Examination of Witnesses (Questions 240-259)
11 MAY 2004
Q240 Christine Russell: Maybe this is
a question more for Mr Bilsland. Have you done your sums in Somerset
on the likely effect on house prices if the council tax was abolished?
Mr Bilsland: I do not think we
have seen any evidence that there is going to be an automatic
effect on house prices anyway if council tax was abolished. The
theory is that a tax on property will depress house prices, but,
as we have seen with interest rates and mortgages, house prices
are quite insensitive to these sorts of things and therefore we
have not done that. What we have done research on is what the
impact will be of council tax revaluations, and we do not like
the look of that, which is another reason why the council is against
Q241 Mr Sanders: Coming on to that, the
South West has seen house prices rise far higher than the national
average, and the revaluation, which is supposed take place by
2007, will have a significant impact on the council tax bandings
in the South West, probably with many people seeing themselves
jump up at least a band. The protests that we have seen last year
to the Devon rise and the Somerset rise, and this year, are probably
nothing compared with the protest we will see as a consequence
of that revaluation. In that sense, given the South West perspective
on this, is council tax actually sustainable after the revaluation?
Mr Bilsland: If I can quote some
figures on that. The figures we have seen are that nationally
revaluation will uplift the tax base by about 15%. The South West
uplift will be 18%, which is the point you are making. So that
3% uplift results in a 10% increase in council tax, and when you
think where that is going to fall, it is going to fall on the
people who can least afford to pay it. None of it will fall on
people who are already in band H, because, of course, this extra
tax is paid by people whose properties shift up a band. So the
very high earners in the very expensive properties are immune
from this. The impact will be on people in the Bs, the Cs and
the Ds, the nearly poor, the people who can least afford it, and
actually council tax revaluation will not survive, council tax
will not survive a simple uplift like that, something else has
to be done to neutralise the impact of that.
Q242 Mr Clelland: Are you saying that
this would mean no more revenue for the council on that simple
basis, that there will be no more revenue for the county council?
Mr Bilsland: No, the way the system
works is that government grant equalises needs and resources.
So, all other things being equal, if council tax revaluation happens
and properties in Somerset and the South West go up a proportion
more than the rest of the country, the government reduces grants
to neutralise the impact of that. So as government reduces grants,
that means therefore that tax payers in the South West will end
up paying more council tax, but tax payers elsewhere in the country
will pay less.
Q243 Mr Clelland: There will be a balancing
Mr Bilsland: Yes, there will be,
but region by region there will be winners and losers.
Q244 Chairman: Would you prefer to see
more bands on the council tax? Would that ease the problem?
Mr Bilsland: Banding sort of bandages
the problem, does it not? An extra band at the top of the property
range would be right, because at the moment people, as we know,
council tax is all banded around band D, so at the moment people
who are in properties worth four times the value of Band D are
only paying twice the council tax. That does not make any sort
of sense. So extra bands will help at one end, extra bands at
the bottom will help, but it is bandaging the problem, it is not
Q245 Chris Mole: What is the most numerous
band in Somerset?
Mr Bilsland: Sort of C and a half.
Q246 Chris Mole: Which is higher than
in many places?
Mr Bilsland: Yes, absolutely.
Q247 Chris Mole: Which will quite often
be dominated by As and Bs.
Mr Bilsland: There are many councils
in the north which are virtually all As and just a few Bs.
Q248 Chris Mole: So it indicates that
Somerset probably is wealthier, and should expect to
Mr Bilsland: No. Average earnings
in Somerset are low, and I think the research is there that in
the South West generally there is a bigger gap between earnings
and house prices than anywhere else in the country. Although house
prices are high, for example, in the South East, their earnings
are higher. I think the gap is about 10%. Well, I know. The gap
is 10% in the South West. Council tax is 10% more expensive in
the South West than in the rest of the country.
Q249 Sir Paul Beresford: The crux of
the problem is the one you touched on earlier, and that is that
revaluation will shift the proportion of houses up the band. Therefore
the Government assesses grant, assesses the so-called ability
to pay, you will lose grant because of that shift. So that extra
banding does not necessarily make any difference, because if they
put an extra band at the top and an extra band at the bottom and
you shift, you still lose and that load has to go on the council
Mr Bilsland: The extra bandings
will, as I say, bandage the problem a bit, but it will not make
a fundamental change to that loss of grants, yes.
Q250 Mr Sanders: The fundamental problem
here is the ratio between income levels and property prices, and
even within a region like the South West, there is a significant
difference between the far South West and the North and East of
the South West where you have some of lowest incomes in the United
Kingdom, in Cornwall and in some parts of Devon, and the second
highest house prices in the United Kingdom. That makes this tax
unsustainable, pretty unsustainable at the moment, but if you
were then going to levy an even greater charge on those low income
earners simply because their properties are so popularit
is not money they can realiseit is going to become unsustainable
and government needs to be warned about that, that the protests
of last year are nothing compared with what is going to happen
at revaluation across the South West region. It will be up in
Ms Bakewell: Yes, I totally agree
Q251 Mr Cummings: If I can turn now to
council tax benefit. I certainly recognise that the county council's
preferred option is the abolition of council tax; but let us assume
that the Government intend to continue to keep it. What changes
do you believe should be made to the council tax benefit system?
Ms Bakewell: It would be better
if it were easier to claim. However it would still not be claimed
by some people. Some pensioners are far too proud to claim benefit,
they feel they have failed if they have to claim benefit, and
they would attempt to struggle on in quite desperate poverty in
some cases. I do not think it could become a universal benefit,
how that would be implemented if it would, but it needs to be,
we need to have a big campaign to make sure that people understand
that it is a benefit to which they are entitled in order to get
more people to claim.
Q252 Mr Cummings: Do you have any specific
changes in mind to improve the system?
Ms Bakewell: I am not a council
tax benefit expert, but we do have members of staff working with
district council members of staff to increase the benefit take-up
throughout the whole of the county, and we work in conjunction
with the Citizens Advice Bureau to do that.
Q253 Chairman: What is the level of take-up
Mr Bilsland: The last time we
did a count, as far as Somerset was concerned about two-thirds
of people who should be claiming benefit were actually claiming
it. When we did work to find out why they were not claiming it
(and this is what Cathy was saying, and of course, it is incredibly
complicated) in areas like Somerset there is not always the support
network available for people to go about knowing how to fill the
forms in. It is not just that people are too proud to claim benefit;
sometimes they do not know how to access it.
Q254 Chairman: Are things improving or
getting worse in terms of take-up?
Mr Bilsland: In terms of take-up,
much improved, because we identified this as a problem four years
ago and we put extra funding into the Citizens Advice Bureau and
Help the Aged specifically so that people could go out and help
people fill these forms in and since then we have even more work
for our own direct county council services. It is improving, but
even now there is a strong substantial group of people in near
poverty who cannot or will not claim this benefit, despite our
Q255 Mr Cummings: What percentage more
of people are claiming now than before you started the exercise?
Mr Bilsland: Four years ago less
than half the people in Somerset who could have been claiming
benefit were claiming it. We think the figure now is about three-quarters,
so we have improved it by 50%,but it is still not very good.
Q256 Mr Betts: This issue of local income
tax. In some ways your response is really one of a response to
pressure of circumstances, is it not? You have got the pensioners
particularly complaining about the level of council tax; so what
you are going to do is abolish the council tax, bring in local
income tax and therefore shift the burden of taxation from the
elderly to younger people?
Ms Bakewell: No, you shift the
burden from those who cannot afford it
Q257 Mr Betts: That is what is going
to happen, is it not? The elderly are the ones you are saying
have got low incomes and often quite high house prices. If they
are going to pay less, then younger people are going to pay more?
Ms Bakewell: People on higher
incomes will pay more at the moment.
Q258 Mr Betts: No, no.
Ms Bakewell: Some of the younger
people will pay more, some of the elderly people who are on high
incomes, because there are some of the elderly on high incomes,
would also pay more. It is a nonsense that somebody on a fixed
income should pay 10% of their disposable income in council tax
and yet somebody on a very high income only pays 1% of their income
in council tax. That, quite clearly, is unfair.
Q259 Mr Betts: The people who are asset
rich but have not got very high incomes tend to be elderly. They
are going to pay less under the arrangements you are proposing;
so there is going to be a shift of taxation from elderly to younger
people. That is what you are proposing. That is the effect of
what you are proposing?
Ms Bakewell: It is the effect
in some areas, but it is more of a shift from those that do not
have income to those that do have income. Some of those will be