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Baroness Hamwee moved Amendment No. 69:

"( ) If a billing authority makes a determination under this section, it shall be disregarded for the purposes of distributing revenue support grant to receiving authorities under section 78 of the Local Government Finance Act 1988 (c. 41) (revenue support grant)."

The noble Baroness said: My Lords, in moving Amendment No. 69 I shall speak also to Amendment No. 70. These amendments were debated in Grand Committee. The order of names to the amendment was different at that point. We do not intend to steal the thunder of the noble Baroness, Lady Hanham—she moved the amendments on the last occasion—but it is a matter about which we, the noble Baroness and the Local Government Association feel strongly.

The LGA has said that it is disappointed that the Government have decided that the money raised by removing the discount on long-term empty properties will be paid to the Secretary of State, although I note of course what the Minister has said about it being redistributed. The association considers that to be inconsistent with statements made previously. When they announced the welcome changes in this area, the Government had said that local communities would benefit from improvements in local services such as more affordable housing.

The LGA has made the very credible point that bringing long-term empty properties back into use can be a resource- intensive process. There is the question of tracing the owners of the property. Sometimes owners hold out for a long-term redevelopment opportunity and then hope to sell the property on for a large profit. If the additional council tax raised was retained at the local level without ring-fencing, it could be used to help councils develop and fund an active empty properties strategy to tackle the problem.

Of course the Government have recently provided guidance on empty properties in the form of a handbook entitled Empty Property: Unlocking the Potential. My noble friend Lady Maddock, who has had to leave, said that she wished she was half as skilled as the draftsmen who prepared Amendment No. 68, in which case she would have tabled an amendment to the effect that an authority could keep the money if it had in place a good empty homes strategy and perhaps an empty homes officer. She has asked me to pass on her plea that the Government might seriously consider bringing forward an amendment to that effect if they are unwilling to accept the broader issue.

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When we debated the matter in Grand Committee, the Minister said that the Government want to persuade authorities to reduce or end the discount on long-term empty properties,

    "on housing and planning grounds and not for financial reasons".—[Official Report, 16/6/03; col. GC215.]

We agree that that is inherently an important issue but, as the LGA explained, it is not inexpensive. The Government may not want to give local authorities a financial incentive but they should ensure that they are not providing a disincentive.

I note the Minister's comments about redistributing the money, but we are seeking freedom and flexibility in totality, not only part way. He referred to the money being difficult to track when it is redistributed. That is one of the issues. Although we may all refer to additionality, it is often very difficult to pin down and for people to see that it is there. I beg to move.

Baroness Hanham: My Lords, to some extent the discussion on these amendments was pre-empted by the debates on earlier amendments. The Minister's reply that this money will not be additional will cause concern. It was said rather as an aside, but we need to get into the open the fact that the money raised from the policy of no discounts on empty homes will go to the Exchequer. As the Minister said, it will be "repatriated" within the revenue support grant. In fact, it will not be repatriated; it will be dissected and sent back in little bits not necessarily relating to the amount raised in any particular area.

As the noble Baroness said, this will provide no incentive for local authorities to introduce an empty homes strategy. If a local authority can identify how much it is achieving by bringing empty homes back into use—which is what it will do if it does not have a discount—that will have a far greater effect than any money raised being swept off into the Treasury and then parcelled out as part of the revenue support grant.

Amendment No. 70 is extremely important to local authorities and the way in which they will set about dealing with their empty homes strategy. Many local authorities have empty properties for all kinds of reasons. Where people have been able to get in and get the empty property shifted, one of the sustainable communities proposals is that local authorities should be almost able to confiscate empty homes and get them back on to the market.

As it is obviously a clear policy of the Government that empty homes should not be allowed to sit and fester and prevent people living in them—it is not one with which we disagree—there will have to be other incentives.

I support both amendments to which my name is attached, as I did in Committee. I am concerned about the Minister's response that the money will not be additional. In our view the money should be left with the local authority that raises it and brings the homes back into the system.

Lord Bassam of Brighton: My Lords, Clause 76 inserts a new Section 11A into the Local Government

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Finance Act 1992 to allow a billing authority to reduce or end the 50 per cent council discount for classes of unoccupied dwellings prescribed in regulations. Amendments Nos. 69 and 70 seek, in slightly different ways, to ensure that any extra revenue raised would be kept by local authorities and disregarded for determining financial support for the authorities concerned.

I want to make a clear statement of government policy so that we can set out our view logically. We have said we will allow local authorities to retain the money from reducing the second homes discount but not from reducing or removing the long-term empty homes discount. We do not require any primary legislation to give effect to our policy.

For revenue support grant purposes, we will continue to calculate the tax base as if there were no determination in respect of second homes, prescribed as a class under Section 11A(3), inserted by Clause 76. In other words, we propose to calculate revenue support grant on the basis that the 50 per cent discount continues for second homes. And we will make no change in respect of long-term empty property, so that as the tax base goes up, this will automatically be reflected in the grant calculations.

We have heard a great deal about local authorities keeping the money from charging more council tax on empty homes. But we are concerned that this would create what is probably best described as a perverse incentive to keep property empty. A local authority would retain the resources only if the property continued to be unoccupied, and so success by its empty homes service in getting domestic property back into use would effectively reduce the amount of income it would get. That does not seem sensible. We have said on a number of occasions that we think the decision to change the discount on long-term empty property should be taken on housing grounds and not because it raises more money for the authority.

Further to Amendment No. 68, in Wales, billing authorities have for a number of years been able to reduce from 50 per cent to 25 per cent the discount for classes of dwellings prescribed under Section 12 of the Local Government Finance Act 1992. Amendment No. 68 has extended to Welsh authorities the discretion conferred by Clause 76 on English authorities, as I explained earlier.

Amendment No. 69 would require the National Assembly for Wales to treat the dwellings as if they were still subject to the 50 per cent discount. At present, where Welsh billing authorities reduce the 50 per cent discount to 25 per cent or zero under Section 12 of the Local Government Finance Act 1992, this is taken into account to reduce Welsh authorities' relative shares of revenue support grant. Arguably, Amendment No. 69 runs contrary to the devolution settlement in so far as revenue support grant is a matter devolved to the National Assembly for Wales.

I hope that the explanation addresses the issue that the noble Baroness raised about empty properties. Like her, the Government want to ensure that empty

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properties are brought back into use. However, she has to address the issue of the potential for the perverse incentive to keep properties empty.

As a former local authority leader responsible for housing, I think any good local authority, regardless of financial benefits, should have in place a sound strategy—they are obliged, I think, to do so—to deal with bringing empty homes back into use. We all support that; I know that noble Lords and Baronesses on the Benches opposite have supported various schemes to ensure that empty properties are brought back into use. That was the spirit behind much of the legislation to deregulate the private rented sector. I know, too, that the "above the shop" schemes for bringing flats back into use and many other empty homes strategies have all-party support.

I do not think these amendments are the appropriate way in which to deal with the issue. Pursuing the issue in the way in which these amendments seek to do could have a perverse impact. I cannot believe that the amendments would have quite the dramatic impact in that policy area that has been claimed for them this evening.

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