HC Deb 23 April 1991 vol 189 cc927-41

5.7 pm

The Secretary of State for Scotland (Mr. Ian Lang)

With permission, Mr. Speaker, I should like to make a statement about the application in Scotland of the Government's proposals for the new council tax.

The consultation paper that the Government are publishing today describes proposals for Great Britain as a whole, and the new council tax will operate in Scotland in the same way as has been described for England and for Wales. I set as objectives in my statement of 21 March the requirement that the new tax should be easy to administer, that it should spread the burden as widely as possible, and that it should enable councils to remain accountable to their electors. I also told the House that the tax would have elements based both on the value of each house and on the number of people living there. All these objectives are achieved in the new council tax.

As elsewhere, for the purposes of assessing the property element in the new council tax, domestic properties in Scotland will be divided into seven bands centred on the value of the average Scottish domestic property. Each household will get a single bill. The tax will assume a two-person household, with a 25 per cent. discount for single households and 50 per cent. discounts for unoccupied properties. About 3.5 million adults in Scotland would therefore be taken into account; that is about 90 per cent. of the total. The discount, rebate and transitional arrangements will also be the same as in England and Wales.

I assured the House, in my earlier statement, that the new tax would not suffer from the defects of the old domestic rating system: that disproportionate burdens would not be placed on a small minority of households and that there would not be the unreasonable fluctuations that we had following revaluations. Those objectives are also achieved by the proposals that we have published today.

I am today placing in the Vote Office estimates of likely tax levels for single and two-adult households in each local authority area in Scotland in each of the proposed seven property bands. The majority of Scottish households are in the lowest three bands, where the average bill for a two-person household is £380 or less, and £280 for a one-person household. The range of bills depends on local authority spending decisions, but at this year's spending levels, bills for two-adult households would range from £260 to £730 throughout Scotland—the average being £420. However, if local authorities spent at the level of grant-aided expenditure—the basis for grant distribution—the bills would be much lower.

Two proposals in the consultation paper are specific to Scotland. I undertook in my earlier statement to ensure that the now reduced burden that local taxpayers will face is not increased, once again, to unacceptable levels by local authorities' spending decisions. I therefore propose to bring my capping powers into line with the powers of the Secretaries of State for the Environment and for Wales in order to achieve this. I also propose, as a consequence of the ending of the community charge, to introduce new arrangements for the payment of water and sewerage charges in Scotland. The proposed new system is the subject of a separate consultation paper, which I am also publishing today.

As I said in my statement of 21 March, I retain the right to vary details of the new tax slightly in Scotland, to take account of distinctive Scottish circumstances and to ensure consistency with the rest of Great Britain. At present, I see no need to exercise that right, given the satisfactory formula that we have now achieved for the new tax.

The consultation paper confirms that there will be separate consultation about the structure of local government in Scotland. I intend to publish two consultation papers on this subject, the first of which will appear in a few weeks' time and will deal with the broad principles that should underlie a reform and a possible move to a new single-tier structure.

I am confident that the proposals that we are announcing today represent a major advance in the way in which we fund local government in Scotland. They have my strong support and I believe that they will be well received in Scotland. I look forward to wide consultation on them, and I commend them to the House.

Mr. Donald Dewar (Glasgow, Garscadden)

Seldom can a Minister have made a more embarrassing appearance at the Dispatch Box. The right hon. Gentleman has had to concede that, on the essentials, the Labour party has been right all along. He is here to bury the poll tax which he was once so determined to praise as a remarkable success story. The Secretary of State and the hon. Members for Eastwood (Mr. Stewart) and for Stirling (Mr. Forsyth) have been scathing in their denunciation of any form of property-based tax. Do they really believe that they carry credibility if they now argue the merits of exactly such a system? What explanation can the Secretary of State offer to hide the plain fact that the policy that he now advocates is demonstrably humbug and hyprocrisy? It is sad that, having accepted the general principle, Ministers have managed to get so wrong the practicalities dictated by logic and the Labour party.

I welcome the exemption from the present 20 per cent. rule for those on income support. It would be monstrous if those on subsistence incomes faced cuts to compensate for the increases allegedly to meet poll tax payments, as suggested in the consultation document. The consultation document also suggests that students, student nurses and those on youth training schemes will be entitled to personal discounts. At present, students pay 20 per cent. What will they pay under the new system? How many households in Scotland, and what percentage of the total households, will qualify for 100 per cent. rebates? Does not the Secretary of State recognise that Scotland expects the 20 per cent. rule to go now? If it will be wrong in 1993, when the new system will be introduced, it is wrong now.

A key objective of the Labour party has been to help people who were struggling to meet local tax bills. The 25 per cent. rebate system is a gesture that does not effectively target those in greatest need. How will applications for the 25 per cent. personal discount be checked? Will the Secretary of State guarantee that, whatever emerges from the muddled consultation document, the electoral register will not be involved? Otherwise, there will be a clear incentive for many people to opt out of the democratic process.

It is also clear that many of those who will benefit from that 25 per cent. discount are unlikely recipients of such help. Some will be well off, some young single people in employment and some single people living alone, but by no stretch of the imagination in financial difficulty. It is not a targeted benefit but a clumsy device unrelated to the ability to pay. Help must be given, but surely it would be better to concentrate on a targeted scheme or an effective rebate system in which all the money available would be concentrated.

Why should I be offered a 25 per cent. reduction when so many of my constituents have been left in poverty? Is that a realistic and effective use of scarce resources? Can the Minister confirm that the cost of this 25 per cent. discount or rebate—perhaps he could give the figure—is not being met by central Government but will be paid for by higher contributions from other households?

Is it not the case that the system has been rigged to protect the better off living in top-range properties? Is not the key the Secretary of State for the Environment's threat that the amount payable will vary only within a limited range"? Are not those weasel words—a dishonest way of saying that those in modest houses will subsidise those who live in top-range properties? Will those proposals apply in Scotland and, if so, can it be right that the most expensive property in Newtown Mearns or Morningside pays, at the most, only two and a half times the most battered council house in Easterhouse or Pilton?

Will not the seven-tier banding system be cumbersome and complex and seen by many as rough justice? The Secretary of State has unveiled figures for what average bills would have been if his scheme had been in place this year. Clearly, to do that he would have required a valuation base. Can he tell the House what that was, whether it was based on capital values and who supplied it?

There is a rumour, which I find it difficult to believe in terms of its ingratitude, that the assessors' departments of local authorities, which have been martyred by their attempts to make an unworkable poll tax work, will now lose responsibility for valuation under the new system, and that, in Scotland, it is to be handed over to the Inland Revenue. Why? Is that a tribute to the tremendous job done by the Inland Revenue in keeping the valuation base in England and Wales up to date in recent years?

Is it not totally unacceptable that the system cannot be in place before 1993 at the earliest? If the Secretary of State started with the present valuation roll now, with drive and initiative, he could end the misery of the poll tax within a much shorter time scale than he sets out. Is it not essential that he does so? If the poll tax limps on for two full years it will destroy confidence and leave local government with appalling problems of collection. Does he not see that the faults that he is building into this Tory tax will hit services and, in a blatant attempt to placate those at the opposite end of the income scale, those, who are often the most vulnerable, who rely on those services?

If the new system means moving to the English system of standard spending assessments and fierce cutting powers that leave the Secretary of State as a virtual dictator, it will be no service to local democracy. The Secretary of State boasted that he would have great powers of discretion over the Scottish system. Is it all to boil down to restrictions imported from the Department of the Environment, a power to vary the details slightly, and a promise that, in any event, the powers will not be used, at least in the immediate future?

Can the Secretary of State define the powers that he has achieved and the battles that he has won in Cabinet? His answer to that question should not greatly elongate his reply. He must know that his folly and that of his Government has cost Scotland dear. We have suffered years of chaos, extravagance and destructive waste. His blind loyalty to a system that he now concedes is fatally flawed has damaged local democracy and divided communities in bitterness.

After a decade, the Government are back where they started. Those who are responsible still enjoy office and power, but this shameful story of malice and indecision will not be forgotten. The errors and miscalculations behind today's insincere charade will not be forgiven.

Mr. Lang

The hon. Member for Glasgow, Garscadden (Mr. Dewar) asked many questions and welcomed certain aspects of our proposals. He seems to be uncertain whether to welcome the scheme because he thinks that it is the same as rates, or to oppose it because he thinks that it is not. Let me assure him that the scheme is not the same as rates. The electorate will have a clear choice between our new council tax and Labour's "back to the rates" policy at the next election. If rates in Glasgow, and probably in the hon. Gentleman's constituency, had been retained, the average rate for a £75,000 house would be about £1,100. Our council tax would produce about £490.

The hon. Gentleman asked what students will pay. Students will be eligible for a discount. A student will be likely to pay the council tax only if he is a householder and owned a property. He will then be liable to pay for the property element.

The hon. Gentleman asked me who will qualify for rebates. The consultation paper indicates that those on income support—students, student nurses, apprentices and YT trainees—will qualify. We are, of course, consulting on the rebate scheme.

The checking of applications for discounts will be a matter for local authorities to decide on. I see no need for the electoral register to be involved in the process. The hon. Gentleman asked me whether discounts will be funded from within the local government system: yes, indeed they will. All our calculations take account of the likely number of discounts that will arise.

The hon. Gentleman referred to top-rate properties and suggested that our proposed banded arrangements will introduce protection for them. Yes, indeed they will. That will be one of the important differences between our proposals and the old domestic rating system. Under the old system, higher-valued property bore a grossly unfair proportion of the burden of local government expenditure.

I believe that it is right to have a system in which the range will vary no more than two and a half times between the top band and the bottom band, bearing in mind especially that the system will contribute about 11 per cent. of the total cost of local government spending in Scotland, the rest coming from business rates and a central Government through income tax, value added tax, and other such taxes.

Mr. Dewar

And VAT.

Mr. Lang

I said VAT.

The hon. Gentleman has suggested that the seven-tier banding system might be unwieldly and a form of rough justice. The very fact that there will be seven bands shows the range within which different types of property and different values of property can be accommodated. It will lead to a smooth and progressive relationship with the liability of residents to pay within the bands. Valuation will be supervised by the Inland Revenue's valuation office. Private sector valuers will be used to achieve a valuation base and to locate individual properties within the bands. We are still considering the possible role of Scottish assessors in the system. If the hon. Gentleman chooses to consult us, we shall be interested to hear any suggestions that he has to offer.

We propose to introduce the new tax in 1993. I hope that the Opposition will give us as fair a wind as they can to ensure that we keep to that objective.

I have the power to vary any arrangement in Scotland so as to meet any difficulties that could arise for payers in Scotland as a result of the different nature of the Scottish domestic property base and the different levels of spending, and of central Government funding. I do not believe that it will be necessary to make use of that power because of the formula that we have achieved, but it remains in place.

When I reflect on the hon. Gentleman's peroration I reflect also on what the Leader of the Opposition said about domestic rates, which he described as the most unjust of all taxes. The right hon. Gentleman was right, and I am surprised that he is prepared to lead a party that wants to return to domestic rates.

Several Hon. Members


Mr. Speaker

Order. May I repeat to the House what I said previously'? The House knows that we are discussing a consultation document. There will be plenty of opportunities between now and June to discuss it further. As there are 18 groups of amendments to the Ports Bill, in which there is a great deal of interest, and a ten-minute Bill, I shall allow questions on the statement to continue until 5.55 pm. I hope that during that time I shall be able to call all those who wish to question the Secretary of State for Scotland. That should be possible if they ask only single questions. We shall start with Sir Hector Monro.

Sir Hector Monro (Dumfries)

Does my right hon. Friend agree that, coupled with the current reduction of £140 in the community charge and his insistence on keeping down local government expenditure, the new scheme will be widely welcomed in Scotland? Will he say a little more about standard charges and any other anomalies that he has had to remove from the current community charge with the welcome changes that we have following the abolition of that and of the old rating system?

Mr. Lang

I thank my hon. Friend for the welcome that he has given to our proposals. He might like to know that the average bill for the two-person household in Annandale, Eskdale and Nithsdale would be about £290 under our proposals as we are illustrating them today. My hon. Friend is right to draw attention to the reduction introduced by my right hon. Friend the Chancellor of the Exchequer by which a switch of emphasis took place between local government and central Government, thus reducing the overall level of moneys required to be raised at local level.

My hon. Friend will know that the standard community charge was considerably modified over the past two or three years to remove some of the worst of the anomalies. I believe that the system is much more stable now. To a large extent, the sort of arrangements that exist for the standard charge will carry over to the new arrangement.

Mr. Malcolm Bruce (Gordon)

Is it not extraordinary that, after the debacle of the past two years—the abolition of rates and the introduction of the poll tax—both the Labour and Conservative parties are now united in their commitment to bring back the rates with added confusions of their own? Surely it is extraordinary that the Secretary of State should be remitting the matter to the Inland Revenue. As it is qualified for tax assessment, would not it be more appropriate to ask it to assess for local income tax rather than property valuation, for which it is not qualified? Is it not a fact that capping will become a feature of the scheme, which makes accountability—the original claim of the Government—a mockery? For the next two years we shall continue to have the shambles of the poll tax, only worse.

Mr. Lang

Every hon. Member should reflect on the fact that we are putting a much more substantial proportion of resources into local government from central Government. It is important to ensure that that does not leak away in the form of higher spending by local authorities but goes to the benefit of local residents. It is important that we have an adequate capping mechanism.

The hon. Gentleman seemed to suggest that the proposals that we are now putting before the House are the same as rates. He could not be more wrong. Rates on a £50,000 house in his constituency would have risen to £540, compared with £250 under the council tax. A personal element is provided for within the council tax, and there is a banding of properties that affords a protection that the old rating system never did.

Sir Nicholas Fairbairn (Perth and Kinross)

I should declare an interest as chairman of Historic Scotland. May I ask my right hon. Friend to bear in mind—I think that it is a matter that will be borne in mind by Members of all parties—the fact that the value of a house is not a sign of people's ability to pay and that the fragility of the heritage of Scotland, of which I am privileged to be in charge, is an extremely subtle matter? If buildings that require normal duties of upkeep as part of the heritage of Scotland are to be burdened with a tax that has nothing to do with their upkeep, my right hon. Friend must be careful to ensure that the Government, in giving a grant for their upkeep, do not destroy them by the tax that is being introduced.

Mr. Lang

My hon. and learned Friend makes an important point. He is right to draw attention to the important advantages that will be derived by the owners of Scotland's historic buildings. It was precisely such buildings that bore an undue proportion of the domestic rating burden and a lack of incentive to improve and maintain. Now, because the burden will be more evenly and equitably spread, they will be protected from such burdens, and from the depredations of high-spending local authorities. That will lead to a continuing improvement in the quality of the fabric of Scotland's built heritage.

Mr. Robert Hughes (Aberdeen, North)

The Secretary of State, after turning somersaults on a full stomach, having eaten a bellyful of his own words, is understandably queasy and cannot focus on the main issues. Is he aware that the shambles that he has now produced means that the poll tax will exist for another two years, that councils will be in great difficulty, that low-paid people will still not have the full rebates to which they are entitled and that we need swift action to move much faster than the right hon. Gentleman currently proposes, rather than wait for another two years? Will he think again, withdraw this nonsensical review and introduce proposals for a rapid change which, with the co-operation of the Opposition, he would get through?

Mr. Lang

We are moving as quickly as is sensible, practical and prudent, and I believe that the new system, when in place, will be found to work smoothly and effectively and be simpler and fairer than what has gone before. In the meantime, the fact that we have reduced the burden that falls on local government by a substantial amount as a result of the switch from local to central taxation will considerably reduce the difficulties and anxieties that people will face. In addition, as I said, I am taking powers to strengthen my ability to cap local authorities that overspend. If the need arises, I shall use such powers to protect residents from high spending.

Mr. Bill Walker (Tayside, North)

Will my right hon. Friend confirm that the sensible use of VAT to reduce bills will produce a bill for North Tayside for the lowest band of property of about £250 and for the highest band of about £600? If those figures are accurate, they show clearly that the new tax will be seen by the Scots as a big improvement on rates or community charge.

Mr. Lang

The figures that my hon. Friend uses sound about right to me. The arrangements that we are introducing into the new system will give protection to property owners, will ensure that local authorities are not able to impose an unduly high burden on them and will see that the burden is sensibly spread across the whole population.

Mr. Alexander Eadie (Midlothian)

Does the right hon. Gentleman, in introducing this form of roof tax, make the same claim that the Secretary of State for Wales made, which is that, when the new scheme is introduced in three or four years' time, that will be the final death of the poll tax? Has the right hon. Gentleman costed the new scheme? For example, what will it cost to advertise and administer?

Mr. Lang

The hon. Gentleman is unduly pessimistic. I sincerely hope that it will not take three or four years to introduce the new tax. I hope that we shall be able to introduce it by 1993 and abolish the poll tax then, because this is an infinitely better and more efficient system. I anticipate that the costs of administration and collection will be substantially reduced over those of the poll tax.

Sir David Steel (Tweeddale, Ettrick and Lauderdale)

I hoped that, as Scotland was lumbered with the poll tax a year earlier than England and Wales, the Secretary of State would be leading the campaign to get rid of it a year earlier than in England and Wales, instead of which he is reported as trying to fight a rearguard action to keep it. Will the valuations take account of the condition of property, given that there will not be individual house valuations, or will a person living in a large slum pay more than someone living in a small decent house?

Mr. Lang

As for the alleged reports to which the right hon. Gentleman refers, I hasten to reassure him that they are and were entirely without foundation. I have never read so much fantasising as I have in the last few weeks. The valuation process is intended to achieve as accurate a valuation as possible. It will not be such a detailed valuation as existed under the old rating system, and it will be open to any householder who feels that his property has been placed in the wrong band to appeal against that. The incentives will be that much less to do so because, with a range of seven bands, the variation in bills between the different bands will not be so substantial.

Mrs. Maria Fyfe (Glasgow, Maryhill)

Will the right hon. Gentleman now answer the question that was put to him earlier by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar)? Why should a person who is so rich that he lives in a large mansion set so well back from the road that his house is out of sight from the ordinary public pay only about two and a half times the amount paid by a council tenant? The right hon. Gentleman said that that was fair. Will he kindly explain why he thinks it is fair?

Mr. Lang

It is fair because what happened under the domestic rating system was unfair, when there was no protection for those in more valuable houses. A range of two and a half times between the highest and lowest bands is about right, given the rebate scheme which we shall be introducing and given the fact that we are talking about 11 per cent. of the cost of local government. A substantial proportion of the rest will come through indirect and direct taxation, to which the better-off in society will contribute much more than those on low incomes.

Mr. Norman Hogg (Cumbernauld and Kilsyth)

Will the Secretary of State pay tribute to those local government officers who, in council offices throughout the country, have tried to make the poll tax work and who will continue to have that job? Will he clarify the manpower implications to today's statement for local government and explain why he is encouraging the use of assessors from the private sector when there are skilled and professional people in local government well capable of discharging that task?

Mr. Lang

I pay tribute to the officials in local authorities that have administered the poll tax efficiently, as some of them have. As for the manpower implications of the change to the new arrangements, I cannot give the hon. Gentleman detailed figures now, but in the course of the consultation process a clearer picture may emerge.

The answer to the hon. Gentleman's question about valuation is that the Government took the view that the most effective way to get the new system up and running quickly and with the appropriate accuracy of valuation was to use Inland Revenue valuation officers, supervising the arrangements and employing, as appropriate, valuers from the private sector. It is in everybody's interest that we get the new system up and running as quickly as possible, and I believe that what I have described will achieve that.

Mr. Dick Douglas (Dunfermline, West)

Is the right hon. Gentleman aware that we in the SNP have extreme difficulty in accepting his figures, in view of the fact that it took him two months to respond to our statement about a local income tax? We shall wish to discuss the matter with him further. Is he further aware that the new scheme smacks of a band-aid tax, with the whole thing stuck together to give a spurious view of coherence that it totally lacks? Those who are interested in decision-making and responsibility in local government read centralising forces into the right hon. Gentleman's statement.

If the right hon. Gentleman is really interested in getting the scheme up and running, why will he not, in view of the scarcity of Scottish legislation before the House, immediately introduce a Bill giving 100 per cent. rebates, so making it clear that students and others will not have to pay the tax and showing that local authorities in Scotland will not again have to go through the stupid exercise of trying to collect money from people who manifestly cannot pay?

Mr. Lang

The question of rebates in the remaining two years of poll tax is still under consideration. The hon. Gentleman says that the new tax lacks coherence. We have worked on the proposal carefully and gone into all the issues in great detail. I urge him to examine it more carefully, when he will find that, far from lacking coherence, it is an extremely coherent and effective system. I welcome the sign that I took from his remarks that he will take part in the consultation process. I shall look forward to his submissions once he has had an opportunity to study the detail of the matter.

Mr. Dennis Canavan (Falkirk, West)

Will the Secretary of State now eat humble pie and admit that he has been forced into a U-turn in the face of the massive demonstration of people power, including a disciplined, conscientious campaign of civil disobedience to an extent not seen in Scotland for centuries? Will he admit that, if everybody had dutifully touched the forelock and stumped up every penny of poll tax on demand, the right hon. Gentleman would not have been forced into making his historic statement to the House today?

Mr. Lang

The main reason why we had to decide that the community charge was no longer viable was its failure to control high-spending local authorities. It was perfectly clear from some of the levels of poll tax that some local authorities sought to impose on their residents that the tax was no longer an acceptable method of funding local government. Far from carrying out a U-turn, we are going on both from the discredited domestic rating system and from the community charge, with its shortcomings, to a new system which is infinitely better than both.

Mr. John McAllion (Dundee, East)

Since 1989, the Secretary of State has personally and passionately defended the defining characteristics of the poll tax—the liability of everyone to pay something, the requirement for a poll tax register, the rejection of any sort of property tax. This afternoon he has been forced to eat his words. How can he with any honour hang on to his high office when his personal credibility has been so undermined by the retreat of his right hon. Friends in the Cabinet? Should not he and the other poll tax fanatics in the Scottish Office do the decent thing and resign?

Mr. Lang

This is the first local government finance system that I have helped to design. I believe that it is more effective than the community charge system or the domestic rating system. I believe that it meets the objectives that I set out in my statement on 21 March. Once the hon. Gentleman has considered it further, he will think so, too.

Mr. Jimmy Hood (Clydesdale)

Will the Secretary of State cast his mind back to the recent council elections when there were Tory party posters all over Scotland condemning what they called the roof tax? The Secretary of State and his right hon. Friends have today announced a seven-band roof tax for the United Kingdom and for Scotland.

Since we have a proposal today offering transitional benefits and payments to millionaires, why cannot we have immediately a one-clause Bill that will do away with the minimum contribution of 20 per cent.?

Mr. Lang

The roof tax was locked up so quickly when the Labour party realised how unpopular it was that it is difficult now to scrutinise its details. As far as I am aware, it had few of the features of our new council tax, which will limit the burden on householders in the top band to paying two and a half times what those in the bottom band will pay. The system includes a personal element in the form of the 25 per cent. discount for one-person households, and the new system avoids arbitrary revaluation leaps every few years. It will operate fairly and, unlike the roof tax, it will gain widespread acceptance.

Mr. Tom Clarke (Monklands, West)

Will the Secretary of State consult the Convention of Scottish Local Authorities to explain why England is to have a commission to consider structural changes but Scotland is not? Will he also meet representatives of the Keep Scotland Tidy campaign to consider the removal of the vultures from rooftops and advertising hoardings placed there by the hon. Member for Stirling (Mr. Forsyth) and now looking like chickens that have come home to roost?

Mr. Lang

Knowing the hon. Gentleman's history as a former president of COSLA, I can reassure him that I look forward to further consultations with that organisation on these proposals and to the opportunity to discuss the proposals that we announced on 21 March, following which I went to the COSLA annual general meeting the next day.

As for the vultures, they flew away from the rooftops as soon as the Labour party abandoned its roof tax proposals, recognising that that system was not viable. The hon. Gentleman can rest happy: there is no question of the vultures reappearing against the background of these extremely effective and efficient proposals.

Mr. James Wallace (Orkney and Shetland)

In the past, the Secretary of State has said that local accountability is an important feature of a local tax. How does he see local accountability, operating in the islands areas, when his illustrative bilks show that there will be no local tax and when, regardless of the size of house in which they live, people will still have to pay 2.5 per cent. more in a national tax in an area in which the cost of living is already among the highest in the United Kingdom?

Mr. Lang

The hon. Gentleman always draws attention to the fact that the situation in the islands is different—as it is in this case. Spending in the islands is below assessed need—a lesson that I wish many other local authorities would learn. Our present grant distribution assumptions mean that there would be no council tax in those islands, but I think that the hon. Gentleman will recognise that that should be dealt with, in the interests of equity. We shall be willing to discuss the matter in the course of consultations to try to achieve a system that is fair.

Mr. Gordon McMaster (Paisley, South)

Is the right hon. Gentleman aware that his credibility is at an all-time low following his humiliating U-turn and the mess that he has created and announced today? Does he realise that there is an easy way to get some of that credibility back? It is to announce today that he will abolish the 20 per cent. rule, which affects so many pensioners and unemployed and disabled people, and that he will consider rebating them for the extra year that they have paid the poll tax.

Mr. Lang

I have no announcement of any sort to make about that. We are contemplating a new kind of tax and a new kind of arrangement for it. It is the Labour party which would lose credibility if ever it sought to implement its proposed return to unfair rates, not least because of the impact that that policy would have on the business community in Scotland, for which the Opposition propose to remove the harmonisation progress that we have achieved in the past few years—progress towards a uniform rate and the reduction of business rates all over Scotland. The Labour party's policy would allow local authorities to let rates rip, to the extreme detriment of business throughout Scotland.

Mr. William McKelvey (Kilmarnock and Loudoun)

The Secretary of State must realise that the millionaire living alone, perhaps in Eastwood, might be content to wait until he receives his 25 per cent. rebate—lonely money. But there are many lonely, poor people who cannot afford to pay the poll tax and who never have been able to afford it and who have run up debts, thereby contributing much to the £600 million arrears faced by Strathclyde. What will he do to assist Strathclyde with its massive arrears bill and to help people caught in the poverty trap who cannot afford to wait until 1993 for an easing of their pain?

Mr. Lang

The hon. Gentleman is fully aware of the fact that under the community charge system rebates are paid up to 80 per cent., and that the remaining 20 per cent. for which people are liable is taken into account when calculating income support. The difficulty facing many people on income support is that many hon. Members in the Labour party, and in the Scottish National party until recently, encouraged non-payment. That created difficulties for local authorities such as Strathclyde and for people who took the advice proffered to them so irresponsibly; and the responsibility for those problems lies with many hon. Members in the Opposition parties.

Mr. Gavin Strang (Edinburgh, East)

Does not the Secretary of State see that, by insisting on retaining a link with the poll tax through the personal discount, he is building in some of the same problems as existed with the poll tax? The fact is that many people who live in two-person households will register elsewhere so that their households can get a discount, and they will be able to register with households containing two or more people without adding to those households' bills. The right hon. Gentleman must appreciate that the tax will be discredited from day one because of that possibility of evasion.

Mr. Lang

The hon. Gentleman has a mind which seems to seek out methods of evasion. It will be up to local authorities to ensure that there is no evasion; in any case, there will be little incentive for evasion, because this is a fair tax which will be well imposed at a reasonable level. The discount is expressed as a proportion of the property element and is thus a progressive tax: the personal element will increase the higher the band.

Mrs. Ray Michie (Argyll and Bute)

Can the Secretary of State explain why a house with two people and only one income has to pay more than a house with only one person and one income?

Mr. Lang

If she looks at the figures, the hon. Lady will see, when she has had the chance to study them carefully, that the system is a fair one which takes account of the difference in the burden that falls on a house with two or more occupants and the burden that falls on a house with only one occupant. The 25 per cent. discount is a fair way of taking account of that difference, against the background of a rebate scheme.

Mr. Mike Watson (Glasgow, Central)

I should like some clarification from the Secretary of State. The consultation paper seems to reject the idea of capital values as a basis for assessment and speaks of bands expressed as a percentage of the average national property value. What is that average national property value? Will it be set at a United Kingdom level or a Scottish level? Is there a distinctive Scottish element to the proposal? If so, what form will it take?

Mr. Lang

Property bands will be based on values of properties within a Scottish context. Those valuations will be different from valuations in Wales and England. We are going for capital values because they are banded and their impact is thus dampened; the impact of the capital value of a house on what a person has to pay is modified. That is a more sensible, fairer and more realistic way of proceeding than reverting to the notional rental value basis used under the old domestic rating system.

Dr. John Reid (Motherwell, North)

Does not the Government's ignominious retreat today show that they do not even know how to retreat in good order? Have they not forgotten the first law of Healey—when in a hole, stop digging—and staggered from one tax which was unfair and unjust to another which is unfair, unjust and complicated, with this band, that band and the next band? Every day will be 12 July for the next few years in local government. Why are we discussing today how to raise tax for local government, in what form it will be raised, how it will be capped and how it will be spent when it has not yet been decided when to issue the consultation paper on what form local government in Scotland will take?

Mr. Lang

I made it clear to the hon. Gentleman that our first consultation paper on the structure of local government will be issued in a few weeks' time and it is not necessary or desirable to rush that process either in the preparation of the document or in the consultation period that will follow. We intend to consult widely on the structure of local government because we intend to get it right. We have considered carefully the system for the funding of local government and once the hon. Gentleman has become more familiar with it, he will realise that it is not nearly so complicated as he thinks it is at first glance and that it will work effectively.

Mrs. Margaret Ewing (Moray)

The Secretary of State has referred to possible changes in water charges, which will be of particular interest to fish and food processors in the Grampian region who pay the highest water rates in the United Kingdom. What steps will he be taking to ensure that the industrial voice is heard in the consultations, and does he expect that the charges in water and sewerage charges will be implemented at the same time as the council tax?

Mr. Yeo

The proposals on which we are consulting concern personal water and sewerage charges. In the past, sewerage charges have been absorbed within the community charge system, whereas water charges were separately billed as a community water charge. Therefore, we have to take account of the need to reform that as well as reforming the community charge. We shall consult on that and the hon. Lady will have every opportunity to study the paper, and, if she wishes, to submit her views.

Mr. Tam Dalyell (Llinlithgow)

In the consultation paper, will there be an appendix or a specific explanation of those points where Ministers now think that the Wheatley report was wrong? Will there be a full explanation of the amount of compensation that will have to be paid to officials in Strathclyde, Lothian and elsewhere if there are to be changes?

Mr. Lang

I will obviously consider the hon. Gentleman's suggestions. We have not yet written the consultation paper, but we will bear in mind his suggestion that we should make reference to the Wheatley commission, possibly in an appendix or in the body of the paper. With regard to compensation, it is certainly part of our purpose to ensure that any change to any new system of local government structure in Scotland should achieve that changeover with a minimum of expense, disorganisation and disruption, learning the lessons that we should all learn from what happened last time.

Mr. Alistair Darling (Edinburgh, Central)

Is the Secretary of State aware that a couple in modest circumstances owning a small house in Gorgie in Edinburgh will find their house in the same tax band as a large three or four-bedroomed house in rural Scotland owned by a single person who may well receive the 25 per cent. rebate? Where is the link with ability to pay, and why should most houses in Edinburgh find themselves in the top three bands in the new tax system?

Mr. Lang

The problem that Edinburgh faces is that it has a high-spending district council. The solution to the problems that are faced in Edinburgh lies in the hands of the local authorities, both district and regional.

Mr. Menzies Campbell (Fife, North-East)

The Secretary of State knows that there is more than one way in which to arrive at the capital value of a property. What principles of valuation will be used by the Inland Revenue in deciding into what band particular houses should fall? If a householder embarks on improvements such as installing double glazing, central heating or a new bathroom, will that take the house from one band into another, thereby incurring additional cost?

Mr. Lang

The precise details of the basis of valuation will obviously be part of the consultation process, but essentially it will be the market value that arouses the interest of the valuation office. It is most unlikely that in the vast majority of cases changes such as the installation of central heating which the hon. and learned Gentleman mentioned would lead to a change of valuation banding. Only a substantial change in the nature of a house would lead to an upgrading from one band to another. But even if there were such an upgrading, the relative movement in terms of the extra burden of local government tax would be small because of the existence of seven bands and the gradation which exists within them.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

As we know from the statement made by the Secretary of State for the Environment that he believes that a commission is necessary to carry out the review of local government in England, and as on the last occasion that there was a major review of local government in Scotland it was carried out by the Wheatley commission, how can the Secretary of State honestly believe that a review of local government can be carried out systematically and, above all, fairly without an independent commission in Scotland? Will it not be yet another political gerrymander by the Secretary of State?

Mr. Lang

No, there will be no question of any Conservative Member contemplating gerrymandering of any kind. The very existence of the Wheatley commission and the work done by it gathered together a large amount of information that will prove a useful quarry as we review the reform of local government. The local government commission contemplated by my right hon. Friend the Secretary of State for the Environment will be an advisory body and my right hon. Friend made it clear that the Government would decide what changes to make and what form they would take.

It is proposed that the local government commission will replace the local government boundary commission in England and undertake its work on a long-term, gradual, area-by-area basis, taking account of the wide diversity of local government structures in England. In Scotland, we have a much greater cohesiveness and coherence in the system and I believe that it will be possible, without haste and without lack of consultation, to move to a single tier process that will win general acceptance.

Mr. Ron Brown (Edinburgh, Leith)

The Secretary of State has admitted little today, but he has admitted that the poll tax has been a mistake. Why should the low-paid in Scotland pay for the Government's mistake? Why should working-class people pay for their mistake? Surely there should be an amnesty. Even Charlie Gray, the leader of Strathclyde regional council, has argued for that. Mr. Gray is not a left—winger I understand that he is a moderate—so surely his views should be taken into consideration. I understand that they reflect the general consensus within COSLA. Will the Government listen to reason in Scotland? Clearly, many feel that the only alternative to the Government is a Scottish Parliament with proper economic and political powers so that the Scottish people can run their own affairs.

Mr. Lang

I always listen with great care to anything said by the leader of Strathclyde council, although it is intriguing to find him forming an axis with the hon. Gentleman. Whether that is a reflection of the way in which the Labour party is going, I do not know. Suffice it to say that I am sure that the hon. Gentleman, like everyone else in Scotland, will, once he has digested the proposals, find them a good, sound and secure way forward for local Government funding.

Mr. John Maxton (Glasgow, Cathcart)

Does the Secretary of State not understand that the people of Scotland, who have suffered under the poll tax and seen their local government dive into crisis as a result of it, expected today to see some sense of shame and regret that the tax had been imposed on them by the right hon. Gentleman who, as a Minister, served on the Standing Committee that considered the Bill which introduced it?

After the humiliating climbdown that we have seen, the people of Scotland expected to see the Secretary of State and his Ministers announce their resignations today. Why is he allowing the crisis that is now facing local government in Scotland and the poverty that is facing so many people there to continue for at least another two years instead of, with our support, introducing legislation that would bring back the rating system on 1 April 1992, abolish the 20 per cent. minimum payment, backdate rebates and get rid of the poll tax once and for all and do it efficiently and quickly.

Mr. Lang

Far from regret, I feel a sense of pride that we have achieved a new system of funding local government which is infinitely better than the domestic rating system of the community charge. My involvement in the Committee to which the hon. Gentleman referred was, as he recalled, primarily concerned with the standard community charge and the introduction of the new arrangements for business rates. I believe that what we have done for business rates in Scotland is widely welcomed and will be greatly to the advantage of the Scottish economy. It is clear that, at the next general election, the Scottish electorate will have a choice between our new, simple, easy-to-collect and fair council tax, or returning to the old rating system under Labour. I have no doubt which they will choose.