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Andrew Bennett: Will the hon. Lady give way on that point?

Mrs. Spelman: The hon. Gentleman has had one intervention; this is a very important point, which answers a number of Labour Members' questions.

The tax cut will be fully funded by central Government from the £4 billion-worth of savings identified in central Government by our James review, which the shadow Chancellor has allocated for tax reductions.

Andrew Bennett: Many pensioners in my constituency are on a full rebate at present. How do they get the £500?

Mrs. Spelman: The hon. Gentleman might like to tell the pensioners in his constituency who pay council tax—

Andrew Bennett: Many pensioners are not paying because they get the discount.

Mrs. Spelman: Ah, but many are paying, and often it is the pensioners with just a little in savings, taking them
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out of eligibility for benefits, who are the worst off. The hon. Gentleman might like to tell the pensioners in his constituency who are eligible to pay council tax that, under our proposals, a single pensioner living by herself in his constituency would be more than £450 better off.

Miss Julie Kirkbride (Bromsgrove) (Con): Does my hon. Friend recognise that the reaction among Labour Members is typical, because they do not understand the pain and upset caused to people whom she and I represent in neighbouring constituencies who have worked hard all their lives and saved their money? Those people have a modest pension and nest egg for their retirement, which they want to keep to pay bills or to pass on to their children, and they find that that nest egg is decimated by their having to dip into it year on year because of increases in council tax imposed by the Government.

Mrs. Spelman: My hon. Friend has reinforced my point extremely well. Labour Members may refuse to take up that point, but I hope that they will begin to understand the strength of feeling among Conservative Members, and why we are glad to have secured this debate.

Mr. Edward Davey: Will the hon. Lady give way?

Mrs. Spelman: I should like to make progress; the hon. Gentleman will have an opportunity to make a speech later.

Labour spokesmen have decried the offer of help to pensioners with their stock response of "fantasy figures". If that discredited allegation is the best that the Government can do, it proves how desperate their position is. The fact is that the Government's own efficiency review, conducted by Sir Peter Gershon, admitted to £22 billion of waste in central Government. Surely it is not too much to ask to let hard-pressed pensioners have £1.3 billion of that to help with their council tax bills.

The Deputy Prime Minister's own empire—how I wish that he was here to hear this—wastes money, such as the millions of pounds that were poured into the futile attempt to talk the electorate into regional assemblies. That idea was roundly rejected by the people of the north-east last autumn. However, he cannot take no for an answer and he is still burning up millions of pounds of taxpayers' money transferring powers to regional level.

That is just one example of the Government's profligacy costing taxpayers dear. The savings that we have identified will help councils to keep levels of council tax down for everyone. Pensioners in particular will receive help, but all council tax payers will be helped by our action plan to reduce the costs and burdens that councils face. We would close the Office of the Deputy Prime Minister and transfer the functions to a smaller new Department for local government, whose tasks would be to decentralise and deregulate, to empower and support local decision making and to secure better value for money.

We would free local councils from the straitjacket of central Government and the plethora of performance targets and armies of inspectors that cost local
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authorities and general taxpayers more than £1 billion. That £1 billion would be better spent on keeping council tax down to a sustainable level for everyone.

We believe that no single sector of society should    shoulder the tax burden disproportionately. Unfortunately, that is exactly what would happen under the Liberal Democrats' proposal. The local income tax would be no panacea for the problems of local government finance. The Lib Dem slogan, "Axe the tax," is disingenuous because it implies that there would be no tax at all. In reality, however, the burden of taxation would be shifted on to hard-working families. Pensioners, many of whom are grandparents, do not like the idea of the burden of taxation being shifted on to their children and their children's children.

The Liberal Democrats' Treasury spokesman had the honesty in an interview with the Evening Standard to admit that local income tax would "bite" on a household with a joint income in the mid-£30,000s. By our calculations, typical working families would have to pay £630 more than their council tax payments today. Pensioners who pay income tax would not escape either. Some 71 per cent. of pensioners receive income from their savings, yet that would be taxed under the Liberal Democrats' proposal. Their plans for a local income tax would come on top of those for higher national income tax and a regional income tax to fund regional assemblies. I say, "Beware the axe man."

Council tax payers of all ages deserve better than that on offer from either Labour or the Liberal Democrats. Neither party has seriously addressed the drivers of council tax inflation. The Conservative party has pledged to halve the council tax for millions of pensioners and to scrap Labour's plans for higher council tax bands and a rigged revaluation.

Mr. Betts: Will the hon. Lady give way?

Mrs. Spelman: I am about to finish my speech.

We have pledged to cut back on unfunded burdens, regulations and red tape, and to ensure that there is fairer funding from Whitehall. Additionally, we have said that we will deliver above-inflation increases for schools, the police, health and social services. People face a clear choice: more waste and higher taxes under Labour, or value for money and lower taxes with the Conservatives.

2.12 pm

The Minister for Local and Regional Government (Mr. Nick Raynsford): I beg to move, To leave out from "House" to the end of the Question and to add instead thereof:

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We have just heard a speech of breathtaking insincerity, surprising ignorance and shameless opportunism that told us a great deal about today's Conservative party. The Conservatives have conveniently forgotten their lamentable record in government and are displaying a staggering capacity for self-delusion about the responsibilities of being in government. They are playing fast and loose with the serious business of local government finance and are unforgivably trying to perpetrate a cruel deception on millions of elderly people by promising benefits that they could never deliver. Their latest electoral gimmick, for that is what it is, comes, of course, from the same individual who gave us the poll tax when his attention was last turned to local government finance. I intend to return with some relish to the Conservatives' record and their non-credible proposals.

We should put the record straight about the council tax in 2005–06. Who would have thought, after listening to the hon. Member for Meriden (Mrs. Spelman), that according to the estimates of the much-respected Chartered Institute of Public Finance and Accountancy, we will see in the coming year the lowest council tax increases for 11 years and—[Interruption.] Wait for it; I have good news. Conservative Members will not like it, but they will hear it anyway. It is also estimated that that will be the second lowest council tax increase ever. Contrast that with the 16.5 per cent. increase in the last year of the poll tax, for which the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) was responsible.

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