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Mr. Malcolm Moss (North-East Cambridgeshire) (Con): Since this Government came into office, council tax bills have risen by an average of 70 per cent. throughout England and Wales. I trawled through some statistics from my own area and the area around the constituency of the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Corby (Phil Hope), who will no doubt respond to the debate later. Corby's council tax has increased by 71 per cent.
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over that period, Kettering's by 72 per cent., Leicester's by 88 per cent., Milton Keynes's by 73 per cent., Peterborough's by 83 per cent., Cambridge's by 77 per cent., Great Yarmouth's by 95 per cent., and Northampton's—close to the Minister's patch again—by 71 per cent. Similar figures apply across the board, across all councils of whatever political persuasion. That is the result of Labour's policy on local government funding.

In 2004, the average band D council tax bill in England was £1,167, up from £689 back in 1997–98. As we have heard today, further tax hikes are expected after the election, due to the black hole in the Government's funding of local councils, just as happened after the 2001 general election. Calculations suggest that council tax bills will top £2,000 by the end of a Labour third term.

Much was made of the additional money from the Chancellor, announced in his pre-Budget report, of £1 billion this year to help to keep council tax as low as possible—obviously with the election in mind—but we now discover that £350 million of that is money announced last year and £350 million is ring-fenced money, which will not be distributed evenly across councils throughout the country. That leaves new money of about £250 million for distribution.

Under this Government, pensioners have lost over a third of their pension increase in higher council tax. For typical single pensioners, 40 per cent. of their basic state pension increase has been snatched back in higher council tax, with pensioner couples losing a third of the rise in soaring council taxes.

To take another measurement of Government policy on council tax receipts, the increase in such receipts under this Government is about £9 billion—from £11 billion in 1997–98 to £19.7 billion last year. So, there has been a hike in council tax receipts of almost 80 per cent., which is equivalent to about 3 per cent. on the basic rate of income tax. One problem with this Government is that they claim each year that they are giving additional increases and above-inflation increases—we heard that from the Minister today—but they do not convey to the House the fact that a lot of the money in terms of the global increase is specific grant money, which is ring-fenced. The figure some years ago was 15 per cent., but the Minister recently announced that it is to drop to, I think, 13 or 13.5 per cent.

Mr. Raynsford: Nine per cent.

Mr. Moss: That tells me that the Government have accepted the mistake that they made and that they are reining back on the specific grants, which go to pet projects, usually in Labour areas.

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

Mr. Moss: No. I have been told that I have to finish fairly soon to let other hon. Members speak.

I want to refer to my constituency, North-East Cambridgeshire, and to Fenland district council, which occupies most of that territory and which was capped
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last year in a way that I consider spiteful, unnecessary and unwarranted. The facts of the matter are that last year Fenland district council had £420,000 withheld or clawed back under the floors and ceilings policy, while this year the amount is £360,000, which went to help those on the so-called floor.

The formula uses sparsity factors, deprivation indices and other factors to determine the grant requirement. In effect, therefore, the Government are on the one hand saying that my council area requires a certain amount to deliver services in a rural area with deprivation and sparsity problems, but on the other are taking back a considerable amount of that money. They then have the audacity to say, "We said you needed the money. We haven't given it to you, but you are increasing your council tax above a rate that we deem necessary. Therefore, we are going to cap you."

The bill paid in Fenland is, on average, the lowest in Cambridgeshire, £83 lower per dwelling than the county average, more than £60 lower than the English average and more than £130 lower than the shire district average. So, under no count can one conclude that the council tax payers of Fenland pay more than those in many other equivalent banded properties in adjoining constituencies, or for that matter in shire districts throughout the country.

David Taylor (North-West Leicestershire) (Lab/Co-op): Will the hon. Gentleman give way?

Mr. Moss: I am sorry, but I do not have time.

The problem for councils such as Fenland is that a huge proportion of their properties are in the lower bands. For example, nearly 85 per cent. of Fenland's properties are in bands A, B and C. That is a remarkable statistic for a Conservative constituency, but it is the reality. So, it costs Fenland far more to raise extra finance on council tax than it would neighbouring districts. I believe that it will require about £2 on council tax in Fenland, while neighbouring Cambridgeshire districts will need to charge only an extra £1 to raise the equivalent amount.

Nominating a few councils for capping last year was a spiteful exercise on the Government's part. It was of course intended to set a clear standard for this year, with an election coming up. The stick that the Government wielded then, plus the carrot produced by the Chancellor with his extra funding, mean that most council tax increases will be about 4 or 5 per cent., which is what the Government intended all along. They can announce that figure in the run-up to the election.

The Minister mentioned two Cambridgeshire councils, Huntingdon and South Cambridgeshire. For many years they imposed very small increases; on one occasion I think there was no increase at all. They were able to do that partly because they had sold off housing stock and had money in their capital accounts, but it is not possible to cushion the blow for ever, as the Minister well knows. Indeed, he is nodding. There comes a time when a council must put back its tax base. Huntingdon is now proposing an increase of, I think, 13.7 per cent., and South Cambridgeshire has said that it must increase the district element of council tax by 100 per cent. It will still be the case that neither council will have an average band D tax higher than that of any other shire district.
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I want to say a little about the rebate that we promised to pensioners. This is extremely good news for my pensioner constituents. The constituency has an elderly population, and some 10,500 pensioner households will benefit from a £500 rebate. I congratulate my colleagues, including those on the Front Bench, on that extremely helpful suggestion.

3.47 pm

Mr. Clive Betts (Sheffield, Attercliffe) (Lab): When we debate local government finance here, the problem with the Conservatives is that they believe that history began in 1997. They conveniently forget everything that went before: the poll tax, the problems with rate-capping and the massive cuts in grant faced by local authorities, not just during the four years before the 1997 election but throughout the 1980s.

Whose council tax is it anyway? Given the way in which the hon. Member for Meriden (Mrs. Spelman) introduced the debate, no one would believe that it was introduced by a Conservative Government. I happen to think that it was probably one of the better things that the Conservative Government did during their 18 years in office. I think it is a reasonable tax that is now in need of some reform, and that is precisely what the Government are trying to do. It would, in my view, be entirely illogical not to impose any tax on the most valuable asset that people own, whose value has increased so much over the past few years.

The Government have sensibly established a balance of funding review and the Lyons inquiry into the funding of local government. We must address the fact that because the business rate is linked to inflation, an increasing burden is being imposed on council tax to fund local services. I hope that Sir Michael Lyons will consider that. I would not oppose a local income tax in addition to council tax for larger councils, which the Chartered Institute of Public Finance and Accountancy has recommended, but proper research is needed so that we know what the impact would be. We need significant reform of council tax benefit for owner-occupiers, which is the one benefit that is not taken up by about half the people who are eligible for it. We need a campaign to deal with that, but perhaps we should also think again about some form of tax credit to replace the benefit.

We also need to look at the bands. I think that we should have more at the top, and split band A at the bottom. Given a system of rebanding and a substantial increase in the take-up of the council tax benefit to which people are entitled, council tax would become a progressive form of taxation. The figures are there to show that.

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