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I beg to move,
That this House
notes that council tax bills have increased by 70 per cent. under the Labour Government, with further above-inflation rises planned in the forthcoming year and after the general election;
expresses concern that pensioners have been hit hardest and calls on the Government to implement the Conservative policy of an automatic council tax discount for those aged 65 and over;
notes with alarm the Government's plans in any third term for a revaluation which would lead to greater inequities and new higher council tax bands;
rejects Liberal Democrat plans for a local income tax, regional income tax and higher national income tax;
and calls for less bureaucracy and interference from Whitehall and regional bureaucrats in local government funding and for greater transparency in the allocation of local funding for councils.
I seem to be making a habit of standing before the Chamber to talk about a crisis. Last time, it was the crisis in housing and this time it is the crisis in local government funding. It seems to me that we have a Government who are prone to crises. Where the housing crisis particularly hurts the young, the council tax crisis particularly hurts the elderly—it cannot be said that the Office of the Deputy Prime Minister discriminates on grounds of age. People who have worked hard all their lives and saved for their retirement should live in dignity and security in old age, but today many of them, particularly those on fixed incomes, find it difficult to make ends meet because of the burden of taxation, which the Government have increased by stealth.
The council tax has proved to be the ultimate stealth tax under this Government, as council tax payers have seen their bills soar by 76 per cent. since 1997. That means that more than a third of the increase in the state pension has been swallowed up by council tax hikes.
Order. Let me make it clear from the outset that I want no interventions from a sedentary position. If Members want to intervene, they must stand up and do so in the conventional way.
As I was saying, more than a third of the state pension increase has been swallowed up by council tax rises. This year, typical council tax bills will top £100 a month for the first time in the history of the council tax. Is it any wonder that people feel so betrayed, when they recall the Prime Minister saying:
"We have no plans to put up taxes"?
Is the hon. Lady aware that the position in Wales is even worse, because the rebanding has led to 33 per cent. of properties being allocated to a higher band and only 8 per cent. to a lower one? In effect, 25 per cent. of houses in Wales have been subjected to a further significant tax increase.
Before responding to his intervention, I would like to congratulate the hon. Gentleman on his 40th birthday. That is the good news, but I have to impart a bit of bad news. What he says about Wales is true—I shall come on to deal with it later in my analysis—but I remind the hon. Gentleman that in July 2003 his party voted in favour of increasing council tax bands.
The fact is that it has been convenient for the Chancellor to shift the burden of taxation on to local government, and we have seen a constant stream of unfunded burdens foisted on to local government, leaving local authorities no choice but to put up council tax.
I shall be happy to explain it later in my speech, but for the avoidance of any doubt, it would be worth quickly listing some of the unfunded burdens, which make uncomfortably long reading. The increase in national insurance has added £280 million to local authorities' costs and fuel duty has increased by 25 per cent. since 1997. Councils have been faced with the financial consequences of the landfill tax, the pension tax, numerous EU directives such as the end of life vehicle directive, the waste electrical and electronic equipment directive and so forth. All those have added costs to local government, which has not been granted matched funding from the centre.
The Government defence of those rises has been a master class in dissembling and disinformation, but that has not fooled the taxpayers. When MORI asked voters last year whom they blamed for their council tax increases, 78 per cent. said that they blamed central Government. Of course, they are right to do so, as on average 75 per cent. of what is spent on local services derives from central Government grant.
The Minister is fond of telling the House that every local authority has received an above-inflation increase in formula grant, but that bland statement conceals the fact that the Government have so manipulated the level of the grant to different authorities that there are glaring contrasts in the increases that councils have had to make to council tax to maintain services. The really revealing figure emerges when we look at Government grant per capita to each local authority which, conveniently, I was given in a written answer on
Does the hon. Lady accept that overall local government has done very well from this Government? It has had a 33 per cent. increase in real terms in grant since 1997, compared with a 7 per cent. cut over the previous four years. Of the so-called burdens that have been inflicted on local authorities, which she has just read out, can she tell us which burdens her party will commit itself to removing, should it by some mischance happen to win the general election?
I shall come on to the removal of burdens. The point is that increases in grant vary from area to area. Perhaps the hon. Gentleman should go back to his constituency and, no doubt through gritted teeth, inform his pensioners that under our proposals a single pensioner living alone would be £456 better off when her council tax is halved.
We continually hear the story of how local government has done very well in the past eight years of Labour Government. If that is the case, can my hon. Friend tell us why we have seen such a record increase in council tax?
I thank my hon. Friend for that intervention. He has given me the opportunity to reveal the inequity of the grant distribution. The sheer range of the allocations beggars belief, but it helps to explain why so many Conservative authorities have been short-changed since 1997. The Government have now been rumbled, and in the debate on local government finance settlements last month, the Minister fell into his own trap by threatening councils with capping if this year's council tax increases are above 5 per cent. He suddenly realised that he may have bitten the hand that feeds him. The truth is that efficient, well run Conservative councils are the goose that lays the golden egg for this Government.
While we are on the question of equity, I should perhaps thank the hon. Lady for her proposal to reduce my council tax bill by £500 a year. Is that really sensible, however, given that people on very small pensions will get no benefit at all? Is not it logical to provide help for all council tax payers, rather than just the better-off?
With respect, I suggest that the full detail of our proposal is not completely clear to the hon. Gentleman. There is a cap of £500 and I shall explain that in more detail. I remind him, however, that it was his party that committed itself to stop means-testing. If he is in any doubt about what pensioners feel about means-testing, he should go and ask them, because they find it offensive to be means-tested in later life. That is why our discount would be universally available to the over-65s.
How does the hon. Lady explain the record council tax increases we have had in Cambridgeshire? Recent grant increases include 11.2 per cent. from April this year, 8 per cent. for the current year and 11 per cent. for last year. Despite those record increases in grant from a Labour Government, we have had record increases in council tax from a Conservative county council.
The hon. Lady seems not to have got the essential point at this stage of the debate, which is that the grants distributed to various parts of the country are very inequitable. Cambridgeshire has been in receipt of a below-average Government grant, and one of the consequences has been that the local authority has been forced to recover more of what it costs to fund local services from local taxation.
Will the hon. Lady please correct the record? Cambridgeshire has not received below-average grant increases: it has received above-average grant increases in each of the past three years. For the sake of accuracy, will she please now confirm that?
The Minister is very knowledgeable about local government finance and he knows the answer to his own question. It is because Cambridgeshire is an education authority. The unitary authorities have fared better under his grant system and the district councils have fared poorly.
It is small wonder that Runnymede council, which was rated "excellent" by the Government's watchdog, has had to double its council tax since 1997 to make up for its 20 per cent. decrease in real terms grant. One council leader rang me up this week saying that he will have to risk capping with a 5.9 per cent. increase because he is just not prepared to cut services. As a unitary authority, his council received a poor settlement of a 4.4 per cent. increase, compared to an average of 6.1 per cent. for comparable authorities. It just goes to show how unfair the system is.
Eight years ago, the Government started with a policy of deliberately forcing up council tax in what they perceived as affluent areas, then they panicked and capped, and they are now forcing service cuts on the same areas. Would the Minister like to tell me which services he wants councils such as Southend to cut?
We could spend a great deal longer than a single Opposition day discussing the smoke and mirrors deployed by this Administration in local government finance, but the fact is that the people to whom we are accountable—the tax-paying public—know that since 1997 council tax has gone through the roof.
Does my hon. Friend share my deep misgivings about the behaviour of the Government in relation to the West Mercia constabulary? Some 300 additional officers were paid for entirely out of increases in the council tax. The Government's reaction has been to nominate the authority and threaten to cap it. On top of that, they try to take credit for the additional police officers. The Government cannot have it both ways.
I thank my hon. Friend for that intervention. In another helpful written answer on
The pain of the crisis in local government finance has fallen disproportionately on our pensioners, exchanging their dignity and security for anxiety and penury. We must not forget that under this Prime Minister 2 million pensioners still live in poverty. And there is worse to come. If Labour should get a third term in office and council tax inflation continues on the same trajectory that it has followed since 1997, band D bills will hit £1,836 by the end of that third term. Moreover, under Government plans to introduce new, higher bands—a measure that has met support from both Labour and, as I mentioned, the Liberal Democrats—a typical household bill will be taken to well over £2,000.
The hon. Lady was talking earlier about universality as a panacea to the problems, but has she considered the question in the round? What would happen to pensioners whose payment of council tax was entirely discounted? Has she considered how the Conservative proposal could be paid for, given that there are, I believe, proposals to end other universal benefits, such as winter fuel payments, TV licences and tax relief for pensioners?
Of course the proposal has been carefully thought out. It is, as the Institute for Fiscal Studies pointed out, fully costed and fully funded. I reassure the hon. Lady that the discount for pensioners, which I am about to deal with in more detail, would come on top of the existing council tax benefit, single person's discount and, as my hon. Friend Mr. Willetts confirmed, winter fuel payments. [Interruption.] If Labour Members will hold on while I discuss in more detail what our proposal will consist of—perhaps when they see its merits they will join me in challenging the Government to match it—many of their questions will be answered.
The Government have committed themselves to the revaluation of property, which is already being undertaken in Wales, where four times as many homes have moved up one or more bands as have moved down. If that were repeated in England, 7 million homes would go up a band. How else should that exercise be described but as rigged revaluation? It is a ticking tax time bomb, primed to explode on the doorsteps if Labour wins the next general election.
Does the hon. Lady agree that the effect of the revaluation is not an increase in the total amount of council tax revenues but redistribution in collection to reflect more accurately the value of properties? If more properties end up in a higher band, that reflects the fact that more properties in that area have gone up in value, but bands will go down in other areas and people will pay less.
I am concerned about the hon. Gentleman's naivety in this matter. Although I agree that the objective should not be to increase the total amount of money raised because it is a completely disconnected fact that property prices have risen, the fact is that the revaluation is being used in Wales as a redistributive tool. Therefore, we conclude that its extrapolation to England would have a redistributive effect and, in fact, aggravate the inequity that I have been describing in distribution of central Government grant.
I think that I have made it perfectly clear that we are proposing corrections to problems in the council tax system that have been vastly aggravated by the Government.
I am not wriggling. The answer to the question about revaluation is that, of course, a property-based tax must take account of changes in the value of the property, but it does not have to be used to fill the Chancellor's coffers with extra money by stealth or to redistribute grant inequitably between different parts of the country.
The Conservative solution to the problem facing our pensioners is simple. It is to cut the council tax in half for those aged 65. In our first year in office that would mean that more than 5 million pensioners or 3.8 million pensioner households would see their council tax bills halved. Such a discount would not be means-tested because we recognise how much pensioners dislike the intrusion of means-testing in their lives, but it would be capped at £500 to allow the resources to be targeted on those who most need it. It will be given on top of council tax benefit if a pensioner is in receipt of that and in addition to the single person's discount of 25 per cent. if the pensioner lives alone.
The hon. Gentleman has had one intervention; this is a very important point, which answers a number of Labour Members' questions.
The tax cut will be fully funded by central Government from the £4 billion-worth of savings identified in central Government by our James review, which the shadow Chancellor has allocated for tax reductions.
Ah, but many are paying, and often it is the pensioners with just a little in savings, taking them out of eligibility for benefits, who are the worst off. The hon. Gentleman might like to tell the pensioners in his constituency who are eligible to pay council tax that, under our proposals, a single pensioner living by herself in his constituency would be more than £450 better off.
Does my hon. Friend recognise that the reaction among Labour Members is typical, because they do not understand the pain and upset caused to people whom she and I represent in neighbouring constituencies who have worked hard all their lives and saved their money? Those people have a modest pension and nest egg for their retirement, which they want to keep to pay bills or to pass on to their children, and they find that that nest egg is decimated by their having to dip into it year on year because of increases in council tax imposed by the Government.
My hon. Friend has reinforced my point extremely well. Labour Members may refuse to take up that point, but I hope that they will begin to understand the strength of feeling among Conservative Members, and why we are glad to have secured this debate.
I should like to make progress; the hon. Gentleman will have an opportunity to make a speech later.
Labour spokesmen have decried the offer of help to pensioners with their stock response of "fantasy figures". If that discredited allegation is the best that the Government can do, it proves how desperate their position is. The fact is that the Government's own efficiency review, conducted by Sir Peter Gershon, admitted to £22 billion of waste in central Government. Surely it is not too much to ask to let hard-pressed pensioners have £1.3 billion of that to help with their council tax bills.
The Deputy Prime Minister's own empire—how I wish that he was here to hear this—wastes money, such as the millions of pounds that were poured into the futile attempt to talk the electorate into regional assemblies. That idea was roundly rejected by the people of the north-east last autumn. However, he cannot take no for an answer and he is still burning up millions of pounds of taxpayers' money transferring powers to regional level.
That is just one example of the Government's profligacy costing taxpayers dear. The savings that we have identified will help councils to keep levels of council tax down for everyone. Pensioners in particular will receive help, but all council tax payers will be helped by our action plan to reduce the costs and burdens that councils face. We would close the Office of the Deputy Prime Minister and transfer the functions to a smaller new Department for local government, whose tasks would be to decentralise and deregulate, to empower and support local decision making and to secure better value for money.
We would free local councils from the straitjacket of central Government and the plethora of performance targets and armies of inspectors that cost local authorities and general taxpayers more than £1 billion. That £1 billion would be better spent on keeping council tax down to a sustainable level for everyone.
We believe that no single sector of society should shoulder the tax burden disproportionately. Unfortunately, that is exactly what would happen under the Liberal Democrats' proposal. The local income tax would be no panacea for the problems of local government finance. The Lib Dem slogan, "Axe the tax," is disingenuous because it implies that there would be no tax at all. In reality, however, the burden of taxation would be shifted on to hard-working families. Pensioners, many of whom are grandparents, do not like the idea of the burden of taxation being shifted on to their children and their children's children.
The Liberal Democrats' Treasury spokesman had the honesty in an interview with the Evening Standard to admit that local income tax would "bite" on a household with a joint income in the mid-£30,000s. By our calculations, typical working families would have to pay £630 more than their council tax payments today. Pensioners who pay income tax would not escape either. Some 71 per cent. of pensioners receive income from their savings, yet that would be taxed under the Liberal Democrats' proposal. Their plans for a local income tax would come on top of those for higher national income tax and a regional income tax to fund regional assemblies. I say, "Beware the axe man."
Council tax payers of all ages deserve better than that on offer from either Labour or the Liberal Democrats. Neither party has seriously addressed the drivers of council tax inflation. The Conservative party has pledged to halve the council tax for millions of pensioners and to scrap Labour's plans for higher council tax bands and a rigged revaluation.
I am about to finish my speech.
We have pledged to cut back on unfunded burdens, regulations and red tape, and to ensure that there is fairer funding from Whitehall. Additionally, we have said that we will deliver above-inflation increases for schools, the police, health and social services. People face a clear choice: more waste and higher taxes under Labour, or value for money and lower taxes with the Conservatives.
I beg to move, To leave out from "House" to the end of the Question and to add instead thereof:
"welcomes the Government's support for local government with its 33 per cent. grant increase in real terms since 1997, compared to a real terms cut of 7 per cent. in the last four years of the previous administration;
notes that the increase in council tax this year is set to be the lowest in over a decade at around 4 per cent. and the second lowest since it was introduced and is less than the increase in average earnings;
notes CIPFA's view that it will add less than £1 a week to average council tax bills;
further notes that the effect of the Opposition's policy to cut grant to councils and abolish capping would allow council tax to rise unchecked;
and looks forward to the report of the Lyons inquiry into local government funding which is due by the end of this year."
We have just heard a speech of breathtaking insincerity, surprising ignorance and shameless opportunism that told us a great deal about today's Conservative party. The Conservatives have conveniently forgotten their lamentable record in government and are displaying a staggering capacity for self-delusion about the responsibilities of being in government. They are playing fast and loose with the serious business of local government finance and are unforgivably trying to perpetrate a cruel deception on millions of elderly people by promising benefits that they could never deliver. Their latest electoral gimmick, for that is what it is, comes, of course, from the same individual who gave us the poll tax when his attention was last turned to local government finance. I intend to return with some relish to the Conservatives' record and their non-credible proposals.
We should put the record straight about the council tax in 2005–06. Who would have thought, after listening to Mrs. Spelman, that according to the estimates of the much-respected Chartered Institute of Public Finance and Accountancy, we will see in the coming year the lowest council tax increases for 11 years and—[Interruption.] Wait for it; I have good news. Conservative Members will not like it, but they will hear it anyway. It is also estimated that that will be the second lowest council tax increase ever. Contrast that with the 16.5 per cent. increase in the last year of the poll tax, for which Mr. Howard was responsible.
Did not that same CIPFA report say that spending pressures are building up in the system which threaten a huge council tax rise after the election because the Government have not guaranteed that they will repeat the one-off bribe detailed in the pre-Budget report?
I am a little surprised by the hon. Gentleman's language. I will come to his point later, but the claim that there was a bribe is not worthy of him. I am sure that he will accept that the CIPFA report confirms that the increase in council tax this year will be the lowest for 11 years, but one would not have had the slightest idea about that from what the hon. Member for Meriden said. Her speech was one of total delusion that showed that she simply did not understand reality.
Does the right hon. Gentleman think that in addition to predicting massive council tax rises next year, the CIPFA report took into consideration the fact that the council tax for band B properties has gone up by 76 per cent. since 1997?
As I said, I shall come on to the subject of next year. The hon. Gentleman should remember that the CIPFA report starts with a clear statement that we will have the lowest increase in council tax for 11 years. The consequence of that will be an average increase of less than £1 a week. Those are the facts, so I am surprised that he and his colleagues are not celebrating the good news that council tax bills are being brought down from the unacceptably high levels that we have experienced.
I want to make a bit of progress, but I will give way later.
Mr. Pickles should recognise that it is no accident that we will have the lowest increase for 11 years. It is the result of hard work over three years to bring down council tax from the unjustifiable levels that we saw in 2003–04. Last year, with additional resources and the judicious use of our capping powers, we cut the increase from 12.9 per cent. to 5.9 per cent. We will take the same approach this year, and the CIPFA report suggests that the increase will fall again to just 4 per cent.
I want to make a bit of progress.
This situation has been achieved with no help at all from the Conservative party. It has gone wobbly on capping, conveniently forgetting its record in government, and its councils have the lamentable record of making the largest council tax increases. The figures speak for themselves—[Interruption.] Mr. Hammond would do well to listen to these figures.
Latest indications show that while councils have budgeted prudently overall and kept council tax levels down, a clutch of councils is bucking the trend. Aylesbury Vale district council is reported to be considering a 9.2 per cent. increase. Huntingdonshire district council is thought to be making a 12.7 per cent. increase, and Mid Bedfordshire district council a 13 per cent. increase. As the hon. Gentleman will know, Runnymede borough council has already set a 17.5 per cent. increase. Hambleton district council has set a 17.9 per cent. increase.
If the hon. Gentlemen restrained themselves, they might find these figures instructive. They can make their interventions after they have listened to the figures because they tell an interesting story.
North Dorset district council has set a 23.7 per cent. increase and South Cambridgeshire district council has set a 100 per cent increase—yes, 100 per cent. What do all the councils that I have mentioned have in common? They are controlled or led by the Conservatives. That is the common factor behind the disproportionate increases in council tax.
I am grateful for the opportunity to set the record straight on Huntingdonshire district council. Could the proposed increase in its council tax have anything remotely to do with the fact that the Government have clawed back £750,000 of its grant?
No. The hon. Gentleman should do his homework. He knows that Huntingdonshire district council received an 8.5 per cent. grant increase. How does he have the nerve to come to the House to make such a complaint, given that the authority will receive a grant increase that is massively above inflation, yet wishes to impose a wholly exceptional council tax increase on his constituents?
The right hon. Gentleman referred to the outstanding increase in mid-Bedfordshire of 13.3 per cent. Is he aware that Mid Bedfordshire district council has the 10th lowest district charge of 238 authorities in England? The 13.3 per cent. increase is equivalent to £1 a month.
I am well aware that Mid Bedfordshire district council received a 5.2 per cent. grant increase. Contrary to the view of the hon. Member for Meriden that those Conservative councils were suffering from unreasonably low grant increases, they have received huge grant increases well above inflation. It is because they cannot manage their affairs properly that their residents have been confronted with wholly unreasonable council tax increases.
The Minister will know that the increase in Runnymede, which he mentioned, is equivalent to 34p a week. Over the eight years in which the Government have been in office, Runnymede has received an increase in total grant per capita of the princely sum of 0.4 per cent., which is equivalent to a 25 per cent. cut in real terms. Will he confirm, however, that the district councils on the list that he read out have something else in common, as their band D council tax is below the Government's notional band D figure?
The hon. Gentleman will know that his per capita figures are not given on a like-for-like basis. It is terribly easy to compare unlike with unlike, which creates a distorted picture. On a like-for-like basis, Runnymede council—I am speaking about comparable services because, as he knows, they can change from year to year—has once again received an inflation-matching increase in grant this year. It is one of the most affluent authorities in the country, with one of the largest council tax bases. If all other variables are removed, the single factor that links the councils that I mentioned is the fact that they are all Conservative-led or Conservative-controlled. Those abnormally high council tax increases are not the product of reduced government grant—every council in the country received an increase in grant, on a like-for-like basis, at least equivalent to inflation, and that never happened under Conservative Governments. Nor is it the case, as some Conservatives have dishonestly sought to claim, that all the grant has been shifted "up north". Many of my hon. Friends might wish that that were the case, but as the figures show, the southern regions have done just as well from the 2005–06 settlement as the northern ones.
The Minister will be acutely aware of discomfort in loyal Labour Reading at receiving a grant increase of 4.9 per cent., when affluent Tory Wokingham benefited from a 13.9 per cent. grant increase? Whatever accusations one levels at the Minister, they are not about partisanship in local government grant settlements in Berkshire.
I take that mild rebuke from my hon. Friend as an indication that the Opposition's allegations are wholly unfounded. It is sad that the hon. Member for Meriden, who made those claims, did not have the decency to withdraw them.
Authorities in the south-east will receive a formula grant increase of 5.2 per cent. in the coming year. Authorities in the north-west will receive an average of 5.1 per cent.; authorities in Yorkshire and the Humber will receive an increase of 5.2 per cent.; and authorities in the north-east an increase of 5.3 per cent. So much for the nonsense from the Opposition about favouring authorities in the north over those in the south.
As the hon. Gentleman would know if he had been listening, the per capita increases that have been set out are not made on a like-for-like basis, so there are no proper grounds for comparison. He will be well aware that Sedgefield is an area in County Durham with serious problems of deprivation following the disappearance of traditional industries, and authorities with such problems have far more significant cost needs. The formula system rightly takes account of that, as well as the special needs of areas, such as the one represented by the hon. Gentleman, where there is sparsity. Sparsity is therefore a factor in the settlement. The system also takes account of pressures in areas with high costs, and areas such as Cambridgeshire have received substantial grant increases because of changes to the area cost adjustment.
Anyone who understands the way the formula works will know that it takes account of the cost pressures on local government, and distributes funds in the fairest possible way to authorities to ensure that they receive a settlement that enables them to deliver services. The difference—the hon. Member for Meriden would do well to listen—between what happens now and what happened when the Conservatives were in government is that in those days councils did not receive increases in grant, but often suffered cuts. In the eight years in which Labour has been in office, councils have received good grant increases year on year, as has been accepted by fair-minded commentators of all political persuasions.
Mr. Curry—I am delighted that he is here today—has long experience in this subject, and had the difficult task of announcing much less generous settlements when he was a local government Minister. In the debate on
"I am tempted to say that this settlement is as good as it gets. It might well be the best settlement of the decade."
Would the right hon. Gentleman like to read the words that immediately follow that quotation? I said that from now on the air would be thick with the chickens of Labour's economic policy coming home to roost, and that settlements would be much tougher if Labour won the election.
No, that was not it. I shall remind the right hon. Gentleman of what he said:
"I suspect that whichever party wins the . . . election, the next settlements will not be as welcome as this one." —[Hansard, 2 February 2005; Vol. 430, c. 945.]
I do not think that his party will take much comfort from that. However, I shall come on to future settlements, as I have already told hon. Members.
"grant redistribution—which moved grant from London and the south to the Midlands and the north—led to some councils putting up council tax more than others. We found a clear association between the size of grant increase a council received and their increase in council tax"?
Is the commission making that up?
That report from the Audit Commission is a year and a half out of date. [Interruption.] No, it did not reflect accurately the grant distribution at the time and, on that particular issue, it got it wrong. The hon. Gentleman will know from the figures that I have just quoted that, this year, authorities in the south of England received grant increases of no lesser value than those in the north. There was no question of a differential, and the different increases in council tax, with Conservative councils introducing much larger charges, do not relate to grant levels. There is not a correlation between the levels of grant increase and the levels of council tax increase.
I have already given way, and I shall make some progress.
It should be a source of shame to the Opposition that the largest increases in council tax reported this year have all been made by Conservative-led councils. The protestations from the hon. Member for Meriden about the unfair impact of high council tax increases have a strong whiff of humbug and hypocrisy about them, as the problem has been created by her own party. Instead of seeking to divert attention with specious attacks on a Government who have given far more generous funding to local government than her party ever did, she would do better to try to get a grip on her own councillors, who have shown a cavalier disregard for the impact of high council tax rises on local residents. While she fails spectacularly to tackle the problems in her own backyard no one will have any confidence at all in her or in her party's ability to keep council tax down.
The Minister has sought to justify his redistribution of grant. Assuming for a moment that we buy that argument, that still means that authorities that have had grant redistributed away from them are faced with a simple choice: cut services or increase taxes. What services would he like my council, Runnymede, to cut if it does not increase the council tax?
The hon. Gentleman has made a fundamental mistake. He has forgotten that every council got a grant increase that matched or was higher than inflation; no council has had money taken away from it. When his party was in power, councils used to have grant taken away. I ask him to go back eight or nine years and remember what it was like when his party was in government and cut grant. Under this Government, councils have all had an increase in grant. He should remember that, and perhaps he should do his homework a little better before he makes further interruptions.
Because the Opposition parties know in their hearts that the 2005–06 local government settlement is a good one that enables all properly run councils to deliver high-quality services without imposing unreasonable council tax increases, they have sought to divert attention from this year's outcome by running scare stories about supposed future threats. The Liberal Democrats are just as guilty in that regard as the official Opposition. Take the issue of revaluation. The Opposition motion "notes with alarm" the plans for revaluation. The implication is that they do not wish any revaluation to take place. If the hon. Member for Meriden is saying that they do want revaluation to take place, I would be grateful if she confirmed that. I am happy to give way to her.
In my opening speech, I made clear our position on revaluation. Of course we understand that a property-based tax has to take account of changes in the value of property, but the revaluation exercise does not have to be a stealth exercise to garner more money for the coffers of the Chancellor or for a massive redistribution to compound further the problems of inequity that arise from the present system.
That is an interesting intervention, because it reveals just how badly briefed the hon. Lady is. We have repeatedly made it clear that there will be no increase in the yield as a result of revaluation. Revaluation is taking place simply to ensure that we should base values on up-to-date values, rather than on values that are 14 years old. It is nonsense to base values for council tax purposes on 1991 values that have to be notionally imputed for all new properties, so revaluation is necessary. We are doing it on a basis that ensures that we have up-to-date values, but with a clear commitment that there will be no increase in the overall yield. That has been made clear year after year, time after time. The hon. Member for Runnymede and Weybridge was in the Committee when we made that clear two years ago. We have repeatedly said that, and I am only sorry that the hon. Lady has not understood that that commitment has been given.
The right hon. Gentleman will know that revaluation is often associated with the concept of rebanding. It does not mean anything to say that there will be no increase in overall take. What matters is where the take happens within the bands. There is much speculation that there will be a new low band, which means a lower take for councils with large numbers of properties in the low band, and there is also speculation about the addition of at least two new bands, which would mean higher council taxes. In addition to that, if there is regional valuation, areas that have done relatively well in house prices in a generally depressed market will find their bands increased. The Minister's assurance means nothing unless he is also prepared to say that there will be no rebanding exercise, because it is rebanding linked to revaluation that gives rise to people's concerns.
Earlier, I quoted the right hon. Gentleman's comments on
He accepted that then and I hope that he will accept it now.
Yes, of course we will consider the question of rebanding. We have powers to adopt different bands in different regions and to introduce different bands if we feel that that is appropriate, but any such decision will be taken in the light of the evidence of the Lyons inquiry, because we want to look carefully at the evidence before decisions are reached. Our clear objective has always been that there will be no increase in yield as a result of the revaluation.
Of course I accept what the Minister says, but a constituent in my division would be unlikely to say to himself, "Oh, that's fine. There is no increase in overall yield for the Chancellor of the Exchequer", if his own council tax had gone up by a band. That is the heart of the argument as far as people are concerned. Unless the exercise means nothing except the maintenance of all the existing relativities, the Minister's assurances are welcome but will not mean much to the person paying the Bills.
There are two separate issues here, as the right hon. Gentleman will understand. The first is the overall yield. He accepts the commitment that I have given and I hope that the hon. Lady will. It has been made clearly often enough. The second issue is the impact on individual households. Yes, of course there will be variations because values have changed. Some will go up, some will stay the same and some will go down. Until we have the evidence from the valuation exercise, we will not know what the likelihood of those movements will be, or how it is appropriate to damp them through transitional arrangements or any other changes to the banding system. I have made it clear that we will do that in the light of the evidence because our overall commitment is not to increase yield, and we also do not want to aggravate potential turbulence as a result of changes. Those commitments have been made clear. We will act on that basis and I hope the right hon. Gentleman accepts that.
We are coming up to a general election. The Minister suggests that he can give the British electorate no indication of how revaluation will work. Will he admit for the record that, however it is done, revaluation will mean that millions of households will lose and receive higher council tax bills? That is the lesson not just from Wales, but from all past property tax revaluations.
No, and I am afraid the hon. Gentleman has, rather uncharacteristically, gone for completely unjustified scare tactics. He knows that the values are set at the date of April 2005. Until the process has begun, no one can know what the relative values of different properties are. He knows very well that, over the past two years, there have been significant variations in the movement of house prices in different parts of the country. Two years ago, the figures would have shown that in London there was a substantial increase compared with 1991 vis-à-vis Yorkshire. Latest figures suggest that Yorkshire and London are now more or less in the same relationship as they were in 1991—there is very little difference. That has been a significant move in recent years. Until we have all the evidence, examine it carefully and decide whether there should be changes in banding and, if so, what transitional arrangements there will be, it is entirely hypothetical and utterly speculative to talk about potential losses or, indeed, gains. I hope that the hon. Gentleman will in future be more serious, as he usually is in these debates.
May I take my right hon. Friend back to the point that the Conservative spokesman was making about unfair redistribution of grant? I have an excerpt from The Surrey-Hants Star in 2003, which quotes a comment from
"Finance boss Coun. Lorraine Fulbrook" of Hart district council, who said:
"Huge council tax rises are set for the south this year as the Government diverts our money from the south to its friends in the north."
Does my right hon. Friend share my concern that should the party of Lorraine Fulbrook come to power, money will be taken away from Labour Lancashire county council and redistributed to Tory county councils in the south of England?
One concern that some of us have about revaluation is that the combination of revaluation and rebanding—increasing the number of bands at top and bottom—will be reflected in the assessment of need and grant. That is where the biggest change could happen. Will the Minister consider regionalising that to diminish the effect of just using dampening measures?
Had the hon. Gentleman been a member of the Committee that considered the Local Government Act 2003, he would know that we have given ourselves powers to introduce new bands, but there is no commitment to do so. We have said, and I said it again today, that we will await the advice of the Lyons inquiry. We also have powers to adopt regional bands, if necessary. That could be a useful tool to damp the impact of variations in prices since 1991 between regions. We will consider all these issues with the evidence, when that evidence becomes available, after the valuations begin. As I have already indicated, that does not happen until April 2005 because that is the valuation date.
Does my right hon. Friend share my recollection from the Standing Committee on the Local Government Bill, as it then was, in 2003, that, when revaluation was discussed, the Liberal Democrat and Conservative members of the Committee did not seek to stir up and frighten people about the effect of revaluation? They accepted the sensible need to go ahead with it. Does my right hon. Friend agree that the proximity of a general election is leading them to try to frighten people with totally spurious scare stories?
I agree with my hon. Friend's observation and I would only make the point that Mr. Clifton-Brown, who was on the Front Bench in that Committee, moved an amendment to require five-yearly revaluations, but did not press it to a Division. I suspect that the fact that he is not speaking from the Front Bench shows that it did not find favour with his party.
What Mr. Hall says is quite untrue. In fact, during the Bill's passage, particularly on Report, I remember saying from the Front Bench, to screams from the Government Benches, that the Government had hit on "a seam of silver" in raising extra money by rebanding. The Minister will find that phrase if he looks in Hansard.
It is not particularly helpful to pursue questions of what might or might not have been said. It is on the record that the hon. Gentleman pressed for five-yearly revaluations. The Government feel that a 10-year cycle is appropriate, and I am only sorry that the Opposition, in their motion today, choose some rather extraordinary words in saying that they note
"with alarm the Government's plans . . . for a revaluation", which everyone here has clearly accepted is necessary to bring values up to date.
We have covered valuation in some detail and I shall move on, but first, in view of the remarks made by the hon. Member for Meriden, I want to make it clear that speculation that the recent revaluation in Wales is a precedent for England is entirely misleading. The decision to have the revaluation in Wales two years before England was taken by the Welsh Assembly Government, who also decided on a new banding scheme and transitional arrangements in Wales. Wales has always had different council tax bands from England, and what is happening in Wales is not a precedent for England.
The Opposition parties also pretend that this year's increase in grant is a one-off, and that next year there will be additional pressures on local government budgets. The truth is that this year's settlement, while good, is by no means a one-off. The overall increase in Government grant in 2005–06 will be 6.3 per cent. The equivalent increase in 2003–04 was 8 per cent. and, in 2004–05, local authorities benefited from an additional 7.3 per cent.—both higher than next year's generous investment. I hope that we will hear no more from the Opposition parties of their entirely misleading and inaccurate claim that this is a one-off.
The Government, unlike the Opposition, are committed to ensuring proper levels of support to local government to enable councils to deliver their responsibilities without imposing unreasonable council tax demands. We are also committed to the new burdens principle under which Government accept responsibility for meeting the additional costs of new responsibilities placed on local government. Of course local authorities will claim that they face rising cost pressures. They always do. They do it every year in the period leading up to the settlement. Some of those claimed pressures are real, some are exaggerated. Each year we look seriously and rigorously at the balance sheet, and, as hon. Members know full well, in each of the last two years we have put additional resources into the settlement in response to justified arguments put by local government that there were real pressures. We also expect local government to operate in a cost-effective way and to make savings where, as the Gershon review has demonstrated, there is scope to do so. That is the responsible way to support local government and ensure that it operates cost-effectively.
By contrast, the Opposition have no credible or serious policies to offer. They cannot even control their own councillors and their financial projections are so fanciful that they would make even Walter Mitty blush.
I am grateful to the Minister for giving way because I want to make a serious point. Does he concede that all councils have cost pressures on their budgets because of the increases imposed by this Government in terms of national insurance and pension contributions, waste obligations, increases in the landfill levy, the redistribution of capital receipts and the abolition of the local authority housing grant, which of course increase their need for a council tax increase?
The hon. Gentleman has simply read out a list that was read out earlier, and some of those apply to some councils, but not all to all councils. All of them have been taken into account and, as he will know, local government has received a 33 per cent. real-terms increase in grant under the Government, whereas when the Conservative party was in power, local government faced cuts year on year on year. [Interruption.] Dr. Lewis, who is again commenting from a sedentary position, would do well to remember that, when his party was in power, it cut local authority spending. It did not increase it.
As the shadow Chancellor has made absolutely clear, the Conservative party is committed to £35 billion of public expenditure cuts. If it was ever elected, those cuts would cause immense damage to local government, which would bear the brunt, as it did when the Conservatives were last in power. The issue is so important that I intend to spend a little time on it. The Tories' commitment to slash £35 billion will have a massive impact on public services and a massive impact on pensioners. It is patently obvious that the Conservative party cannot make cuts of that magnitude and at the same time fund the spending pledges and tax cuts that it has promised.
Let us take the example of pensioners, as the hon. Member for Meriden made much play of pensioners in her opening remarks. The pensioners of this country will not forget what the Tories did to them during 18 long years, when the Leader of the Opposition introduced the poll tax and the Tories put VAT on fuel, for example. If any group of people in our society know about the value and importance of money and of living within one's means, it is our pensioners. They know that the Tories cannot spend money that they do not have.
If the hon. Gentleman will wait a moment, I will tell him more about what the Government have done for pensioners and the very substantial increases in income that pensioners have enjoyed, which is in marked contrast to what happened when the Conservative party was in power.
The Tories cannot spend money that they do not have. No one has to take my word for it. The latest edition of the Municipal Journal has considered the matter in its usual impartial way and it described the Tory party's plans for efficiency savings to pay for its so-called council tax discount as "pie in the sky". That is what local government experts think about its calculations. Pensioners know that, if the Tories win power, the only cut that pensioners and council tax payers can rely on is £35 billion of cuts. The Tories cannot find those cuts from waste, because our plans already assume substantial efficiency savings as a result of the Gershon review. The Tories are double counting the savings that we have already allocated for reinvestment in front-line services.
Does the Minister regret the increase in means-testing under the Government? Does he acknowledge that those pensioners least likely to take up means-tested benefits tend to be older pensioners and poorer pensioners, often overlapping groups? Why does he reject the Conservative policy of restoring the earnings link for the state pension?
For reasons that I will describe in a moment. Pensioners have benefited substantially from increases in living standards under this Government far greater than could possibly be delivered by the Conservative party's policies.
The Tories have also made more than £15 billion of additional spending commitments, which means that they have to find an additional £15 billion of cuts elsewhere. That gives a total of more than £50 billion of cuts by 2011–12. Again, I say that the only cut that pensioners and hard-working families will get from the Tories is cuts to hospitals, the police, schools and services delivered to their local communities.
I said that I intended to spend some time on Tory cuts, and I have not finished yet. Let us look in detail at how the Conservative party intends to pay for its pie-in-the-sky council tax discount. It says that it can find the money from the £1 billion that it claims that it has found from the cost of local government inspection. It claims that it will abolish inspection, although the Leader of the Opposition told the Local Government Association in July that
"we will be consulting on what should take its place."
If the hon. Lady will contain herself, I will give way in a moment.
The Conservative party does not include in its spending proposals any costs for the alternative that it intends to put in place. To the best of my knowledge, it has not even begun the consultation promised by the Leader of the Opposition. Perhaps the hon. Lady, when I give way to her, will tell us when this consultation is due to begin.
I am grateful to the Minister for giving way, because since we announced our discount for pensioners, he has deliberately misunderstood this point. The Institute for Fiscal Studies has costed the pensioner discount at £1.3 billion, which will come out of central Government waste. The £4 billion from waste in local government identified in the James review will remain with local government to use as it sees fit. Among other things, it will be used to hold down council tax for people of all ages. The pensioner discount will come from the £4 billion identified by the shadow Chancellor within £35 billion of savings in central Government. I rest my case.
The hon. Lady has compounded the problem by showing the Conservative party's utter confusion. Its figures are not credible and it uses them in different combinations that make no sense. The overall effect is an unaffordable series of pledges and promises that they do not have the money to deliver. The prospectus is entirely bogus and comes from a party that has lost all sense of reality and that no longer faces the realities of government, which any party must do when it is in government.
Has the Minister talked to any of the 235,000 civil servants who would lose their jobs under the James review? Has he asked how much the redundancy payments would cost? Does he think that those civil servants are pleased by Conservative policy?
I shall do no more than quote the Municipal Journal, which states:
"There must be an awful lot of civil servants sitting around drinking tea, judging by the Conservatives' latest expensive pledge on public spending".
The series of estimates is not credible.
The £1 billion figure quoted by the Conservative party comes from a Joseph Rowntree Foundation report in September 2001, which the Conservative party claims estimates the annual direct costs of inspection at £600 million per annum. It then adds to that figure an estimate of £400 million that the Local Government Information Unit came up with for compliance costs.
The Conservative party is wrong. The Office of Public Services Reform estimates that the total cost of all inspectorates is around £600 million, but as hon. Members know, many inspectorates—for example, the Healthcare Commission and four out of five criminal justice inspectorates—do not inspect local authorities. Even for those inspectorates that do inspect local government, local government inspection makes up only a small proportion of their overall costs. For example, the bulk of Ofsted's costs relate to school inspections, not local authorities. My Department's initial and provisional estimates of the total cost of local government inspection in 2004–05 is just more than £90 million.
Even if one were to accept the indirect costs of inspection given by the LGIU—I have yet to see proper evidence supporting those figures—the Opposition's sums do not add up. Are they proposing that we should abolish all inspections? Are they proposing that we should abolish Ofsted or the Commission for Social Care Inspection, and, if we were to do so, what would be the implications for school standards or child protection? Even those cuts do not bring them anywhere near their £1 billion pie-in-the-sky saving. Their figures have no credibility—not a shred—and that example is just one of many. Their pie-in-the-sky discount for pensioners for council tax bills has no credibility. They simply do not have the means to deliver their promise, which is a cruel deception.
The Tory cuts would force local authorities to hike council tax massively. As the Tories oppose capping, they would presumably allow council tax to rise unchecked year on year. If there were another Tory Government, pensioners would face cuts in services and uncontrolled increases in council tax.
Unlike the Conservative party, this Labour Government care about pensioners and have been working hard to raise pensioners' living standards. This Labour Government reduced VAT on fuel to help pensioners and gave free TV licences to the over-75s. This Labour Government introduced £200 winter fuel payments to all households containing someone aged 60 or over, with an extra £100 for those aged 80 or over. This Labour Government added the £100 payment for households with a member over the age of 70 to help meet council tax costs. This Labour Government introduced the minimum income guarantee for pensioners and the pension credit to give extra help to those with savings and modest occupational pensions.
The effect of Labour's reforms has been to increase the average income for pensioners by £1,350 a year, and to increase the income of the poorest pensioners by £1,750 a year. Do those hon. Members who criticise the Government on means-testing seriously think that it was wrong to give that extra help to the poorest pensioners? The Conservatives opposed all those achievements and they threaten all those benefits. Their hollow rhetoric and dishonest promises will not convince pensioners, who know more than anyone else that money does not grow on trees and that one should never promise what one does not have the means to deliver. Pensioners, more than any other section of society, know the importance of prudent economic management and not pretending that one can live beyond one's means. Along with this House, they will reject the Tory party's blandishments with contempt.
We are right to keep debating council tax in this House, because it is the most unfair major tax in Britain today, and because it causes huge problems. We all know that the council tax is bust, which is why the Government set up the balance of funding review and asked Sir Michael Lyons to examine the matter, and why we have seen so much unrest among pensioners in many communities throughout the country.
Since we last debated council tax, two major issues have arisen: first, the Conservative party has a new policy, which, although it has been a long time coming, we can at least debate; secondly, the revaluation issue has occurred. I would like to spend a little bit of time on those new issues.
If one examines Conservative policy, five facts leap out. First, the Conservatives intend to keep the unfair, discredited council tax system. Secondly, they would introduce a new unfairness into that system, which is a matter that I shall discuss at some length. Thirdly, they have forgotten all pensioners in Scotland and Wales, on whom they have obviously given up. Fourthly, as the Minister has said, the figures are unbelievable—the cheque will bounce because the costings are questionable at least and specious at most. Finally, if one compares the Conservative policy with other polices—particularly ours—it is not generous to pensioners.
The Conservatives have clearly nailed their colours to the mast of council tax. Given that the Leader of the Opposition introduced council tax and the ill-fated poll tax, it might have been embarrassing for him to renege on council tax.
The Conservatives have kept their commitment to the council tax, but that means that they have no long-term solution to the problem of local government finance, which the Government, to give them credit, are at least examining. We have heard nothing from the Conservatives about how they would deal with problems such as gearing.
As we have heard from Mrs. Spelman, the Conservatives are tied to a post-election council tax hike because they are committed to council tax revaluation, which is surprising, because we have all read the same Audit Commission report, which states that council tax is fundamentally flawed. They have made the mistake of keeping council tax.
Will the hon. Gentleman explain why the Liberal Democrats chose to side with the Government when they were given three opportunities to vote against the rebanding? Were they trying to wreck the rebanding process?
I am glad that the hon. Gentleman has raised that point. Like the Minister, I refer him to Mr. Clifton-Brown, who moved an amendment to the Local Government Bill, which was not subject to a vote, on
"identifies the problem but the solution is entirely wrong. Let us scrap council tax. That is all I need to say."—[Hansard, House of Lords, 17 July 2003; Vol. 651, c. 977.]
She was right. We oppose council tax revaluation because we want to get rid of council tax, and I hope that Mr. Pickles will intervene on that point later.
I want to move on to my next point about why the Conservatives' new policy is bad for pensioners—at least for the 2 million pensioners who are paying council tax and would get absolutely no help from the Conservatives. The 2000 census for England and Wales gives the figures. Some 1.6 million pensioner households have a non-pensioner living with them. Of those, 400,000 have more than one pensioner living with them. I am not talking about the people who do not pay council tax and get council tax benefit—of course, they will get no help from this policy—but the 2 million people who are really suffering. Let me cite some cases.
I will let the hon. Gentleman intervene in a minute, but he must recognise what his party's policy means.
Some pensioner households are looking after adult disabled children, while some are being cared for by adult children, but they will get no help from the Conservatives. They are against families who are caring for each other: that is scandalous.
The hon. Gentleman is talking about my party's proposals and would expect me to know them in more detail. The regulations would obviously have to be framed when we come into government, but I want to make it clear that pensioner households with a disabled adult would not be precluded from being in receipt of the discount. Perhaps he is unaware of what has happened since the ruling that the Government had in the High Court regarding the winter fuel payments. Under a European directive, benefits cannot be discriminatory by gender—that is, against women aged 60 who enter retirement age before then; although according to the Government that will change in due course. That is why the joint age of 65 had to be chosen.
It is interesting that the Conservatives are now blaming Europe for not being able to help our pensioners. That is really something. If they have changed their policy within the space of a week, they should have told their leader, whom I heard saying on "Woman's Hour" that pensioner households with adult disabled children would not get their benefits. The problem is that 42 per cent. of pensioners would get no help from the Conservatives.
The hon. Gentleman referred back to what is commonly known as the poll tax. Does he accept that one of the reasons why the poll tax ended up so disastrously was that where there were two or more wage earners in a household, that household as a whole paid an enormous amount of money in local taxation? Does he accept that under his system of a local income tax, the amount that a typical two-earner household in my constituency paid for local taxation purposes would increase by £721 per household, and by even more if there were more wage earners? Surely the answer is to compromise—not to have that burden on the wage earners but to have targeted help to the pensioners, which is precisely what the Conservatives recommend.
The poll tax was fundamentally flawed: it was not related to ability to pay and was introduced completely incompetently and unadvisedly by the hon. Gentleman's party leader. Let me deal with his point about double earners. The Conservatives are saying that a household of full-time average earners would pay more—indeed, because they would be bringing in a household income of more than £51,000. That applies to fewer than 10 per cent. of households. The figures that the hon. Gentleman cited from his constituency are completely wrong. I know the New Forest, because my grandmother lived in that area, and incomes are nowhere near the level that he suggests. That suggests to me that he is completely out of touch with his constituents, which many hon. Members will not be surprised about.
The hon. Gentleman has referred to some aspects of the Conservative proposals. As they are drafted—although judging from the comments of the hon. Member for Meriden they may well have changed before this debate ends, as we are getting instant policy on the hoof—Baroness Thatcher would receive the benefit, but a retired couple, one of whom is aged over 65 but the other is not, would get nothing at all. Is that, in his view, a fair assessment procedure?
I will give way in a second, but I want the next Conservative Member who intervenes on me to answer this question: what have they got against pensioners in Scotland and Wales that they refuse to give them any discount? I know that they are not doing very well in Wales in Scotland, but this policy shows that they have given up completely. [Interruption.] The Minister tells me that they are about to change their policy. It is quite possible that we could have three such changes in the course of my speech.
The Minister rightly focused on the Conservatives' questionable costings, including the fact that inspection costs are completely overstated. As I said earlier, 235,000 civil servants would be laid off were the Conservatives' plans ever to come to fruition. In other words, the civil service would have 10 per cent. fewer employees than in 1997, after 18 years of cuts. That is a joke. I have to say to Conservative Front Benchers that if they are really telling the electorate that they plan to sack those people to create money for the first year to provide this discount, that lacks any credibility whatever.
I should like to put the Baroness Thatcher point to bed. As she lives in Westminster, which has a Conservative-controlled council, she would receive only a £227 discount. With regard to Scotland, the Scottish Conservatives have announced a reduction in council tax of a third through paying education directly, and have also agreed to adopt our scheme.
We will look with interest at the Scottish Conservative party's costings, because if they are anything like those of the Conservative party in England, they will not be worth the paper they are written on.
I am not going to give way.
The Minister compared the Conservatives' policy with the Government's, so let me do likewise in respect of our policy. Under the Liberal Democrats' plans for local income tax, some pensioners will gain more than £1,000 a year—double the maximum that the Conservatives offer. Liberal Democrat plans for local income tax would benefit 3 million more pensioners than the Conservative plans, with 3.2 million pensioners better off by more than £500 a year.
My hon. Friend is absolutely right. Interestingly, Christine Melsom from the IsItFair campaign has said:
"The Tories' proposals will do nothing to help the many younger people on low incomes who are already struggling with the effects of previous increases".
The Conservatives' policy is opportunist and unprincipled, and does not even do what they say it is trying to do. The Conservatives plan to help 5 million pensioners, but the average pensioner couple in that group would be £100 better off under our local income tax plans. We are looking forward to debating this with the Conservatives, because pensioners will much prefer our proposals.
I want to nail the issue of the five-year revaluation. As the hon. Gentleman, who served on the Committee, will remember, the Local Government Bill was huge and hundreds of amendments were tabled. The amendment was not pushed to the vote because it was a probing amendment and we had heard what the Minister had to say about it.
On a different matter, did the hon. Gentleman see last Sunday's "Politics Show", in which the BBC consulted a Liberal website and found a household of three relatively modestly earning public servants who will be more than £800 each worse off under his party's proposals? What does he have to say about that? His colleague Dr. Cable was left burbling—all he could say was that the website must be wrong.
I have examined the example closely because I was worried about the reports that I heard. It appears that the household in question had a combined income of £100,000. I know that the Conservatives are worried about well-off households, but it is interesting that they are not concerned about people on low incomes. Liberal Democrats are worried about those on low incomes and we will stand up for them because we believe in fairness.
No, I have not finished answering the question that the hon. Member for Cotswold asked. He described an amendment that he tabled as "probing". I have a copy of Hansard for the relevant debate, and "probing" never crossed his lips. That is especially interesting.
I shall, because it might help the hon. Gentleman's blood pressure.
I am delighted to hear that, but it will not help the blood pressure of my constituents in the New Forest, with which I am pleased that the hon. Gentleman has a connection. The £721 extra was calculated according to Liberal Democrat figures, which appear to mislead everyone. He refers to households of perhaps four people on incomes of £25,000 or less each and asks whether they should contribute more. I have news for him—they all pay income tax nationally. Why should they pay local income tax, too? If there is anything wrong with the income tax that they pay, let it be adjusted nationally. Liberal Democrats' local income tax proposals will slaughter people on relatively low incomes.
The hon. Gentleman is completely off beam. He should read the report of the independent Institute for Fiscal Studies, which Conservative Front Benchers cited earlier. It shows that our policy is massively progressive and helps all those in the first six and seven deciles of income distribution. The people who would lose are in the top two deciles. He talks about our figures. If he calculates the average earnings of households in his constituency on his figures, the result will be more than £60,000. That is the sort of figure on which Conservative calculations are based. Clearly, he needs to do some more arithmetic.
The hon. Gentleman says that the wealthy would lose and the poor would gain under his proposals. However, he has not tackled the point that foreign nationals in this country who pay no national income tax but pay council tax would not pay local income tax and would thus get their local services free, whereas trainee nurses, who do not pay council tax, would pay local income tax. Is not that a redistribution of wealth from the poor to the rich?
Student nurses can be protected through extra bursaries. I did not realise that there were so many foreign millionaires. The Chancellor said that he would ensure that they paid their fair dues, and I support him on that.
Revaluation is the next new factor in the council tax debate, because it is imminent. It is happening in Wales now, and if the Labour party or the Conservative party wins the election, revaluation will go ahead. If we win, we will get rid of the tax altogether. The Minister, in his usual charming way, tries to claim that we can wait until Sir Michael Lyons reports, and that there is nothing to worry about. He says that we must wait till
I was especially interested to hear Conservative Members' statements today. They have been welcome because at least they have been up front and clear for the first time and said that they support a revaluation. I hope that they will explain how they propose to revalue.
It is worth reminding hon. Members of the damage that revaluation can do. The Minister claims that revaluation in England would not be like that in Wales. However, I must stress that Welsh people will have to pay those council tax bills this April. Many people will experience huge increases. In Cardiff, the council tax for 64 per cent. or more of households will increase by one or more bands, whereas it will decrease for only 2 per cent. Some of those increases through the rebanding exercise will happen in the poorest wards in Cardiff. There is therefore no relation between the increases and ability to pay. The council tax for some pensioners whom I met when I was last in Cardiff will increase by three or more bands. I met one person who explained that the council tax for one property had increased by six bands. That is the extent of the pain that may be created through the exercise.
The Government may say that revaluation in England will not be like that in Wales, but we want to know what it will be like.
The hon. Gentleman heard the Minister say that the revaluation exercise would be revenue neutral in overall terms. However, he knows that, because of the way in which resource equalisation works, it can be hugely redistributive. The Minister did not give a commitment, either in the proceedings on the Local Government Act 2003 or today, that the exercise would be neutral in distribution terms. Does the hon. Gentleman agree that that is worrying?
It is worrying, and that is why we want to scrap the tax. That is the best answer to that question.
Hon. Members need to focus on what rebanding means. A move from band D to band E means an increase of 22 per cent. in council tax. A move from band G to band H means an increase of 20 per cent. No move from any band is less than 13 per cent. The rebanding exercise will therefore lead to significant increases, with no relation to income. All the changes under rebanding are effectively random and arbitrary. Changes in people's bills are unrelated to changes in their circumstances. We believe that if local taxes are to be changed, it should be done on a principle—that of fairness. That is why we want to scrap the council tax.
One of the key difficulties with the hon. Gentleman's local income tax proposals is that they will have to be redistributive. How will he tackle the fact that the tax base in the south of England would have to pay for the north of England?
No grant or local government finance system that any party has ever espoused is without some form of redistribution. That applies to the council tax system, a local income tax system and the poll tax system.
No, because I want to make some progress.
We have had silence from the Labour party about revaluation in England, and Conservative denial, except on one point. The Conservatives said that if they undertook revaluation there would be no new bands. That will be especially interesting for the 4.5 million households in band A. The figure may be higher because one of the helpful questions that the hon. Member for Meriden tabled this year elicited the response that there are 5.5 million households in band A. They will get no relief from the Conservative approach to revaluation. It appears that the 121,000 households in band H would get relief under Conservative proposals. The Conservatives are committed to not only an unfair council tax and an unfair revaluation but to the most unfair revaluation imaginable.
Our proposal for local income tax is based on a clear principle. It is based on experience throughout the developed world, in America, Switzerland, Japan, Norway, Denmark, Sweden and other countries.
We are grateful for the analysis of our policy that the Institute for Fiscal Studies and the Chartered Institute of Public Finance and Accountancy have undertaken. The IFS analysis shows that all the figures that we have published to date are spot on. Its estimate of an average local income tax was between 3.5 per cent. and 3.75 per cent. I said that our figure was 3.75 per cent. I was therefore being rather conservative with a small "c". The IFS states that 73 per cent. of families would be better off or unaffected by our policy. We said that the figure was approximately 70 per cent. Again, I underestimated the number of people who would benefit from our policy.
The second thing that the IFS said in its analysis was that the number of gainers would far outweigh the number of losers. Its press release says:
"there would be many fewer losers than gainers from this reform."
The analysis goes through the different family groups, showing that families would gain. On average, the IFS says, families in the bottom eight decile groups of income distribution would gain, which Labour Members should support. Single-earner couples would gain on average £4.56 a week, while those with children would gain £2.69, and half of two-earner couples would gain as well. This is a family-friendly policy. Around 8 million pensioners would also gain, with 6.7 million gaining at least £1 a week. Only 4 per cent. of pensioners would lose, and they are the wealthiest, the ones being given £500 by the Tories. The average pensioner couple would gain £8.46 a week, which is an annual tax cut of £440.
I was delighted by those figures. They show that what we have said all along is correct. The figures coming out elsewhere, particularly from the Conservatives, are a total fabrication and completely unrepresentative of real, ordinary families in our country. They are talking about the top 3 to 5 per cent., not ordinary families.
The third thing shown by the IFS analysis is that scrapping council tax for a local income tax is extremely progressive. Our policy is by far the fairest. The people who would gain are the large majority on ordinary incomes. They are the people on low and modest incomes who have been struggling to get by. I am proud to have fought our campaign, and I am proud that we have the fairest policy. I find it odd that some Labour Members have criticised that, and it is worth noting that the Labour Front Bench has not totally rejected our policy but has put it into Sir Michael Lyons's remit so that he can have a look at it. That has not been done in a way that we would have supported, but the Government clearly do not think our policy is as bad as their rhetoric sometimes suggests.
The hon. Gentleman states that in the first year of his new local income tax, income tax rises would not be above 3.75 per cent. On his website calculations, that will be achieved by allocating £1.7 billion from the proceeds of a new top rate of income tax. Is he prepared to commit himself today to continuing to put that money in and to inflating it each year in order to stop the gearing effect applying after year one? If local authorities wish to raise the tax in a second and third year to keep their services going, without that guaranteed support they will have to raise local income tax by a factor of two or three times the 3.7 per cent. that he has calculated for the first year.
I can reassure the hon. Gentleman. When we publish our costed proposals, he will see the money going through all the five years of the next Parliament. In year one, the figure is not £1.7 billion, but £2.3 billion, and if the website needs updating, I will happily do that.
I am also happy with the CIPFA analysis of our policy. CIPFA recently published a report, "Local Income Tax Exemplified", which, interestingly, had a new idea on how to administer local income tax. This is an idea that I had not come across before, and that—this will be interesting for the Minister—CIPFA did not include in its report on the balance of funding. In that report, CIPFA explained how the Inland Revenue could administer local income tax and said that the policy of scrapping council tax and replacing it with local income tax would yield nearly £300 million a year in savings on administration, as we had said previously.
However, in its latest report, CIPFA comes up with an idea that would bring even more savings and make local income tax even easier and quicker to implement than our first analysis implied. By suggesting that the Inland Revenue build any individual local income tax rate into the personal income tax allowance, CIPFA has come up with a method of administering local income tax through the existing pay-as-you-earn codes, which, to use its words,
"would dispense with the need for any additional work by employers in administering the PAYE system."
Having read that report, I have had further discussions with CIPFA, which suggest that its new method would make it even easier than we had first thought to levy local income tax, not just at the principal authority level but at district and indeed parish and town level. I hope that the Minister will consider that idea, which would significantly change the conclusions of the balance of funding review to be even more favourable to local income tax.
How would the hon. Gentleman's party intend to deal, if that proposal were adopted, with those who are not within the PAYE system, including a large number of very wealthy people who receive income from investments and dividends?
Those 9 million people have always been the easiest to deal with, as the CIPFA report shows for the balance of funding review, so I am surprised that the Minister makes that point. An end-of-year return makes it much easier to operate a local income tax.
This has been an interesting debate, giving us the chance to expose the Conservative policy and to explain how the Government have misused the council tax system. It has also given us a chance to demonstrate that the IFS and CIPFA analyses, by independent groups, show that local income tax is by far the best and most effective policy on offer. We go into the next election with two parties wanting to keep council tax and one wanting to scrap it. We go into the election with two parties wanting to revalue everyone's homes for council tax and one party wanting to stop that revaluation. There is a clear choice, a choice of fairness, and I know which way the people are going to vote.
It is a matter of some regret that the three Front-Bench spokespeople have between them taken so much time. To be blunt, all three have been unnecessarily indulgent, and I shall take no interventions and be as brief as possible to allow other Members to speak.
The council tax is the son—or, in these politically correct days, the daughter—of the poll tax. It was brought in in a blind panic by the previous Deputy Prime Minister. To fund the expenditure gap, value added tax, one of the most regressive taxes known to mankind, was increased from 15 to 17.5 per cent. Council tax is not a tax of which we can be proud, although its introduction in place of poll tax saw the end of Margaret Thatcher, which happened on one of the happiest days of my political career.
The fact that council tax was introduced in such a hurry meant that, in their essence, the valuations were hurried. In fact, at the time, they were referred to as second-gear valuations. Estate agents and valuers, employed quickly by local authorities and valuation offices, drove around communities in second gear deciding which row of houses were in bands B, C, D, A and whatever.
Perhaps the most popular I ever became in my 12 years as a councillor was when I uncovered fundamental flaws in the banding assessment for the Newtown part of Park ward, which I represented. We were able to get about 2,000 properties re-banded from band C down to band B. If there is anything that the public like—as the Conservatives' current policy indicates—it is being handed money back. The fact that my endeavours got back £65 for each council tax payer in my ward is something that will stay with me for some time.
In a debate on council tax, it is fair to look at how councils of different political persuasions have sought to implement it. We should also ask what value for money they give. My constituency is known as Reading, West, but it includes 24,000 electors in west Berkshire, which, as we all know, has one of the worst-performing Liberal Democrat councils. Sadly, I have to say to the Minister that it is very well rewarded for that; its revenue support grant is some 11.1 per cent. We have certainly rewarded incompetence in west Berkshire.
West Berkshire council uses the 24,000 electors who actually live in the Greater Reading area but fall under the local authority boundaries as little more than a milch cow to raise funds. The difference between the standard service in a Labour-controlled authority such as Reading and the service provided by West Berkshire council is pretty stark. Pensioners in west Berkshire do not benefit from free bus travel, as there is a derisory token system that runs out after a couple of months for the regular bus traveller.
Even worse, more recently, West Berkshire Liberals have taken the extraordinary decision to use up to £900,000 of council tax payers' money to subsidise a privately operated cinema in the centre of Newbury and Thatcham. It is a cinema that most of my constituents in Reading, West who fall under the West Berkshire council area will probably never see, never mind use. That is an extraordinary decision to use £900,000 of council tax payers' money as a subsidy.
I want to address the Conservative plans, because council tax is historically a Tory tax. It is a flawed tax that depends on too narrow a base. I make no mistake about that, and I look forward to the outcome of the Lyons review. It is fair to use an Opposition day debate to analyse the effect on council tax levels of the Opposition spending plans. I have with me a copy of the Conservatives' expenditure strategy for 2005 to 2008, which is snappily entitled, "Better public services, better value: Conservative spending plans 2005–08". The Conservatives have scored a massive own goal in publishing those plans.
The Tories propose a cash freeze on the Office of the Deputy Prime Minister. They are pledged to match this Government's expenditure plans over the next three years on education, health and police. There is no doubt or argument about that, but that is not the case when it comes to the amount that will be available from the Office of the Deputy Prime Minister through the revenue support grant to local authorities. According to the Conservatives' own figures, the budget for the Office of the Deputy Prime Minister would rise by a mere 1 per cent. by 2008. It would now be frozen for the next two years, and in the final year of the three-year period, it would rise by 1 per cent. from £39.4 billion to £42 billion. That must be set against the current comprehensive spending review expenditure pledge to increase the figure to £50.7 billion by 2008 under this Government.
That is a massive cut, and it would have an impact on council tax levels. It is a sad fact of life that Parliament and the country have not yet woken up to the impact on council tax of the ODPM Tory cash freeze. Council tax would go through the roof.
I am sure that it would, but let us concentrate on the three years for which we have published figures and on the facts before us. Let us ensure that the Conservative party stands condemned by its own statements.
The impact of the Conservatives' flawed policy on council tax bills in England and Wales is simply horrendous. It works out at a massive £4.2 billion cut in revenue support grant for every single local authority in England and Wales. I am no expert in local government finance, but my hon. Friend Dr. Whitehead, who is also my office mate and a former local government Minister, undoubtedly is, and I pay tribute to his work on this issue. We have taken a look at the impact on council tax in the south-east. Sadly, because he is no longer a Minister—in my view, he should be—[Interruption.] He should not necessarily be a Minister at the current Minister's expense. Sadly, my hon. Friend the Member for Southampton, Test does not have a bevy of special advisers or civil servants to do his number crunching, so we have prepared numbers only for the whole south-east. I think that they are worth reading into the public record.
The average increase for the 13 south-east unitary authorities as a direct result of the proposed £4.2 billion cut in the ODPM budget for revenue support grant would be a massive 44.29 per cent. over the next two years. For the 55 district councils—this is worked out on the basis of billing districts and takes into account the fire and police precepts, as well as accounting precepts—the increase is a massive 30.35 per cent. None of that allows for inflation, for which it would be perfectly accurate to add 5 per cent.
Let me read into the public record some of the figures for council tax that the poor people in the following unitary authorities would have to bear if we were unfortunate enough to have a Conservative Government after the next election. Bracknell Forest would see a council tax increase of 21.6 per cent. in 2005–06, and of 33.4 per cent. in 2006–07. That would be a massive Tory tax rise of 55 per cent. Brighton and Hove would see increase of 35 per cent. over that two-year period. The Isle of Wight's council tax would increase by 25 per cent., and that of Medway by 41 per cent. The increase in Milton Keynes would be an incredible 59.28 per cent. Portsmouth's increase would be 33 per cent., while Reading's would be 50.48 per cent. Slough would see an increase of 44.68 per cent., and Southampton an increase of 41.48 per cent. Swindon's increase would also be 41.48 per cent. over the two years.
The increase in west Berkshire would be 57.48 per cent.—as if its council tax is not high enough already—while Windsor and Maidenhead's increase would be 43.28 per cent. Wokingham would see an increase of 48.28 per cent. The average increase across the unitary authorities in the south-east of England would be 49.29 per cent. These increases represent an incredible tax burden for people to bear.
The Conservatives' proposal to hand back to pensioners a little bit, or perhaps quite a substantial amount, of their council tax is clever politics, but one of the reasons why it is fundamentally dishonest is that the Conservatives have not come clean about how much the council tax will rise as a result of their expenditure plans. Their policy simply involves robbing Peter to pay Paul. Let us look at how it would work for band D council tax payers in Reading. The council there is not particularly profligate—it certainly levies a council tax rate lower than that of west Berkshire, and lower than that in parts of Wokingham.
Over the past three years, Reading borough council has kept council tax rises as low as possible, and I have to say that it has not been particularly favoured by the amount of Government grant that it has received. None the less, in 2003–04 council tax in Reading rose by 7.5 per cent., in 2004–05 by 3.7 per cent., and in 2005–06 by 4.75 per cent. Under a Conservative Government, however, there would be a 50 per cent. increase over the next two years. In cash terms, band D council tax would rise from the current level of £1,270 to a massive £1,902, so a £632 price tag is attached to voting Conservative in Reading, or in any other council tax-paying area.
I hope that the Minister will help me and my hon. Friend the Member for Southampton, Test to ensure that every pensioner and council tax payer in the country is made well aware of the consequences of the Conservatives' fundamentally flawed and dishonest policy.
Since this Government came into office, council tax bills have risen by an average of 70 per cent. throughout England and Wales. I trawled through some statistics from my own area and the area around the constituency of the Under-Secretary of State, Office of the Deputy Prime Minister, Phil Hope, who will no doubt respond to the debate later. Corby's council tax has increased by 71 per cent. over that period, Kettering's by 72 per cent., Leicester's by 88 per cent., Milton Keynes's by 73 per cent., Peterborough's by 83 per cent., Cambridge's by 77 per cent., Great Yarmouth's by 95 per cent., and Northampton's—close to the Minister's patch again—by 71 per cent. Similar figures apply across the board, across all councils of whatever political persuasion. That is the result of Labour's policy on local government funding.
In 2004, the average band D council tax bill in England was £1,167, up from £689 back in 1997–98. As we have heard today, further tax hikes are expected after the election, due to the black hole in the Government's funding of local councils, just as happened after the 2001 general election. Calculations suggest that council tax bills will top £2,000 by the end of a Labour third term.
Much was made of the additional money from the Chancellor, announced in his pre-Budget report, of £1 billion this year to help to keep council tax as low as possible—obviously with the election in mind—but we now discover that £350 million of that is money announced last year and £350 million is ring-fenced money, which will not be distributed evenly across councils throughout the country. That leaves new money of about £250 million for distribution.
Under this Government, pensioners have lost over a third of their pension increase in higher council tax. For typical single pensioners, 40 per cent. of their basic state pension increase has been snatched back in higher council tax, with pensioner couples losing a third of the rise in soaring council taxes.
To take another measurement of Government policy on council tax receipts, the increase in such receipts under this Government is about £9 billion—from £11 billion in 1997–98 to £19.7 billion last year. So, there has been a hike in council tax receipts of almost 80 per cent., which is equivalent to about 3 per cent. on the basic rate of income tax. One problem with this Government is that they claim each year that they are giving additional increases and above-inflation increases—we heard that from the Minister today—but they do not convey to the House the fact that a lot of the money in terms of the global increase is specific grant money, which is ring-fenced. The figure some years ago was 15 per cent., but the Minister recently announced that it is to drop to, I think, 13 or 13.5 per cent.
That tells me that the Government have accepted the mistake that they made and that they are reining back on the specific grants, which go to pet projects, usually in Labour areas.
No. I have been told that I have to finish fairly soon to let other hon. Members speak.
I want to refer to my constituency, North-East Cambridgeshire, and to Fenland district council, which occupies most of that territory and which was capped last year in a way that I consider spiteful, unnecessary and unwarranted. The facts of the matter are that last year Fenland district council had £420,000 withheld or clawed back under the floors and ceilings policy, while this year the amount is £360,000, which went to help those on the so-called floor.
The formula uses sparsity factors, deprivation indices and other factors to determine the grant requirement. In effect, therefore, the Government are on the one hand saying that my council area requires a certain amount to deliver services in a rural area with deprivation and sparsity problems, but on the other are taking back a considerable amount of that money. They then have the audacity to say, "We said you needed the money. We haven't given it to you, but you are increasing your council tax above a rate that we deem necessary. Therefore, we are going to cap you."
The bill paid in Fenland is, on average, the lowest in Cambridgeshire, £83 lower per dwelling than the county average, more than £60 lower than the English average and more than £130 lower than the shire district average. So, under no count can one conclude that the council tax payers of Fenland pay more than those in many other equivalent banded properties in adjoining constituencies, or for that matter in shire districts throughout the country.
I am sorry, but I do not have time.
The problem for councils such as Fenland is that a huge proportion of their properties are in the lower bands. For example, nearly 85 per cent. of Fenland's properties are in bands A, B and C. That is a remarkable statistic for a Conservative constituency, but it is the reality. So, it costs Fenland far more to raise extra finance on council tax than it would neighbouring districts. I believe that it will require about £2 on council tax in Fenland, while neighbouring Cambridgeshire districts will need to charge only an extra £1 to raise the equivalent amount.
Nominating a few councils for capping last year was a spiteful exercise on the Government's part. It was of course intended to set a clear standard for this year, with an election coming up. The stick that the Government wielded then, plus the carrot produced by the Chancellor with his extra funding, mean that most council tax increases will be about 4 or 5 per cent., which is what the Government intended all along. They can announce that figure in the run-up to the election.
The Minister mentioned two Cambridgeshire councils, Huntingdon and South Cambridgeshire. For many years they imposed very small increases; on one occasion I think there was no increase at all. They were able to do that partly because they had sold off housing stock and had money in their capital accounts, but it is not possible to cushion the blow for ever, as the Minister well knows. Indeed, he is nodding. There comes a time when a council must put back its tax base. Huntingdon is now proposing an increase of, I think, 13.7 per cent., and South Cambridgeshire has said that it must increase the district element of council tax by 100 per cent. It will still be the case that neither council will have an average band D tax higher than that of any other shire district.
I want to say a little about the rebate that we promised to pensioners. This is extremely good news for my pensioner constituents. The constituency has an elderly population, and some 10,500 pensioner households will benefit from a £500 rebate. I congratulate my colleagues, including those on the Front Bench, on that extremely helpful suggestion.
When we debate local government finance here, the problem with the Conservatives is that they believe that history began in 1997. They conveniently forget everything that went before: the poll tax, the problems with rate-capping and the massive cuts in grant faced by local authorities, not just during the four years before the 1997 election but throughout the 1980s.
Whose council tax is it anyway? Given the way in which Mrs. Spelman introduced the debate, no one would believe that it was introduced by a Conservative Government. I happen to think that it was probably one of the better things that the Conservative Government did during their 18 years in office. I think it is a reasonable tax that is now in need of some reform, and that is precisely what the Government are trying to do. It would, in my view, be entirely illogical not to impose any tax on the most valuable asset that people own, whose value has increased so much over the past few years.
The Government have sensibly established a balance of funding review and the Lyons inquiry into the funding of local government. We must address the fact that because the business rate is linked to inflation, an increasing burden is being imposed on council tax to fund local services. I hope that Sir Michael Lyons will consider that. I would not oppose a local income tax in addition to council tax for larger councils, which the Chartered Institute of Public Finance and Accountancy has recommended, but proper research is needed so that we know what the impact would be. We need significant reform of council tax benefit for owner-occupiers, which is the one benefit that is not taken up by about half the people who are eligible for it. We need a campaign to deal with that, but perhaps we should also think again about some form of tax credit to replace the benefit.
We also need to look at the bands. I think that we should have more at the top, and split band A at the bottom. Given a system of rebanding and a substantial increase in the take-up of the council tax benefit to which people are entitled, council tax would become a progressive form of taxation. The figures are there to show that.
When revaluation is done, we will certainly have to consider at a regional level the way in which assistance is given. Indeed, I think that my right hon. Friend the Minister mentioned that issue, and the Government will come back to it.
My right hon. Friend did an excellent demolition job on the pie-in-the-sky proposals from the Conservatives that he identified. The reality is that in costing the Conservatives' scheme, the Institute for Fiscal Studies did not confirm that the necessary funding would be available. That is a crucial difference and we have to get it on the record. If the Conservatives are serious—should they come to power—about preserving education and health services and the police, the massive weight of their cuts would fall on local government. They would fall on maintenance of the roads, which they claim to be interested in. They would fall on litter collection and the maintenance of open spaces, and on libraries, leisure services and the fire service. Those services are at the top of the list of people's priorities, and we need to emphasise time and again that they would be cut substantially under the Conservatives' proposals. The environment in which people live and the services that they receive are crucial to the way in which they feel about local government.
I am afraid that I will have to decline as I am on a strict time limit. I want to make progress so that I can allow others who have been present throughout the debate to get in.
The worst criticism that I can offer of the Conservatives' proposals is that they are worthy of the Liberal Democrats' unfunded and uncosted proposals at their worst. During his response, my right hon. Friend made a point that I particularly welcomed. There was some concern in local government circles that the £1 billion would be a one-off sum and that next year, local government would be left to deal with the mess. I am pleased that he dealt with that issue, and local government will be somewhat reassured by what he had to say.
I have two final points to make about the Opposition parties' proposals. The Liberal Democrats say that they have done the research and the costings and that local income tax will achieve various things. However, during his speech Mr. Davey gave away something that also emerged when the Liberal Democrat leader of Somerset county council appeared before our Select Committee. The hon. Gentleman said that any form of taxation needs its own form of grant distribution. When challenged, the leader of Somerset council had to admit that, on a like-for-like basis and without any change to the grant regime, local income tax in Somerset would not be affordable for many families. She said that the council would need a substantial increase in grant.
Frankly, if the hon. Member for Kingston and Surbiton has not calculated how he would distribute grant, he cannot say precisely how much people would have to pay in local income tax, compared with council tax. [Interruption.] He is mouthing silently that the Liberal Democrats have made those calculations, but I certainly have not seen them on his website. It will be interesting to see them in due course.
The hon. Member for Meriden put a great deal of emphasis on the fact that she opposes means-testing, but let us consider the Conservatives' proposed council tax discount for pensioners, according to my understanding of it. Those pensioners who currently pay no council tax because they get a full discount would get no discount from her. Those whose council tax is partly covered by council tax benefit would get only part of her discount. However, those who would get the full discount include some of the richest, who live in some of the largest houses.
Let me make the position clear. Somebody who receives 100 per cent. council tax relief is obviously not in need of any discount. For somebody who receives benefit providing partial council tax relief, the full discount would apply to the residue. They would get the full 50 per cent.
The full 50 per cent. of what? Is it 50 per cent. of the council tax that they are paying or 50 per cent. of what they would be paying if they did not get any council tax benefit? It is completely unclear.
To make it perfectly clear, let me explain the order in which the benefits stack. First, council tax benefit applies if someone is eligible for it; after the application of the benefit, a residual sum may remain. That residual sum is the one to which the council tax discount of 50 per cent. applies. If, in addition, the person concerned is eligible for the single person's discount, the full 25 per cent. is applicable. The benefits stack in that order: council tax benefit; single person's discount, if eligible; and, if there is any residue, the full 50 per cent. discount would apply.
That is not perfectly clear. If people do not pay council tax because they receive the full benefit, they do not get the discount; if they pay part of their council tax, they will get part of the discount according to some rather unclear form of calculation. Some of the richest people living in some of the most valuable houses will receive the full amount of discount—[Interruption.] The hon. Member for Meriden says that this is not means-testing, but her discount is linked to a means-tested benefit—the council tax benefit—so the resulting discount must itself be means-tested, but means-tested in a wholly perverse way. It is, in fact, means-testing stood on its head. That is the charge that I level at the Conservative proposals. It is stood on its head, because the biggest discount goes to the people who have the most money and who live in the biggest houses. That is the reality.
I am grateful for the opportunity to make a short contribution to the debate. I agree with only one thing that Mr. Salter said—we should keep our contributions short in order to allow other Back Benchers to speak. I have to say that the Minister for Local and Regional Government spoke for 43 minutes, but he said absolutely nothing and made no contribution of value to the debate.
Speaking as a former county councillor, I pay tribute to the many councillors up and down the country who do tremendous work under great pressure, frankly, as a result of the extra demands put on them. My patch includes the Lancashire county council, which is Labour controlled and Ribble Valley, which is Conservative controlled. Of course, the people of Ribble Valley will not have to wait very long—we know the date at least of the county council elections—before they have a Conservative-controlled Lancashire county council that will be able to deliver effective policies on a much lower council tax than they currently pay.
One matter on which we can all agree, irrespective of whether we have had experience on a council, is that the vast majority of people in this country simply do not understand local government finance. It is incredibly complex, yet so much of what the Government say these days depends on it. The Government are trying to use smoke and mirrors in order to confuse people, but funnily enough, one thing that does not confuse people is the demand that they receive through the letterbox. When they open up the letter, they see how much council tax they have to pay. On that matter, there is no confusion.
For a band E property in Ribble Valley in 1997, people had to pay £746; today, they have to pay £1,206. There is no confusion there at all—[Interruption.] The Minister knows perfectly well that biggest costs that people living in Ribble Valley will have to face will come from the Labour-controlled Lancashire county council. We hear a lot about the wonderful settlement that councils have had this year, but does not the Minister find it significant that, if we look back to the previous occasion on which a general election and county council elections were held virtually together, the council tax increase was pretty small, too? Subsequently, of course, council tax went up to a much higher level, but, lo and behold, what are we being told now? We hear that the deal this year is wonderful and that all the increases should be kept to a minimum. We are encouraged to rejoice that the increases in Ribble Valley may be only twice the rate of inflation. This is, as everyone knows, a general election year. People in Ribble Valley are pretty canny. They know that if a Labour Government are returned after the next general election, the increases in council tax will rise dramatically, just as they have done—by 70 per cent.—since the Government came to power in 1997.
I want to concentrate mainly on pensioners, but they are not the only ones to suffer. First-time buyers are also being clobbered one way or another. They are getting clobbered now because they have to pay stamp duty, which has not kept pace with inflation. Many people buying their first homes are truly being clobbered by it—[Interruption.] Before Mr. Davey even tries to intervene, I do not agree with any of the Liberal Democrat policies. As I say, people are clobbered at one level, and then the council tax comes in on top, and they are clobbered again.
What the Government are attempting to do with their revaluations and rebanding is to introduce a very crude wealth tax. The Government should be far more intelligent about that.
Part of the problem is that councils face so many extra demands. My hon. Friend Mr. Clifton-Brown listed the various extra demands that have been put on councils, and my local council complains most about the pensions claw back. That has had a huge impact on Ribble Valley council, as expressed at a meeting last night about employee pension funds. The council has to find £120,000 for that next year. The year after it will be £190,000 and the year after that £260,000. Those sums will have a huge impact on the level of the council tax in Ribble Valley. I pay tribute to Councillor Richard Sherras, who proposed the motion last night to bring the issue to the Government's attention. It is not only Ribble Valley that will suffer, because all councils will have to find similar extra sums.
Pensioners are a vulnerable group of people because many of them have to exist on fixed incomes. That is incredibly difficult, because they have to try to budget on the money that they know is coming in. However, from year to year, they do not have the faintest idea of the full impact of the council tax.
Ribble Valley has seen a vast increase in the number of people aged over 65. In 1991, there were 15,578 and in 2001—the latest year for which figures are available—there were 18,801. As those people get older, they rely increasingly on the services that the county and borough councils provide for them. Some of the care homes in Lancashire have been closed recently and the care packages for elderly people have been reduced, at a time when demand has increased. Older people find that very worrying.
Some of my constituents have lived in Ribble Valley for many years, they have brought up a family of three or four children, they have moved house two or three times and they now live in a big house. Although the children may have moved away, leaving one or two pensioners living there, that house holds the memories of their family, and it is appalling that they may be forced to sell that family home simply because the council tax has gone up 70 per cent. since 1997. Who can say how much further it will increase? If the Government win the election, such a property may even be rebanded.
Pensioners will look at all the issues in the round when it comes to the next general election. We have heard much from Labour Members in this debate about the new Conservative proposals that we will introduce after
Frankly, the Opposition motion is in essence an appalling confidence trick. I had something of a singalong "Sound of Music" moment during the speech with which Mrs. Spelman opened the debate, because on consulting the Conservative party website this morning I saw that she had already made the speech; quite a lot of it was on the website. Sure enough, when I entered the Chamber later, there she was making it. Perhaps that underlines the relative priorities being adopted in the propaganda at the heart of this initiative, and how much the House appears to matter in the debate.
There are two explanations for the deplorable trick that is being played. Either the hon. Lady knows what local government support the shadow Chancellor proposes, should the Conservatives be elected, in which case she is complicit in that deplorable trick, or she does not know, in which case she should consult what the shadow Chancellor says a few pages down on the website from where she has precipitately published the speech she made this afternoon, to see where the truth lies.
The shadow Chancellor said last February:
"will be 0 per cent. growth for the first two years, followed by 2 per cent. growth per year for the remaining four years of the period covered by the strategy."
That is a freeze for the first two years.
Lest the hon. Lady says that that was last February, I point out that just two days ago the Conservatives posted the uprating of their medium-term strategy on their website and said:
"Last February, we set out our medium term expenditure strategy. The heart of that strategy is a path for public spending that is affordable . . . in this document we set out how we will achieve that affordable spending."
Helpfully, on page 2 of that document is a table that sets out the three-year spending priorities. It is divided, also helpfully, into priority and non-priority areas. What every person who thinks about local government ought to know is that under the heading "non-priority areas" is Conservative future spending on local government. That spending, as last February's announcement by the shadow Chancellor shows, is to be frozen for two years, and is to rise by only 1 per cent. in real terms over three years.
What does that mean? It may not mean a great deal to some people, but it actually means that some £4.2 billion will be sucked out of local government expenditure, with the result that that money will not go to local authorities.
For the record, I had not finished writing my speech this morning. I think that what the hon. Gentleman saw on the website were the details of the proposal.
On the financial question, of course local government spending includes the important elements of education—on which we are committed to above-inflation spending increases—the health budget, with a read-across to social services provision, and police, on which we are committed to increasing spending. All those are elements of local government finance. In the same document, we identify more than £4 billion of savings within local government that could, of course, be used by local authorities, as they choose, to help with front-line services and so on.
I am afraid that that will not do. The £4.2 billion loss over the three years would occur after taking account of the increases that the Conservatives have indeed suggested they would make in their education and health expenditure. As everyone knows, in the context of local government and council tax, that £4.2 billion loss can be made up only in one of two ways: either there must be a change to the system whereby the relationship between what is raised locally and what is provided centrally is augmented by other forms of local tax, in which case the gearing ratio is not so harsh; alternatively, if one wants to maintain services at the same level, having lost that amount of money, council tax must be raised, as day follows night. It is quite simple and straightforward.
There are no Conservative proposals, as far as I am aware, for any change to how the council tax works, other than that the Conservatives apparently want rebanding, but not nasty rebanding. The Conservatives have two commitments: first, to keeping the council tax as the main source of raising revenue for local authorities; and, secondly, to reducing radically the amount that central Government put into local government, as set out in their medium-term expenditure plan.
Perhaps my hon. Friend was about to come on to the Conservatives' third commitment: the so-called council tax discount for pensioners. That would cost £1 billion, and although they say that it would be funded by savings, the latest edition of The MJ—formerly the Municipal Journal—shot a hole in the bows of that by saying that such savings are pie in the sky. Does he agree with that assessment?
I am sorry, but I cannot take any more interventions because I have only a little time.
Even if the Conservatives could make the savings that they claim—I agree that they are pie in the sky—and told pensioners that they could fund the scheme, what would be the effect of taking such money out of local government? We should compare their proposals with Labour's medium-term expenditure plans, which put it on record, in black and white, that such funding will increase by 17 per cent. over the same time period.
What would be the effect of a 1 per cent. increase rather than a 17 per cent. increase? Owing to the gearing effect, local authorities that wished to keep their services at the same standard would have to increase their council tax by 4 per cent. for every 1 per cent. lost from central Government grant, which explains why, when the Conservatives introduced the council tax, they increased value added tax by 2.5 per cent. They did that so that they could pack the amount given by central Government and thus keep council tax rises lower. They would not be able to say that they were not warned about that effect or that they did not know about it.
What would be the effect of the Conservatives' proposal in Southampton? Council tax would probably rise by about 40 per cent. over two years because of the loss of increased grant. That means that the council tax for an average band D property in Southampton would increase by about £600.
I am sorry, but I do not have time.
The Conservatives tell us that pensioners would receive £440, but they would have to pay an extra 50 per cent. council tax over that period. After taking inflation into account, all the money that the Conservatives would give pensioners under their phoney plan would be taken away from them due to the removal of money from local government, as identified in their medium-term expenditure plan.
The Conservative proposal is a fraud that is unworthy of the people of this country. If the hon. Member for Meriden ever has the misfortune of trying to put the policy into practice, I urge her, before she becomes distressed, to consult the shadow Chancellor to find out whether he will change his policy. If she understands what his policy really means for local government, she should withdraw the proposal that she put before us today.
I am grateful to Dr. Whitehead for drawing attention to any distress on the part of my hon. Friend Mrs. Spelman. I assure him that I see no distress on her face. Her clear exposition of our party's position was given with the authority and assurance that she will carry into her new position of local government Minister in due course.
The debate is much concerned with figures, but the council tax represents more than that. We can use the debate to illustrate the way the Government go about their business more widely. They ride two waves with the British people, the first of which is disillusionment. There is a sense that they have squandered the good will with which they came to office. Those in professional and public service circles have a sense of their overbearing centralism, which prevents good professional officers from exercising their discretion and doing their work. The second wave that the Government ride is one of cynicism, which is born of the fact that the public do not trust them any more because there is sufficient evidence of their dishonesty. The council tax draws those two waves together.
Let me give examples from the three authorities that I share the honour of representing. Bedfordshire county council has been given an extra £14.9 million, which no doubt the Minister for Local and Regional Government will trumpet. Some £11.6 million of that will be automatically passported to education, which leaves £3 million to deal with new legislative issues and unavoidable growth. Some £2.5 million is required for additional social services assistance, and there are demographic pressures in the area.
An item called "Supporting People" used to be 100 per cent. funded by Government, but is now only partly funded, leaving a shortfall. Where will the extra money come from? The council must now pick up the costs for preserved rights and residential allowances, as no extra funding is available. Bedfordshire county council therefore needs to spend more of its own money, as costs are not accounted for by the Government, yet the Government trumpet their good will towards local government.
Mid Bedfordshire district council was mentioned earlier. The guns of Whitehall are trained on it, because it proposes to make a 13.3 per cent. increase, which, as I told the Minister, equates to £1 a month. It is the 10th lowest rated district council of 238, yet the full might of Whitehall will be brought to bear on it for its unjustifiable activities in protecting its citizens. In a letter to the Minister dated
"this Council is in a designated growth area under the Milton Keynes and South Midlands Sub Regional Strategy and we have experienced a tax base growth of 4.7 per cent. in 3 years, equal to 2190 properties. This growth is expected to continue. The calculation for grant distribution, however, applies a band D equivalent of about £180 for each new property to be set against the Formula Spending Share."
The band D charge for mid-Bedfordshire, however, is £90, so Mrs. Turners says that
"the council effectively loses around £90 with every new property added when its FSS is reviewed."
There are clearly pressures on Mid Bedfordshire council, yet it will fall foul of Government capping rules.
There has been a 72 per cent. increase—eight times the rate of inflation—in council tax in mid-Bedfordshire since 1997. At Bedford borough council, which covers part of my constituency, the increase has been 66 per cent. or seven times the rate of inflation over seven years. It calculates that even on the Government's own needs assessment, a further £237,000 should have been made available. It is concerned about issues such as the implementation of the Licensing Act 2003, as that is not fully funded and will add 1 per cent. to the costs of the council tax. It is worried about increased pressures for recycling—a good thing—that will add an estimated 7.7 per cent. to council tax costs. The council must bear those additional costs.
The meanest cut for Bedford borough council is the loss of the disabled facilities grant. The Minister looks doubtful, but after our debate I shall give him a copy of a letter from the Office of the Deputy Prime Minister to the council dated
"For 2005/06 the share available for authorities in the East of England is £9,778,000, which represents a 2 per cent. reduction compared with the amount available for 2004/05."
The disabled in Bedfordshire borough will receive less as a result of the Government's actions. The former director of the SHAC housing association is giving all his attention to Mid Bedfordshire district council, which is going to charge people an extra £1 a month, yet he shows little interest in whether or not the disabled people of Bedford borough face a reduction in the disabled facilities grant.
As I said earlier, the Government are riding two waves—disillusion and cynicism. We cannot trust everything that they say. I have given the example of three different councils that are trying to do their best under the Government. The statistics will be used to claim that they are receiving more money every week and, indeed, every day from the Government, but their own experience of rising costs affects what they can do with the money. Councillors and people who work in local government know that the figures are fiddled. As my hon. Friend Mr. Evans said, when the bill comes through the letter box people can see that they have been charged extra and that council tax has increased at a rate many times that of inflation since 1997. The Minister says that the Government are giving councils more money, and that the problem is with the councils. However, it is an insult to electors' intelligence to be told that this year's settlement does not have anything to do with the general election. Until Ministers stop treating the electorate with contempt the twin waves of disillusion and cynicism will go all the way to the Government's grave—a moment that cannot come too soon.
Local government finance is, in some ways, straightforward. Local authorities have three sources of money. They get it from central Government in grant, the business rates and the domestic property tax. Those are the three sources that have existed in my adult lifetime. Until 1990, the level of the business rate and the domestic property tax were subject to decision by local authorities. Since 1990, the business rate has been decided by central Government and its rate has been fixed to inflation. The only flexibility that local authorities have is in the council tax.
Today's debate has ignored the fact that we will not have stable, long-term local government finance until we give local authorities control over a bigger proportion of their revenue. The Tory proposal has a lot to commend it in terms of what it does for middle income and better-off pensioners, but for local government it shifts the balance in the wrong direction. It means that local government is more dependent on central Government finance than on revenue raised locally. The Lib Dems' solution of a local income tax ignores the gearing effect. Because there will not be the bill on the doorstep that Mr. Evans mentioned, local authorities will be tempted to increase the proportion of the local income tax and mix it with the national income tax year by year in the hope that the increase will not be noticed.
I am not necessarily against the concept of a local income tax, but it is only viable if we recognise that to throw away the benefits of a property tax would be stupid. We need to ensure that a property tax is at the core of local government taxation and that should be supplemented with other locally decided revenue raising sources, of which local income tax may be one. Current council tax levels are probably at the maximum that can be supported.
Once we have the Lyons report, we need to deal with the serious issues of finding a long-term, cross-party solution to local government finance. I realise that we will not get it this afternoon, a few weeks or months away from a general election, but until we look in a grown-up way at giving local government a real opportunity to decide its own level of finance and be accountable to its local people, we will never solve the problem because, each year, the amount of revenue grant that local authorities receive will be decided by the pressures and strains within the Treasury. We must move away from that to give greater flexibility, power and freedom to local authorities. The Lyons report will be key to that, and it is about time that we discussed the matter in a more grown-up way.
If ever in the early hours of the morning my sleep became troubled by worries about whether the Conservative party had done the right thing with regard to the pensioners discount, those worries have long gone, because it is clear to me that both the Labour party and the Liberal Democrats are rattled by our proposal and realise that we are on to a winner. How else can one explain the grumpy performance today of the Minister, who is usually a ray of sunshine on these occasions? Perhaps the rumours are right. Perhaps he has realised that there is a problem with regard to pensioners and has lobbied the Chancellor to do something about that in the Budget. Only time will tell. Perhaps the Minister will be eating his words in a little while. It is clear that, despite the abuse and the talk about pie-in-the-sky figures, he realises that he faces an enormous problem after the election, either in having to explain why he has left such a lousy legacy for the Conservatives or in having to defend the rapid rise in council tax that CIPFA suggests.
The Minister introduced a new definition of whether the Audit Commission is right or wrong in saying that its suggestion that increases in council tax are largely because of pressures placed on councils by central Government is wholly wrong. If the Audit Commission agrees with the Government, it is right; if it disagrees with them, it is wrong.
The Minister ended his long speech by listing a load of things that the Government have done for pensioners. Unfortunately, he did not address the one fact that pensioners remember—one third of the increase in the state pension has disappeared because of council tax increases.
My hon. Friend Mr. Evans made a powerful case in discussing the increase in costs for council tax payers in Ribble Valley. He said that council tax has increased from £746 to £1,206 since 1997. From a sedentary position, the Minister says that that is because the example involves a Conservative council, but, as my hon. Friend pointed out, Lancashire county council is controlled by the Labour party, which imposed those increases. I hope that my hon. Friend is right, and that we take control of Lancashire county council and reduce the cost of council tax.
My hon. Friend Alistair Burt discussed the true effect on local authority expenditure of the squeeze by education spending on other forms of spending.
My hon. Friend Alistair Burt mentioned the overbearing control of local authorities, which imposes an additional cost. In my small local authority, one comprehensive performance assessment costs £250,000, and when that figure is translated into council tax, it is multiplied by four. That council must collect £1 million and its budget is less than £12 million.
My hon. Friend has made a powerful point, which further underlines why the Labour party is in such a mess. Our proposals are clear—protection for education, protection for health and protection for law and order. On the elements outside that protection, local authorities will be able to apply £4 billion a year of savings to keep down council tax or to improve services.
The Minister and the Government will be remembered for just one thing: on their watch, council tax increased by 76 per cent. For the first time, an average family in an average home will pay £100 a month in council tax—an independent survey predicts that band D council tax will hit £1,214 in England—but eight short years ago, the average family paid £30 a month in council tax, which shows how viciously the Government have targeted it.
The Government have managed to convert an earnest but dull property tax into an oppressor of pensioners, which is a mark of how cynically they have manipulated it.
Does the hon. Gentleman agree that pressure on residential council tax payers has increased since the business rate was nationalised and increases were capped annually? Does he favour the relocalisation of the business rate?
I have to say that, if I were a Labour Member, the business rate would be the last thing that I mentioned, considering what revaluation means. The hon. Gentleman must already have constituents banging on his door telling him about the problem that they face with revaluation, and that is just a foretaste of what his party plans.
We have been invited to believe that big increases in council tax are a thing of the past and that we have hit sunlit uplands where low-single-figure increases have become the norm. But surely we have been here before, within living memory. In 2001, there was an increase of 6 per cent., only to be followed by an increase of 8.3 per cent. in 2002 and 13 per cent. in the following year. The difference is the general election. Of course things will be reasonable before the general election, but we want to know about Labour's plans for after it. Before Labour was elected, the Prime Minister preached the importance of keeping council tax down, pledging limited rises and preventing big increases. We know what followed—a 76 per cent. increase in council tax under this Government.
As my hon. Friend Mr. Moss said, we have already received expressions of concern, including a letter from Sir Sandy Bruce-Lockhart about the £1.5 billion black hole in the Government's spending plans. As he rightly points out,
"If local government is to continue to improve, it must no longer be left to stumble from one year to the next with last minute financial fixes from central government."
"My Lords, the noble Lord identifies the problem but the solution is entirely wrong. Let us scrap the council tax. That is all I need to say."—[Hansard, 17 July 2003; vol. 409; c. 977]
Indeed, that is all she did say, so why do the Liberal Democrats favour rebanding? The last time the hon. Gentleman spoke he said that they did not, but this time he said that it was part of a deliberate policy. I have here the Liberals' official policy—I managed to get it from their website. It says:
"As an early first step, the government should increase the number of bands at both ends of the Council Tax scale."
Now it is official: rebanding comes courtesy of the Liberal Democrats. We know that their local income tax would hit working families particularly hard and cost them £630. Thanks to the honesty of Dr. Cable, we know that it would start to bite families who earn in the mid-£30,000 bracket.
Many Members have referred to the plight of older people—a generation that this Government have done so much to airbrush out of modern Britain, and an inconvenient reminder of Labour's neglect. In eight short weeks, pensioners will have a choice, and it could not be clearer: under Labour, massive council tax increases, with a crippling revaluation; under the Liberal Democrats, a massive assault on the incomes of their children and grandchildren through an unfair local income tax; or under the Conservatives, up to £500 in their hands to address the abuses of the council tax—their own money back in their hands to do with what they wish. I am confident that given that choice, they will choose the Conservatives.
Let us cut straight to the main question, shall we? The key political question of the afternoon is the credibility of the Tories and their so-called council tax discount for pensioners. That is what this debate has been all about. The policy has been described by my hon. Friend Mr. Betts as giving more discounts to those who need them least. That is a good summary of the Tories' proposals.
Does the Tories' electoral bribe stand up or is it, as this debate has shown, unravelling? We witnessed the unedifying spectacle of Conservative MPs defending Tory councils that are going to increase their taxes by 13 per cent., 17 per cent., 23 per cent. and 100 per cent. That news will go back to the electorate in those constituencies, so that they know what those Tory councils and Tories really stand for.
What is at stake is the credibility of the Tories overall strategy for public spending. As my hon. Friend Mr. Hall said, they admit that by 2011–12 they will impose spending cuts of £35 billion per year, as compared with projections based on Labour's spending plans. Mr. Letwin, the shadow Chancellor, said in November that those spending plans
"provide the ability over a six year period for us to be spending about £35bn less per year, in the sixth year, than Gordon Brown's plan provide for."
Leaving aside council tax for a moment, we see that the choice is clear: investment with Labour or cuts under the Tories. It was ever thus.
Then the Tories con trick comes into play. They are going to give some of the money back to particular groups, such as some pensioners in England, through a so-called discount on their council tax. That is a con trick, typical of the "now-you-see-it-now-you-don't" politics of Tory tax pledges. In reality, the Tories are once again being economical with the truth and offering fool's gold to the electorate.
We know that that money will not be found from efficiency savings. The latest edition of the Municipal Journal says that to suggest that the £1 billion cost of the rebate will be met by efficiency savings is pie in the sky. I think that the description given by Mr. Pickles was pie-eyed, as well as pie in the sky. We know that those cuts can come only from cuts in front-line services. There is no money for those discounts—it must come from such cuts.
The Tories say, for example, that they would cut £1 billion by abolishing all local government inspections. I look forward to hearing a few Tory MPs explaining on the doorstep why they are taking away the service that keeps child protection in place or how they are going to cut £1 billion from local housing. I cannot see too many of them going round the housing estates explaining those things when councils receive a massive cut in the grant.
I am not going to give way, as I have very little time.
My hon. Friends the Members for Reading, West (Mr. Salter) and for Southampton, Test (Dr. Whitehead) have done an extraordinarily good job of analysing the Conservatives' spending plans and are clear that councils that receive a massive cut in grant will inevitably increase council tax. The discount will therefore not be a discount at all. Pensioners in areas such as Reading, West and Southampton, Test and across the country will experience a 40 per cent. increase in council tax.
The Tories proposals are fool's gold. There is no money to give away to pensioners in council discounts. The Tories £35 billion of cuts means full spread council tax and an increase for council tax for all, not just pensioners.
It is important that we remember the Tory record on funding for local government. We are not dealing with a here-and-now question. The pensioners whom the Tories are trying, with their fool's gold, to bribe into voting for them remember the Tories all too well. Those pensioners remember Mr. Howard, the Leader of the Opposition, introducing and scrapping the poll tax, and increasing VAT from 15 per cent. to 17.5 per cent., as we have been reminded. Those pensioners remember that in the last four years of their term the previous Tory Government cut funding for local government by 7 per cent. That stands in stark contrast to the 33 per cent. real-terms increase that the Labour Government have given to local councils.
Even if memories among those pensioners were not very strong, however, they would know about the track record of Tory councils and about the average council tax, which is £200 more under Conservative authorities, as compared with Labour authorities. Labour authorities have lower council tax and better services, as measured by the Audit Commission's comprehensive performance assessment.
Finally, the Liberal Democrats continue to peddle their slogan, "Axe The Tax", in a desperate attempt to win votes, despite the fact that not a single organisation with real expertise in local government funding supports the idea of replacing council tax with local income tax. What it means is a massive increase in the income tax of every family across the country. That is the Liberal proposal—written on the back of a fag packet, it does not add up and will not be accepted by local people.
The Tories have been caught out. Their track record on funding and support for local government is shameful. Their proposal on spending means savage cuts, and their promises on council tax discounts are worthless. The choice is clear: continued public investment and low council tax under Labour or cuts in services and massive increases in council tax under the Tories.
Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to
Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.
That this House welcomes the Government's support for local government with its 33 per cent. grant increase in real terms since 1997, compared to a real terms cut of 7 per cent. in the last four years of the previous administration; notes that the increase in council tax this year is set to be the lowest in over a decade at around 4 per cent. and the second lowest since it was introduced and is less than the increase in average earnings; notes CIPFA's view that it will add less than £1 a week to average council tax bills; further notes that the effect of the Opposition's policy to cut grant to councils and abolish capping would allow council tax to rise unchecked; and looks forward to the report of the Lyons inquiry into local government funding which is due by the end of this year.
On a point of order, Mr. Deputy Speaker. You will be aware of today's severe weather conditions in East Sussex and Kent, which have made driving particularly treacherous. According to the BBC, the Army has been deployed to help the emergency services. Have you had any indication from the Ministry of Defence that a Minister will come to the House to make a statement on these unusual circumstances and what assistance the Army is giving to the emergency services?
Only in the narrowest sense is that a point of order for the Chair, but we would all be concerned and express sympathy for the people who are affected by these drastic weather conditions and those who seek to help them in the circumstances. Those on the Treasury Bench will have heard what the hon. Gentleman said. As necessary, the matter may be dealt with or he and his colleagues might wish to pursue it at some later date on behalf of their constituents and local authorities, but the Chair cannot say more on the subject.