Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 347-359)



Mrs Dunwoody

  347. Good morning, gentlemen. May I welcome you to the Committee and say that we are going to require plenty of voice from all of you because this room absorbs sound, but I am quite convinced, with your background both in the trade union movement and with consumers, that you are all capable of making yourselves heard. Would any of you wish to start with any general remarks, or may we go straight to questions?

  (Mr Spence) I would like to make three points which cover the crucial elements of the evidence we have submitted. First, that water charges based on 1973 rateable values are no longer credible or understood by the public; we believe that to be fact. The current system of water metering takes no account of ability to pay which is an important consideration for government, and the draft Bill provides an opportunity to put the issue of water charging on a fair, progressive basis, and council tax bands provide the machinery to do that in a consistent way across water companies. These points are at the heart of our evidence and are the focus of our response.

  348. Can I ask what evidence you have of that? It is all very well saying that it is a fact that people do not find this credible any more, but what evidence do you have of that?
  (Mr Spence) Our members work in the valuation office agency which has a responsibility for maintaining council tax bands and non-domestic rating systems and they often get queries from the public about what is the basis for water charging as much as questions about the council tax bands and non-domestic rating systems. It is very difficult based on a system that was last looked at in 1973 to be able to respond with any credibility to that, so the evidence from our membership is that it is not a defensible or credible system any more: it requires people to understand it and relate it to the world today.

  349. If it is anecdotal, are you talking about a consistent pattern right the way across all the different offices in which your members work?
  (Mr Spence) It is a general response. Before submitting evidence, we tested the opinions of our members and that was a consistent reaction across the 84 officers we have up and down the country.

  Mrs Dunwoody: I think that is quite helpful.

Mr Blunt

  350. You still have not produced any evidence other than the fact that this is what your members think. Could you tell me why redistribution of wealth, which it would be through the system you are suggesting on progressive charging under council tax bands, should happen through charging for water rather than a direct council tax and benefit system?
  (Mr Spence) The first point is that everyone recognises everyone needs access to water; it is socially unacceptable that people would not have access to water in today's society. That then leads on to the question of how it should be charged for. There is a general acceptance that there should be some recognition of ability to pay, and one of the problems in the current arrangement with water metering is that we have people who are on unmetered charging subsidising people on metered charging systems which effectively means, because it tends to be the more well-off people on metered charging systems, that the less well-off are subsidising those people. If one were to say that the less well-off should be relieved by a tax of benefit system, what we are then saying is the taxpayer should relieve the less well-off in order that they can have the money to subsidise the better off who use water meters, and that seems inconsistent to us in any sense of social fairness.

  351. But the subsidy could be argued precisely the other way round, because the people who have to have meters are those who have swimming pools and sprinkler systems for their gardens who are at the top end of the income bracket, and they of course will be paying a very substantial charge for their water—much higher than under the rateable value system.
  (Mr Spence) Certainly from the evidence we have drawn—and I am quite happy to provide further evidence on this—in terms of proportion of income, the less well-off pay a greater proportion of their income on water charges than the well-off do.

  352. But that is inevitable?
  (Mr Spence) There is a gap of the less well-off paying something like 2.4 per cent of their income and the better-off paying 0.9 per cent.

  353. Of course, because the less well-off pay rather more for a loaf of bread than the well-off do: that is self-evident, but if we are to make decisions about redistribution of the wealth, that should be transparent through the tax and benefit system so people can see the transfers and the redistribution that is taking place, rather than being hidden within the system of water-charging which, inevitably, will be capricious. It is capricious if it is on 1973 rateable values; there will also be anomalies if you move to council tax bands.
  (Mr Palmer) Firstly, just as a practical argument, currently water is charged on ability to pay so one's starting position is different for water than for other utilities. Secondly, if you have rebates through the tax and benefits system, they are going to go to a much smaller number of people than the current number of people who benefit from the ability to pay provisions in the rateable value scheme.

  354. If we are going to move, what further legislation is required given that there was a Bill only in the last session?
  (Mr Palmer) The key starting point is to encourage the water companies to come up with tariffs which include council tax provision. At the moment, whilst they have a theoretical right to propose such tariffs, they are not encouraged to.

  355. I know what the present position is but, in your assessment of this, can this be done under existing legislation by regulation, or will it have to be done by new primary legislation, and do you think that is realistic given we had a Bill in the last session?
  (Mr Harrop) I believe provisions under local government legislation need to be changed, although I am not a lawyer, but that would be a relatively straightforward procedure and could be inserted as a section in this Bill. It would not require a large tranche of legislation.

Mr Donohoe

  356. Who would be the substantial losers if the basis of water charging were to be moved to the band system?
  (Mr Spence) It depends on how that is applied. There would be fairly significant effects and losers if you just transferred the council tax bands as they stand across and applied them, but you do not have necessarily to utilise the same ratio between the bands that there are for council tax in terms of establishing water tariffs. This is an area where various options have been modelled in research we have commissioned that demonstrate that you can alter the ratio of the council tax payments to each other in order to establish a system that reduces the incidence effect on, particularly, the lower council tax bands where the ability to pay is an issue.

  357. How could this be avoided?
  (Mr Palmer) We have written a report which analyses different charging structures with the aim of finding scenarios which minimise the winners and losers. What you find is that you have a number of winners and losers in each council tax band primarily because the revaluations from 1973 to council tax bands of the current day can differ substantially between houses.

  358. But you cannot expect, can you, to maintain a system that in itself archaic?
  (Mr Palmer) No. What we are trying to do is modernise the system whilst retaining an ability to pay. That is what we are trying to argue, on the unmeasured tariff.

  359. By virtue of your argument you are almost suggesting that the council tax itself is unfair?
  (Mr Palmer) It has an element of progressivity which is a lot less than the rateable values are. Our proposals are on the wider front, to widen the ratios of payments between council tax bands.

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