Council Tax Valuation Bands Bill [HL] — House of Lords, 2015-09-11
Topic: Macroeconomics
Nicholas True (Conservative, Centre-right): Sorry, my noble friend’s father—I apologise. Anyway, we are interested in policy and it is absolutely true that what my noble friend Lord Marlesford has come up with has some ingenious aspects When you think about policy, you need to think about what you are trying to achieve. One effect of reforming a tax might be to raise more revenue. I noticed from the noddings on the other side at the speech of the noble Lord, Lord Desai, that there is certainly some interest in the possibility of raising more tax from the better off by this mechanism. Personally, I would like to hear of a little more ingenuity in reducing spending. I do not think that my noble friend was after raising more revenue overall The second reason might be redistributive. Actually, if you want to redistribute money from the wealthy to poorer people, there are far more effective methods than working through bricks and mortar; you go directly to income and the pay packet. That is a well-tried mechanism. Another motivation might be—I have heard a lot about this in this debate—some sort of mild embarrassment about the fact that wealthy people live cheek-by-jowl with people not so well-off: a distaste for the privileges of substantial wealth, one of which might be property We are getting a rather confused approach in the way that policy is going at the moment. Do we want to have wealthy people or do we not? I follow very much my noble friend Lord Flight’s remarks about stamp duty. We have lately seen a reform of child benefit, which has effectively been withdrawn from those earning over £60,000 a year— not necessarily the way I would have reformed child benefit, but it is done and I am perfectly content with it. On the pension side, we want to reduce privileges for those earning more than £150,000. Meanwhile, before the Recess, we had a measure in your Lordships’ House proposing unlimited free childcare on the ratepayers for people earning up to £5 million, £10 million or £20 million a year. Indeed, we pay for free school meals for the five and six year-old children of people of unlimited wealth—a policy which overall costs the country more than £1,000 million a year. So we have a slightly confused view in different areas of policy on whether or not we want to get after wealthy people The trouble with going after property, as others have indicated, is that it is an imperfect measure of what is actual wealth now. Income and property value do not always coincide. This is a point which others have alluded to and which we can look at in Committee, but I say to my noble friend that this is written as a retrospective measure. Anyone now living in a property which had been bought or sold since 2000 would suddenly find, on the passing of this Bill, that their council tax went up overnight if they were at the upper end in parallel to the other measure. We would be introducing a new taxation system based on the values of up to 15 years ago in place of one based on the values of up to 23 years ago. I do not know whether that is what is intended but it looks to me to be retrospective I believe that property taxes in this country are relatively high in international terms. There are good economic arguments, as the noble Lord, Lord Desai, said, for raising them if we wish to. It is absolutely correct to say that stamp duty in the south-east, and in London in particular, is counterproductively high, and one would not wish to add another disincentive effect by setting council tax levels too high and discouraging people from moving. Inheritance tax, contrary to the sleight of hand of my right honourable friend the Chancellor, is scheduled to go on rising—the take from it will rise by 50% in the survey period, whatever you see in the headlines. So property is quite heavily taxed, particularly at the higher level, but that is not necessarily a reason to address reform in itself of a tax which, I remind noble Lords, is about paying for council services. It is not a surrogate wealth tax or a surrogate mansion tax; it is designed to pay for council services. That is another philosophical issue that we need to consider In the detail of the Bill is an extremely ingenious proposal to put the Valuation Office Agency out of business—and, as a good Tory, I can certainly follow that. Measuring values when properties change hands in any reform is a very ingenious proposal. Many properties of course change hands not on sale but on succession: they change title when somebody dies, and the value is registered through the IHT system. The Bill would seem to include that form of succession, so the higher council tax would immediately bite on the carer of an older person who had died. The definition in the Bill is "bought or sold", and whether that includes inherited needs to be clarified in Committee. A lot of people who are living together and who already fear the impact of inheritance tax will be interested in that aspect, which is something to probe in Committee I do not want to tire the House too much, but we need to look at the impact of the measures in Committee. It is certainly fiercely redistributive, as my noble friend has said, within local authority areas. The dampening effects within the council tax system would lower band D in an area such as mine with a large number of higher-value properties What then is the impact on the authority as a whole? Normally, the grant system would adjust itself to account for the impact of changes in council tax and would claw back the kind of windfall gains that some authorities might get. If this came in, it would probably have the effect of my authority getting a negative grant and having to pay the Treasury money. Some might support that. Before Committee, for the convenience of the House and my noble friend, I will run a council tax model through our computer on this basis and see what impact it would actually have. I do not think that every Government would compensate local authorities for the possible effect on their area of this change in the system. There is therefore a risk that people across the financial board might lose money if Governments claw money back Although the suggestion is ingenious and the mechanism is particularly interesting, I am concerned about the retrospective effect. As other noble Lords have said, we have to look carefully at what the impact of the new bands might be and whether the levels are right. There are irrationalities in council tax, as there are in every form of local taxation. Unless central government deals with it, there are basically only three ways of doing it: a local income tax, direct charges for services or a levy on property. At the moment we have a sort of mix. I personally think the balance overall is not too bad at present. My noble friend’s Bill is certainly worth considering, but would I go forward with it without considering very carefully in Committee the specifics of some of the issues that I have raised more broadly? On balance, I would probably leave it, but I would want to investigate further whether we could make savings through the Valuation Office Agency issue.