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Mr. Michael Foster (Worcester) (Lab): Is the hon. Gentleman's party for or against insisting on the passporting of 100 per cent. of funding directly to schools?

Mr. Davey: We have always said that that should be a decision for local education authorities, not for Whitehall. We would not go ahead with the dedicated schools grant model because it represents one of the biggest centralisations of local government finance ever seen. It is supported by the Conservatives, and I am surprised to discover that Labour is working with the Tories—yet again—on this issue.

I would like to understand how the Minister is going to reconcile this model with three-year budgeting. Moving to such budgeting, as has happened in Whitehall, is a very sensible local government finance reform, which we totally support. But if it happens, how will it fit alongside dedicated schools grants and capping? The whole point of three-year budgeting is surely to enable schools and local authorities to take a longer-term view and to get over the blips that come along occasionally. But how can they do that if they do not know what the capping regime will be during those three years? How can they take best advantage of that extra freedom if ring-fencing is to be increased? It will not be possible.

It is not just the dedicated schools grant that will cause problems in future; there is also the council tax revaluation. The hon. Member for Brentwood and Ongar was right to mention it because it is the biggest ticking tax time bomb in Labour's hidden manifesto. Anyone who has seen their house price increase faster than the national average had better beware: Labour is gunning for you.

Mr. Pickles: Will the hon. Gentleman give way?
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Mr. Davey: No. In Wales, 33 per cent. of houses have gone up by one or more bands, and only 8 per cent. have gone down. In Cardiff, 64 per cent. of households have been moved up by one or more bands and only 2 per cent. have moved down. In some wards—indeed, in some of the poorest wards in Cardiff—90 per cent. of households have been moved up one or more bands. How are the Government going to explain that unfairness to the people of England?

Mr. Raynsford: It is rather unlike the hon. Gentleman not to have listened to what I said in response to the hon. Member for Brentwood and Ongar (Mr. Pickles) earlier. I pointed out that there was no parallel whatever with what is happening in Wales, where a decision was taken to add a band at the top of the scale but not at the bottom, which clearly excused the whole arrangement, as compared with any arrangement in this country, where no decision at all has been taken. Does the hon. Gentleman accept that the sort of speculative figures appearing in the press—prompted by the Daily Mail, which is renowned as a propaganda sheet that is always trying to damage the Government—should never be given the time of day? Frankly, I am astonished that the hon. Gentleman and his party have given credence to those entirely spurious figures, which are designed to stir up unjustified anxiety among the public.

Mr. Davey: The Minister is trying to have his cake and eat it. He is trying to say that revaluation will happen, but that it will not be the same as in Wales. What the House and the electorate would like to know is how revaluation will be designed. We want to know the Government's policy on revaluation. [Interruption.] Unlike the hon. Member for Brentwood and Ongar, who is shouting from a sedentary position, we do not know what the Government's revaluation policy is. They have not set out how many bands will be affected, what the change in the multipliers will be, whether there will be regional banding or anything like that. I believe that this House—and, far more importantly, the electorate—should know what the Government's policy on revaluation is. Will the Minister tell the House what Government policy is?

Mr. Raynsford: Does the hon. Gentleman accept that it would be foolish—though a typical example of Liberal Democrat policy—to try to take decisions before seeing the figures? We are quite rightly and properly waiting until we see the actual values in April 2005, the valuation date, before deciding on any changes to the structure of council tax banding. Is it not highly foolish—I accept, of course, that it is typical of the Liberal Democrats—to plunge in and give commitments before seeing the figures?

Mr. Davey: The Minister commissioned a balance of funding review, which met for 15 months. All its results are on the Office of the Deputy Prime Minister's website, and the New Policy Institute, as the Minister well knows, investigated the effects of council tax revaluation across England. It looked at four particular scenarios, so the evidence is out there on the ODPM website. That is what people are looking at. What they see is that, for example, in three of the four scenarios envisaged in the report commissioned by the Department, a council tax
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band C home owner in London would face double-digit council tax rises as a result of revaluation. When the Minister intervenes, I hope that he will answer that point. Is he really going to say that there will be no losers under council tax revaluation? No losers?

Mr. Raynsford: The hon. Gentleman will know, because there was a Liberal Democrat member of the balance of funding team, that the review's conclusion was that it would be inappropriate to make any recommendations on changes to the banding system—or, indeed, to local government finance—without considerable further work, which should be based on the latest up-to-date figures. The values are not yet known and we are still three months away from the date of valuation, so how can the hon. Gentleman possibly provide these forecasts? He is scaring people by talking about huge increases, but he simply does not know what he is talking about.

Mr. Davey: There is an awful lot of information out there about house prices, as the Minister well knows. He criticised the Daily Mail, but I am afraid that he is wrong about that. The Halifax source, used by the Daily Mail, is one of the most authoritative sources on house price rises at local level. The Minister knows perfectly well that boroughs across London will be badly hit because their house prices have risen far above the national average.

Mr. Pickles: Will the hon. Gentleman give way?

Mr. Davey: No, I am engaging with the Minister. I will come to the hon. Gentleman in moment.

Many people are concerned—because they have seen from what happened in Wales—that if they move from a band D to a band E as a result of revaluation, they are likely to face a 22 per cent. increase in council tax. When I visited Cardiff the other week, I met a pensioner on the basic pension whose house had been revalued, and had moved up three council tax bands as a result. She now faces an increase in her council tax of more than 40 per cent. That is why people are worried about revaluation. It is not good enough for the Minister to say, before the general election, that what has happened in Wales will not happen in England. People need to know more about this very significant decision.

The problem is made worse by the double whammy effect of the grant system—

Mr. Pickles: Will the hon. Gentleman give way?

Mr. Davey: I am worried about the hon. Gentleman's health, so I will give way to him this time.

Mr. Pickles: I could not be happier. Will the hon. Gentleman say why, if he feels so strongly about the matter, he, with his Liberal Democrat colleagues, twice voted in favour of the extra bands? Was that a mistake? Did they not mean to do it? What are the Liberal Democrats' policies in this matter?

Mr. Davey: Time and again, Liberal Democrat Members have voted in this House to scrap council tax altogether. I am sure that the House would be more interested to learn the Conservative party's plans for
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council tax reform. Conservative Members talk about revaluation and an unfair council tax, but despite many nods and winks, we do not know what their policy will be at the general election. My party has put its policies forward again and again. We want to scrap council tax, stop the revaluation, and introduce a fair system of local income tax.

The final problem with revaluation is storing up huge difficulties. If a council's council tax base increases above the national average, that council will lose grant. That is the double whammy that has hit Wales, and the same thing will happen in England. Councils in London, the south-east and the south-west, in particular, will have council tax bases way above the national average, according to the new figures. As a result, their grants will be cut significantly and council tax will have to rise.

We need reassurances that the one-off increases in the pre-Budget report will become permanent, that the concerns about the dedicated school grant will be dealt with, that the council tax revaluation will be dropped and that council tax itself will be replaced. Otherwise, although the Government may survive this year's round of council tax increases, they will be storing up huge problems for the future.

6.32 pm

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