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Baroness Hanham: I thank the Minister for her reply. I accept that the amendment may not have been absolutely perfect but we are very restricted by the Short Title, which has made it extremely difficultprobably deliberatelyto table amendments to tease out the process of council tax banding and revaluation. Our amendment may not be brilliant but it was the best we could do to get past the Clerks in order to get the matter discussed at all. I know that ingenuity was required to do it.
Baroness Andrews: It was an extremely useful exercise for us to work through both the original amendment and this one, so nothing has been lost. It is useful to put on the record the nature of the debate, even though we are constrained by the Short Title.
Baroness Hanham: I, too, think that it was worth having the debate. The tenor of the amendment is clear: to ensure that the Government make no decisions on council tax banding without having decided whether to carry out revaluation. We accept that council tax banding depends on valuations but there is a whole host of other things attached to that banding and the decisions on thatthe increase in the number of bands, the proportion between them and the ratio between the top and the bottom.
We discussed during debates on the Local Government Bill the basis on which council tax was originally introducedpart property tax, part service tax. Any decision to increase the number of bands must be related to whether there will be a revaluation or differences between the values. If council tax banding were taken as a separate item, it would make nonsense of the revaluation.
The amendment is simply to try to prevent the Minister of Communities and Local Government making any decision on council tax banding, the numbers or the ratio without having decided whether there should be a revaluation. I think that the Minister would agree that postponement here does not mean that revaluation will ever come about. Given how things are going, a completely different system could be set upwe do not know, and, I dare say, nor does the Minister. We are fishing in quite deep waters. We are trying simply to put a few brakes on the road ahead for local government council tax and how it is
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organised. I hear what the Minister says. I dare say that we may return to the matter but I beg leave to withdraw the amendment.
"(1B) The Secretary of State shall decide at least once in each calendar year whether to exercise the power granted by subsection (1A), and shall give reasons for his decision.
(1C) The reasons referred to in subsection (1B) shall include the Secretary of State's assessment of the degree of divergence in relevant property values since the original valuations made under this Act or since any subsequent revaluation."
The noble Baroness said: We would agree that, given the work that Michael Lyons is undertaking, it is wise to postpone the planned revaluation. However, like noble Lords who have spoken before, our nervousness can be summarised in the fact that we do not know how long this interim period will be. It is therefore in our collective interests to make sure that whatever the ramifications of this particular piece of legislation, it does at least work in the time that it takes for Michael Lyons to report and for the Government to act. That could take some years, so it is important that we have a solution that is sustainable and acceptable to everyone.
It is certainly the case that almost every revaluation that has been planned under the old rating system was delayed, postponed or cancelled; there is a long tradition of that. It is inevitable, given that the political costs of revaluation almost always outweigh the technical and financial benefits. Put simply, people who end up paying more always end up feeling aggrieved. Sometimes people who are revalued and do quite well still feel aggrieved because they think they have been paying too much until that point. None of us who have been local authority leaders like to go out and face the public with such a situation and the Government certainly do not want to either, so the easy option is to keep shuffling it off into the long grass.
On the other hand, if you're going to have a tax which is linked with property, at some point there has to be a revaluation because property prices do not rise at a uniform level throughout the country. I have found some interesting figures from the base year of 1991 to 2001. While the average increase in prices throughout the country was 29 per cent, this varied between 63 per cent in London and 2 per cent in the north-west. Since 2001, there is evidence of some convergence, but it is not on that sort of scale. Then of course there are variations within regions and within relatively small geographical areasdown to individuals' homes, if they have done some work on them.
This is where we come to the nub of the problem and why we have had the comments of the noble Baroness on the Conservative Front Bench about consistency of approach. While this is a tax based on property, it is not a property tax. That sometimes leads to intellectual and therefore real practical difficulties,
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which is why the Conservative Front Bench in another place said that they supported revaluation. That brings us to the interesting point made by the noble Lord, Lord Smith of Leigh, about how we should consider a full-blown property tax rather than one that is part property tax and part not. Perhaps the Minister would like to reflect on the effect on house price inflation, for example, if the noble Lord's suggestion were put in place and council tax rises were linked annually to property prices.
Nevertheless, my amendment would require the Government to consider on an annual basis whether a revaluation was justified or not. In other words, it moves us from the provision in the Bill that the Government may order a revaluation to one whereby the Government must consider it. The problem with the current situation is that, while there is an affirmative procedure for revaluation, there is no opportunity for a debate about the status quo. To a large extent, the result of not revaluing is as significant as revaluing, so this is an attempt to bring some clarity and transparency to the process in which the Minister would be required to come to the House to explain why the Government in that calendar year decided not to go ahead with revaluation. I am happy to debate whether it should be a year, two or three, but I feel quite strongly about this principle. Leaving it entirely to the discretion of the Secretary of State to determine when revaluation should take place is a very wide power indeed. My amendment would not change that power, but it would ensure that the Secretary of State is publicly accountable and can be questioned in Parliament. I beg to move.
Lord Bassam of Brighton: This amendment has been debated twice before in another place so it has the benefit of being consistently moved by the Liberal Democrats. However, it was moved in a slightly amended form. From my reading of the amendment, I see that we have returned to its original form. So far as we are concerned, the arguments against the amendment put forward in those debates have not changed, so I hope that I will be forgiven for repeating what has been said before.
While the Government readily accept the argument for revaluation of council tax to maintain a fair alignment between house prices and council tax bands, we can see no case for the regular publication of assessments of house price movements that this amendment requires. As my honourable friend Mr Woolas said in his response to this amendment in another place, the problem that we have with it is the suggestion that there must be, as he put it,
that underlies the decision to revalue or not and, more particularly, that the predominant factor in the rule is divergence. The idea seems to be that a certain point of divergence would trigger a revaluation and, conversely, if that point were not reached then, then an insufficient case would be made to warrant a revaluation. Mr Howarth, who tabled the amendment
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in another place, denied that that was in his mind when he devised the amendment, but none the less the suggestion is there, intended or not.
Of course, the factors to be considered in determining the right time for revaluation are many and complex and, sadly, we do not have a neat formula to give us the answer. Furthermore, if we did have such a formula then, by implication, if the Government were to decide for whatever reason not to proceed with revaluation, notwithstanding that evidence, then they would somehow be seen to be flunking the issue. The Government reject the implications that a particular level of property price movement necessarily justifies revaluation and that divergence that falls short of that level of property price movement precludes any case for revaluation. What level should we take this analysis of divergence to? What are we to do about the complications of house price divergence at sub-regional level? What if there were no significant variation of house price movements between regions, but real variation within billing authorities or, perhaps, within some billing authorities, but not others? The position of the official Opposition seems to be that the recent narrowing of divergence between regions removes the case for revaluation. But that simplistic view is certainly not shared by the Government.
Mr Howarth in the other place tried to answer these points by proposing a revised version of the amendment that effectively said that the reasons would not be solely connected to house price divergence. However, by leaving this factor as the only one specifically listed, the overemphasis on this point remains. This overemphasis may not be the intention of the noble Baroness, but whatever the intention, that is certainly what would be inferred by many commentators before too long.
As my noble friend Lady Andrews said, we should also consider the practical effects of this amendment. In order accurately to assess the level of house price divergence or convergence, there would have to be what would amount to an annual revaluation of all 22 million properties, with all the cost implications that that would imply. The assessment would have to look not just at the national picture but also at regional and local levels to reflect the fact that divergence can happen, and have an impact, at the micro level just as much, if not more, than it does at the macro level. Sir Michael Lyons himself noted this point in the interim report that he published at the end of last year. Moreover, I have no doubt that many individual householders would be tempted by this process to enter into some sort of annual debate about whether the Government should revalue that particular year, according to whether they themselves stood to win or lose by that particular set of figures. Moreover, one can well anticipate the media frenzy that will probablyand unhelpfullyensue. We have seen in recent weeks just how interested the media are in council tax. That cannot be a sound basis on which to take forward the important decision on when, or when not, to revalue.
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Let us be quite clear: revaluation is not simply about reflecting divergence in prices across the property market, still less about any particular degree of divergence. The case for revaluation is simply to ensure that property values are fairly reflected in council tax bandings and that values are up-to-date and timely and can be sensibly handled by the Valuation Office Agency and all other interested parties. We are interested, above all, in fairness: but fairness does not depend on passing some sort of arbitrary test, as implied by this amendment, of the level of divergence between past and current property values.
The Government's view is that the right way forward, in the light of the Lyons review and their response to that, is to propose and justify a date for revaluation to Parliament, and for Parliament to consider the merits of that date and justification by the process of debating the affirmative order provided for in the Bill. Our view is that that would be a rational basis on which to consider our strategy. That is why we cannot agree to this amendment. I hope that the noble Baroness will feel reasonably content with my reply and will be happy to withdraw her amendment.
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