Examination of witnesses (Questions 347-359)|
TUESDAY 13 FEBRUARY 2001
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
(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
Mrs Dunwoody: I think that is quite helpful.
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
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 watermuch
higher than under the rateable value system.
(Mr Spence) Certainly from the evidence we have drawnand
I am quite happy to provide further evidence on thisin
terms of proportion of income, the less well-off pay a greater
proportion of their income on water charges than the well-off
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
(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.
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