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The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Baroness Andrews): I apologise for not having been here for Second Reading and thank Members of the Committee for their kind words, which are much appreciated. I left things in the very safe hands of my noble friend Lord Bassam, who did his usual sterling job. This is my first opportunity to explain our policy on council tax and where we are with this Bill, and I do so with pleasure.

This is a useful amendment in that it allows me to set out some of the implications. I should like to talk about the implications of the amendment first, because
 
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they are rather serious, and then answer the questions on the potential date of revaluation, the powers of the Secretary of State and the implications of the process of valuation in terms of the temporary stop put on it and of gearing it up when revaluation happens, as we intend it will. This is very much a postponement, not a cancellation.

The amendment raises some critical issues. I will not over-egg the pudding, but I want to point out the implications. It would delete subsection (2), which would prevent the insertion of new subsection (1A) into the Local Government Finance Act 1992. That is what provides the power for the Secretary of State to set the date on which new valuation lists are to be compiled. Without that power, and without revaluation in 2007—which is removed by subsection (3)—or a requirement for regular revaluations at 10-yearly intervals—removed by subsection (4)—there can be no uprating of valuation lists ever.

In moving the amendment, the Conservatives seem to want to cancel rather than just postpone revaluation. The noble Lord and noble Baroness may be adopting a rather more definitive position than their colleagues in the other place, or their party, may intend. At Second Reading, the noble Baroness made it clear that,

But when, in the other place, the Front Bench was challenged to clarify whether the Conservative Party would ever carry out a revaluation, the response of Mrs Angela Watkinson was, "We never say never". That position is not dissimilar to our own; we recognise that now is not the right time for revaluation, but we want to maintain the flexibility for it to happen in the future when the time is right.

That is a clear position; in contrast, I find the Opposition's current stance rather confusing. In a debate in another place in 2003, my right honourable friend Mr Miliband noted that previously, in a debate with Mr Raynsford, Mr Pickles said:

Two years later, he said:

In March 2005, Mrs Spelman said,

Indeed, Mr Howard, when Leader of the Opposition, said on 20 February 2005, "You have to revalue".

So clearly the Opposition were supporting the principle of revaluation. But in April 2005 they decided to argue for postponement. Mr Howard was clear: on 20 April he told Sky News that his new policy was a postponement of revaluation and not a cancellation. For the avoidance of doubt, he added
 
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"for the first Parliament" when he was questioned about delay. Therefore, I suggest, it has been a rather confusing debate.

Adding to the confusion, of course, was the Opposition's reasoned amendment at Second Reading in the other place, which effectively would have meant that revaluation would have had to go ahead. This amendment would now remove entirely the prospect of revaluation at any time in the future, regardless of any conditions that may prevail. But, whatever the policy of the party opposite, the cancellation of revaluation for all time and the removal of any level of flexibility is hardly a way forward that the Government could commend to this House.

We have gone on record many times in recent months stating our conviction that council tax is a fair and equitable source of a proportion of local government funds. Added to that is the continued belief in the case for revaluation and that it is right to maintain a fair alignment between house prices and council tax bands.

We are not alone in this position; many other experts support that view. In a very useful interim report at the end of last year, Sir Michael Lyons said:

He also recognised that:

Prior to that, as noble Lords will probably remember, the Balance of Funding Review and the ODPM Select Committee report, both published in July 2004, were equally supportive of council tax as a source of local government funding and both recommended that the system would benefit from reform and revaluation. The amendment would fundamentally overturn that position and the overall viability of council tax, but it would do so without providing for any credible alternative.

Lord Hanningfield: Can I intervene briefly? I say straightaway that the Conservative Party is not against the council tax—obviously because we proposed it—but I think we all agree that there could be other ways of forming local government finance to supplement the council tax. I hope that the report of Sir Michael Lyons and others will find ways of doing so as the council tax is beginning to reach a totally unacceptable level.

I think that there are still ways of using the council tax without a full-scale revaluation. I suggested those ideas to Sir Michael Lyons and to Neil Kinghan—a very senior official in the noble Baroness's department—and I hope they may get fed in. I do not think that we need a full-scale revaluation; there are other ways of proceeding. I shall not explain them in great detail here but they are totally consistent with our amendment. There are ways of supporting council tax and dealing with changing house values—they do
 
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change in value—but we are against giving this power to the Secretary of State as there could be other ways of proceeding which justify our amendment.

Baroness Andrews: I am very pleased to have that contribution from the noble Lord as it will help me when we come to the next amendment and the issue of linking reform and revaluation. I shall bear in mind what he says. I am also grateful for his support for the council tax. In a way, that reinforces the difficulty posed by the amendment, which would bring nothing but cancellation. For that reason, we cannot accept a proposal that would effectively leave us with a council tax system which is becoming increasingly out of date, more difficult to administer—particularly for the Valuation Office Agency—and more and more discredited in the eyes of the taxpayer. I know how seriously noble Lords opposite take the point about discrediting council tax and the need for credibility, and I put it to them that this is a very serious point.

The Opposition have argued at other times in another place that revaluation is unnecessary because distortions in the property market realign. That may be true at a national level—indeed, we have seen some evidence of convergence where house price differentials between regions are decreasing—but it is never likely to be true at local or street level. Indeed, in his interim report, Sir Michael points out that there are serious local distortions in that regional figures mask large differences in house prices between and within the authorities in each region. I should also say that house price movement is not the only reason why a revaluation may be desirable. So to take away the flexibility ever to revalue would be very worrying.

We have declared on many occasions that any revaluation would be revenue-neutral, and that continues to be our position. That does not mean that some properties will not move up, or indeed down, a band if they have been subject to a change in value which is significantly different from the average. That must be fair in the sense that the system is fundamentally a property value-based tax. If a property has changed significantly in value, then that should be reflected in the banding at the time of revaluation.

3.45 pm

When Sir Michael Lyons has concluded his independent inquiry into local government funding and made his final report at the end of the year, he will make recommendations for the reform of the council tax system. It was to allow ourselves the scope to take those recommendations on board—in a wider context, with clear and certain information—that we took the decision to postpone. Revaluation is linked to wider questions about the structure of council tax, the operation of council tax benefit and, critically, the need for a shared understanding of the role of local government and of councils' accountability to service users.

One of the interesting things about the interim report was the way in which Sir Michael exposed the difficulty people have in understanding where funding
 
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flows from and what it accounts for in local and national services. That is why we extended the inquiry's terms of reference, asking Sir Michael to consider and review the changing role of local government and how the agenda for devolution and decentralisation could improve services. The Bill gives us time to properly consider all the options for local government funding, but the amendment would severely restrict those options.


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