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Sarah Teather: No, I have not read Chairman Mao.

Mr. Woolas: That probably says more about me than it does about the hon. Lady.

Several hon. Members rose—

Mr. Woolas: I will accept one more intervention before turning to the specifics of council tax revaluation. I have a duty to the House to do so before drawing my speech to a close.

Mr. Betts: Further to the question about deferral asked by my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), has revaluation been postponed so that it can be implemented at the same time as any changes arising from the Lyons review—it will probably take four to five years in the legislative process to bring such changes into effect—or are the Government simply delaying and deferring revaluation until they know what Lyons is going to report on? Perhaps revaluation will start then pending any further changes.

Mr. Woolas: My hon. Friend's question allows me to put the situation on the record again. In the statement announcing the postponement of revaluation, we made it clear that we did not believe that revaluation would take place during this Parliament. We went no further than that, and it is for Parliament to decide the future. Second Reading of the Council Tax (New Valuation Lists for England) Bill is imminent, giving us an opportunity to debate these issues in more detail. The decision rests with Parliament but, none the less, the Government's policy is that revaluation has been postponed, not cancelled. The exact timing partly depends on any actions that may arise from the recommendations of the Lyons report.

It is right to maintain a fair alignment between house prices and council tax bands. The case for council tax revaluation is linked to wider questions about the structure of the tax and to the operation of council tax benefit. A number of other changes in the local government finance system are in the pipeline, including the move to three-year budgets, the review of the local government finance formula and the creation of a dedicated schools budget located in the Department for Education and Skills.

Ian Lucas (Wrexham) (Lab): Does my hon. Friend agree that one group suffers particularly badly from the way in which council tax is devised? By definition, housing association tenants do not benefit from the open market value increase of their property, so it is extremely unfair that they should be expected to pay towards that increase.

Mr. Woolas: My hon. Friend has made an interesting contribution. It is because of such questions that I put the other side of the coin, which opponents of the council tax rarely acknowledge. A substantial proportion—13 per cent., I believe—of income
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generated by council tax is repaid through the council tax benefit system. Indeed, a pensioner on guaranteed pension credit does not pay council tax—[Interruption.] The hon. Member for Cambridge (David Howarth) was trying to make a point, but I did not quite catch it. I am sure, however, that I will answer his concerns in a few moments.

The Government have decided that it would not be sensible to proceed with the current timetable for revaluation. Sir Michael's analysis so far has led him to conclude that there may be a case, as I told my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), for a delay of up to a year in the implementation of revaluation. However, the Government concluded that the balance of advantage lies with allowing the flexibility to revalue as part of a fully developed package of funding reforms, rather than as a precursor to them, and at a moment of greater financial stability for local authorities. That is the background to the decision.

I should like to make the Government's position on council tax quite clear. First, as we said in our response to the balance of funding review, we accept that council tax should be retained but reformed. That was why we appointed Sir Michael Lyons in the first place. Secondly, as I have said, we remain committed to council tax revaluation even though 2007 is not the right time for it. Council tax is related to property values. As we said in our 2001 White Paper, the Government fully recognise the importance of keeping property values up to date. That remains our position. We are postponing, not cancelling, revaluation. We need to ensure that we get revaluation and reform of council tax right, and that is why Sir Michael is conducting an extended inquiry. There was a great deal of unnecessary scaremongering by the Opposition about the effects of revaluation. Revaluation would not mean that individuals would pay more council tax just because their house had gone up in value. Nevertheless, many people believed that it would because of statements made to that effect. Many properties would stay in the same band. That has been made perfectly clear all along, despite reports that appeared in the press. Thirdly, the Bill that we have introduced and which we will debate in due course is simply concerned with timing requirements. All the other provisions are unaffected. I trust that the Bill will receive the full support of the main Opposition party, as it is keen to cancel the 2007 revaluation.

I must now address some myths and accusations about council tax. The Government are often accused of letting council tax rises get out of control. That accusation misses an important point. It is local councils that set council tax levels, not the Government. We have reserve capping powers, which we have used to deal with excessive increases over the past 2 years. There is no excuse for excessive council tax increases, but we should not confuse the principles of the council tax with council tax increases. There is an important difference.

Several hon. Members rose—

Mr. Woolas: I am afraid that, to be fair to hon. Members who wish to make speeches, I do not have time to give way.
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Since coming to office, the Government have provided local councils with grant increases of 33 per cent. in real terms. Local authorities know that we are serious about capping and that we will use those powers if we have to.

The Government are also accused of under-funding local authorities by not paying sufficient grant and by letting unfunded pressures build up, despite the 33 per cent. real-terms grant increase to local councils. We will shortly be announcing the provisional local government finance settlement for 2006–07. That will see a move to three-year settlements for individual authorities, with allocations for the authorities covering next year and 2007–08. We will also be announcing individual allocations for those two years for specific grants which it is possible to allocate in advance. For others, such as performance-related grants, it is not possible to do so.

After the considerable extra funds provided this year—an increase of 6.3 per cent. overall compared with last year—and the transfer of schools funding, the overall increase in formula grant for local authorities is likely to be lower than in previous settlements. However, it is important that the spending power that this grant will deliver for authorities is taken into account. Because of the shift to 100 per cent. Government funding of schools, council tax will fund more of the other local services, so unless the whole picture is looked at, the increase next year cannot be compared with grant increases in earlier years.

It is often said that the present system is unfair to pensioners. The Government recognise the concerns of many pensioners, particularly those on low or fixed incomes, about excessive council tax increases. However, as I have already said, it is local authorities, not central Government, that set the increases in council tax. Keeping council tax increases down is only one side of the coin; improving pensioner incomes is the other. We have already done a great deal in that regard, spending nearly £11 billion extra on pensioners in 2005–06, compared with 1997. On average, after allowing for inflation, pensioner households are about £1,500 better off this year than they would have been under the system that operated in 1997. The least well-off third of pensioner households are, on average, £2,000 better off.

We are providing money to pensioners specifically to help them pay their council tax bills. We gave £100 to households with someone aged 70 or over in 2004–05. In 2005–06 households with someone aged 65 or over will receive an extra £200. The money will usually arrive with their winter fuel payment and is in addition to that, unless they are receiving the pension credit guarantee. People getting the guarantee element of pension credit are already entitled to a 100 per cent. rebate of their council tax bills. Households with someone aged 70 or over getting the pension credit guarantee will receive £50 to help with general living costs.

We need to look at both sides of the coin when we discuss the funding of local government. I look forward to the debate and I am keen to hear hon. Members' views as a contribution, I hope, to a serious consideration of the future role and function of local authorities. The Government are firmly committed to developing strong local government, given its vital role
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in improving life for people in our communities, so that they are proud to live there. That is the goal of our policy. I invite everyone to embrace the opportunity that the Government have provided to support Sir Michael Lyons in the next phase of his work, and to help him and us to ensure that a sustainable and secure funding base supports the changing and challenging role of local government, which is being developed.

1.54 pm

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