My Lords, I thank the noble Baroness, Lady Hayman of Ullock, for setting out in Amendment 168B her suggested redistribution of the income raised by the council tax premium from upper-tier councils to district councils. The proposed premium will provide all councils, including district councils, with the opportunity, where they set a premium at the maximum level of 100%, to raise double the revenue from each second home in their area.
Revenue from council tax is essential for a wide range of councils, providing them with funding to make available a range of public services which best fits the needs of the local area. Under this amendment, in an area with two tiers of councils the district council would be able to retain all the income raised by the council tax premiums. This would disturb one of the key components of the council tax system—that local authorities should calculate their council tax charge for local services on the same basis as each other, with equal access to the revenues generated. The long-term empty homes premium has been in place since 2013 and has followed this long-established principle. We trust councils to make their own decisions on where their funding should be spent, and we do not consider it appropriate to engineer the system to direct part of the proceeds of council tax to one particular type of authority in some parts of the country.
Different communities will have their own set of challenges and solutions to second home ownership and empty properties. For instance, this may be through additional funding for transport or education, which falls within the remit of county councils. The current approach provides flexibility for a range of councils and other authorities to generate additional income, which can be used as they see fit. If a council feels that funding should be put towards a particular goal such as housing, this should be discussed with the other authorities in the usual way.
A change in the distribution method for the council tax premiums would also create an imbalance between two-tier areas and areas covered by unitary authorities. For example, in a single-tier area with a high number of second homes, such as Cornwall, the council would be required to share the proceeds of the premiums with the other precepting authorities, such as the PCC or the fire and rescue service. However, in a two-tier area with a high number of second homes, such as Norfolk, the amendment would mean that all additional income was retained by the district council. Notwithstanding the second part of the noble Baroness’s
amendment, there would be no obligation to enable precepting authorities to benefit from the increased income. This may be advantageous to the district but would prevent the income being spent on services provided by other authorities in the area that can benefit the local community, such as road maintenance and better care for the elderly.
I turn to Amendment 169, in the name of the noble Baroness, Lady Hayman. We discussed earlier in Committee that the purpose of Clause 76 is to provide councils with an opportunity to apply a council tax premium on second homes. As with all properties, second homes may be in a variety of different conditions. For the purposes of Clause 76, however, a second home would be caught by the provision only if the property was substantially furnished. Indeed, this is an important factor in differentiating such properties from those that might be impacted by the long-term empty homes premium, as set out in Clause 75. Where such properties are substantially furnished, I would not envisage that they are likely to be in a condition to require significant work as a result of dilapidation. Therefore, the premium council tax on a second home applies only where it is furnished. However, in specific circumstances the local authority has tax relief powers as well.
Notwithstanding that potential distinction, I can reassure the noble Baroness that the clause already makes provision for the Secretary of State to make regulations that exempt certain classes of property from the effects of the second homes premium. Similar powers are already in place for the long-term empty homes premium. Obviously, before making any regulations the Government would wish to consult on any exemptions and to provide everyone with the opportunity to say what should—and, perhaps, what should not—be exempt from the effect of the premium.
The noble Baroness’s amendment also proposes a right of appeal against the imposition of a second homes premium. I can reassure her that, under Section 16(1) of the Local Government Finance Act 1992, council tax payers already have the right of appeal against any calculation of amounts they are liable to pay, including any premiums.
Finally, Amendments 428 and 474 were tabled by the noble Baroness, Lady Pinnock, and the noble and learned Lord, Lord Etherton. The Government are of course aware of the pressures facing businesses, including those on the high street, and have acted to support businesses up and down the country. As noble Lords are no doubt aware, the Government have only recently concluded a comprehensive review of the business rates system. A final report on the review was published at the Autumn Budget 2021, alongside a package of reforms worth £7 billion over five years. The review recognised the importance of the system in raising funds for critical local services in England, worth around £22.5 billion in 2022-23, and concluded that there was no consensus on an alternative model that would be of sufficient scale to replace business rates.
At the Autumn Statement 2022, the Government went even further and announced a range of business rates measures worth an estimated additional £13.6 billion
over the next five years. As part of that package the Government announced that the tax rate will be frozen for a further year. This is a real-terms cut to the tax rate, worth around £9.3 billion over five years.
In addition, the retail, hospitality and leisure relief will be extended for a further year and made more generous. In 2023-24, it will provide eligible businesses with 75% off their bills, up to a maximum of £110,000 per business. This is worth an estimated £2.1 billion to ratepayers, many of which are on our high streets.
Furthermore, in response to the concerns of businesses in England, the Government will, for the first time and subject to legislation, introduce a transitional relief scheme for the 2023 revaluation. This will be funded by the Government and is expected to save businesses £1.6 billion. This will mean that the 300,000 ratepayers—