General Matters

Debate between Jonathan Lord and Caroline Lucas

Tuesday 17th July 2012 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I am grateful to have this opportunity to call on the Government urgently to investigate how a land value tax might be introduced to replace, first, business rates, and then council tax. I call for this because it would be more progressive and fair, it would help to prevent property speculation and it is a potential means of redistributing wealth. I am also encouraged by the fact that land value taxation has long been a key policy of one of the coalition Government partners. I hope that the robust reports on LVT from the likes of the Institute for Fiscal Studies, as well as debates such as this, might help to persuade the other partner.

As hon. Members know, LVT is a tax or levy on the value of land that takes account of any planning permission associated with it but not of any improvements made to the site such as buildings. For domestic property, for example, the house price includes both land and building values, but LVT would apply only to the land that the house stands on. LVT encourages efficient and sustainable use of land, as owners of derelict land or properties that they have deliberately allowed to become run down pay the same as those who take care of their properties. It therefore has the potential to bring more brownfield sites into use and to ease pressure on green belt. Building in towns and cities would become more efficient, urban sprawl could be reduced, and speculative land banking—for example, by big supermarkets—could be discouraged.

[Jonathan Lord]

The hon. Lady cites all sorts of terrible, egregious cases, but what about the widow who wants to carry on living in the family home but does not have much income or spare capital? Would she force her to move home because of these taxes?

[Caroline Lucas]

I thank the hon. Gentleman for his intervention, not least because it gives me the opportunity to reassure him that I certainly would not be asking that widow to leave her home. What I am asking the Government to do—I have drafted a private Member’s Bill to this effect—is to research how we would implement a land value tax. Among the provisions that we would need to consider is how to protect the widow in the case to which he alludes. For example, one could give her the option of continuing to pay council tax until she dies or moves house, and if she moved house one could think about how to introduce the land value taxation at that point. I assure him that I certainly do not envisage a scenario where this measure would force people to leave their homes. It would have to be brought in gradually. I stress that my private Member’s Bill asks the Government to research this and look into the modalities of introducing it, transition periods, and so on.

One of the great advantages of a land value tax is that it would be very hard to dodge, avoid or evade. It would encourage more efficient and sustainable use of land and avoid distorting business behaviour, as our current business rates do. Business rates are levied as a percentage of the estimated rental value of the property, and the effect of that is to skew economic activity away from property-intensive production and to create a perverse incentive not to use or properly develop brownfield land first. Crucially, an LVT could discourage boom and bust in property, giving incentives against disproportionate amounts of capital being tied up in property and unsustainable accumulation of debt.

Support for this idea comes from interesting quarters both historically and today. For example, in February this year, Samuel Brittan said in the Financial Times that

“the case for a land tax is one of the oldest and least disputed propositions in economic thought.”

He went on to explain:

“Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element.”

Samuel Brittan is in very good company. Winston Churchill, speaking in 1909, put the argument in favour of LVT rather eloquently:

“Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains—all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

In addition to that, last year we had the heavyweight report from the IFS that was commissioned from the Nobel prize winner, Sir James Mirlees; it is known as the Mirlees review. It clearly recommends that the Treasury take LVT seriously. It says:

“This is such a powerful idea, and one that has been so comprehensively ignored by governments, that the case for a thorough official effort to design a workable system seems to us to be overwhelming.”

In responding to the questions that I have put to the Government so far on LVT, they have always fallen back on the work done by Sir Michael Lyons in his 2007 inquiry into the role, function and funding of local government. There are many criticisms of the Lyons report and there have been dramatic economic changes since it was released, the most obvious of which is the 2008 crash, which make Lyons’ analysis of land value taxation out of date.

We need a study into the practicalities that looks at how we would bring in an LVT, who would be the winners and losers, and what transitional measures would be needed. The evidence suggests that such a measure would be broadly progressive. In other words, those who can afford it would pay the most and those who can least afford it would pay the least. I hope that the Government will use the response to this debate to reply positively to the broad cross section of people who are saying that this idea has potential. We now need research into how it would be implemented.

The practicalities of land valuation at the necessary level of disaggregation might seem daunting, but that does not mean that it is not possible. There is already a substantial apparatus designed specifically to record land and property values for business rates. Rating lists are compiled by the Valuation Office Agency, which in 2009-10 employed approximately 4,000 staff. New lists are compiled every five years. The infrastructure is therefore already there and could be used.

As I said, I have introduced a private Member’s Bill which, if we are lucky, will be discussed in November. It calls on the Treasury to do a serious piece of work that looks into how land value taxation might replace business rates and, subsequently, council tax, and that takes account of transitional arrangements as necessary. I hope that the Government will take that proposal seriously. The economic case is strong. If we took the wider view to see how such a transition could be made, I think we would find that such a tax would be sensible, efficient, effective and progressive.

Housing Benefit

Debate between Jonathan Lord and Caroline Lucas

Thursday 10th March 2011 Westminster Hall

[Caroline Lucas (Brighton, Pavilion) (Green)]

I warmly welcome the report of the Work and Pensions Committee. I congratulate its Chair and her team on such an excellent piece of work.

The report and the evidence given to the Committee show that the Government are prepared to attack the most vulnerable in our society in pursuit of their blinkered cuts agenda. The so-called reforms to housing benefit demonstrate, sadly, that the nasty party is alive and kicking—and kicking the poor especially hard.

The Government response, which was published today, does not adequately address the concerns raised by the Committee’s report and by the expert witnesses. It is a shame, and perhaps rather telling, that the Government chose to publish their response on the morning of the debate, giving little time for proper scrutiny of it.

As the Committee notes in its conclusions, it was told that a few highly publicised cases of large families in high-rent properties in central London have been used to distort public perception of the scale of the problem. With the assistance of the right-wing press, the coalition tries to justify the housing benefit cuts by presenting housing benefit as an area of waste.

[Jonathan Lord]

I accept, as hon. Members have said, that these isolated cases are anomalous and are not the norm. However, does the hon. Lady really think it right, especially in a time of economic hardship, that hard-working families see other families living in properties, perhaps in central London, worth £1.2 million, when they could never possibly aspire to live in such houses on their salaries and wages? Does she agree with the cap that the Government still intend to introduce?

[Caroline Lucas]

A tiny number of high-profile cases have completely distorted the whole debate. Yes, there will be a few cases that cannot be justified, but I do not think that they should be allowed to dictate a policy that will be so punitive towards the poorest and most vulnerable.

[Caroline Lucas]

I am enormously grateful for that information, which clearly sets out what we are dealing with. We are not dealing with the manufactured scenario in which hard-working families support the housing costs of huge numbers of workshy people who are wasting taxpayers’ money, which is the story being put about. The evidence given to the Committee shows plainly that that approach is inaccurate and irresponsible.

Let us remember that only one in eight of all housing benefit claimants is formally classified as unemployed. The rest include people on low incomes, pensioners, carers, and people with disabilities who are unable to work. We must challenge the myth of the workshy.

[Jonathan Lord]

We had a thoughtful exposition from the Chair of the Select Committee, and I now hear a diatribe about the nasty party. First, I remind the hon. Lady that the Government are a coalition, as is evidenced today, and secondly the characterisation is totally wrong. I used to be the housing chairman in a London local authority and am now the Member of Parliament for Woking. There are many hard-working people in Woking, including the ethnic minority communities, who would love large houses in the centre of London, but it is just not tenable.

--- Later in debate ---

[Jonathan Lord]

Thank you, Mr Sheridan. My question is whether the hon. Lady will withdraw her uncharacteristically barbed remarks, when she can see from the Government’s response that we are trying to get the housing benefit system back into kilter. At a time of economic difficulty, there is a need for a fairness test. I bring her attention back to those hard-working families who see others living in ridiculously large houses.

[Caroline Lucas]

I should be delighted for the housing benefit changes to be challenged under a fairness test, because any sensible fairness test on what is proposed shows that it fails a fairness test over and over. I am not delivering a diatribe. I am making a point. The media coverage and the language used, from the Prime Minister downwards, give the impression that there are many people who are simply workshy. To begin to challenge some of the stereotypes, it is important to state that only one in eight of all housing benefit claimants is formally classified as unemployed. I should love to withdraw the remarks I made about the nasty party, but on the basis of the information I have I cannot. The fact that the Lib Dems have now joined the nasty party does not make things better. It makes two nasty parties instead of one.

However, I should like to get on to the serious points. Many people who depend on housing benefit to get by in Brighton and Hove are in work. To be exact, 31% of people who receive LHA are in employment. They rely on housing benefit but they fear they will be forced to move away from the higher-rent areas where they work, such as my constituency of Brighton, Pavilion. As part of the June 2010 Budget the Government announced an intention to uprate LHA rates by the consumer prices index from April 2013. That measure, which is now in the Welfare Reform Bill, will make rents increasingly unaffordable for local housing allowance claimants throughout the country as the rates are linked to inflation rather than the real cost of rents.

Without access to adequate temporary support with housing costs, people who lose their jobs may be forced to uproot their families and move to a new area, undermining their efforts to find employment and get back on their feet. That is graphically demonstrated by new research by Shelter and the Chartered Institute of Housing, which shows that by 2025 nine out of 10 homes will be unaffordable to local housing allowance claimants in Brighton and Hove. The research found that in Brighton the areas with the most locations of employment were quickest to become very unaffordable, with the more remote rural areas and the eastern coastal area, which has relatively high unemployment, remaining relatively affordable. For many, therefore, the cuts to LHA will force them to move and make it difficult to retain their jobs, because it will be too impractical or costly to commute from the cheaper areas they will be forced to go to.

Once the cap on rail fare increases is raised to 3% above inflation from 2012, and the arrears caused by the shortfalls in housing benefit have really started to pile up, the Government’s housing benefit cuts will mean that many will find themselves in a new benefits trap, removed from their communities and newly unemployed. When working parents in receipt of LHA are forced to give up their home and move to a cheaper area, they will struggle to afford the astronomical child care costs they need to pay so that they can work, because they will no longer live near friends or family members who might have helped with child care in the past.

The proposal for LHA to be set at the 30th percentile of market rents—down from the 50th percentile or median rate—and the proposal to link LHA increases to the CPI will have a hugely negative impact on my constituency. Brighton and Hove has one of the largest private rented sectors in the country, comprising 28,000 homes—almost a quarter of all the city’s housing at 23%. My surgeries are already full of people who are struggling to pay rent and to find alternatives to cramped, overcrowded and overpriced accommodation. The Government’s plans can only make their situation worse. The increase in housing benefit bills over recent years is not, as the Government would have us believe, the result of an epidemic of scroungers. As the evidence to the Committee makes clear it is due to considerable growth in the number of people who are being forced into the private rented sector. In Brighton, Pavilion, for example, someone would have to earn more than £50,000 a year to buy an averagely priced house. No wonder that 11,000 households are on the waiting list for affordable housing in the Brighton and Hove area. At current rates, that list will take more than eight years to clear.

Brighton and Hove city council acknowledged to the Committee in written evidence that the housing benefit changes could increase homelessness applications. Indeed, the Committee reports the fears of numerous expert witnesses that evictions and increased homelessness will be the results of the policies. The Committee concludes that large families, young people, older people and disabled people may be particularly affected. It is plain from the evidence given by Brighton and Hove city council that the reality of those changes for people who are already struggling in my constituency will be even greater shortfalls between benefits and rents than already exist.

Perhaps I may give the House a few figures. In the city council’s evidence to the Committee, it acknowledges that a total of 721 pensioners will not be able to meet their rent, while 250 pensioners who could previously meet their rent will have an average weekly shortfall of £7, and a shocking 471 pensioners will have a new average shortfall of £31.76 a week. Some 2,500 working families will not be able to meet their rent, and more than 1,400 of those families will have a new average weekly shortfall of £33.70. There are 2,386 families with children who will not be able to meet their rent, with 1,122 of those families facing a huge new average weekly shortfall of £41.94—about £175 a month. I could go on, but the House gets my drift.

It is not okay to sit back and wait to see whether landlords will drop their rents. The Government are being far too complacent in their response. Landlords are under no obligation to reduce rents. Some may do so, but many may not, and it will be the vulnerable people, including pensioners, children and people with disabilities who will suffer the most. The way landlords respond to the cuts will vary depending on their local private rented sector market, as well as on their own financial circumstances. Many landlords will shift to the non-LHA market and LHA claimants are likely to be ghettoised in lower-rent areas, living in poorly maintained houses in multiple occupation. It is not good enough simply to hope that the cuts to LHA will lead to a fall in rent levels, when people’s homes are at stake.

What of young people—another group identified in the Committee’s report as particularly affected? It is clear that young people will be very hard hit by the shared room rate announced as a follow-up to the June Budget proposals, as part of the October spending review. Now consideration is being given to extending that rate to include people up to the age of 35, and that will have a hugely negative impact. The paltry shared room rate already results in single claimants experiencing unsustainable shortfalls between their rent levels and housing benefit entitlement. Those shortfalls are more acute for younger claimants. Given that it is already extremely difficult for young people to find accommodation at the pitiful shared room rate, the proposal to extend the age group of those who must try to survive on it in the housing market will make it even harder for young people to get accommodation. I fear it is very likely that the proposal will lead to an increase in youth homelessness.

The Government like to present the shared room rate proposal as an extension of the idea of a group of young friends living together as their children might after university. That is a seductive argument, but only because it is so simplistic. There is a variety of reasons why shared accommodation is not always a suitable option for claimants. People with behavioural or dependency problems, and people who pose a risk often need to live on their own. As I said earlier, under the policy even expectant mothers will be expected to share until they give birth. Even if sharing is not a problem for an individual in principle, where is the accommodation to be found? It is wholly unacceptable for the Government to take the approach of implementing the policies before they have assessed what the likely outcomes will be. In answer to a parliamentary question, the Government stated that

“the increase in the age threshold for the shared room rate announced in the spending review will affect around 88,000 claimants.”—[Official Report, 1 November 2010; Vol. 517, c. 538W.]

However, the Department for Work and Pensions has not yet published an equality impact assessment on the shared room rate proposal. That is expected to be published with draft regulations. How can we have confidence in a Department that is prepared to make such a proposal, which is likely to lead to massive inequality and hardship—particularly for young people—without doing the equality impact assessment first?

The Government’s agreement, in response to the Committee’s report, to undertake a review of the housing benefit cuts taking effect this year is welcome as far as it goes. Such reviews will be essential if these damaging proposals go ahead. However, it is clear from the expert witnesses who gave evidence to the Committee and, indeed, from my constituents that the cuts being implemented will lead to hardship for many vulnerable people. Reviews are one thing, but the fact is that there is more than enough strong evidence of widespread concern over the likely effects of these measures to show that they ought to be dropped, and dropped now.

Not only are these cuts socially devastating, they make no economic sense. It is clear from the Committee’s report and the number of times that it suggests in its conclusions and recommendations that money will be needed to address the negative consequences of these proposals, that the funding announced for discretionary housing payments is not enough. As the Committee rather gently puts it, the money is

“intended to provide a solution to a very wide range of identified areas of concern”.

That is very true. Even if we put fairness aside and look solely at the money, it is clear that the short-term budget savings from housing benefit cuts are highly likely to be eclipsed by a mounting bill to the taxpayer, as the knock-on consequences of homelessness, job losses and overcrowding impact on people’s health and employment prospects.

Instead of attacks on housing benefits and cuts to other schemes that help people in housing difficulty, such as the support for mortgage interest schemes, we need a major investment in new affordable housing and measures to bring empty properties back into use. We need simple measures, such as a reduction in VAT on repairs, to encourage people to put older properties to better use, and we need proposals to support housing co-ops and other forms of affordable housing, not measures that drive up social housing rents to 80% of market rent. The Committee’s report and the evidence it received makes it clear that if we are to reduce the housing benefit bill in the long term, we should build more affordable housing. Of course, that should be green, decent and fuel-efficient housing.

In conclusion, the proposed reforms are nothing less than brutal. The Government’s U-turn on the punitive proposal to punish people who are on jobseeker’s allowance for more than a year by cutting their benefit by 10% shows that the Government are on the back foot over their nasty housing benefit cuts. Thousands of people are losing their jobs and they do not want that safety net left in tatters. The coalition seems to want us to ignore the fact that we do not all start out with equal life chances and opportunities. A fair society redistributes wealth from the rich to the poor, not the other way around. The coalition’s plans are punitive, destructive and costly, and people deserve better.