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Mrs. Spelman: I explained that, according to the Halifax building society, there is a clear convergence. Given the argument that the right hon. Gentleman is promoting, however, how does he explain the situation
 
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that pertains in Northern Ireland, which still has the rates system but has values based on 1975? That does not seem to present a problem in Northern Ireland.

Mr. Raynsford: It is completely untenable, for reasons that I shall outline, to have a values system based on historic values without any revaluation. Let me tell the hon. Lady why.

First, there is the nonsense of new properties being built where a notional value must be imputed as to what that property might have been worth 15 years ago. That is difficult enough if one is building a property in a developed area, but in an area which was previously entirely undeveloped, it is a completely ludicrous process. Secondly, when properties change hands and new values are applied, unfairness will inevitably be created. Two identical properties next to each other will have different valuations, purely as a result of a change of ownership in the intervening period, which is absolutely intellectually incoherent. Thirdly, the whole system is increasingly out of date, because it is based on values created 15 years ago. For all those reasons, it is intellectually and economically illiterate to suggest that one can have a system of council tax without the need for periodic revaluation. That is why we introduced arrangements for a regular 10-yearly revaluation. The Conservatives made fun of the Liberal Democrats for voting in favour of revaluation during the Committee stage of the Bill that became the Local Government Act 2003. The Liberal Democrats said that they did not vote for it on Third Reading. They do not seem to know where they stand.

Mr. Davey: It is nice to see the right hon. Gentleman on the Back Benches, although we enjoyed his performances on the Front Bench.

There was not a single vote on revaluation in Committee. The only amendment was tabled by the Conservative spokesman, the hon. Member for Cotswold (Mr. Clifton-Brown), who proposed five-yearly revaluations. There was no vote on revaluation on the Floor of the House. The only votes in the House took place on Second and Third Reading.

As the right hon. Gentleman knows, there was much in the Bill for which we had campaigned for many years. We did not support revaluation, but we supported many good things such as prudential capital borrowing.

Mr. Deputy Speaker: Order. That intervention was far too long.

Mr. Raynsford: The truth of the matter is that both Opposition parties are up a gum tree. One argues against revaluation now, but in Committee argued for five-yearly revaluations; the other adopted the view in Committee that revaluation was sensible, but now, because it is embarrassed about that, says that on Third Reading it did not vote for it.

This is nonsense, and the motive behind it is the revealing factor. Both parties are positioning themselves in the short term so that they can attack and criticise the revaluation when it happens without being in any way to blame. That is the position of the politically—let me
 
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choose my words carefully—the politically unprincipled, who simply wish to attack and criticise without having a credible alternative to offer.

Mr. Pickles: Speaking of the politically unprincipled, one of the things that have consoled us since the right hon. Gentleman's removal to the Back Benches is the number of articles that he has been writing on local government finance. Next to those articles have appeared news items from the Government suggesting that they are going wobbly on revaluation, rebanding and the whole process of local government finance. Are they being opportunist?

Mr. Raynsford: I am delighted that the hon. Gentleman is reading my articles in the "Municipal Journal" and other organs. I am sure that he agrees with much of what he reads, because he has some experience of local government. Despite his present difficulty, caused by the position that his party is temporarily adopting for expedient short-term reasons, I think he will understand that Labour is the party that is currently pursuing a credible policy to try and create a long-term, viable system of local government finance.

Let us now consider the Liberal Democrats' local income tax. Carried away by its vacuous slogan "Axe the tax", the party came to believe that this was the panacea and the miracle for them, but I am afraid that the rhetoric concealed all the defects of the local income tax. It is administratively complex, as the hon. Member for Bournemouth, West pointed out.

David Howarth: Will the right hon. Gentleman give way?

Mr. Raynsford: No. My time is limited, and I have already given way to a member of the hon. Gentleman's party.

The local income tax system would be inherently complex, with 400 authorities setting different rates. It becomes even more complex when we take account of the fact that unlike properties people move, because that means that there must be an arrangement for apportionment between areas. There would be huge additional pressures on employers, who would have to cope with the new coding arrangements. All that leaves considerable scope for evasion. The council tax is relatively easy to collect, and is difficult to avoid.

The second problem with the local income tax is its unpredictability. That does not apply to the council tax. Local authorities could find that following the closure of an important factory, there was a dramatic fall in their revenue in the short term and no means of covering it. That is clearly a serious weakness.

Thirdly, the local income tax is inherently unfair. If the Liberal Democrat proposals exempt those who do not contribute through the PAYE system, they are essentially exempting several hundred thousand of the richest people in the country, who are living on investment income and dividends, from making any contribution to local taxation. That is a scandal. Coming from a party that talks of fairness, it is one of the most ridiculous and absurd propositions that could be advanced.
 
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So the positions adopted by the Liberal Democrats and by the Conservatives are untenable. By way of contrast, the Government have rightly set up the Lyons inquiry, entrusting this work to Sir Michael Lyons, who is one of the foremost experts in the country. He is widely respected and is giving careful and thorough attention to the various issues. I am confident that he will produce a credible package of proposals, in line with the brief that he was given, as outlined by my right hon. Friend the Minister of Communities and Local Government. It is important that we await Sir Michael's findings before jumping to conclusions or advocating a particular course of action. [Interruption.] The hon. Member for Meriden is nodding; I counsel her to await Sir Michael's report and recommendations before jumping to any conclusions about revaluation. She will recognise that in a taxation system based on values, there will be a need for regular revaluations. I am afraid that the motion tabled in her name would have to be withdrawn or amended in the light of those recommendations.

Sir Michael's work and the preceding work of the balance of funding review, which I am proud to be associated with, give us an historic opportunity to establish a long-term framework for local government finance that provides greater certainty and greater devolution to local authorities—so that they can take decisions and raise money themselves—but which also recognises the importance of an equalisation framework in ensuring no undue disparities between areas, and gives incentives for high performance and the delivery of high-quality services. That should be our aim and objective—local government empowered to serve communities in the most effective way, with a sustainable long-term finance system that is not the subject of short-term political squabbling among parties. I hope that Sir Michael will be allowed the freedom to produce his proposals, and that the Government will then introduce sensible proposals for reform, based on his propositions.

5.17 pm

Mr. Andrew Turner (Isle of Wight) (Con): It is a pleasure to follow the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), to whom I shall refer later on, if I may. I do not usually begin a speech by disagreeing with my own Front Benchers, and I do not   intend to do so today. However, I should point out   to my hon. Friend the Member for Meriden (Mrs. Spelman)—she is no longer in her place—who said that 76 per cent. of people blame the national Government for the level of local taxation, that although that is doubtless true nationally, on the Isle of Wight it is not. There, it is the Liberal Democrats who are blamed for the level of local taxation. The people of the Isle of Wight understand that if one spends more, one has to tax more. The Liberal Democrats do not seem to have understood that point in proposing their panacea of local income tax as an alternative to council tax.

The Liberal Democrats do not seem to understand that shifting the taxation burden from a ratio of 30:70 to 70:30, as the hon. Member for Brent, East (Sarah Teather) suggested—she is also no longer in her place—would place an additional burden on the taxpayer. Such a proposal would be particularly burdensome in areas of
 
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low income such as my constituency, which has one of the lowest average income levels in the country and a very small number of higher-rate taxpayers. In other words, it has very few people who could afford to pay the level of tax that translating from the Isle of Wight's council tax to a local income tax would involve. As a result, the rate of tax would have to be pushed up. Nothing that I have heard so far from the Liberal Democrats during this debate has explained how they intend to help people in areas of relatively low income.

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