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Baroness Hanham moved Amendment No. *3A:

The noble Baroness said: I think that we all accept that this is an important piece of legislation, but it is not free-standing. It introduces no new concepts—revaluation has been around since 1991—but seeks to shift the goalposts of the Local Government Finance Act 1992 by enabling the Secretary of State, once the 1997 date is postponed, to order new valuation lists in any given year thereafter. The rationale put forward for the delay, as we have discussed, is the extension of the remit of the Sir Michael Lyons review.

Currently, under the 1992 Act, the Secretary of State is able to change the proportions between council tax bands and the value of bands, and under an amendment from the Local Government Act 2003, to change the number of bands. The amendment would ensure that the Secretary of State would be able to alter the number and relative proportion of council tax bands only once a revaluation had taken place. We can see no logic in making any changes to the council tax bands at all, but particularly not prior to revaluation, if that is going to take place.

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Both valuations and council tax banding are an integral part of the totality of the council tax system and, as the Government have admitted, the council tax is linked to wider questions about the structure of the council tax and to the operation of council tax benefit. Indeed, Sir Michael Lyons draws attention to that in his report. At present, there is no requirement on the Secretary of State to refer to any other matter if he decides to increase the number of bands, and we believe that that decision should be constrained, at least until revaluation, if it ever takes place. If it is decided to abandon the revaluation, then there would be a status quo.
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Revaluation, as we discussed under the previous amendment, is a costly process that has hugely disruptive effects on local areas, without an enormous deal of benefit to the funding of local councils. There is the possibility of some flexibility as a result of increased values, but not a lot, because the Government will almost certainly ensure that there is no benefit to councils from any increase in valuation in their areas. The grant would no doubt be suitably adjusted. The same goes for changing council tax bands. To make these disruptive changes without the proper basic information relating to revaluation—either you stick where you are or you have to have the information before you change council tax bands—would make a bad situation worse.

My noble friend Lord Hanningfield and I tabled amendments along these lines at Report on the 2003 Local Government Act to ensure that, however many valuation bands were added to the spectrum, the ratio between top and bottom would not change. The noble Lord made the argument that to allow for the ratio to change between top and bottom bands could change the structure of council tax substantially. That is relevant to this amendment, as the Minister at the time, the noble Lord, Lord Rooker, said:

That sensible statement meets this amendment halfway.

The amendment seeks to confirm the common sense of that statement and ensure that valuation is put to its proper use. It would mean that the work of valuation officers and the expense of compiling a valuation list would be put to constructive use, rather than lying dormant until government policy dictated a re-jigging of local finances. It may be that the Government have no intention of reforming council tax bands before any revaluation has taken place, but we are getting a little wary at the rate and number of pronouncements and consultations on the structuring and finance of local government that are coming out on a daily basis. I twitted the Minister a while ago at Question Time about the Miliband review; I think that the Minister told me that there was no such review and—hey presto—we have a Miliband review, which presumably runs alongside the Sir Michael Lyons review. Certainly, there is plenty about the restructuring of local government to make one feel that more is going on below the line than is going on above it.

We believe that these amendments are necessary to constrain a government change to council tax banding before or without a revaluation. If there never was a revaluation, the council tax banding system would stay as it is; if there is one, it will be tied up with it. I beg to move.

Baroness Andrews: I am grateful to the noble Baroness for her clear explanation, which is the one that she thought she would make. The effect of the
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amendment would be to prevent any changes being made to structure of the council tax system—that is to say the proportion of council tax between bands, the values attributed to each band or the number of bands—without first compiling a new valuation list through a revaluation exercise. That is to ensure that reform of the council tax band structure will always be linked to a revaluation.

I cannot see that major reform of the system of this nature would ever take place without also a revaluation; it is self-evident that the two elements go together hand in glove, and we were clear about that during the passage of the Local Government Act 2003. That is not to say that the current legislation precludes such changes in isolation from revaluation, but I believe it to be unlikely, not least for the practical problems it would present. It is worth reflecting that, when Sir Michael Lyons was appointed in July 2004, the expectation was that his recommendations for reform of council tax would be fed into the 2007 revaluation. It was postponed, for the reasons that we have rehearsed, but the link would certainly have been there.

I want to argue, therefore, in the first case, that the amendment is unnecessary as a matter of practice; moreover, it suffers from a major problem: it is unworkable. I want to explain the detail of the language and meaning involved. I must ensure that we are all clear about the definition of a compiled list. A compiled list has a very precise definition. Section 22 of the Local Government Finance Act 1992 provides that the compiled valuation list must show:

and, most importantly for this debate,

It also makes allowance for other,

But the crux of the matter is that a compiled list allocates dwellings to bands, which is where we can start to see why this amendment is unworkable.

Let us look at the process of revaluation and the intrinsic link that there must be between revaluation and any structural reforms in order for either the reforms or a revaluation to work. The Local Government Finance Act 1992, as amended by the Local Government Act 2003, stipulates that properties must be valued at an antecedent valuation date two years ahead of the date of compilation of the final list, and that that date will always be 1 April of the relevant year. In addition, a draft list must be compiled by 1 September in the year before compilation of the final list.

Any changes that alter banding, whether the proportionate relationships between bands, the value range within bands or the number of bands, must evidently be based on the best, the most sound and the most recent evidence about property values if they are to be fair, transparent and sensible. To achieve that, the logical sequence of revaluation might be: the date of revaluation is set; the Valuation Office Agency—the
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VOA)—revalues properties; any reforms to the bands are announced to take effect from the date of revaluation; the VOA places properties within the new band structure using the new valuations; draft notices of valuations and banding are sent to all householders to allow them to correct any inaccuracies; any necessary amendments are made; and, finally, the new lists are compiled and bills issued.

There is a sensible sequence of events leading to a successful revaluation, with revaluation and reform going together as one complete package and the compiled list the culmination of the process. Bear in mind that any revaluation would involve some measure of change or reform simply because, if nothing else, the value range of each band would have to be changed to reflect the housing market at the time, otherwise there would be mass movement of properties up or down the bands depending on the prevailing state of house price inflation or deflation.

The amendment would effectively separate that logical link. Although it may not be the intention of noble Lords opposite, it would, perversely, lead to the completely illogical position that any revaluation could use only the existing banding structure, because there could be no change to the bands until after a new valuation list had been compiled. In practice, that would mean: the date of revaluation is set, as before; the VOA values properties, again as before; but now a compiled list would come into force on the prescribed revaluation date—1 April of the chosen year—with new valuations but using the pre-existing band structure. Bills would be issued against this list, because they would be bound to be, and only then would it be possible to make the necessary changes to the band structure to account for inflation and any other reforms thought desirable. So we are talking horses and carts here.

Surely we can all agree that that is unworkable. Not only would it have the immediate effect of dramatically changing the council tax take but it would most likely impact most severely on households currently in the lower bands. They could move up several bands by pure virtue of any house price inflation since the last valuation.

The amendment would also make it impossible for valuations and bands ever to be revised because not even minor reform could take place in any circumstances without revaluation. Again, I think that that is an unintended consequence. It is clear that Parliament understood the link to be logical, too, as was made clear in the Local Government Finance Act 1992 and the Local Government Act 2003. It has also received more recent political endorsement. Mr Pickles in another place seems to have got the point but also to contradict his colleagues in this House. His argument against the need for revaluation was that adjustments to the system could be made, if necessary, without revaluation. He said that matters relating to council tax banding and people's ability to pay,

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They could not if this amendment were agreed to. It seems, therefore, to fly in the face of official policy in the other place.

I do not want to over-egg the pudding but the amendment is tautologous and therefore redundant. Moreover, it would be positively harmful by forcing revaluation on the basis of out-of-date valuation bands, causing significant increases and even greater inequalities, followed possibly by structural reforms that would catch up a few years later with reality.

With that in mind, I hope that the noble Baroness will accept that the amendment is not workable and that revaluation and reform go together as a logical package and sequence.

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