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Patrick Hall (Bedford) (Lab): I congratulate all the Members who have spoken in the debate, especially those who gave their maiden speeches today. They brought to life the places they represent in a way that almost makes me want to visit those areas, but I am happy with the constituency of Bedford and Kempston that I have the honour to represent. The maiden speeches we have heard showed a remarkable balance of clarity, humanity and intelligence. We have certainly heard generosity, too, from several speakers, including the hon. Member for Leeds, North-West (Greg Mulholland) in his remarks about Harold Best, who was one of the kindest people I met in the House and will be much missed.
I had hoped to make the contribution that I am about to make during the debates on the Queen's Speech, although it is understandable that I was unable to do so due to the need to give priority to maiden speeches. I want to talk about council tax, an issue of considerable and growing concern to most of the people I represent, and one that the Government are determined to tackle.
Although specific legislation was not brought forward in the Queen's Speech, I have no doubt that in the months ahead the House will spend much time talking about council tax, revaluation and the recommendations of the Lyons review of the financing of local councils. I am sure that I am not the only Member who is eagerly awaiting a special Christmas presentthe publication of the Lyons review. I understand that it is on schedule to report, as required, by December.
Although concern about council tax is expressed throughout the country, it is understandably acute in Bedford and Kempston and throughout Bedfordshire. Band D council tax in Bedford is now £1,323.71, having risen 81 per cent. from £731 in 1997. Despite the fact that Bedfordshire county council has received a real-terms increase of 33 per cent. in Government grant since 1997, in stark contrast to the real-terms cut of 7 per cent. during the last four years under the Conservatives, it has managed to become the third-highest taxing authority in the country. To compound that felony, the council has been found consistently to be the worst performing. From being judged "poor" in the comprehensive
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performance assessment, it has now made some recovery to "weak". Its children's services have been placed under special measures and a few days ago Ofsted found that its youth services were unsatisfactory on all counts.
Patrick Hall: As a former member of Bedfordshire county council, I confess to some sadness when Luton took that step eight years ago, but I can understand why it did so. For people living in Bedfordshire, that draws attention to the potential advantages of unitary authorities rather than to the situation we face at district and county council level.
The county council is run with a rod of iron by the Conservative party. For the past eight years, until the recent elections, the ruling Conservative group had only a small majority, yet it refused to allocate places on the executive and other structures to the Labour and Liberal Democrat groups. The poor performance and high taxing of Bedfordshire is thus entirely down to the Conservatives. They can blame no other group, and certainly not the council staff. The Conservative group in Bedfordshire bears full responsibility for what is happening, so guess what happened at the county council elections three weeks ago? The demonstrably failed Conservative group, which had increased its overall majority from one in 1997 to three in 2001, was gratefully rewarded by the people of Bedfordshire for being pretty useless by an increase in its majority to 20.
Surely that is one of the most bizarre election results of all time. Perhaps Bedfordshire Conservatives could let us into their secret. Do they have a Blarney stone hidden in the bowels of county hall, or do they perform the darks arts in some way to mask what they have really done to the people of Bedfordshire? I add in haste, however, that the people of Bedford and Kempston did not come under that spell to the same extent as those elsewhere in the county. In the constituency that I have the honour to represent there are only three Conservative county councillors out of 11, and six of them are Labour. The residents of Bedford and Kempston understand that the council tax is a Tory tax made worse by a Tory council. They also understand that a Labour Government are most likely to bring about the necessary changes in the funding of local councils and to make funding fairer, more transparent and more effective.
Although a high-taxing authority such as Bedfordshire county council puts an added burden on local residents, it has to be said that there are systemic weaknesses with the council tax itself, and I shall now turn to those. First, it is inherently regressive and that is reflected in the fact that although a person on band H pays three times more than someone on band A, the band H property is valued at eight times more than the property on band A.
Secondly, there is the gearing effect due to the fact that the council tax raises about 26 per cent. of local council budgets. That means that if a council wishes to raise its budget by an extra 1 per cent. from the council
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tax, the tax has to go up by about 4 per cent. Above-inflation increases are very difficult to avoid and will always tend to make the council tax stand out as a big tax unless we make radical changes.
Patrick Hall: Indeed, I am just about to come to that, because it follows logically from what I have just said. My hon. Friend picked that point up instantly. The business rate is the one area of radical change that we could consider and make. I hope that the Lyons review will come up with a careful assessment of that possibility.
The business rate was nationalised by the Conservative Government in 1990, and that leaves the domestic council tax payers as the only significant source of revenue open to the decision of local councils. Even that is constrained by Government capping powers, and I would like to mention them. I was a councillor in the past, but I would not attempt to be a councillor and a Member of Parliament at the same time. That is a matter for the hon. Member for Leeds, North-West to resolve in the weeks and months ahead. Good for him if he can do it.
I am uncomfortable with capping. I believe that decisions about locally raised revenue are best taken locally and that, if levels of local taxation are judged to be excessive by local people, the local electorate should cap the councillors by booting them out of office. That is the best way to deal with the issue. However, in exceptional circumstances, I accept that there may be a need to use reserve powers and that what I have said does not appear to apply to the people of Bedfordshire as a whole who continue to return Conservatives to the county council.
When the business rate was nationalised, it was pegged to inflation, but the council tax was not. Therefore, over the years, the share of local council budgets carried by businesses and local residents has shifted significantly on to the shoulders of residents. While the business rate contribution has dropped from 29 to 22 per cent. over the past 12 or 13 years, that from council tax has increased from 20 to 26 per cent. In effect, that means that the council tax payer is subsidising the business ratepayer, a situation that is unfair and unsustainable. We need to address that.
It makes sense to return the business rate to local councils if we want a fair share of the cost of local council services to be paid and to reduce the gearing effect, although that would not be an automatic panacea.
Mr. Love : My hon. Friend's argument is a little inconsistent. Surely the problem with the business rate is that it has been pegged to inflation. It would not be necessary to abolish the unified business rate because we could simply urge business to pay its proper proportion to achieve what he wants.
It would be difficult for a centrally determined level of business rates to take account of the
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varying conditions throughout the country with which locally elected councils deal. If we want councils to play a strong role in our civic society, there must be some scope for variation because otherwise they lack the power to do what we want them to. I am not in favour of a nationally applied rate because it leads to the situation in which we demonstrably find ourselves, with the burden unfairly carried.
Re-localising the business rate would not be an automatic solution to the problems of the council tax. There would have to be understanding and support from the business community. I also think that a measure of protection would be needed because although residents have a vote, businesses do not, so they could reasonably argue that such protection would be needed because there would be no immediate electoral kick-back from a council's decisions to increase the local business rate, as there would be from a council tax increase. We would certainly need to retain a national equalisation mechanism to redistribute business rate yields because they might be high for some councils and low for others. None the less, on balance there is much to commend in the re-localisation of the business rate.
If property tax is to remain as the sourceor indeed a sourceof locally raised revenue, which is likely even if we consider the possibility of adding a local sales tax or indeed a local income tax to the armoury as a result of the Lyons review, it is crucial that it is based on accurate information about the value of property. Such information must then be fed into a robust system that can be regularly updated so that revaluation exercises are sensible and effective. The Government have made it clear that the revaluation exercise for England that is about to begin will be revenue-neutral. The value of the council tax bands will be uprated to reflect house price inflation, but that should result in the overwhelming majority of properties remaining in the same band. However, achieving that will pose difficulties due to not only strong regional variations in house prices, but large variations within regions.
I understand why people in England express fears about the possible effects of revaluation because the experience in Wales was that 40 per cent. of properties ended up at least one band higher. We must make it clear that revaluation is not about raising revenue, learn from what happened in Wales and approach the process in a more measured way than was the case there. We have time to get the system right before the new bills hit the doormats in April 2007. I am delighted that the Lyons review is on the case and that it will advise Ministers on this crucial matter.
I ask the Government to be open-minded about options for funding local council services. I hope that they will be prepared to consider changing the number of bands and the possibility of introducing regional variations for both the number of bands and the payment proportions among them. Although it will be controversial, I hope that the Government will be open minded about the re-localisation of the business rate, for the reasons that I mentioned. We also need to ensure that we learn from the Welsh experience and deliver an English revaluation that is revenue-neutral.
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Finally, we all need to be clear about the overall purpose of the reform of local council funding. It should be about underpinning and strengthening local government to create a framework in which local government and local democracy flourish and should make a difference to our towns and communities throughout the land. Councillors should be able to respond to the wishes of residents and to have freedoms and responsibilities. That will make the job of being a councillor worth while and, therefore, more likely to attract new people who want to serve their communities in that way, as well as perhaps achieving a higher turnout at local elections. To achieve all that, the way in which councils are funded must be fair and easily understood and funds must be easy to collect.
Surely, if we are to retain a property tax, the aim should be that householders with comparable incomes pay roughly the same local council tax if they live in broadly similar house types anywhere in the country, and there should be a reasonable span of bands nearly everywhere, with band A, for example, applying to houses that are cheap by local rather than national standards. If we do not do that, we will end up keeping and reinforcing the current situation in which 60, 70 or 80-plus per cent. of properties in many northern towns and cities are in band A.
Those are important issues for the Government and Parliament. They are certainly important to my constituents, whose message to me is clear: the current situation cannot be sustained and council tax must be reformed.
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