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David Wright (Telford) (Lab): Under that system, what would happen in communities that were reliant on one or two big employers if one went under before the end of a tax year? How would local councils collect their cash?

Mr. Raynsford: My hon. Friend makes a valid point about the unpredictability of depending on a tax that is not predictable—as council tax is—as a main source of revenue. The closure of a major employer in an area would result in a significant reduction in income tax revenue, but it would not affect the council tax yield because those who had lost their jobs would be entitled to council tax benefit.       

Mr. Clive Betts (Sheffield, Attercliffe) (Lab): Will my right hon. Friend give way?

Mr. Raynsford: No, I must make some progress.

I particularly enjoyed—as, I think, will the House—what the hon. Member for Kingston and Surbiton says on his website about the proposal for end-year adjustments:

local income tax—

We should note the selective use of the word "little". He does not say, "You will get a little discount"; nor does he say, as he should, "You will pay a little more unless you are unwise enough to live in a Liberal Democrat area where you will pay a lot more because they charge a lot more."

The final significant option for reform put forward during the public consultation was for a range of smaller taxes or charges. The Local Government Association has been keen to explore that option, and it presented a useful paper at the steering group meeting on 27 April. It includes a wide range of possibilities, including localising existing taxes such as vehicle excise duty or stamp duty on property transfers, or introducing new taxes such as land value taxes, tourist taxes and more charges for local services. The steering group accepted that that is not a panacea, not least because most of the options would not raise sufficient revenue to make significant changes to the balance of funding. It has agreed to look more closely at some of the options, although it has ruled several out. The balance of funding review has just finished hearing presentations on the individual reform options. The next step at our meeting at the end of May will be to start to pull the threads together and to consider what the report will say.

These are important issues. Many Members will remember the consequences of the previous Administration's rushed reform, which gave us not only the disaster of the poll tax, but the hiking of VAT to 17.5 per cent. That lesson of past failure is one good reason why we are adopting a cautious and considered
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approach, not a knee-jerk response based on slogans. It is clear to the Government that many people, whether council tax payers on fixed incomes or those working in local government who would like a more transparent funding system, have serious concerns about many aspects of local government finance.

The Government are clear that there are no easy fixes or quick wins and that we need to analyse the options carefully. I am sure that hon. Members will recognise that we must take a measured approach. We will not hold out false promises, as do the Liberal Democrats, to the effect that reform is easy and solutions are painless. "Axe the Tax" must be one of the most mindless slogans ever put forward.

The hon. Member for Kingston and Surbiton may fancy himself as the Arnold Schwarzenegger of south-west London, but it is a bogus prospectus. The Liberal Democrats are not a low-tax party—their councils are increasing council tax by more than any other party's. Their councillors do not want to cut council tax, but at the same time as they are busy increasing the burden, their Members of Parliament try to pretend that there is a quick and easy solution that can magically deliver lower tax bills. That is simply not credible. As I said before, they are no better than snake oil salesmen peddling quack remedies which would, if taken, leave the patient worse not better. Their motion deserves to be rejected with contempt.

Mr. Steen: On a point of order, Madam Deputy Speaker. I wonder whether you could give the House some advice. As the Liberal Democrats' motion has been totally and utterly demolished by the Government, is it possible for them to withdraw it so that we can all go home and not listen to any more?

Madam Deputy Speaker (Sylvia Heal): That is not a point of order for the Chair; we will continue the debate.

8.23 pm

Mr. David Cameron (Witney) (Con): My hon. Friend the Member for Totnes (Mr. Steen) makes a tempting suggestion.

In rising to speak against the motion, I should refer to my entry in the Register of Members' Interests.

This is my first outing on the local government finance ticket, and it is a great pleasure to take part in the debate. I listened carefully to the Minister, who gave us an interesting walk through the balance of funding review. I think that we can take it from his speech that the Government have formally ruled out local income tax as part of the review; otherwise, he would have quite a few words to eat. He said that he expects to make an announcement before the recess. I think that he mentioned a debate, and I hope that the Under-Secretary will be able to give us a guarantee that we will have a debate in Government time before the recess.

I listened carefully to the hon. Member for Kingston and Surbiton (Mr. Davey). Although I am new to the subject, I found his speech rather odd, because he did not say much at all about local income tax. I wonder whether that was due to the fact that next to him was the brooding presence of the hon. Member for Twickenham
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(Dr. Cable), who speaks for the Liberal Democrats on finance. His speech was a bit like a lecture on the principles of local government finance, and I was taken back to a university lecture hall. I have to tell him that one does not need to try to make this topic boring and impenetrable. I thought that any minute we were going to hear about neo-endogenous growth theory, but we did not quite get to that.

Given that my Sunday papers told me that a leadership election is now under way in the Labour party, I was impressed by the number of Labour Members who stayed in the Chamber, as I thought that they might be in the Corridors being canvassed or canvassing. It was good to see them staying. [Interruption.] It is all true—I read in my newspaper that the Chancellor is getting his dream Cabinet ready, and thought that the Minister, who has been knocking on the door for so long, would certainly be making a guest appearance in that dream Cabinet. We will have to wait and see.

The debate is a good opportunity to shed some light on a subject that is normally kept in the dark—official Liberal Democrat policy. I know that many other Members are waiting to speak, so I will restrict myself to three points. First, in recent years the council tax has risen far too far and far too quickly. That has caused real anger and real pain. Every year under this Government, council tax has gone up by at least three times the rate of inflation. Every year, the Minister comes here and talks in his reasonable way about a generous settlement, yet every year we have these significant council tax increases. In England, council tax levels are up by 70 per cent. for a band D property since 1997. In 1997, the average bill was £689—now, it is £1,167. Council tax receipts are up from £11 billion to almost £20 billion. That has happened pretty much across the country—the Minister cannot point to authorities that have been immune. The Prime Minister promised us "no excessive rises" in council tax, yet that is precisely what we have had, year in, year out.

That brings me to my second point: why has that damaging and painful increase taken place? It is possible to identify three separate causes, all of which, interestingly, can to a large extent be laid at the door of central Government. First are the additional and largely unnecessary bureaucratic burdens. My own local authority, West Oxfordshire, has calculated that complying with just two of those—comprehensive performance assessments and best value—adds £14 to each council tax bill, yet it is hard to find anyone who has a good word to say about them or thinks they have altered policy or practice in a meaningful way.

Next are the unfunded liabilities. To be fair to the Minister, some of those include worthwhile goals. A classic example would be the targets for waste recycling. We all want those to be met, but where is the money to make that possible? Let us consider the list. Council leaders have to comply with the Licensing Act 2003, the Care Standards Act 2000, the Homelessness Act 2002 and the Freedom of Information Act 2000. Once they have finished doing that, they can try the School Standards and Framework Act 1998, the Special Educational Needs and Disability Act 2001, a range of transport Acts, and requirements to develop plans on everything from litter to landlords.
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After that, councils have to pay the Criminal Records Bureau, bed-blocking fines, higher national insurance contributions, pension liabilities, landfill tax and, of course, higher fuel duties. Next, they have to meet EU environmental directives, extra travel concessions, e-government targets and the cost of asylum and all that it entails.

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