Cities and Local Government Devolution Bill [HL] — House of Lords, 2015-07-15
Topic: Housing
Patricia Hollis (Labour, Centre-left): My Lords, this is a probing amendment, for obvious reasons, and it has slightly awkward wording to put it into the scope of the Bill, for equally obvious reasons. Quite simply, it asks the Secretary of State to discuss with local authorities and return with a report on the financial impact and desirability of additional council tax bands, perhaps to have two or three above the current band H This issue is not going to go away—we are, I think, heading into a perfect storm. Local authorities and combined local authorities are rightly taking on greater functions for economic growth, for which they need enhanced resources. Yet in the past five years, our finances have been cut by some 40% while needs such as social care have grown. Those needs will increase even further when 50p an hour is added to the minimum wage for domiciliary care. That is highly desirable, but how is it to be funded? We need more money in the system On Saturday 11 July, the Guardian showed that in 2010 we had some 200,000 houses worth more than £1 million but that, just five years later, the figure is 525,000. The huge price distortion in housing over the past 20 years, with vast capital gains which are neither earned nor taxed, means that there is a widely shared recognition that our council tax bands which are levied on such property take a far higher proportion of lower rather than of higher incomes. The bands are highly compressed; therefore they are regressive and unfair, and therefore they should be modified—which, in turn, would generate more income Those bands were devised in the 1991 revaluation for the new council tax which replaced the Tory poll tax. I was among those who worked on that Bill, and we all agreed that we needed to revalue every 10 years or so. The longer you leave revaluation, the more problematic it is—and no Government, including my own, have had the guts to do it. It is precisely because the problem gets worse that no Government will step in to stop it getting even worse than it is. I fear that a full revaluation seems unlikely unless the Bill of the noble Lord, Lord Marlesford, goes for it. However, one quite modest piece of tinkering—adding on extra bands at the top—would be a useful way forward. It would do two things: it would bring in extra income to the local authority, and it would be fairer to individual families. There are 13 streets in London where the average house price is £10 million. No one in this House thinks it right that a property worth £2 million, let alone £10 million or £20 million, should be in the same band as a property with one-third or even 1/10th of its value Just to remind ourselves, band D is the fulcrum point of the eight bands. Dwellings in the top band H are rated at three times the bottom band A. The entire width between the bands is 3:1, so if band D is one, band C is eight-ninths of that, band B is seven-ninths and band A is six-ninths. There is a one-ninth drop for every band below D. Above band D, band E is 11/9ths, band F is 13/9ths, band G is 15/9ths and band H is two. Of course the higher bands cover a wider range of property price ranges, but even so, they have a more generous ratio to band D than smaller homes in lower bands. It is not a flat tax but it comes pretty close to one because the top band pays only three times as much as the bottom band, even though the property may be worth 30 times as much. This is profoundly unfair and regressive. We have a 3:1 ratio in our property taxes while the old rating system offered a far greater stretch—something like 20:1, I think—until it was abolished for the poll tax. In some countries, the property tax ratio is nearer to 20:1, and as far as I can tell, we have in this country one of the most compressed sets of local property tax bands in Europe and compared to the USA If one driver of this amendment is fairness for hard-pressed families, who need public services more than the wealthy, the second is income for equally hard-pressed local authorities. In the north-east, half of all properties are in band A and only 3% or 4% are in bands F and G, so the levy at band D is usually well above the English average. London and many parts of the south-east are the mirror opposite, with only 3% or 4% of properties in band A and 20% in bands F, G and H, so their band D is much lower still What are the implications? The result is that not only do the very affluent in London not pay a fair property tax within London but neither is it fair when compared to authorities outside London. Families in the lowest band A in Nottingham, Hartlepool and Walsall pay around one-fifth more in council tax than the residents of Kensington Palace Gardens, whose properties are valued at more than £40 million apiece. To take another example that the Minister may be familiar with, families in band A properties in Trafford paid almost the same in council tax—£736 —as families in band H properties across Wandsworth and Westminster.