Council Tax (New Valuation Lists for England) Bill

As the hon. Lady knows, the business rate revaluation has been based on its being followed by dampening mechanisms to take account of the differences in the way in which the rate works in various parts of the country. When there is a transition in value between various parts of the country, the dampening mechanism works to a better or lesser extent in different places to equalise as far as possible the effect of the revaluation over a period of time. However, if a dampening mechanism is introduced, it cannot necessarily ensure that there is no difference in yield because it works differently in different parts of the country, depending on the change that has occurred in the revaluation. A revaluation with a dampening mechanism cannot give a revenue-neutral, guaranteed yield in the way that the Government suggested could be done for council tax revaluation. I am sure that the hon. Lady has been greatly enlightened by what I have just said. When we consider bands and whether we need new ones, I want to ask whether we need them at all. The previous Conservative Government introduced bands in the Local Government Finance Act 1992. They were prepared in something of a hurry, on the erroneous understanding that they would ultimately get rid of revaluation. I believe that a system of points would be a fairer and better method of valuing properties than the current bands system. We would not then have the worry about moving between bands. Points would be given on the basis of a specific valuation. As we have heard, the Institute of Revenues Rating and Valuation has said that, if revaluation were to proceed, it would provide an individual valuation for each property. It would thus be relatively straightforward to move from individual valuation to a series of points rather than placing properties in a band. The total number of points that a local authority had would form the basis on which council tax could be levied. That would provide considerable certainty about the amount of money available for the local authority to levy council tax as part of its budget-making activity. Such a system would also mean, if combined with a change in the way in which councils set their council tax, that there would be no gearing effect. If, for example, one were to introduce a marginally variable core grant at the beginning of the process, set the council tax on the basis of points rather than bands, then compensate at the end of the process, one would simply not have the gearing effect. The way in which the settlement was brought about would effectively remove much of the concern about that effect. The right hon. Member for Skipton and Ripon and the hon. Member for Brent, East both mentioned proposals to localise the business rate. It has been suggested that that should happen because it would introduce a greater degree of autonomy to councils in terms of the decisions that they make about their finances. If there were no gearing effect, however, that would be of less significance. However, the right hon. Member for Skipton and Ripon rightly pointed out that, since the business rate was introduced, with the intention that it should not be levied at above the rate of retail price inflation, the percentage of funding into the local government stream that the business rate has provided has gone down from about 27 per cent. to 22 per cent. If we had historically pitched the level of the business rate against increases in earnings rather than in prices, it would have been possible more or less to have kept up that proportion over a period of time. If we prospectively pitched the business rate against earnings rather than prices, it would re-equalise that proportion over time, so that it would continue to operate on a level basis, rather than falling continuously against the total proportion of moneys raised for local government and against the amount raised by council tax. That would resolve another problem. There are a number of measures in the Lyons review—or associated with it—that the Government could consider in the context of revaluation, over and above whether we revalue or not, which would bring back a council tax whose operation was significantly refreshed. That is the potential prize that lies ahead of us, assuming that we consider that council tax should continue to be the main device whereby local tax is raised. If, as a result of this process, we achieve a council tax that reflects more marginally on people’s concerns about the tax bill landing on the carpet, that relates more fairly in terms of its effects on the rise of property prices and to the actual amount that people pay, and that is in line with the way in which the business rate works, we will have done a good job, so far as temporarily suspending the revaluation is concerned. If the tax comes back refreshed in that way, the question of revaluation will play a part in the process but it will not form most of the process. That would be a positive outcome from a decision that people in some quarters are calling a U-turn, and it could result in something good for future local government.