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Standing Committee A
Tuesday 11 February 2003
[Mr. Derek Conway in the Chair]
Power to change number of valuation bands
Amendment proposed [this day]: No. 163, in
Question again proposed, That the amendment be made.
The Chairman: I remind the Committee that with this we are discussing amendment No. 147, in
clause 78, page 39, line 18, at end add—
'(4B) The power under section (4)(a) above includes power to make provision for different proportions for different areas of England and Wales.
(4C) The power under section (4)(b) above includes power to make provision for different valuation bands for different areas of England and Wales.'.]
Dr. John Pugh (Southport): Previously, I think that I stole the thunder of the hon. Member for Bedford (Mr. Hall), so I shall be relatively brief and cue him in. I do not want to make unnecessary enemies and I need every friend that I can get in this place.
I began by pointing out that the proposal is not about increasing the tax take, as it deals with a review of the distribution of the burden. There is a fair case for saying that that needs doing, and that house price inflation and the widening gap in house prices between regions have created problems for everybody in justifying the fairness of the council tax regime in the first place. I suppose that it represents a move to secure a fair distribution of the tax burden.
Given that our tax system is built around property values, I can understand the Under-Secretary finding that extraordinarily difficult, and I would not be surprised if, at times, he finds it tempting to consider the Liberal Democrat proposal for local income tax. That said, in the last sitting, I was surprised to hear the hon. Member for Cotswold (Mr. Clifton-Brown) say that the council tax is working well. That is not the perception where I come from, and we find increasingly that widows in modest houses pay more or less the same charges as stockbrokers. Given that stockbrokers are not doing so well, perhaps I should refer to footballers.
Does the Under-Secretary agree that some people, particularly those on fixed incomes who live in modest houses, have something to gain in the banding review? I am not sure whether he would go this far, but, equally, he may want to offer reassurance to people in areas where property values have stayed behind the national average that they have nothing to lose in these
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circumstances, should there be an increase in respect of the property bands, and nothing to fear from a new band structure.
There are still concerns, however, and some can be teased out by discussing this probing amendment. May I sketch two extreme and very different cases? In Liverpool, the vast majority of property falls in band A. It could reasonably be argued that band A covers a range of individuals with different incomes and capacity to pay. Given that the council tax in Liverpool is not to be sneezed at—its authority was the first to break the £1,000 barrier—it could be argued that a little regional and local sensitivity is a necessity. [Interruption.] It was under Liberal Democrat administration, but that was coincidental. It did not happen because of the Liberal Democrats.
Equally, there is the issue of London properties. We are all aware of the fact that a large number of people in London have property with a high capital value, but a low income. One wonders how a national system could cope with that. Essentially, the amendment makes a case for regional flexibility. At any rate, attention should be paid to the problems that I have sketched. I am anxious for the Under-Secretary to confirm that he is at any rate aware of those problems and I hope that they can be taken on board during consideration of the legislation.
I want the Minister to confirm three things: first, that the proposal has nothing to do with increasing the take from council tax; secondly, that it will provide a mechanism to resolve clear anomalies between people with widely different incomes and properties who pay more or less the same council tax; and, thirdly, that areas with property value increases that are lower than average have the least to fear from the proposal.
Mr. Patrick Hall (Bedford): I hope that amendment No. 147, which stands in my name, adds to the exciting debate that we were having before lunch on the council tax. It addresses important issues relating to council tax, which I believe impact strongly on all our constituents. They will do so particularly after revaluation. Regular revaluation is an essential reform of the council tax system and a welcome proposal. My amendment would strengthen the opportunity for reform.
I am aware that the Government can change the price range of bands and the payment differentials separating those under the Local Government Finance Act 1992. Clause 78, through the addition of proposed new subsection (4A), will sensibly also allow the Government to change the number of tax bands beyond the existing eight.
My amendment would provide the Government with additional powers: first, the ability to introduce different bands in different parts of the country and, secondly, as an alternative approach, the ability to introduce regional variations to payment proportions. The reasoning behind the proposal is the need to address problems that have always been inherent to the council tax, but which have become far worse since 1993. As was said before lunch, there is the key question of the regressive nature of the council tax. The gap between the bottom and the top—between
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bands A and H—is too narrow and the payment proportions related to those bands are also too narrow.
Under the current system, people who live in a band H property pay only three times more than those who live in a band A property, even though the price difference between those bands is at least eightfold. That point was made this morning.
Mr. Desmond Swayne (New Forest, West): I do not understand what the problem is. Why is that a problem, given that the consumption of services, for which that is the tax payable, will not differ by nearly that amount?
Mr. Hall: Those are precisely the arguments that the Conservatives advanced with regard to the poll tax. Now we hear them again with regard to the council tax. The idea is not a good one because it is not fair. Broadly speaking, taxation should have some relationship to a person's ability to pay.
I must refer to the regressive nature of the council tax and the threefold difference between top and bottom as well as the eightfold difference in price between top and bottom. In Bedford and Kempston in my constituency, house prices range between about £55,000 and £450,000, but that is not the case nationally. One can point to house prices ranging between £20,000 and £500,000, which is a twenty-fivefold difference.
Mr. Swayne: There is not the correlation that the hon. Gentleman refers to between living in an expensive house and an ability to pay. Indeed, will he acknowledge that the relationship can be inverse? Those living in expensive houses tend to have higher mortgages and, therefore, lower disposable incomes.
Mr. Hall: It might be in the interest of the Conservative party not to develop that theme too well, as it does not bear careful examination. Of course there are examples of people in an expensive house who can barely afford it, but, generally speaking, surely we all live in the real world. The hon. Gentleman's postulation is just not reality in most people's experience.
Mr. Geoffrey Clifton-Brown (Cotswold): The hon. Gentleman seems to be arguing for a property wealth tax. What, in an ideal world, would be the correlation between the lowest band and the highest? Would it be a direct correlation between the property with the lowest value in the country—probably £1—and that with the highest value that one could think of, which may be many hundreds of millions of pounds?
Mr. Hall: The amendment does not propose an entirely new tax system, and you might rule me out of order, Mr. Conway, if I attempted to do so on the back of speaking to it. In support of the amendment, I am saying that, broadly speaking, we should seek to obtain a fairer rather than a less fair tax system so that it has public support and is more likely to succeed. That is the important point. The council tax is moving further from the basis on which it started.
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Mr. Clifton-Brown: The hon. Gentleman is courteous in giving way. He is now saying that his amendment would introduce a fairer system, but he has not said what, in his view, that fairer system is. The Committee might want to vote for his amendment and, although it is improbable, I might want to urge my hon. Friends to vote for it, so will he give us more detail as to his thinking?
Mr. Hall: The hon. Gentleman clearly was not listening when I began my remarks and explained the amendment's purpose, which is to give the Government the opportunity to introduce variations in how council tax is levied so that it is fairer and more efficient in its application. I have not completed my remarks by any means, so I want to make progress and speak to the amendment, which you might think important, Mr. Conway.
Nationally, the relationship between bands A and H is even more distant than was intended in 1993. In single council tax areas and single council areas, the range can indeed be large—not as large as the national range, but considerable. For example, the difference between bands A and H is thirteenfold in Milton Keynes and thirtyfold in Hull. Other examples illustrate the inherent unfairness in the system, which benefits the well off at the expense of middle and lower-income families. It was always intended to be so, was it not?