Local Government Tax (Hansard, 22 May 1991)

§ Lord Waddington
My Lords, the Government believe that a banded system, based on the market value of domestic property, will be simple to administer, easily understood and cheap to collect and is therefore the right way forward.

§ Lord Constantine of Stanmore
My Lords, I thank the Minister for that reply. However, does he not agree that the banding of the type of property by its type and not its value, such as semi-detached or detached, three or four bedrooms, and so on, would be much more descriptive? That would be less likely to arouse the envy of those who say that people in the South East can afford to pay more on their properties and therefore should do so?

§ Lord Waddington
My Lords, the banded system involves no need to value each individual house. There will be no need at all for regular revaluation. Therefore, it will be simple, cheap, and also fair to administer.

§ Lord Dean of Beswick
My Lords, is the Minister aware that historically the old rateable system was very unfair and there was a severe imbalance? For example, some people could never understand why flats were always rated higher than larger houses on ground floor level. Can the Minister give an assurance that there will be no imbalances that will operate unfairly under the new system?

§ Lord Waddington
My Lords, I do know that the plan of the Labour Party is immensely complicated—

§ Lord Dean of Beswick
My Lords,—

Noble Lords
Order!

§ Lord Waddington
My Lords, we have aimed at simplicity. There is not only an advantage in simplicity, there is also an advantage in banding. If there are a number of bands the effect of moving from one band to the next is not traumatic in itself. One can only move a certain distance and that is another recommendation for the system.

§ Lord Gisborough
My Lords, does my noble friend accept that there are houses of identical size in the North which compare with houses in small villages in Cornwall and Devon where prices are highly inflated due to second home ownership? At the moment people in those villages cannot afford to buy homes in the area because they have very high rates which are quite out of proportion to their ability to pay.

§ Lord Waddington
My Lords, the top banded house will attract a council tax 2.5 times higher than a house in the bottom band. Therefore, the difference between 236 the cheapest house and the most expensive will be far less than under the old rating system. One of the great criticisms of the old rating system was that an unacceptable burden was placed on a person who might be living in the suburbs of a town on his or her own, in a property which was very highly valued. The result was that he or she had to pay a very large sum of money for limited services. The system we propose will be much simpler and much fairer.

§ Lord Stoddart of Swindon
My Lords, is not the banding system proposed unduly restrictive in that it will have only seven bands? Will that not mean that people living in much smaller properties, in poorer parts of the country, will pay more than they should while other people living in large houses in more prosperous parts of the country will pay a lot less? Should not the system be much fairer than that?

§ Lord Waddington
My Lords, there are many great virtues in simplicity. Of course, one could have a proliferation of bands, but the more bands there are, the more complicated the system becomes. Surely it is preferable to have a system such as the one we set out in our consultation document than to have a system which involves no limits whatever on local authority expenditure and the setting up of regional authorities with the creation of yet another layer of bureaucracy. The total cost of that puts the Question posed by the noble Lord into proportion. Labour's plans would mean vastly increased expenses for local authorities.

§ Lord Stodart of Leaston
My Lords, as one of my noble friend's supporters, and as one who has suffered grievous bureaucratic difficulties over the poll tax, and remembering the advocates of that tax saying how simple it would be to operate, can the Minister give me an assurance that we have got it right this time?

§ Lord Waddington
My Lords, I can tell my noble friend that I certainly believe so. It is a very much simpler system than the poll tax. Surely it is a very much simpler system than going back to the old rating system and eventually changing yet again to a tax that is based not on the capital value of a property but on a value based on building costs, repair costs, rental values and capital value lumped together.

§ Lord Taylor of Gryfe
My Lords, is the Minister aware that the valuation of property on which these bands are calculated is done by the Inland Revenue in England and by independent assessors in Scotland? The variations in valuations are great. Can the Minister assure the House that there will be some uniformity in standards of valuation covering the United Kingdom?

§ Lord Waddington
My Lords, that is certainly the intention.

§ Lord Monkswell
My Lords, is the Minister aware that the population will be appalled at the suggestion that there should not be regular revaluations of bands related to individual properties? It should be borne in mind that one of the major problems caused by the old rating system was the fact that properties were not revalued regularly.

§ Lord Waddington
My Lords, one of the attractions of the banded system is that it is not necessary to have regular valuations. Assuming that some sort of reasonable relationship still applies between the bottom band and the next band and the band after that, all that has to be done is to apply the same tax at a higher £age. One will get precisely the same result.

§ Lord Peston
My Lords, the noble Lord is falling into the same trap as the poll tax argument to which he has referred. His argument totally gets away from the fact that the housing market, as a market, is enormously complicated and we cannot just take values for granted. My question to the Minister is: will the tax, assuming we have to suffer it, at least allow local democracy to survive? In particular, will local authorities be able to set their own rate of tax apropos of the value?

§ Lord Waddington
My Lords, if the noble Lord is asking whether we are going to abandon capping, then the answer is certainly not. I am quite sure that when the people of this country grasp the fact that it is part of Labour's policy that there should be no limits whatever on local authority expenditure they will not vote Labour.

§ Lord Peston
My Lords, does the noble Lord remember the argument on poll tax; that if a local authority taxes too much the electorate will get rid of it? What happened to that argument? It seemed to fail with the poll tax; is it also going to fail this time round?

§ Lord Waddington
My Lords, the noble Lord wants it both ways. If, indeed, he is right that the accountability arguments did not result in restraint in expenditure by local authorities, I am saying that that adds to the argument for capping. It does not detract from it.

§ Lord Hatch of Lusby
My Lords, the noble Lord insists that this tax is fair. Is his concept of fair that a person with a house worth £1 million pays the same as a person with a house valued £160,000?

§ Lord Waddington
My Lords, I only have to remind the noble Lord of the criticisms which were made of the old rating system. The principal criticism made was that a completely unfair burden was placed on people who occupied what in these days might be considered quite moderately valued houses. Therefore, some decision must be made as to the relationship between what is paid by the person living in a small house and what is paid at the top of the scale.
One should bear in mind that under this scheme the person at the top of the scale. will pay 2.5 times as much for local authority services to his local authority than the person at the bottom of the scale. On top of that, the remaining 80 per cent. of the cost of local authority services will be paid for by central government, which operates under a steeply graduated system of direct taxation. I think the noble Lord will concede that that system will be fair.

§ Lord Williams of Elvel
My Lords, under the new scheme, will there still be standard spending assessments to tell local authorities what they are allowed to spend?

§ Lord Waddington
My Lords, there will be standard spending assessments in order to assess what grants should be paid to local authorities. That is certainly correct. How else could it be? There must be some way in which one apportions grant between one area and another so as to make sure that as near as possible a person living in one part of the country receiving a standard level of service pays about the same as someone in another part of the country receiving the same service.