Local Government Finance Bill

Lord True Excerpts

Tuesday 10th July 2012 Grand Committee

[The Earl of Lytton]

My Lords, I aggregated these amendments together to try to deal with them as quickly as I could. They cover a number of different areas but I felt that it was right not to seek to group them individually or in smaller groups for the very purpose of discharging that obligation. While understanding what the noble Earl said and standing here chastised as appropriate, I am nearly at the end of what I wanted to say.

This particular amendment seeks to restore objectivity and professionalism—not that these individuals are lacking in professionalism but to make sure that the valuation body commands respect and continues to do so in future. That is quite an important point of principle. I have dealt with the question of falls in value following the antecedent valuation date, which just leaves me to deal with Amendments 70 and 95.

Amendment 70 relates to the way in which the Valuation Office Agency appears to be managing the appeals system. There seems to be an inclination to declare incoming proposals for alteration invalid, but not necessarily straight away. It is important that the validity of an appeal is decided at an early stage, in the same way as if a planning application were submitted that had to be decided upon at that juncture. It should not thereafter be possible for the validity to be impugned. Amendment 95 is linked to Amendment 70 and could be an alternative to it. I am going to sit down. I beg to move.

[Lord True]

My Lords, the noble Earl has raised a number of issues and I know that my noble friend will respond. That will be important because as business rates take the burden over the coming years these issues will become matters of considerable controversy and potentially democratic controversy. Knowing the noble Earl’s expertise and the courtesy of my noble friend, I am sure that these matters will be discussed further over this summer. I hope that in her response she will not necessarily rule out the idea of at least exploring these proposals. It may be that the Government have the necessary powers that the noble Earl is referring to in Amendment 96 to make adjustments in the system. But if that is not the case, it is a matter that we ought to consider further because this area will bear further examination. Indeed, I referred to an incident in my borough, which demonstrated the problems that can arise.

I am not going to tempt the noble Earl to his feet immediately, but perhaps when he replies to the Minister’s response he will say how he envisages in Amendment 70ZC this concept of a decline in market value being a reason, rather than a proximate event, to occasion appeals and change. I am not absolutely certain as to how he envisages that would be triggered. Would it be triggered by each individual land holder? You could have whole series of appeals in the light of a general trend in market decline. The noble Earl nods, so I think that that is the case. If that doctrine is to be imported into law, for some of the reasons that the noble Earl set out, some mechanism might be needed for collective action in those circumstances, otherwise it could be another reason for a proliferation of appeals that might come out of the works.

I listened with great interest to what the noble Earl said and I hope that we can be assured we will have the flexibility to address some of these issues as they arise over the next few years.

[Lord McKenzie of Luton]

My Lords, the noble Earl has treated us to a veritable manifesto of issues. Like the noble Lord, Lord True, I am grateful to have had the benefit of his expertise on these matters. Perhaps I may also say in the noble Earl’s defence, if he needs it, that I am advised that the 20-minute rule does not apply to legislation—quite apart from the fact that the noble Earl could have degrouped all his amendments.

It also seems that some of the issues raised would impact on local business rate deals. In line with the discussion we have just had and the amendment of the noble Lord, Lord Jenkin, we would expect there to be some consultation on that. I hope that noble Lords will understand if we formally reserve our Front-Bench position on some of these issues, at least until we have heard from the Minister. The list prompted a visit to the Valuation Office Agency website to try and get some briefing. It is worth reflecting that the group of amendments brings home the breadth of responsibilities of the Valuation Office Agency and underlines the importance of the points made in earlier debates by the noble Earl about the significance of maintaining this important service. Its work includes not only the compilation of rateable values for some 1.7 million non-domestic properties in England and 100,000 in Wales, and the list of council tax bands for some 23 million properties in England and 1.5 million in Wales, but determining local housing allowances across 153 broad market rental areas in England. That is a heck of a responsibility and a major task.

The theme of much of the noble Earl’s group of amendments is the fitness for purpose of the current system, with particular issues around appeals. If the noble Baroness is unable to give satisfaction on that this afternoon, it would lend itself to an amendment on Report, saying that there should be, within a period of time—maybe two or three years—a specific report on how the system is coping with the business rate retention scheme. Given where we are, that is probably the best that we can do with the generality of those issues. Have the Government recently assessed the fitness for purpose of the Valuation Office Agency and the system that it supports in driving forward the business rate retention scheme?

Having said that, perhaps I might comment on one or two specific amendments. Amendment 62 requests the paying off in instalments of backdated liabilities. I seem to recollect that we had some heated debates about the backdated liabilities suffered by some ports. They were paid off in instalments. There was a facility to allow that, so I wonder why there is not sufficient in the system to protect that at the moment.

As the noble Earl identified, there are issues not only for rural petrol filling stations but for shops and rural pubs. I am particularly interested in who bears the cost of these reliefs under the current system. How will that break down under the business rate retention scheme? Will there be a switch in the bearing of costs for that? Will 50% now be borne by local government and 50% by central government? What is the change on that?

On Amendment 64, the noble Earl talked about no reallocation of funding coming the way of parish and neighbourhood councils. My understanding is that there is certainly an expectation that the grant for council tax support will be paid to billing authorities and major precepting authorities. The bit attributable to local precepting authorities goes to billing authorities and there is an expectation that they should engage with parish and town councils with the prospect of payment being made. Therefore, to that extent at least, there will be some relief.

In Amendment 65, the noble Earl refers to completion of a single annual return. We are not opposed to this principle, although if the system is creaking at the moment, I am not sure of the benefit of imposing another annual return—even a simple one—if there is no resource to deal with it. There is nothing worse than having a system of returns that simply cannot be coped with; the system is brought into disrepute.

Perhaps the Minister will tell us how central rating lists will work under the business rate retention scheme. The central bit of these rating liabilities deals with hereditaments such as railways, telecoms infrastructure, toll motorways and so on, which straddle multiple billing authorities. These liabilities are collected by the Secretary of State. How is the local share fed back to appropriate billing authorities, if at all?

Amendment 68 seeks to reflect the role of billing authorities in the appeal system, given the changed circumstances that arise where billing authorities have a more direct interest in the outcome of rates collection. That does not seem unreasonable. I shall be particularly interested in the response of the noble Baroness on that. I will not comment further on the specific amendments, but there is a case emerging for having a specific look at the whole system—not to hold things up, but so that we can make a judgment in a relatively short space of time as to whether it is fit for purpose for the new demands that are being imposed upon it.

--- Later in debate ---

On the cost of collection, the average amount that 6,038 households in Pendle would have to pay under the new system, if the 18% were levied, would be £142.60 a year—£3 a week. It is extraordinary that the council will have to collect £3 a week from 6,000 households. It is exactly the poll tax problem, which is why the noble Baroness, Lady Hollis, was absolutely right that in a practical sense the thing is not going to work. From 500 households the levy would be less than £1 a week. We can see that a lot of that money simply is not going to be collected. It will cost the local authority more than £50 a year to take someone to court even if it is awarded court costs. The result of this will be that the collection rate will go down. The many authorities that have been working very hard to get their collection rate up to high levels—97%, 98% and more—will have all the problems of the poll tax and will be thrown back 22 years to all the difficulties that we had then. This is not a good idea. Whatever the rights and wrongs of the policy, it will cause huge practical difficulties. I look forward with great interest to the proposals that my noble friend Lord Tope will put forward to mitigate some of the effects.

[Lord True]

My Lords, I cannot claim to have been a council leader at the time of the community charge, as I will carry on calling it.

[Lord Tope]

The noble Lord was too young.

[Lord True]

However, in the early 1990s I worked for Sir John Major at No. 10, where one of our main responsibilities was finding an alternative to the community charge. Therefore, I was in a different place but working on the same issue. In many ways I am also in the same place as other noble Lords who have spoken today. I made a number of points at Second Reading that were taken up by noble Lords. I support to a large degree the intellectual case that was put. My noble friend Lord Tope spoke wise words. The Committee must address practically the issues that have arisen. We have all made our position clear. I said at Second Reading and will say again that I would rather we were not here and that the benefit was part of universal credit. However, given the position that the Government are in, we must try to make this work in the best way possible.

This debate has taken on the tone of that on Amendment 1. I agree with some of the analysis, but if the logic is that the burden will go on a narrower and narrower base, and that base will tend to be lower-income working families, we will have to wrestle with these issues very carefully in Committee. A number of amendments suggest all sorts of other exemptions, some defined, some less defined. Some call for the Government to define who the vulnerable are; that is an interesting concept. The risk is that the Committee could make the work incentive situation worse with a well meaning intent to try to protect broad categories of people who obviously deserve our consideration.

I throw that into the discussion because it will be an interesting tension given that we are also told to take it as read—like my noble friend Lord Tope, I accept the position of my Government—that pensioners are to be excluded. However, as my noble friend Lord Greaves and others have said, that of course narrows the ground. In my authority, too, pensioners make up around 44% of claimants and 43% of council tax benefit spending.

I am not going to claim any credit of prior speaking on this. The point is well made; I made it at Second Reading. However, I hope that as we go forward to look at the amendments in detail we will remember that some well meaning amendments might have the perverse effect of making the work incentive situation even worse. I hope that we can now go on to look at the matters in detail.

[Lord Beecham]

I suppose that we must be grateful to the noble Lord, Lord True, for the part he played in mitigating, to use the phrase of the day, some of the worst consequences of the poll tax. However, he should be gently reminded that an element of the poll tax remains within the present system. That was a most astute piece of reconstruction of the poll tax, somewhat akin to the three-card trick. I do not blame the noble Lord, Lord True, for that; I think that the Secretary of State of the day, the noble Lord, Lord Heseltine, trod the path rather carefully. It certainly was an improvement but, as we all know, it leaves us even now with a system of local taxation more regressive than it should be.

However, we are not really debating the poll tax; we are debating these proposals. It seems to me that my noble friend Lady Hollis’s amendments are designed to have precisely that mitigating effect that the noble Lord, Lord Tope, cannot discern but which the noble Lord, Lord True, rightly encourages us to find. That is because of the link to universal credit. However, frankly, we should stop talking about a 10% cut. It is much more likely to be a higher figure anyway. The £500 million is widely regarded as a substantial underestimate. Then, as implied or explicitly mentioned by other noble Lords this afternoon and at Second Reading, the impact of the exemption of pensioners from this—which I support, contrary, once again, to the ministrations of the Local Government Association—will obviously increase the burden on everybody else. We have heard the noble Lord, Lord Greaves, refer to an 18% figure. The impact assessment talks of a 16% figure. It is interesting to look at what the impact assessment says about the whole issue. Paragraph 34 of the recently updated impact assessment reads:

“Although the net impact of the policy is simply a transfer from council tax payers to Government”—

a phrase worth thinking about—

“(and therefore a reduction in demands on general taxation, by bringing decisions about local tax reliefs closer to those responsible for raising local taxation), there will be some groups who see a reduction in their income. These groups may be: working age council tax benefit claimants”,

as already referred to,

“council tax payers or any recipients of local services that may be reduced in order to meet any funding shortfall”.

Again, this is implicit but is worth making explicit. Then it says:

“However, an accurate analysis of the reduction in income of these groups is not possible since the design of any council tax support scheme for working age people will be at the discretion of local authorities. In addition, the means by which a local authority recovers any shortfall in funding will be for themselves to decide”.

Once again, the buck is passed but accompanying support is not there.