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Mr. Roger Williams (Brecon and Radnorshire) (LD): Will the hon. Gentleman give way?

Mr. Pickles: Of course. It is nice to see the hon. Gentleman.

Mr. Williams: I have been here for rather longer than the winding-up speeches. The hon. Gentleman speaks of the nightmare of revaluation. Surely the nightmare is the council tax itself, which places such a burden on the poor and lets the rich off scot free. That has always been a Conservative policy.

Mr. Pickles: If the hon. Gentleman had been here longer, he would have heard more of the arguments, but I shall deal with that point shortly.
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I am grateful to my hon. Friend the Member for Lancaster and Wyre (Mr. Wallace) for his knowledgeable contribution.

The Government's dependency on council tax is a case study in addiction. It starts with a small transfer of a little public expenditure to councils, with the addition of the odd unfunded burden on local councils. Only a few people notice, and the Government begin to feel good. Now it has become a habit. Each year, a little bit more is added. Each year, it becomes more difficult to disguise the dependency. Every four years or so, the Government realise that they have a problem and they swear off the habit, only to fall off the wagon in a post-election binge. It will ultimately kill them.

Some people believe that identity cards—the plastic poll tax—will bring the Government down. However, I believe that it is their abuse of property tax—revaluing and adding bands—that will bring them down. Even including an element of local income tax will make no difference. As The Independent put it,

The causes of the rise are the causes of the problem. Labour Members and their Liberal Democrat allies are beginning to resemble "Desperado".

That day is known: it is 2007. The Government's world will truly rock—to its foundations. They will bitterly regret fiddling the council tax.

6.48 pm

The Minister for Local Government (Mr. Phil Woolas): Thank you, Madam Deputy Speaker, for calling me to speak in this debate. I saw its title, but I should have realised that its real subject would be the Cheadle by-election. The Opposition have clearly not grasped this opportunity to hold the actions of Her Majesty's Government to account. Rather, it has been an Opposition day debate in the sense that the Opposition have been opposing the Opposition, who in turn have been opposing the Opposition's opposition to the Opposition. I think that the watching public will be very confused indeed.

Two Members have taken part in today's debate: the hon. Member for Scaremongering, South, representing the Conservative Front Bench, and the hon. Lady for Naive, North, presenting the Liberal Democrats' ideas for a local income tax. In relation to the review of the balance of funding between local taxpayers and the national contribution, we should point out that the national contribution comes from taxpayers, not from the Chancellor's back pocket. At the last general election, the Conservatives' formal policy was to freeze the amount of money that would be given on grant to local authorities at 0 per cent. for two years. That renders their protestations over the amount that could be given in rebate—

Mr. Pickles: Will the Minister give way?
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Mr. Woolas: The hon. Gentleman has had his chance to put his point of view. My right hon. Friend the Minister of Communities and Local Government quoted the then shadow Chancellor on this point, and that remains on the record.

I should like to answer some of the points raised in today's debate. I hope hon. Members across the Chamber will join the Government in our campaign to improve the take-up of council tax benefit. I do not doubt that many of the problems that have been mentioned are real ones for Member's constituents—I recognise their credibility in that regard—but they could in many cases be addressed by better take-up of that benefit. My right hon. Friend the Secretary of State for Work and Pensions is working very hard on a comprehensive programme to improve that take-up, particularly among pensioners.

The policy of the hon. Member for Brent, East (Sarah Teather), who spoke on behalf of the Liberal Democrats, was teased out, not least by the hon. Member for Bournemouth, West (Sir John Butterfill), the Chairman of the pension trustees. I can see that he retains that position—at least, I hope he does because his grasp of finance has clearly not diminished since the election. Frankly, he demolished the Liberal Democrats' case for a comprehensive local income tax, and he addressed very well the questions of how the tax would be assessed, how resource equalisation should be met, how the area cost adjustment should be taken forward, and how the council tax collection rates could be matched with equal collection rates for local income tax.

The hon. Member for Brent, East did clarify one point. Perhaps inadvertently, she said that she hoped that the balance of funding would shift from 30 per cent. local and 70 per cent. national, as it is now, to 70 per cent. local and 30 per cent. national. My research has quickly shown that that would result in an increase of 10.6p on income tax. That figure is winging its way to the Labour committee rooms in Cheadle even as we speak. The good work force of the Woodford BAE Systems plant in Stockport will now know that not only could they be paying more income tax depending on who they were working alongside, but that it could go up by 10.6 per cent. That is an amazing figure.

I am delighted to pay tribute to my right hon. Friend the Member for Greenwich and Woolwich (Mr.   Raynsford) who, with typical politeness, has passed me a note apologising for the fact that he cannot be here for the end of the debate. I think it was the hon. Member for Brentwood and Ongar (Mr. Pickles) who urged Members to read my right hon. Friend's articles in the "Municipal Journal". I can tell the hon. Gentleman that, however hard he has been reading them, he has not been reading them half as hard as I have. I congratulate my right hon. Friend on them.

On a serious point, my right hon. Friend said that the goals of local government finance policy were greater certainty, greater equalisation, incentives for high-quality delivery of local government services, and the sustainability of long-term funding with equal, if not greater, emphasis on expenditure control, both through
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the Gershonefficiencies—the successes of which my right hon. Friend the Minister of Communities and Local Government has already reported to the House—and through macro-expenditure decisions. In the coming Session, we will debate the three-year settlement that we intend to fulfil to bring about that greater certainty and stability.

I should like briefly to reply to some of the constituency points raised. I congratulate the hon. Member for Isle of Wight (Mr. Turner) on his new appointment as Conservative spokesperson on voluntary affairs. He had great fun attacking the Liberal Democrats on the Isle of Wight—an easy target, but he had great fun none the less. I must point out to him, however, that his own council has recently received a 5.8 per cent. increase in its grant from central Government, and above-inflation increases for the past eight years running. I invite him to give the money back if he does not want it, but I suspect that there will not be a cheque in the post to my right hon. Friend the Minister of Communities and Local Government.

David T.C. Davies: Will the Minister give way?

Mr. Woolas: I am sorry, but I shall not be able to do justice to the many intelligent points that have been made if I give way.

My hon. Friend the Member for Plymouth, Devonport (Alison Seabeck) made a brief but very well informed speech, and I look forward to her being able to use the platform of her membership of the House to give us the benefit of her vast experience and knowledge of local government finance. She has found her voice now, and we look forward very much to benefiting from her advice.

The hon. Member for Ludlow (Mr. Dunne) made some important points on his constituents' behalf about the fact that some people in his area are on lower incomes. He asked how that could be taken into account if the Lib Dem policy were to be introduced. That was precisely the question asked by the hon. Member for Bournemouth, West and others: how would greater resource equalisation take place if the local income tax were to be genuinely local? That is the paradox that was teased out of the Liberal Democrats' policy.

The hon. Member for East Dunbartonshire (Jo Swinson) got mixed up when she said that her constituency was the most middle class in Scotland, yet incomes there were under £25,000. I take her point, but she must acknowledge that a couple on average incomes, not on average household earnings, as was suggested, would experience average council tax increases of £600. It is all very well the hon. Lady shaking her head, but if the tax base were based on income rather than property, it would be narrowed, a greater burden would fall on those people paying income tax, who are on the whole members of hard-working families. The Lyons review's remit is to consider whether an element of income tax could be used in balance with the existing property element—[Hon. Members: "Ah!"] This is not news. If hon. Members had read the Municipal Journal—or, indeed,
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the answers to the parliamentary questions that someone has been writing for them—they would know about this.

We have requested the Lyons review to consider the balance of funding, building on the work that my right hon. Friend the Member for Greenwich and Woolwich has done, and to make recommendations on how best to reform the tax, taking into account the possible impact of revaluation. It will also assess the case both for providing local authorities with increased flexibility to raise additional revenue and for making the shift in the balance of funding that I have just mentioned, and conduct a thorough analysis of options other than council tax for local authorities to raise supplementary revenue.

This has been an interesting debate, if only because it has teased out the differences between the two Opposition parties, both of which are clearly concentrating on what is going on in Cheadle rather than on the Lyons review.

This Government's record in providing a 33 per cent. real-terms increase in resources to local authorities since 1997, providing incentives to councils such as those in Surrey and giving better freedoms to improve services—as the Audit Commission is reporting sustained increases in local services—is one of which we should be proud. We look forward to Sir Michael Lyons's recommendations, and to further debates on this matter.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 160, Noes 340.

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