Council Tax (New Valuation Lists for England) Bill

My Lords, on behalf of my noble friend Lady Andrews, I beg to move that this Bill be now read a second time. Before I start, perhaps I should explain that my colleague and noble friend Lady Andrews is unable to be with us today because of family bereavement. I am sure that all Members of your Lordships’ House will want to send their sympathies and support to her. This short Bill of two clauses comes before the House from the other place unamended and with the support of Her Majesty’s loyal Opposition, who went on record as saying:"““There is little difference between the Opposition and the Government . . . We think that postponement is a good thing””.—[Official Report, Commons, 1/12/05; col. 416.]" The Liberal Democrats also said: ““We support the Bill””. That is fairly clear. On 20 September last year, the Government announced our decision to extend the remit of the inquiry by Sir Michael Lyons into local government funding and, as a result, to postpone the 2007 council tax revaluation in England. The Bill is the legislative consequence of that decision. In brief—I will go through the detail for the benefit of noble Lords a little later—it removes the requirement in the Local Government Finance Act 1992 for a revaluation of domestic properties for council tax purposes to be implemented by April 2007. At the same time, it removes the requirement for subsequent revaluations to take place at intervals of no more than 10 years. Also, it replaces both those provisions with another that allows the Secretary of State to set the date of any revaluations, by order subject to affirmative resolution in the other place. That differs only slightly from the existing order-making power in the 1992 Act for the Secretary of State to set the date of a revaluation if it is to be in advance of the 10-year maximum interval. It is not the biggest Bill ever to come before your Lordships’ House, but it has importance beyond its size for the future of local government in England. That importance comes from the time and space its provisions give us to allow Sir Michael to complete his inquiry, and for the Government to properly consider his recommendations and consult widely on them, before moving forward with a reformed local government finance system. I do not intend to speak for an overly long time, but I would like to cover three things. First, I would like to remind your Lordships of the background to the Bill and the context within which it sits; secondly, I will outline the specific detail of the Bill and its provisions for the record; and finally, I will address some of the myths and rumours that have sadly circulated since the announcement of postponement and, in so doing, make it clear exactly what the Bill does and, perhaps more importantly, does not do. I shall begin by setting the context and by explaining our current reform agenda and the changes that are already under way. We are clear that the future of local government is critical to the future of the country. Local government is at the heart of national life and has a pivotal role in championing the communities in which we live and in helping them to prosper. It plays an essential role in delivering services, leading and co-ordinating the activities of local public, private and voluntary organisations, and making communities more pleasant to live in. When speaking at Second Reading in another place, the Minister responsible for communities and local government paid tribute to councillors of all parties and to hard-working public servants for the way in which they have raised standards. Since then we have seen the results of the Audit Commission’s Comprehensive Performance Assessment 2005, which shows that—even under the new and more challenging framework—more than 70 per cent of councils are improving strongly or improving well. That is an impressive performance, and shows clearly that local government is responding to the challenges of leading their communities and tailoring service delivery based on the real needs of local people, while at the same time delivering services that represent good value for money. Important changes are under way in local government. The new deal for communities initiative, neighbourhood wardens, and neighbourhood renewal strategies to tackle problems of deprivation and disadvantage have all been taken forward by councils. Local authorities are leading new children’s trusts across the country that are bringing together social services, education, health and other services, and local area agreements enabling councils and central Government to recognise and agree local priorities, rationalise funding streams and support greater local leadership. The Government believe that those changes represent not only a big challenge but a massive opportunity for local government, and we believe that that opportunity is most likely to be grasped if local government can focus on service delivery supported by financial stability. Underpinning that, the Government announced on 5 December last year the provisional local government finance settlement for 2006–07 and 2007–08. That settlement—the first provisional multi-year settlement that we shall have delivered—is a further demonstration of our commitment to local government delivering local services. By 2007–08, the increase in government grants for local services since the present Government took office will be 39 per cent in real terms. Through the new settlement arrangements the Government have provided another significant boost to local government with a financial package that is stable, predictable and adequate to meet the pressures that local authorities will face over the next two years, while keeping council tax increases down to acceptable levels. With the move to three-year settlements at the next spending review, that stability and predictability will be even greater.Investment and reform have gone together and have delivered. The communities that our local councils serve are growing ever more diverse with a greater range of needs and higher aspirations than ever before. That is something which we should all celebrate. But we should also realise that it means that local government’s role will have to change alongside the communities it serves. That is why we launched a debate on the future role of local government—local:vision. The debate has already generated a number of excellent ideas, some of which are making a difference to people’s lives. One of the clearest messages emerging from the local:vision debate, and which was reinforced by Sir Michael Lyons when he met with Ministers in the summer of last year, is that we need to be clear about what the new role for local government will be before taking decisions about individual functions or means of funding. The Government have listened and agree. We believe that we should make changes to local government funding only when we have a clear and complete understanding of what we want local government to do. That understanding must be shared not only by central and local government but by all those who help to deliver services and, most importantly, by the people they are there to serve—the general public. In short, we must settle function before settling funding. Your Lordships will be aware that in July 2004 the Government appointed Sir Michael Lyons to carry out an independent inquiry into local government funding, which was originally due to report by the end of 2005. He has made good progress with that remit and has started to work on his extended terms of reference, which the Government announced on 20 September. He is now being asked: to consider the current and emerging strategic role of local government; to review how the Government’s agenda for devolution and decentralisation could improve services; and, in the light of that, to consider how to manage pressures on local services. In the light of this work, Sir Michael will then address critical funding issues, including those of fairness, accountability, clarity, efficiency and effective management. He will produce his final report at the end of 2006. As noble Lords will know, Sir Michael published a consultation paper and interim report on 15 December. This set out his approach to his extended remit and his preliminary thinking on his work to date. The Government welcome Sir Michael’s publication as a useful contribution to the debate on the future role and function of local government and the way it is funded. This is an interim report—not a final one. Sir Michael has not come to firm conclusions, but has elaborated on his thinking to date. However, a number of important messages emerge from it. First, it reaffirms the Government’s view that effective funding reforms must be based on a clear view of what we expect from local government and, therefore, to have proceeded with revaluation of council tax in 2007 would not have been sensible. Secondly, Sir Michael’s research has revealed a weak public understanding of how local government is funded, confusion over how the responsibility for the delivery of local services is shared between central and local government and, in turn, a poor understanding of the cost of public services. Sir Michael suggests that this lack of understanding raises important questions about accountability and transparency. With the extension of Sir Michael’s remit, there is now a real opportunity to promote a greater understanding of local government among the public. We encourage all concerned to contribute to the next phase of Sir Michael’s inquiry so that he can offer the best possible advice in his final report at the end of the year. In this way we are confident that Sir Michael’s work will provide the platform for fundamental and lasting reform. As your Lordships will be aware, at the same time as the Government announced the extension of Sir Michael’s remit, they also announced that they had decided to legislate to postpone council tax revaluation. As the Government’s announcement of 20 September explained, the case for revaluation—that it is right to maintain a fair alignment between house prices and council tax bands—is linked to wider questions about the structure of council tax and to the operation of council tax benefit. This, linked to the other changes in the local government finance system, such as those that I outlined earlier, all led to the view that to proceed with the current timetable for revaluation would not be sensible. The Government, therefore, concluded that they need the flexibility to revalue as part of a fully developed package of funding reforms, rather than as a precursor to them, and at a moment of greater financial stability for local authorities. Although this is a short Bill, it may be helpful to your Lordships if, as I promised earlier, I now explain its effects in some detail. First, it removes the requirement laid down by the Local Government Finance Act 1992, as amended, for the compilation of new lists on 1 April 2007. Clause 1(3) amends Section 22B of the 1992 Act by removing the duty on the listing agency—in practice, that means the Valuation Office Agency—to compile a new valuation list for billing authorities in England on 1 April 2007, and a draft of that list by 1 September this year. By way of a slight digression, at this point I should reaffirm to your Lordships that, to prevent nugatory expenditure, the VOA stopped work on the revaluation of domestic properties in England immediately the announcement was made. But we should be quite clear that until this Bill—particularly this provision—is enacted the VOA remains obliged to carry out the revaluation. If Royal Assent is not achieved by the Summer Recess, draft valuation lists must be published by 1 September this year. The second substantive provision comes from subsection (4) which removes the requirement for subsequent revaluations in England on the 10th anniversary of the previous one, unless an earlier date has been specified by order. Until the Government have received and considered Sir Michael Lyons’ final report, we cannot take a view on how frequently revaluation should occur. Therefore, we think it right that we should not be statutorily committed to revaluing on a rigid, predetermined cycle. Finally, the Bill replaces those two provisions with a power for the Secretary of State to specify by order the date on which a new valuation list must be compiled. Such orders will be subject to the affirmative resolution procedure in another place, following the precedent set for similar provisions contained in the Local Government Finance Act 1992, which provided for the council tax in the first instance. For the sake of completeness, I should make it clear that Clause 2 simply provides for the short title of the Bill and, of course, for its extent. As the title of the Bill makes clear, the provisions have effect in England only. It does not in any way affect the approach being taken in the devolved administrations. In Wales, executive local government functions are, rightly, devolved. I can reassure noble Lords that the Government consulted the National Assembly for Wales on the subject matter and extent of the Bill before its introduction in another place, and the National Assembly indicated that it was content that the Bill had no effect on provisions relating to it. The Principality implemented its own council tax revaluation in April of last year. Noble Lords will be aware that the provisions of this Bill have no effect at all on the state of affairs, or local taxes, in Scotland or Northern Ireland. I conclude by turning to some of the myths and rumours that have abounded in recent months and weeks, some of which have been frankly ridiculous and absurd, and many little more than scaremongering. I will take this opportunity to set the record straight and reassure the House of the actual position. I cannot emphasise too strongly that this Bill does three things and three things only. It postpones the 2007 council tax revaluation exercise. Yes, despite the confused messages being fed by some to the press, the Government are postponing revaluation and have made clear that we do not believe that it will now happen in the lifetime of this Parliament. It removes the requirement for subsequent revaluations to take place at intervals of no more than 10 years. Finally, it provides power for the Secretary of State to set the date of revaluations by order, subject to affirmative resolution, as I said earlier, in another place. That is all it does. It does not legislate for a ““snooper’s charter””. It does not give powers to the Valuation Office Agency to forcibly enter homes or to take intrusive photographs at will. It does not change the basis on which a property will be valued. The Valuation Office Agency has been tasked to maintain an accurate valuation list for the purposes of fair distribution of council tax liability since the Local Government Finance Act 1992 was first introduced. The VOA has powers to carry out property inspections and, if need be, these powers extend to internal inspections. This is not a snooper’s charter, it is simply necessary to ensure that everyone pays their fair share of the tax. Indeed, the current powers date back to the Local Government Finance Act 1992. In fact, powers to carry out property inspections of this nature have existed since before the Second World War, so reports suggesting that the Government are introducing new powers are simply untrue. It is important to recognise, however, that staff and contractors of the Valuation Office Agency have no powers to forcibly inspect a property for council tax valuation purposes. The VOA does not forcibly enter people’s homes—it has neither the legal power nor the desire to do so. Yes, there are provisions in the 1992 Act for fines to be imposed if a valuation officer is refused access, but these provisions have never been invoked. Moreover, internal inspections are the exception and certainly not the norm. Suggestions, which I have read, that all 22 million dwellings in the English housing stock will be individually inspected are frankly absurd. As for photography, we have seen ridiculous suggestions that the VOA will be taking intrusive pictures of people’s bedrooms and personal belongings. Your Lordships will wish to be reassured that for a member of the VOA to take internal photographs of a property is extremely rare and would only ever happen with the express permission of the householder. Indeed, the VOA has very clear guidance for its staff about on-site photography, which specifically states that photographs can only be taken with the permission of the householder and that they must not show people, details of security systems, or valuable possessions. Finally, I wish to be clear that the basis on which property is valued for council tax purposes is the same now as it was when council tax was first introduced by the party opposite. The VOA seeks to assign a market value based on the variables that operate in the market. If one property has a scenic view and another overlooks a chemical plant, it is likely that the scenic view will attract a higher relative market value than the view of a chemical plant. I ask: what is surprising about that? If one property has an attribute, say an extension or loft conversion, which leads to its market value being higher than that of its next door neighbour, it is only fair that that should be reflected in its banding. That has always been the case—nothing has changed. The fact that the VOA is capturing property attributes in a database using codes does not indicate some sinister new big brother database. It is simply the most effective and efficient way of capturing data in a form that can be used by its automated valuation software to come up with a fair and justifiable valuation. That process has previously been done manually by a valuation officer. The only difference now is that the valuation officer has the benefit of modern technology to support him in his task—making valuation quicker, more efficient and more consistent. I would argue that that surely is in everyone’s interest. For the avoidance of confusion, it is worth my putting on record one or two specific details of the valuation process. For example, all properties are currently valued at 1991 equivalent values—1991 being the antecedent valuation date. This includes new properties. We should also be clear that extending or improving your property does not automatically lead to an increase in council tax. The value and council tax band of a property is only reviewed at the point of a ‘relevant transaction’, such as transfer of ownership through sale. Also, as council tax is based on bands, a property could rise in value as a result of improvements but remain in the same band, even if it were sold. So it is perfectly possible for a homeowner to improve his property without automatically incurring higher council tax charges. Finally, we have also seen stories suggesting that people who are unable to pay their council tax will be sent to prison. That is completely untrue. People who wilfully refuse to pay may be imprisoned, but that is entirely different from the position of someone who is unable to pay. Nobody has ever been gaoled for being unable to pay, nor would they be. Two and a half million people aged 60 or over now receive council tax benefit, which provides a rebate of up to 100 per cent on their actual bills. We know that many more who are entitled to benefit do not claim, and the Department for Work and Pensions is actively seeking to address this. It has already made the process for claiming the benefit easier and is working with others to encourage greater take up. In addition, households with someone aged 65 or over received £200 with their winter fuel payments, unless they were already entitled to a 100 per cent council tax rebate. These myths and rumours have only two effects—they undermine the council tax system and, worse, they frighten vulnerable members of society. I sincerely hope that this scaremongering campaign will stop and that, at least in this House, we will see a return instead to proper debate and dialogue based on fact. I commend the Bill to the House. Moved, That the Bill be now read a second time.—(Lord Bassam of Brighton.)