HL Deb 23 July 1991 vol 531 cc690-700

5.30 p.m.

Earl Ferrers

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Local Government Finance and Valuation Bill, have consented to place their prerogatives and interests so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.

Read a third time.

Baroness Blatch

My Lords, I beg to move that the Bill do now pass.

Moved, That the Bill do now pass.—(Baroness Blatch.)

Lord McIntosh of Haringey

My Lords, it is customary at this stage of a Bill to perform the usual courtesies. I do so with no hesitation whatever. I am pleased to be able to pay tribute to the noble Baroness, Lady Blatch, and her team for the way in which this short but important Bill has been conducted through your Lordships' House. The noble Baroness will recall that there was an awkward stage in Committee, which we sought to redress on Report, when briefs became slightly mixed up. However, that is so unusual for the noble Baroness that she will not mind me referring to it this once.

I am grateful also to my noble friend Lady Hollis for the constant support she has given me in Committee and on Report. I am sorry that the noble Baroness, Lady Hamwee, is not here because, for a very new Member of the House, she made an outstandingly coherent and confident contribution to the consideration of the Bill and she deserves our congratulations and thanks.

When the original poll tax Bill came before your Lordships' House and the amendment was moved by the late Lord Chelwood I was severely tempted—and I may have said so—to welcome the Bill and to say that it would be death knell of the Conservative Party's chances at the next election. Throughout the four-year history of the poll tax, if one includes Scotland, it has always been clear that the interests of party and the public do not coincide. From the public interest point of view we must oppose such legislation; we know it is wrong. However, at the same time anything which is so conspicuously and outstandingly an own goal for the Conservative Party, as this legislation has been, deserves the support which we cannot always express in public. I have restrained myself throughout those years and have avoided welcoming legislation which will damage the Conservative Party. Finally I thought, "To hell with it. I welcome the Bill. It will do a great deal of damage to the Conservative Party". Having done our duty in opposing the detail of the Bill, we should not oppose the Motion that the Bill do now pass.

Perhaps I may look at what the Bill contains and then consider one or two provisions which it does not contain which it should have contained. Primarily the Bill enshrines a new view for the Conservative Party, as it is new in politics generally in this country for over a century —that capping, the central determination of local government expenditure, is not just an exceptional feature but a regular feature of every system of local government finance supported by this Government.

Until recently they took the view that capping was required only because a few rogue local authorities were extravagant. They took the view that, on the whole, local authorities could be left, as my noble friend Lady Hollis said, to respond to the needs and wishes of their electorate. That has been the view not only of the Labour Party but of the Liberal and Conservative parties ever since democratically elected local government started properly in the last century.

The Conservative Party has now abandoned that view. It has abandoned it, leaving behind not just all members of other parties but also Conservatives active in local government. I remind the Minister of the powerful speech by the noble Lord, Lord Rippon, in Committee. He told the House of his experience as chairman of the Conservative-controlled Association of District Councils at its annual conference. It was faced with the proposition that the association should condemn government proposals for extension of poll tax capping to the smaller authorities. The noble Lord asked the meeting of 1,500 people whether anybody in the association wished to speak in favour of the Government's proposals. He told the Committee that nobody was prepared to stand up and defend government policy.

That is the extent to which the Government have isolated themselves—to which they have abandoned the constitutional relationship between central and local government which is at the heart of local democracy in this country. That is what they are now proposing to enact into legislation as a permanent feature.

They are no longer saying that there are a few irresponsible local authorities or that they must deal with an exceptional circumstance. They are no longer saying that they can devise a system of local government finance which, because it is accountable in itself, avoids the necessity for central control of individual council budgets. All that has been abandoned. The Conservative Party nationally has isolated itself not only from every best tradition of local democracy but from its own local councillors.

It is not as though the proposed capping were based on any rational estimate of what local authority expenditure should be. It is based on the standard spending assessments, which are not based on an accurate, up-to-date and well thought out calculation of local authority needs and resources. They are based on a centrally determined estimate of what central government can afford to pay in support of local authorities. That is then imposed in a blanket and uncaring way on local authorities' total expenditure.

Secondly, on what the Bill contains, it contains the preparations for a valuation system for what is politely called a council tax. It is evident from the discussions which we have had on the Statement that we shall not have a tax based in any sensitive or effective way on ability to pay. The tax will be crude, coarse and designed to protect the better off at the expense of the less well off.

That was bound to be the case. The attraction of the poll tax to the Conservative Party was that the better off people who vote Conservative did better from the poll tax and the worse off people did worse. That was what it was all about. That was why Members of your Lordships' House who had any conscience, whichever Benches they sat on, recognised that a Bill introducing a new system of local government finance which made them better off and people poorer than they were worse off was profoundly wrong. That was why Lord Chelwood challenged the Government in Committee.

We are not going back from the poll tax to a tax based on ability to pay. We are reverting to a crude, coarse and unjust taxation system. It is not only unjust but will be seen to be unjust. That is an inevitable consequence of having only eight bands of local property taxation and the proposed differences between them. The valuation system will be secret and not comprehensive. It does not cover individual properties. People will believe that they are being hard done by and will appeal. Over the period before the next general election—but not after the next general election—we shall have a situation where the Government are in constant conflict with local people. It will do the Conservative Party immense damage.

What does the Bill not do? The first thing it could have done easily and which could have been done right up until the Statement made this afternoon, was to abolish the 20 per cent. rule on rebates. In other words, it would have been possible to abolish the absurd insistence that everybody, however poor, should pay 20 per cent. of their poll tax assessment. That 20 per cent. costs more to collect than it brings the local authority in revenue; it inevitably encourages non-payment; it inevitably encourages a conflict between otherwise law abiding people and the law of the land, and it inevitably increases the alienation of poorer people in our society from central government and unfortunately also from local government.

The Government have missed the opportunity that was available to them if they had chosen to draft the Bill differently. It is a matter of regret that, because of the way the Bill was formulated, we were not able to table amendments to deal with that gross injustice. More important than that is the failure of the Bill to make the real preparations needed; that is, to take out the poll tax from April next year. It was possible when the Bill was introduced; it is just possible now. We might not he able to go over to the long term system we want—whether it is local income tax for the Liberals or a fair rate system for the Labour Party —but we could have gone immediately away from the poll Lax and returned to rateable values from April 1992. The Government have missed that opportunity in this Bill. The Conservative Party will live to regret it.

Lord Tordoff

My Lords, I wish to offer the House the apologies of my noble friend Lady Hamwee, who would have been present today save that she is attending a meeting of the London Planning Advisory Committee, of which she is the chairperson.

Noble Lords

Chairman!

Lord Tordoff

My Lords, I am glad of that reaction from around the House. I am in a difficult position as regards thanking everybody because I have not been present for much of the time during the passage of the Bill. I know that my noble friend would wish to thank the Minister, the noble Lord, Lord McIntosh, and indeed the noble Baroness, Lady Hollis.

I was grateful to the noble Lord, Lord McIntosh, for his remarks concerning my noble friend's interventions in this series of debates. I was impressed with the way in which she took to this subject, of which she has considerable experience as a councillor in the Liberal Democrat borough of Richmond. However, it was good to see somebody getting their feet wet so quickly in your Lordships' House and taking to our discussions so well.

With regard to the Bill I do not know that I can go as far as the noble Lord, Lord McIntosh, in congratulating the Government and thanking them for bringing this self-destructive Bill upon themselves. There are other considerations in relation to both local government and the people who must pay for the running of local government. The system that has been brought forward is a bad system; it is not fair; it will be seen to be unfair and I fear that that will damage local government once again. The idea of extending capping to small districts is a particularly malevolent action on the part of the Government against local government. Furthermore, it is one which will not make any significant impact on the problems that the Government see in their fantasies about local government.

We are glad that, since the Bill was before the Home on the last occasion, the Government have, in a Statement this afternoon, announced an increase in banding. However, the way out of the dilemma is not to continue increasing the number of bands but to introduce a proper system of funding local authorities based on people's ability to pay. Clearly we are firmly in this belief that local income tax is the simple, fair and effective way of doing that.

Having said that, I do not want to be in the position of going over old ground once again. On behalf of my noble friend Lady Hamwee, I thank all those who have taken part in the debates.

5.45 p.m.

Lord Boyd-Carpenter

My Lords, nobody enjoyed the speech of the noble Lord, Lord McIntosh of Haringey, more than he; he obviously thoroughly enjoyed himself. However, one day he may come to regret a good many of the things he said and be a little unhappy if noble Lords perhaps from this side of the House remind him of his prophecies as to the likely political effects of this measure. He may well find that the sensible British electorate will see that there is a great deal of good sense in the Bill and that all his cheerful ribald suggestions that it may be to the benefit of the Labour Party will turn out to be an anti-climax.

I want to deal specifically with his criticism of the continuance of capping. The reason for it is absolutely straightforward. It is central government that is responsible for the management of the economy. One of the major aspects of the economic management of the national economy is the control of expenditure. In recent years local government expenditure has become so massive as to amount to a substantial element in the working of the national economy. If central government are not to have the power to control that expenditure by local authorities, then they will not have effective power to manage the British economy. They would be liable to be taken to task for inflation, a breakdown in competitiveness and various other aspects of economic decline because of something they had no power to prevent. Therefore it is essential that central government should have the power to control the totality of local government expenditure; that is to say, to have powers of capping.

It seems to me that no one would be free to criticise central government for their economic management if central government did not have that essential power, which I say to my noble friend the Minister I hope that she, with her colleagues, will firmly decide to retain indefinitely.

I have only one other point to make. The noble Lord, Lord McIntosh, in a fit of what I can only describe as fantasy, suggested that the present community charge should be allowed to lapse next April. Then, as I understand him, he suggested that for one year we should return to the rating system. That is a perfect recipe for confusion and extravagance. If that is really a serious concept and policy of the Labour Party, it only confirms my suspicion that the party is totally unfitted to govern this country and that were it to have control of the government we should be in for serious depression and decline.

The noble Lord may say that he did not mean it. If he says that, of course we accept it. But if it is really the intention of the Labour Party to do that, that gives a powerful argument to the British electorate not to have it back at any price.

Lord McIntosh of Haringey

My Lords, before the noble Lord sits down, perhaps I may express my regret, having heard his fascinating speech, that he did not feel able to take part in the proceedings on the Bill.

Lord Boyd-Carpenter

My Lords, I thank the noble Lord for that delightful comment. However I ask him to consider that sometimes noble Lords in this House are thought to be more of a nuisance for taking part in a debate than for not taking part in it. Perhaps the noble Lord will give that concept a little reflection in the future.

Baroness Hollis of Heigham

My Lords, I understand that at this stage of the proceedings it is customary both to thank Members opposite (the Ministers in particular) for their courtesy and to engage in remarks about how much better the Bill is. As regards the first of these, I have very great pleasure in being conjoined with my noble friend Lord McIntosh and the noble Lord, Lord Tordoff. I thank the Minister and the noble Viscount, Lord Astor, for their impeccable courtesy throughout.

However, when we come to the second part of the convention, which is that at least we congratulate ourselves that the Bill is much better now as it leaves the House than when it arrived, I wish that were true. Of course it is not. But for the marginal improvement that has occurred not so much to the Bill itself but in the Statement today, the Bill leaves this House virtually unaltered and certainly not improved by any of the revising work of this Chamber. It remains ill-advised, ill-prepared and ill thought-out. Opportunities have been lost, amendments have been rejected and occasions for clarification have not been taken. My noble friend Lord McIntosh made the point about amendments lost.

I return to the two main themes of the Bill. The first is that of universal capping and the second is valuation. As regards universal capping, I do not want to engage in the democratic argument that my noble friend has expressed so well. I wish to remind the House why the £15 million rule was introduced in the first place. First, it was because local authority spending is based on standard spending assessments, which are the hinge on which both grant and capping will be determined. Every expert in local government, every advisory body in local government, every local government treasurer and every local authority association will tell you, and all have told your Lordships and the Minister repeatedly, that the SSA—the hinge on which grant and capping depend is an excessively fragile tool. It considers only one element of the services. In so far as that is wrong—because everyone believes that it is wrong and inaccurate—so will the capping and the grant be wrong.

The second reason for the £15 million figure is the recognition that the SSA was not sufficiently sensitive to pick up the spending of small authorities, unlike the metropolitan areas and counties, where 12 or 13 considerations come into play. A further consideration is that, as regards the district councils, we are talking about modest levels of total expenditure. The average district council may spend between £4 million and £6 million. One large item such as a car park or a contribution to a swimming pool, will allow it to exceed enormously its SSA in one year. It is not sensible to try to deal with that by capping. It is not worth it. It is neither fair nor administratively sensible.

Universal capping is therefore not about accountability, because local people have voted for that level of expenditure. It is not about sensible discipline, because, as I have tried to argue, the SSA is not a reliable tool. Universal capping is not about saving money, because the sums involved will be extremely small. They will be perhaps £90 million in total from all the districts overspending below £15 million this year. That is less than half the cost of rebilling in paperwork and administration alone for the charge-capped authorities this year, which will come to about £200 million. That is the kind of sum we are talking about. The total saved will be perhaps a quarter, a fifth or one-eighth of the budget of the average county council. Therefore, the issue is not about saving money, accountability or levels of spending. If it is anything it can only be about, I fear, a vindictiveness which has no place in government legislation.

If the first part of the Bill is about applying universal capping, then I suggest to your Lordships that what we are to see is exactly the mirror image of what we have seen with the 20 per cent. That is the Government chasing a large number of authorities for very small sums which are regarded by the local authorities as unfair on the one hand and as unreasonable to collect on the other. If the Government learnt anything from the poll tax they should have learnt that chasing a large number of bodies for very small sums is not worth it. The below £15 million capping figure is not worth it. Leaving aside the democratic arguments, in terms of straightforward administration, common sense and sanity, it is not worth it.

The second part of the Bill is about valuations. We have already explored some of the arguments earlier this afternoon when talking about the eighth band. At Committee and Report stage the Government consistently refused to take on board amendments for the individual valuation of houses moved by my noble friend Lord McIntosh; for 14 bands, which was the proposal of an amendment moved by my noble friend; or for the regional positioning of bands, which was an amendment moved from the Liberal Democrat Benches. As a result, even with the eighth band and in the light of the information which the Minister has given us today, three-quarters of the country will be in the bottom four bands and for the rest of the country, including the South East and London, the majority of the properties will be in the top four bands. In other words, we shall still see the compression and therefore the approximation of council tax to flat rate charging. When we add to that discounts for single people and the like, then every subsequent adjustment of the Bill will make it closer to the poll tax which we have learnt to hate.

At Report stage we also hoped that we might at least see some professional expertise going into the assessment of the Bill. With capping we have seen an insistence on central government controlling the total local authority spend. But what is at least as important is what share of that individuals will pay. That brings us to the point about valuation. An amendment which we consistently moved sought to ensure that the valuation procedure would be handled by those who are professionally qualified with qualifications recognised by the Institute of Chartered Surveyors and the like.

As I have said, we hoped at Report stage that we had received an advance on that matter from the Minister, the noble Viscount, Lord Astor. I recognise that that was not the case. He used the words "professional expertise" at Committee stage. That produces in me even stronger regret that we failed to persuade him of the importance that valuation assessments are not trusted by people and that that simply adds to the pressure on the appeal system. That is what is going to happen because the Government rejected our amendment to ensure that valuation was carried out by those whose qualifications are beyond dispute. All the work going into control the total local authority spend will be squandered because individuals will challenge the part that comes to them because they will not trust the potential wideboys who are too often associated with the estate agency profession.

We have argued and fought hard for the Government to abolish the 20 per cent. contribution and to restore the 100 per cent. rebate. The Government are committed to that in the full council tax. While it remains, local government will continue to have a tax that not only lacks moral integrity but which it cannot collect. The summonses are not being delivered and they are being turned into liability statements. When the liability orders go out they are not being paid. When the warrants go out they are not being delivered. The whole of our legal system for enforcing that aspect of the poll tax has fallen into disrepute. The Minister has consistently refused to accept an amendment from us that might at least, in the twilight years of the poll tax, have made its collection less expensive and objectionable.

Yesterday we saw the announcement of the Citizens Charter. That charter contains many good things, but it does not contain very much about citizenship. If that means anything it surely means not just being an active consumer, but in having a voice, a vote, a power and a presence in decision making. It means recognising the value and virtue of local government and allowing people to shape and empower their own lives. Instead we have had recent speeches from the Secretary of State of a centralist complexion that I have not come across during 25 years in local government.

We have to say to the Secretary of State that there is a Europe out there which is prosperous, progressive, pluralist and committed, unlike us, to enshrining the constitutional rights of local government into law; which also affirms the local government powers of general competence; which supports the principles of subsidiarity; and which has signed the Council of Europe charter of local self-government.

Whether the Government like it or not, in the next decade that is the way that government is going to go. Our only regret is that the Minister and the Government have not taken the opportunity of this Bill to bring us into line with the best and most progressive pluralist and prosperous thinking in Europe rather than continuing to hold on to tenets that we know have been exploded.

Baroness Blatch

My Lords, not only because it is the convention but because I wish to do I thank the noble Lord, Lord McIntosh, for his co-operation on this Bill. He is always courteous and a formidable opponent. Together with the noble Baroness, Lady Hollis, he is even more formidable. I thank him for that. In the absence of the noble Baroness, Lady Hamwee, I wish to say through the noble Lord, Lord Tordoff, how very much I welcomed her to the Benches. I said that after her maiden speech. It was an excellent performance which she presented in great style. She was enormously courageous because she was a very new Member when this Bill set out. I hope that the noble Lord will pass on my thanks to her for her part in the Bill. I also thank my noble friend Lord Astor, who, as a relatively new Whip, has been an excellent support to me during the course of the Bill. I also thank, in his absence, my noble and learned friend the Lord Advocate for his support.

We have considered the Bill in great detail both in Committee and on Report. The Bill has two purposes both of which prepare the way for the introduction of the council tax in April 1993. The Bill deals, first, with strengthening our capping powers and, secondly, with valuation; that is, the task of allocating domestic properties to bands.

I should like to deal first with capping. By strengthening our capping powers, both north and south of the Border, we shall ensure that local authorities will not be able to raise their spending unnecessarily in the run up to the introduction of the council tax. In introducing the community charge we had high hopes for the ideal of unfettered local accountability—high hopes for the ideal of local people holding their local authorities to account for their spending decisions. But we have learnt a bitter lesson. In 1990–91 local authorities in England overspent by nearly £3 billion, pushing household bills up by 30 per cent. on the previous year. Contrast that with 1991–92, when the Government announced their intentions for capping in advance. Local authorities' budgets were only about 0.5 per cent. above that for which we provided in the settlement. In Scotland, local authorities have ignored the principle of accountability and continued to spend at high levels, resulting in an increase in the original charges set for this year of an average 30 per cent.

The Government have a duty to manage the national economy. They have a duty to protect chargepayers from the consequences of excessive local authority spending a point very strongly made by my noble friend Lord Boyd-Carpenter. The message from the Opposition Benches during our consideration of the Bill has shown quite clearly that they would not be prepared to accept that responsibility. They advocate no limits whatever on local authority spending.

The capping provisions in the Bill seek to remove the £15 million exemption from capping for local authorities in England and Wales and to strengthen and widen the scope of the capping powers in Scotland by bringing them broadly into line with those in England and Wales. Experience in the past two years has shown that there is a need for all chargepayers, even those living within the areas of small district councils, to be protected. Given the fundamental shift in the burden of paying for local services from local to national taxation, implemented by the Government from 1991–92, it is vital that the extra resources provided by the Government be used to keep charges down, rather than fuel higher spending. In the run up to the introduction of the council tax the ability to take action wherever necessary is an imperative. This Bill provides the powers to do just this.

I turn now to the second purpose of the Bill: the valuation of domestic property. The Bill enables the Commissioners of Inland Revenue to get started with the task of allocating domestic properties to bands in preparation for the council tax. As the House knows, my right honourable friend the Secretary of State has today announced in another place certain decisions about the banding of properties. They are decisions we have reached following the detailed consultation exercise on our proposals that we have undertaken. We have listened carefully to all the comments put to us before reaching those decisions which give, subject to the passage of the Bill, a firm platform for the valuation task.

I wish to emphasise only one point this afternoon, which relates to the process of the valuation itself. We have provisionally estimated that the banding task can be carried out for a sum of £250 million. That is not a small sum of money, though it pales into insignificance beside the cost of the precise individual valuation which would be required to set up the so-called fair rates proposed by noble Lords opposite.

The banding task needs to be carried out cost effectively if we are to keep within our budget. It also needs to be carried out on time in order to deliver a council tax in April 1993. The Bill provides that the job will be carried out by the Commissioners of Inland Revenue and, in Scotland, the local assessors under the direction of the commissioners. Under the terms of the Bill they can call on the private sector to assist them. The noble Baroness, Lady Hollis sought on Report to claim a great conversion on the part of these Benches when my noble friend Lord Astor informed her (Hansard, 17th July, col. 233) that we were determined to use "the best professional expertise" to do the job. There was no conversion. That has always been our position as stated precisely in Committee and on Report. That has always been the position of these Benches. We seek to use the best expertise to do the job whether from the public or private sectors.

The noble Baroness, Lady Hollis, said that it really was not worth chasing those small amounts of overspend. Some individual chargepayers are paying in excess of £40, £50, £60, £70 or, in the case of one authority, £95 more each. I submit that they are the people who require the protection of the Government. The noble Baroness also said—I hope that it was a slip of the tongue—that the Minister rejected her amendments. We live in a democracy. The whole House can reject any amendment that is put to it for consideration.

The Opposition raised two further points. The noble Baroness, Lady Hollis, referred to the cost of re-billing. She said that the re-billing of a capped authority costs about £100,000 to £200,000. That is a far cry from the actual cost which is £200 million. The final point is that noble Lords opposite have indeed put down a challenge to this Government. Perhaps I may in return put a challenge down to them. They have yet to define specific details of their system of fair rates. What we do know is that local authorities would be unfettered and be allowed to spend unlimited sums at local level with no interference from national government. We know from what is said at Question Time daily that they would throw a great deal more money at local authorities. We also know that an incredibly complex valuation of all properties would take place annually—every single property in the land —on the basis of capital values, rental values, maintenance values and replacement costs. We also know that details of our incomes will be required in order to relate what we pay to income levels.

The Opposition have said very little about whether they would retain the split of government and business rates of 85 per cent. to local authorities 15 per cent., though they remain critical of that split. They also have said—or rather, by implication, have suggested —that business rates would go back to local authorities, who would then be at the mercy of the vagaries of local authorities. The Bill paves the way for the council tax. Noble Lords opposite have to explain to the community what they would do.

The council tax will be a long lasting and fair tax. By strengthening our capping powers we can look forward with confidence to a tax that will be levied at acceptable levels. By making an early and effective start on the banding task we can be confident of an orderly introduction for the new tax. I notice that the noble Baroness was anxious to get to her feet on something I mentioned earlier. The actual cost of £200,000—

Baroness Hollis of Heigham

My Lords, I believe that I said—I certainly meant to say, and Hansard can be checked—that I understood that the cost of re-billing last year for the capped authorities was £200 million in total. I was setting that against the £90 million which it is assumed the Government will be able to collect from the local authorities that are capped to under £15 million on this year's figures.

Baroness Blatch

My Lords, in fact I reversed the millions and the hundred-thousands. The actual cost was £200,000. The noble Baroness used the figure of £200 million. I believe that we have a fair and balanced alternative to offer the community. I commend the Bill to the House.

On Question, Bill passed.