternative but to take out altogether from the Bill this objectionable procedure? I beg to move.
§ Baroness Hamwee
My Lords, I confess to having been somewhat surprised to see these two amendments tabled in the name of the noble Lord, Lord McIntosh. However, when I thought about them for a moment, I realised that the noble Lord was quite right to have gone from the particular to the general.
The clauses that are the subject of these amendments go to the heart of the respect that central government professes to have for local government and the accountability of local authorities to their 199 electorates. I have heard many fine words spoken in the short period of time that I have been a Member of this House—fine words about accountability, local assessment of local needs and local choice. It would be sad if those words were mere lip-service, as I am beginning to believe that they are.
The extension of capping to all local authorities takes the Government's theories and dogma to the very limit of their extremes in order to save tiny amounts of money. I did not realise how many noble Lords had previously been members of local authorities. I wonder how they would have reacted in their previous incarnation as local councillors if they had heard this debate. I wonder how angry they might have been at the attack on their sense of responsibility and the suggestion that they were not fit to take decisions for their local communities.
§ 3.30 p.m.
§ Earl Russell
My Lords, I apologise to the House if I intervene out of ignorance or stupidity. However, I was not in this country when the power to cap was first introduced. I have never entirely understood the rational justification for the power to cap. But it seems relevant to the debate on the amendment to try to understand it.
We are told regularly that controlling local authority spending is vital for the fight against inflation. I do not argue with that. However, is it not equally essential to the fight against inflation to control private spending? Is there any reason to believe that one form of spending is more inflationary than the other? Why do we have stringent powers to control local authority spending without having equivalent powers to control private spending? If we have one but not the other, the rationalisation seems to me to fall short. If we were to place controls on private spending that were as stringent as those on local authority spending, would we perhaps be on the road towards a command economy?
§ Baroness Blatch
My Lords, I wish to start by making two points. First, the time is fast approaching whey: the parties of noble Lords opposite will have to explain to the world outside that they approve of no limit; whatever on government spending, because that is the message that they are sending out. We are not talking about constraints on private money—that is, on people spending their own money. We are talking about giving a licence to local authorities to spend without limit other people's money. That is the issue. I make no apologies whatever for saying that there should be concern about macro-economics. Eighty-six per cent. of local authority spending is provided by national taxation. That is a high proportion of the whole. We have a concern about macro-economics. Noble Lords opposite will have to explain to the electorate that they have no worry about macro-economics.
§ Earl Russell
My Lords, I am sorry to intervene. I had thought that local authorities were accountable to their own electorates.
§ Baroness Blatch
My Lords, the noble Earl has missed the point. Eighty-six per cent. of local authority spending is directly grant-aided by government, business and commerce. Therefore local authorities are spending a great deal of other people's money. Under the present system only 14 per cent. is raised by local people. Therefore the point made by the noble Earl about accountability is rather lost.
We have made clear our reasons for seeking to abolish the anomalous exemption from capping for local authorities with budgets of less than £15 million. The current exemption mirrors a similar provision which existed under rate capping. Initially we considered it appropriate to concentrate our efforts on the worst overspenders, which tended to be the larger districts and counties. But times have now moved on. Small authorities, while they may have only a small effect on the total of government expenditure, have in some cases overspent to the extent of adding significantly to the bills local people are required to pay.
During the period of transition from domestic rates to the community charge some local authorities used the change-over as a smokescreen to hide their increases in spending. Over the two years 1989–90 and 1990–91 spending rose by more than a quarter. This year we announced our provisional capping criteria in advance of budget setting by authorities. In stark contrast to previous years, budgeted spending by authorities has come out about 0.5 per cent. above the amount provided for in the settlement.
But notwithstanding this success we have not been able to protect all charge payers from the effects of overspending because of the exemption from capping for authorities with budgets of less than £15 million. While many small authorities budget wisely, a number have not done so. Eighteen such authorities set budgets which added more than £40 to their bills and 44 added at least £20. In certain cases the overspending was much more substantial, for example in the cases of Derwentside, Elmbridge and Harlow, adding some £95, £73 and £83 respectively.
This alone provides a powerful argument for abolishing the £15 million threshold. But the need for strong and comprehensive capping powers is now even greater. This year's budget sought to reduce in the long term the proportion of local authority finance provided by local taxpayers to support local expenditure. We are determined that the considerable extra resources that we are making available to local authorities should be used to keep charges to reasonable levels rather than to finance higher spending. Most importantly, in the run-up to the introduction of the council tax we are determined to avoid a repetition of the massive spending up by local authorities which accompanied the introduction of the community charge.
We have no desire to cap large numbers of authorities. As this year it is our aim to achieve as much as possible by deterrence and as little as necessary by capping. We have made clear that we intend to make an advance announcement of provisional criteria for next year before local authorities take their budgeting decisions.
201 I have explained our reasons for wishing to strengthen our capping powers. The proposed amendment reflects the Labour Party's unwillingness to accept responsibility for controlling public expenditure, and to that I have to add the Liberal Democrats. It is all very well to talk about accountability. Of course that is central to any system of local authority finance. But experience has shown that sharpened accountability is not enough. In a system without restraint, spending would go through the roof.
I have dealt with the English side of Amendment No. 1. I now hand over to my noble and learned friend, who will address the Scottish dimension of Amendment No. 2.
§ The Lord Advocate (Lord Fraser of Carmyllie)
My Lords, we wish to introduce stronger capping powers in Scotland because in our view our present powers are too limited. Those powers were used previously for rate capping. By their nature they are selective and have little effect in deterring general overspending. We thought that in a system where accountability had a major part to play they would provide adequate protection for charge payers. But many local authorities have continued to spend excessively. They have flagrantly ignored the interests of their charge payers. The result was an increase in charge levels set originally by local authorities for 1991–92 of an average 30 per cent. That was despite an extremely fair increase in central government support through aggregate external finance of 10 per cent. In Edinburgh charge payers were asked to pay £584, an increase of 33 per cent. In Aberdeen the increase was 29 per cent., in Nairn 29 per cent., in Clydebank 29 per cent., in Kilmarnock 30 per cent. and in Dundee 29 per cent. All over Scotland people were struggling under the intolerable burden imposed by local authorities.
The effect of Clause 2 will be to strengthen and widen the Secretary of State's capping powers in Scotland. That is essential to protect local taxpayers from the excessive overspending of local authorities. It is also our duty to ensure that the fundamental shift in the balance of taxation brought about by the Community Charges (General Reduction) Act has the intended effect of keeping local taxes down to a reasonable level and is not used to fund higher spending. The new local level of charges made possible by this measure must be passed on to local people. The new capping powers will enable us to do that by making local authorities exercise restraint on spending.
The noble Lord thought that the word "excessive" was without legal meaning or content. I can only invite him to read the opinion of the noble and learned Lord, Lord Bridge, in the Hammersmith case—if he is not already familiar with it—in order to appreciate that the courts have indeed been able to give content to the use of the word "excess".
The existing legislation requires a long and detailed scrutiny of budgets, which means that it is usually well into the financial year when capping decisions are 202 announced. That leaves authorities with the difficulties of making adjustments to budgets when the financial year is already under way. The proposed new arrangements will enable the Secretary of State for Scotland to outline in advance the capping criteria he proposes to apply in the year ahead so that local authorities know where they stand when they begin their budgeting process. It is certainly not my right honourable friend's intention to cap large numbers of authorities next year when he has these new powers available to him. On the contrary, he fully expects that, with the benefit of capping criteria available to them before they make their budget decisions, local authorities will budget sensibly and local taxpayers will reap the benefit of reasonable charge levels. On that basis, I invite the House to reject the amendment.
§ Lord Molloy
My Lords, before the noble and learned Lord sits down perhaps I may say this. He has made a venomous attack on many of Scotland's local boroughs. However, as I understand it, in another place Mr. Heseltine has decided that the poll tax is a massive blunder. Therefore the problem has been created by the blunder, as Mr. Heseltine described it, of the poll tax. Would it not be fairer to blame the Government rather than many of Scotland's local authorities?
§ Lord Fraser of Carmyllie
My Lords, there is nothing venomous in merely recording what has been an excessive degree of overspending by local authorities in Scotland. That was the choice that they took and I believe it only appropriate that the figures should be put before the House.
§ Baroness Phillips
My Lords, perhaps we can return to the situation in England and Wales. What has been the cost of the rate capping? I cannot speak for every borough but I can speak for some of the London boroughs. Yes, they have been rate capped and money has been saved. But how has it been saved? Schools and parks have been closed as have many services to the people. My local authority was good and did its job thoroughly but now it must apologise for being unable to provide services that it would like to provide; yet Government Ministers just sit there smugly and talk about the issue.
When I was in one of my local shops this morning and someone complained about the local authority, I was happy to say, "Put the blame where it belongs, on the Government". That is what we must do. Rate capping sounds marvellous because you save money. But how do you save money? You do so at the cost of essential services.
§ Lord Carmichael of Kelvingrove
My Lords, the noble and learned Lord the Lord Advocate was the second Front Bench speaker and dealt with Scotland. The issue was dealt with during our debates on the poll tax in Scotland and was put clearly. That was a good debate in which we made clear to the Government the difficulties of collection and that there would be a shortfall in local government expenses. We also made clear the fact that local government inflation was greater than any other because of the high incidence of labour costs.
203 I agree with what my noble friend Lady Phillips said about London boroughs. What services do the Government believe should be reduced? Since the Government came to power there have been great reductions in the home help service. People used to have visits from home helps two or three times a week but now at best it is once a week. There are not enough home helps to ensure that the same person always visits the home. That is disturbing to old people. Have local authorities fallen down on their control of what they are spending? No, home helps are costing more because of the rise in inflation caused by the Government.
The same applies in all areas of local government; for instance, libraries, schools and recreational facilities are being closed. The service to ordinary people is being reduced not because of the profligacy of local government but because the Government have not recognised that local government has become more expensive to administer. The House should support the amendment tabled by my noble friend Lord McIntosh.
§ Lord McIntosh of Haringey
My Lords, as will be evident, we do not propose to be flattered or intimidated by having both the Minister of State and the noble and learned Lord the Lord Advocate speak against us in respect of one humble group of amendments. There are fundamental disagreements which will not he overcome by negotiation. We have a Government who are repudiating everything they have said in recent years about accountability, about the relationship between central and local government and about the heinous crimes of a small number of profligate authorities. That is what we were told from the Government Front Bench only a couple of years ago. Their argument was not that there was general over spending but that a few wicked Left-wing councils were causing all the trouble. They said that provided we dealt with those councils that would be good enough.
The Government have set themselves up against their distinguished past—the past of the Conservative Party which over many years has respected local government, diversity and plurality of power—and are now proposing to repudiate that. The Government are setting themselves up not only against Labour local authorities and the Association of Metropolitan Authorities but against the unanimous view of the Conservative-controlled Association of District Councils, as was made clear in Committee by the noble Lord, Lord Rippon of Hexham. The Government are setting themselves up against every principle in the modern world of subsidiarity. That is a nasty word but a desirable concept of delegating to the lowest possible level the power and responsibility for the allocation of resources.
We are not profligate and we do not support profligacy. The power that central Government properly has to control local government expenditure is contained in central Government's power to control the grant which they give to local authorities in recognition of the gap between their resources and their needs. A Labour Government would use that power as firmly as any Conservative Government.
204 Labour Governments have always used that power as firmly as any Conservative Government and they will continue to make a just assessment of local authority needs and resources. If additional expenditure is incurred by the decisions of a local authority it will be for the local authority and the local rate-payers alone and it will not continue to be supported by central Government.
That is my answer to the Minister's comment that we are in favour of uncontrolled local authority expenditure. What we are not prepared to accept—until now what the Conservative Party has not been prepared to accept and what the Conservative, Labour and Liberal Democrat controlled local authority associations are not prepared to accept—is that even that part of local authority expenditure which is raised on a democratic basis from local people by their democratically-elected council should be controlled from Marsham Street. That is the divide between us and I have no hesitation in asking the House to support the amendment.
§ 3.47 p.m.
§ On Question, Whether the said amendment (No. 1) shall be agreed to?
§ Their Lordships divided: Contents, 85; Not-Contents, 134205
|Division No. 1|
|Alport, L.||Kennet, L.|
|Ardwick, L.||Kilbracken, L.|
|Aylestone, L.||Leatherland, L.|
|Beaumont of Whitley, L.||Listowel, E.|
|Blackstone, B.||Llewelyn-Davies of Hastoe, B|
|Blease, L.||Lockwood, B.|
|Boston of Faversham, L.||Longford, E.|
|Bottomley, L.||Lovell-Davis, L.|
|Briginshaw, L.||Macaulay of Bragar, L.|
|Brooks of Tremorfa, L.||McIntosh of Haringey, L.|
|Bruce of Donington, L.||Mackie of Benshie, L.|
|Campbell of Eskan, L.||Mallalieu, B.|
|Carmichael of Kelvingrove, L.||Mason of Barnsley, L.|
|Carter, L.||Mayhew, L.|
|Cledwyn of Penrhos, L.||Mishcon, L.|
|Cocks of Hartcliffe, L.||Molloy, L.|
|David, B.||Mulley, L.|
|Dean of Beswick, L.||Murray of Epping Forest, L.|
|Desai, L.||Nicol, B.|
|Diamond, L.||Ogmore, L.|
|Donaldson of Kingsbridge, L.||Peston, L.|
|Dormand of Easington, L.||Phillips, B.|
|Ezra, L.||Pitt of Hampstead, L.|
|Fisher of Rednal, B.||Prys-Davies, L.|
|Foot, L.||Redesdale, L.|
|Gallacher, L.||Ritchie of Dundee, L.|
|Galpern, L.||Robson of Kiddington, B.|
|Gladwyn, L.||Russell, E. [Teller.]|
|Glenamara, L.||Sainsbury, L.|
|Graham of Edmonton, L.[Teller.]||Seear, B.|
|Hampton, L.||Stallard, L.|
|Hamwee, B.||Stedman, B.|
|Hollis of Heigham, B.||Stoddart of Swindon, L.|
|Holme of Cheltenham, L.||Strabolgi, L.|
|Howie of Troon, L.||Taylor of Gryfe, L.|
|Hughes, L.||Turner of Camden, B.|
|Jay, L.||Underhill, L.|
|Jeger, B.||Varley, L.|
|Jenkins of Hillhead, L.||Wedderburn of Charlton, L.|
|Jenkins of Putney, L.||Whaddon, L.|
|Judd, L.||White, B.|
|Kagan, L.||Williams of Elvel, L.|
|Ailesbury, M.||Joseph, L.|
|Ampthill, L.||Killearn, L.|
|Arran, E.||Kimball, L.|
|Ashbourne, L.||Kinloss, Ly.|
|Astor, V.||Knollys, V.|
|Auckland, L.||Lauderdale, E.|
|Beloff, L.||Lloyd of Hampstead, L.|
|Belstead, L.||Long, V.|
|Bessborough, E.||Lothian, M.|
|Birdwood, L.||McAlpine of West Green, L.|
|Blanch, L.||McColl of Dulwich, L.|
|Blatch, B.||Mackay of Ardbrecknish, L.|
|Blyth, L.||Mackay of Clashfern, L.|
|Borthwick, L.||Macleod of Borve, B.|
|Boyd-Carpenter, L.||Mancroft, L.|
|Brabazon of Tara, L.||Mar, C.|
|Brigstocke, B.||Marlesford, L.|
|Brougham and Vaux, L.||Marsh, L.|
|Butterworth, L.||Merrivale, L.|
|Caithness, E.||Mersey, V.|
|Caldecote, V.||Middleton, L.|
|Campbell of Alloway, L.||Milverton, L.|
|Carnock, L.||Monckton of Brenchley, V.|
|Cavendish of Furness, L.||Monteagle of Brandon, L.|
|Chalfont, L.||Morris, L.|
|Chelmer, L.||Mottistone, L.|
|Cockfield, L.||Mountevans, L.|
|Coleraine, L.||Mowbray and Stourton, L.|
|Colwyn, L.||Nelson, E.|
|Constantine of Stanmore, L.||Newall, L.|
|Cottesloe, L.||Norrie, L.|
|Davidson, V. [Teller.]||Nugent of Guildford, L.|
|Denham, L.||Orkney, E.|
|Denton of Wakefield, B.||Oxfuird, V.|
|Donegall, M.||Park of Monmouth, B.|
|Downshire, M.||Pender, L.|
|Eccles, V.||Peyton of Yeovil, L.|
|Effingham, E.||Porritt, L.|
|Elibank, L.||Prior, L.|
|Ellenborough, L.||Pym, L.|
|Elles, B.||Quinton, L.|
|Elliot of Harwood. B.||Rankeillour, L.|
|Elliott of Morpeth, L.||Renfrew of Kaimsthorn, L.|
|Erroll, E.||Renton, L.|
|Fanshawe of Richmond, L.||Richardson, L.|
|Fortescue, E.||Robertson of Oakridge, L.|
|Fraser of Carmyllie, L.||Saltoun of Abernethy, Ly.|
|Fraser of Kilmorack, L.||Sanderson of Bowden, L.|
|Gainford, L.||Shannon, E.|
|Gisborough, L.||Sharples, B.|
|Glenarthur, L.||Shaughnessy, L.|
|Granville of Eye, L.||Stodart of Leaston, L.|
|Gray of Contin, L.||Strange, B.|
|Gridley, L.||Strathclyde, L.|
|Grimston of Westbury, L.||Strathmore and Kinghorne, E.|
|Halsbury, E.||Sudeley, L.|
|Harmar-Nicholls, L.||Swinton, E.|
|Harvey of Prestbury, L.||Terrington, L.|
|Henley, L.||Teviot, L.|
|Hesketh, L. [Teller.]||Thomas of Gwydir, L.|
|Hives, L.||Thomas of Swynnerton, L.|
|Holderness, L.||Thurlow, L.|
|Howe, E.||Ullswater, V.|
|Hylton-Foster, B.||Vaux of Harrowden, L.|
|Ilchester, E.||Waddington, L.|
|Ironside, L.||Wharton, B.|
|Johnston of Rockport, L.||Wynford, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 3.55 p.m.
§ Clause 2 [Amendment of grounds for charge capping in Scotland]:
§ [Amendment No. 2 not moved.]
§ Clause 3 [Valuation of domestic properties]:206
Lord McIntosh of Haringey asked Her No. 3:
Page 2, line 35, leave out ("a") and insert ("an individual").
§ The noble Lord said: My Lords, in moving Amendment No. 3 I shall speak also to Amendment No. 6. With these amendments I return without apology to a fundamental principle of the valuation system which is prepared for in the second part of the Bill.
§ Noble Lords will have seen over the past few days that there has been a flurry of comment in the press about the way in which the Government are proposing to implement the valuation for the council tax. Stories have been flying around which have been immediately denied—I suppose not surprisingly. However, there has been a dispute between the Treasury and the Department of the Environment about the banding system to be imposed.
§ The one thing which we can be sure of is that any flak which the Government are now catching because of what we know already about the valuation system proposed will be nothing compared to what will hit the Government when it becomes clear that they are now proposing, and will attempt to legislate in the next Session, a system of valuation which gives no rights whatever to individuals to understand what valuation is being put on a property and no effective rights to appeal because there will be no information on which to base the appeal—all that because what is proposed is a wholesale, on-the-cheap version of property valuation rather than the individual property valuation which the people as a whole will expect and will demand if they are to accept the fairness of the proposed system.
§ I often wonder whether this Government understand anything about what is going on in the outside world. Do they not understand that the poll tax is unacceptable because people did not accept the fundamental principle that taxation should be based on ability to pay? Do they not understand that by introducing this new council tax, which is supposed to be property based but is not based on an effective valuation of individual properties, they will come up against the same opposition?
§ If I were to be cynical I should not seek to interfere with the Bill in any way. I should say, as we said when the original Local Government Finance Bill was introduced in 1988, that it was only out of a stern sense of public duty that we opposed the Bill. The Government are doing exactly the same as they did in 1988. They are digging a trap and a pit for themselves. They are putting themselves back in the position of introducing a system for local government finance which will simply not be understood or accepted as being fair.
§ In the unlikely and unfortunate event that there is a Conservative Government in three years' time, there will be exactly the same sort of retreat from this legislation and forthcoming legislation that we are now seeing from the legislation introduced with such élan in 1987 and 1988.
§ People in this country will not accept a valuation system which consists of people subcontracted by the commissioners —we will come on to the question of 207 qualifications later —to stand at the end of the street, to make neither an individual valuation for an individual property nor any attempt to look at individual properties, and then to assign those properties into a band of value without telling the occupiers or owners what the actual valuation is.
§ People will not be told that, according to the valuer, their house is worth £135,000. They will be told that it will fit into band E, F or G or whatever the case may be. The Government in their ignorance may think that that will deter appeals. They may believe that, if they do not tell people whether their property is near or at the edge of a band, that that will deter them from appealing. They are totally wrong about that. If people are not told whether they are at the edge or in the middle of a band, the message they will receive is, "You have carte blanche to appeal against the valuation placed on your house without your house being looked at".
§ That is why I say that the Government are storing up trouble for themselves in introducing this legislation. To prepare for this legislation as the Government do in this limited Bill, by providing for a system which permits neither individual assessment of individual properties nor precise valuations which can be understood and justified to the occupiers or owners is to invite the accusation that I now make. What is proposed is an injustice as great as any which has been known in the history of property taxation in this country. I beg to move.
§ 4 p.m.
§ Lord Cockfield
My Lords, I am sorry that the noble Lord, Lord McIntosh of Haringey, waxes so indignant on the question of banding. The broad concept of banding has been enshrined in our taxation system at least since the time of the late Mr. Lloyd George. Indeed, it goes back to Harcourt in 1894. Mr. Gladstone always maintained that it went back to Mr. Goschen in even earlier days. We have therefore lived with the broad concept of banding, not in exactly this form but in a general form—the noble Lord is becoming more indignant but perhaps he will allow me to complete the sentence—for a very long time. I regard the concept of banding in this specific legislation as one of the major intellectual simplifications. On both of those grounds, it probably does not appeal to the noble Lord.
§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Lord for giving way. I was not waxing more indignant; I was becoming more curious. Is the noble Lord, with his great experience of the Inland Revenue, referring to banding in levels of income taxation?
§ Lord Cockfield
My Lords, no. I am referring not only to income taxation but to estate duty and to the temporary estate duty which preceded estate duty. The concept of banding is therefore not entirely a new one. It is not something to get frightfully indignant about. I see the noble Lord is bubbling like a kettle on the boil. I wish he would restrain himself.
One of the major points of this banding system is precisely the same as in those other situations. It 208 ensures that people in higher bands pay higher amounts of tax pro rata. That is exactly what graduation does for the income tax and originally for the estate duty. There was a dispute, which the noble Lord will find fully reported in Hansard, between Mr. Gladstone and Mr. Goschen as to whether or not Mr. Goschen had invented the idea.
§ Lord McIntosh of Haringey
My Lords, before the noble Lord sits down, perhaps I may intervene. I know that he is amused by the anxiety I feel in regard to the matter. I am hesitant to disagree with something said by a noble Lord of his experience, but surely, when he refers to banding for income taxation or any other kind of taxation, he is speaking of a band above which a higher rate is levied. If my income rises £1,000 above the level at which 40 per cent. income tax is due, I pay the 40 per cent. on that £1,000. If I earn £10,000 above the level at which 40 per cent. taxation is due, I pay the tax of 40 per cent. on that £10,000. In other words, for income taxation and inheritance taxation the bands are levels at which additional amounts are levied; they are levied on the actual amount assessed. This banding situation is quite different. The banding is a blank level between £0–£50,000 or anything above £160,000; whatever the value, the same council tax is paid by all people. That is a different situation from income or inheritance taxes.
§ Lord Cockfield
My Lords, the noble Lord is always entitled to disagree with me. If he did not disagree with me I should suspect that I was wrong. In this instance his knowledge or imagination does not extend quite far enough. If he goes back to Harcourt's original estate duty he will find that the higher rate was charged on the whole estate and not merely on the excess above a specific level.
None of that has really got anything to do with the point I am making. My point is a simple one; namely, that the concept of the use of a system of banding in the field of taxation is not a brilliant new invention by the Secretary of State for the Environment. It is brilliant but is not new. Its great advantage is that it eliminates an enormous amount of work. If the noble Lord had lived as I had to live in years gone by, through revaluations for Schedule A —I do not want to embark upon a lecture to explain to the noble Lord what Schedule A was—
§ Lord Cockfield
My Lords, the noble Lord says he used to pay it. All I can say is that he must have been one of the few people who did pay it; most people succeeded in vacating it by allowable expenses. I shall leave that point on one side.
Revaluations both for Schedule A and for rating purposes caused enormous hassle. The objective of this measure is to combine relative administrative simplicity with a substantial degree of fairness. I know that the noble Lord may object to the word "substantial". I take the view that there is no such thing as perfect fairness in this world. The best one can do is to make every endeavour to achieve it. I suggest 209 to the House that this proposal is probably the best solution that can be found to a particularly difficult and intractable problem.
My Lords, in Committee last week the noble Lord, Lord McIntosh, said, when moving amendments identical to those we are now debating, that the words of the Bill as drafted seemed to him, "to be deliberately opaque". Clause 3(3) provides for the valuation to be carried out for the purpose of compiling lists of all domestic properties,differentiated according to prescribed bands of values".That is clear enough for most people. But let me explain once again for the benefit of the noble Lord.
We have stated our proposal for seven bands. We consulted on that proposal and are now considering the responses to that consultation. The proposal is that there will be a valuation of all domestic properties which will differentiate those properties according to the band in which each falls. In other words, the task of those responsible for valuation will be to decide to which band a property should be allocated—nothing more, nothing less.
Property owners placed in band A will know that they have been placed in that band on the basis that the value of their property is, to use our proposed figures, less than £40,000. Property owners placed in band B will know that they have been placed in that band on the basis that the value of their property is between £40,000 and £52,000. The decision which the valuer will have to make is that the value of such a property is between £40,000 and £52,000; and so on for each of bands C, D, E, F and G. We are not saying that we believe all properties within each band are of the same value, only that each falls within the range of values applicable to the band concerned. That is simple and straightforward.
However, contrast that with the approach sought by this amendment. Individual and precise valuation means a reintroduction of all the unfairness and complexity of the rates. It would mean that all those who seek to improve their property by building a garage or making an extension will face an increase in the valuation of their property and an increase in their bills. I believe that would be an unfair penalty. It would also mean disproportionate bills for some people, based on a wide range of valuations, which would bear scant relation to the individual's circumstances. I believe that would be unfair, particularly for many elderly people who have lived in their house for many years and faced extreme hardship on account of punitive rates.
Our proposals for seven bands of properties mean that a couple living in a property in the seventh band would pay two-thirds more than a couple living in a property in the middle band. A couple living in a property in the first band would pay two-thirds of the bill for a middle band property. Overall, bills for couples in the seventh band would be two-and-a-half times as much as those for couples in the first band in the same local authority area. Our proposals will avoid disproportionate bills for high priced areas and will mean low bills for low priced properties. Modest home improvements should not push a property from 210 one band to another, and thereby attract a penalty. There will be no snoopers going around looking at home improvements.
These amendments would also be expensive because they would require the precise Valuation of each house, flat, and dwelling in Great Britain, perhaps on the basis of four factors; market values, rental values, building costs and repair and maintenance costs. The cost of a professional assessment of each of these factors, as my noble friend told the Committee last week, would be astronomical, and there would be annual revaluations under the scheme preferred by noble Lords opposite. That would mean yet more astronomical costs.
I was very grateful for the support of my noble friend Lord Cockfield and for his perceptive historical analysis which not only amused us but very firmly explained how the system of banding is not new. Our proposal for a system of banding is greatly preferable to precise valuation and has been widely welcomed. These amendments seek a reintroduction of an expensive and unfair system and I call on noble Lords to reject them.
§ Lord McIntosh of Haringey
My Lords, it would be wrong of me to respond without expressing my thanks to the noble Lord, Lord Cockfield, for the lesson in 19th century history. It was Sir William Harcourt who said, "We are all socialists now". I might have known that he would have introduced his taxation system on the same crude basis that the Government are now proposing. But it is a fact—is it not?—that since that time the banding of levels at which income tax is due has been based on the principle that the assessment is on the actual income and not on an assumed income as between wide bands. The higher level is due on higher levels of income, but at all levels the assessment is made on actual income. That is the distinction between the taxation introduced by Sir William Harcourt and that being introduced, nearly 100 years later, by the Government.
The Government's proposals are crude and unfair. In Sir William's case it might even have been socialist, but in this case it is designed with the opposite intention. The intention here is to have a system which is certainly cheaper but at the expense of apparent justice. People who see their properties valued without individual inspection, and put into a band without being told where the property is placed in the band, will certainly not consider it fair.
I must say again that the downfall of the poll tax came because, as the Government admitted, it was not seen to be fair. This taxation system will not be seen to be fair. If the Government insist on preparing for it in this way, so be it, but it will not be to their advantage and in the end it will not save money or enhance the reputation of the new system of taxation. This is not a matter on which I seek to divide the House, but it will certainly be a matter on which the House will be divided on many occasions when the substantive legislation comes forward. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.211
§ 4.15 p.m.
Baroness Hollis of Heigham asked Her No. 4:
Page 2, line 37, at end insert ("and to facilitate administrative preparations for the introduction of any new form of taxation which is likely to be based upon the result of such a valuation").
§ The noble Baroness said: My Lords, in moving this amendment I shall speak also to Amendment No. 12. The two amendments together are in two parts. The first part asks the Secretary of State to empower local authorities to be able to spend the appropriate sums in the current and forthcoming financial year to prepare for thy; new council tax. The second part asks that the House empowers the Secretary of State in turn to have the authority to raise rebates to, we hope, the full 100 per cent. That is an invitation for further powers which we hope the Minister will find irresistible. Certainly, the Secretary of State has a very good track record in accepting invitations to increase his powers and we hope that this will be one such instance.
§ At Committee stage we spent some time trying to persuade the Government of the need to ensure the smooth introduction of the council tax by permitting local authorities to start preparatory work as soon as possible—that is to say, this summer—and to be permitted to incur expenditure to do so. I do not want to take up your Lordships' time by repeating the sorry saga concerned with the problems of implementing the poll tax. However, I must say that a bitterly hated tax was made harder to introduce and collect by the complexity of preparing for it. I refer to the registers, computer equipment, recruiting and training of apprehensive staff, the sixth-fold increase in paper flow, and the new benefit schemes. All that says much for the professionalism of local government in that the introduction of the poll tax was achieved as smoothly as it was. On occasions it might be appropriate for the Hours; to pay compliments to the professionalism of local government in that it succeeded as well as it did.
§ The point is that we do not want to repeat that trauma. We want to learn from the experience. At Committee stage the Minister said—and I am sure that it is right—that it was clear that local authorities can work with valuation officers to begin the valuation procedure. It is also clear that, should the Bill be passed by spring 1993, local authorities can incur expenditure next year—that is, during the financial year 1992–93. But that leaves barely one year for local authorities, if they are to meet the Government target, to have the tax up and running by April 1993. It took two years to introduce the poll tax, and that was done inadequately though with good will. We have barely one year in which to introduce a scheme which in many ways is at least as complicated. The period is not enough. Local authorities should be at least able to begin placing contracts now for computer software and for the associated paper and printing, and the like.
§ I am very surprised that the Government do not accept the rationale of that unless they are so confident that the Bill will not become law or will not take effect. Otherwise, I cannot see why the Government should resist these matters. We are not talking about large sums of money at this stage. We 212 are seeking to ensure that prudent treasurers, beginning their preparations now and incurring expense in so doing, do not lay themselves open to an ultra vires action by an aggrieved poll tax payer. That is what we are seeking to do and that is precisely the kind of farsighted administrative preparation that the Minister should support. We owe that to the staff. As the Audit Commission has noted, already we are facing rises in absenteeism and illness among poll tax staff. We shall see a repeat of that problem if we do not allow them somewhat longer than only 12 months to introduce the tax.
§ The second part of the amendment empowers the Secretary of State to introduce improved rebates or a discount scheme in the current financial year, 1991–92; including, of course, from April 1992. I cheerfully admit that this is a way of getting the Government, if they will, to reconsider yet again the cost, pain and trauma of the 20 per cent. rule that everyone, whatever their circumstances, must pay 20 per cent. of the poll tax. During the debate on the Address in November 1990 some of us warned the Government of the folly of holding to the 20 per cent. rule, though that view was not widely shared. Shortly afterwards the Audit Commission reported in searing terms. There is a still more recent report from the Audit Commission deploring the 20 per cent. rule. I ask the Government why they do not listen, especially to bodies like the Audit Commission which have been appointed by the Government and reputation of which is beyond dispute.
§ What is in the second report of the Audit Commission? Why is the commission so concerned to see the end of the 20 per cent. rule? What it makes clear is that in local government the 20 per cent. rule is helping to bring poll tax administration down around our heads. It is seen as unfair and, above all —and this is why we have brigaded it with this amendment—it is seen as virtually impossible to collect. In consequence, says the Audit Commission, we are going to see a two-tier system of community charge. In areas of stable population—the more settled rural areas —perhaps 95 per cent. of the charge will be collected; but in inner city areas with a high turnover of population on the registers, in university towns, or in regional capitals to which young single people drift, local authorities will be lucky to collect 90 per cent. of their poll tax compared to the 99 per cent. of the old rates.
The Audit Commission concedes that, even in November 1990, it underestimated the amount of turnover on the register. I remind your Lordships that it now looks as though in each district council about 40 per cent. of the population moves every year, with 50 per cent. in the metropolitan areas and 60 per cent. in the London boroughs. It is on that turnover—people changing their address—as much as the poverty of individuals that the capacity to collect the poll tax depends. Those who move most frequently, as well as those who are most poor, are groups like students and single-parent families. They are the people whose 20 per cent. we cannot collect. On the annual register of Oxford council there is a current turnover of 85 per cent. The Audit Commission states:
It is proving almost impossible to track movements in and out".
I again quote the Audit Commission:
Local authorities believe that few chargepayers know of their duty to disclose information. Of those who do know, few remember. And of those who remember, few bother".
§ The Audit Commission also recognises that of those outstanding sums a large proportion of non-payers are the 20 per cent. contributors and that the money is never going to be recovered—ever. It is not just a matter of volume and court resources; it is not just the estimate of 4 million to 5 million summonses, which is probably an underestimate and the courts will be clogged up until kingdom come trying to handle them. Even where the courts have finally delivered liability orders the money cannot be collected from the 20 per cent. payers.
§ The Audit Commission studied a snapshot of 79 liability orders. Only 14 per cent. resulted in full payment; 8 per cent. generated a further benefits inquiry; 5 per cent. of the liability orders were withdrawn; from 34 per cent. of those against whom a liability order was issued there was no response, and from a further 36 per cent. letters were returned marked "gone away". Where, beyond the liability orders, the local authorities went so far as to instruct bailiffs, in four out of five recent cases before the courts local authorities were defeated because the bailiffs were impounding property which, in student houses, belonged to other people. When it comes to the ultimate sanction of prison, police have made it clear that they will not serve non-bail backed warrants.
§ I repeat, there are virtually no sanctions for the non-payment of poll tax, especially non-payment by the poor and the physically mobile. Local government cannot collect the tax and the Government cannot make local authorities collect it because they are physically unable to do so. All the evidence suggests that at least half of those individuals in arrears are the 20 per cent. payers. Local authorities only ever collected the old rates because 95 per cent. of the population dutifully paid up on time and 4 per cent. of the last residual 5 per cent. paid up when prodded. We cannot return to that scheme, when people expected to pay and did so without prodding, except by abolishing the 20 per cent. rule. It is not only impossible to collect but, even if we could, it is also not financially worthwhile because, as I said, the collection costs are greater than the gain.
§ Perhaps your Lordships will allow me to repeat what I said in Committee. In my own authority of Norwich one-third of our administrative charges is spent in chasing one-quarter of the population. Because that one-quarter pays only 20 per cent., that brings in just 5 per cent. of our income. One-third of our costs to collect 5 per cent! Such a tax fails every test of a good tax. It is not fair in its incidence, it is not simple to collect, and it is easy to avoid. By every standard that 20 per cent. has made a bad tax horrendous. But for the fact that the claim to the £140 flat rate subsidy from the Government is linked to that 20 per cent. local authorities would probably give up tomorrow.214
§ It was apparent from stories in the press, as was mentioned by my noble friend Lord McIntosh and as we suspect, that the Department of the Environment rather agrees even if the Treasury does not. After all, the principle of 100 per cent. rebate—getting rid of that last 20 per cent.—has been conceded in the forthcoming council tax for the very good reason that the twenty per cent. cannot and will not be collected. The situation will get worse as we go into the twilight nightmare years of the last year of the poll tax. Already 40 per cent. of adults are in debt to their local authority, sometimes by missing just one or two payments. As a result, we have created a whole generation of young law-breakers who will now have a record against their name. I beg the Minister to give a commitment today that the Government will consider scrapping that 20 per cent.—in other words, take on the second part of our amendment. We would all save time and administrative costs. We would all save huge quantities of court, police and city hall time, which would be better devoted to the smooth introduction of the forthcoming council tax should it become law. We might even restore some integrity to local government finance.
§ I make one final point. Given that the 140 flat rate subsidy benefits most the full payers of poll tax, and given that that £140 is financed by VAT—which even the 20 per cent. payers pay and which falls hardest on the poorest—one might argue that those 20 per cent. payers are already more than paying their way by virtue of their contribution to indirect taxation. A recognition of that by abolishing the 20 per cent. would simply be straightforward justice as well as administrative common sense. I beg to move.
§ Baroness Hamwee
My Lords, I should like to support the first part of these amendments by saying no more than this. I assume that the administrative arrangements to which the noble Baroness, Lady Hollis, referred will either be agreed by amendment or that we shall have an assurance that they are not ultra vires in regard to the local authorities. If they were, a nightmare would ensue.
On the second part of the amendment, dealing with the 20 per cent., simple fairness must dictate, after all our experience, that it should now be reduced to nil and that the rebate arrangements to be introduced as part of the new council tax be brought in as soon as possible. However, quite apart from fairness, those who work hard in local government to achieve value for money work to the words "efficiency and effectiveness"; words that rightly are rammed down our throats by the Audit Commission. The noble Baroness has described very vividly the disproportionate effort that is required by local authorities to achieve so little by way of income. The effort is not only on the part of the local authorities, it is on the part of the courts and the bailiffs. If only to follow the dictates of the Audit Commission, which are very right and proper, I support this amendment.
§ 4.30 p.m.
§ Baroness Blatch
My Lords, this is a paving Bill—a preparatory Bill—for the introduction of the council tax. It is not about the community charge. I have to say to the noble Baroness, Lady Hollis, that some of her colleagues in another place, Members of Parliament, set the worst possible example by not paying their community charge. They are people who could pay but who refused to pay. People who were in a privileged position to make the law went on with gay abandon to break the law. I hold no brief for those people and I certainly would not use more House of Lords time to address that issue.
I must warn noble Lords that, if the amendments were accepted, they would he a matter of privilege in another place. They rest on the assumption that, without such provisions, authorities will not have the powers they need now, either for the valuation or for the introduction of the council tax. As I explained to the Committee last week, I do not believe that that is the case. I shall explain the position.
So far as concerns valuation, Clause 4 of the Bill places a duty on authorities to supply any information requested in a notice served on them by the Commissioners of Inland Revenue. If the Bill now before the House is enacted, authorities will be placed under a duty to provide that information. There will therefore be no doubt about their powers in that respect. I understand that representatives of local authorities have confirmed to my department that they accept this view. The first part of the new clause, which is the only part directly connected with the valuation which is the subject of this Bill, states that:This section has effect for the purposes of enabling administrative preparations conducive to the undertaking of a valuation under section 3".If the local authority associations accept that the Bill, as drafted, already gives no room for doubt, then this part of the new clause is not necessary.
I now turn to the more general preparations for the introduction of the council tax. As prudent managers, local authorities will of course be looking ahead. There is nothing unusual in this process of looking at statutory functions and assessing possible developments in the future. As the House will know, I am on record as saying that if I were still in local government today I too should be looking at how my authority should prepare for the introduction of the council tax. Many authorities are, I know, doing just that.
We have announced our intention to legislate next Session to introduce the council tax in April 1993. It is that legislation which will give local authorities the necessary powers generally to prepare for and to implement the council tax. If it is enacted according to our plans, local authorities will have all the necessary powers early in the 1992–93 financial year. It is our view that in such circumstances it is open to authorities to make a contingency allowance when preparing their 1992–93 budgets to cover the expenditure they estimate they will incur in 1992–93 in exercising those powers.
The appointment of staff and consultants, the commissioning of computer software and the letting of contracts for a new form of taxation can be done 216 only when the details of the new legislation have been brought before Parliament for consideration. The wording of the new clause makes the point. It refers to, the,efficient introduction of any new form of taxation".Is the noble Baroness seriously suggesting that local authorities would wish to engage staff to work on any new form of taxation, or that they would wish to let contracts on that basis?
Our timetable for implementation of the council tax is a rapid one. But it is one that we, and many others including the Audit Commission, think every effort should be made to meet. We propose to bring forward the appropriate legislation as soon as possible. Once the details of that legislation are in place, local authorities will be in a position to do all the things I have mentioned, such as appointing staff and consultants, and we believe that that time will be the right time for authorities to do those things.
We have asked local authorities to let us know of any specific difficulties they foresee with such arrangements. We have not yet received anything from them but if we do we shall of course consider carefully what they have to say. We ourselves are also commissioning consultants to look at what needs to be done. However, preparing generally for the council tax is not a matter for this Bill. This Bill is about the valuation of domestic property. General preparation for a new form of local taxation is an entirely different matter. It is a matter for future legislation. At this time I believe it would be wrong in principle for us to do more than to deal with valuation.
The new clause also refers to improved rebates and discounts for the community charge. Noble Lords may consider this particular subject to range wider than the Bill we are considering today, but I am happy to list the Government's achievements in that regard. First, headline community charges everywhere have been reduced by £140 following the Community Charges (General Reduction) Act 1991. In addition, the Government's community charge reduction scheme has meant that increases in household liability have been limited this year to £52 for the first two charge payers and a further £52 for each successive charge payer. In fact, taking account of community charge benefit and the extra element of income support which is there to pay for the minimum 20 per cent. charge, the average community charge actually paid this year is only £172, compared with £285 last year. So the steps which we have taken to alleviate the burden of the community charge are considerable.
But, to return to the main thrust of the amendments, they are, as I have explained, unnecessary. It is our belief that authorities have now all that they need. For the future we shall ensure that authorities have the powers they need at the time they need them. But these amendments have no place in this Bill, and I ask the House to reject them.
I must re-emphasise that, were these amendments to be accepted, they would be a matter of privilege in another place.
§ Baroness Hollis of Heigham
My Lords, I thank the Minister for that reply. I can only take her advice on the issue of financial privilege. On this side of the 217 House we hold no brief for those who wilfully refuse to pay the poll tax when they can afford to do so. I want to make it clear that we hold no brief for that. We are entirely at one with the noble Baroness on that point. One changes the law through legal and constitutional means. There is no disagreement between us on that.
I turn now to the general points made by the noble Baroness. She referred to valuation and said that subsections (1) and (2) of the new clause are not necessary because there had been agreement between the Department of the Environment and local government that valuation is protected in the Bill and that therefore there are no financial implications and no risk of surcharge for local authorities. That is not my understanding. While I defer to the Minister, my understanding is that local government did not agree that with the Minister. On the contrary, local government was told by the Minister that that is the case. It is clear that local government still has some worries even on the issue of valuation. However, that may be followed up in other places and at other times.
The Minister's second point is the substantive one. I refer to her refusal to accept that local authorities may need to incur expense in the current financial year so that they may introduce the council tax, should it become law, at the point and time at which the Government wish it to be introduced, which is April 1993. On the Minister's timetable, there will be precisely 12 months. With the poll tax, local government had two years, and even that was not enough.
This is silly. It may be that we are not talking about very large sums but a cost is involved in an officer giving advice to a committee meeting. That cost is billed in our budget statements as a democratic cost. In theory, an aggrieved poll tax payer could regard such expenditure as ultra vires. I am not saying that that will necessarily happen. However, I am saying that even discussion in committee or the use of officer time to discuss the issue, let alone going as far as talking about contracts or discussing software, is vulnerable to challenge. I urge the Minister to put it on record that local authorities will be allowed to incur costs for democratic meetings or costs associated with the purchase of hardware or the appointment of consultants. If she does not, I fear that we may see a problem similar to that which arose with the proposed introduction of community care. That had to be deferred for 12 months because the Government did not give local government enough lead-in time. The same problem will arise with the council tax if the Minister does not go some way to meet these anxieties.
I accept that, because of financial privilege, the amendment may not be the correct way to achieve what I have in mind. But the Government must give local government more breathing space and more lead-in time. If they do not I fear that the introduction of the council tax will be as bumpy as the introduction of the poll tax has been. I beg leave to withdraw the amendment.
§ Baroness Blatch
My Lords, before the noble Baroness sits down, and with the leave of the House, 218 perhaps I may say that I believe that the noble Baroness's imagination is working overtime. It is working overtime if she is suggesting that, if local authorities discuss the possibility of the introduction of the council tax, somehow or other they will be acting ultra vires. I would positively expect indeed, if I were in local government today I would be pre-empting—the world of the council tax because I would be at least making some prediction that it might come about. For the noble Baroness to suggest that talking about it, and officers preparing papers on it, would be ultra vires is absurd.
§ Lord Cockfield
My Lords, before permission is given for the withdrawal of this amendment, there is a point I should like to make. One greatly respects the desire of the noble Baroness, Lady Hollis of Heigham, to ensure that the council tax makes a good and efficient start. However, I suspect that the amendment was drafted by someone with a greater degree of skill in obfuscation, which means that its real effect has unfortunately escaped the notice of the noble Baroness, Lady Hollis, because at no time did she refer to it. I am sure that that was entirely due to an oversight.
The amendment refers to "any new form of taxation", a phrase no doubt intended by whoever drafted the amendment—I am not suggesting by the noble Baroness, Lady Hollis, herself —to cover the proposals adumbrated by the Labour Party to impose some entirely new and objectionable form of taxation.
§ Baroness Hollis of Heigham
My Lords, with your Lordships permission may I clarify that point? It is not impossible that following consultation, for example, the Secretary of State may decide to revise or amend the number of bands. He may, for example, adjust some of the principles. The amendment says,and to facilitate administrative preparations for the introduction of any new form of taxation which is likely to be based upon the result of such a valuation".In other words, following valuation and following discussions with the Minister, it is not impossible that those bands may change or be amended. The proposal would cover that situation.
Is the Minister giving the assurance that authorities can make their own arrangements for forward planning in 1991–92 —that is, the current financial year—to ensure the smooth introduction of the proposed council tax?
§ Baroness Blatch
My Lords, the noble Baroness is making heavy weather of this particular point. Without the details of this council tax —in other words, before Parliament has seen the Bill, discussed the Bill and passed the Bill—it would be impossible for local authorities to be ordering software, employing staff, or physically doing things: but that they should be discussing it and talking about it within their council chambers is appropriate.
The noble Baroness talks about the kind of physical arrangements that one would make. Without the details of the tax it would simply pre-empt details, and in an undemocratic way, before Parliament had even discussed it.
§ Amendment, by leave, withdrawn.219
§ 4.45 p.m.
§ Lord McIntosh of Haringey asked Her No. 5:
Page 2, line 45, at end insert:
("(2A) In carrying out a valuation under this section, the Commissioners or local assessor shall furnish to any occupant of domestic property which is subject to valuation information relating to
§ The noble Lord said: My Lords, in moving Amendment No. 5 I should like to speak also to Amendments Nos. 9 and 13. These are all amendments concerned with something that I think the noble Lord, Lord Cockfield, will accept as being a proper part of any taxation system; the right of appeal. Even he will accept that the Inland Revenue could not have achieved the level of compliance with its demands unless there were also a right of appeal incorporated in it. Indeed, I suspect that the right of appeal against taxation demands goes back a good deal further than Sir William Harcourt. The appeal against Morton's Fork might have been a little more difficult, but there are many examples of negotiation and appeal between taxing authorities and those subject to taxation.
These amendments are not pieces of political dogmatism only from these Benches. They follow closely the opinion of the Royal Institution of Chartered Surveyors, which points out:
The consultation paper makes no reference to the establishment of an appeals procedure through which Council Tax payers would be able to challenge the correctness of the value band to which their property has been allocated".
It goes on:
We believe that the establishment of an appeal procedure is essential if the Council Tax is going to be accepted as fair by the public. It seems only reasonable that the public should have the right to appeal against handing assessments made by officials or their agents.
§ It may be said by the Government that this is something that they will introduce in due course but that it need not be a part of this paving Bill. They would be misunderstanding the psychology of the electorate and the psychology of people in the country as a whole if they put forward that argument. In this paving Bill the Government are preparing for the valuation process. They are authorising expenditure on the valuation process. It is the intention of the Government that the valuation process, certainly, if not completed, should have started before the substantive legislation reaches the statute book.
§ In our view it would be an act of political folly—to put it no higher—to introduce a system of valuation without at the same time making it clear that there is to be a right of appeal. That is not in the consultation paper; it is not in the Bill. If the Government care to assure us that there will be a right of appeal, then of course we can deal with the argument as to whether or not these amendments should be on the face of the legislation. The important point is that there should be a recognition of the necessity of a right of appeal for any new taxation system. I beg to move.
§ Baroness Blatch
My Lords, these amendments seek to establish the appeals process in relation to the 220 banding of domestic properties on which liability to the council tax will be based. As I have explained both in Committee and today there will be a right of appeal and the appeals process will be provided for in the main council tax Bill to be introduced in the autumn, but I am happy today to respond to the points made by the noble Lord, Lord McIntosh.
Amendment No. 5 seeks to require the Commissioners of Inland Revenue and local assessors to supply information to any occupant of domestic property relating to the process of valuation and rights of appeal. The House is aware that we are committed to ensuring that the council tax is properly understood by the public and that they are aware of the process of valuation and their rights of appeal. We have said that there will be a full procedure for appeals. It is our firm intention to have this in place in good time. We are now considering all the points put to us during the consultation period about this and many other matters connected with the council tax. When we come to consider the machinery of appeals in this House we will no doubt be in a much better position to discuss the sort of information occupiers of property will need in order to exercise their rights of appeal.
The noble Baroness, Lady Hollis of Heigham, was happy in Committee to accept my assurance that the Government were seeking to ensure that information is widely spread. On the basis of our current thinking, draft valuation lists will be available in December 1992. These lists would show the address of each property and the band to which that property has been allocated. Our thinking is that the occupiers of properties will be able to see the band to which their property has been allocated as soon as practicable. As I said, there will be an appeal system. Appeals will cover both questions of council tax liability and the band in which properties have been placed.
Of course it is important that the appeals machinery is, and is seen to be, impartial, competent and consistent. We are considering the best ways of achieving this, and are looking in particular at the points put to us during consultation and the views of local authority practitioners. I can assure the House that the appeals procedure will be in place at the appropriate time following the main council tax legislation. These amendments are therefore premature, and I call on the House to reject them.
§ Lord McIntosh of Haringey
My Lords, we were of course aware of the assurances given by the noble Baroness in Committee and repeated now. Clearly, in the long run, we must welcome the fact that the Government recognise the need for appeal. But I find it extraordinary that the Government should be introducing the valuation system in a paving Bill and waiting until the main legislation is passed—which is bound to be a number of months into next year, even if this Government survive until then—before introducing an appeals procedure.
Do the Government not run the risk of having a valuation system which will build up resentment without having any way of dealing with that resentment? We shall have a valuation system in which people will be told that they are in such and 221 such a band although they will not be told where they are in that band. We shall have a valuation system based on the inspection of groups of properties, if any properties are inspected. There is no assurance that they will be. No one will have any confidence that anyone has seen the house or flat or has any direct knowledge of the valuation process, as provided for in Amendment No. 5. We shall have a valuation system, as we shall discuss with later amendments, that will be subcontracted by the Commissioners of Inland Revenue to outside experts. We do not know whether they will be experts, because the issue of valuers' qualifications has yet to be resolved.
It seems foolhardy—to put it no higher—for the Government to introduce a valuation system by means of a paving Bill, without making it clear on the face of the Bill that there will be an appeals procedure and without starting that appeals procedure. If the Government pursue legislation in this way, we are likely to have a valuation system in place but an appeals procedure which cannot start until the substantive legislation has reached the statute book. That will inevitably delay the implementation of the proposed council tax.
I should not want it thought that anything I have said is in support of the Government's council tax proposals. In terms merely of legislative feasibility, the Government are scoring an own goal by failing to include the provision in the paving Bill. That is their business. I shall not seek the opinion of the House. I merely draw attention to the inconsistencies in the Government's approach. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 6 not moved.]
Baroness Hamwee asked Her No. 7:
Page 3, line 5, after ("prescribed") insert ("regional").
§ The noble Baroness said: My Lords, I move an amendment similar to one moved in Committee by the noble Lord, Lord Gisborough, to make relatively simple points about fairness and ability to pay that I hope will be reflected by acceptance of the amendment. It was said in Committee that regional banding meant that economic circumstances would not be reflected in people's bills. House prices do not automatically reflect people's ability to pay. They may sometimes, but there are wide variations in house prices in England, Wales and Scotland. I cannot be the only person who looks at estate agents' windows when on holiday and thinks how much I might gain if I sold my flat in London and bought a property in the West Country or the North-West, for instance.
§ The Minister has said that this is special pleading for London—if so, I do not apologise for it—but people in London frequently occupy homes of high value compared with those in other regions. To do so they may be paying high mortgages and have relatively little disposable income left, or they may be renting properties owned by a local authority or a housing association. The capital value of those properties is not in proportion to the income and means of the occupiers.222
§ The proposed regional banding is designed to ensure that those paying similar amounts will obtain similar levels of services. In that sense, regional banding would be fairer. Will a one-bedroomed flat fall into the same band in different regions if we do not have the type of banding proposed in the amendment? It would be fair to have the same banding throughout the country if one could find the same low-value flat in every part of the country.
§ In my part of London many small flats will fall into the highest proposed band. The examples given in Committee were interesting. Harrogate was referred to as a "good" area. I accept the figures relating to Harrogate that the Minister gave; but Harrogate is not typical of the Yorkshire and Humberside region. Hackney is often given, properly, as an example of the most deprived borough in the country. On the Government's own figures, the average council tax based on a SSA for a two-adult household will be £500. In Scarborough, it will be £346. Even in Harrogate, at £455, it will be less than that of Hackney.
§ When discussing another amendment, the noble Lord, Lord Cockfield, referred to the hassle created by the need for revaluation. He mentioned that in the context of revaluation under the rating system. The amendment aims to avoid the need for periodic revaluations caused by fluctuations in relative house prices across the regions. The difference in house prices in London between 1987 and 1981 was a mere 6 per cent. The national average for that period was 34 per cent. and in the North-West the difference was 84 per cent. One of the factors which most discredited the rating system was the need for revaluation. By accepting an amendment such as this or by introducing similar arrangements in the regulations, I hope that that factor can be avoided.
§ I return finally to fairness. Bills cannot be related in a rough and ready manner to the type of property occupied, which cannot show how much the person is able to afford. The basis of the valuation will be the most important factor in ensuring the success of the tax. Although I hold no brief for the tax, like Members on other Benches I feel that if it is to be imposed we must try our hardest to make it work. I beg to move.
§ Lord Gisborough
My Lords, I support the amendment as I did in Committee. The concept of regions is accepted because Scotland and Wales are accepted as having values different from those in England. There is just as much difference between house values in the South-East and those in, for example, Northumberland. Houses in Northumberland are probably cheaper than those in Scotland. I do not want to give more than one example. A pensioner, with a little more income than that allowing him to qualify for a rebate, may live in a house he bought many years ago. He may live in Northumberland or in a little village in the South-East which is in demand by commuters. A three-bedroom house would probably be in the bottom band in Northumberland whereas in the South-East it would probably be in the top band. I am informed that a detached three-bedroom house in a desirable village in the South-East is worth well over £160,000. Therefore, 223 there is the problem that the householder who is not well off would pay exactly the same as the person in the big mansion up the road. It would give rise to all the cries of unfairness which did so much to destroy the community charge. I hope that the noble Baroness will press the amendment.
§ Baroness Blatch
My Lords, I do not intend to reheat se all the arguments I made to the Committee last week on this topic. Suffice it to say that the Committee quite resoundingly rejected regional banding. I was a little surprised today to find the name of the noble Baroness, Lady Hamwee, to the amendment. In Committee she said that she spoke to the amendment,not with a huge degree of enthusiasm".Our council tax proposals resulted from careful consideration. We believe that they meet all the concerns which led to the perception that the community charge was not fair and which discredited the rakes. Our proposals are for a banded tax based on property values. Properties with a similar value would be in the same band. The tax would be based on the readily comprehensible principle that where councils spend at the standard level couples living in properties with the same value would face the same council tax.
Of course that means that those in properties whose values are high pay more. I say once more to the House. that I do not duck that issue since it is in that way that we reflect the individual circumstances. I believe it is the right approach when coupled with our proposal for a maximum difference of two-and-a-half times between the bills faced by properties in the lowest band and those in the highest band. This proposal will mean that sums will not be demanded out of proportion to the circumstances of the individuals concerned.
I notice that the noble Baroness, Lady Hamwee, referred to the variations in house prices. The variations in bands that relate to those house prices will be nothing like the variations in the house prices. That will be true both within regions and between regions.
Our proposals will not, as has been suggested, require Londoners to pay more than their fair share. They are designed to ensure that everyone pays their fair share, no more and no less. Before we came forward with the proposals we considered the position of London in great detail and are satisfied that we have achieved a fair deal for residents in the capital. What our proposals mean is that in any street the occupier of a flat or house with a high value is likely to pay more than the occupier of a house or flat with a low value. We believe that that is fair and, as I told the Committee last week, the same logic is carried through on a local, regional and national scale. The differences reflect differences in circumstances between those areas which are reflected in house prices. In short, anywhere in the country someone with a house valued at, say, £50,000 will face a lower bill for a standard level of service than someone with a home valued at £150,000.
Regional banding would mean that economic circumstances, as reflected in house prices, would not be reflected in the hills people pay. Regional banding 224 would mean that those in the North with a property which was valued at a similar level to one in the South would pay more.
The noble Baroness is unconcerned about special pleading for London and that the expenditure would fall on those in other parts of the country. We are concerned about people in the whole of the country. The effect of regional banding is to force areas where properties are generally lower priced to pay more. At the margin it means that identical properties with identical values can pay different amounts. Of course the Bill in its current form does not preclude regional handing. I have said that both at Committee stage and now. We shall consider carefully all the points put to us on the issue before finally deciding the pattern of bands. However, I have to say that we are not convinced that regional banding would be fair and I call on the House to reject the amendment.
§ Baroness Hamwee
My Lords, I am sorry that I did not make myself clear at Committee stage. I realised that when I read Hansard, having said that I did not support the amendment at Committee stage with a huge degree of enthusiasm. That was because—although I did not say it—I did not support anything in the Bill with a huge degree of enthusiasm. Therefore amending the Bill rather than rejecting it would not create great enthusiasm.
We can go round this argument again and again. Perhaps I may quote figures which were given to me after the debate last week about the implications for another group of people —agricultural workers. I was given a figure—not by someone from these Benches —that an agricultural worker's cottage in Berkshire is probably worth about £200,000 and would go into the top band. An agricultural worker's cottage in the North would be worth perhaps £40,000. But the occupants of the cottages would be on the same wages.
It would still be possible to incorporate the concepts that we have been discussing when the regulations are made. Nevertheless, I find it quite irresistible when the noble Lord on the opposite Benches asks that I divide the House. I cannot refuse the invitation. I wish to press my amendment.
§ 5.5 p.m.
§ On Question, Whether the said amendment (No. 7) shall be agreed to?
§ Their Lordships divided: Contents, 63; Not-Contents, 112.225
|Division No. 2|
|Addington, L.||Fisher of Rednal, B.|
|Airedale, L.||Gallacher, L.|
|Ardwick, L.||Galpern, L.|
|Blackstone, B.||Gisborough, L.|
|Blease, L.||Gladwyn, L.|
|Boston of Faversham, L.||Glenamara, L.|
|Broadbridge, L.||Hampton, L.|
|Brooks of Tremorfa, L.||Hamwee, B. [Teller.]|
|Bruce of Donington, L.||Hollis of Heigham, B.|
|Carmichael of Kelvingrove, L.||Houghton of Sowerby, L.|
|Carter, L. [Teller.]||Jenkins of Hillhead, L.|
|Clinton-Davis, L.||Jenkins of Putney, L.|
|Cocks of Hartcliffe, L.||Judd, L.|
|David, B.||Kagan, L.|
|Donaldson of Kingsbridge, L.||Kennet, L.|
|Ewart-Biggs, B.||Kilbracken, L.|
|Kirkhill, L.||Redesdale, L.|
|Lockwood, B.||Richard, L.|
|Longford, E.||Ritchie of Dundee, L.|
|Lovell-Davis, L.||Robson of Kiddington, B.|
|Macaulay of Bragar, L.||Russell, E.|
|McIntosh of Haringey, L.||Seear, B.|
|Mayhew, L.||Shepherd, L.|
|Molloy, L.||Stoddart of Swindon, L.|
|Murray of Epping Forest, L.||Taylor of Blackburn, L.|
|Nicol, B.||Turner of Camden, B.|
|Ogmore, L.||Underhill, L.|
|Perry of Walton, L.||Varley, L.|
|Peston, L.||White, B.|
|Phillips, B.||Williams of Elvel, L.|
|Pitt of Hampstead, L.||Willis, L.|
|Alexander of Tunis, E.||Holderness, L.|
|Alexander of Weedon, L.||Hooper, B.|
|Allenby of Megiddo, V.||Howe, E.|
|Ampthill, L.||Hylton-Foster, B.|
|Arran, E.||Johnston of Rockport, L.|
|Ashbourne, L.||Joseph, L.|
|Astor, V.||Killearn, L.|
|Attlee, E.||Kimball, L.|
|Auckland, L.||Kinloss, Ly.|
|Belhaven and Stenton, L.||Knollys, V.|
|Beloff, L.||Lauderdale, E.|
|Belstead, L.||Long, V.|
|Bessborough, E.||Lurgan, L.|
|Birdwood, L.||McAlpine of West Green, L.|
|Blatch, B.||McColl of Dulwich, L.|
|Blyth, L.||Mackay of Ardbrecknish, L.|
|Borthwick, L.||Mackay of Clashfern, L.|
|Brabazon of Tara, L.||Macleod of Borve, B.|
|Brigstocke, B.||Mancroft, L.|
|Brougham and Vaux, L.||Marlesford, L.|
|Butterworth, L.||Marsh, L.|
|Caldecote, V.||Merrivale, L.|
|Campbell of Alloway, L.||Mersey, V.|
|Campbell of Croy, L.||Middleton, L.|
|Carnock, L.||Milverton, L.|
|Carr of Hadley, L.||Montgomery of Alamein, V.|
|Cavendish of Furness, L.||Mountevans, L.|
|Charteris of Amisfield, L.||Nelson, E.|
|Chelmer, L.||Newall, L.|
|Cockfield, L.||Norrie, L.|
|Colnbrook, L.||Orkney, E.|
|Constantine of Stanmore, L.||Park of Monmouth, B.|
|Cork and Orrery, E.||Pender, L.|
|Crathorne, L.||Peyton of Yeovil, L.|
|Cross, V.||Prior, L.|
|Davidson, V. [Teller.]||Pym, L.|
|Denham, L.||Quinton, L.|
|Denton of Wakefield, B.||Rankeillour, L.|
|Donegall, M.||Rawlinson of Ewell, L.|
|Downshire, M.||Renfrew of Kaimsthorn, L.|
|Eccles, V.||Saltoun of Abernethy, Ly.|
|Elibank, L.||Sanderson of Bowden, L.|
|Elliot of Harwood, B.||Seccombe, B.|
|Elliott of Morpeth, L.||Shrewsbury, E.|
|Fanshawe of Richmond, L.||Stodart of Leaston, L.|
|Fortescue, E.||Strathcarron, L.|
|Fraser of Carmyllie, L.||Strathmore and Kinghorne, E.|
|Fraser of Kilmorack, L.||Sudeley, L.|
|Gardner of Parkes, B.||Teviot, L.|
|Glenarthur, L.||Thomas of Gwydir, L.|
|Gray of Contin, L.||Trefgarne, L.|
|Hailsham of Saint Marylebone, L.||Vaux of Harrowden, L.|
|Harmar-Nicholls, L.||Wharton, B.|
|Henley, L.||Whitelaw, V.|
|Hesketh, L. [Teller.]||Wynford, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.226
§ 5.13 p.m.
Lord McIntosh of Haringey asked Her No. 8:
Page 3, line 5, at end insert ("as specified in Schedule (Banding of Property) to this Act").
§ The noble Lord said: My Lords, in moving Amendment No. 8 I wish to speak also to Amendment No. 16, which is—as is often the case—the substantive amendment in this small group. In speaking to these amendments I am obliged to return to arguments that were made in Committee. Those arguments were made when far fewer noble Lords were present. In view of the government arguments that have been made in Committee and today in response to earlier amendments, I believe it is important that we should set out our stall as clearly as we possibly can.
§ The noble Baroness, Lady Hamwee, has argued powerfully for a more discriminating system of valuation. She chose to argue her case by considering regional differences. We must remember that, even though the Government's proposals are not on the face of the Bill, they are firm proposals and the valuation is to go ahead without further substantive legislation. I suggest to the House that the Government's proposals are as crude as they could possibly be. They are crude for a perfectly understandable political reason. The Government have been obliged to abandon the poll tax. I shall not labour that point as I have laboured it often enough in the past few days.
§ The inevitable result for the Government of abandoning the poll tax is that there is to be—people expect this—a move towards a system of local government finance which more adequately reflects ability to pay, in other words, a system which more adequately reflects people's judgment of whether the taxation system is unfair. Unfortunately what the Government are doing in the proposals set out in the White Paper—consultation is still proceeding on those proposals —is to produce a system of property taxation which is as close to the poll tax as they can possibly get it. The Government are doing that for a perfectly understandable political reason. The better off people who have done very nicely out of the poll tax, thank you, and who voted Conservative for the first time as a result, if they had not done so all their lives—I suspect that this is being done for the people who have voted Conservative all their lives —have to be sheltered against a system of local government finance which really reflects ability to pay.
§ The proposals in the White Paper that are before the country —they are not before the House at the moment—reflect ability to pay to the smallest degree that the Government can propose while still maintaining a straight face. The noble Baroness, Lady Hamwee, gave good examples of the way the proposals would work when she talked about the difference between an agricultural worker's cottage in Berkshire and a similar cottage in some other part of the country. I am sure that she will agree with me that the effect of the proposals will be that an agricultural worker's cottage in Berkshire which is worth £161,000 will attract the same council tax as another property in 227 the same district which may be worth million or even £.1 million. That is the important point. It is that degree of injustice that is wrong.
In response to similar amendments in Committee the Minister made a number of points which I must return to. On 8th July she argued at col. 1298 of Hansard:
The more bands there are, the greater is the administrative task involved and the greater the likelihood of disputes and appeals".
§ That is the first time that I have ever heard the argument of administrative tasks and convenience used as the prime justification for a new taxation system. Admittedly administrative convenience should be a consideration but it should not be the prime one. Even if the Minister were right about appeals, I suspect that the cruder the system, the more appeals there will be because the differences between one band and another will be greater and therefore the incentive to appeal will be that much greater. Nevertheless we cannot support an exercise which is driven by administrative convenience rather than by fairness.
The Minister also stated at col. 1298:
Overall, bills for couples in the seventh band would be two and a half times as much as those for couples in the first band… That will, unlike the rates, avoid disproportionate bills for high price areas".
§ That is not an argument against instituting more hands, which is what we are proposing. This is an issue concerning the ratio between the bands which has been deliberately set to be as flat as possible in order to get as close as possible to the principle of the poll tax benefiting better off voters, who are more likely to be Conservative voters. But that will not work. It did not work with the poll tax and it will not work now.
§ The Minister said again that it is a myth that all those living in expensive properties can afford to make a limitless extra contribution to local government. It is indeed a myth. That is not what is proposed in the amendments. We are not proposing a limitless extra contribution to local government. We are talking about a contribution to local government which is in accordance with the value of the property.
§ I remind your Lordships that the value of a property itself has under the rating system always been known to be a less progressive method of taxation than income tax. The differences between high and low rates have always been less than the differences between high and low taxes on income. To that extent local authority taxation has always been relatively regressive.
§ Baroness Seear
My Lords, in that case I wonder why the noble Lord does not support a local income tax.
§ Lord McIntosh of Haringey
My Lords, I support a local income tax, as the noble Baroness knows very well. Income is one of the considerations to be taken into account in the fair rate system which we propose. That stall has been very clearly set out not only by my honourable friends but also at Second Reading and Committee stage of the Bill in this House. It is proper that income should be a consideration in local authority taxation.
228 There is no question of a limitless extra contribution. We have to consider local authority taxation within the whole spectrum of taxation. I suggest to the House that the banding proposals for which the Government are preparing in this Bill by preparing the valuation system will be extremely regressive. They will only be a little less regressive than the poll tax, and they will arouse very similar, but perhaps less ferocious, objections to those which the poll tax has already aroused. It will be in the political interests of the Government to recognise that fact and to recognise that people's sense of fairness in relation to ability to pay is more developed than they give the public credit for. It would be to their advantage to accept the amendments. I beg to move.
§ Baroness Blatch
My Lords, the noble Lord began by saying that these are firm proposals and that the Government intend to go ahead without substantive legislation. These are firm proposals and the intention is to go ahead, but subject to this preparatory Bill and the main council tax Bill which will be presented to Parliament in the autumn.
§ Lord McIntosh of Haringey
My Lords, I always understood that there would be substantive legislation to follow. If I did not say that, that was a slip of the tongue on my part.
§ Baroness Blatch
My Lords, I am grateful for that explanation.
To have so many bands would, I believe, destroy the careful balance we have struck with our proposals. Our proposal is for seven bands. The idea behind banding is to avoid the problems of detailed valuation which plagued the rates. For banding to be effective there can be only a small number of broad hands.
I remind the House that the more bands there are the greater is the administrative task involved and the greater the likelihood of disputes and appeals. We have proposed seven bands as a balance between the benefits of a few broad bands and our desire to ensure that the council tax is related to the value of the property.
Our proposals are specifically designed to avoid disproportionate bills, both in London and the South East and elsewhere in the country. A couple living in a dwelling in the seventh band would pay two-thirds more than a couple living in a property in the middle band. A couple living in a property in the first band would pay two-thirds of the bill for a middle band property. Overall, bills for couples in the seventh band would be two-and-a-half times as much as those for couples in the first band in the same local authority area. That will, unlike the rates, avoid disproportionate bills for high price areas.
People living in Barnet, where there are a large number of homes priced above £160,000, will know that despite the high value of their property the amount they are being called upon to contribute is limited to two-thirds more than the national average for spending at a standard level. Contrast that with the position under rates, or, indeed, under the proposals 229 of noble Lords opposite, where they would have been called upon to pay at least twice as much and in many cases three, four and many more times as much.
It is a myth that all those living in expensive property can afford to make a limitless extra contribution to local government. Many of course have high levels of income, but they pay their fair share in income tax—much of which is used to pay revenue support grant to local authorities. For those who do not have high levels of income, penal rates are unfair and a considerable hardship to many, particularly elderly, people.
It is also a myth that our proposals are the same as the community charge in some areas because virtually all the properties are in the same band. There are likely to be properties in every band in every local authority area in the country. The proportion of properties in each band will vary but we estimate the national average proportions in England as: 19 per cent. in band A, 16 per cent. in band B, 20 per cent. in band C, 17 per cent. in band D, 13 per cent. in band E, 8 per cent. in band F and only 7 per cent. in band G. In other words, across the country no more than one in five properties are in the same band. Even at the extreme there are only two authorities where we estimate that more than two in five properties will be in the top band and in neither of those are as many as half of the properties in that band.
Under the amendments there would be no fewer than five bands for properties which are in the highest of our seven bands. For those at the top properties would be assessed "with no upper limit". It has been argued that such a system would remove an unfairness from our proposals. Such a system would not remove an unfairness. It would introduce an unfairness. It would lead to the disproportionate bills, often for those with only modest incomes, which characterised the flawed rating system.
Such a system, without an upper limit, would introduce a major unfairness for some without giving any significant benefit to others. There are, as I said, only 7 per cent. of properties across England in our top band. That is of course highly variable between areas, but a further four bands might include only a very small number of properties nationally. The benefit to the rest would be tiny. If there were five top bands instead of one the effect might at best be to reduce the bills for the rest by less than 1 per cent. Skewing the system in that way to make those at the top pay more does very little for the rest.
The number of bands is not laid down on the face of the Bill. We are still considering the many responses to our consultation. When we have fully considered those responses we shall come forward with our decisions. It would be premature for the number of bands to be prescribed in the Bill. Both for that reason and for the reasons of principle I have outlined I ask the House to reject the amendment.
§ Lord McIntosh of Haringey
My Lords, things have come to a pretty pass when the Minister says something in Committee, I quote it at Report stage arguing against what she said in Committee and 230 instead of seeking to refute my arguments she simply repeats her original speech verbatim in her Report stage response.
I suppose that this is one of those cases in which we shall not come any closer to agreement or understanding. The Minister based her whole case on the use of the word "disproportionate". She talked of disproportionate differences between high and low levels of taxation.
§ Baroness Blatch
My Lords, I am grateful to the noble Lord for giving way. With the leave of the House, perhaps I may put a point to the noble Lord. He said earlier that he did not propose limitless contributions to local authority finance. As I read the amendment, it proposes that the local tax liability of any property with a value above £500,000 shall be separately assessed, with no upper limit.
§ Lord McIntosh of Haringey
My Lords, that is not a limitless contribution, any more than the value of properties above £500,000 is unlimited. It is limited by the value of the property. It is not limitless. It means that if a property is worth £1 million, the taxation will be more than for a property worth £501,000. The value of the property is the overriding consideration.
Perhaps I may return to the point that I was seeking to make. The Government use the word "disproportionate" as if there were some philosophical basis behind it. "Disproportionate" is a Humpty Dumpty word. When the Government use it it means what they choose it to mean, nothing more and nothing less, as Humpty Dumpty said about the nice knock-down argument. "Disproportionate" is no more sacrosanct than Humpty Dumpty's nice knock-down argument was in Lewis Carroll's work.
My charge remains. The Government seek to have as flat a system of local government taxation and as few differences as possible between those who pay at the top level and those who pay at the bottom level. I shall not go over all the exemplifications given by the Minister, but if she looks at the case of Islington she will find that there are no properties in the bottom two bands. It is not the case that all bands occur in all local authority areas. We shall therefore have a tax which is not only unjust but seen to be unjust.
All the consequences that arise from that, with all the consequences that have arisen from the poll tax and all the consequences that have led to the collapse of the poll tax, will in some measure arise from the introduction of the council tax that the Government plan to bring forward in legislation next Session. If they are so blind to that as to allow this paving Bill to go through without indicating the inadequacy of the thinking behind their council tax, so be it, but they will suffer for it. I do not intend to seek to divide the House. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 9 not moved.]231
§ 5.30 p.m.
Baroness Hollis of Heigham asked Her No. 10:
Page 3, line 7, after ("persons") insert ("who have appropriate expertise as recognised by the Royal Institution of Chartered Surveyors or the Institute of Revenues, Rating and Valuation and").
§ The noble Baroness said: My Lords, this amendment deals with professional qualifications. We return in this amendment to a version of the pair of amendments that we moved in Committee. In Committee we sought to confine valuation to Inland Revenue staff. When it was clear that the Minister was unable to accept the amendment, we sought to confine valuation to members of the two recognised bodies—the Royal Institution of Chartered Surveyors and the Institute of Revenues, Rating and Valuation. We should perhaps have added the ISVA—the Incorporated Society of Valuers and Auctioneers.
§ The aim of the amendments tabled in Committee was to ensure that valuation should be conducted only by professionally qualified people. The Minister—the noble Viscount, Lord Astor—agreed that all the people used must have the expertise and qualities to undertake a sound job. However, when we pressed him w. to what those qualities and that expertise might amount to, he would not or could not say how that quality control should be exercised. Since then, the various leaks in the press have suggested that there will be job lots of 10,000 houses auctioned out for which every under-employed or under-qualified estate agent may hid, and there are a great number of both of these around at the moment. That has made the urgency of the amendment that much sharper. The amendment states that appropriate expertise must be recognised by the professional institutions. That is a slightly looser formulation than the amendments that we introduced in Committee and one which we hope that the Minister might endorse.
§ The amendment rests on two arguments: first, the professional nature of the job—that picks up some of the arguments that we heard explored when talking about banding and regional valuation—and, secondly, the high political profile of the job. We argue that for both of those reasons you need professional protection and expertise.
§ On the question of the professional nature of the job, the Government propose, despite our best efforts on this side of the House, to go for street-by-street valuation, based perhaps on a sample survey of one property in 50 and the rest filled in by computer with ticks in the boxes. Without such an amendment, a firm of unqualified estate agents could put in the cheapest bid and effectively have the street work done by a group of students in the summer vacation. No doubt my student son might think that that was an entirely satisfactory arrangement, but it might just not commend itself to the occupiers and owners of the properties.
§ Valuation is a highly professional skill. It involves assessing not just minor improvements, to which reference was made earlier, but those major improvements which will take properties across bands —extensions, granny flats at the back and, above all, 232 multi-occupation when a house has been divided. That is not always easily recognisable from the front of the house. Equally, it involves consideration in mining villages of subsidence, or, as in my own authority, of chalk pit works and the effect that they may have on foundations. All of that will affect a valuation of a property, as will the improvements or alterations made to a property for a disabled person which may well reduce that property's value and put it into a lower band. Those points all relate to physical condition and require, if not interior inspection, at least detailed knowledge of the local housing market.
§ There is also a whole series of professional questions which relate not just to physical condition but to location even within the street. Your Lordships will be aware of, for example, the impact of ethnic groups on property ownership and the effect of proximity to a park, council housing, bus routes, shops, one-way streets, no-parking zones or of non-conforming usages such as small garages and noise-generating usages such as community centres, leisure facilities, a pub, a disco or even a fundamentalist chapel much given to hallelujahs. All of those will have implications for the valuation of a property sufficient to take it across a band.
§ Judging how the market responds both to physical condition, which is a skilled task requiring building surveyor skills, and to location, which requires skilled local knowledge, requires the skills of a professional. All the examples that I have suggested—I have spoken to chartered surveyors about this matter—are sufficient to take properties across a band if they are properly reviewed. That is an important point especially, if I may repeat evidence given in Committee, when Paisley College suggested that about 25 per cent. of all properties will be within the top 5 per cent. or the bottom 5 per cent. of a band and therefore vulnerable to modest changes in value. That will have major implications for the local tax.
§ I hope that, if we want to avoid ad hoc-ery or odd-jobbery, the Minister will accept a version of this amendment. The first part of the argument concerns the fact that this is a skilled job. The second reason why it matters that valuers should have professional qualifications is the high political profile of the job. People have the right to know about the size of local authority budgets. As noble Lords will know, the poll tax was based on the notion of transparency and accountability. Widdicombe quite rightly said that local people should have details of their budgets and how they were drawn up.
§ If that is correct, local people equally have the right to know how their share of that budget, which is based on valuation, has been drawn up. If they are not confident of the professional expertise going into making that valuation and therefore their share of local authority budgets, they will appeal.
§ We should not take the threat of appeal lightly. There appear to be about 23,000 outstanding business rate valuations in Yorkshire at present. They are being dealt with at a rate of 1,000 a year. It will take us a further 20-odd years at the present rate of progress before those valuations are complete. Appeals are expensive, time-consuming, lengthy and cumbersome 233 and clog up the system. Everything that we can do to strengthen the original valuation will reduce the appeals pressure. Everything that we fail to do to strengthen valuation will increase the appeals pressure and bring the system into disrepute.
§ We have all seen what happens with the poll tax, which is not persuasive in the eyes of local people in terms of its morality or its propriety. If valuations which determine individuals' share of their council tax are to be done by unqualified estate agents who do not, regrettably, stand high in public esteem, who are held, rightly or wrongly, to have an improper interest in pushing up house prices, who may employ casual labour, who may seek to obtain the maximum profit from the scantiest work from the cheapest bids, whose ethics cannot be scrutinised and policed by a professional body and who have undergone no professional training, I ask your Lordships: would you want your house valued by such an individual, with all the implications for re-sale? The Bill is all about public confidence, which needs to be restored after the trauma of the poll tax. Our amendment will go some way towards doing that.
In their evidence to the Government, the chartered surveyors said:
If the new council tax is to be accepted by the public, it must be seen to be fair… We believe that the only way that the council tax will be assured a successful future will be if council tax payers see a clear, distinct and continuous relationship between the value of their house, the band it is placed in and the council tax bill they receive".
§ Quite so. That is why we tabled the amendment. I beg to move.
§ Baroness Hamwee
My Lords, I support this amendment. I supported a similar amendment at Committee stage. It is essential that the estate agents and other people who carry out such valuations should have the expertise—the term referred to in the amendment—so that they are accountable not only to those who engage them from the Government but to their professional bodies. There are good reasons for having professional bodies to control the standard of work of professional people.
I was not surprised to learn that an estate agent, no doubt a responsible one, has estimated that properly to carry out a valuation would cost not £10 for each property but £100 per property. That does not strike me as an unreasonable figure. I am glad that there are estate agents who are prepared to consider carefully and sensibly what this exercise must mean.
I return to the brief point made by the noble Baroness, Lady Hollis, about the confidence that the public must have in this exercise, not only because of the number of appeals and the administrative chaos that could ensue but because of the cash flow implications. If payment of council tax is delayed because of a large number of appeals, the cost to local authorities and to the Exchequer will be considerable simply because the system is grinding to a halt.
My Lords, we have made clear our intention to use the best professional expertise to undertake the work involved in allocating properties to bands. We shall use the private sector when it can 234 use its skills to do a speedy, cost-effective job. By the same token we shall use the public sector when it can do a speedy, cost-effective job. I stress that cost-effective does not simply mean cheap. It means the best job, done competently, for the best price.
§ Baroness Hollis of Heigham
My Lords, perhaps the Minister will give way. He talks about "the best professional expertise". What is the test of that?
§ 5.45 p.m.
If the noble Baroness gives me time, I shall do so. As I said, it means the best job, done competently, for the best price. The reason for this is simply to get the best value for money for taxpayers. It would be wrong to rule out the opportunity of using the private sector where to do so would provide better value for money.
While we are committed to using only those with appropriate expertise, we do not see the need to provide by statute that the only people who do any of the work must have expertise recognised by the Royal Institution of Chartered Surveyors or by the Institute of Revenues, Rating and Valuation. We are naturally, however, considering the role of members of both the RICS and the IRRV and the responses that both organisations have made to our proposals.
However, it cannot be right for us to rule out asking people who are not recognised by those bodies to assist in the task. What I can assure the House is that we shall rule out persons who do not have the appropriate expertise and qualities to undertake a sound and cost-effective job. There are a variety of jobs to be done.
The banding task will be—I quote the words of the Bill:carried out … in England and Wales, by the Commissioners of Inland Revenue; and … in Scotland, by local assessors, acting under the direction of those Commissioners".The role of the private sector is simply—again I quote:to assist them in carrying out the valuation".That is the important point. The Commissioners of Inland Revenue and the local assessors are in charge of the valuation. Their knowledge and expertise will ensure consistency and confidence in the valuation. There can be no question about the integrity of such a valuation. But where it is cost-effective and where there is appropriate expertise available, under the terms of the Bill they will be able to call upon assistance. It is envisaged that the commissioners will invite private sector bodies to tender for contracts covering geographical areas. Perhaps, as the noble Baroness said, they could be packaged into 10,000 properties each. Contracts would be awarded to those with the appropriate expertise who could do the job in a timely, professional and cost-effective manner. That definition of expertise is a matter for the Commissioners of Inland Revenue, who will ask people for advice.
235 Perhaps I may explain precisely how we envisage that it will work. The Commissioners of Inland Revenue are in charge. They will work through their chief valuer's office, which in turn will draw on the local knowledge of district valuers. District valuers will use their detailed knowledge of the characteristics of their area and of professional private sector values in the area. The district valuers have very detailed knowledge. They are in the area and know about it. Armed with that knowledge from within their own management organisation, the Commissioners of Inland Revenue will invite tenders from the private sector. The work will be put out to competitive tender. Those qualified from the private sector with the right expertise who will be invited to tender will compete among themselves against the valuation office. We are determined to get the best deal for taxpayers.
Before appointing anyone from the private sector, the commissioners will need to satisfy themselves that those appointed are up to the job—in many cases they will employ members of the RICS, for example. Qualified valuers are likely to take a leading role in the contract. Other employees of the contractor will be engaged on a variety of jobs required properly to carry out the contract, including perhaps visiting the area to match gaper records supplied by the commissioners or carrying out the administrative task of collating the proposals for banding.
The proposals for banding will be passed to the commissioners who, through their valuation office, will continuously monitor the output of their contractors. The final output from the private sector will be proposals for the banding of domestic properties in the area contracted to it. I must stress that they will be proposals. It will then be for the commissioners to decide the band for each property. They are the arbitrators. Their decision will take account of the information given to them by those appointed to assist them, but it is their decision. It would be against their decision that an appeal could be lodged. The commissioners will be in charge and will ensure the integrity, competence and public confidence of the valuation. In these circumstances I do not believe that people recognised by the RICS and the IRRV are the only ones able to assist with the task in hand.
Our aim is to ensure competent, effective valuation at the right price at the right time. I therefore call on the House to reject this amendment.
My Lords, with the permission of the House and before the noble Viscount sits down, if I heard correctly, he does not seem quite to understand the point. I am the sister of a valuer employed under the Inland Revenue. In order to be a valuer one has to be a member of the Royal Institution of Chartered Surveyors. Who are the people being brought in? What are their qualifications? The Minister said that they would be skilled people. If they are not skilled in valuation, they cannot be a member of either of those two societies and therefore they are not competent to carry out the job.
Let me go back to the rates system. Under the old rating system the valuation was done by a chartered surveyor. Valuations were always done by chartered 236 surveyors although they had a different scale of working. As my noble friend on the Front Bench pointed out, this measure conjures up a terrifying picture of a lot of half-trained people making assessments which they are not competent to make.
My Lords, I must correct the noble Baroness. The Commissioners of Inland Revenue are in charge of the valuation. As I said, they will be able to use outside organisations to assist them to collate the information that is required. The contracts which are handed out may be undertaken by their own valuation office or by outside contractors whose staff may or may not be members of various bodies. But if they have the appropriate expertise they will be used. They do not produce the final valuation. The Commissioners of Inland Revenue produce the final valuation. They can look at the advice and come to any decision that they wish to make.
§ Baroness Hollis of Heigham
My Lords, I thank the Minister for that reply. We shall consider in greater detail the information he has given about the role of the commissioners. His version of commissioners testing the samples gives me no great confidence in the quality control mechanism that will be operated by the Commissioners of Inland Revenue. So far as we understand, it will be undertaken on a street by street basis by unqualified people, and may be based on a sample of one house in fifty.
My Lords, the task is not being undertaken by anyone who is unqualified. It is being done by people who have the expertise. Whether or not they are members of a particular institute is a different matter. However, the job will not be undertaken by people who do not have the capacity to do it properly.
§ Baroness Hollis of Heigham
My Lords, I must accept what the Minister says. However, we shall see the justification for our anxiety when we consider the number of appeals that the valuation list generates. That the people concerned may not be fully qualified in recognised ways will not increase public confidence in the Bill. However, I do not wish to labour the point.
I am very pleased with the earlier part of the Minister's reply in which he met our point. That is why I do not labour the point about quality control and commissioners testing samples. In Committee, the Minister referred throughout to "appropriate expertise". That is why we recycled his words into the amendment hoping that that would attract his support.
Today the Minister has gone one stage further. He has gone beyond our amendment. As Hansard will attest tomorrow, he spoke of the intent to employ the best professional expertise. Certainly he talked later about appropriate expertise. However, the Minister used the words "best professional expertise". The word "professional" has a clear meaning in law: that one belongs to a professional body, has undertaken professional training and is policed by professional standards. That is exactly what we have sought. As I 237 can think of no better provision, I can only thank the Minister for that concession and welcome it. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 11 not moved.]
§ [Amendments Nos. 12 and 13 not moved.]
§ Clause 4 [Information about properties in England and Wales]:
§ [Amendments Nos. 14 and 15 not moved.]
§ [Amendment No. 16 not moved.]