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Council Tax

Volume 814: debated on Thursday 22 July 2021


Asked by

To ask Her Majesty’s Government what plans they have, if any, to introduce higher rate bands for Council Tax.

I recognise my noble friend’s interest in this issue, but the Government do not have any plans to introduce higher bands for council tax. Many people living in high-value properties are on low incomes and may have lived in their homes for a long time. Higher bands risk penalising such people, including pensioners, who have seen their homes increase in value. They could face a substantial tax rise without having the income to pay the higher bill.

Does my noble friend agree that it would be odd to calculate today’s income tax on what people earned 30 years ago, but this is the basis on which we fund local government? The council tax is out of date, arbitrary and regressive. While the right policy would be revaluation, ducked for too long by successive Governments, would it not be right in the meantime to take the higher band and, without breaking any manifesto commitments, introduce two extra bands to bring in extra revenue from those with more valuable assets?

My noble friend’s suggestion has some merit. Even a limited revaluation would be costly and would yield significant extra revenue only in those parts of the country where house prices are the highest, given that council tax income is not redistributed. It would also leave council tax payers in a rather odd, and arguably less fair, situation where some were paying their tax based on 1991 values while others were doing so based on prices in the present day.

According to the citizens advice bureau, council tax is the most common debt problem faced by families in Britain, with 86,000 people in England struggling to keep up with payments. The current system heavily favours the south-east and disproportionately disadvantages the poor. As part of the levelling up agenda, what consideration have Her Majesty’s Government given to a land value tax to address these inequalities?

My Lords, the Government do not have any plans to introduce such a land value tax, but they are committed to supporting those on low incomes, including by increasing the living wage and by spending £111 billion on welfare support for people of working age in 2020-21.

My Lords, the council tax was introduced as a result of the abolition of the community charge, which was introduced as a result of the discredited rates system. One reason why the rates system became so discredited was that there was no revaluation. There has been no revaluation of council tax for 30 years. Are we going to find ourselves in the same position in another five years if we do not act soon?

I note my noble friend’s call for a council tax revaluation. As I said in my previous answer, a full revaluation would be costly. The council tax bands are well understood by residents and provide a stable income for councils, so at this stage we have no plans for a full revaluation.

My Lords, how is it possible for a £54 million luxury house in London’s Mayfair to have a lower council tax than a former council house on Windebrowe Avenue in Keswick in Cumbria and almost the same council tax as an £80,000 house on Moorclose Road in Workington, both in my former constituency? Is it not the simple truth that the whole council tax system is now discredited? It is unfair, it penalises much of the north, it favours London and much of the south, and it is now in urgent need of reform.

My Lords, I am interested to hear the specific examples given, but we must recognise that, for local authority funding, council tax represents only a proportion of the income received. That is why we try to equalise through measures such as the grant system, which recognises the index of multiple deprivation as one of the reasons in how you provide grant—

Yes, it does. On that basis, grant enables areas with lower council tax bases to receive 16% more in core spending power.

I recognise the point made by the noble Lord about the disparity in valuations between the north and the south, but it is a system that works well to develop the funding that councils need at the moment.

My Lords, I refer the House to my registered interests. What consideration will the Government give to the potential benefit of a proportional property tax, as recommended by the Housing, Communities and Local Government Committee to replace council tax and business rates in its report published earlier this week?

My Lords, we have looked at putting on hold the reform of the local government finance system because of the pandemic, and further reforms will be potentially be brought forward as a result of the spending review. I note the idea that the noble Lord raises.

My Lords, I yield to no one in my passionate belief that the state should tax the citizens less, but domestic real estate is by international standards undertaxed. It would not be that expensive to restrict a revaluation to council tax band H properties —perhaps those over a certain current market value. We should then look at empty properties. There are currently 30,000 empty properties in London alone, with a value of £15 billion. They should attract a surtax, along with overseas-owned properties.

My Lords, I note that my noble friend again calls for a new, higher band of property. If that higher band were based on 1991 values, the Valuation Office Agency would need to revalue all properties in the current top band. That would certainly be cheaper than a full revaluation.

I refer noble Lords to my registered interests. The impact of the pandemic has led to the worst recession of any major economy. With the virus still not under control, local councillors will again be forced to raise council tax this year to protect vital local services, just when many families are struggling to make ends meet. Will the Government remove the necessity for planned council tax rises by giving councils the resources they need and stand by their pledge, so far not honoured, to do whatever is necessary to support councils?

My Lords, I do not recognise the picture that the noble Baroness paints. Throughout the pandemic, we have provided considerable additional funding for local authorities. Local authorities received £3.8 billion in social care grant funding through the social care grant and the improved better care fund. We continue to support councils throughout this very difficult period.

Hardly a week goes by without a news story about someone’s new basement causing problems to their neighbours. Should there not be an automatic revaluation when such improvements are carried out and higher bands introduced to cope with massively inflated property values, or do we need a new system altogether, related to the ability to pay?

My Lords, I am delighted that all these ideas are being floated on how we should support and organise the funding of local government. As I said, the Government have put that on hold, and we are looking at bringing forward measures as part of the spending review.

My Lords, there is a clear rationale for introducing higher-rate council tax bands. The gap between the top and bottom bands is ludicrously small compared with the value of the premises. I ask the Government to consider reviewing the whole territory of property taxation and introducing a new, fairer tax covering property—commercial and residential.

I thank my noble friend. He joins the chorus of people calling for new bands and a reform of the council tax system, but, as I have said, we do not intend to bring in new bands. Plans around local government finance reform have been put on hold and will be carried forward as part of the spending review.

My Lords, does the Minister not realise that the disparities in council tax create a lot of the poverty that he referred to in his earlier statement? Is he aware that the maximum level in Westminster is £1,655? In every district in Cumbria, the average is in excess of £4,000. How can that be fair?

My Lords, I point out that Westminster has a low-tax policy and sets probably the lowest council tax in the country, and it should be commended for being a low-tax authority. Certain authorities know how to squeeze every penny in every pound, and I commend Westminster on being able to do that.