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Sarah Teather: I am happy to do so—such people would be taxed on business rates under a second home system. [Interruption.] We have made the proposal time
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and again. If the hon. Gentleman wants more detail, he can go to our website, where we published the detail in February this year.

The questions raised by Brian Gould are still valid, yet the Labour Government, who were elected, as the Prime Minister told us in May 1997

decided that council tax did not need reforming after all.

Labour's record on local government is not, as the Conservatives have claimed, one of confusion—it is one of broken promises. What about the promise to re-localise business rates, giving councils financial freedom and an incentive to foster business in their area? Eight years in, and all Labour has managed is the catchily named local authority business growth incentive scheme. Thanks to the delay of the Lyons review, any hope of proper reform has been postponed into the next Parliament.

I do not think that the spin about extending the Lyons review and tying it in with yet more reforms and proposals will amount to anything very much, because the truth is that local government reform has been kicked into the long grass. That refusal to grasp the nettle of financial reform for local authorities is proof both that new Labour has lost its supposed commitment to social justice—it does not care about the families who struggle week after week to pay their council tax bills—and that its new localism is nothing more than a gimmick.

Freedom and autonomy for councils is only possible with a wholly reformed financial regime. The Government's freedoms and flexibilities agenda is nothing without the one freedom that must precede them all—the freedom for councils to raise and spend their own money. However, the Government see fit to retain a system that cripples councils by making them dependent on central Government for most of the money that they spend, and councils too often have no choice over how much they raise in council tax because of the crude capping system, which Margaret Thatcher introduced, but which this Labour Government operate with great zeal—earlier this year, we saw that zeal in the House. That means that all the Government's rhetoric about devolution is just hot air.

The Lyons review is supposed to consider the functions of local government, with the suggestion that more powers and responsibilities might be devolved. Last week, however, we discussed new structures for police services, fire services and health services. By the time that the Lyons review reports, every service that could be placed under local authority control will have been restructured into a new set of quangos. The only thing that will be left for Lyons to do will be to nationalise the education system and tear the very heart out of local government.

Labour spent 18 years in opposition arguing that local government should be given more power and that local democracy is at the heart of improving public services. All we have now, however, is the freedoms and flexibilities agenda, which everybody knows is about centralising praise and devolving blame.

Mr. Philip Hollobone (Kettering) (Con): The motion highlights the Conservative party's desire to curtail the growth of regional government. The hon. Lady has not
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mentioned regional government, the Liberal Democrats' enthusiasm for regional government or the impact of regional government on council tax bills in the future.

Sarah Teather: I will discuss that point at the end of my speech, so the hon. Gentleman must listen carefully.

What would we do differently? We would localise business rates to give councils real financial freedom; we would give councils control—not some opaque right to be consulted or right to co-ordinate a strategic partnership between key stakeholders—over the services in their area; and we would end Whitehall micro-management, targets, capping and inspections and the centralisation of decision making. At the heart of our local government reforms would be the tax change that we have been talking about for 20 years—local income tax.

Dr. Whitehead : Does the wonderful new world that the hon. Lady is setting out include the equalisation of resources against the ability to raise money? Do her plans include the idea that money comes from central Government to local government in order, among other things, to equalise those authorities that have higher resources with those that have lower resources?

Sarah Teather: Absolutely. Any system of local taxation must include some form of equalisation, although we advocate a simpler system than that used at the moment.

Local income tax would be fair, progressive and simple. It would also be cheap to administer, saving more than £300 million a year in administration costs, so it would be a lot better for the average family. An average family on an average household income of £23,000 a year that pays an average council tax bill would pay £450 less under our proposal. Six million pensioners would pay nothing at all, because their incomes are so low that they do not pay income tax. Local income tax would also encourage people back into work. At the moment, people returning to work lose about 20p of council tax benefit for every pound that they earn. Under local income tax, they would pay less than 4p.

Adam Afriyie (Windsor) (Con): Will the hon. Lady give way?

Sarah Teather: No; I want to finish.

Crucially, local income tax would allow us to shift the balance from national to local taxation, solving the balance of funding crisis and giving councils the freedom to raise and spend their own money.

In conclusion, we will vote with the Conservatives today. [Interruption.] Conservative Members are so disappointed by that. We, too, regret the Labour Government's decision to delay revaluation, rather than to cancel it altogether, and we want them to scrap the unfair council tax. The situation in Wales is completely unfair and untenable, and Wales, too, should have a local income tax. We agree with the Conservatives that the Government's vision of increasingly powerful
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unelected, unaccountable regional government should be curtailed. Unlike the Conservatives, however, we have a clearly laid out policy on local government financial reform, and it is time that the Labour Government had a policy to match it.

Madam Deputy Speaker: May I remind all hon. Members that Mr. Speaker has imposed a 10-minute time limit on speeches by Back Benchers?

2.19 pm

Dr. Alan Whitehead (Southampton, Test) (Lab): I was delighted to hear the name of Chairman Mao mentioned this afternoon. The Conservative policy spelled out by the hon. Member for Brentwood and Ongar (Mr. Pickles) could be summed up aptly by Chairman Mao's dictum, "Let a hundred flowers bloom", which, as hon. Members will know, was his campaign slogan in 1956, with unfortunate results.

The hon. Member for Brent, East (Sarah Teather) set out the Liberal Democrat policy, which reminded me of Chairman Mao's campaign shortly afterwards—the great leap forward. She will remember the phrase that he used then was, "A smelter in every back yard", which was to solve all the problems of Chinese industry by itself. We have been offered two alternative visions of local government which are not visions, are not alternative and do not address the real issues.

I am sorry that the hon. Member for Brentwood and Ongar did not cash in his promise to say something about what a Conservative Government would do about council tax. After all, the motion says that the Conservatives would cancel council tax revaluation in England. If we want to find out more about what the Conservatives' policy might be, we should perhaps look at their manifesto for the last local government elections, when they did indeed say that they would cancel council tax revaluation in England. They also said that they would not introduce any new or higher bandings; that they would block any taxes other than the council tax coming into the local government arena, so they would have only that as a method of raising money for local government; and that they would, despite all that, provide above-inflation funding and cut waste, red tape and bureaucracy,

That implies, although the hon. Member for Brentwood and Ongar did not say so, that they would keep the council tax despite making no changes to it whatsoever. In the next paragraph of their manifesto, they stated:

However, they did not say that, in addition to the severe cuts in local government spending that that would represent, a good proportion of the savings from central Government would be the grant that went to local government in the first place, enabling local authorities to keep council tax down by equalising the cost of council tax. In other words, council tax would have gone straight up had the Conservatives got into power. Not only that, it would have been retained with no possible way of ameliorating the problems that arose when it was first introduced in 1993.
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It was clear during the passage of the legislation that brought in the council tax that, all things considered, the principle of some form of property tax is not a bad method of raising funds for local government expenditure, because properties cannot move and the tax is easy to collect.

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