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Mr. Woolas: The hon. Gentleman says that that will always be the case, but if he were to read the 1992 Act and, more importantly, the Hansard report of the debates on that legislation, he would understand that an essential part of resource equalisationthe notional effort made by banding to equalise the systemwould not be possible, so the amendment would throw out the baby with the bathwater. There would thus be a confused situation with different banding systems operating in different billing authorities. If the hon. Gentleman stays with my argument, he will understand the position.
Sir Paul Beresford: Perhaps I should have explained a little more clearly that I thought that the power would be used in relatively isolated cases and that it would still be maintained by the Secretary of State, which my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) would perhaps deplore. However, local people would feel a difference if the revaluation were reflected in the assessment of ability to pay in the funding formula. If that were changed, the difficulty that the Minister cites would be offset.
Mr. Woolas: I understand the hon. Gentleman's point and assume that that is why the amendment provides for groups of billing authorities. If he will allow me to stick with my argument for a moment longer, I hope that he will understand why the amendment is not workable.
The hon. Gentleman argued that such small-scale revaluations could help with the costs of revaluation, which the hon. Member for Christchurch (Mr. Chope) also mentioned. Taken in isolation, he is, of course, right, but taken in aggregate, across all the many different revaluations that could ensue, I believe that he is mistaken. There is a widely accepted theory that economies come from scale. Under national revaluation, even with the automated valuation model,
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that is still the case. The VOA could gear up to deliver one national revaluation and would calibrate its software with one valuation date in mind in such an event before revaluing in one concentrated effort.
Mr. Clifton-Brown: The fact that any revaluation creates winners and losers has not yet been mentioned. Those who are losers will call for transitional arrangements under section 79 of the Local Government Act 2003. Does the Minister agree that it is almost certain that such revaluations would trigger transitional arrangements?
Mr. Woolas: I mentioned briefly my assumption that a transitional relief scheme would be needed in such circumstances, as was the case when the poll tax was abolished and the council tax brought in. That was also the case with the business revaluation, which proved to be successful and did not cause the controversy of the Welsh revaluation.
Under local or local area revaluations, the VOA could be faced with a constant cycle of recalibrating, revaluing and publishing draft lists, and then providing compiled lists to individual billing authorities. That would inevitably lead to more costs and, in the long term, the use of more staff resources.
Let me turn to the impact that the amendment would have on the finance settlement and the grant distribution system. Imagine for a moment a scenario in which one billing authority was revalued. Let us say that in that case revaluation led to a reduction in its overall tax base because properties, on average, moved to lower bandshon. Members have cited examples of circumstances in which that could happen. At the outset, that appears to be entirely desirable for the householders concerned.
The expectation would be that the grant distribution system would compensate the billing authority for its reduced tax base by shifting a larger proportion of the overall grant pot into that area. However, we encounter a problem at that point because the grant pot is of course finite. Without another authority revaluing and increasing its tax base at the same time, which would effectively rebalance the whole system, we would not have the extra funds that would be needed. Everyone else would thus get less, effectively on the say so of the authority concerned.
Without any compensation through the grant distribution system, the billing authority would be faced with two options: either cover the deficit through efficiency savings or service reductions; or increase its tax rate, which would effectively mean asking its council tax payers to pay the same amount of council tax overall as they did before the local revaluation ever happened. Any overall benefit from revaluation would therefore be cancelled out. On the other hand, a billing authority with an increasing tax base going through a similar revaluation would be handed a windfall increase in tax yield, which would be left unadjusted until the next three-year settlement period.
We have gone on record on many occasions saying that we accept the case for revaluation and that it is right to maintain a fair alignment between house prices and council tax bands. The amendment implies that it might be right to realign one subset of properties while leaving all the others unaligned, but how can it be fair that one
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person benefits from a reduction in band through a revaluation while their neighbour, who happens to be in a different authority that is not revalued, does not? As some speakers noted, we would be faced, I fear, with a flood of appeals as the public became increasingly concerned and confused by the ensuing unfairness.
The amendment appears to be based on an assumption about the factors influencing the housing marketan assumption that is fundamentally flawed. It is that influences on the market couldindeed, mustoperate at a local level in isolation from national factors. Why else would we ever conceive that revaluation could be justified in one billing authority separately from all others? Micro-economic factors play their part, but to revalue only on the basis of such factors would destabilise what is, after all, a national tax system based on relative values across the whole housing market.
Mr. Binley: My major concern is the enforced growth imposed by the Government themselves. If the Government enforce growth, they should at least give the local authorities affected the ability to have a say in revaluation and its timing.
There is a wider policy at stake. The right hon. Member for Suffolk, Coastal said that he was against growth areas, and other speakers complained of a problem because of increased house prices. The argument that revaluation is needed has arisen from the increase in the differential between earnings and house prices that is caused by the excess of demand over supply, which is precisely why growth areas have been proposed.
Mr. Gummer: I rise to correct the Minister. I did not say that I am against growth; I said that I am against piling growth into the south-east of England instead of spreading it over the whole of the United Kingdom when modern techniques of transport and IT make that possible.
I understand that the right hon. Gentleman said that. I muttered across the Chamber to the Liberal Democrat spokesman that I was not sure that local people in the right hon. Gentleman's constituency who wanted to buy a home in the area would necessarily agree with that point. Of course they are welcome to move to Oldham and Saddleworth, but I have to point out that house prices in some parts of my
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constituency are as high as, if not higher than, prices in his. It is not true that all housing growth areas are in the south-east, or that the relative increase in prices has occurred exclusively in the south-east, yet that was the assumption implicit in many of the speeches made by Opposition Members this afternoon. I am more than happy if they continue to make that assumption, because it does them electoral damage.
I conclude my remarks on the amendment by asking the House to reject it. I thank the hon. Member for Mole Valley for tabling it because it has allowed us have a clearer debate on the purposes of revaluation and the methods involved, but I hope that he understands that his proposal has the potential to create significant problems for local government finance and the operation of the council tax system.
Sir Paul Beresford: I thank the Minister and all Members for the supportmixed support. We have had a substantial discussion, much more so than I anticipated, and the spread of knowledge of local government finance has been incrediblefrom next to nothing to absolutely everything. As my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) pointed out, the subject is difficult for people to understand. Clarity is needed, and that was part of the inspiration behind the amendment. The difficulty, however, is that because of the wording of the Bill, the amendment had to be very tight. I could only touch on some of the consequential effects and answer them in a way that would enable the amendment to be carried forward. I shall study the amendment and the Minister's comments carefully, and we can return to the matter another day. For the moment, I beg to ask leave to withdraw the amendment.
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