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Mr. Mike Hancock (Portsmouth, South) (LD): Can the hon. Gentleman explain what his position was when he voted for the implementation of council tax? How did he imagine that increases in local government expenditure would be met in ensuing years? Did he think that council tax was a temporary measure, and if so what did he envisage would follow it?

Mr. Pickles: Unlike the hon. Gentleman I voted against revaluation. Indeed, I voted against it three times. The only substantial problem with council tax is its size. It is unpopular because it falls disproportionately on the backs of poor people. It is little short of a disgrace that a third of the increase in the basic state pension is taken up by higher council tax for
 
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a typical pensioner. The Government's increased use of means-tested benefits and complex application forms has resulted in reduced take-up of council tax benefit, which means that more people on lower incomes are paying higher council tax. Fewer than two thirds of eligible pensioners claim the council tax benefit to which they are entitled, compared with more than three in four before Labour came to power.

Thanks to the Audit Commission, we all know why council tax has risen since Labour came to power. There are three reasons: changes in the grant formula, the implementation of often unfunded Government initiatives, and national pay rates. Each year, the fiasco drags on; each year, it gets worse. The imbalance between local and central Government funding grows, which, in turn, will force Ministers towards crude, universal capping in the vain hope that the public's ignorance of the arcane details of council tax gearing will pass the blame for the unacceptable increases on to local authorities.

The public have rumbled the Government. A stealthy postponement of the revaluation will not hide the true responsibility for Labour's favourite tax. The Local Government Association forecasts a £1 billion shortfall next year. Ministers may try to gag the LGA for a couple of weeks so that the result of the survey is not discovered, but trying to push issue upon issue into the long grass will not work.

Sarah Teather (Brent, East) (LD) rose—

Huw Irranca-Davies (Ogmore) (Lab): Will the hon. Gentleman give way?

Mr. Pickles: I shall give way in a moment. I said that I wanted to make a little progress, and I have been very generous in giving way.

Those imbalances in the system and the effect of how a revaluation will hit the total tax take of each council are important. My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) is not here, but I had the opportunity of going through his council's budget in some detail not so long ago. The more that that council raises in council tax because of the higher bandings that occur, the less it receives in grant and the more it must put up council tax, so the risk of capping is greater. That is not a sensible way to run local government finance.

I am very pessimistic about the Lyons review. I have no great hopes for its deliberations. After all, the Lyons review was originally set up as a device to avoid taking a decision. It was the ultimate long grass into which to kick the Government's balance of funding review. Just when the Government were beginning to hear the odd stirrings from the undergrowth, they gave it another substantial kick backwards, and we can still hear it pinging around the shrubbery. We have indications of the issues that Sir Michael is considering because we know that the Government are looking at them too.

Albert Owen (Ynys Môn) (Lab): The hon. Gentleman was talking about Wales and the fact that there was unfairness in the way that the council tax was made up and that it was unhelpful for some pensioner groups. The Welsh Assembly Government changed the
 
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spending assessment to help the poorest local authorities, yet the Conservative group in the Welsh Assembly voted against that change. How does he square that circle?

Mr. Pickles: I shall give the hon. Gentleman a serious, non-partisan answer. I have rapidly come to the conclusion that council tax is too crude an implement to be used for social engineering—that goes to the heart of the dilemma—and in a few moments, I shall make some suggestions about how we can improve it. The situation has become complex and difficult. That is not a party political view.

Sarah Teather: The hon. Gentleman has identified the balance of funding crisis as a problem in the steep rises in council tax year on year, but what are the Conservative party's proposals for addressing that imbalance? What about localising business rates, for example?

Mr. Pickles: The hon. Lady has attended many debates in which we have given a whole list of measures, such as removing a lot of restrictions on local authorities and freeing them up. [Interruption.] That would make a significant difference, but I am about to make some other suggestions in a few moments if the hon. Lady will be patient and not just rely on interventions drafted by her researcher.

Huw Irranca-Davies: Will the hon. Gentleman put clearly on the record his view of the decision that was taken in the Welsh Assembly, where a proposal opposing revaluation could have been made by any Opposition Member, but not a single vote was registered in opposition to revaluation in Wales? Were his own colleagues—some of whom are present now, with a dual mandate—wrong not to vote in opposition?

Mr. Pickles rose—

David T.C. Davies: Will my hon. Friend give way?

Mr. Pickles: I spy the cavalry. Of course I will give way.

David T.C. Davies: I wonder whether my hon. Friend is aware that Members of the Welsh Assembly voted to support revaluation when they were specifically told by the Labour Minister responsible for local government that there would be as many winners as losers. They had no conception that she could have misled them by creating a system whereby one in three people were moved up by at least one band—two or three bands in several cases—and only one in eight went down.

Mr. Pickles: It is extremely unlikely that a Yorkshireman who represents an Essex constituency would ever aspire to become a Member of the Welsh Assembly, but after those two interventions, there is not a chance that I will do so.

Chris Bryant (Rhondda) (Lab): On an entirely non-partisan point, I should like to take the hon. Gentleman back to his earlier confession of his change in point of view, because it would be interesting to know more about it. There are some real problems with
 
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revaluation whenever it is undertaken. Often, it is not just the house price at a certain moment that is of importance, but how it has changed over the past three, four or five years. For example, in the Rhondda we had virtually no house price changes for several years, but suddenly over the past three years we have had dramatic changes in house prices. In the past year, they have gone up by 56 per cent. Sometimes, it can seem extremely unfair merely to base revaluation on a snapshot. I wonder whether the hon. Gentleman would like to reconsider the Tory party position. Although delay might be a good idea because we might need to ensure that any future revaluation is more sane than other revaluations that have happened, I merely point out to him that, in the Rhondda, quite a lot of people went down a band, not up.

Mr. Pickles: I think that council tax has gone up by eight times the rate of inflation in the hon. Gentleman's constituency, so I can understand the pain that he feels. However, the important point is not the relationship between individual properties in Rhondda, but how that affects the difference between prices in our constituencies and the relative values in the various parts of the United Kingdom. A revaluation should exist for the process of realigning the housing market, but the rise in the market is not out of line and is much the same as 10 years ago. I suppose that there was a time when it looked as though it was starting to get out of line. That is why we consider such things over a long period. A decent period is needed for the housing market to readjust.

Andrew Selous (South-West Bedfordshire) (Con): Does my hon. Friend agree that the debate is somewhat missing the point? It is not a question of preventing future rises in council tax. The current level of council tax is unacceptably high. Even if we introduced a system that pegged the current levels, it would not be good enough. We need to consider radical reform to reduce current bills.

Mr. Pickles: My hon. Friend is absolutely right. If the debate is missing the point, all I can say is that I am doing my absolute best. Ultimately, there would have been no U-turn nor any question of revaluation but for the fact that council tax has simply got out of control.

We know what Sir Michael is looking at because we know that the Government are looking at it. We know that Northern Ireland is being selected as a guinea pig, with discrete capital values, which would make the council tax more progressive and target social needs. In plain English, council tax bills in Northern Ireland will soar. Northern Ireland is being selected for another experiment that involves a variation on the council tax: the death tax, in which a deferred local tax bill can be paid by pensioners. Vulnerable people must either forfeit their children's inheritance or face the prospect of bailiffs at the door.

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