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Council Tax

4.51 pm

The Minister for Local Government (Mr. Phil Woolas): With permission, Madam Deputy Speaker, I would like to make a statement on council tax for 2006–07 and the action that the Government propose to take with regard to local authorities that have set excessive budgets. Figures released today show that, excluding the council tax element of the funding package for the 2012 Olympic games, the average council tax increase in England for 2006–07 is 4.2 per cent. With the council tax element of the Olympics, it is 4.5 per cent.

We have a mature working relationship with the Local Government Association. We have worked with the LGA to look at the pressures that councils face in the next two years, and how central and local government can manage those pressures. Under the settlement for 2006–07, which the House approved on 6 February, total support for local government, including specific grants, will rise by 4.5 per cent. compared with 2005–06. That includes an extra £305 million above previous plans. The provisional settlement for 2007–08 will provide an increase of a further 5 per cent., with £508 million above that previously planned. By introducing multi-year settlements, we are enabling authorities to plan ahead more effectively in budgeting for service delivery. We have now provided a framework for authorities to deliver effective local services over the next two years that takes account of the pressures that those authorities face.

By 2007–08, Government grant for local services will have increased by more than the rate of inflation for 10 years in succession. That represents an increase of 39 per cent. in real terms since 1997. It can be compared very favourably with a real-term reduction of 7 per cent. in the four years up to 1997. I also remind the House of the council tax support that the Government provide to those on low incomes. Indeed, 14 per cent. of total council tax is paid through council tax benefit. Nobody who is unable to pay is made to pay, and we are working to ensure that all who are eligible do claim the benefit.

Given our significant extra investment of grant, and the continuing scope for efficiency savings, we made it very clear again this year that we expected authorities to budget prudently. It was only with the greatest reluctance, following the 12.9 per cent. rise in council tax in 2003–04, that we first made use of our reserve capping powers. However, as we said in our 2005 election manifesto, we will use capping to protect council tax payers from excessive increases. There can be no doubt that the recent, more modest increases in council tax could not have occurred without the Government making judicious use of those powers.

When we announced the provisional settlement in December, we said that we expected the average increase in council tax in England to be less than 5 per cent. for each of the two years 2006–07 and 2007–08. I set that out in a letter to all authorities. Ministers later wrote to those authorities reported to be considering setting increases of more than 5 per cent. I also wrote jointly with my right hon. Friend the Minister for Policing, Security and Community Safety to all police authorities reaffirming the Government's expectations.
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I am pleased to report that the overwhelming majority of authorities have responded positively to our messages. Most authorities fully recognise the need to minimise the demands that they place on council tax payers. Regrettably, however, a very small number of them have set excessive budget and council tax increases, and it is for that reason that I am making a statement to the House today about the action that we propose to take.

I should like to remind hon. Members of the provisions of the capping legislation set out in the Local Government Finance Act 1992, as amended by the Local Government Act 1999. In order to determine whether each authority's budgeted expenditure as defined in the legislation is excessive, we must compare the authority's budget requirement for 2006–07 with that of the previous year. The legislation also allows us to determine other principles, such as the level of increases in council tax.

This year, the increase in budget requirement for authorities providing education, police and fire services is measured using the alternative notional amounts given in the "The Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2006/07", which the House approved on 6 February. Alternative notional amounts are notional figures used for capping purposes to help give a like-for-like comparison of budget requirements between years.

Our view is that authorities' 2006–07 budgets are excessive if they show, first, an increase of more than 6 per cent. in budget requirement compared with 2005–06, and, secondly, if council tax has increased by more than 5 per cent. in the same period. As was the case in 2005–06, a single set of principles has been applied to all authorities.

Despite the principles being more stringent than in 2005–06, when authorities' budgets were judged excessive if they showed an increase of more than 6 per cent. in budget requirement compared with 2004–05 and if council tax had increased by more than 5.5 per cent, we are proposing to take action against only two unitary authorities this year, compared with 2004–05, when we took action against 14 authorities, and 2005–06, when we took action against nine authorities. The two authorities in question are Medway borough council and York city council, which have both set excessive budgets according to the principles that I have described. We are writing to those authorities today, informing them of our decision to designate them with a view to capping them in-year, and notifying them of the maximum budget that we propose to set for them.

The authorities have a statutory right to challenge the proposed caps, and they have 21 days in which to do so. If they want to challenge, we will carefully consider the information that we have required them to send us, along with any other representations they make, before we take final decisions. We will then either make an order, to be approved by this House, designating the authorities at the level of the proposed maximum budget or another level, or we will withdraw the designation and nominate them instead. Nomination would allow us either to set them notional budgets for 2006–07 for future capping comparisons or to cap them in advance for 2007–08.
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Two shire districts, Aylesbury Vale district council and Wellingborough borough council have also breached the limits. However, as they have done so by very small amounts—only 12p and 9p respectively in terms of band D council tax—we are not proposing to take action against them. We have always made clear our reluctance to take capping action, because these are powers of last resort and we would prefer not to have to use them, but the public have a right to be protected from excessive council tax increases.

Under our wider localism agenda, we are giving local authorities more freedom over how they deliver services. However, that must be set within a framework of prudent financial management and value for money. The vast majority of authorities—99 per cent.—have responded well to our clear message for council tax in 2006–07, and no one would have been happier than me if the figure had been 100 per cent. However, we remain committed to taking action against those increases that we believe to be excessive.

Mr. Eric Pickles (Brentwood and Ongar) (Con): I thank the Minister for sending me an advance copy of his statement. That is much appreciated and entirely in line with the courtesy that we have come to expect from him. I also thank him for delivering it almost a month earlier than expected. I hope that that sets a precedent and that, in future, we can see statements in plenty of time for the local elections.

The Minister talked about the amount of extra resources that he claims to have put into local authorities. Can he put a figure on the extra burdens that have been placed on local authorities? That would be interesting to know.

The figures released represent an 84 per cent. increase in council tax in the period since Labour came to office. From 1997 to 2006, the average council tax on band D properties has soared to £1,268—the equivalent of £106 a month. It is a measure of how great is the council tax burden that the current increase is £4 short of being the fourth largest increase that this Government have made in the course of their massive increases in council tax. The current increase is £5 more than last year's increase. The Minister can talk in terms of percentages, but £54 is a lot for a hard-working family. As the Chancellor might say, in his own inimitable way, "We have had increases of £59, £50, £49, £54, £75, £126, £65, £47 and £54, making a total increase of £579 since Labour came to power"—although he would probably have rattled through it much more quickly. That represents a considerable burden on hard-working families.

But one section of the community faces increases of more than £54 on this year's bill—pensioners, who face an increase of £254. Where does the Minister seriously expect pensioners just above the benefit level to find an extra £254? Can he explain why the £200 pensioners' payment has mysteriously disappeared this year? Last year, when council tax had increased by £525 since 1997, the Government felt that pensioners needed extra protection. This year, it has increased by £579 since 1997, so why do they now feel that pensioners no longer require that protection? The House can only draw the conclusion that that money was a cynical election bribe.
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I have heard the Minister express concern that council tax might be a tad regressive, but are not the current figures taking his case to the extreme? When a billionaire donor to the Labour party faces an increase of £54—perhaps a bit more in other bands—and a pensioner just above the benefit level faces an increase of £253-plus, is there no better indication of the true state of the Labour party? Aneurin Bevan and Keir Hardie must be turning in their graves. This is a complete sell-out of pensioners.

Not only did I get the statement in good time, but I have also had the benefit of the Minister's press release, courtesy of "Gallery News". In it, he makes the most extraordinary statement, which I note he did not repeat on the Floor of the House. For the benefit of colleagues, it says:

What is the basis for those figures? Surely they are not the discredited figures that do not take account of the relative property values of traditional Labour and Conservative authorities. Surely they are not the discredited figures that rely on Labour authorities having a lower valuation than Conservative authorities. Surely they are not the figures that no one else uses because they fail to convey a fair picture. That marvellous set of accounts and such creative accountancy show that the Minister for Local Government is wasted in his job. He should be a fundraiser for the Labour party.

If we use the comparison on band D that the rest of the country and the House of Commons Library use, we realise that Conservative councils charge £81 a year less than Labour-controlled councils and £88 a year less than Liberal Democrat councils, despite the fact that Labour has fiddled the grant to give more money to its councils. As the independent Audit Commission put it,

Yet Conservative councils still manage to charge lower council tax. The figures that the Minister produced are the clearest manifestation that Labour is in retreat and being pushed into its heartland.

The Minister made some announcements about capping. After last year's fiasco, when re-billing cost more than the money saved, he again targets minnows. Both authorities have increases in absolute terms that are below the average increase. The Minister appears to be blinded by percentages and to have forgotten that people pay in pound notes.

In Medway, a Conservative-controlled council, this year's increase is £50, which is a 5.5 per cent. increase. That is £4 less than the average council tax increase. In York, a Liberal Democrat-controlled council, this year's increase is £49 or 5.5 per cent. That is £5 less than the average. Yet the Minister does not seem to be obsessed by percentages when it comes to his friend—and the Standard Board's friend—Mr. Ken Livingstone. The Greater London authority's increase, before the addition of the Olympic precept, is 5.5 per cent.—exactly the same figure as Medway and York.

Medway and York are capped because they have introduced increases that are below the average. Let us contrast that with three other councils. Oldham's
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increase for band D is £59, that of Hartlepool is £57 and that of North Tyneside is £55. What makes those increases acceptable to the Minister? Why is the highest band D council tax in the country levied in Sedgefield, at £1,490? It has a Labour district council, a Labour county council and, at least for now, a Labour Member of Parliament. Cannot the Minister speak to that spendthrift Member and try to ensure that people in Sedgefield get a fairer deal?

Every year, the council tax increases. Every year, despite fiddled figures and grant, and wishful figures provided by the Minister, Labour's tax burden increases and it digs itself further into a hole over council tax. In some parts of the country, Labour will face the consequences in May, but in most parts, the poor council tax payer must face those consequences.

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