Mr. Borrow: I come back to the experience of regular revaluations for business rates. When revaluations took place in the 1990s, some parts of the country experienced booms in property rents and certain classes of property had large increases in comparison with others. Provided that we have regular revaluations and some sort of transitional relief in place, we have a way of coping with the problem. We do not want to find ourselves in a position where we cannot have a revaluation because the change is so massive.
I remember looking into property values in central Liverpool in the early 1980s. At that time, rates were based on rental values of the early 1970s and many business properties in the area were attracting more in rates than in rent. At the same time, there were tenants in central London paying 10 or 20 times as much in rent as they were in rates. That reflected the change in the economy during the period. It was also reflected in changes in domestic property values, albeit to a lesser extent.
Another important problem with putting off property revaluations is that they have an impact on Government grants. The longer we delay revaluations, the longer it will be before Government grants reflect economic differences between one area and another. Liverpool got hammered in the 1980s with cuts in services and real financial problems. Had there been regular revaluations throughout the 1970s and 1980s, I suspect that Liverpool city council's budget position would have been much stronger in the 1980s because the revaluations would have reflected the recession in the city and would have fed through into the amount of Government grant awarded. We never did the revaluations, so that never happened.
I shall vote in the same Lobby as the Minister tonight, though I was tempted by the appeal of the hon. Member for Brentwood and Ongar (Mr. Pickles) to vote in his Lobbyuntil he spoke. I hope that when the Minister sums up, he will provide some reassurance that we are not talking about a long delay.
I want to restate a point that I made in an earlier interventionthat the reason for having a revaluation in 2007, as against a business rate revaluation in 2005, was to even out the work load of the Valuation Office Agency, the valuation tribunals and all those involved in the valuation of rating and council tax. The danger is that we could end up with a revaluation of council tax not in 2011 but in 201320 years after the first council tax valuation. It is important that the revaluation of council tax ties in with the reform of local government finance because of the revaluation's impact on the amount of Government grant. Those two aspects need to be tied together under a new regime, rather than introduced separately. The timing is crucial.
I want to comment on the views of Her Majesty's Opposition. On the one hand, they complain that domestic property prices have rocketed, with huge
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increases all over the place, so that a revaluation will mean some people paying a huge amount more. On the other hand, they say that there has been hardly any difference, so we do not need a revaluation. Both those arguments cannot be right. I have served on Standing Committees in which Conservative Front-Bench spokesmen have said that there should be regular revaluations. There is plenty of documentation in the Library about the occasions on which Tory Front Benchers have argued in favour of having regular revaluations. Indeed, the Front Benchers currently accept the need for them, albeit as long into the future as possible.
The danger is that if we continue to put off council tax revaluation, whoever is in power in five or 10 years' time will be tempted to do a Michael Heseltine and we shall end up with council tax being unsustainable, so that it has to be ditched completely and something else dreamed up in its place. Let us do it properly. I want some assurances from the Minister that the postponement will be a short and sensible one, not one born of political expediency.
Mr. David Curry (Skipton and Ripon) (Con): This is a grubby little Bill that reflects a very English mess. If we build new housesand the Deputy Prime Minister wishes to build very many new houseswe will all have to pretend that they were built in 1991 for the purpose of valuation and a fictional value will be associated with them. Let us suppose that I buy one of those houses and put on a conservatory and a granny annexealthough they are unlikely to be big enough to allow the latter additionand, a couple of years later, I sell it. It will be revalued for council tax purposes and will probably go up a band. Let us suppose that the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) lived next door and had decided to spend the rest of his life in his house, so he had added a conservatory, a granny annexe and an extremely well-appointed garden shed. He would pay less council tax, even though he had a much more valuable asset.
There are between 1.6 and 1.8 million house sales a year in Britain, or some 34,000 a week. Even allowing for sales of properties to which no substantive change has been made, a relatively high proportion of houses have been revaluedsome more than once, depending on property turnover in the areaand that creates anomalies. Across the country, people ask, "Why on earth is he paying the same as I am? He has a much bigger house." My colleagues talk about the battles and the discontent that a revaluation would bring, but we should remember how much seething discontent can be caused by failing to have a revaluation and the continuation of the anomalies.
I know that you do not wish us to trespass beyond Offa's Dyke, Madam Deputy Speaker, but the situation in Wales is interesting. There was a revaluation in Wales because the Welsh authorities decided that they wanted to get more revenue out of the system. It was not revenue neutral, because they set out to make it into a tax-raising venture, which was very successful. However, one consequence of the present situation is that the council tax will come under increasing strain. Local government finance has a wonderful capacity to start as a dot on the horizon no bigger than a man's fist and grow to emerge
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as a subject of colossal emotive and totemic power. We have hit just such a rough patch in the last couple of years.
The Minister will sayI remember saying it myself and the right hon. Member for Greenwich and Woolwich also said itthat council tax yield is not the same as average council tax. Of course it is not, because more houses are built and houses are revalued, but it does provide a good rough indication of likely council tax increases. We are now destined to spend the next five or six years going through the same sequence of minatory arguments, including threats of capping and blaming the local authority. The silliest argument of all pretends that the amount of money a council raises has nothing to do with the nature of the property in its area, as though somehow there was a curious moral perversity in the fact that Westminster manages to raise more money than Burnley on the basis of its council tax stock.
More and more pressure will be felt because public expenditure is coming under strain and chickens are coming home to roostas I forecast last year. There are reasons for a postponement for one year, and Sir Michael Lyons accepted that that was reasonable. For example, the changes in education funding and the introduction of three-year budgets make it reasonable to pause to see how all the bits will fit together. However, Ministers have suggested that we wait until there is no turbulence in house prices. What a wonderful notion. After all, the Chancellor of the Exchequer set up the Barker review to discuss why we had permanent turbulence in house prices. The link to structures is one of the most grotesque non sequiturs that I have come across, even from this Government. Ironically, we may have been living through a period when price disparities were closing to some extent. Select parts of my constituency are approaching the levels of the south, but as the hon. Member for Somerton and Frome (Mr. Heath) would say, the variation regionally, and even locally, can be very significant indeed.
Mr. Heath: The right hon. Gentleman was talking about houses that had changed hands or been improved, but there is the significant problem of, for example, an elderly lady living in Rose cottage in a desirable village in my constituency. She has never improved her house and never received any income, yet the price of her property would be hugely inflated over time simply because people with London salaries like the idea of living in Rose cottage in my constituency and are prepared to pay a large amount of money for an unimproved cottage. Is there an answer to that in the council tax framework?
From my reading of the Sunday papers, I understand that the Cotswolds are no longer what they used to be because all sorts of fashionable people who own large properties in London, which are no doubt at the top of the band, have gone there and opened up little bistros. One perfectly reasonable answer for a person who is asset-rich but cash-poor, which is the situation of that lady, would be to allow her
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to roll up her council tax into the final estate. There is nothing inherently unreasonable about that notion, and it is worth examining.