Local Government Finance Act 1992

[Victor Wolfe (CON)]

Mr. Speaker, 

I rise today to present legislation - the Local Government Finance Act 1992 - to fulfill a commitment made by this Government to eliminate and replace the Community Charge. 

Our Government has heard the concerns regarding the way the Community Charge was levied and assessed on individuals throughout the United Kingdom. The flat levy that applied regardless of ability to pay made the imposition of the tax simpler. However, that does not necessarily mean that it is better. Rather than spend needed resources on tracking down those who avoided the tax or increasing enforcement, this Government has decided that a new method is required- one that can better take into account the ability to pay while also ensuring that community needs are met. 

That is where this legislation steps in. It would task assessors throughout the United Kingdom with determining the value of land and improvements throughout the United Kingdom- which is certainly useful for policy purposes- and then grants the ability to apply a tax based on that value. Rather than establishing a flat charge as was done with the Community Charge, it sets up a system wherein there are bands- based on the value of property and the distribution of property values- and each band is charged a different rate. That way, more expensive properties- which are generally held by those with a greater ability to pay- would have a higher charge than those in lower bands. 

This legislation also sets up regular revaluations to ensure that there is no unfair treatment for new properties or that there is no unfair treatment for those who see their housing values move in one way or the other. This Government will also revisit the bands on a regular basis to ensure the bands move appropriately with housing value as well to again avoid that unfair taxation. 

We would be remiss if we did not include provisions that would allow for individuals to challenge their valuations in a fair and transparent manner that reflects the rule of law. Because again, it is important that we are fair when it comes to determining property value and, by extension, the tax assessed on it. 

This represents a fulfillment of a vital Government promise to scrap the Community Charge and replace it with a fair, transparent, easy-to-understand system that allows us to fund the vital services that local authorities provide. And with that, Mr. Speaker, I commend this bill to the House.

[Vivian Rook (LD)]

Mr speaker

I beg this bill be printed and read a second time

[Redgrave]

ORDER! Second reading!

[Alex Cardigan MP (LD)]

Mr Speaker,

The Poll Tax - or Community Charge - was a doomed idea from start to finish. Regressive, unpopular, and just, simply put, unfair. It is with great pleasure that I took to the streets with thousands of others to protest it, and with great pleasure that it seems it is at an end, and that Thatcher's Government as a whole is at an end. This legislation, though, is not exactly a work of art either - having presented culture documentaries on the BBC for as long as I did, I should know. It is deeply flawed, and in many ways and places, also deeply unfair, in a manner akin in regression to what it is replacing. This may be an improvement - it is hard to create a worse system than what it replaces - but it misses some key opportunities to create a fairer, more local, more progressive system to fund our local authorities.

This legislation will mean that in my constituency, Montgomery, ratepayers will get a worse deal than in, say, Edinburgh's leafier suburbs. Similarly, ratepayers in the east end of London will be getting a worse deal than... well, those who live in pleasant middle-class country cottages on the Welsh coast - even if they're just holiday homes! That, as well, Mr Speaker, is before we even get how the inequity is not just regional, but individual, and person-to-person. There is zero distinction between multi-millionaires who own country estates, and perfectly well-off, but by no means rich middle-class families who live in homes that are narrowly valued over the Band H threshold. Due to the way that these rates will be set, too, it is an inevitability that those multi-millionaires will pay a far smaller proportion of their income to their local authorities than those middle-class families in nice houses, and those in worse quality housing. All of the above is rife with contradictions and inequities in who pays what - a more progressive system, a local Income Tax, which Liberal Democrats have long-supported, would eliminate most of these contradictions.

The system being proposed here is an improvement. But it is rife with flaws and errors that cannot be amended away, and that require a fundamental rethink of how we make local taxes genuinely progressive. The Council Tax as proposed here regressive conceptually, punishing taxpayers in Wales compared to those in Scotland, and those in England compared to Wales. It also lets the ultra-wealthy off the hook, whilst keeping middle class families firmly on it. Me and my party will be voting against it, and standing by our earlier proposals of a genuinely progressive system. We can do far, far better than this, Mr Speaker.

[Tommy Dawson (LAB)]

Mr Speaker,

First of all, I would like to formally thank the working people and activists who bravely stood up to the unjust, predatory Poll Tax and looked the cruel Government that imposed it squarely in the eye - and won! From getting 100,000 people to march on a single day, to the unprecedented numbers of working people who mobilised to sign petitions, to picket, and to boycott injustice, what those who fought for justice accomplished was no easy feat. Their incredible success speaks both to the power that ordinary people possess which they can leverage for change as well as just how mean-spirited, punitive, and vicious the Poll Tax - a policy developed, supported, and implemented by members of the bench opposite - truly was. Let the defeat of the Poll Tax be a reminder, both to working people all across Britain who do real work, who perform the services that make our country run and as well to those in this Chamber who have grown far too accustomed to this palace’s sterile halls, to the backroom dealmaking, the cozy relationship with the press barons, the fancy dinner parties - that real change toward progress, toward building a better society, always comes from below. Ordinary people not only have the power to build a better world, but it is their interest to do so. I cannot be prouder to hold the defeat of the Tory Poll Tax as a sterling example of that simple truth. 

As for the legislation that the Chancellor has proposed today to replace his party’s Poll Tax - we must acknowledge that it has been proposed more than a year after such legislation was promised to the British people in a high production televised statement. Nevertheless, I am happy that after a little prodding from my honourable colleague from The Wrekin, the Government have taken action. With that in mind, I have a couple of questions for the Chancellor to kick off our discussion on the substance of this bill. 

First, after more than a decade of cruel cuts to our communities, our towns, cities, and villages which are acutely suffering from the intentional hollowing out of our industrial base so that a few may prosper, it is crucial that our communities receive record investment to ensure that they can rebuild and be places of community solidarity with strong neighborly bonds, places where parents are proud to raise their children and where children are proud to grow up, where services are available to uplift the struggling and alienated, and all may enjoy a full life. Thus, my question is a simple one: what is the estimated revenue that this bill will raise for our communities? Secondly, how did the Government determine what the band rates and value thresholds included in this bill would be?

The answer to these questions are crucial to the opposition’s ability to scrutinise this legislation, knowing - as working people in every region know - that sustainably funded record investment in local government is needed to repair the damage inflicted on our cities and towns over the course of 13 years of Tory neglect.

[Victor Wolfe (CON)]

Mr. Speaker,

The lofty rhetoric of the member for Montgomery aside, this is not regressive- the tax is designed in fact to be progressive and to hit higher-valued properties at higher rates. That is very much the definition of "progressive" in terms of taxation. And as it relates to the proposal by the same Member for a local Income Tax, I can say the Government considered that as a potential option and rejected it for the very clear reason that it would do far more to rob local communities of funding more than anything else. Income is not tied to where people LIVE, but where they WORK, and trying to fund services in a place where people live based on how much they earn at work would benefit some communities and negatively impact others. It would require far more centralised control over how funding is redistributed from one community to another in a way that negates the idea of having local authorities have some measure of control to begin with. It is, like many ideas that this Government looked at, one of those things that sounds good but when you dig into the details, so to speak, you find that you end up with a worse idea than doing nothing at all.

And to my colleague opposite- how I have missed his questions, Mr. Speaker, on policy and programming but I look forward to being challenged by him soon- I can say that yes, we have heard the very clever yet short-lived hints that we had done nothing until we had been questioned. This Government arrived at the legislation you see here after consulting with experts, after working with the Civil Service, after examining the costs and benefits of new proposals before deciding on the least-bad option. Certainly less bad than the Community Charge.

This Government agrees in the need for expanded local and community investment. Our last budget saw great efforts put into that space and I am certain that our next budget will do the same. Because these areas provide vital services that have some of the most direct impacts on the day-to-day lives of individuals and therefore are the areas where efficient government works better- and that's something that I think can truly find a cross-party consensus.

To the questions posed by my colleague opposite, the member for Sheffield Brightside, the estimated revenue that this will raise is provided for in the bill itself: the rates within bands are to be determined based on local authorities identifying and meeting their needs and requirements. There will of course be redistribution of other funds in grants from Her Majesty's Treasury as well as the collection of business rates, but this ensures that we are not asking for local authorities to do anything less than meet their basic cost requirements to fund day-to-day activities, with additional funds coming from budgets for expanded investment.

As to the question on how the bands were established, they were linked in part to the ratio of rates that is laid out in the legislation and looking at the average value of properties in each constituent part of the United Kingdom. So for instance, the average house would fit solidly in Band C- which ranges from 90% to 120% of the average price. This broad range is to take into account the fall of home values since 1990 given the recession; so as economic indicators improve we're not dropping the average price at the lower end of a higher rate band. Houses that are twice the value- which is based on current value- will pay twice the tax or more depending on where they fall on the band. Houses that are of a lower value will likewise pay a lower tax: if a house is two-thirds the average value then our calculations based on the bands that we've set out here will result in a tax bill that is two-thirds less than the average. This accounts of course for a range of properties which allows us to more predictably account for homes: if you know you are in Band C, like the average home value, then you know that with revaluations and adjustments accordingly that you will be in Band C unless you sell the house after a significant value of improvements.

Additionally, the banding would simplify the valuation process- though the legislation does require a full a thorough accounting of land and improvements in a way that would inform future Parliaments- say in seven years when the first revaluations provided for when this legislation takes place- in how to increase the effectiveness of this tax.

[Redgrave]

Division!

[Nicholas Eden (LAB)]

Aye!!

[Quinn Shaw (LAB)]

Aye...

[Bibi Lauria (CON)]

Aye..