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8 Dec 2009 : Column 237

Robert Neill: I wonder whether the hon. Lady missed the observation made by my hon. Friend the Member for Welwyn Hatfield (Grant Shapps), who speaks for our party on such matters, which was that, precisely to deal with the issue of affordability, our scheme would fund affordable homes at 125 per cent. of council tax to give an incentive for such homes.

Julia Goldsworthy: If the hon. Gentleman does the sums, he will find that the more lucrative properties will still be the very large ones, not the smaller affordable homes-even the incentivised ones.

Dan Rogerson (North Cornwall) (LD): In anticipating what my hon. Friend might say in response to what the hon. Member for Bromley and Chislehurst (Robert Neill) said about how the money raised by the incentivised scheme would go towards developing affordable housing, I thought that he had already argued that it would go to the council to be used to provide services generally, so that money will be spent twice.

Julia Goldsworthy: I am not entirely clear what the hon. Member for Bromley and Chislehurst was saying, which further underlines the point that I am trying to make. I am not exactly clear what the Conservatives are proposing. I asked him what his plans were for floors and ceilings, given how unfair he felt the current formula was, but I am not entirely sure that I got an answer on what he would do. The implication of his comments was that councils are getting a raw deal because they are not being funded better by central Government, so presumably he is suggesting that we need better funding from central Government. That means centralising more of what local government spends, whereas I would have imagined that a genuinely localist party would be coming forward with proposals for more to be raised and spent locally.

Mark Hunter: Does my hon. Friend agree that, despite the Government introducing needs-based formula funding, too many authorities-I have mentioned Stockport already, but it is only one of many-continue to lose out in an unreasonable and unfair way? Does she further agree that the Government are now quite deliberately planning to overpay some councils and underfund others? Does she agree that that is nothing less than a monumental fiddle by the Treasury? After 12 years in government, it is about time Labour stopped cooking the books and instead put them in order.

Julia Goldsworthy: Where I agree with my hon. Friend, and with the Conservatives, is on the need for a fundamental rethink about how the funding formula works, although that in itself will not be sufficient. If I refer to the motion to try to determine what the Conservative policy on council tax is, the only relevant thing that I can see is the part where it

That is not a policy. It looks like a tactic for a year, but it would not be sustainable year on year.

I love how the Conservatives pray in aid the council tax freeze in Scotland. I am glad to hear that they support that policy, but I wonder whether they would
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follow the Scottish National party minority Administration's proposals to follow that up with a local income tax. Do the Conservatives agree with half that argument or with all of it?

James Brokenshire (Hornchurch) (Con): I have been listening carefully to what the hon. Lady has been saying about local income tax, which her party supports. I understand that her party wishes to increase the threshold for the payment of income tax generally. Does that also apply to local income tax, and how does she propose to plug the shortfall arising from that?

Julia Goldsworthy: I am grateful to the hon. Gentleman for showing such an interest in Liberal Democrat policy. Perhaps he is doing that because of the absence of any policy in his own party on this issue.

When I look at how the Conservatives propose to pay for that council tax freeze, I find that it would be paid for by reducing advertising and consultancy, which would involve about £700 million in year 2. I have already said that I have doubts about whether that measure would be genuinely localist, because it would increase the proportion of central Government spend in local government. The hon. Member for Bromley and Chislehurst did not say how many Conservative-controlled councils were planning to take him up on his offer. I wonder, too, whether there would be any perverse incentives for councils that wanted to benefit from additional resources. Might they have to make up the additional income that they needed to deliver services by increasing charges?

Barry Gardiner: I have been listening to what the hon. Lady has said, but I have also been listening for what she has not said. The hon. Member for Hornchurch (James Brokenshire) asked her a pertinent question about her party's policy on a local income tax. He asked whether certain people would be taken out of it. I am fairly sure that she has not yet been able to give him an answer, and I think that the House would be interested to know what her party's policy is on that.

Julia Goldsworthy: I must ask the hon. Gentleman to be patient, because I will come to that point all in good time. I have been on my feet for only 10 minutes, which is about a third of the time taken by the Secretary of State and only about a fifth of the time taken by the hon. Member for Bromley and Chislehurst. I will respond to that question when I turn to the alternatives that we think should be put forward, but at the moment I am dealing with the Conservatives' motion, and their policy-or tactic, depending on which way we want to look at it. As I have said, it seems unlikely that it would provide a permanent solution, so I do not understand how it could form a programme for government.

I am also unsure about whether the Conservatives' approach to revaluation has been made clear. Given that we have not had a revaluation for 20 years, and that the Government and the Opposition think that the council tax system is the right way to fund local government, it is logical that that system should be based on a realistic valuation of people's properties, and that we therefore need to revalue. Unfortunately, neither party can have it both ways. They need to make it clear that a revaluation would be a consequence of staying with the existing system of taxation.

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In the absence of any clear statement of Conservative policy on local government finance, either in the motion or in the remarks of the hon. Member for Bromley and Chislehurst, I have been forced to turn to other areas for evidence. Barnet council has already been mentioned, and I shall come to that later, but I have decided to start my investigation in the other place.

The most recent contribution to the debate seems to have come from Lord Hanningfield, who is also the leader of Essex county council. In an interview in The Observer-which was reported in the Western Morning News on 15 September-he talked about a policy of localising welfare benefits. He said:

Are we therefore going to see another tactic from the Conservatives? Are they going to use policy proposals such as these to make further cuts in services and penalise poor areas through the benefit system? They completely misunderstand that a low cost of living is not the same thing as a low-income area. I was disappointed that the hon. Member for Bromley and Chislehurst chose not to clarify that particular point.

I had a further look at some of the policies being pushed forward by Conservative-controlled councils. Perhaps the most eye-catching direction of travel seems to be from "easy Barnet", although I am not sure whether it is best to draw the parallel with easyJet or Ryanair. At first sight, the service looks fairly cheap, but the more one delves into it, the more one finds that services that should be core to what is being purchased are suddenly defined as extras. I understand that if people want to use the toilet on Ryanair flights, they will have to pay to do so. In Barnet, it appears that some services are heading the same way. I understand that even refuse collection may no longer be viewed as a core service. What it boils down to is that people will have to pay more for a worse service, with additional charges being made through the back door. I am not entirely sure that council tax payers will welcome a council tax freeze if the money is being taken away from their other hand.

If there is a key theme running through all these Conservative ideas-I would not say that they have any policies-it is the need to cut spending. That should not be seen as an end in itself, even though we are clearly in a difficult financial situation and there is a need for spending restraint. The Conservative approach has the effect of encouraging top-slicing-shaving off all budgets across the board, which means that it is more likely to impact on front-line jobs. For most councils, the largest element of spending is wages. It is easier to cut staff numbers than to cut entire programmes, but what the Conservative Front-Bench team should be doing is clearly to identify the programmes of spending that it considers to be high and low priority.

The leader in today's edition of The Times best summed all this up in pointing out that all the evidence points to the fact that the Conservatives want

they know

and that

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That point could not be better summed up than by the lack of any policy content whatever in today's Opposition day motion.

It is disappointing that there is a similar poverty of ambition in the Government's approach, as once again it seems that talking the talk is more important than walking the walk. If we go back a few years, the Lyons report was commissioned by the Government to look at the problem of structural difficulties in our local government taxation system. What happened there was that some very limited recommendations were made, but they were then hoofed as far as possible into the long grass. We have also seen an incremental approach towards local government finance, which makes things more complicated and even less transparent than they already are.

I am drawn to reflect on the debates we had on the business rate supplement scheme. Although technically a better debate at a local level is possible, it takes place around the margins, which makes it even more difficult for businesses to understand what their business rates and any supplements are paying for, and there is little democratic engagement in what the increases will provide.

The Government's latest offering is "Putting the Frontline First: smarter government". Having read it, I have to say that one would never have guessed that it was written by a former management consultant-the Chief Secretary to the Treasury. The language provides some warm words, but there are also some words that send a chill down my spine. For example, some bullet points talk about letting local areas set priorities and giving them more control over resources, but if we look at the detail, we discover that letting local areas set priorities apparently means

That is obviously going to have a wonderful impact on allowing local people to determine priorities. Similarly, when it comes to local area control of resources, we suddenly find that this means:

I am concerned that some key powers are being reserved. It all sounds very intangible and it seems that national targets are going to be aligned with local ones rather than granting genuine control to the local level.

The fundamental point that this report and the Government's approach miss is that we have an opportunity to re-engage people. The Government will be able to take advantage of that opportunity only if they offer-or at least talk about offering-options such as entering people who vote in a raffle for which the prize is an iPod. They think that that is what is necessary to engage people in voting.

Mr. Cox: On the question of localism, could the hon. Lady help us by clarifying one point? Who would levy the income tax proposed by the Liberal Democrats? Would it be levied by local district councils or-as was required by Liberal Democrat policy in the past-by regional assemblies?

Julia Goldsworthy: As the hon. Gentleman would know if he were paying any attention at all, it would be levied by local government.

The key point about the time of fiscal constraint that we are entering is that it provides an opportunity. All too often, politicians assume the lowest of intentions
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among members of the public. They assume that no one wants to participate, and that that is due not to a lack of opportunity but to their refusal to engage. My experience has shown that people are more than willing to give up large amounts of their time to become involved in something that they think is important to their communities if it can be demonstrated that their involvement will have an impact on the outcome.

The aim of the Total Place pilots and the work achieved by the Sustainable Communities Act 2007-I was disappointed to note that neither the Secretary of State nor the Minister was able to attend the meeting that was held about that earlier this evening-is not just to provide more transparency, to make more information available online, and to allow councils to scrutinise more public spending in local areas. It is not just about a process; it is about engaging people.

What the "Smarter Government" report does not make clear, and what the Government have failed to understand, is that if tough decisions are to be made about what should be the priorities at local level, those decisions should be made, engaged with and accountable for at local level. The Total Place pilots provide a real opportunity not just to ensure that bureaucrats from a number of different areas of public service sit around a table with their cheque books, but to allow people to engage in a debate. We have not heard enough from Government about that, but it is critical, which is why I was so disappointed that there was nothing about it in the Queen's Speech.

The Local Democracy, Economic Development and Construction Act 2009 represents another missed opportunity. Once again we were told that legislation would be all about engaging people in participation, but it ended up being about the architectural structures to which I believe the former Secretary of State has referred.

Dan Rogerson: And about how to respond to a petition.

Julia Goldsworthy: Indeed. It is entirely about turning people off politics, rather than showing them how their contribution can make a difference to the outcome.

All this makes clear to me that there are fundamental problems with the current system of local government finance, and that simply ignoring them will not make them go away. It is inherent in the current structure of local government finance that, on average, council tax will rise above the rate of inflation. It is also inherent in the system that we have a regressive council tax, because by definition it will hit hardest those on low and fixed incomes. People will feel the impact more because they are paying from net income rather than at source.

The position is made worse by the broadly 75:25 split between central Government's contribution to local services and the amount that is raised through council tax. That gearing makes it difficult for councils to prioritise services that they consider important, and also makes it difficult for people to understand exactly what the money is being spent on. On top of all that, we have a council tax benefit system under which an incredibly high proportion of people who are entitled to benefit are still failing to claim.

All those things add up not to a need for a freeze or a pilot, but to a need for more fundamental change. I simply cannot understand why neither of the main
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parties is willing to face up to that. We need a change that goes beyond local government taxation. We need a whole package of reform. Yes, there is a need to replace council tax with a progressive form of taxation based on ability to pay, but that is a means to an end, not an end in itself. It is part of a process of ensuring that more is raised locally and less is raised nationally.

There are fair steps that can be taken to achieve that end. For instance, business rates could be localised, which would immediately ensure that councils raised more of what they spent at local level. We need a link with the national taxation system, which is why we have proposed a levy of 1 per cent. on each property with a value of over £2 million. We think that the priority should be making the whole tax system fairer, and that the best way to do that is to raise the income tax threshold to £10,000, which would make every person, on average, at least £700 better off. That would be a first step towards making the taxation system fairer, and it would be introduced alongside a whole series of other reforms designed to ensure that more money was raised and spent locally.

Justine Greening (Putney) (Con): The hon. Lady mentioned the Liberal Democrat proposals for a local income tax. Can she briefly explain how it would work in respect of equalisation? More affluent areas where more people are working would obviously raise more local income tax to be able to invest in their services, but how would this work for more deprived areas with more people on benefits and lower value houses? Does the hon. Lady propose to have a central cap of some kind, or to have councils paying money into a central pot that is then redistributed?

Julia Goldsworthy: I am pleased to learn that the hon. Lady is taking such a great interest in Liberal Democrat policy. Perhaps her party is studying it because it has yet to come up with any proposal of its own. Our position is clear: we are currently saying that the 25:75 split between local and central Government is the wrong way around. We have at no point said that 100 per cent. of all local government spending should be raised locally. Of course there will be a need for some kind of equalisation measure.

Justine Greening: What kind?

Julia Goldsworthy: In the same way that we have an equalisation measure now. Of course, one of the biggest problems with the council tax system is that we have a benefit system whose take-up is very low. A local income tax removes the need for that at a stroke.

The hon. Lady refers to more deprived areas. One of the things that Total Place has exposed is that the more deprived an area is, the more likely it is that there will be lots of different agencies intervening to try to assist people. That results in a duplication of the administration that goes into supporting these areas and people. We need not only to look at local government spend and to tackle the problems of deprived areas, but to open up the whole area of spending that goes into supporting these groups of people.

Mr. Redwood: Is the hon. Lady's party proposing a regional income tax levied by the regional assembly, as well as a local income tax?

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