The Parliamentary Under-Secretary of State, Ministry of Housing,
Communities and Local Government (Baroness Taylor of Stevenage)
(Lab) My Lords, I shall now repeat an Answer to an Urgent Question
that was given in another place: “Mr Speaker, to be clear, we are
not increasing the council tax referendum thresholds. The Secretary
of State sets thresholds, known as referendum principles, for
different classes of authority. Within these referendum principles,
local...Request free trial
The Parliamentary Under-Secretary of State, Ministry of Housing,
Communities and Local Government () (Lab)
My Lords, I shall now repeat an Answer to an Urgent Question that
was given in another place:
“Mr Speaker, to be clear, we are not increasing the council tax
referendum thresholds. The Secretary of State sets thresholds,
known as referendum principles, for different classes of
authority. Within these referendum principles, local authorities
do not need to seek consent from their residents to increase
council tax. The Government will maintain the previous
Government's policy on council tax, in line with the OBR forecast
made in March 2024.
The OBR forecast of the last Government assumed that council tax
would increase by a 3% core, plus an additional 2% for local
authorities with adult social care responsibilities, for the
entirety of the forecast period. We are continuing with the
policy set by the previous Minister for Local Government for
2025-26. In 2025-26, this will raise £1.8 billion. The purported
figure used by the shadow Communities Minister failed to account
for the new homes being built or other local government income,
such as retained business rates, which accounts for an additional
£600 million. That is why at the Budget we announced over £4
billion in new local government funding, including an additional
£1.3 billion in the local government finance settlement. This has
been welcomed by the sector. Indeed, the Conservative chair of
the County Councils Network, Tim Oliver, said that:
‘Today's announcement of £1.3 billion in new core funding for
councils offers some welcome relief to the day-to-day financial
pressures'.
Decisions on the council tax level to set, or whether to hold a
referendum to go beyond the referendum principles, sit squarely
with councils. The Government, however, are committed to limiting
increases to the 5% principle and will not raise any taxes on
working people. We continue to remain committed to the single
person council tax discount and local council tax support
schemes. We will set this out fully in the local government
finance settlement, which will be presented to Parliament in the
usual way”.
3.24pm
(Con)
My Lords, when it comes to local government, the Chancellor is
giving with one hand and taking away with another. The increase
of employer national insurance contribution will hit local
government hard, particularly through its contracted services.
Can the Minister explain how the Government expect councils to
cover their increased costs without raising council tax, or are
His Majesty's Government happy to see yet another tax increase on
working people as a result of their Budget?
(Lab)
My Lords, the Government have committed to provide support for
departments and other public sector employers for additional
employer national insurance costs. This applies to those directly
employed by the public sector, including local government. We
will set out further details of how this support will be
delivered in due course.
(Con)
My Lords, given that the Government remain committed to the
principle that public opinion should be tested before an
excessive council tax is levied, would it not be consistent for
the Minister to step outside and ask the farmers how they react
to the imposition of inheritance tax on agricultural land, which
they were promised would not happen and which manifestly has an
excessive impact on agricultural values and their businesses?
Incidentally, I declare an interest: I have no agricultural land
myself, but numbers of my family do.
(Lab)
My Lords, it is quite a stretch from council tax to farmers'
inheritance tax. However, we are listening closely to farmers'
concerns. In fact, the Environment Secretary met the NFU to
clarify the changes in the Budget, and he met representatives
again yesterday. The approach we have taken is fair and balanced,
and the majority of farms will remain unaffected. Currently, 40%
of agricultural property relief goes to 7% of the wealthiest
claimants. That is not fair or sustainable and has been used by
some to avoid inheritance tax. That is why we are maintaining the
100% relief up to £1 million and 50% after, which is an effective
20% tax rate, half the normal 40% rate. We have ensured that tax
due can be paid over a 10-year period, interest free, and if land
is transferred seven years before death then farmers pay no
inheritance tax. I am assured that my colleague the Secretary of
State for the Environment is listening to farmers and will
continue to do so.
(LD)
My Lords, I have relevant interests in the register. Since 2016,
the previous Government imposed the social care precept on
councils which have those responsibilities, and this nearly
doubles the council tax rise each year. In my council, the social
care precept accounts for over £220 of the council tax on
average. Given that council tax is regressive, does the Minister
agree that this is not a fair way to fund social care?
(Lab)
My Lords, the noble Baroness makes a good point. We have all seen
the crisis in social care caused by the previous failure to face
up to the issues that were confronting that sector, and we heard
earlier from my noble friend Lady Merron about some of the steps
that have been taken to address it. This year, the Government are
providing at least £600 million of new grant funding for social
care as part of the broader estimated real-terms uplift to core
local government spending power of around 3.2%. We are committed
to reforming adult social care and improving the quality of care
for people in need, and that is why we have invested an
additional £86 million next year for the disabled facilities
grant, to enable people to stay well, safe and independent at
home for longer. In October, we introduced legislation to bring
in the fair pay agreement to ensure that those vital care
workers, who we know so many of our vulnerable residents rely on,
are recognised and rewarded for the important work that they
do.
Lord Clarke of Nottingham (Con)
My Lords, the most obvious problem with the council tax system in
this country is that it is based on a hopelessly out-of-date
valuation which no Government have dared to address in recent
years. It produces great anomalies in the council tax levied in
different parts of the country. As this new Government have a big
parliamentary majority and this is the early stages of the
Parliament, will they not have the courage to address this
obvious anomaly, so that at least the basis for council tax can
be fairer in future years and we can begin to establish a system
of revaluing, from time to time, to keep it a defensible
system?
(Lab)
As a former Chancellor, the noble Lord will have detailed
knowledge of this, and I am sure he made similar representations
to his own Government. We all know that problems are caused by
outdated valuations and the regressive nature of council tax.
However, widescale reform of the council tax system at this stage
would be time consuming and complex. We would still have winners
and losers whichever way we did it. Instead, this Government are
committed to fairer funding. We will start it in this year's
funding settlement, with a further review in the 2025 spending
review.
of Cumnock (Lab Co-op)
My Lords, does my noble friend agree that it would have been
great if we had had a much higher threshold in the European
referendum so that we could have avoided the disaster of Brexit?
It has been particularly disastrous for farmers.
(Lab)
I hear my noble friend's point, which he has made in the House
several times before. The impact of Brexit is widespread, and I
completely understand his point.
(Non-Afl)
My Lords, will the Minister return to the point that the noble
Lord, Lord Clarke, made a moment ago? Unless we address the gross
imbalance in the amount of money taken from various groups in
society in council tax, we will never make any progress on the
other side of ledger, which is how to spend the money on social
care. The Government must grasp this nettle. Is now not the best
moment to do it, when the Government have a large majority and a
long Parliament ahead to achieve their aims?
(Lab)
I thank the noble Lord for his comments. My honourable friend
Minister McMahon is very clear that we need to set up a fairer
funding settlement for local government. It is our choice to do
it this way, rather than by a complicated and time-consuming
reform of council tax. In this year's funding settlement, the
noble Lord will hear news about reshaping the way that funding is
distributed, and there will be further news on it in the spending
review next year.
(Con)
My Lords, further to the questions posed by the noble Lords, Lord
Clarke and , if the Government are not
prepared to do a wholesale revaluation, and I understand why,
could they not at least introduce two new higher bands of council
tax to produce more revenue for social care?
(Lab)
The noble Lord has made this point in the House before. It is a
good point; it needs to be considered alongside further reform of
council tax. That is not our priority at the moment, but when it
comes to be done, I am sure that his point will be taken on
board.
(Con)
My Lords, for the last few years, at the insistence of a Labour
mayor, Londoners in council tax bands D and B have had an extra
£60 added to their bill to pay for Transport for London. Yet the
mayor is about to enter negotiations with the unions for a
four-day week and an inflation-busting pay rise. What is the
referendum policy for London? With the charges that the mayor
keeps heaping on people and these raises in mind, will the
Government ask him to give taxpayers in London an opportunity to
have their voices heard?
(Lab)
My Lords, the citizens of London had a chance to express their
view in the recent election for the Mayor of London, and they did
so resoundingly.
Lord (LD)
My Lords, are the Government turning their backs on the idea of
tax reform for local government or as a whole? Of course it is
time consuming, but tax reform is fundamentally important. We
have an extremely complicated and unjust tax system. I declare an
interest, as I have lived between Yorkshire and London for the
last 40 years and, more years than not, I have paid higher
council tax on a house in Bradford than in London. That is absurd
and it is one of the things that tax reform ought to cope
with.
(Lab)
I can only reiterate my earlier statement: there are no current
plans to reform council tax.
(Con)
My Lords, I declare my interests as in the register. Further to
the noble Viscount's question, the Minister might be aware that
nearly a year ago at the Oxford Farming Conference, said, “Let me assure you that
Labour will not alter the IHT treatment for agricultural land. We
recognise that such a move would be damaging to the farming
sector”. Does the Minister agree with what he said then?
(Lab)
Again, that is quite a stretch from council tax. We constantly
hear calls from the other side that they do not like the steps we
had to take to fill the £22 billion black hole they left. Public
services are crumbling, including in local government. I have
heard lots of suggestions from that side about what we should not
be doing; what I have not heard is what they think we should be
doing to fill the £22 billion black hole. I have looked very
closely at the issues around inheritance tax. An individual can
still pass up to £1.5 million, including personal allowances, and
a couple can pass up to £3 million tax free. We have concern for
how the farmers are feeling, but some steps had to be taken to
fill that black hole. This Government have done so. We need to
stabilise the foundations of the economy and fix our crumbling
public services.
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