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Mr. Pickles: Will the hon. Gentleman concede that ring-fencing is still slightly over three times the level that the Government inherited in 1997?
Phil Hope: The hon. Gentleman makes a fair point, but the direction of travel is now definitely right, with less ring-fencing and therefore more freedoms and flexibilities to local authorities.
Mr. McLoughlin : I should like to take the Minister back to what he said a few moments ago. He was talking about the amount of money by which the Government have increased the grant to local authorities. Given that what he says is true—and I do not argue with his figures—why have our constituents seen such a large rise in council tax over the past few years, when in the years when he says there was a reduction in council grant there was actually a smaller increase in council tax levels?
Phil Hope: I was coming to precisely that point. Given the generous grant settlement for next year and the scope for efficiency improvements, our view is that local authorities can and should deliver council tax increases in low single figures in 2004–05, so we are now looking at proposed council tax rises very closely. We are pleased that initial indications suggest that many authorities have listened and are planning increases in low single figures. For example, Southampton is talking about a council tax increase of 2.9 per cent.; Birmingham, 1.5 per cent.; Dudley, 1.5 per cent.; Derbyshire, 2.9 per cent.; and Suffolk, 3.9 per cent.
Mr. Ivan Henderson (Harwich) (Lab): Is my hon. Friend aware of the situation with my local council, Tendring district council, which is run by the Conservatives? In May last year, the Conservatives on the council said:
- "Your Conservative district councillors have implemented the lowest Council Tax increase in Essex and one of the lowest in the UK".
Phil Hope: My hon. Friend makes an excellent point. Despite significant extra investment, some local authorities—he has just quoted his own, Tendring— have not listened, and they have indicated that they will impose large council tax increases. I shall give some examples of authorities proposing very high rises. Torbay is proposing a 17.5 per cent. increase; Leicester, 14 per cent.—a subject of debate in the House last week—Milton Keynes, 11.1 per cent.; Dover, 17.1 per cent.; Warwick, 24 per cent.; Waverley, 14 per cent.; Rother, about which we had a debate in the House last night, 13 per cent.; Medway, 15 per cent.; and Brighton and Hove, 13 per cent. Those are simply unacceptably high council tax increases.
My right hon. Friend the Minister for Local Government, Regional Governance and Fire has now written to no fewer than 65 local authorities about which we have seen reports of council tax increases that are not in low single figures, and he is planning to call in some authorities. It appears inevitable that the Government will have to use their capping powers this year.
Mr. Pickles: Will the hon. Gentleman confirm whether the letter has now gone to the Mayor of London?
Phil Hope: I cannot confirm at the moment whether the letter has gone to the Mayor of London. There is a complicated debate between the Greater London authority and the Mayor, but he will receive a letter if he is considering such an increase. Indeed, no sooner have I answered the question than I am holding in my hand the letter that has gone to the Mayor of London.
The hon. Member for Kingston and Surbiton prayed in aid the Audit Commission to explain the increases, saying that they were all the Government's fault. Let me remind him that the chairman of the Audit Commission said, in commenting on the settlement, that there are a number of factors behind the rises this year and that trying to find a single point of blame is not only counter-productive, but simply not borne out by the evidence. It is interesting that, although we are still gathering information about council tax increases, our initial reports show that the average increase in Labour councils is about 5 per cent., but Conservative councils are coming in at about 7 to 8 per cent.—and, yes, hon. Members will be glad to hear that Liberal Democrat councils are coming in at about 8 to 9 per cent. Perhaps
one reason why we are hearing about alternatives to the council tax is that Liberal Democrat councils cannot budget awfully well.
Mr. Edward Davey: Will the Minister confirm that Liberal Democrat councils had the lowest rises last year?
Phil Hope: I am discussing the council tax for next year, and Liberal Democrat councils are coming in with much higher figures than the others, although the Tories are not far behind.
I come now to the balance of funding review, which is the essence of today's debate.
Mr. Pickles: I am grateful to the hon. Gentleman for giving lots of information. Will he tell us which political party has the lowest council tax, band for band? Would that be the Conservatives?
Phil Hope: Unfortunately for the hon. Gentleman, the average band D council tax in Conservative councils is now higher or equal to that in Labour councils, so the previous position, which I think he was trying to put, no longer applies.
Sir Paul Beresford (Mole Valley) (Con): Will the Minister give way?
Phil Hope: I want to move on to the balance of funding review, if I may.
The review's steering group has met several times over the past few months. It discussed the principles of a successful local government finance system, held a public consultation and commissioned independent research, all of which is publicly available. It is now discussing possible reform options. I shall take a moment to emphasise one of its research findings. Many members of the public are not clear where accountability for local government services lies or where the money comes from. However, what matters to them is not where local authorities get their money, but that services are efficiently delivered. According to the review's research, there seems to be no sign of a direct link between balance of funding and local election turnout. That was a surprise to many of us.
What are the options for reform of balance of funding? The hon. Member for Kingston and Surbiton talked about 12 options, but the review is examining four. Given today's debate, hon. Members will be interested to learn that one of them is indeed local income tax. The others are a reform of council tax, the relocalisation of business rates, and a mixed option of smaller taxes or charges. I should emphasise that the fact that the review is hearing evidence on different options is not an indication that the Government accept that the balance of funding must be changed, nor that they favour any of the reform options. One difficulty with an open debate is that it can be open to abuse. If all information is published on websites so that people can engage in the debate openly, the inevitable party politicking starts and positions are misrepresented. The hon. Member for Kingston and Surbiton did that, and I shall come back to it later.
The hon. Gentleman asked whether we had ruled anything out, but one option that we are not considering is a return to the Tories' failed community charge, or the
poll tax as it was popularly—or, perhaps, unpopularly—known. Many hon. Members will remember that one of the consequences of that rushed reform was that value added tax increased to 17.5 per cent. to raise an additional £140 per community charge payer in central Government support. That is one reason why a considered approach to these matters is essential, rather than a knee-jerk response based on slogans such as "Axe the Tax" or "Scrap the Cap". There is nothing like a good Liberal slogan—frankly, they are nothing like good Liberal slogans.
Phil Hope: I shall give way to the hon. Gentleman, who will no doubt give me another slogan.
Mr. Davey: Will the Minister confirm that, although he has ruled out the community charge, he has not ruled out the local income tax?
Phil Hope: I am looking forward to reaching the part of my speech about the local income tax, but first I want to talk about something that the hon. Gentleman skipped over during his speech: reform of council tax. Many responses to the review consultation said that there were serious problems with council tax, including the questions of fairness with which he opened the debate, but most suggested that it could be reformed rather than abolished. The tax was widely accepted until recently. It has advantages—for example, it is relatively easy to understand and collect. Indeed in 2002–03, local authorities in England collected more than 96 per cent. of the council tax due within the financial year.
Mr. Borrow: Does my hon. Friend agree that any Government should be reluctant to give up a property tax in favour of increasing an existing tax, as the Liberal Democrats propose? If the Government were to do that, the likelihood is that a future Chancellor would resurrect a property tax because it makes sense to have a good basket of taxes, of which a property tax should be part.
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