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Grant Shapps (Welwyn Hatfield) (Con): Is my hon. Friend familiar with another aspect of council tax—that students are not required to pay it? The Government helpfully provide a CBT1 form, which is returned by local authorities to the Office of the Deputy Prime Minister each year recording the number of properties in the hands of students, but because the reporting time is in the autumn, the actual number of student properties is not known until the following spring. Students are generally slow to return their council tax demands and to get an exemption form. As a result, areas such as mine miss out to the tune of £500,000 or £750,000 and face a further problem, which is surely why people are paying too much through their council tax.
Mr. Pickles: I congratulate my hon. Friend on his ingenuity in making an important local point—
The Minister for Local Government (Mr. Phil Woolas): Which is wrong.
Mr. Pickles: The hon. Gentleman says that my hon. Friend is wrong, but there are a number of indices of the way in which the council tax grant is developed and sometimes there is a significant time lag. If I were the Minister, I would not be so quick to dismiss that.
The Government's increased use of means-tested benefits and complex application forms has resulted in reduced take-up of council tax benefits, which means that more people on lower incomes are paying higher council taxes. Fewer than two in three eligible pensioners claim the council tax benefit to which they are entitled, compared with three out of four before Labour came to power. It is a terrible indictment of the Government that the take-up of benefit should drop so significantly under their care. The Government should feel ashamed of this unmet pensioner poverty.
The House deludes itself if it believes that revaluing property or adding further bands will cure the unpopularity of the council tax. The increase in the proportion of the tax taken from household budgets is a symptom of a desperate problem. The revenue generated by local authority's tax base has a direct effect on the size of the revenue support grant. Ring-fenced grants often distort the calls on the council tax—the point that my hon. Friend the Member for Salisbury (Robert Key) made so eloquently a few moments ago.
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The Minister of Communities and Local Government was a Minister in the Department for Education and Skills when the passporting of school funding was introduced. That led to some authorities suffering a cut in funding for other services, and to many more receiving nothing for other services.
The Audit Commission became so worried about the rise in council tax levels that it produced a report. Thanks to the Audit Commission, we all know why council tax has risen since Labour came to power. The report outlines three main areas—first, the changes in the grant formula; secondly, the implementation of Government initiatives, often unfunded; and thirdly, national pay rates.
Each year the fiasco drags on, and each year it gets worse. In a document that the Government tried to suppress, entitled "Beyond the Black Hole—a time of opportunity and challenge", the Local Government Association states that there is
"a £2.2 billion black hole in the funding for local government, equivalent to an increase of 10 per cent.—or around £100—a year in council tax bills".
I note from the Financial Times this morning that Ministers are taking the begging bowl round to find ways to reduce the council tax. It would be a wise thing to do, if they are. The bung in the settlement is equivalent to £1.4 billion. The right hon. Gentleman's political future depends on stretching that to £2.2 billion.
Hugh Bayley: The Opposition's motion states that their complaint is that the Government are delaying rather than cancelling the revaluation. Does that mean that the Conservatives would never have a revaluation in the future, and would allow council tax banding to become less and less related to people's ability to pay?
Mr. Pickles: The hon. Gentleman has considerable expertise in the matter, but he would have been advised to listen to what Members say in the House. I said that the purpose of a revaluation was to take care of distortions in the property market, and I demonstrated clearly that no distortion has taken place. By and large, over the past 10 years property values have realigned, and matters could be taken care of by adjusting the banding. That is an established fact.
The imbalance between central and local government funding grows, which will force Ministers towards crude and universal capping in the vain hope that public ignorance of—
Mr. Pickles: The hon. Gentleman will have to improve his interventions before he tempts me to give way.
Mr. Pickles: I will make a little progress, if the hon. Gentleman will forgive me.
The public have rumbled the Government and have acquired out of necessity an understanding that most local authorities are just the messenger delivering the
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bad news of high bills. The stealthy postponement of the revaluation will not hide the true responsibility for Labour's favourite stealth tax.
Let us deal with the cost of the revaluation. During the debate a couple of weeks ago, I mentioned the rapid rise in the cost of the revaluation operation. Let me remind the House that the cost of the revaluation is spiralling out of control. In 2004, the Government estimated that the revaluation would cost £108 million. In July 2005, the cost hit £178 million, which is an increase of more than 60 per cent. Much of the £60 million that has already been spent has been lost because of the postponement, and it would be criminal to spend more.
Mr. Pickles: Why have costs spiralled so significantly? Given the examples of the Child Support Agency and identity cards, the Government are renowned for their inability to keep within estimates. Is this just another example of optimism over experience? In fairness to the Government, I think that the reasons are more complex than that and go to the very heart of the revaluation.
The revaluation is much more complex than that undertaken in 1992. The 1992 revaluation, which established the council tax, placed each house into one of eight valuation bands based on 1991 house prices, with the bands being determined by primary legislation. The banding of the individual properties commenced in January 1992, and the draft valuation lists were published in December 1992. In other words, valuers knew the banding structure when they conducted their assessments. They did not need to draw up a list of numerical valuations for each property and merely had to place each property in a band.
As the Valuation Tribunal Service notes to the Local Government Finance Act 1992 state:
"It is important to remember that the legislation requires Listing Officers to place each dwelling within a Council Tax band and not to place a precise value on each dwelling".
Mr. Borrow: Will the hon. Gentleman give way?
Mr. Pickles: I have told the hon. Gentleman that I will give way. He must be patient.
The short-term expediency of pushing off all the unpleasant decisions into the long grass for Sir Michael Lyons means that that approach cannot be followed. No one knows how many bands there will be or where they will be located in the 2005 revaluation. As a result, the Valuation Office Agency decided that it had to calculate a numerical property value for every home, in order to place those homes in their appropriate bands later. The relevant internal note has been deposited in the Library:
"Given the degree of uncertainty around the council tax bands in 2007, EVERY property will probably need a specific numeric valuation so, when the bandings are finally agreed, properties can be allocated their bandings quickly".
The note lays the blame firmly at the Government's door:
"No decisions have yet been reached by the Government on whether, and if so what, revisions should be made to the level and number of council tax bands. Those decisions will be informed by the outcome of the review currently being undertaken by Sir Michael Lyons due to report by end of 2005".
Since that note was written, the schedule for the Lyons report has slipped further back.
The revaluation will be more expensive, more intrusive and much more difficult to perform than the last one, when only 10 per cent. of houses were inspected and, in the valuation office's own words, the remaining houses were assessed, "at the desk". Furthermore, the number of dwelling house codes has jumped from 10 to 17.
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