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With permission, Mr Speaker, I should like to make a statement on council tax in England and the capping action that the Government propose to take for 2009-10. Today, the Department has released figures showing that the average band D council tax increase in England next year will be 3 per cent., the lowest increase for 15 years. The average council tax rise for all households will be 2.6 per cent., the lowest ever since the council tax was introduced.
There are three reasons for that. First, Government funding for local services is rising by 4.2 per cent. in 2009-10—an extra £3 billion and the 12th successive annual increase above inflation for local government since 1997. Secondly, local authorities are taking seriously their responsibility to residents to tighten their belts and operate more efficiently. Thirdly, although I know local government does not like it, council tax capping helps concentrate the minds of councils. I have consistently said that we will take tough action when it is necessary to protect council tax payers against excessive increases—I said so to the House in November in my statement on the provisional local government finance settlement.
I therefore want to set out for the House the action that we are now taking. Our capping principles relate both to an authority's council tax and to its budget requirement, which, broadly speaking, is the spending financed through the formula grant and council tax. I can confirm that our capping principles are that authorities' 2009-10 requirements are excessive if they set a budget requirement increase of more than 4 per cent. for 2009-10 or a band D council tax increase of more than 5 per cent. For an authority that was set a notional budget requirement following capping action in 2008-09, these principles operate by reference to that notional budget requirement and a related notional amount of council tax calculated for that year. The principles are described in more detail in a report that I am placing in the Library of the House.
I realise—especially as I look around the Chamber—that not all Members will be familiar with the concept of a notional budget requirement. Put simply, it is one of our capping options. It involves the Government's setting figures for an authority against which their future increases are compared—last year, those figures were equal to the caps that would otherwise have been imposed in year in 2008-09. The requirement puts a greater onus on authorities to control their budget and council tax the following year, as they are measured against the lower baseline.
Of the eight authorities against which we took capping action in 2008-09, four were set notional budget requirements. They were Bedfordshire, Norfolk and Surrey police authorities and Portsmouth city council. This year, two authorities have exceeded the principles I have announced. They are the police authorities of Derbyshire and Surrey. All other councils, police authorities and fire and rescue authorities have set increases within the limits I am confirming today.
Derbyshire police authority has increased its budget requirement by 4.99 per cent. and its council tax precept by 8.68 per cent. Surrey police authority has increased its budget requirement by 4.82 per cent. and its council tax precept by 7.07 per cent. compared with the notional levels set last year. I am disappointed that Surrey has set an excessive increase for a second successive year. This is the first time under current legislation that we have had to take action against an authority more than once.
Let me make it clear to the House that I am not announcing a cap on the council tax of Derbyshire and Surrey police authorities. I am starting a process that could lead to that. The authorities have a right under the legislation to challenge the proposed cap and to seek to justify their decisions. We will consider carefully all the representations the authorities may make before reaching any final decisions. Today I am writing to the chairs of the two police authorities confirming that I and my hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing will meet them personally to hear their case in person. After that, when we have considered any case made by the authorities, we can proceed either to designate—or cap—the authority for 2009-10, either at the level proposed today or at another level, or to nominate an authority, which means either capping the authority for next year, 2010-11, or setting a notional budget requirement for 2009-10 as the baseline for any future capping decisions.
Confirming a cap for this year would require the authority to re-bill residents for a lower council tax, with the cost falling on the capped authority. All authorities set their budget requirements and council tax in the full knowledge that excessive increases could lead to re-billing, so they can have no complaints about this.
The capping principles I have announced today are expressed in terms of band D council tax. That is because the band D amount that authorities are required to determine is set out by the legislation. However, the average household pays around £240 less than the band D amount and the increase for average council tax next year is 2.6 per cent, the lowest increase ever since the council tax was first introduced by the Conservatives in 1993.
I would like to end by looking ahead. Central Government funding increases, the concerted efficiency effort of many authorities and our commitment to tough capping action have resulted in some of the lowest council tax increases ever seen. Nevertheless, council tax payers will not be pleased to see that 86 authorities have set band D increases of more than 4.5 per cent., especially during this period of economic pressure all round, while 39 of these authorities have set rises of between 4.9 per cent and 5 per cent. Some suggest that that is because such authorities believe the Government have in place some standing 5 per cent cap. That is not the case. The Government have always been clear that our purpose when setting capping principles is to protect council tax payers from excessive increases. In the current economic climate, keeping council tax under control is more important than ever.
So I put all authorities on notice for next year. It would be a serious mistake for any local authority to assume that the principles I have announced today for this year are in any way a guide to the approach or the levels I may set in future years. I commend the statement to the House.
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I thank the Minister for providing advance notice of his statement. As hon. Members will know, he is unfailingly courteous and he unfailingly manages to put the most outrageous spin on events in the most reasonable fashion.
May I ask the Minister to help me on a few matters? Is not the reality behind the Minister's words and this year's figures the fact that since 1997 council tax bills will have risen by £726 a year on band D, the band that is the basis of the statutory measure? Given that has happened across the board, in councils of all types and all political compositions, will the Minister accept that the Government must take responsibility for these hikes? Council tax bills are rising by £41 this April, compounding those previous rises. At a time when millions face losing their jobs or are suffering pay freezes, is that good sense? Is it sustainable that council tax bills are taking almost £120 from the pockets of families? Is it acceptable that council tax has gone up by an inflation-busting 105 per cent. on this Government's watch? Is not the reality that the Government inherited a local government finance system that worked and that has at least been consistent— [ Interruption. ] I simply refer to a comment made by the Government in their 1998 local government Green Paper. It said:
"The council tax is working well as a local tax. It has been widely accepted and is generally very well understood."
Of course, that was before the Labour party got its hands on it. The reality is that the Government have managed to break the economy and the local finance system as well.
I hope that the Minister can help me on a couple of other specifics. Is not the 4.2 per cent. figure that he uses less than the whole picture? It relates to an increase in all grants, whereas the increase in formula grant—the only area where local councils have discretion—is considerably less?
The Minister is right to say that the efforts of local authorities should be appreciated, but might not that be because the Conservative party controls more councils than Labour and the Liberal Democrats put together? Would he care to reflect on that?
Will the Minister confirm that one third of the basic state pension has been taken up in these council tax increases? Why has the proportion of pensioners claiming council tax benefit declined from three out of four to one in two on this Government's watch? Why has the Audit Commission raised concerns about the method of funding distribution? It has said that
"grant redistribution...has led to some councils putting up council tax more than others."
Does that not raise the suspicion of fiddled funding? Is there not a need for a clearer and more transparent basis for setting the criteria for formula grant allocation?
Can the Minister help me in relation to capping? Is he aware that the small print of the statistical release shows increases in parish precepts of 5.8 per cent., which come on top of the 8.1 per cent. rise last year and the 6.7 per cent. increase the year before?
The Minister referred to the increase in the grant for police authorities, and two questions arise from that. First, is there not a need for greater and more direct electoral accountability of police authorities? Secondly, is there not a need for a control that is more effective than the crude capping device? Instead of imposing a cap, would it not be better to give local residents the opportunity to decide in a local referendum?
Does the Minister regard it as acceptable that there is to be yet another council tax freeze in Scotland this year? It will mean that Scottish tax bills will be £265 less than in England, so might it not be time for the Government to adopt a policy of freezing council tax in England as well?
Will the Minister confirm whether the Government intend to carry out a revaluation after the next general election? He will know that the suspicion is that they do: if so, that will be a further council tax stealth tax. Otherwise, can he explain why the Valuation Office Agency recently renewed its contract with Rightmove, which allows it to plunder estate agency records to find out how many bedrooms, bathrooms and parking spaces each home has? If there are no revaluation preparations, why has the contract been renewed and public money spent on it? It was said to have been drawn up explicitly for a revaluation. I remind the House that the VOA is the same agency that made such a mess of the ports revaluation that we debated in this House only yesterday.
I hope that the Minister will bear it in mind when he answers those questions that the council tax is the most sneaky of the Government's stealth taxes. It is cooked up in Whitehall, but it is councillors on the front line who take the flak and the Government hide behind them.
Despite the Minister's courtesy and the reasonableness of his spin, today's announcement means that families will have to pay an extra £40 a year in the middle of a recession. That demonstrates a serious lack of reality on the Government's part.
I shall try to respond to the wide range of questions posed by the hon. Gentleman, but he can hardly say that the council tax is a stealth tax. Each year, the council tax settlement is debated and approved in this House, and the Minister in charge makes a statement, as I have done today. One of the difficulties is that the council tax is one of the most visible taxes, given the bills that residents receive.
At the outset, the hon. Gentleman asked me to make the case for the level of local government funding. Next year, there will be a 4.2 per cent. increase in the total Government grant to local authorities, which means that, for the 12th year in succession, local councils will get an above-inflation annual increase from this Government. The direct comparison is that they suffered a 7 per cent. cut in real terms in the last four years of the previous Conservative Government.
I did not want to make this debate political, but the hon. Gentleman asked me to say what the position really is. I can tell him that the council tax for the average home is £204 lower in Labour areas than in Tory areas, and £134 lower than in Liberal areas. The rise this year in Labour areas is lower than in both Tory and Liberal areas.
The hon. Gentleman asked about the grant distribution and pensioner take-up of council tax benefit. Both matters were debated last month when this House examined and approved the local government finance settlement.
Finally, it is true that we do not have the legislative powers to take action against excessive rises in parish council precepts. We expect parish councils to set their budgets prudently and to take residents' views into account and to respond to them. However, if it is necessary to take further steps or powers to deal with parish and town council precepts that become excessive for local council tax payers, we will do just that.
I thank the Minister for giving me advance notice of his statement. He lauds the 3 per cent. rise in council tax as a success, but does he recognise that it is still higher than inflation—as it has been every year? Does he also recognise that council tax is felt more keenly than any other tax, because it is paid straight out of people's disposable income? As he acknowledged, many families are finding it very difficult to make ends meet at the moment. If both partners lose their job, they receive council tax benefit to meet the cost of the tax, but does he accept that the family will get landed with a large and unaffordable bill if just one partner becomes unemployed?
Does the Minister also recognise that what is happening in many families is that, although people are not necessarily losing their jobs, their employers are cutting back on their hours because of the recession? In that situation, of course, there is no safety net. Does he thus accept that it is time that we completely reformed the system and introduced a fair tax based on people's ability to pay?
Does the Minister also recognise that, in a recession, councils face both falling incomes and rising demand for their services? Their income streams from planning and leisure services, and even interest rates from investments, are all drying up, yet more and more vulnerable families, desperate for help, are arriving at their doors. In the light of that, will he commit to a moratorium on unfunded Government mandates to local authorities? Does he recognise that they will only make things worse?
I was aghast to hear the final sentence in the Minister's statement. If he were really serious about wanting to keep council tax low for British families, he would set out the principles for capping—if capping is what he has to do—well in advance, so that councils can plan before they set their budgets. Instead, we go through the same macho charade every year: the Government threaten councils with draconian action but will not tell them what they need to do to avoid the penalty, and the inevitable result is that council tax payers pick up the bill for the cost of rebilling local residents. Worse, that approach destroys any constructive relationship between central Government and local government. It is high time that the Minister stopped behaving like a playground bully in that regard, and started behaving like a responsible partner.
I have not been accused of being a playground bully before, but I am glad to welcome the hon. Lady to the Liberal Front Bench for the first time in our dealings on local government.
I am not clear whether she is against council tax capping—
The hon. Lady confirms that she is against council tax capping but, combined with the increases in Government funding for local government funding, it is part of the reason why we have seen the lowest council tax rises ever in five out of the past six years.
The hon. Lady is against council tax capping, but she also wants us to declare well in advance what the level of cap will be. The effect of that would be that many councils would set their council tax up to that level. That is not a good way of dealing with the issue or of protecting council tax payers.
The hon. Lady is right about the pressures on local authorities. Like the Government, local government faces a demand for services as well as a reduction in some of its income streams. Most local councils have coped well over the last year, but it is clear that all local councils will have to do more this year to step up their drive to deliver their services more efficiently, as well as bringing in what may be necessary to support people through this difficult time.
On council tax and housing benefit, the hon. Lady is right that part of the consequence of the economic downturn is a bigger demand on front-line service staff who are trying to deal with and support people through the claims process. That is why we have allocated local councils an extra £45 million for that purpose.
Finally, for some time there has been a system in central Government such that if any Department places an extra responsibility or burden on local authorities to deliver services or to carry out functions they have not previously undertaken, it is the responsibility of that Department fully to fund them. It is my job as Minister for Local Government—whether or not I act as a playground bully—to ensure that other Departments fully fund any extra responsibilities they place on councils. That is precisely what we do at the moment.
Last month, the Conservative council in Bury set a council tax rise of 4.99 per cent. At the same time, it introduced several million pounds-worth of cuts, including promises to privatise the youth service and switch off street lights in the middle of the night. Two weeks ago, we learned that the council had turned down the offer of £8 million of grant from the Government to support the Building Schools for the Future programme in the coming financial year.
The good news is that as of yesterday the Conservative majority of one has disappeared after the arrest for blackmail of Councillor Peter Redstone, the former Conservative—
Order. There has been quite a long statement, so I hope we shall have a question. Has the hon. Gentleman formulated one in his mind?
I have formulated the question, Mr. Deputy Speaker. As Bury council now has no overall control, and in the context of the arrest of the former finance spokesperson, will the Minister look carefully at this year's budget in Bury and the planning for next year's budget too?
I have heard what my hon. Friend has said. It is clear that things in Bury have gone badly since Labour stopped running the council. From what he has told the House this afternoon, it is also clear that the council is looking for some soft targets to make easy cost cuts, which is in contrast to what many other councils are doing. They are giving priority to trying to protect and in some cases improve the services that people most need and, in particular, they are stepping up services and support for young people in our community. I am disappointed to hear that my hon. Friend's council is not following suit.
With reference to the Minister's proposals as they concern Derbyshire police authority, may I point out to him that the authority described its budget for this year as a standstill budget? If he decides that the authority has to reduce its expenditure, does that not mean that front-line services will fail? Will he confirm that Derbyshire is the fourth worst-funded police authority in the country and that if it was funded as well as the authority in the constituency of the Minister for Security, Counter-Terrorism, Crime and Policing, who is sitting next to the right hon. Gentleman on the Treasury Bench, it would not have the problems that required it to raise that amount of money? Will the right hon. Gentleman confirm that Derbyshire is the fourth worst-funded police authority in the country?
No, I will not, but I will tell the House that Derbyshire police authority is not just getting the 2.5 per cent. rise that all police authorities are guaranteed by the floor that my hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing is putting in place for funding. Instead, the authority is getting a 3.2 per cent. increase this year, which does not even take into account more than £14 million in specific grants and other funding that my hon. Friend has decided Derbyshire also needs to maintain its police services.
Derbyshire will have the chance to lay out its case. If the authority wishes, it can do so in person to me and my hon. Friend. After that we will assess the extent to which we may need to proceed, with the options I set out to the House, having started a process that does not impose a cap today but could in the end lead to that for Derbyshire and Surrey police authorities. If the right hon. Gentleman and other Derbyshire Members wish to make representations to my hon. Friend and me, we will consider having a meeting to hear them.
I welcome my right hon. Friend's statement, but may I press him a little more on formula grant? It is essential that local councils provide services, where needed, for disabled people and vulnerable people, yet in Stoke-on-Trent we are not getting the amount of supporting people funding that we should have. I am afraid that that will have an adverse effect on the amount of extra money that the council will need to raise, so I should be grateful if my right hon. Friend will assure me that he will look again at how we can get the amount of supporting people grant from Government that they say we need.
I know how fiercely my hon. Friend feels about the issue and how much she is concerned about the services needed by many of the most vulnerable people in our community and in her city of Stoke. May I make three points? First, we have put in place a three-year funding deal for councils eligible for supporting people money. In part, that is to give those councils certainty about the income they will receive over that period so that they can manage their budgets better. Secondly, we have determined the amount of money for supporting people in Stoke in precisely the same way as for other areas. Thirdly, I am conscious of the case my hon. Friend makes and if she and either of her colleagues who represent the other two Stoke constituencies wish formally to see me or my fellow Ministers about the issue, we will happily set up a meeting and look at such representations as she may want to make.
The Government promised to bring in proposals for reform of the local government superannuation pension scheme by
I shall write to the hon. Gentleman, who has been reading too many lurid and badly based articles about local government pension schemes. First, there is a legislative and regulatory constraint on local government pension fund deficits being passed on to council tax payers. Secondly, from the beginning of the current financial year, starting last year, the reforms I have put in place in the local government pension scheme mean that employees are paying more and employers'—in other words, taxpayers'—contributions are capped. Beyond that, it is not right to use private sector pension scheme formulae as a comparison with the position of local government pension schemes. They are regulated differently and use different financial accounting methods. It is like trying to compare apples and pears.
Among the 86 authorities whose council tax increase has been between 4.5 and 5 per cent. this year is Slough, despite its having an excellent Labour council. The reason is that Slough has more people than was estimated by the Office for National Statistics. I am deeply concerned that we shall continue to be bumping at the top level of council tax increases, because on the basis of the three-year settlement, Government grant will not be able to meet the needs of Slough's growing population. Can my right hon. Friend offer any comfort to my local council tax payers and my local council that they will have the services they need, properly funded, in future years?
The short answer to my hon. Friend is yes. Partly prompted by the case that she has made so assiduously in recent years, we now have a very detailed programme to improve population and migration statistics. We will make sure that those improvements take place, so that for the next spending review period, any decisions on local government funding, or other public sector funding that draws on those statistics, can be based on the improved population and migration statistics. She is right about the quality of her Labour council, which has a new leader, Rob Anderson. I visited the area several weeks ago to see for myself the innovation, the new services, and the serious way in which the council is going about not just managing the financial pressures that it is under, but making sure that it can improve services for people right across Slough.
The Minister will be aware from discussions that he has had with leaders of one of my local authorities and with me that what is excessive in percentage terms is not always excessive in cash terms. North Dorset district council continues to be one of the lowest taxing authorities for band D in the country, with a band D council tax of just over £100. I wonder whether the Minister could help a small local authority in my area with a very low band D council tax next year, by having a discussion, or asking his officials to have a discussion, with the council's officials, so that we do not end up playing roulette with council tax bills, and so that the council is aware of the parameters within which it should be working?
I think that I can help in two ways. First, I can help by setting out, as I have done already, the funding that the hon. Gentleman's council, and other councils, can expect from central Government for the full three years of this settlement period. That will mean that they know where they stand, and can plan and manage for that period. Secondly, I point out that the regional improvement efficiency partnerships are in place. They are led by local government experts and specialists in the field. They have the sort of expertise from which his council may well benefit, as it prepares to manage its services this year and plan ahead for next year. I will ensure that the regional partnership gets in touch with his chief executive and offers what help it can, as the council looks ahead to next year. If the hon. Gentleman wishes to make representations to me about the funding for his council in the third year of the three-year settlement, I will of course see him at the appropriate time.
May I say to my right hon. Friend the Minister how much I welcome the extra £3 billion for local authorities this year, but could he provide us with a little more information? Will he list for this House the total reserves held by every local authority, work out what percentage those reserves are of their annual net budget, and present that information in a league table?
We do not, at present, collect that information council by council, but we publish annually the reserves that local councils have in total. The last figures that we published put the figure at almost £14 billion. That is clearly part of the financial calculation and budget planning undertaken by all local councils. Particularly during this period of economic pressure, it makes sense for councils to look hard at the level of their reserves. Having sufficient reserves is necessary if there is to be prudential management, but the high level of reserves held by some councils might, in this period of pressure, be put to good use to maintain services and to keep council tax pressures down.
Many councillors and tax payers in Cambridgeshire and many other areas will listen with astonishment to the Minister bragging about an increase of 4.2 per cent. in central Government funding when they see that the figure for their council is closer to just 1 per cent. Is it any surprise that they will naturally conclude that many other authorities must be getting considerably more than 4.2 per cent.? They will not be surprised to hear the Minister say that Labour councils are levying a lower average tax rise, because it is quite clear that the Government look after their own. Counties such as Cambridgeshire, where Labour has no representation, get no money.
The hon. Gentleman has been around long enough to understand that we have a formula, which we consult on and debate in this House, for distributing funding to local councils. It applies equally across the country. He will also be aware that this Government introduced a system of floors. Without it, some of the councils that he may have in mind would, by rights, get less than they do. That floor is funded by taking the money off the rises for other authorities. He asks whether the residents of Cambridgeshire are aware of that; I ask him whether they are aware that his party plans, if it gets into power, to slash grants to local councils by £240 million from next month. That would, at a stroke, put an extra 1 per cent. on their council tax.
I note that in his inquiries about a possible capping of authorities, my right hon. Friend is including both the budget and the council tax levied by those authorities. Does he accept, however, that over a period of time, the axis of what people pay in council tax is increasingly becoming divorced from the measure of the band D council tax payment? Is he therefore looking at measures to provide, in future years, a more accurate depiction of what may be excessive council tax increases? As far as capping is concerned, does he accept that if the Opposition had their way—they want to freeze council tax for a period, and would apparently never change the basis on which council tax is valued or charged—council tax would be centralised to such an extent that local authorities would not even have the choice of whether to levy a low council tax or a high council tax?
My hon. Friend is right, in that what we have heard from the Conservative party is a con. It is a con in two ways. First, it is a con to suggest that it will be a freeze for all councils, as has been promised, because the freeze will apply only to those that join the scheme. Secondly, it is a con to suggest that somehow that will give more power and decisions to the local area, because the constraints will still be set at the centre. He asked me whether I am considering seriously some of the principles of council tax. I know that he follows the subject, and is a source of fresh policy thinking almost without compare in this House. I am seriously considering a set of suggestions, and am looking very carefully at the ideas that he has submitted. I have a good deal of interest in them, and look forward to discussing them with him.
Earlier this afternoon, the Minister said that any extra costs imposed on local councils by Government Departments would be reimbursed. Does that mean that local authorities in Norfolk will be reimbursed for the cost of responding to his Department's discredited, deeply unpopular and incompetently handled LGR?
For the benefit of the House, LGR is local government reorganisation. Members should not make the mistake of accepting the hon. Gentleman's description of the way in which it is being handled. The short answer to his question is no, because from the outset of the process, we made it clear that if local authorities were going to play a part, they should cover the costs. We also made it clear that those costs should not be excessive. Clearly, councils that choose to use the legal process to try to influence the policy process should account for those costs to local residents. Finally, the important LGR process started with proposals that we received from councils, including councils within his area—
Including councils within his area, the county of Norfolk. We will bring the process to a conclusion as soon as we can, because there are important questions at stake concerning the future of local governance and local services for people in his county.
My right hon. Friend has had to make a tough and difficult statement today, and I recognise, as I am sure that he does, that local government is a difficult beast to wrestle with. The Conservative spokesman mentioned a council tax freeze in Scotland; that has not come about without significant pain, and cuts in services, right across the country. The Liberal Democrats and the Scottish National party advocate a local income tax. I am sure that my right hon. Friend does not need me to tell him that those proposals lie in a bin in Holyrood.
I have to concede to the House that I do not know a great deal about council tax in Scotland; I have my hands full looking after council tax in England. However, I note the points that my hon. Friend makes, including the fact that what was advocated by the Administration there has been put on ice, and is not, despite being a manifesto undertaking, likely to be put into practice.
Will the Minister kindly look into what can be done to help several hundred of my constituents in the estates of Cepen Park North and Cepen Park South in north Chippenham, just on the outskirts of Calne? Through no fault of their own, they have been moved into Chippenham and Calne town councils respectively, which means that their council tax has increased not by 3 or 4 per cent. but by 17 and 20 per cent. this year, causing outrageous pain to quite a large number of people. Perhaps they had to move into those town councils, but would it not be possible to phase in that increase over a number of years? No one in the local authorities or town councils is saying that that would be illegal, so the Government could allow it to happen.
I will look into the electoral ward arrangements raised by the hon. Gentleman. The bigger picture in Wiltshire is of a new council that will be up and running from next week. It will make massive savings for the people of Wiltshire, and we will see over the coming months the advantage of having one level of local councils, rather than two, because that will give stronger leadership to his county, as well as better services to his residents.
Would the Minister like to conclude his statement by congratulating Councillor John Bailey and all the councillors at Wellingborough on the zero council tax increase this year? However, would he help with a serious matter relating to a local hotel that has been in existence for at least 16 years with no capital changes? Unfortunately, this year, it is paying £3,646 in council tax, but next year, it has been asked to pay £6,135—I understand that that has something to do with the removal of transitional relief. In a time of recession, that is a major problem for the hotel.
The hon. Gentleman is not talking about council tax—he is talking about business rates. He would have done better to have been in the Chamber yesterday, rather than today, when we debated that. I will write to him and explain how the business rate system works.