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Vehicle Registration Marks

Mr. Mark Hendrick accordingly presented a Bill to make further provision abut the retention of vehicle registration marks pending transfer: And the same was read the First time; and ordered to be read a Second time on Friday 11 November, and to be printed [Bill 48].

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Council Tax

1.44 pm

The Minister for Local Government (Mr. Phil Woolas): I beg to move,

The order will be made under section 52F(4) of the Local Government Finance Act 1992, which was inserted by the Local Government Act 1999. In my view, its provisions are compatible with the convention rights. It sets out maximum 2005–06 budget requirements for eight local authorities, which means that they are being capped in year. The eight authorities named in the order, all    district councils, are Aylesbury Vale, Daventry, Hambleton, Huntingdonshire, Mid-Bedfordshire, North Dorset, Runnymede and South Cambridgeshire.

Subject to the House's approval, I will make the order and issue notices to the authorities about their maximum 2005–06 budget requirements—that is, their caps. They will then be required to recalculate budget requirements that are at or below the level of the caps. They will also have to send revised council tax bills for the current year.

On 23 March, my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford) made a statement in the House about the capping action that the Government proposed to take in 2005–06. He pointed out that the Government had first used their reserve capping powers in 2004–05, and that we had made clear that we were prepared to take even tougher action this year if necessary. He said that he was pleased to see most authorities responding positively to the Government's strong message on council tax. Let me add some figures to those words. That means that 447 of the 456 authorities—98 per cent.—did not set excessive budget and council tax increases, which is a credit to those authorities individually and to local government as a whole.

Some authorities, however, did impose unreasonable increases on their council tax payers. My right hon. Friend therefore went on to say on 23 March that the Government were designating nine authorities with a view to capping them in year.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): Why did the Government recognise the position of low-taxing authorities last year by taking into account the absolute level of tax, and choose not to do so this year? Where is the consistency in that?

Mr. Woolas: The hon. Gentleman makes a point that he and his council have made before. It is true that the criteria applied this year were, in some instances, different from those applied in previous years. The Government are trying to avoid the second-guessing whereby councils try to set their tax and budgets at the level that they expect the capping regime to produce, which is a self-fulfilling prophecy. The hon. Gentleman's point has been noted. I hope that if he catches your eye, Mr. Deputy Speaker, I shall be able to answer his question more fully later.
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Mr. Robert Walter (North Dorset) (Con): Will the Minister give way?

Mr. Woolas: I will take some interventions when I have set out the principles of the order.

As I was saying, my right hon. Friend announced that the Government were designating nine authorities. He proposed maximum budget requirements for them at levels that would not be defined as excessive according to principles determined by the Secretary of State. As I said in my written statement to the House on 7 July, when the order was laid, all nine designated authorities challenged the proposed maximum budgets.

The Under-Secretary, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick), and I met representatives of all those authorities to listen to their cases. Having carefully considered the representations made by all nine of them—and, indeed, by Members present in the Chamber today—and having taken into account all relevant information, the Government have reached the following decisions. We have set a maximum budget for seven authorities—Aylesbury Vale, Daventry, Hambleton, Huntingdonshire, Mid-Bedfordshire, North Dorset and Runnymede—at the levels we proposed on 23 March. We have set a maximum budget for South Cambridgeshire that is £1 million higher than the originally proposed cap, in order to allow the authority time to reduce its over-reliance on reserves.

We have decided to cancel Sedgemoor's designation and to nominate the authority instead. [Interruption.] I am grateful for that acknowledgement. We propose a notional budget of £11,974,169 for 2005–06, which takes account of the fact that the authority made a genuine mistake in thinking that special expenses did not count against its budget for capping purposes. I should emphasise that in doing so we have not set a precedent for the treatment of special expenses in future capping rounds; authorities should be in no doubt that such expenses form part of their budget requirement. There is no parliamentary procedure involved in setting notional budgets for nominated authorities, so the draft order before us does not include Sedgemoor. But Sedgemoor has 21 days from receipt of the letter in which to challenge its proposed notional budget, should it choose to do so.

Mr. Eric Pickles (Brentwood and Ongar) (Con): The hon. Gentleman is laying this order before the House in order to protect council tax payers, but given that none of the capped authorities has a council tax greater than his own authority in Oldham, East, can he explain why he is not capping his own?

Mr. Woolas: The hon. Gentleman is talking about actual levels of council tax, but the capping order before us today relates to percentage increases. That is the regime and the policy being pursued. The legislative definition—by which the Secretary of State clearly has to abide—is concerned with what constitutes "excessive". I understand the point behind the hon. Gentleman's intervention, which other Members representing authorities affected by the measure have also made forcefully, although courteously and reasonably. They have asked whether this is a fair way to proceed, especially in cases where the council tax level is below the average for the type of authority in
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question. Of course, the counterpoint to that argument is the obvious, arithmetic one: ignoring the average level would simply bring about a self-fulfilling prophecy. We have to look at this issue from the point of view of the council tax payers in the affected areas.

Mr. Clive Betts (Sheffield, Attercliffe) (Lab): My hon. Friend mentioned the statement made by my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), in which he laid down the criteria and said in conclusion:

Does my hon. Friend not accept, therefore, that the capping criteria are universal—and pretty crude?

Mr. Woolas: They are neither crude nor universal. The increases proposed by some of the councils that we are discussing today, even after the cap has been put in place, are still greater than the capped increases being made by other councils. Members present have doubtless prepared speeches pointing out the alleged inconsistency in this viewpoint, but both viewpoints cannot be true. My hon. Friend, who has dealt with these matters for many more years than I have, and who has been a champion of local devolution and local autonomy, suggests that we are going back on our policy. Of course, we have to take into account local authorities' statutory duties and their particular circumstances, so I reject the accusation that the capping criteria are crude and universal. However, I have no doubt that my hon. Friend will carry on his campaign against any form of capping regime.

Mr. Walter : The hon. Gentleman referred to "excessive" spending and said that spending must be in the context of the area in question. Perhaps he can therefore explain why in my authority, a band D council tax increase of £98 is considered excessive, whereas in the neighbouring constituency—it was retained by his colleague, the hon. Member for South Dorset (Jim Knight)—Weymouth and Portland borough council has set a council tax increase of £232 for band D properties. Most of my constituents would say that those authorities are in the same area.

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