4.1 Part of the proposals of the Local Government Act 2003 involved changes in council tax. The draft secondary regulations were published on 10 September. The final secondary regulations to implement the areas concerning Council tax changes are to be issued in November and we have been notified that these secondary regulations can be implemented from 18 November 2003, although the final regulations had not yet been published at the time of despatch of this report. This means that they can be implemented for the next financial year, starting April 2004.

4.2 The proposals are discussed in Appendix 1. Significant options in terms of timeliness and financial impact are outlined in the table below:

4.3 Appendix 1 contains more information concerning the application of these proposals, their costs and benefits.

1) Council tax on second homes - the Council keeping the proceeds of the additional charge made from reducing the discount from 50% to 10%.

2) Discounts for long term empty properties of 50% can be reduced or removed altogether. However the Council would not retain any of the proceeds - they would just increase the national tax base yield used in the allocation of government grant would reduce accordingly. Because any decision will change the tax base, there is to be a supplementary return to the Office of the Deputy Prime Minister (ODPM). This is another tax base return or CTB1 (Council tax base) form due in February that sets out any new tax base and asks what powers the Council plans to use in regard to the Act.

3) We will be able to have locally defined discounts on Council tax. However we as the billing authority will be required to pay for these discounts. They will also be shown on the Council tax bill.

4) There are changes to council tax enforcement regulations, including the ability to recover additional costs in debt collection.

5) We will need to add a note to Council tax bills regarding the Fire Authority percentage increase (i.e. that it is not comparable from 2003/04 to 2004/05). As there will probably be a separate charge for the Avon Fire Authority made in bills next year, but our charge will be reduced as the element relating to Fire is removed from our budgets. This will alter our Council Tax charge and our corresponding grant funding as well.

6) The option for the Secretary of State to increase the number and values of Council Tax Bands in future financial years. The first revaluation and change is likely to be implemented for the 2007/08 financial year.

1) What powers would the Council wish to exercise from the Bill e.g. in terms of the potential changes in tax yield?

2) What cost will these proposal take to implement?

3) Are there any other practical barriers to implementation e.g. software? Also there will be implications for Revenues and benefits in terms of how the relevant information can be extracted and there are likely to be costs in implementation that need to be covered, not only to billing and data but also in recovery. There are some required changes to Council Tax bill information which will require software changes to implement. Discussions are taking place with our suppliers to ensure that these changes can be delivered in time for annual billing 2004/05. So the consideration of how practical it will be to introduce changes for next financial year will also need to be included.

4) Notification and publicity of policy changes and also to what benefits and initiatives any additional yields are being put to all stakeholders.

Discussion of this proposal

1) An assessment of this "benefit" is at least £90k up to around a maximum of £700k, but the maximum figure includes all properties with a 50% discount. The most likely yield will be assessed by how many of the 50% discount properties are in fact second homes. This will be achieved by a sampling of these properties. The same review will also assess the level of empty properties in the area. But it is estimated that it would be in the region of £200-£250k yield for second homes. (NB this is a rough estimate as the system has been changed to record second homes for any new/reviewed properties but not all have been reviewed and this would need to be done to assess the full impact).

2) In administration there will be a one off cost in cleaning up the data base which could be carried out within existing resources by reprioritising work, and thereafter an ongoing cost to keep it up to date. However some of this ongoing cost could be incorporated in existing systems and kept up to date as part of the routine reviews. It will require a full survey of the 1400 properties where a 50% discount applies. This will cost £5,000 to carry out, excluding advertising costs. In total it is estimated it will cost around £7,500 to implement this in the first year, including additional ongoing costs of £3,000 thereafter.

3) The Council can chose not to use its powers in relation to this proposal or to delay implementation until 2005/06.

Recommendation

4) That the discount on Council Tax on second homes is reduced from 50% to 10% from 1 April 2004.

Discussion

1) It is likely that a key Corporate Policy will be the consideration of affordable Housing and key worker Housing. The presence and use of properties in the area as second homes works against such a policy. Therefore it is totally in accordance with likely Council Priorities that this charge should be levied.

2) But there may be an impact on Housing in the area; particularly if the final rules encourage conversion of furnished accommodation to an empty property to take advantage of the 6 month Council tax discount rule (an empty property still gets a 50% discount for the first 6 months when it is empty).

3) This funding could be used to support additional financing of a capital programme in the Housing area or to finance additional revenue schemes for specific areas as set out in the draft Corporate Plan.

4) Alternatively this can be seen as an additional source of income to reduce tax charges in the area. Every £600k raised would reduce Council tax by 1%, so the estimated £200k raised could be used to reduce increases in tax by 0.32% or £3.20 a year/5.6p a week on a Band D charge. This is against a likely increase in Government Guideline Council tax increase of 4%, so would form a very small movement in tax increase.

5) The additional benefits from utilising additional proceeds would therefore appear to outweigh the marginal difference it could make to Council tax.

6) The allocation of these funds would be determined within the corporate plan and the consequent financial plan. A Corporate Plan improvement priority is affordable housing. There is a strong policy link between making this charge and increasing affordable housing.

Recommendation

Discussion

1) This would have no financial benefit to the Council (except possibly the first year) but would have sound policy backing in terms of encouraging property owners to bring properties back into residential use. However the practicalities are also difficult in that assessing the tax base would be a snapshot and this may not reflect the position throughout the year. It is most likely that this will be most volatile in the first year.

2) With the removal of this discount, any person buying a new house that they are waiting to move into after another is sold would still get a discount as long as the property remains unfurnished for up to six months.

3) The proceeds of removing this discount would increase the Council's tax base. When the grant settlement is announced, the Council's grant moves up by the increase in Formula Spending Share less the amount we are "expected" to collect in additional Council Tax. Therefore the effect of this is that the government will assume that we can collect more Council Tax when it allocates grant to us. Then the grant will be reduced by the same amount. Thus like business rates, all the proceeds will, in effect, go back to the government to redistribute from this policy change and it would make no difference to the Council's financial position.

4) The introduction of this charge will incur some additional visiting costs to the police and gathering more information when properties become exempt, as well as adding additional information to databases. This is estimated to add an additional £2,500 to one off costs and have a £10,000 a year ongoing cost.

5) The tax is new. The property owners could make changes to ensure that the empty properties remain in an exempt categorisation, so that the total discount will apply. The Council does not keep the proceeds and takes a risk on behalf of ratepayers whether these will be collected at all in terms of its collection fund. This would have to be reflected in our collection fund estimates, where we currently expect collection of 98% of the total when we set our tax base.

6) Therefore it is unclear at this stage exactly what impact any change in this discount will have in financial terms. But current estimates indicate that this is worth around £200k in total proceeds as a maximum potential figure. The Council's empty properties officer has 200 properties on the database at present that have been empty for more than a year. If all an average Band D charge, then the potential yield from these properties alone would be around £100,000. However when empty property owners are identified, it is likely that some that are counted within the tax base at a full council tax will again become exempt through their action. The Government tax base always assumes 100% collection, so in future years (from 2005/06) there are is a possibility we could lose out in grant terms for the extra properties we assessed in the tax base.

7) In terms of the empty properties there will be properties that are vacant whilst being let or sold. There are also dwellings is that are not being actively marketed. Bath and North East Somerset has enjoyed a buoyant housing market over the past few years. The average house price according to Land Registry data in July - Sept 2003 was £222,115 compared to £143,160 in July - Sept 2000 an increase of approx 55% in 3 years.

8) However the Office of The Deputy Prime Minister has noted in a recent consultation paper that nationally the biggest single factor preventing occupation of empty property was the condition of the property. Disrepair is often common feature with an empty property, 77% of owner occupiers and 62% of landlords experience a vacancy owing due to repairs and renovation. Nearly a half of owners and a third of landlords considered the property to be in serious disrepair. [ Dept of Environments Buildings Stock research Division, the Centre of Housing Management and Development, University of Wales, MORI]

9) The Council's empty property officer has listed the following reasons for homes remaining empty

· Serious dilapidation

· Abandoned, typically older properties considered derelict

· Ownership unresolved, for example owing to the death of the previous occupant.

· Investment holding, the property is left empty as the owner considers the capital growth.

· Inheritance holding, the owner is holding the property for retirement or inheritance.

· Mobility holding, someone moving home for economic or social reasons, purchases a property well in advance but doesn't wish to let in the intermediate period.

· Co-habitation holding, two homeowners begin to co-habit in one of the homes and do not wish to sell or let the other.

In addition the property may pose a direct risk to those in adjoining properties, attract petty crime and anti social activity ranging from fly-tipping to graffiti.

10) Best Value Indicator 64, measures the Council's performance in terms of bringing empty properties back into use. The target for 2003/04 is 8 properties.

11) This change is therefore totally in line with council Policy objectives. So it is recommended that this discount is reduced from 50% to zero from 1 April 2004.

Recommendation

12) That implementation of the empty properties discount is implemented in 2004/05. This would entail removal of the discount of 50% to zero from 1 April 2004.

Discussion

1) The spirit of the original proposals was that the concession was there to reduce Council Tax for exceptional circumstances or hardship (not dissimilar to the business rate relief scheme). For instance a property that was flooded would be given some kind of discount.

2) So this option gives the Council the power to use its own discretion, as it does on Business Rates to alleviate hardship in certain circumstances that it can define within the powers of the Act.

3) Therefore if applied the Council would have to set a firm policy on how it was to be applied.

4) If more universal or general discounts were to be introduced, not only would that discount need to be charged to other taxpayers (as the Council will have to pay for it), but there will almost certainly be increased administrative costs, e.g. an assessment or proof of entitlement.

Recommendation

5) The introduction of specific local discounts on Council Tax is not a Policy area that the Executive wishes to explore at this stage. However consideration of a Policy for selective discounts in exceptional circumstances is something that the Council may wish to consider at a later date.