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Mr. Woolas: First, I thank the hon. Gentleman for his kind initial remarks. Let me deal with his points in the order that he raised them. On extra resources, we have a mature working relationship with the Local Government Association that allows us to make a serious analysis of the pressures that councils say that they face. I have made it clear that the new burdens principle will be implemented, but on the basis of net rather than gross new burdens, and on a shared understanding and analysis of those pressures.

We believe that the exercise leading up to the two-year settlement satisfied the Local Government Association's major recommendations, either by establishing self-funding regimes in the case of fees—particularly in regard to licensing—or by providing the extra resources that we were able to announce in the settlement. I notice that the hon. Gentleman did not welcome that extra money but, shucks, I guess I will just have to live with that.

The hon. Gentleman said that council tax had gone up by 84 per cent. I said in my statement that the 12.9 per cent. increase some years ago had been unacceptable. It is also true that significantly more resources had been given to local councils in that period. I also mentioned the 39 per cent. real-terms increase in Government support for local authorities.

The hon. Gentleman asked about the £200 assistance for pensioners, but he failed to mention two important points. One is that about 14 per cent. of council tax is now paid through council tax benefit, and that people on full pension credit pay no council tax at all. All right hon. and hon. Members would like to see 100 per cent. take-up of council tax benefit, and I would ask Conservative Members to join us in encouraging that take-up, as many Conservative-run local authorities already do. Secondly, the hon. Gentleman ignored the other help that pensioners receive.

The hon. Gentleman's fifth question was about billionaires. I feel that it is only right to ask him what is the Conservatives' actual policy on a property tax. I must remind the House that this property tax—the council tax—was introduced by the Conservatives, and we all remember the circumstances in which that happened—[Interruption.] Well, I have asked before in the House about their policy on a property tax. Do they have a commitment to a property tax or do they not? They introduced the eight bands in 1991. It would be perfectly possible for them to put a proposal to Sir Michael Lyons' inquiry for an increase in the number of bands, so as to include a billionaires' band. Perhaps they should propose that, but I suspect that they will not.
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I cannot accept the hon. Gentleman's accusation that the grant system is politically biased. That is not borne out by the facts, the figures of the House of Commons Library, or the representations that have been made to the Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick) and other ministerial colleagues. My hon. Friend the Member for Wigan (Mr. Turner) is not in his place, but if he were, he would be reading out statements from the special interest group of municipal authorities—SIGOMA—many of which are floor authorities. It is a bit rich of the hon. Member for Brentwood and Ongar to make such an accusation, which I deny outright. Indeed, having studied the formulae and the method of grant distribution in detail for nearly 12 months, I defy anyone to come up with a formula that would achieve what he is accusing us of doing. I reject his analysis.

The hon. Gentleman referred to what he described as last year's "fiasco". In my view, however, there is a relationship between the decisions that we took last year on excessive budgets and council tax levels, and our success this year—and in future, no doubt—in keeping council tax levels down. I suspect that the hon. Gentleman is not quite sure whether he would prefer there to be higher council tax increases so that he could blame central Government, or lower council tax increases, for which he would no doubt give the credit to Conservative-run councils—but not Labour ones—in the forthcoming local government election campaign. He cannot have his cake and eat it, although he always tries to do so.

The hon. Gentleman's final point related to the comparison with the Greater London authority. I repeat for the benefit of the House that the principles involved this year and last year relate not just to council tax levels but to budget requirement levels—in layperson's terms, expenditure levels—of the authorities concerned. It is important that that point is understood.

Andrew Stunell (Hazel Grove) (LD): I thank the Minister for his statement and the measured way in which he presented it, although I cannot thank him for the news that it contained.

I am sure that the Minister recognises that yet again council tax nationally is rising by twice the rate of inflation. He will know that the Liberal Democrats believe that the tax should be scrapped, not simply fudged and tinkered with. What does he have to say to pensioners across the country who, if they were paying the average council tax last year with the £200 rebate and are now paying the new average council tax without the £200 rebate, face a 25 per cent. increase in the coming year? It is fine to cap local authorities, but does he not understand that without that rebate, pensioners, the poorest council tax payers, will be hit hardest by his and the Chancellor of the Exchequer's combined decisions?

Should not local tax be based on ability to pay? Do not the Deputy Prime Minister and the Minister understand that the current system is fundamentally flawed and puts the poorest at a disadvantage when it comes to paying for local services? Will the Minister now speed up the Lyons review and make sure that that report comes to the House promptly, not delay its implementation until after the next general election,
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which would condemn the poor council tax payers of this country to another three years of this iniquitous system? He should bring it to the House with his reform ideas clearly in mind.

When did resistance to capping and all its works, clearly and firmly expressed by the Deputy Prime Minister when in opposition, translate into the current enthusiasm for centralising and suppressing the work of local authorities? Does not the Minister see that capping is a sign of Government failure and not of Government success? Underlying all that is the byzantine grant allocation mechanism that he and his colleagues have devised. It might or might not be politically partisan, but it is certainly partisan as between central Government and local democracy, leading to higher council tax, intolerable burdens on pensioners, cuts in services and, today, the ultimate madness, capping by this Government.

Mr. Woolas: I should start by congratulating the right hon. Gentleman—

Andrew Stunell indicated dissent.

Mr. Woolas: Not yet. I congratulate the hon. Gentleman on his new position and look forward to debating this important policy subject with him.

At least the hon. Gentleman's points, in contrast to those made by the hon. Member for Brentwood and Ongar (Mr. Pickles), are based on a policy. At least he has a policy. It is an unworkable policy, and the wrong policy, but it is a policy. He says that the ability to pay should be the criterion for a local tax. We will wait to see whether such a local income tax proposal emerges from the Liberal Democrats' internal debate. He has made it clear, however, that he believes that local tax should be based on ability to pay. Of course, that ignores all those people in hard-working families, with two or more income earners, who would pay for the difference. I suspect that the "scrap the tax" campaign—indeed, I know it for a fact—does not have details of the costs of the extra local income tax.

The hon. Gentleman asked about the timing of the Lyons review. For the sake of clarity, the Government intend to publish a White Paper on local government before the summer recess.

The timing of the announcements by Sir Michael Lyons is a matter for him, but we expect his interim report to be published in the first half of the year, and the final report to be published by the end of the year. That is the time towards which we are working.

The hon. Gentleman criticised what he described as a centralising Government. I suspect that he is not fully aware of the impact of the new local area agreements, which are bringing about an important change in the relationship between central and local government, and the working relationship that we have on a practical day-to-day level with the Local Government Association as we consider how best to implement the reduction in the performance regime and the extra financial freedoms and flexibilities that have been introduced. I am sure that the hon. Gentleman welcomes those, along with his Liberal Democrat colleagues on the LGA.
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The hon. Gentleman asked about pensioners. As I said earlier, some 14 per cent. of the total council tax bill is now paid through council tax benefit, and there is additional help for pensioners as well.

The hon. Gentleman accused me, or accused the Government, of having a byzantine formula. It is not always entirely fair to cite the words of the hon. Member for Brent, East (Sarah Teather), who preceded the hon. Gentleman in his job, but she criticised me for making the formula simpler when I announced the abolition of the formula spending share.

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