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Mr. Edward Davey (Kingston and Surbiton) (LD): I thank the Minister for his statement, and for his original decision to carry out the balance of funding review. But,
 
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having decided on a review, have not the Government now decided just to review that review? Is not the new Lyons review all about ducking the hard decisions on council tax, rather than taking them? Does not the Minister realise that dither and delay simply mean more years of the unfair council tax?

This Government were prepared to risk the lives of British servicemen and women in Iraq on the basis of a dodgy dossier, yet after 15 months of detailed expert study, Labour is incapable of taking a decision on the future of council tax. The Minister talked about ideas for tinkering with council tax. Does he not realise that none of them will end its unfairness? Indeed, is it not a key finding of the review that even a reformed council tax would not help the balance of funding problem? Does not his support for revaluation and new council tax bands place a double threat of higher tax directly over the heads of millions of tax payers?

Will the Minister confirm that the Government have no intention of coming clean on their council tax hike until after the general election? If the Government will not tell the people their real plans, will he tell the House what the difference now is between Labour and the Conservatives on council tax, given that the Tories also have no policy? Ministers are to be congratulated on one thing: their willingness to eat humble pie on local income tax. The report says that a local income tax

"would be more progressive . . . than council tax."

So why will the Labour Government not commit themselves to fairer taxes, not higher taxes?

Does the Minister not realise that today's further delay in tackling the balance of funding amounts to a betrayal of local government? Is he not allowing the Prime Minister the room that he wants to continue to attack local democracy? Is it not the Government's real policy to change the balance of funding simply by nationalising the funding of schools? Will the Minister confirm his personal view, given at the Institute for Public Policy Research on 10 May, that Whitehall control of education was not a "magic solution" for the balance of funding, and that centralising education finance was a "bizarre suggestion"?

Today's report could have been written by Lord Butler: it was good on analysis but weak on conclusions. The Deputy Prime Minister might have been acting in good faith when he set up the review of council tax, but today's report shows that he is not competent to take the decisions that council tax payers want.

Mr. Raynsford: One could not help but notice the sound of a needle trapped in the single groove of a cracked gramophone record, repeating "Lord Butler" and "Iraq" over and over again. That seems to be the only noise that the Liberal Democrats can make at the moment. They should at least be aware that this debate is about local government finance. There will be a full opportunity for them to voice their other concerns later.

The hon. Gentleman claimed that the Lyons review would duck the issue. If he really believes that, he does not know Sir Michael Lyons, or the very considerable capability of the man and his commitment to achieving a lasting and effective reform of local government finance. These are not easy issues. The hon. Gentleman knows very well that they are complex issues that require a great deal of careful, painstaking thought. He also
 
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knows that an inclusive group of some 20 members from a range of backgrounds and political parties—including a Liberal Democrat councillor, who we welcomed on board the balance of funding review—which helped to achieve a consensual approach, is not the body to take hard decisions on the intricate, detailed issues that will determine the long-term future for local government finance. That is why we have invited Sir Michael Lyons to undertake the review, and I am confident that the outcome will be very positive indeed. This is certainly not tinkering, but, as the hon. Gentleman made that charge, I shall make the point to him that we do not introduce ill-thought-out proposals and assume that they can be implemented simply with the wave of a hand. It is much harder than that.

The hon. Gentleman talked about increases in council tax. The Liberal Democrats have the unenviable record of the largest increases in council tax of any political party. Their increases averaged 6 per cent. this year, compared with 5.4 per cent. from Conservative councils, and 4.7 per cent. from Labour councils. I also remind him that the councils with the highest increases last year, which we debated last night on the capping order, were Liberal Democrat Shepway in terms of district councils, and Liberal Democrat Torbay in terms of unitary authorities. His party has an unenviable record, and he would do better to talk to his members about keeping council tax down rather than to give lectures here.

Finally, on local income tax, the balance of funding review has made a balanced and objective assessment. It has identified both the potential advantages—the hon. Gentleman has highlighted the point of greater progressivity—and the considerable disadvantages and technical obstacles that need to be examined far more   carefully than his party has ever been prepared to do.

Andrew Bennett (Denton and Reddish) (Lab): I congratulate my right hon. Friend on getting Sir Michael Lyons to take the work forward. Will he also accept, however, that some aspects of the work are urgent, particularly getting council tax benefit take-up improved, which ought to be in place by next April? A revision of the amount of money being paid by local citizens compared with businesses is also needed, and should be in place quickly. If we are to have extra bands, they must be in place so that the revaluation, which starts next April, can take them into account.

Mr. Raynsford: I thank my hon. Friend for his comments, and I congratulate him on the thorough and thoughtful report that the Select Committee, under his chairmanship, conducted and published. I agree that Sir Michael Lyons is a formidable figure to carry forward this work, and that we should make rapid progress on issues such as take-up of council tax benefit, in relation to which there are real problems. That is why the Department for Work and Pensions is already undertaking work to improve council tax benefit take-up, and I assure him that we will continue to work closely with it to tackle this problem with the urgency that it deserves.
 
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Mr. David Curry (Skipton and Ripon) (Con): I feel sorry for the poor old Minister. He knows very well that we could have got to this point after 15 minutes with officials, 15 months ago, instead of spending 15 months in laborious working parties. At no stage did he or his office give the impression that they were simply working towards some provisional outcome. This is a funk, and it is a gold-plated, comprehensive funk.

Will the Minister make it clear to Sir Michael Lyons that this is supposed to be about the balance of funding? Will he therefore ask him to examine seriously the argument for relocalisation of business rates to anchor businesses in the community and to give the community a stake in the success of business? That would be an extremely positive outcome and very good for local democracy.

Mr. Raynsford: The right hon. Gentleman said that this could have been done in 15 minutes with officials. The hallmark of his party in government was an ill-thought-out reform that probably did have only 15 minutes' advice from officials, because the officials would undoubtedly, had they been given more time, have told it that the poll tax was an extremely foolish venture. We do not intend to repeat that mistake. We are doing this thoroughly, carefully and rigorously, and Sir Michael Lyons will be continuing the work that the balance of funding review has undertaken.

The right hon. Gentleman has considerable experience of this matter. He spent most of his ministerial time trying to live down and repair the damage created by an ill-thought-out and rushed reform of local government finance. He should appreciate the importance of a measured, sensible and thorough approach.

Mr. Bill O'Brien (Normanton) (Lab): I thank my right hon. Friend for his statement this afternoon. I hope that he will continue to pursue this direction, and that a property-based tax will continue to apply to local government. I remember clearly the Committee that considered the poll tax: I was a member of that Committee, and the Leader of the Opposition was at that time one of the keen advocates of the poll tax, which failed miserably, and a property tax had to be introduced. I therefore consider keeping a property tax to be in the best interests of local government.

My right hon. Friend referred to council tax banding in his statement, and said that a review of council tax bands is to take place. May I suggest that a regular review of council tax banding is also important, and that additional bands would be welcomed by members of the special interest group of municipal authorities, because a fairer balance is required in relation to tax bands? May I also—

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