Asked by
To ask Her Majesty’s Government what plans they have, if any, to
introduce higher rate bands for Council Tax.
The Minister of State, Home Office and Ministry of Housing,
Communities and Local Government () (Con)
I recognise my noble friend’s interest in this issue, but the
Government do not have any plans to introduce higher bands for
council tax. Many people living in high-value properties are on
low incomes and may have lived in their homes for a long time.
Higher bands risk penalising such people, including pensioners,
who have seen their homes increase in value. They could face a
substantial tax rise without having the income to pay the higher
bill.
(Con)
Does my noble friend agree that it would be odd to calculate
today’s income tax on what people earned 30 years ago, but this
is the basis on which we fund local government? The council tax
is out of date, arbitrary and regressive. While the right policy
would be revaluation, ducked for too long by successive
Governments, would it not be right in the meantime to take the
higher band and, without breaking any manifesto commitments,
introduce two extra bands to bring in extra revenue from those
with more valuable assets?
(Con)
My noble friend’s suggestion has some merit. Even a limited
revaluation would be costly and would yield significant extra
revenue only in those parts of the country where house prices are
the highest, given that council tax income is not redistributed.
It would also leave council tax payers in a rather odd, and
arguably less fair, situation where some were paying their tax
based on 1991 values while others were doing so based on prices
in the present day.
[V]
According to the citizens advice bureau, council tax is the most
common debt problem faced by families in Britain, with 86,000
people in England struggling to keep up with payments. The
current system heavily favours the south-east and
disproportionately disadvantages the poor. As part of the
levelling up agenda, what consideration have Her Majesty’s
Government given to a land value tax to address these
inequalities?
(Con)
My Lords, the Government do not have any plans to introduce such
a land value tax, but they are committed to supporting those on
low incomes, including by increasing the living wage and by
spending £111 billion on welfare support for people of working
age in 2020-21.
Lord McLoughlin (Con)
My Lords, the council tax was introduced as a result of the
abolition of the community charge, which was introduced as a
result of the discredited rates system. One reason why the rates
system became so discredited was that there was no revaluation.
There has been no revaluation of council tax for 30 years. Are we
going to find ourselves in the same position in another five
years if we do not act soon?
(Con)
I note my noble friend’s call for a council tax revaluation. As I
said in my previous answer, a full revaluation would be costly.
The council tax bands are well understood by residents and
provide a stable income for councils, so at this stage we have no
plans for a full revaluation.
(Lab)
My Lords, how is it possible for a £54 million luxury house in
London’s Mayfair to have a lower council tax than a former
council house on Windebrowe Avenue in Keswick in Cumbria and
almost the same council tax as an £80,000 house on Moorclose Road
in Workington, both in my former constituency? Is it not the
simple truth that the whole council tax system is now
discredited? It is unfair, it penalises much of the north, it
favours London and much of the south, and it is now in urgent
need of reform.
(Con)
My Lords, I am interested to hear the specific examples given,
but we must recognise that, for local authority funding, council
tax represents only a proportion of the income received. That is
why we try to equalise through measures such as the grant system,
which recognises the index of multiple deprivation as one of the
reasons in how you provide grant—
A noble Lord
No.
(Con)
Yes, it does. On that basis, grant enables areas with lower
council tax bases to receive 16% more in core spending power.
I recognise the point made by the noble Lord about the disparity
in valuations between the north and the south, but it is a system
that works well to develop the funding that councils need at the
moment.
(LD) [V]
My Lords, I refer the House to my registered interests. What
consideration will the Government give to the potential benefit
of a proportional property tax, as recommended by the Housing,
Communities and Local Government Committee to replace council tax
and business rates in its report published earlier this week?
(Con)
My Lords, we have looked at putting on hold the reform of the
local government finance system because of the pandemic, and
further reforms will be potentially be brought forward as a
result of the spending review. I note the idea that the noble
Lord raises.
(Con)
My Lords, I yield to no one in my passionate belief that the
state should tax the citizens less, but domestic real estate is
by international standards undertaxed. It would not be that
expensive to restrict a revaluation to council tax band H
properties—perhaps those over a certain current market value. We
should then look at empty properties. There are currently 30,000
empty properties in London alone, with a value of £15 billion.
They should attract a surtax, along with overseas-owned
properties.
(Con)
My Lords, I note that my noble friend again calls for a new,
higher band of property. If that higher band were based on 1991
values, the Valuation Office Agency would need to revalue all
properties in the current top band. That would certainly be
cheaper than a full revaluation.
(Lab)
I refer noble Lords to my registered interests. The impact of the
pandemic has led to the worst recession of any major economy.
With the virus still not under control, local councillors will
again be forced to raise council tax this year to protect vital
local services, just when many families are struggling to make
ends meet. Will the Government remove the necessity for planned
council tax rises by giving councils the resources they need and
stand by their pledge, so far not honoured, to do whatever is
necessary to support councils?
(Con)
My Lords, I do not recognise the picture that the noble Baroness
paints. Throughout the pandemic, we have provided considerable
additional funding for local authorities. Local authorities
received £3.8 billion in social care grant funding through the
social care grant and the improved better care fund. We continue
to support councils throughout this very difficult period.
(LD) [V]
Hardly a week goes by without a news story about someone’s new
basement causing problems to their neighbours. Should there not
be an automatic revaluation when such improvements are carried
out and higher bands introduced to cope with massively inflated
property values, or do we need a new system altogether, related
to the ability to pay?
(Con)
My Lords, I am delighted that all these ideas are being floated
on how we should support and organise the funding of local
government. As I said, the Government have put that on hold, and
we are looking at bringing forward measures as part of the
spending review.
(Con)
My Lords, there is a clear rationale for introducing higher-rate
council tax bands. The gap between the top and bottom bands is
ludicrously small compared with the value of the premises. I ask
the Government to consider reviewing the whole territory of
property taxation and introducing a new, fairer tax covering
property—commercial and residential.
(Con)
I thank my noble friend. He joins the chorus of people calling
for new bands and a reform of the council tax system, but, as I
have said, we do not intend to bring in new bands. Plans around
local government finance reform have been put on hold and will be
carried forward as part of the spending review.
(Lab)
My Lords, does the Minister not realise that the disparities in
council tax create a lot of the poverty that he referred to in
his earlier statement? Is he aware that the maximum level in
Westminster is £1,655? In every district in Cumbria, the average
is in excess of £4,000. How can that be fair?
(Con)
My Lords, I point out that Westminster has a low-tax policy and
sets probably the lowest council tax in the country, and it
should be commended for being a low-tax authority. Certain
authorities know how to squeeze every penny in every pound, and I
commend Westminster on being able to do that.
