Mr. William Hague (Richmond, Yorks) (Con):
As so often, it was my hon. Friend the Member for North-East Bedfordshire (Alistair Burt) who hit the nail on head. He said that he could not accept that the Minister really believed in the case he was putting to the House. It is a tribute to the Minister that he put the best possible gloss on the argument for the order, but it is deeply worrying that, even after he had done so, it is still one of the weakest cases for a Government order that I have heard in the House for many years.
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An innocent observer who came to the Chamber today might think that our debate was about excessive council taxes. They might expect us to focus on councils that charge a huge amount in taxation or whose council tax is higher than the average, leading to objections from local people and the need for Government intervention. They would be astonished to discover that the order is not about that at all, and deals with some of the most responsible councils in the country that set some of the lowest council taxes. They would be even more astonished to discover that councils such as Hambleton district council, which my hon. Friend the Member for Vale of York (Miss McIntosh) and I have the privilege of representing, are affected. The council has the highest possible rating for financial management, according to the Government's audit assessment; it sets a council tax less than half the predicted figure under the Government's own formula spending share; for the past three years, its council tax increases have been less than a third of the national average; its 10-year financial strategy is financially robust and is supported locally; and this year it is proposing an increase at band D of £12.
Most people would give their eye teeth to live under such a council. The vast majority of people in this country would love to do so, so it is extraordinary that councils that fulfil all those criteria are among those whose budgetary freedom is to be taken away under the order. Hambleton district council has the third lowest council tax of any shire district, as my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) and the hon. Member for Brent, East (Sarah Teather) have pointed out. It proposes an £80 council tax at band D, compared with the £182 suggested by the FSS. The Minister knows the background that made that figure possible. The council transferred its housing stock in 1993, and achieved strong balances as a result. In the past 12 years, it has returned nearly £19 million to local taxpayers. For a time, it set its council tax at or near zero, but as its reserves fall it has planned a series of rises that are small in cash terms but which allow modest improvements in services while keeping within a low and disciplined budget.
That is a sensible approach to local government. The problem is blindingly obviousthe Government think only in percentage terms, never in cash terms. If a council starts at or near zero, the slightest increase is obviously a huge percentage. According to the Minister's own criteria, if a council set a council tax of £10 and raised it to £11 that would be regarded as an excessive increase. In his opening speech he asked whether we would be prepared to defend the council tax increases in our constituencies. My answer is yes. I am extremely happy to do so, because my council's policies, including its council tax levels, are very popular. Will the Minister therefore answer a question from me in his winding-up speech? Does he acknowledge that a £10 council tax raised to £11 would be deemed excessive and capped under his criteria? It defies all common sense to judge only by percentages at such levels. No Minister would believe that excessive taxation is being levied in Hambleton district council or most of the other councils that we are debating today. No Minister believes that it is a badly run council. Even more importantly, no local taxpayer or voter thinks that the increase is excessive.
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The council has received a total of five complaints about the level of council taxI have received oneso the capping is bizarre and unjustified.
The capping powers that the House provided for the Government were not designed to be applied to the third-lowest taxing authority in the country. The Minister is sending a bad message to local government: if it is responsible, it will ultimately be penalised; if it has a 10-year strategy it will be forced to abandon it; and if it carries local voters with it that can nevertheless be disregarded by the Government. The bizarre and counterproductive nature of the proposals are demonstrated by what will happen in practice if Hambleton district council, for example, is capped under the order. First, it must deliver a refund to council tax payers. At band D, that will be £5.63. My hon. Friend the Member for Brentwood and Ongar has pointed out that each household will therefore only receive a few pennies a week. More than £50,000 will be spent on re-billing. At band A the refund will be only a couple of pounds for each household for the whole year, but the re-billing will cost nearly £1.50. That is the weighty and supposedly wise decision that the Deputy Prime Minister has made. It is the ultimate example of micro-management.
Secondly, the council will be less able to fund any improvements in local services for which local people have asked, particularly because since the capping decision it has incurred additional costs of £100,000 to clear up after the severe floods in North Yorkshire. My hon. Friend the Member for Vale of York has often spoken to Ministers about the floods, because they affected her constituency even more seriously than mine. The Government have not made any allowance for that in their decisions.
Thirdly, and most alarmingly, if the same criteria were applied in future, either the council would have to use up its balances extremely quickly and cut spending by 28 per cent. in the next few years, leaving it with a budget below the statutory minimum or, having exhausted its balances on an accelerated timetable imposed by the Government, it would have to introduce a council tax increase of 91 per cent. in three years' time. I therefore have another question for the Minister. As the Government think that they know better than Hambleton district council and all the people who live in the area, and as they must have thought about the consequences of their capping policy if it continued for several years in a row, do they wish it to plan for a huge council tax rise in a few years' time or for a major reduction in services? It is no good the Minister saying that that is up to the council, because by their actions today the Government are implying that that is not the case. They must therefore take responsibility, whether there is a large council tax rise or a budget below even the statutory minimum in a few years' time.
It is hard to escape the conclusion, having examined all the arguments, that there was a political motivation before the general election behind the decisions on council tax. I hoped that with the appointment of a new Minister things would change after the election. I did not expect the Minister to say that the proposal was unfair and destructive, although we would have wanted him to do so, but I hoped that he would let it fall quietly to one side. There will be no thanks from local voters to
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the Government for making this decision, only anger that money is to be wasted on bureaucracy and local wishes overridden.
This week, only five days after he delivered that speech, we have seen how utterly worthless those words have already become. Whatever the motives of the Government, exercising power at the lowest sensible level is certainly not one of them, and it is sad that neither is local democracy or the good financial management of local government, both of which are being damaged today.
Miss Anne McIntosh (Vale of York) (Con): It gives me great pleasure to follow my right hon. Friend the Member for Richmond, Yorks (Mr. Hague). The most pertinent point that he mentioned is the £50,000 cost of reissuing council tax bills. The alternative is to reduce services.
I repeat my declaration that my husband and I have chosen to live in Hambleton district because of the excellent services that the council provides and the modest council tax it charges for them. It is interesting to note that in the order the Government have not issued a regulatory impact assessment. That has not been prepared because the Secretary of State cannot make assumptions about which services and activities may be affected when authorities calculate lower budget requirements.
I follow my right hon. Friend's question to the Minister with a modest question of my own. The Secretary of State may not be prepared to say which services should be cut, but which services does the Minister think should be cut? I pay tribute to what Hambleton council has done. It is a prudent council that is known for its excellence, as my right hon. Friend said. It is also a listening council that has just conducted a consultation exercise, about which the Minister heard when my right hon. Friend and I made representations to him.
As a result of that consultation, the council has decided to commit an additional £500,000 to improve housing benefit performance; to improve development control performance; to introduce additional half-fare travel for young people, recognising that in a rural district there are distinct access problems; and to pay for patrol wardens to assist with a cleaner environment and the control of nuisance behaviour and fear of crime. That has been decided even before the council considers its obligations under the Clean Neighbourhood and Environment Act 2005. Having served for some two months on the Committee that considered the Bill, I know how onerous those duties will be. The council will also improve homeless support, recognising the increased number of homeless people. Top of the list, as my right hon. Friend said, is the council's response to the major flooding in the district, which we have
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experienced three times in the past five yearsin Thirsk in Hambleton district within the Vale of York twice during that time, and in 2000, 2003 and 2005 in the whole of Hambleton district.
The Minister has not responded to my letter to him and my plea not to proceed with the order in the light of an application from Hambleton district council and North Yorkshire county council under the Bellwin formula. Why are the Department and the Minister not reading across to their responsibilities in that regard? The threshold is £1.5 million, which the council must first spend from its own funds. It has therefore rightly chosen to go in with North Yorkshire county council and Ryedale district council as well. The Minister must live up to his responsibilities. Against that background of three floods in five years, with an application to be submitted within a month of the floods of 19 June, it is irresponsible of the Minister to proceed with the order. My first question to him was which services he suggests Hambleton should cut. My second question is what are the implications of the capping scheme for the Bellwin formula?
My third question, which I put to the Minister in an earlier intervention, is will he please drop his obsession with percentages and reward councils such as Hambleton district council for the excellent services that they provide, for the prudence with which they seek to deliver those services, and for achieving the third lowest council tax in the country? I pay tribute to the council's performance and to the brilliance of its staff. It must be a kick in the teeth and a slap in the face for those staff, who often work in extremely difficult conditions. In the recent floods, staff from Hambleton district council were among the first, with the emergency services and North Yorkshire county council, to step into people's homes late in the evening of Sunday 19 June and put themselves in harm's way when everyone else was running away from the floods. It is insulting that the Minister does not recognise the services that council staff provide.
It is true that, technically, the order caps councils that breach a 5 per cent. threshold for council tax increases, yet the tax in Hambleton district council is among the lowest in the country. Will the Minister confirm that the rule setting the 5 per cent. threshold was published after the process for setting the council tax was in place for the current tax year? Is that fair? Is that due process? Could not that be challenged in law?
Rebilling will cost £50,000. How does the Minister envisage that that will take place? In its view, the council is being penalised for having an historically low council tax, a policy that it intends to maintain into the future. It intends to force a solution to deal with excessive taxation, as my right hon. Friend described. Any cash increase on a low council tax base is bound to be higher in percentage terms than in other authorities that have higher council tax bases than Hambleton. The Minister designated the lowest district council tax, including parishes, for 200405, and Hambleton district council is the third lowest in 200506. That position will not change after the capping order, but the effect of capping will be to destroy the prudent financial management that has delivered excellent services at low cost, resulting in a 40 per cent. cut in budget over 10 years. It will leave the council financially non-viable.
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The Minister will create a situation that requires a massive council tax increase in future for the council to remain viable, rather than the sustainable increase set out in the council's financial plans. Like my right hon. Friend, I urge the Minister to consider the implications of the message going out from the House this afternoon. It is perverse to penalise a prudent council that is providing excellent services and that has the third lowest council tax in the country. It is even more perverse to cap it in a year in which it has suffered its third severe flooding in less than five years. With his decision he has burdened the council with the additional cost of £50,000 to reverse the council tax bills. His policy of capping is inconsistent with previous Government commitments that local taxes should be determined, as my right hon. Friend said, by local councils. I urge the Minister to withdraw the order or the House to reject it.