Examination of Witnesses (Questions 123-139)
MAYOR SIR
ROBIN WALES,
CLLR STEPHEN
HOUGHTON AND
CLLR KEN
THORNBER, CBE
MONDAY 8 JULY 2002
Chairman
123. Could I ask you to identify yourselves
for the record, please?
(Sir Robin Wales) I am Robin Wales, I
am Chair of the Association of London Government and Mayor of
Newham.
(Cllr Houghton) I am Stephen Houghton and I am Chair
of SIGOMA.
(Cllr Thornber) I am Ken Thornber, Vice Chairman of
the County Councils Network.
124. Right. Do any of you want to say anything
by way of introduction or are you happy for us to go straight
to questions?
(Cllr Thornber) I think, Sir, just a general observation.
I see this Bill as part of a movement that has taken place for
20 to 25 years, which is the amount of time I have served on my
county council. I think it is a question of strong local government
versus Central Government prescription. I do believe, Sir, that
there has been an erosion in local government, of its powers and
its abilities, and that has been reflected in the ballot box.
Mr Betts
125. Do you support the proposals to allow the
Secretary of State to vary the number of council tax bands?
(Sir Robin Wales) The answer to that would be yes
but it is a complex issue, the question of rebanding and how the
money is divided across regions. I can see the argument for extending
the number of bands, I think there are so many issues that will
not address. Primarily from a London perspective, clearly the
high value of property is likely to push a lot into higher bands
when there is revaluation and that gives us grave concerns because,
particularly for people who are renting property, for example,
which I think is 41 per cent in London, they will not get any
benefit from higher values and clearly we are very worried about
them. I think in principle yes, but it does not address all the
issues but then you would not expect it to.
(Cllr Houghton) A similar answer, we would support—
Chairman: If you agree leave it at that. If
you disagree please come in.
Mr Betts
126. So there is hope for it but what will the
effect be on the residents in the areas that you represent? Presumably
there will be slight differences in the effect on different parts
of the country.
(Cllr Houghton) In terms of our area, clearly as far
as Band A goes, there are far too many properties in our view
within Band A. Within Band G it is a very broad band and therefore
changes within housing and house prices do not impact in terms
of council tax and then, of course, at the very top end we have
Band H so any improvement across there ought to be an improvement
in terms of recognising people's ability to pay. Obviously we
want to see the exemplifications and how that is going to work
but as a general principle it will move us from being as crude,
if that is the right word, as the system is currently.
(Cllr Thornber) Yes. The top end has a huge range
of values within it, open ended in fact. So one would like to
see one perhaps two more bands. Of course in the South East house
prices are rising dramatically, perhaps a little more than is
the norm so I think there is, as it were, an exemplification of
the north-south divide which could be inherent in these band revaluations.
Chris Grayling: Can I pick up on that point.
Is there not a danger that Government will take a simplistic view
and say "Well, house prices in the South East are high and
therefore people can afford to pay a lot and house prices in the
North are low and therefore we will have an adjustment of bands
which reflects those differences" whereas in reality, for
example, a primary school head teacher living in the South East
will have much more difficulty paying extra tax than a primary
school head teacher living in the
where the cost of living is less.
Chairman
127. Good try on behalf of Surrey.
(Cllr Thornber) That is certainly true, Chairman.
Mr Betts
128. As well as the proposal to have more band
rates there is the idea of revaluation as well. Have you a concern
about how that might impact on the people in the areas you represent?
(Sir Robin Wales) Extending the bands is very useful
but there is the real issue about the high value of housing in
London. I believe that it is desirable that there is a narrowing
of the difference in property prices between the north and the
south. If this were the case it would have a knock on effect on
the impact of revaluation. Clearly it is a big issue. As I said
earlier, 41 per cent of our householders live in rented accommodation
in London, they do not get the benefit of higher values in property.
You might argue well if you have got the benefit at least of the
higher capital asset then you can maybe have a quid pro quo,
with 41 per cent rented they do not get that benefit. Clearly
if house prices go up, that is a big problem also in terms of
social housing where the clear value of social housing in London
is rising rapidly as well and those are people who cannot necessarily
afford to pay so there is a big issue there. Wages are higher
in London, okay so there is a balance to be struck. It is one
of the things which needs to be discussed, I think, and thought
through. Clearly there has to be a revaluation, I think we would
accept that, because you cannot stick on a valuation that is years
and years out of date. We would not argue about having a revaluation,
what we would say is that it needs a lot of discussion.
129. Are your concerns about the effect on the
Revenue Support Grant because if all you are doing is raising
a given amount of money in the borough and all the house prices
are going up—
(Sir Robin Wales) What will happen is by having an
increase in the number of high value properties the Government
will adjust the Revenue Support Grant then so we will have to
meet that with an increase in council tax in areas which have
got large numbers of high value property. So the effect will be
that council tax will rise for no change in services simply because
London property prices have gone up and things have moved into
higher banding. We are keen to engage in a discussion. I have
to say I think this is something which needs a discussion and,
like a number of things in the Bill, it needs further discussion
with the Government and arguments on all the different sides need
to be picked up. I have some understanding for people in the North
who have lower property prices saying "Hang on a minute,
why should we be paying as much, why should there not be something
in this". I think it is something we need to talk about but
certainly there is a concern that all that will happen is we will
push up council tax and a lot of people in London will be unable
to get it, we are eager that the government undertake some research
work into what the effects of revaluation will be.
Chairman
130. Should it be done quicker?
(Sir Robin Wales) No, I think it is a very helpful
timetable because it gives us a chance to discuss these issues.
These are not simple issues. Like many issues in local government
there is justice on all sides and there is a case to be noted,
and actually I think the London case is a better case for debate
and we will have the debate. I think it is very helpful that we
have taken some time on that and I think the Government's timetable
is reasonable.
Mr O'Brien
131. In the submission from Westminster City
Council they say "The City Council has long argued that the
success of the council tax depends on it being seen as a fair
tax. For this to be achieved, it must be kept up to date."
On the question of the revaluation of council tax, what will be
the effect of council tax revaluation on council tax payers once
the area cost adjustment is taken into account?
(Cllr Houghton) From our perspective this is partly
related to the previous question. We believe that there should
be revaluation because the funds local authorities get or the
amount of Revenue Support Grant they get to some degree is determined
by how much it is judged could be raised locally and if we are
saying that house prices are the basis of people's ability to
pay, which is what the system does, then you need a revaluation
because clearly things have moved on in the last 12 years. Therefore,
the sooner that is done the better.
Chris Grayling
132. But house prices cannot reflect people's
ability to pay because they are unrealisable capital.
(Cllr Houghton) That is what the system says. That
is the system we have currently got, so if we have it then we
will have a system that more adequately reflects the current position.
If people are struggling in terms of their ability to pay then
obviously we have got to talk about the benefit system as well
for people on low incomes who have real problems with that.
Mr O'Brien
133. How do you see the question of the area
cost adjustment impacting? Has this been taken into account in
the revaluation and how do you see it impacting upon your council
tax payments?
(Sir Robin Wales) The area cost adjustment is clearly
something that is currently under debate and something which I
think we are going to be engaged in some discussion on. It is
an attempt to reflect the fact that London is a more expensive
place. The concern we have with that is reflecting both the needs,
the deprivation and extra costs.
134. Do you think that should be based on the
actual expenditure or assumed expenditure, the area cost adjustment?
(Sir Robin Wales) I actually think the exemplifications
the Government has come out with today are reasonable and based
on a reasonable assumption. I think all the relevant costs, the
general labour market, are worth looking at and that is the right
approach. I generally think the exemplifications today seem to
be interesting ones that we want to discuss. If you like, if the
Government is prepared to find a way of subsidising when the revaluation
comes in and will then say "we will add the area cost adjustment",
that would be a way of protecting people in terms of high property
prices, but there are also issues around things like looking at
the regional issue and carrying it out on the basis of regional
earning. There are a number of different options that we can follow
with the revaluation.
Chairman
135. What would be the advantage of a regional
set of council tax bands?
(Sir Robin Wales) If we did it today, if we revalued
today with London being in the position it is in—I think
there is evidence that maybe, as the last time there was a property
boom, it moves out of London, it just takes a bit longer—what
would happen is that when the Government comes to calculate how
much grant it is giving it would assume a certain take from London
authorities with the higher banding and that would mean for a
straightforward increase in council tax there would be no change
in the services people are getting. If you did it regionally and
said "we will look at the regional set-up and then within
that regional set-up we will allocate the money based on council
tax" then you have got a possible way forward. I think it
does need some discussion, that is why I think 2005 is a reasonable
date.
Mr O'Brien
136. Do you agree with the regional calculation,
Councillor Thornber?
(Cllr Thornber) Yes, I do because I think it would
be seen to be fairer and I think it would have to take account
of the regional differences.
Chairman
137. So what would happen if you have got a
London one and then just outside Surrey, would you not have a
problem at the transition?
(Cllr Thornber) We would certainly, yes. I would like
to add that whatever happens in terms of the proposed changes
to revaluation, there has to be a careful phasing in in terms
of transitional relief because otherwise—
(Cllr Houghton) Obviously the SSA forms part of the
local government expenditure or support for local government,
so the greater the figure in terms of the SSA, the less the other
forms of revenue support. We recognise that there are costs in
London in particular but also the South East. All we are asking
for is that that SSA should reflect the real and actual costs
as far as they possibly can of that area and not just be based
on assumptions. We had the position this year, which I think people
are familiar with, where something like 350 merchant bankers and
city financiers were added late into the calculation which took
something like 78 million from SIGOMA authorities. It is things
like that which discredit the system and clearly cause angst amongst
our members. What we are saying is, yes, there needs to be a recognition
of the extra cost but let us have that clear and transparent and
be a recognition of the cost that is there. If the SSA simply
continues to grow on the basis that it does now that is less for
other people, less grant, and potentially an impact on council
tax.
Mr O'Brien: Can I just put to you that Clause
81 in the Bill suggests amendments to the transitional arrangements
that were introduced in 1992. Are the proposals for the transitional
arrangements adequate?
Chairman: Come on, a thumbs up or a thumbs down,
very quickly.
Mr O'Brien
138. Clause 81 allows council tax payments in
the transitional period to be either higher or lower than their
long run value.
(Cllr Houghton) Adequate.
(Cllr Thornber) The jury is out.
Christine Russell
139. It is anticipated that there will be provisions
in the Bill for council tax discounts and exemptions. What are
your views on that? What issues would you like to see taken account
of? In particular, I think we would like to know your views on
the issue about charging, or rather charging full council tax
on empty properties and second homes.
(Sir Robin Wales) I think the LGA's position is that
they support that and we support that fully because think it would
be an appropriate thing to do. We are a little disappointed that
it is not there. We would certainly support the LGA on that.
(Cllr Houghton) A similar position.
(Cllr Thornber) I would agree.
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