Local Government Finance — House of Lords, 2017-07-13
Topic: Housing
Meghnad Desai (Labour, Centre-left): My Lords, we are very grateful to my noble friend Lord Kennedy for initiating this important debate. Unlike some other speakers, such as my noble friends Lord Smith and Lord Kennedy, I have no experience of local government, but I am an economist In all the years I have spent in your Lordships’ House, local authority revenue has haunted British politics. I am old enough to remember what was there before the poll tax. It was the biggest crisis in British politics that there was a need at that time, with the rating system, for the Government in charge to take the bull by the horns and revalue properties, because property prices had risen. Governments were proud that they had. Rising house prices is a fundamental part of British politics and we are alarmed when property prices are not rising. But when it comes to earning the state’s share of the rising capital value, we are suddenly very shy. Because of the Conservative Government under Mrs Thatcher, we do not want to go into the tricky idea of revaluing property and then passing on the standard rateable value calculation Then we got into the poll tax. We all remember what happened with that. It was a complete disaster. Then we had the council tax. I remember taking part in the debate on council tax and trying to point out that it would not be adequate unless there was flexibility to increase council tax or add new property bands, because property values would rise. We know that; it is a fundamental fact. So here we are discussing a variety of revenue sources. The noble Lord, Lord Shipley, talked about a variety of sources that his party has been proposing over the years—local income tax and various other things—but we are not taxing the most valuable asset local authorities have. It is like the elephant in the middle of the room: we know that when we talk about that we are going to talk about every little bit—business taxes and this and that At some stage, one of the political parties has to bite the bullet and say that we need a royal commission or some other official body to sit down and examine how much property prices have risen since the council tax was introduced. We all know that it is a gigantic sum. I have lived in a house in south London since 2004. I might not be too far wrong in saying that the property price has risen by three times. I am still paying the same council tax. It would be fair for me to pay a bigger local authority tax so that my local authority does not have to shut down local libraries. Yes, I can join the campaign to not shut down local libraries, but that will not solve the problem. They need money. If you unlock that particular source of local authority wealth—houses cannot run away; they have to be there, so you can be pretty sure it is your asset—then they will have a flexible and buoyant source of revenue. You could even cut the council tax rate and increase the revenue. It is a win-win solution. You could say, "If we get into power we’re going to cut the council tax rate but we’re going to revalue properties". It could be done—if the Government want, I could do it in 15 days—and we would release this buoyant source of revenue and solve a lot of the problems local authorities have As I said, this could be done keeping the current structure of council tax intact. You do not need to be predatory or increase the tax rate. As some people may know, there is the philosophy of Henry George, who said in the 19th century that countries need only one tax: on the improvement of landed property. If you had that one tax you could abolish all others. I have done some work on that—I will go down that route—and we have a source of taxation that we are deliberately not using because we think it will be very unpopular. We are willing to go through austerity and all the hardships local authorities have. Even local authorities are not thinking about this as a source taxation Being an academic economist, I do not have to worry about the real world; I can think about ideal solutions. One feasible solution is to keep council tax but have a panel that revalues properties across the country. It does not have to rely on anything subjective; there is enough evidence in estate agents’ records. We know what transactions have taken place in each area and we know how much property prices have gone up. We could easily treble, if not quadruple, local authority income from council taxes. I know it will not happen. I have spent a lot of my life saying things here that will not happen that ought to, but we ought seriously to consider, on a bipartisan or all-party basis, that the time has come and we cannot deprive our local authorities of a fruitful source of revenue and go through torturous negotiations between central and local government Every party in one way or another tells us how valuable local initiative is, how much we want to decentralise and, once we have delegated power to local authorities, how power should be near the people. The Conservative, Labour and Liberal parties have slightly different philosophies, but we are all for it. It is only when it comes to giving the money that we suddenly become centralist. If we stay centralist we will deprive local authorities of proper revenue. That is unfortunately a sad truth, as some speakers have said, and more will talk about it. I suggest to the Government that they have a panel to revalue properties across the nation. They have enough problems on their hands anyway; one more will not make much difference, so they may as well bite the bullet. Then, we can have a proper yield from council tax. That will solve the problems of local authority financing.