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Mr. Patrick McLoughlin (West Derbyshire) (Con): We often hear from the Government about the huge increase given from the centre to local government. If that is the case, why has council tax gone up by so much? That is what people want to know.

Mr. Miliband: I can give a number of clues. First, council taxes are set locally by local government. Secondly, local government has an extremely ambitious
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agenda that it is delivering. Thirdly, the one thing that   certainly would push up council tax is if local government funding were cut as the Conservative party proposed at the last election. That would certainly drive up council tax—by our calculations, by about 11 per cent.

John Bercow rose—

Mr. John Redwood (Wokingham) (Con) rose—

Mr. Miliband: I have an embarrassment of riches, but I think that I will choose the future rather than the past.

John Bercow: Obviously the Minister must make a finely balanced judgment between the fiscal position on the one hand and the risk of political flak on the other. He has made his choice and will do his best to justify it today. But in the circumstances, given the plug that has to be gapped, what assessment has he made of the effect of the change in the rules on the use of capital allowances from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Miliband: I am a genuine admirer of the hon. Gentleman's ability to command the attention of the House, but when he talks about gapping plugs rather than plugging gaps he really does have us on the edge of   our seats. He will join me in saying that the Government's decision to ensure that the proceeds of the social homebuyers scheme are returned to local authorities to help them build should be supported by all hon. Members. It would only be polite if I allowed the right hon. Member for Wokingham (Mr. Redwood) to intervene.

Mr. Redwood: The Minister is courteous in the end and I am grateful to him. What was his reaction to the weekend's press stories that if someone has taken the   trouble to do up their home, put in extra facilities and paint the front door a decent colour, they will be socked in the teeth by the Government with a higher valuation?

Mr. Miliband: I suggest that the right hon. Gentleman spend more time reading the Bill than the Sunday papers, because the Bill is designed to ensure that that does not happen. I am surprised to get such a lesson from the right hon. Gentleman, who, as the great believer in the market, should be arguing that a property-based taxation system should reflect the market value of properties. If he does not take that position, we can have an interesting debate on the role of markets in public life.

We believe that the changes that I have set out represent not only a big challenge but a massive opportunity for local government and we believe that opportunity is most likely to be grasped if local government is able to focus on service delivery supported by financial stability. This is the context for the changes we are debating today.

The Opposition gave the Under-Secretary, my hon. Friend the Member for Poplar and Canning Town (Jim   Fitzpatrick), the chance to set out our arguments and explain the Lyons inquiry in our recent debate on
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19 October. The Government appointed Sir Michael Lyons in July 2004 to carry out an independent inquiry into local government funding. He has made good progress with that remit and, over the summer, discussed with Ministers his view that robust recommendations on possible reforms to local government funding could not be made in isolation from proper consideration and understanding of the changing role of local government.

It is in that context, and for that reason, that my right hon. Friends the Chancellor of the Exchequer and the Deputy Prime Minister extended the terms of reference of Sir Michael's inquiry to consider and review the changing role of local government and to review how   the Government's agenda for devolution and decentralisation could improve services, and, in the light of this, to consider how to manage pressures on local services. That was in addition to his existing remit to make proposals on the funding of local government.

Mr. David Curry (Skipton and Ripon) (Con): Will the Minister confirm that Sir Michael Lyons said that a delay of one year in revaluation was justified, but not longer?

Mr. Miliband: I did not hear all of the right hon. Gentleman's question, but if he said that while Sir   Michael Lyons was willing to countenance up to a year's delay in revaluation but did not propose the postponement that we are proposing today, he is absolutely right; I do not seek to hide our decision behind the recommendation of Sir Michael Lyons.

As I said when I announced our decision on 20 September, we need a clear and complete picture of what we want local government to do before we tackle how it will be funded. In short, we must settle function before funding. As I also said on 20 September, later this autumn Sir Michael will set out his preliminary thinking, drawing out the relationship of local government function to finance. He will publish a series of reports next year in the lead up to his final report at the end of 2006.

Mr. Andrew Turner (Isle of Wight) (Con): Can the right hon. Gentleman, who is a former Education Minister, tell me whether the recent White Paper adds to, or reduces, the responsibilities of local government?

Mr. Miliband: As the hon. Gentleman and I have discussed before, the White Paper provides for a changed role for local government that builds on the existing strength of its relationship with schools. If, like me, he had been in Sheffield last week talking to the local authority, he would know that it does not see itself running schools. It is for head teachers and governing bodies to run schools, but the role of local authorities is to step in and to promote reform and development, which is what the best local authorities throughout the country are doing.

John Bercow: Will the right hon. Gentleman give way?

Mr. Miliband: The temptation is too great.

John Bercow: I am very grateful to the right hon. Gentleman for generously giving way again. It really is
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the merest casuistry to answer my hon. Friend the Member for Isle of Wight (Mr. Turner) in those terms. I rather suspect, even though I have not spoken to my hon. Friend on this subject, that he was not looking for an essay-question response or for an evaluative answer from the right hon. Gentleman. What he really wants to know is whether the right hon. Gentleman thinks that, as a consequence of the White Paper, bills will go up overall and more money will therefore be required, or that they will go down, with the logical corollary that that involves.

Mr. Miliband: Tempting as it is to be the tutee of the hon. Gentleman, council tax bills is precisely not what the hon. Member for Isle of Wight (Mr. Turner) was asking about. If the hon. Member for Buckingham (John Bercow) had read the White Paper, he would know that it makes it absolutely clear that it imposes no new burdens on local government. The hon. Member for Isle of Wight was actually probing our view of the role of local government in national life, and specifically in respect of education.

Mr. Andrew Turner rose—

Mr. Miliband: If I may, I shall proceed. We are here to discuss the postponement of revaluation and, tempting though it is to discuss education policy, perhaps we can stick to local government finance.

Sir Paul Beresford (Mole Valley) (Con): Does the Minister agree that this Bill effectively puts revaluation in limbo, and that there might be no revaluation in future if there is a rethink on the grant formula, depending on the Government's reaction to Sir Michael Lyons' comments?

Mr. Miliband: By definition, if we are not taking a decision now to revalue but are keeping our options open, all options remain open in future. But we have made it clear that we think it right to keep property tax as the basis of local taxation, to invite Sir Michael Lyons to complete his review, and to assess the role of a revalued council tax in that context.

As the House knows, at the same time as we announced the extension of Sir Michael's remit, we   announced that we intended to legislate to postpone council tax revaluation. As our announcement explained, the case for revaluation—that it is right to maintain a fair alignment between house prices and council tax bands—is linked to wider questions about the structure of council tax and to the operation of council tax benefit. It is also relevant that a number of   other changes in the local government finance system are imminent, 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.

We have reached the view, therefore, that to proceed with the current timetable for revaluation would not be sensible. We have concluded that we need 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.
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