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The hon. Member for Southampton, Test (Dr. Whitehead) made some excellent points, which were relevant to our own stance. Our stance is that we do not want to proceed with the revaluation, but my hon. Friend the Member for Basingstoke (Mrs. Miller) produced a twist on that. Our election manifesto focused largely on pensioners and old people. Conservative Members feel that re-banding, particularly for pensioners, is an extremely blunt instrument.
Many pensioners are asset-rich. They have sat in their houses for 20, 25 or 30 years and, often unbeknown to them, the asset value has increased. Unfortunately, however, those pensioners are also cash-poor. They are stuck in a difficult position. I fear that the re-banding will force many of them to move from the homes in which they have lived throughout their lives. We need to deal with that structural conundrum, which is why I oppose any re-banding at any time.
Let me deal with what was said by the hon. Member for Colne Valley (Kali Mountford) by quoting from a press release sent on 20 December from the Office of the Deputy Prime Minister. It announced that the Government intended to suspend the council tax revaluation and extend the scope of Sir Michael Lyons' inquiry, and stated
"The additional work which Sir Michael will undertake will add value to the Government's own current work on a strategic view of the role and functions of local government, under its local vision programme."
I go back to my original point. I was lucky enough to be approached by the IsItFair campaign. Last Wednesday, I had an opportunity to present to the House the campaign's petition. The concern of that campaign and the Braintree pensioners action group is not simply that the current system is unfair because of the way it affects pensioners in particular, but that they face a double whammy: re-banding would hurt many pensioners tremendously and ultimately force many of them to move home.
I am interested by what the hon. Gentleman says. He will be aware that pensioners can count the cost of their care in care homes against the
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value of their house and pay the cost at a subsequent date. Would he favour a similar system for council tax, whereby pensioners could run up a bill, as it were, and pay when their estate is realised?
Mr. Deputy Speaker: I am grateful to the hon. Gentleman. I allow one slip, as has already occurred with another hon. Member, before I pile in, but I understand from what he says that I am being very lax and I will remember that.
The hon. Gentleman makes an excellent point on capital and how one may deal with the capital asset of one's house, but the primary desire of many of the pensioners to whom I have spoken is to avoid moving from their house and into a care home. I hope that the Government will reconsider the issue, because elderly people feel comfortable in familiar surroundings. Care homes are not necessarily, as we all understand, familiar surroundings. As I have said, re-banding pensioners' houses is a blunt instrument and will hurt many of the elderly in our country.
David T.C. Davies (Monmouth) (Con): I am delighted to have the opportunity to support the Conservative amendment. I see nothing confusing about it at all. It draws attention to the inequalities that are being created across the United Kingdom and calls for revaluation to be completely abandoned. I have no problem with either of those two concepts.
I have seen at first hand how unequal things are becoming in my constituency of Monmouth. I heard the figure bandied around earlier of a 94 per cent. rise in one constituency. We would be very pleased if we had council tax rises of 94 per cent. over the past few years in my constituency. Someone else mentioned a rise of 74 per cent. There would be parties in the streets had our council tax rises been limited to 74 per cent. Prior to any re-banding in Monmouthshire, band D council taxes rose on average by well over 130 per cent. That is a truly shocking measure of the inequalities that are already being created before re-banding takes place. Obviously, therefore, I will speak against any form of re-banding.
The Minister earlier repeated the oft-made claim that council taxes have absolutely nothing to do with central Government. In a rather long speech, the hon. Member for Southampton, Test (Dr. Whitehead) made one point with which I fully agreed: few people seem to understand how local government funding works, and that seems to apply to Ministers, who state that central Government policies have nothing to do with it.
If a hypothetical local authority were run on a budget of £100 a year, around £80 would come from central Government in Westminster or, in Wales, from the
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Welsh Assembly; only £20 would be collected in council tax. Council tax simply tops up the money that local authorities receive from central Government.
If minor adjustments were made to the amount coming from central Governmentlet us say that, in our hypothetical council, the £80 became £78, a drop of less than 2 per cent.council taxes would have to go up by 10 per cent., from £20 to £22, to make up the difference. That is the so-called gearing effect, which has caused disproportionate council tax rises in the past few years.
Mr. Mark Hendrick (Preston) (Lab/Co-op): The hon. Gentleman will be aware that since 1997, central Government funding has increased in real terms by 33 per cent. Is not the level of council taxI speak as a former local councillor who served two terms of officeto a great extent due to what local councils themselves want to set it at?
Mr. Deputy Speaker: Order. I hope that the hon. Member for Monmouth (David T.C. Davies) will steer skilfully back within the terms of the Bill. I would not want him to go off course as a result of that intervention.
I warn hon. Members that when re-banding was introduced in Wales, we were told that it would be fiscally neutral, just as hon. Members in this Chamber are being told that the re-banding exercise in England will be fiscally neutral. When Governments find that their estimates are not quite what they expected them to be, it is easy for them to manipulate local government funding to raise revenue directly for themselves. If hon. Members' experience is anything like the experience of those of us who live in Wales, they may find that their surgeries are full of people complaining about council tax rises of 130 per cent.
If we abandon revaluation for good, how will we overcome the problems that will result? To take the point made by the hon. Member for Preston (Mr. Hendrick), I think that there is a strong case for looking at the inflation that is occurring within local authorities. Local authority inflation is not at the same headline level as the inflation figures generally. He talks about 33 per cent. extra going into local authorities. I do not dispute that, but what has been the percentage increase in costs for local authorities? For example, a Government initiative such as the teachers work load agreement in Walesthere is an equivalent one in Englandis not properly funded. The National Union of Teachers talked about a shortfall of £30 million or so in that alone. If the costs rise above the level that is given to local authorities, they will have to make up the shortfall by putting up council taxes.
Therefore, the first thing that we need to do is to set up an inquiry into how expensive it is to run a local authority, to take evidence from local government leaders and to ask them about the extra increases and burdens that they have and to what extent they are being
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funded by Government. There is a responsibility on Government not to announce any headline-grabbing initiatives unless they are prepared to fund them properly.
The second thing that all of us need to do, whether in Wales or England, is to look at the way in which the formula for local government funding operates. That again is easy to manipulate. In fact, it has been manipulated in a manner that I believe is completely unfair to the southern counties of England and to the rural areas of Wales.
When assessing deprivation, it is easy to look at the number of people on benefits, which is what the formula does. The formula should take into account average household incomes, because that is a much clearer way of defining deprivation than simply looking at the number of people of benefit. We all know of people working in agriculture, tourism or the service sector for the minimum wage. They are not taking home much money and their incomes are no better than they would be on benefit, but they are not counted as being deprived for the purposes of the formula.
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