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Mr. Deputy Speaker: Order. I had hoped that the hon. Lady would steer out of using the form of address that she has been using. All remarks are made to the Chair, so that when she says "you" she is referring to the Chair, not to the Minister.

Mrs. Dorries: I am sorry, Mr. Deputy Speaker. I hope that the Minister for Local Government will look a little closer at what the Government are doing. This pernicious measure will be regarded by many as politically cheap and unworthy—a sledgehammer to crack a nut. Ministers should do themselves a favour and rethink now, before it is too late.

4.22 pm

Mr. Woolas: I thank hon. Gentlemen and hon. Ladies who have taken part in the debate and put the views, as they see them, of their constituents and local authorities in a generally constructive way, despite some of the language used. I am grateful that most of the insults—not all—have been directed against the collective "we" rather than the individual "I". I shall try to answer some of the detailed points as well as those on general policy.

A theme running through the debate has been the question of why the Government have chosen to concentrate on percentage increases in council tax rather than on real-terms cash increases. I have a couple of points to make in that context. If we had adopted a different policy—one that focused on cash increases—the debate would have been the opposite of today's. MPs from other parts of the country would have argued the inequity of such a policy as it affected their local council—perhaps a unitary council or a metropolitan borough council with a significant budget of more than a third of a billion pounds and council tax band D rates running at £800 or more a year.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) has made his arguments in correspondence and in meetings with me. To him I say that the Government made two points clear. The first was that council tax increases should not be excessive—5 per cent. was the benchmark. The second point—this crucial point has been missed in today's debate and in some representations—was that the council tax increase was only one criterion to which my predecessor referred. Another requirement was to set a budget that was not excessive, and a limit of 6 per cent. was given. We have been consistent in our application of those criteria.

Mr. Pickles: I am sorry to have tell the hon. Gentleman that it is not the case that the 5 per cent. limit was flagged up by the Government. There were some winks and nods to the specialist press, but his predecessor never mentioned 5 per cent.

Mr. Woolas: I take the point that the hon. Gentleman is making— "low single figures" was the phrase that was used. However, none of the councils that we are considering today was close to such figures, so his argument is a case of angels dancing on the head of a pin.
 
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Two criteria were applied. We have concentrated today on council tax increases, but there was also a requirement to establish expenditure budgets that were not excessive. Some budgets were far above the level of inflation, whether measured according to the general retail prices index or equated with the inflation rate claimed by some in local government.

Mr. Philip Hammond rose—

Mr. Woolas: I would be grateful if the hon. Gentleman allowed me to complete my general points, as I have limited time.

There has been a complaint that councils with a low council tax base are being punished. The hon. Member for Brentwood and Ongar (Mr. Pickles) said that authorities with a low council tax base should be exempt from any capping regime. There is a twofold argument against that. If we take the average as the benchmark and consider councils whose council tax has historically fallen below that level, we would quickly find that a Government of any colour would face an increase in the average. Rises would become a self-fulfilling prophecy. Experience of local government finance in the past 30 to 40 years shows that that is the case.

Another theme of our debate is the accusation that the Government have failed to listen. I am genuinely sorry if that impression has been given. We have made changes, in particular in response to the representations from South Cambridgeshire and elsewhere. If the House does not accept my assurances, I remind hon. Members that we have a legal obligation, which can be subject to challenges in the courts, to show that we have indeed taken those points into account. It is not the prime purpose of the legislation, but I am also under an obligation to take into account the 98 per cent. of authorities that have not made excessive increases in their expenditure budgets or council taxes. Many of those authorities face similar problems to councils mentioned in today's debate, including the negative housing subsidy to which the hon. Members for Brentwood and Ongar and for Kettering (Mr. Hollobone) referred. It is reasonable that the Secretary of State should take such matters into account.

Arguably, the very fact that we are talking about small amounts and a small number of local authorities shows that although capping is regrettable—our policy of using capping only as a last resort has failed in this respect—it has nevertheless secured the lowest level of council tax increases across the country for a number of years. Given the 12.9 per cent. of previous years, we cannot dismiss the 4.1 per cent. achieved this year. As for the accusation that the order is politically motivated, when I was first briefed on the issue and saw the word "Sedgemoor" the colour drained from my cheeks, as I genuinely believed that it was the constituency of my right hon. Friend the Prime Minister. I faced the daunting prospect of meeting not just a former leader of the Conservative party—everyone would regard the right hon. Member for Richmond, Yorks (Mr. Hague) as a formidable advocate—and his local authority, but my right hon. Friend. That is not sustainable. As further evidence, I remind the House of what happened last year in a similar debate, when Nottingham city council—not
 
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exactly a bastion of the blue rinse Conservative party—was facing a similar problem. I give the assurances requested in that regard.

The hon. Member for Brent, East (Sarah Teather), speaking on behalf of the Liberal Democrats, said that she would not support any capping regime. Will she then desist from blaming the Government, as she does constantly, when council taxes rise above the level of inflation? When there was no council tax regime three or four years ago, the Liberal Democrats were the first and the strongest to condemn not the local councils that put up council tax above the rate of inflation—including my own, which was Liberal Democrat-run at the time—but the Government. She cannot have her cake and eat it. It is consistent for her to say that she opposes a capping regime of any kind, but it is not consistent for her opportunistically to use people who she says are suffering disproportionately from council tax increases and to hang that around the neck of the Government.

Sarah Teather: The Minister will recall that I also said that the way to solve the problem was to deal with the balance of funding crisis. I suggested that the first step might be to give control of business rates back to local councils. That way, they can raise a larger proportion of their income from a local base and have much more control.

Mr. Woolas: I understand the point that the hon. Lady makes. I guarantee the House that were the Government to pursue that policy and use the Lyons review to decentralise the national non-domestic rate, as she suggests, without applying a form of capping regime or an inflation limit to that non-domestic rate, we would be back here in two or three years and she would be blaming the Government for imposing excessive taxes on businesses and her constituents. If she will give me a guarantee that that will not happen, I will guarantee to consider her proposal more seriously.

Let me respond to some of the other points that were made. I shall try to answer the hon. Member for Runnymede and Weybridge if I can. The hon. Member for Brentwood and Ongar, who spoke on behalf of the official Opposition, did not say that his party was opposed to any capping regime. He said that it was opposed to capping regimes that hit only the lower council tax base local authorities. As he claims that Conservative councils are the more efficient authorities with a lower council tax base, is he not saying that he would accept a capping regime as long as it did not apply to Conservative authorities? Is he not therefore hoist on his own petard and guilty of what he falsely accuses me of doing?

Mr. Pickles: The Minister has been most courteous in giving way and we all thank him. He has introduced a new idea that because low-spending authorities increase council tax by a particular percentage, that affects the aggregate amount raised by local authorities. However, the calculation is on the actual increase, not on the percentage, as the hon. Gentleman agrees. I have quickly calculated that the proposal would put up the average by 0.002 per cent. In order to make a 1 per cent.
 
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increase on the average, councils would have to increase their council tax by 2,000 per cent. Does he expect to be taken seriously on the basis of that maths?

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