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Mr. Eric Pickles (Brentwood and Ongar) (Con): On Telford and Wrekin, the Minister has made a sensible move from designation to nomination on the grounds that the savings—only 68p—would be insignificant. In respect of Nottingham, given that the cost of re-billing will be more than the amount saved, why not adopt the same procedure there?

Mr. Raynsford: In the case of Telford and Wrekin, the rebate was only 66p for band D property for the full year; in the case of Nottingham, it is £2.48—a significantly higher figure. [Interruption.] Let me tell the hon. Gentleman that when the authorities set excessive budgets, they took the risk of being required to re-bill. We made it absolutely clear that we would use our capping powers and that if authorities were designated they would be required to re-bill for a lesser amount. No authority can say that it acted in ignorance of the position. As the hon. Gentleman will understand, when
 
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one sets principles—as we have; we announced them on 29 April—it is right that those principles should be applied, and they have been applied.

Mr. Graham Allen (Nottingham, North) (Lab): Would it not be sensible to set the bar at the amount at which it would not cost taxpayers more to re-bill than they would gain by having the rebate, so to speak? In that case, both Telford and Nottingham would easily fall beneath the bar.

Mr. Raynsford: I hear what my hon. Friend says, but one of the difficulties is that the estimates of the cost of re-billing vary quite significantly from authority to authority. In the case of Nottingham, it is quite a significant amount—more than £2 per individual council tax bill. In a Committee debate earlier this year, the Opposition spokesman said that he thought that the cost of re-billing would, on the whole, average between 80p and £1 per household. If that estimate were correct and Nottingham were able to re-bill at that level, the cost of the re-billing would be less than the impact of the cap. One can only try to take account of such information, but as I said earlier, the important point is that the principles be applied in a rigorous and fair way.

Telford and Wrekin was given 21 days in which to challenge its proposed notional budget, because it had been nominated for the first time and was in the same position as the other nominated authorities. Once we finally set the notional budgets, we will use those budgets rather than the authority's actual budgets to measure future budget increases for capping purposes.

Alan Simpson (Nottingham, South) (Lab): I want to follow up the Minister's comment about principle. Will he confirm that Nottingham does not object at all to the principle that it should adhere to the Government's spending limits? Is not the absurdity of it all putting the council into a position in which it is required not only to adjust this year's spend, but to incur greater costs in re-billing than it would cost to adjust the spend and the bills in subsequent years? Is that not the principle to which we should adhere?

Mr. Raynsford: No. As I pointed out in response to the earlier question of my hon. Friend the Member for Nottingham, North (Mr. Allen), the actual cost of re-billing varies. We have seen significant variations in the estimates that we have had from different authorities and I have to say that Nottingham's is one of the highest. Another factor to which I must draw the attention of my hon. Friend the Member for Nottingham, South (Alan Simpson) is that Nottingham has the sixth worst collection rate of council tax of any authority in the country. It collects less than 90 per cent. of the total council tax due. In those circumstances, I have to say that it is incumbent on the authority to think about how to improve its own efficiency to collect rather more of the council tax owed to it. If it were successful in doing so, there would be less need for large council tax increases, which impose unreasonable pressures on council tax payers.

Final amounts for the notional budgets will be determined once we have carefully considered any representations made by the eight nominated authorities. There is no parliamentary procedure
 
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involved in setting notional budgets for nominated authorities. Therefore the draft order before the House today deals only with the maximum budget set for the six designated authorities. In laying the order, we are keeping our promise to act against high council tax increases. The Government have provided all authorities with above-inflation increases in general grant for two years running, and have increased funding to local government by 30 per cent. since 1997. In exchange, we made it clear to authorities that we expected them to budget prudently. There is no justification for excessive tax increases. I hope that the House will support the order.

6.50 pm

Mr. Eric Pickles (Brentwood and Ongar) (Con): There was a time when capping was necessary; when it was the last line of defence for local residents against extremist councils determined to take on the Government; when Labour councils ordered taxicabs to hand out redundancy notices to staff; and when factory roofs were removed to avoid paying excessive local taxation. But those days have long gone. Such clashes changed local government for ever. There are no real rogue authorities trying to bring down the Government in the bunch arbitrarily selected for capping. They may rank from the excellent to the gorblimey, but they are no threat to the Government's medium-term financial settlement.

Mr. Steen: The Liberal Democrat council in Torbay is certainly a gorblimey council. It has been a disaster and performed poorly. However, is my hon. Friend aware that sending out the council tax revision will cost £100,000? The Liberal Democrats have closed many of the public loos in the Riviera area, but they could open them all again with that money.

Mr. Pickles: That would certainly be a more convenient solution. My hon. Friend is right about the management of Torbay.

Capping these authorities—even Torbay, Shepway and Nottingham—is like breaking butterflies on the wheel. Surely the Minister was right when he talked some years ago of

"the unfairness and unsatisfactory nature of the process."

He was certainly right when he said:

"We see a sad and sorry picture of the imposition of centralised diktats by Ministers who cannot possibly understand the intricacies and the detailed implications for local communities".—[Official Report, 24 June 1992; Vol. 210, c. 344–46.]

How haunted the Minister must feel by his almost youthful words! However, he is not alone in having bitterly to eat his past words.

As recently as 12 months ago, councils that were deemed to be excellent or good by the Audit Commission were promised freedom from capping restraints—a promise that has now been broken. Herefordshire unitary district council was graded "good" in its comprehensive performance assessment of December last year. Telford and the Wrekin UDC was
 
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graded "excellent" and Fenland was only two half points away from being graded "good". The Government's White Paper, entitled "Quality Public Services", stated:

"Decisions on local taxes are a vital part of local democracy and accountability. They should be taken by the local authority, based on the costs it faces and of the local people's willingness to pay."

An earlier Labour party document—"New Politics, New Britain: Restoring trust in the way we are governed"—said that reserved powers for capping should be used only "for extreme cases". So what has brought on the Government's blind panic?

The principal architects of this state of affairs are not the councillors, officers or residents of Nottingham, Torbay, Herefordshire, Fenland, Hereford and Worcester and Shepway: they are the Government. For years they have used the council tax for a purpose for which it was never intended—to transfer expenditure from central to local government without sending the necessary income to cover the burdens. The council tax is the Government's favourite stealth tax.

We need only look at the Audit Commission's report, "Council tax increases 2003–04: Why were they so high?" It said:

"Slightly more than half the total increase is due to national pay and price inflation . . . The causes of increased spending by councils included . . . national priorities, such as the requirement to increase funding for schools by an amount determined by government or to meet national waste recycling targets."

Above all, the Audit Commission cited grant redistribution:

"We found a clear association between the size of grant increase a council received and their increase in council tax."

With the exception of Shepway and possibly Torbay, those councils have been caught by the change in grant and the increased Government burden.

There is more than a whiff of arbitrariness about the use of the capping criteria and threshold. Six uncapped unitary authorities have higher percentage budget increases than Telford and Wrekin, while five have higher percentage band B and D precept increases. But Telford and Wrekin has been nominated, while other authorities have not. In addition, some of the tiers of council that have been capped have higher increases but not high levels of council tax, while other tiers of council have the dual threshold applied.

Let us take one example. Fenland has a precept increase in cash terms of just £27. In terms of their final bill, Fenland residents pay the lowest average council tax in Cambridgeshire—£904, compared with £973 in Liberal Democrat-run Cambridge. In Fenland, the precept, including the parish precept of £222 in 2004–05, is far less than that in many Labour councils. For example, the Prime Minister's district of Sedgefield levies a precept of £326 a year—the largest district precept in England and £104 more than Fenland. Why has the Prime Minister's district not been capped? I hope that the Minister's judgment in these matters has not been affected because the order coincides with the coming reshuffle, although, of course, we wish the Minister well.
 
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The amount of money that will be returned is not even significant. It is £2.9 million, and the rebilling cost is estimated at between £1.1 million and £1.5 million.

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