Andrew Stunell MP writes: Lib Dems should welcome localist reforms of Council Tax

Liberal Democrats have long called for reform to local government finance. No matter what alternative systems we’ve proposed, the key element has always been that the revenue was raised locally, and decisions about how to spend that money were taken locally. As you would expect of a Government with a Liberal Democrat influence, the Coalition is adopting that same approach. The consultation on the relocalisation of Business Rates has just ended, and today’s announcement by DCLG of the Technical Consultation on Council Tax contains a number of positive news stories for Liberal Democrats.

Take second homes for instance. You ask any Liberal Democrat in the Lake District or Cornwall what their biggest housing problem is, and second homes will come out near the top of the list. Tim Farron and Steve Gilbert have both raised the issue with me on more than one occasion. Second homes distort the housing market in an area, and make it even harder for local people to get onto the housing ladder. Currently, second homeowners receive a guaranteed discount of between 10 and 50% on their council tax bill.

Over the last two years alone, the second homes subsidy has cost local authorities around £90 million in lost revenue. Today’s consultation announces our intention to provide councils with the flexibility to charge full council tax on second homes and ensure their owners pay their way. It will help councils like South Lakeland invest more money in local affordable housing and it will ensure that local people struggling to pay the bills in their solitary home are not left subsidising the council tax bills of people wealthy enough to own two.

The other main news is on empty homes. As anyone who heard my speech at Autumn Conference will know, doing more to tackle the problem of Empty Homes has been one of my top priorities in government. We have almost 300,000 long-term empty properties in this country. That’s the equivalent of two years’ housing supply standing idle and vacant, whilst social housing waiting lists have soared, and the number of new household formations continues to outstrip the number of new properties built. Meanwhile the glut of empty properties can act as a magnet for anti-social behaviour and drag an area down. Tackling empty properties is not in itself the solution to our housing crisis, but it is an important ingredient, and we need to do more to give councils and communities the tools to get to grip with these problem properties.

And today’s announcements do just that. The consultation outlines our intention to end the mandatory discount on empty homes, and provide councils with the ability to decide for themselves whether to charge full council tax on an empty property, or offer a discount of up to 100%. Further still, as I announced at conference, the consultation outlines our plans to allow local authorities to charge an Empty Homes Premium – up to an extra 50% of council tax – on any property that has been vacant for two years or more. Crucially, we are retaining the exemptions for properties empty as a result of the death of an owner, or if the owner has moved into hospital or to give or receive personal care (Exemptions E,F, I and J, since you asked). This will ensure that the tax burden does not fall unfairly on the shoulders of those who are least able to pay. But the moves will give councils an extra weapon in their arsenal to tackle empty homes, and will act as a spur to their owners to bring them back into use. And there will be more details in the next few weeks on how councils and other organisations can bid for our £100 million programme to make those homes available for some of the many families stuck on waiting lists.

Both the changes to council tax on Second Homes and Empty Homes should be welcomed by Liberal Democrats everywhere. They are inherently localist measures, giving councils genuine freedom over whether to offer a discount or not, rather than centrally imposing one from Whitehall.

But please note it’s a consultation, not a done deal. We’ve set our stall, but we want to hear from you. If you think there’s something we’ve missed, or a change we need to make then let us know. The consultation is open until 29 December and I hope that as many Liberal Democrats as possible will offer their views.

Andrew Stunell MP is the Liberal Democrat Communities and Local Government Minister

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17 Comments

  • LondonLiberal 31st Oct '11 - 5:47pm

    both welcome policy suggestions andrew. however, compared to your connivance with the conservatives to slowly let truly affordable council housing wither on the vine, they don’t amount to a hill of beans. maybe if you weren’t quite so proud of charging tenants 80% of market rents for an insecure, short tenancy, you might consider actually funding new council house building, which would create jobs and add at least £2 to the economy for every £1 spent, thus not only paying for itself, but reducing the deficit as well.

  • Tony Dawson 31st Oct '11 - 8:50pm

    I am more concerned at the plans to allow local authorities to determine their own systems of determining Council Tax Benefit for the significantly-reduced benefit sum which each council is going to be awarded in future. If there was ever a grosser inefficiency proposed, I would find it hard to think of one. Besides all the efforts (and costs!) which each council will have to put into dreaming up a scheme to penalise some people in a worse manner than others, this will be a different manner to how it is done in the borough next door. Which in some cases will be literally the other side of the road. So, not only will there be confusion for people contemplating movement between areas (thus reducing mobility) but there will no longer be any ability of national organisations to advise people accurately on their entitlement. And, of course, Council Tax is about as regressive a tax as you can get, so cutting back on support against it for the poorest does not make much sense at all.

  • On Local Authority tax Mr Stunnell, I’m afraid that your 10% cut to Council Tax benefit and the ‘localisation’ of the implementation of this is a disgrace. It is cutting the rebate of council tax to the poorest in society and localising it is a classic race to the bottom.
    I’d expect this from the Tories, but from the Lib Dems, totally inexcusable.
    see:
    http://www.leftfootforward.org/2011/08/how-pickless-brutal-council-tax-benefit-reforms-will-pulverise-the-working-age-poor/

    (by the way, it is still being consulted on, it can only get through with Lib Dem support).

  • Andrew Suffield 1st Nov '11 - 8:33am

    10% cut to Council Tax benefit

    That is a lie. This is not a cut to council tax benefit. 10% of the funding for it is being moved from the national budget to the local one.

    Simultaneously, control over how council tax benefits are handled is being partially transferred to local government, a very LD policy. Local control over spending is something that the LDs have spent decades fighting for. Perhaps you don’t like the idea, and would prefer the insane bureaucratic mismanagement of Labour, but that does not change the fact that one of the fundamental LD goals is to devolve all local decisions to local government, so far as it is practical to do so.

    There is nothing “inexcusable” or “excusable” about this, because it’s not subject to excuses. Localism is the objective. If your council tax benefits are to be cut, then the person voting for it should be somebody who knows your name and exactly what the effect on you will be – and if you don’t like it, you can go tell them.

  • Peter Jones 1st Nov '11 - 8:35am

    If folk with second homes are paying the full whack (rightly) then they should be allowed a vote in local government elections in that area. No taxation without representation, as they used to say.

  • LondonLiberal 1st Nov '11 - 10:28am

    @ Hywel,

    Those 170,000 homes are dependent on RSL massively stretching their borrowing capacity and taking on several billions’ pounds’ worth of debt. This makes it built on shaky foundations from the start. It is geared towards delivery in the final two years of the programme (2013-15) so we won’t know for some time whether it is being successful.

    Although contracts are being signed with RSL:s and the HCA at the moment, it is not certain at all that this number will be delivered, not least due to LibDem-backed welfare refomr changes that will pay rent direct to tenants (increasing collection costs for landlords) and caps to housing benefit and universal credit, which will increase slower than rents.

    It is also worth noting that 65,000 of these homes are homes funded by the last Labour Government. It is also worth noting that of the remaining 105,000 homes, they will all be at so-called ‘affordable rent’, ie up to 80% of market rents (c65% of market rents in London), and they will mainly be on so-called ‘flexible’ (ie short) tenancies. If social hosuing is defnied by cheap rents and long tenancies, then what we are building is not social housing. It is really intermediate housing. this is welcome, but it does not serve the same people as true social housing, it is not the sameras true social housing, and it is a deceit of the government to suggest otherwise.

  • LondonLiberal 1st Nov '11 - 10:32am

    @ Andrew Suffield

    While you’re right to say that 10% of the CTB is being moved to councils to administer, at a time of massive cuts in central governemnt grant to councils and no real freedom to raise funds to cover this 10% (council tax is still very centralised) it’s not real devolution. it’s more like central governemnt is giving local governemnt the choice of being drowned or hung – so please don’t try and make out that this is a wonderfully decentralising measure. There isn’t the genuine freedom to raise funds, only to cut them, at the moment.

  • N Waterhouse 1st Nov '11 - 11:00am

    1. Agree with proposals but also that adding higher bands and using the money to reduce the tax on Band A is more important (though I fear less likely to be supported by those whose votes and finances are disproportionately from the rich)

    2. Opportunity to take notice of residential property owned by companies and actually in residential use (they already evade stamp duty on purchase); ditto ;-(

  • Tony Dawson 1st Nov '11 - 12:53pm

    @Andrew Suffield:

    ” This is not a cut to council tax benefit. 10% of the funding for it is being moved from the national budget to the local one.”

    That statement is actually worse than a lie, Andrew. It is evil malignant sophistry. Local Councils are hardly awash with money, are they – and going to be funded less? So how are they going to find this money?

    “…control over how council tax benefits are handled is being partially transferred to local government, a very LD policy. ”

    Oh no it’s not. Lib Dem policy is about transferring APPROPRIATE budgets locally. Benefits budgets are about the most inappropriate thing possible to take away from a standard framework, besides the monstrous cost and waste of time of trying to create and then implement 180 varieties of Council Tax benefit schemes.

  • Cllr Colin Strong 1st Nov '11 - 1:11pm

    @Stephen W said:”Next the Lib Dems should abandon all this talk of a Mansion Tax. Concentrate on adding in new council tax bands for homes worth more than £325,000.”

    To be clear, in England, the Council Tax bands are the property value as at 1st April 1991.
    So at the top end Council Tax Band H is £320,000 + in 1991 prices.

    Today, roughly speaking, Council Tax Band H would be homes worth more than £1million.

    So why bother with extra bands (valued at 1991 prices) just tax people with homes worth more than £2 million. A Mansion Tax that I support.

    At a rate of 0.5% above the £2m threshold (not on the entire value of the property):

    Home valued at £1,950,000 Mansion Tax = £0
    Home valued at £2,500,000 Mansion Tax = £2,500
    Home valued at £5,000,000 Mansion Tax = £15,000
    Home valued at £7,500,000 Mansion Tax = £27,500
    Home valued at £10,000,000 Mansion Tax = £40,000

    For those who are asset rich and income poor they can have the Mansion Tax deferred until death and the Mansion Tax taken from their estate.

  • LondonLiberal 1st Nov '11 - 1:40pm

    @ Dave Page – but council tax is still very controlled from the centre. and because of the fact that local governemnt only actually raises about £1 in every £4 it spends, to add a pound to its revenue it would have to put up council tax by £4. It’s a myth that councils control their income,. they have a say in it,. but within very tight parameters.

  • I agree with Tony Dawson. I just cannot see how somewhere like Stockton that is not going to get any income from second homes paying Council tax, and with few very large properties is going to deal with this cut. As I see it, either people will have to pay quite a bit more, or those who are working will get less Council Tax rebate, or those who currently get 100% rebate will have to start paying something – which means a lot of expense on billing them and chasing up arrears. For a number of people this payment is going to be another burden on top of the drop of benefits as they are having to go onto JSA as deemed fit enough for work (which is very debatable indeed for a number of people I see).
    please tell me I am wrong.

  • David Evans 4th Nov '11 - 8:19am

    @Andrew Suffield

    “10% cut to Council Tax benefit – That is a lie. This is not a cut to council tax benefit. 10% of the funding for it is being moved from the national budget to the local one.”

    I’m sorry Andrew, it is you who is totally wrong on this. There is no funding being transferred from the National Budget to the Local one. The government proposals are completely clear. They expect local authorities to make a 10% saving as part of the transfer.

    You are not often Conned by Pickles, but on this one you have been.

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