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We look forward to the report of the independent inquiry by Sir Michael Lyons, which is due to be submitted to my right hon. Friends the Deputy Prime Minister and the Chancellor by the end of the year. In the meantime, we continue to receive many representations on a variety of local government finance issues.
Council tax in Wimbledon has risen by 75 per cent. since 1997 and I have received several representations from constituents about the proposed council tax revaluation. Will the Minister confirm to my constituents and the House that the revaluation will not result in another large increase in council tax but will be fiscally neutral?
I welcome the hon. Gentleman to the proceedings. I would have thought that his constituents would tell him about the increase of nearly £50 million to the London borough of Merton under this Government. I am happy to confirm that we propose a revenue-neutral revaluation. That has been made clear from the beginning.
The increase in grant to the hon. Lady's council last year was greater than at any time since the 1990s. I would have thought that Conservative Members would congratulate the Government on those increased grants and contrast them with the cuts under their party. As she knows, the revaluation is being done on a revenue-neutral basis. Last year, the grant increase more than made up for the increase in costs that was being imposed.
Experience in Wales suggests that revaluation will hit hardest where average income is low and house prices are high, as in the west country; where house prices have rapidly increased, as in the west country; and where it will be felt most keenly by local authorities that do not get a fair deal from the current system, as in the west country. Is not the only answer to get rid of an unfair tax and replace it with something that is related to ability to pay?
The hon. Gentleman will be pleased to know that we are not conducting revaluation on the same basis as in Wales. An interesting newspaper—the South Staffordshire Rose, which is published by an august local organisation, namely, the local Labour party—cites the president of the Liberal Democrats on local income tax. He says:
"I don't think actually in the end it worked well."
We agree with that.
Whatever the end result of the review, can my right hon. Friend assure the House that it will not change the system that ensures that the amount of money that goes to local government is based on need? Deprived areas should not have their money taken away, as it was under the Conservative Government, and put into places such as Westminster.
My hon. Friend has campaigned on these issues for a long time. He is right to say that the new local government funding formula recognises need, which was not the case in the 1980s and 1990s. I am proud of those changes. I assure him that the Labour Government will not reverse them.
Is the Minister aware that the proportion of revenue raised for local services from the business rate reduced in real terms by 5 per cent. in the 10 years from 1993–94? Over the same period, there has been a real-terms increase in council tax for local residents of 37.5 per cent. Does he not agree that it is about time that ordinary domestic council tax payers were given the same protection from excessive council tax rises as is available to the business rate payer?
I met Sir Michael Lyons last week, and I understand that he has received over 400 representations. I hope that my hon. Friend will make a representation to him, too. That is certainly one of the issues that Sir Michael is able to consider.
Will the Minister consider ways in which he could better educate Members of the House in the complexities of local government finance, so that they understand that revaluation does not necessarily mean that bills will go up, and that it is the responsibility of local councils to decide the level of council tax and how to spend that money on local services?
I am grateful for my hon. Friend's offer. I am trying to educate myself in the complexities of local government finance, so I should not start giving too many lessons to the rest of the House. Any hon. Member is welcome to join me on that voyage of discovery, because it is certainly well worth it.
I presume that, during his voyage of discovery, the Minister has reflected on the fact that the revaluation will have a dramatic effect on the ability-to-pay estimate that the present system of distribution uses. The effect could be that London and the south-east lost grant again and that grant went to northern, urban, probably Labour areas. Is he contemplating providing compensation for that?
I can do no better than to quote the leader of the hon. Gentleman's own party, who said in February, "You have to revalue." Conservative Members have to think about that and get some consistency into their own position.
Will my right hon. Friend confirm that the Government have a genuinely open mind about the significant reforms that may be recommended by the Lyons review, including the transfer of business rate back to local authorities to deal with the gearing problem, the expansion of the bands at the top and bottom end of council tax to make it more progressive, and reform of the council tax benefit system to deal with the deplorably low take-up, particularly among poorer owner-occupiers?
We set up the Lyons inquiry with an open remit, and we have appointed someone of the authority of Sir Michael Lyons to look into those issues. We insist that his inquiry be his own. He has a wide-ranging remit and total freedom to recommend what he likes.
Is the Minister looking forward to the results of the revaluation exercise in England? I wonder what he is lobbying for first—fair local income tax or a reshuffle?
I am glad that the hon. Lady has extended the usual courtesies to new Front Benchers and has started off in the manner in which she intends to carry on. I am certainly not looking forward to the next reshuffle, as one is as likely to go out as to go up. It is always important to remember that we are not looking to implement local income tax, which would not be a sensible way forward; but I look forward to debating these issues with her in an open and frank way.
Can the Minister confirm whether any of the submissions received on local government finance have been from the F40 group of the worst funded local education authorities—Leicestershire county council is 150th out of 150? Despite a large growth in education funding over the past eight years, there is still a broad gap to be bridged. Will he confirm that the F40 submission will be given very careful consideration?
I will be very surprised if the F40 group has not made a submission to the Lyons inquiry. As far as I am aware, it has not made any submission to me, but I would be happy to check. It is important to say—I have debated this matter long and hard with my hon. Friend—that the increases in funding for Leicestershire in schools and elsewhere have been significant over the last eight years. However much my hon. Friend argues that his area would like to be higher up the league table, the fact remains that Leicestershire pupils and residents are doing far better than they were eight years ago. It is important to remember that.
The Minister was quick to read out a piece of Labour party propaganda from South Staffordshire, but I wonder whether he has had time to read his own Government's White Paper on the question of revaluation in England and Wales? It states that
"there should not be any change in the amount of council tax collected", yet in Wales the amount of tax taken went up by 10 per cent. in the first year. Does that not prove that the forthcoming revaluation in England is nothing more than a Trojan horse for this Government's third-term tax rises?
The document was not about Wales, so that is not surprising. We are talking about a revenue-neutral revaluation in England. I remind the hon. Lady that, just a couple of months ago, she said in the House that
"a property-based tax must take account of changes in the value of the property".—[Hansard, 2 March 2005; Vol. 431, c. 983.]
She cannot run away from what she said before the House.
Council tax payers have already suffered a 76 per cent. increase since 1997 and nothing that the Minister has said will allay fears of a further increase from revaluation. To add insult to injury, it was reported at the weekend that the Government ID card scheme will land local authorities with £10 billion worth of costs. Will the Minister give an assurance that people will be spared the £100 surcharge on their council tax bills for ID cards, which many people neither can afford nor want?
We know what would drive up council tax—a £2 billion cut in local authority grant that was proposed by the Conservative party.
Will my right hon. Friend consider the particular unfairness of council tax revaluation on council tenants? Self-evidently, they do not benefit from an open-market revaluation of their property. During the last general election campaign, I spoke to council tenants in Wrexham who, unfortunately, because of the revaluation in Wales, faced increasing council tax in excess of 20 per cent. How would my right hon. Friend have justified that increase to my constituents on the doorstep?
One of the benefits of devolution is that I do not have to defend those decisions, which are taken by elected Members in Wales. What would be catastrophic for my hon. Friend's constituents, however, is the freezing of local government grant for two years, which some parties in the House have proposed. That would mean an 11 per cent. increase in council tax across the country. I certainly promise my hon. Friend that we shall not do that.