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Council Tax

Volume 814: debated on Wednesday 15 September 2021


Asked by

My Lords, council tax is collected and retained by local authorities, which set it within the national framework. Local authorities best understand the needs of their local area, though any increases above the referendum principles require the support of voters. Council tax is well understood by ratepayers. The Government have no plans for council tax reform, which would be complex and time-consuming to undertake and would create confusion for ratepayers.

My Lords, the national framework is flawed. How can a band C house in Cumbria, with council taxes of over £1,600 per year, pay more than a £54 million band H luxury house in London’s Mayfair? Surely such discrepancies in the treatment of houses in the north serve only to further reveal how utterly absurd the whole council tax system has become. Is not the concept of a red wall defending the north no more than a myth, confirmed by the refusal by the Government to reform council tax and its huge inconsistencies?

The Government recognise that authorities have differing abilities to generate income from council tax, and the settlement methodology takes these into account when allocating funding. The Government have used grant funding to equalise against the adult social care precept since its introduction. Funding baselines for every authority, whether up north or down south, are determined by an assessment of the relative needs of areas, including measures of deprivation. Indeed, councils in the most deprived areas of the country receive 16% more in core spending power than in the least deprived areas.

My Lords, throughout Cumbria, whether in Barrow, Carlisle, Kendal or the many households in the villages in between, householders feel aggrieved that because of the national framework they are forced to pay more council tax than luxury houses in London. Even the Government must accept that it is grossly unfair. When do they intend to take one small step towards alleviating the problem and help levelling up in Britain?

I am sure the noble Lord is aware of the support that is given. Following the spending review in 2020, local authorities’ core spending power is estimated to have increased by 4.6% in cash terms in 2021-22. This follows the largest real-terms increase in core spending power for a decade at the spending review in 2019. Local authorities, including the ones he mentioned, will have access to £2.2 billion of additional funding in 2021-22 to invest in public services.

My Lords, there are 26 million houses subject to council tax in the UK but only 160,000 are in band H, so a sensible small step might be that just council houses in band H are revalued. As 65,000 of those are in London, it would enhance our reputation for levelling up. Will the Minister agree to a meeting with the Treasury to progress this idea?

I can certainly pass on that request to the Treasury—that is no problem at all—but I reiterate that there are no plans to review or revalue council tax. It is important to say that the council tax system is understood by people. A recent poll demonstrated that there is no move from the public to change it.

With 60%, or 60p in the pound, of local authority council tax spent on social support, that is an enormous amount of pressure on local authorities. When we talk about reforming local authorities, can we take into account that enormous pressure, which is growing all the time, and the wonderful work that our local authorities have done over the Covid-19 period?

I certainly recognise the wonderful work done. Each council provides council tax reduction schemes for working-age taxpayers. Councils have choices, as they should, about how to design their scheme, reflecting local circumstances. There is a variation in how councils deliver these schemes. For example, some councils offer 100% reductions on their criteria, while others request a contribution from everyone irrespective of income and savings.

My Lords, earlier this year the Government hiked the amount by which local authorities can increase council tax bills without holding a referendum. This hit family incomes at a time when the Treasury should have been doing everything possible to encourage local spending and stimulate economic growth. With the autumn Budget and the 2021 spending review due shortly, does the Treasury accept the need to properly fund local government rather than placing an increasing burden on working people?

I certainly cannot second-guess what the spending review would have in it, but I reiterate that local authorities have the flexibility to increase council tax bills in 2021-22 by up to 2%, as the noble Lord will know, without a referendum, and up to 3% for the adult social care precept for social care authorities. In addition, the police and crime commissioners can raise their bills by £15 per person per year.

Bearing in mind the Government’s exhortations to local authorities to

“exhaust other options before going to court”

to recover council tax arrears, has my noble friend any comments on the fact that more and more councils are still pursuing unpaid sums through court action, even after only one missed payment? Surely we need new and realistic approaches instead to recover those arrears.

My noble friend makes a very important point about unpaid council tax bills. It is important that everyone takes steps to pay their bill given its importance to delivering local services, on which we all rely. On the other hand, councils should be sympathetic to those in difficulties and proportionate in taking any reinforcement action. If we look at 2020-21, for example, councils had collected £31.7 billion with an in-year collection rate of 95.7%, which is a reduction of 1.2 percentage points on the previous year.

My Lords, the Prime Minister’s sticking plaster for the social care crisis is asking a great deal of cash-strapped councils. As a result of the proposals, they face a larger national insurance bill for their staff despite receiving less grant from central government. Does the Treasury intend to compensate councils for this rise or does it expect that councils will need to raise council tax further still to cover these increased costs? If it is the latter, when combined with personal national insurance contributions, what is the true additional cost to be faced by working people?

I recognise the experience of the noble Baroness in this area, but I reassure her and the House that the Government will ensure that local authorities have access to sustainable funding for core budgets at the spending review. We expect that demographic and unit cost pressures will be met through council tax, social care precepts and long-term efficiencies. The overall level of local government funding, including council tax and the social care precept, will be determined in the round at the spending review in the normal way.

My Lords, when I raised this issue in July and asked if the Government would introduce additional bands to mitigate what has become an arbitrary, regressive and unfair tax, the Minister said that the suggestion had merit. But he then rejected it, even though three Conservative noble Lords broadly supported the principle. Can I add my weight to what my noble friend Lord Leigh said? As the Government look for fairer ways of funding local government and social care, might the Treasury not have another look at this?

I recognise my noble friend’s interest on this issue and I reassure him that his strong comments will be fed back to the department. However, he will know what I am about to say: creating new bands would also require a revaluation, both to determine which properties might be captured by those bands and to ensure a common valuation approach to all properties. Given that council tax income is not redistributed, new bands for the highest value properties would yield little extra money in areas where house prices are lower and demand for services may be higher.

My Lords, the noble Lord, Lord Kirkhope of Harrogate, referred to the already high levels of council tax arrears. Have the Government made an assessment of what impact the £20 cut to universal credit is going to make on increasing those levels of arrears?