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Baroness Maddock: I did qualify my comment; I did say that it is not always like that. The point that I was making is that that is likely to be the case with the very top band.

The Earl of Caithness: Wherever we draw the line, wherever the top band, the second top band or the third top band is, there will be cases of hardship. This was the problem with rates. I remember it so well from the mid to late 1980s. We will have exactly the same problem with council tax. Once we have opened this Pandora's box and we start to tinker and spread the bands, the same will happen and there will be a huge outcry. I say that to the Government once more in the hope that they will listen to me.

Baroness Hanham: I support my noble friend's amendment. It is worth reminding ourselves about

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several things in regard to the introduction of the council tax. First, it is true that it is not entirely a property tax. It is based on two people living in a property, as are the discounts thereafter. The whole premise was that there would be two people living in a property. Thereafter, other people would not be charged and there would be discounts based on that premise.

We need to remind ourselves that at quite a late stage in the implementation of council tax another band—band H—was introduced at the last minute to take account of the higher value of property. It is true that property values have risen, but they have risen in all bands and in most parts of the country. Where they have not risen, it does not matter. The whole purpose of the way in which the council tax was constructed—my noble friend knows more about this than I do—was that there should be a mid-point, bands C and D, and a ratio between that mid point and other bands which would go down or up according to the value of the property. So, effectively, although revaluation may take place, the ratio should not change; the same amount should be paid in the lower bands and the same amount should be paid in the upper bands.

Once one begins tinkering with that, one begins calling into question the amount that is raised under council tax. One begins to call into question all that the Chancellor has done to ensure that council tax increases—and he certainly has increased the whole ratio of council tax to grant during his years as Chancellor.

But throughout there has been a continuity of expectation of how much one would have to pay. It is right that we are beginning to look at what people used to be paying in rates. At Band H level, people are paying 2,500 to 3,000 as their council tax contribution. One may say that that is fine, but the problem outlined by the noble Baroness, Lady Maddock, then arises; that some people in the upper bands are not well off and the increase in their property value has not been reflected in their income.

The noble Lord, Lord Rooker, mentioned equity release schemes. I would be most cautious about getting involved in those and talking about their value and purpose. They are a dubious entity. One has only to read the money pages in the newspapers to discover what has happened to elderly people who have taken equity release schemes to pay for their daughter's wedding or whatever. It is not a form of investment to which anyone is attracted and it is a poor rationale for suggesting any justification for an increase in council tax bands.

It is probably true that the percentage increase in property has not been the same across all bands. However, the justification for the original thesis that there would be a ratio between the bottom and the top, that it would be recognisable annually, and that only a certain proportion of the local authority's money was to be raised from council tax needs to be preserved. However, it is not likely to be preserved

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under these clauses. That is the rationale behind our amendments. I can see that the Minister will not agree with them, but we shall not want to drop the matter.

Lord Smith of Leigh: I do not like to intervene too much in the debate—I like to leave it to my noble friend to reply—but must do so on this occasion. I have even less sympathy for some of the views which have come from the other side.

Let us remember that the council tax was the quick fix to get rid of the poll tax. The poll tax was probably the most unpopular measure ever to be introduced in this country since the Second World War and the Conservatives were desperate to get rid of it. They had to put something in its place. That was a property-based tax with certain amendments about numbers in properties and so forth. Clearly it is a step-tax so the more valuable the property the more one pays.

Members of the Committee opposite do not seem to understand the negative aspects of what they are saying. If we do not make the changes proposed by the Government and reform council tax banding, the people in the lowest council tax bands will be paying more than their fair share of council tax. That is exceedingly the case. In my authority, 70 per cent of properties are currently in bands A and B. The number in the current Band H is so minuscule that it does not register.

That is the case in many other areas; we are not unique. If we do not reform the tax and raise more money from those who can afford to pay because they can afford to buy the larger properties, people in smaller properties will be paying a disproportionate amount of the council tax.

The other mistake the Government made with the council tax—and this went back to the poll tax—was to make the amount of money which local authorities raise so small as a proportion that there is no connection between what a local authority does financially and the change in its council tax. I am sure that the noble Lord, Lord Hanningfield, was saying just that.

The Government have therefore begun their balance of funding review, which is right. If we are to have a sensible form of local government in which the local authorities are accountable for what they do and the people understand that the council tax increases because their decisions are important, we need to shift the balance between central to local taxation. I do not believe that the council tax is capable of paying a larger proportion.

My key message to the Government is that they must continue because a revaluation without reform is not good enough to support the poorest people in this country.

Baroness Hamwee: Council tax was a quick-fix but it is becoming unfixed, as everyone is saying. On Friday evening, I was listening, although not with 100 per cent attention, to "Any Questions?". A throw-away line from someone about council tax being such a bad tax seemed to receive the biggest round of applause during

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the whole programme. However, not every area is like that which the noble Lord, Lord Smith of Leigh, knows so well. The top band, which people no longer regard as the top—Band H—covers an enormous variety of house prices and values. I have noticed that Members of the Committee have been speaking without notes. We all feel so strongly about it and I will try to resist the temptation to speak at length. As usual, I agree with my noble friend Lady Maddock that the sooner council tax comes to an end and we achieve a sensible system of local income tax the better.

I want to throw one other issue into the mix. I am not wholly sure of my facts and I am sure that others will know them. I believe that the council tax benefit relief scheme goes up only to bands F or G. However, there are issues surrounding whether the relief is available in the top bands. A leader of a London council mentioned it to me recently. Regard must be given to the fact that occasionally occupants of homes at the top end are not only strapped for cash but have a low income and ought to qualify.

Lord Rooker: I shall stick to my notes in order to be brief. Like the noble Lord, Lord Hanningfield, some of the points I made in respect of other amendments apply to this matter.

Amendment No. 172 would restrict the powers to change the ratio of 3:1 between the top and bottom bands. I do not know how many people in a town at the top of Band A (40,000) realise that those at the bottom of Band H (320,000)—eight times the amount—pay only three times the amount of the council tax. I guarantee that no one in a town would know that unless they were a local government cognoscenti or aficionado, with their eyes glazed over when they see all the local government balance sheets and think they are wonderful. But there is sheer ignorance because people believe that as band H is eight times higher than band A they must be paying more than three times the amount of council tax.

Baroness Hanham: Every year the annual statement from the council which goes to council tax payers informs what people are paying in band A and band H. I am sure that the education system of this country just about enables people to work out the differential between the top and the bottom. It is by no means secret information and anyone who reads it cannot possibly be in ignorance about it.

Lord Rooker: They see a table of figures but they do not know how it comes about. People read their own tables. It is not stated on the documents that the figures are artificially depressed because of the requirement of the 3:1 ratio. That is not set out. That was a deliberate fix and it was introduced so that the Hoogstraatens of this world—and he cannot be a Tory voter because he is in prison at the moment, so I do not want to attack anyone in particular for having a mansion—

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