Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

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 council tax.

  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 out?

  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 fixing it.

  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 tax payer?

  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 popular—it is not money they can realise—it 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 flames?

  Ms Bakewell: Yes, I totally agree with that.

  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 now?

  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 best efforts.

  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 young people.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 27 July 2004