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Mr. Clifton-Brown: I am delighted to follow my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer). To make the arid subject of local government finance cogent and amusing shows what considerable skill and experience he has.
My hon. Friend the Member for Mole Valley (Sir Paul Beresford) has done the House a huge service, because we have had an interesting and much needed debate this afternoon, but if he presses his amendment to a vote I shall probably not vote with him. My main reason for not supporting the amendment is that I believe that it is premature. The Government set up Sir Michael Lyons' inquiry to look into local government finance and it will be interesting to see what Sir Michael comes up with; only then, after careful consideration, should we decide what is to be done.
Local government finance has got into an almighty muddle. When council tax accounted for a relatively small proportion of income, people were not so worried, but now that it takes up so much greater a proportion of incomeparticularly for people on fixed incomes such as pensioners and other poor peopleit is becoming a much greater problem. Any property tax should, as far as possible, reflect open market value. My hon. Friend's
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amendment is therefore on the right linesalthough, as many of my hon. Friends have said this afternoon, it would have been much better and would more accurately have reflected my party's policy on the matter if it had allowed local authorities, not the Secretary of State, to make the decision.
I have considerable worries about the Secretary of State being able to make such an order. If the Minister is inclined to accept the amendment, will he tell us on what basis the Secretary of State would make an order obliging an individual authority or a group of authorities to undertake revaluations? The measure amends section 22 of Local Government Finance Act 1992, as amended by the Local Government Act 2003, and we are seeking again to amend that section.
On what basis would the Secretary of State make such an order? I can think of a number of reasons why he might, but I wish to probe the matter further. In an area where, when the council tax was originally introduced, property prices were not rising at anything like the present rate, it was envisaged that properties would be put into a band and, provided they were put into the correct band, all properties would increase in price relative to each other. However, in the past few years property prices, particularly in the south of England and the commuter belt of London, have increased very fast. That has led to a huge disparity not only within individual billing authorities, but between billing authorities.
As I mentioned in an intervention, new properties are immediately put on to the valuation list in their full market band, whereas older properties are not. That immediately leads to a distortion. One could see good reason for ordering a revaluation in an authority that had had fast rising prices, such as my own in Cotswold, or in another authorityperhaps that of my hon. Friend the Member for Northampton, South (Mr. Binley)where a large number of new properties had been built. Those are two good reasons for ordering a revaluation. A third reason might be that large numbers of properties had been extended. The moment a property is extended, it tends to be revalued and put in an upper band. Because of the distortion of stamp duty, many people are finding it cheaper to extend their property than to do what they would have done in the old dayssell a smaller property and buy a bigger one. That is happening to a lesser and lesser extent.
Mr. Lee Scott (Ilford, North) (Con): Does my hon. Friend agree that another reason could be that property values have changed and there are two houses or more in the same turning with different bandings? Local authorities should have the right to alter that, so that it is fairer for everyone.
Is my hon. Friend sure that if a new house is built, it is valued at today's price rather than the 1991 price? If he is right about that, almost all new houses would be in bands G and H.
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Mr. Clifton-Brown: My hon. Friend raised that with me privately earlier. I should like to research the point further. I hesitate to contradict somebody as knowledgeable as my hon. Friend. He may well be right.
A fifth reason for ordering revaluations in a particular local authority is that a large number of properties are bought and sold. A property can be revalued if its original value is severely out of kilter with its price when it is bought and sold. In the south of England, for example, many more properties are bought and sold in an individual billing authority than in some of the more northern authorities.
Those are some of the reasons for revaluations. I should like the Minister to tell us why he would want to order an individual billing authority to undertake a revaluation. What about the distortion that would cause between one authority and its neighbouring authorities?
My hon. Friend the Member for Christchurch (Mr. Chope) has mentioned that his constituency contains two billing authorities. My constituency also contains two billing authorities: Cotswold district council, where property prices tend to go up very quicklythe rate of growth is probably one of the highest in the United Kingdomand Stroud district council, where property prices are not increasing so quickly. Under the amendmentthis is why I am going to vote against itthe Secretary of State might order a revaluation for the Cotswold area, but not for the Stroud area. In those circumstances, what would happen to properties on the border? What would happen to people who live in Cotswold and who have low-paid jobs in Stroud? All sorts of distortions could emerge.
Mr. Francois: May I suggest another potential categoryareas in which large numbers of houses have been demolished? I am sceptical about the Government's programme of demolishing houses, particularly in the midlands and the north of England, and I am not sure whether they are doing the right thing. Such demolitions could affect other properties in the area, in which case residents might want a revaluation.
A fifth reason to revalue an individual billing authority is because it contains either a large number of empty properties or, as my hon. Friend has said, a large number of properties that have been demolished. A large number of such properties tends to distort the lists and make them out of date, and my central theme this afternoon is that lists should be up to date because values should reflect the amount of tax paid.
A sixth reason why the Secretary of State might want to instruct billing authorities to carry out revaluations is because the area contains a large number of second homes. As my hon. Friend the Member for Rayleigh (Mr. Francois) knows, because he and I served on the Committee that considered the Local Government Act 2003, it is now possible for local authorities to exercise their discretion and charge council tax on second homes by abolishing up to 90 per cent. of the rebate, which means that people pay almost full council tax. That has happened in Cotswold, where people pay nearly full
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council tax on their second homes. If there is a large number of second homes in a local authority area, it can cause distortion, which is another reason why the Secretary of State might want to order a revaluation.
Perhaps the Minister will tell us how such revaluations will work. Indeed, I think that my hon. Friend the Member for Mole Valley will have the opportunity to sum up amendment No. 3, so perhaps he, too, will tell us how such revaluations will work. I am worried about the timing of the Secretary of State making an order because the amendment does not deal with timing. From when would the Secretary of State make an order and for how long would the listing agency have to compile the lists? If the lists were very out of date in the six categories that I have mentioned, the task would be much greater than that in authorities in which the lists are up to date[Interruption.] I shall give way to my hon. Friend the Member for New Forest, West (Mr. Swayne), who no doubt has an excellent new angle.
Mr. Desmond Swayne (New Forest, West) (Con): With respect to my hon. Friend's fifth categoryauthorities in which there has been a great deal of demolitionit would not take very long to compile the list.
Mr. Clifton-Brown: Indeed, it would not. Nevertheless, if demolitions had occurred, presumably new buildings would have been constructed, and they would need complete revaluation, which would be an onerous task.
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