HC Deb 24 March 1999 vol 328 cc411-40

`.—(1) Schedule 1 shall not apply when the council tax proposals of a relevant local authority have been endorsed in a referendum of electors registered within the local authority area. (2) A proposal shall be deemed to have been endorsed if it is supported by a simple majority of voters where at least 50 per cent. of the electorate have voted.'—[Sir Paul Beresford.]

Brought up, and read the First time.

4.23 pm
Sir Paul Beresford (Mole Valley)

I beg to move, That the clause be read a Second time.

Madam Speaker

With this, it will be convenient to discuss the following amendments: No. 98, in clause 28, page 15, line 37, after 'regulation', insert 'and limitation (capping)'.

No. 1, in page 15, line 38, at end add 'but shall cease to apply on 1st April 2005.'.

No. 101, in clause 29, page 16, line 14, leave out `authorities or'.

No. 102, in page 16, line 15, after 'authority', insert `and the Greater London Authority'.

No. 103, in page 16, line 17, at end add `provided that any criterion referring to an authority's budget requirement for the financial year beginning on 1st April 1998 shall be deemed to refer to the greater of the budget requirement and the amount of the authority's Standard Spending Assessment for that financial year.'.

No. 105, in page 16, line 37, leave out 'authorities or'.

No. 106, in page 16, line 37, after 'authority', insert `and the Greater London Authority.'.

No. 84, in page 16, line 39, leave out subsection (7).

No. 85, in page 17, line 8, leave out subsection (11).

No. 42, in schedule 1, page 19, line 26, at end insert— `() must include the principle that if the budget requirement is set below the total Standard Spending Assessment for an authority, it shall not be regarded as excessive.'.

No. 43, in page 19, line 26, at end insert— `() must include the principle that if the budget requirement is set within twelve and one half per cent. in excess of an authority's total Standard Spending Assessment, it shall not be regarded as excessive.'.

No. 108, in page 19, line 33, at end insert— '(c) it is between the Council Tax Band D for the authority and for the other authorities in its category of authority'.

No. 113, in page 19, line 34, leave out subsection 5.

No. 109, in page 19, line 34, leave out 'If'.

No. 111, in page 19, line 34, after 'State', insert 'will determine'.

No. 110, in page 19, line 34, leave out 'determines'.

No. 114, in page 19, line 43, leave out `If he does not determine such categories,'.

No. 115, in page 20, line 2, after 'relevant', insert 'and is reasonable'.'

No. 117, in title, title, line 3, after 'regulation', insert `and limitation (capping)'.

Sir Paul Beresford

Unusually perhaps, I shall start by speaking to the amendments, because they set the scene for the new clause. They all relate to two different forms of capping in the Bill—the crude and universal council tax benefit subsidy capping and the subjective, or selective, capping that was so proudly introduced by the Secretary of State earlier this year.

On Second Reading, I pointed out that the Bill, as far as it has been decorated for Labour Back Benchers, has a sugar coating of best value and removal of compulsory competitive tendering, but its core is an extremely bitter and unpleasant pill. The capping rules and regulations in the Bill are more unpleasant, more manipulative and more vicious than anything ever proposed by a Conservative Secretary of State, but, as Liberal Democrat Members have pointed out, they may be in the hands of a Conservative Secretary of State post-election.

I am tempted to suspect that the restriction of discussion on the Bill by the guillotine motion may be seen as a plus point for the Labour Whips because I am convinced that not only people in local government but many Labour Back Benchers are opposed to this double form of capping—or they would be, given half a chance. They recognise the measure as a manifesto about-turn—their manifesto, their about-turn.

No amount of scurrying and huffing and puffing by the Minister for Local Government and Housing in Committee covered the fact that the council tax benefit subsidy limitation is a crude, universal form of capping. Worse than that is the capping of a number of local authorities at a point below the standard spending assessment level. The secondary capping is selective capping; the powers have been renamed reserve powers.

The Department's own explanatory note makes clear just how extensive those powers are in comparison with the current arrangements. There are four such powers. First, the Secretary of State may designate the authority in-year"— meaning the current financial year. Secondly—this is an additional power—the Secretary of State may designate the authority for the following year". Thirdly—this is another additional power—he may set a notional budget requirement to be used for the purposes of comparisons instead of the actual budget requirement to decide if budget requirements are excessive". Fourthly—another additional power—he may designate the authority over a number of years, starting in-year or the following year.

Those powers are more excessive than any that have ever been considered, which is why amendments Nos. 98 and 115 were tabled. The amendments make it clear that the Bill provides for a very heavy-handed form of double capping. No doubt, for spin-doctoring reasons, amendments Nos. 98 and 117 will be rejected, but I can see no reason for rejecting them other than the fear of losing face.

Mr. Patrick McLoughlin (West Derbyshire)

Is there anything in the Bill to prevent a recurrence of what happened in Derbyshire this year? The county was capped for £1 million on a budget of £470 million, and it cost £320,000 to change that. It was the tightest cap ever imposed on a local authority.

Sir Paul Beresford

I thank my hon. Friend for reminding us of that ludicrous situation, which raised a smile, although it was expensive for the people to whom it applied. Under the Bill, however, they could experience three further versions.

Amendment No. 103 refers to council tax benefit subsidy capping, but to only one aspect of it—perhaps the most insidious aspect. A number of local authorities will be capped at a level set below SSA. They are the authorities that set their budgets for 1998–99 below SSA. I realise that the SSA for 1999–2000 has come to mean what Ministers wish it to mean. The local government finance report states that the calculation makes use of information reflecting demographic, physical and social characteristics of each area. That means whatever Ministers wish it to mean at the time. However, for the year 1998–99 the same report defined the SSA as representing an appropriate level of budget requirements to provide a standard level". That means that, having set an SSA that indicates the level of services that they expect and by setting a capping level for council tax benefit subsidy below the SSA, the Government are forcing local authorities to provide substandard services.

For many years the SSA has been accepted as a floor below which various Secretaries of State have sought not to push local government. Now this Labour Government have done precisely that in the case of a number of authorities, including some quite poor ones, such as Brent, Newham and Ealing.

As I made clear in Committee, I oppose the regulations, but I am particularly opposed to the Government's outrageous attempt to hit local authorities by fixing their benefit subsidy level below SSA. Not only will the subsidy limitation mean that the nearly poor are paying for the poor; in the case of some local authorities, the setting of the level below SSA may well impinge to a small degree on the financing of the services that people require and expect. The amendment is designed to bring back the floor below which the Government cannot go—the floor that has always been there, and ought to be there.

4.30 pm

I now refer to amendments Nos. 102, 101, 105, 106, 109, 110, 111 and 114. As I have said, perhaps the most dubious aspect of the capping under schedule 1 is that it allows the Secretary of State to be extensively selective. By that, I mean that the Secretary of State may, if he or she wishes, choose every local authority for capping, or just one.

Careful perusal of the schedule will reveal that the justification for the selection could be genuine, arbitrary or even political. It is also possible for the Secretary of State to pick addictively on a particular authority, or a number of particular authorities, over one or a number of years.

The intention of the amendments, which may be technically flawed, is to impress on the Secretary of State and the House the subjectivity of the schedule. I suspect that the Minister will tear the amendments apart on technical grounds, but, if the House is aware of the subjectivity, it is possible for changes or amendments at a later stage—in another place, presumably—to return some reasonableness to these exceptionally heavy-handed and subjective capping rules.

Amendment No. 108 would require the Secretary of State, when considering whether to impose capping on a local authority, to compare that authority with other authorities in the same category. The intention is to bring some sense to a potentially unfair approach to specific local authorities.

The response of the Minister of State to the Liberal Democrat-inspired debate on council tax increases on Monday added to my concern. The right hon. Lady was on full bellowing form—her voice was raised and she thumped the Table to emphasise her points.

I specifically refer to column 45 of the Official Report of 22 March. The Minister of State selectively attacked three Conservative councils in London. She explained that the top three increases, in percentage terms, in council tax in London were in Conservative Kensington and Chelsea, Conservative Westminster and Conservative Wandsworth. In percentage terms, she was right. She went on to contrast them with other councils, specifically naming Labour Islington, Greenwich, Hackney and Lambeth, and to say that they were cutting council tax.

If that deceitful approach to the reality of council tax bills as they land on the doormats of London residents is an indication of the way in which the Minister of State proposes to select councils for capping, we will definitely need some realistic changes in the Bill.

It is worth putting the matter into perspective. In mentioning the council tax increases of those three Conservative authorities in percentage terms, the Minister of State paid no regard to the reality of the bills as they were handed out. In pure money terms, at band D, the increases in those three authorities' council tax were average or below average in London, but if one lists the actual council taxes at band D, the four lowest in London are in those three Conservative authorities, plus the City of London.

What is more, in terms of the average council tax paid by residents, Wandsworth council continues the trend of the past 20 years—for two decades, it has had the lowest average council tax not only in London in the country—and that despite the manipulation of the SSA, which has meant that the council has had its centrally distributed funds for the financial year cut by £3 million.

I am bearing in mind the best value aspects of the Bill when I say that Wandsworth council has a reputation for quality services, as shown by the fact that, between 1996 and 1998, it collected the greatest number of charter marks. The council always does well in the Audit Commission performance indicator charts, which will be used for best value.

Perhaps the final accolade is the fact that Wandsworth is a Conservative council in an inner-city area and has a strong majority. It has been backed year after year by popular vote—a popular vote that is given to it because of the combination of its ability to produce quality services, best value services and value for money.

In Monday's debate, the Minister added to her iniquitous attacks by singling out for praise Islington, Greenwich and Hackney. Curiously, she praised them because they had reduced council tax. The reality is that, using her—percentage—terms, they reduced council tax by less than 1 per cent. The situation is even more appalling when one realises that band D council tax for Conservative Westminster and Wandsworth is £230 and £250 respectively, whereas it is £670 for Hackney, £763 for Greenwich and a staggering £792 for Islington. All that those councils could manage was a tax reduction of less than 1 per cent. on taxes that are three times higher than those of the councils that the right hon. Lady chose to criticise.

The point of amendment No. 108 is quite clear. If a Labour Secretary of State decides to pick on Westminster or Wandsworth—as the Minister did on Monday—or on any other local authority, he or she will be required to compare the bills on the doorsteps of residents of that authority with those of other similar authorities. Specifically, Westminster and Wandsworth compare well with other authorities on quality of services, and on the fact that they managed to produce those services at low cost to their residents.

Amendment No. 115 would add the words "and is reasonable" to subsection 52B(7)—which, currently and quite astoundingly, states: In determining categories of authorities for the year under consideration the Secretary of State shall take into account any information he thinks is relevant. The subsection must be brought back within reason; hence, the amendment to add the words "and is reasonable".

Hon. Members will see that that catch-all subsection would enable the Secretary of State to be selective, if he or she wishes, in an extreme and unreasonable manner. It would be quite possible, for example—to develop the point that I was making on the previous amendment—for the Secretary of State to select any authority whose name began with "D" and ended in "ty", or began with "W" and ended in "th".

Amendments Nos. 108 and 103 were tabled specifically to be helpful amendments, and are intended to bring a little fairness and a tiny bit of reasonableness to a Bill which currently would enable the Secretary of State unreasonably to savage individual local authorities as he or she saw fit.

In Committee, the hon. Member for Milton Keynes, North-East (Mr. White) described an interesting situation in which his local authority decided to set council tax by reference to a referendum of local people. I realise that such an approach could be heavily flawed, according to the nature of the question and the composition of the electorate—whether it comprises those who pay and receive, only those who pay, or only those who receive.

Such referendums, however, offer an interesting prospect. If the Secretary of State came blundering in, treading on the sensibilities of local people—who might want and could then vote for specific services, at a specific price, performed in a specific manner, and, therefore, at a specific cost—the Secretary of State would have to leave that local authority alone. In essence, assuming that it was a fair and above-board referendum in which the cases for and against were quite clearly put and more than 50 per cent. of the potential electorate voted, the electorate's wishes would have to be heeded, over and above the Secretary of State's desire to step in and apply capping. I am sure that most hon. Members would think that such a suggestion is not unreasonable, subject to the establishment of various standards.

Mr. James Gray (North Wiltshire)

Has my hon. Friend noticed that, such is the Labour party's commitment to local government and interest in the Bill, that there is not one Labour Back Bencher in the Chamber?

Sir Paul Beresford

Yes, I had noticed that. I hope that they are watching the debate on television. Much of what we are saying today hurts them. It relates to the very substance of the belief of most Labour Back Benchers. I hope that they are watching so that they can ponder on that when they come to vote.

In summary, this group of proposals, including new clause 6, seeks, in a generally helpful way, to bring some reasonableness and reality to the vicious and bitter core of the Bill.

Mr. Adrian Sanders (Torbay)

I shall speak to amendments Nos. 1, 84 and 85. I shall also deal briefly with amendments Nos. 84 and 85.

Amendment No. 84 removes the subsection on commencement. It appears to have the same effect as our amendment No. 39, tabled in Committee, in that it delays for a year the implementation of council tax benefit subsidy limitation. Amendment No. 85 seeks to remove the Government's amendment, also tabled in Committee, introducing modifications for the financial year 1999–2000. Both amendments concern the iniquitous council tax benefit clawback proposals.

The council tax benefit subsidy limitation scheme is designed to limit the amount of council tax benefit subsidy paid to local authorities if they levy a council tax increase that the Government regard as excessive, irrespective of whether the increase was due to the local authority or to adverse changes in Government grant. The penalty works on a sliding scale: a council that increases its bill by 5 per cent. will have to find one eighth of the additional benefit bill, while one that increases its bill by 8 per cent. will have to find the entire additional amount. As a result, bills will have to rise still further, bringing more people into the benefit system. Councils with a very low proportion of people on council tax benefit will experience minimal effects, but for those with a large number of people on council tax benefit the impact will be extensive, forcing them to impose high council tax increases or to cut services or both. It will result in the poorest areas being hit the hardest and in council tax payers meeting the cost of national welfare benefits.

The scheme may result in an authority paying at or even below the standard spending assessment—which is what the Government consider it needs to spend to provide a standard level of service—and still losing council tax benefit subsidy. Although parish and town councils are not included in the scheme, the effects of their decisions may lead to districts losing council tax benefit subsidy. Another effect is that council tax collection and the collection of poll tax arrears in one year may affect an authority's council tax benefit subsidy limitation threshold in a subsequent year.

Mr. Paul Burstow (Sutton and Cheam)

My hon. Friend referred to the fact that the precepts that parishes might set can affect district councils. Does he know whether the Government have made further progress in tracking down the parish councils, as I understand that in Committee they were unable to supply a list?

Mr. Sanders

I hope that the Minister will be able to respond to the important question posed by my hon. Friend.

The view of the Labour-dominated Local Government Association is that even if, despite the effects that I have mentioned, the Government still go ahead with the scheme, it should be postponed for a year. That is the purpose of amendments Nos. 84 and 85.

Mr. Gray

Is the hon. Gentleman aware that the chairman of the Local Government Association, the former Labour leader of Newcastle city council, Sir Jeremy Beecham, commented that the council tax benefit subsidy regime would mean the nearly poor paying for the really poor"?

Mr. Sanders

As I have already explained, that is precisely what will happen.

Amendment No. 1 is identical to amendment No. 195, tabled in Committee, although it affects a different line in the Bill. The previous amendment was tabled by the hon. Member for Southampton, Test (Dr. Whitehead), who is in his place. The arguments advanced were that local government had suffered under 18 years of Conservative Government; that the new Government were attempting to rebuild a relationship of trust between local government and central Government; and that although the Government still needed certain reserve powers, they would not need them indefinitely.

4.45 pm

The Liberal Democrats believe that local government suffered under the previous Government. Even some of those from the previous Government admit that. We happily concede that the new Government genuinely believe that they are attempting to rebuild a relationship of trust with local government, but they need to give a date for the phasing-out of capping if they want to establish such a reputation.

Capping should have ended the day after the general election. That is what local councillors expected. Labour councillors thought that it was going to happen, but it has not. We believe that capping should end as soon as possible. Amendment No. 1 would end capping by 2005. Many would say that that is too late. I hope that those who choose to vote against the amendment will do so because they believe that capping should be phased out earlier. Sadly for Labour Members, I do not think that the Government Whips will allow them to put that spin on their vote.

We know what the Minister is likely to say. The Government view has been that capping is needed to defend the national interest. Ministers have argued that they have a responsibility to retain reserve powers to protect local council tax payers. That is a strange argument, because it contradicts what Labour Members said in the House and outside before the election. Labour won many friends in local government for defending local democracy against the Conservative Government's capping rules.

That leads to the second argument for the claimed central Government responsibility to protect local council tax payers. We elect local councillors to run local councils, but, like the previous Government, this Government do not trust the voters to make the right choices—and nor do they trust their councillors to protect council tax payers. Of course, they are right not to trust the electoral system to facilitate a truly democratic result, but the lack of a proportional electoral system is not a good enough argument for retaining the reserve power to cap.

The amendments go to the heart of the relationship between central and local government. Is it to be based on trust in local people and local democracy, or on suspicion and fear of the cap? If the Government are sure that their best value policies for local government will be so successful that capping will fall by the wayside naturally, why not set a date for phasing it out? Even the Conservatives have seen the light on capping. Their leader sees the restoration of the power and independence of local government as an important part of the platform for renewing his party's popularity. I hope that Conservative Members will support our amendments.

Amendment No. 1 would set a deadline of 2005 for the end of capping. It is a sunset clause first proposed by a Labour Member. By accepting the amendment, the Government could demonstrate that they are genuine when they claim to be rebuilding trust between central and local government. It would show that they were confident that best value and other proposals were likely to work as they have claimed. To do otherwise would be to admit that the previous Government were right, even though the Conservatives have changed their views on capping since the election. The politics may be topsy-turvy, but the principle of local people using the ballot box to determine local needs is important, and I urge hon. Members to support it.

Mr. Nigel Waterson (Eastbourne)

I am pleased to follow the hon. Member for Torbay (Mr. Sanders). I was grateful for his interest in the renewal of my party during this brief period of opposition. He was right to draw attention to capping. He referred to the recent comments of my right hon. Friend the Leader of the Opposition to the effect that our policy is to move away from capping. The hon. Gentleman said that the situation was topsy-turvy. It is ironic that while my party is moving away from capping, the Labour party in government is moving to embrace it.

I pay tribute to the excellent and authoritative manner in which my hon. Friend the Member for Mole Valley (Sir P. Beresford) dealt with the amendments, and particularly new clause 6. He was right to talk about a heavy-handed and subjective set of capping rules. From his vast experience, he was able to demonstrate the perverse results of the proposals in relation to individual authorities. He put up a spirited and effective defence of those Conservative-controlled councils which, year after year, have delivered good services at reasonable prices, and are continuing to do so—despite suffering under the new regime.

New clause 6 is a novel and exciting concept; I suppose we must call it the Milton Keynes clause. I am not saying that I necessarily endorse the Milton Keynes experiment, but it has attractive features that should make all of us take stock of how we approach council tax, local government spending and finance and—above all—capping. From that point of view, it has some attractive features.

We cannot allow local councillors or any elected people to abdicate responsibility entirely. Why elect local councillors at all if they are not there to make the big decisions? Surely local people should have a voice; whether through their elected representatives every year—as tends to be the case in local authorities such as mine—or slightly less often, or possibly through the limited use of local referendums, as happens in Milton Keynes.

Mr. Gray

Does my hon. Friend agree that the point about the Milton Keynes experiment was that it was a matter not of the council and the people, but of the Secretary of State and the people? The people of Milton Keynes decided to allow their council tax to rise by more than the Secretary of State would have allowed it to rise under the capping regulations—thereby fundamentally undermining the capping regulations.

Mr. Waterson

My hon. Friend is correct. The hon. Member for Torbay said that if the measure is not to have a sunset provision, it is equally valid to argue for another way of ameliorating the effect—in this case, by letting local people have a voice. I hope that my hon. Friend the Member for North Wiltshire (Mr. Gray) will have the chance to develop that point in the debate.

There are wider issues—not least the promises made not just to local government, but to the British people before the election. In its 1997 manifesto, Labour promised the abolition of "crude and universal capping". It is fair to say that that was met with almost universal approbation throughout local government. When the Government announced their provisional caps for 1998–99 in December 1997—and subsequently capped Derbyshire county council—they confirmed that 1998–99 would be the last year of universal capping.

It is a feature of the Government that not everything in the manifesto comes to pass, and that not everything that comes to pass was in the manifesto. In Committee, the Minister conceded that the proposals were not in the manifesto.

The Minister for Local Government and Housing (Ms Hilary Armstrong)

Not true.

Mr. Waterson

If the Minister wants to correct what I have said, I will happily give way.

Ms Armstrong

It was clear in the manifesto that in abolishing crude and universal capping, a Labour Government, if elected, would retain reserve powers. We have done that. Council tax benefit subsidy limitation is not capping.

Mr. Waterson

I do not necessarily disagree, save to say that to describe the powers as reserve capping powers is to stretch the word "reserve" significantly.

In Committee, the hon. Member for Taunton (Jackie Ballard) put it to the Minister that the proposal to have council tax benefit subsidy limitation was not in the Labour manifesto. When my hon. Friend the Member for North Essex (Mr. Jenkin) pressed the point, the Minister rightly—it is a subtly different point, and it is important to get it right—said: No, it was not. However, she continued, ever the mistress of understatement, the Government are doing several things that go beyond manifesto commitments."—[Official Report, Standing Committee B, 23 February 1999; c. 465.] I think, however, that she has claimed public support for the measure in the run-up to the general election, which cannot be right.

Sir Paul Beresford

The Minister is right about the reserve powers, which relate specifically to the provisions on subjective capping, but my hon. Friend is right when he talks about crude and universal capping, which applies to the council tax benefit subsidy limitation—or capping, by any other name.

Mr. Waterson

I am sure that the Minister and I will both be relieved to be right, but on different subjects.

It is worth repeating the powerful comment of the hon. Member for Normanton (Mr. O'Brien). It expresses in words that I could not find the extent of the sense of betrayal felt not only in local government but in Labour-controlled local government. He said: If a council in the poorer group of local authorities tried to increase its council tax over its budget requirements to sustain services, the application of the council tax benefit subsidy limitation scheme would be devastating because of the clawback of the rate support grant."—[Official Report, 4 February 1999; Vol. 324, c. 1152.] That is absolutely right. As my hon. Friend the Member for Mole Valley said, the nearly poor would be subsidising the poor in some areas.

Before, we had crude and universal capping, which was bad—there is an element of "Animal Farm" about this—and now we have what some of the boffins call refined capping, which is good. It is really a question of what one calls it. Capping is the policy that dare not speak its name. The word "capping" does not even appear in the title or in other parts of the Bill, as has been pointed out in an amendment.

I did not have the pleasure and privilege of serving in Committee on the Bill, but I appeared for the official Opposition in the Second Standing Committee on Delegated Legislation when we considered the crucial statutory instrument that underpins the Bill. Any casual observer reading the title of the instrument would not immediately recognise it as an attempt to bring back a form of capping. It is the Local Authorities (Alteration of Requisite Calculations) (England) Regulations 1999. The title does not give much away.

That measure, along with the part of the Bill that relates to it, does not have a friend in the world. I put it to the Minister in Committee that not one authority or organisation connected with local government had a good word to say about the proposals. At the last count—the Minister is welcome to correct me if the figure has gone up—129 councils and groups of councils had expressed their opposition to it.

The point was well made by my hon. Friend the Member for Mole Valley and other right hon. and hon. Friends in Committee that the proposals act in a perverse fashion. Why? Because the highly geared local authorities are those most affected. For example, Mole Valley would be affected 10 times less by the regulations than Liverpool, Hackney or Newham. Indeed, it is a pity that Labour Members who represent the areas that will be seriously affected cannot even be bothered to come to the Chamber to listen to the debate. I have given up hope of their seeking to participate, but they could make the effort, on behalf of those who send them here, to listen to the problems that they are likely to have to face.

5 pm

Mr. Bernard Jenkin (North Essex)

They have been sent away.

Mr. Waterson

My hon. Friend may be right. It was pointed out in the Committee considering the regulations that 19 of the 22 poorest councils would be hit the hardest and the hon. Member for Sutton and Cheam (Mr. Burstow) said that the main burden will fall on people in property bands A and B.

I will not detain the House today with a detailed discussion of the formulae and the calculations—

Mr. Burstow


Mr. Waterson

I am open to persuasion. Suffice it to say that the Local Government Association got it right when it said: The scheme will impact unfairly on different parts of the country … the worst hit being those with the highest proportion of low value property and the highest percentage of benefit recipients … It will be felt hardly at all in prosperous areas of the South East. It will have much more of an impact in inner London and on Merseyside. In that sense, I am not speaking on behalf of my constituents in Eastbourne or for my hon. Friends' constituents in other parts of the south-east: we are speaking for the constituents of hon. Members who represent the worst affected areas. It is worth listing them because they include Liverpool, Hackney, Tower Hamlets, Manchester, Newham, Islington, Lambeth, Waltham Forest, Knowsley and Southwark.

Mr. Oliver Heald (North-East Hertfordshire)

All Labour.

Mr. Waterson

As my hon. Friend says, those authorities have one thing in common: they are controlled by the Labour party or return Labour Members of Parliament. Where are their representatives during this debate?

Ms Armstrong

What about being non-partisan?

Mr. Waterson

If the Minister wishes to intervene, she knows that I am generous about giving way, but she must not keep up a running commentary during my speech.

As I said in the Committee considering the regulations, the disparities will get worse in future. The LGA put it graphically: the scheme could become the thin end of a very unpleasant wedge. A well-behaved authority that tries to do well under the regulations will not get any benefit. From the Government's point of view, it is a win-win situation. An authority cannot prise more money out of the Government by doing better than expected under the regulations.

Mr. Sanders

Does the hon. Gentleman agree that this is another example of a stealth tax that will shift the burden of taxation on to council tax payers?

Mr. Waterson

I am delighted that the hon. Gentleman has caught up with the fact that this Government like to do things by stealth. Perhaps one of his more elevated colleagues would care to raise that in one of the Cabinet Committees in which they are involved.

An article in the Local Government Chronicle stated: One of the starkest examples of how the scheme has a different impact across the country, despite built-in safeguards, is that of Liverpool City Council and Wokingham DC. It goes on: Based on each council exceeding the guideline amount for subsidy limitation by 1 per cent. of their Standard Spending Assessments, Liverpool would lose £926,000 and Wokingham would lose just £29,000. That is incredible.

Mr. Burstow

The hon. Gentleman is right to raise council tax benefit subsidy limitation. However, does he accept that the regulations that the Government used to introduce it were based on powers established in the Local Government Finance Act 1992, which was enacted by a Conservative Administration? They also built on the principle of council housing benefit clawback established by the previous Government.

Mr. Waterson

The hon. Gentleman demonstrates the enormous benefit of never having been in power and of having no hope of it. It is always someone else's fault. It would perhaps be kinder to say that the hon. Gentleman implies the benefit of sunset provisions in regulations. If there had been such a provision in 1992, we would not be here today. Of course, we would not be here today, either, if the Government had not pulled stumps last night.

The Bill has the effect of reintroducing capping, although we may not breathe that word. The handful of Labour Members who are here, and any watching on television, must realise that it introduces capping in all but name. I hope that those whose constituencies are most seriously affected will say something, if not to the House, at least to their constituents, to justify their support for the Bill. I hope that some of them will—despite the pressure of the Whips—think twice about supporting the Bill.

My hon. Friend the Member for Mole Valley gave a good summary of the intent and purport of several amendments. Amendments Nos. 98 and 117 would insert the true name of the Bill and its real effects by referring to limitation and capping. The statutory instrument intimately associated with the Bill could not, as I have said, have had a more misleading title. One has to search for clues as to what the regulations mean.

Amendment No. 1 was tabled by the Liberal Democrats. Bizarrely, though this is not untypical of that party, it suggests that it is all right to have the regulations for a period—say, five years—but equally all right not to have them afterwards. I cannot see the logic of that. Either the system is fair and useful, or it is not.

Mr. Sanders

Amendment No. 1 is identical to one tabled by the hon. Member for North Essex (Mr. Jenkin) in Committee.

Mr. Waterson

I have not said that we would not vote with the Liberal Democrats on that amendment. Anything, however strange, that waters down the effects or the time scale of the regulations must be worth supporting.

Amendments Nos. 101 to 103 would remove the power to distinguish between individual authorities rather than categories of authority. My hon. Friend the Member for Mole Valley was right to say that it is invidious to pick on individual authorities. Perhaps that will happen if their names begin with W and they are successfully run by Conservatives in London. Amendment No. 105 is the same.

Adding the Greater London authority to the provisions was debated, if not in the Standing Committee on the Bill, then in another Standing Committee. My hon. Friend the Member for Mole Valley dealt extremely well with a bizarre result of the regulations, which is that authorities that set budgets below SSA can be caught in the net. We have said before that that is something that Ministers should look at again.

We feel sufficiently strongly about amendment No. 84 wish to press it to a Division at a convenient moment. Amendments Nos. 84 and 85 would take out of clause 29 subsections (7) and (11). That would remove the commencement provision affecting the financial year 1999–2000. In other words, it postpones the provisions, which is entirely right. I agree with what the Liberal Democrat spokesman had to say on that. Apart from anything else, the Local Government Association has been strong and persuasive from the start on the point that these measures are not only wrong and ill thought out but are being introduced far too quickly. It believes that time should be set aside to consult further and consider whether there are other, more sensible ways of achieving the same results in a fairer and more effective way.

Amendments Nos. 42 and 43 seek to limit the scope of the Secretary of State's powers, as so many of the amendments do. The Bill allows him to cap authorities even if they are spending below the SSA set by the Government. That goes beyond what is fair: it is nonsensical. Our amendments seek to restore the more sensible principles that have hitherto underpinned capping. Councils would be allowed to spend up to one eighth more than SSA before being capped. While local taxpayers would be afforded protection, councils would be allowed to increase spending year on year, but would not be given an incentive to do so in order to protect their base for future increases. Again, that is a sensible attempt to amend the Bill.

Amendment No. 108 would oblige the Secretary of State to take into account the council tax levels of authorities in the same category, as my hon. Friend the Member for Mole Valley explained. Thus London boroughs would be compared with London boroughs shire districts with shire districts, and so on.

Amendments Nos. 113, 109, 111, 110, 114, 115 and 117 would ensure that local authorities were treated equally by the capping system. They would require the Secretary of State to determine categories of authority to which various capping criteria would apply and oblige him to announce those criteria in advance. The amendments are intended to reduce the arbitrary nature of the Secretary of State's powers under the Bill, and to provide local authorities with greater certainty that they will not be singled out for special treatment by the Government.

Nothing that the Government have done in their time in office or that Ministers have said during debates on the Bill gives us any confidence that they will be above singling out authorities whose record or complexion they disapprove of and penalising them under the provisions in the Bill. We think that it is too much of a temptation for Ministers in this or any Government to have such powers. The powers should therefore be reduced or watered down.

The LGA speaks for all political complexions across local government. It argued long and hard for a time limit on the capping scheme, which was rejected by the Government. In its latest briefing, it has said that it remains opposed to the present council tax benefit limitation proposals for the reasons that it spells out. It says that the scheme will hit the poorest areas hardest. It is Government's responsibility to meet the cost of welfare benefits. The public's understanding of council tax increases will be further diminished rather than enhanced. That must have a knock-on effect on local democracy. The LGA brief continues: The guideline increases could be seen as a direct substitute for crude and universal capping. The scheme is not justified on grounds of administrative efficiency".

So no one who knows anything about local government at any level has a kind word to say about the proposals. Not only that, but the Bill is being rushed through. The debate is being guillotined today, as we have discussed—it is not a proper matter to return to. How typical of the Government's attitude not only to the Bill but to Parliament in general.

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The LGA, optimistic to the last, is still talking about continuing discussions with the Government as to how the scheme will work, with a view to persuading the Government to drop or modify the scheme in future years. I wish it well, but on the basis of performance to date, I have to say, "Fat chance." It concludes by saying: Although we recognise that they will most probably now pass into law … the Association will continue to oppose the provisions in clauses 28 and 29 to retain capping powers and to localise part of the cost of council tax benefit.

In conclusion, it seems to me from reading the debates in Committee and in the statutory instrument Committee, and all the discussions inside and outside this place, that the Government have comprehensively lost the argument every single time. Why cannot they be big enough, with their vast majority and all the panoply of new Labour and spin doctors, to say, "Yes, we got it wrong. We want to do it differently. We have heard what people say. We have heard the united voice of local government. We are going to look at this again."

Mr. Christopher Chope (Christchurch)

It is a pleasure to participate in a debate opened by my hon. Friend the Member for Mole Valley (Sir P. Beresford), who followed me as leader of Wandsworth council. It is appropriate that we should both be able to point out to the Minister the absurd fallacy of the percentages argument in relation to the weightwatcher. If a weightwatcher weighs 10 stone and increases his weight by 10 per cent., that is an increase of 1 stone. Has he done better or worse than someone of 20 stone who increases his weight by 1 stone, an increase of only 5 per cent? The Minister suggests that someone who is already 20 stone and increases his weight by 1 stone is doing better than someone who is 10 stone and increases his weight by 1 stone. That is absolute nonsense.

My hon. Friend the Member for Mole Valley referred to Wandsworth's 20-year record of achievement. It is appropriate to remind the House of the catalyst that gave the Conservatives in Wandsworth the opportunity to control the council. In its last year in office, the Labour party in Wandsworth moved a guillotine motion to restrict debate in the council chamber. There was such outrage in the borough at the fact that, in an authority of 55 councillors and aldermen, the Labour party had chosen to use the guillotine against 15 Conservatives in opposition that, a few months later, the Conservatives were swept into office. The Labour party lost and, as we know, it is still in opposition in Wandsworth more than 21 years later. Those of my hon. Friends who are concerned about the way in which the Labour Government have promoted the guillotine motion today may take some consolation from the fact that a guillotine gave Conservatives in Wandsworth the opportunity to ensure 20 years or more of successful Conservative control.

Wandsworth never had to resort to referendums because the councillors kept in touch with their electors. They listened and responded and provided quality core services at affordable prices.

Schedule 1, tucked away at the back of the Bill, is a provision of 15 pages which enables the Secretary of State to introduce what is not described as crude and universal capping. In my submission, instead of being crude, it is complex. Instead of being universal, it is arbitrary. Complex and arbitrary capping is even worse than crude and universal capping.

Mr. Desmond Swayne (New Forest, West)

Am I alone in thinking that crude capping was at least predictable? It was clear when the Secretary of State was going to cap, whereas I am mystified as to what the criteria will be under the schedule.

Mr. Chope

My hon. Friend is right. The criteria seem to be that whatever the Minister decides goes. That is an arbitrary use of power; through the ages, dictators have always wanted to take such power to themselves and that is what the Government are taking to themselves in the Bill.

The Government are obsessed with second-guessing councils on whether they are responding to the wishes of the electorate. An experiment being carried out in Dorset is relevant to the proposal in new clause 6 that would prevent Governments from imposing a cap on a council that had carried out a referendum on its council tax proposals and had won the endorsement of its electors. This year, there are extremely large council tax increases in Dorset. Dorset county council has chosen to increase the council tax by 7.9 per cent and the Dorset police authority is increasing its precept by 9.2 per cent.—the third highest amount among county police authorities. In part of my constituency—the East Dorset district council area—the consequence of those two decisions and the council tax imposed by the district council is that the average council tax payer in East Dorset will pay a massive £858 in the coming year. That will be the 11th highest council tax bill for householders anywhere in the country.

That is the consequence of having a county council, district council and police authority that are all Liberal controlled. The sad thing is that the county council had the idea of seeking the endorsement of the electorate for the 7.9 per cent. increase in council tax. One cannot criticise the council for holding consultations but, when it did so, it did not get the answer that it wanted; it ignored the result and went ahead with the 7.9 per cent. increase that it had intended to impose on the people of Dorset all along. Fortunately, new clause 6 does not introduce such a system. It would make it incumbent on an authority to accept the verdict of any referendum, if it wanted to impose a substantial council tax increase.

In Dorset, the council decided to consult a few focus groups, comprising individuals who had been carefully selected—mainly, but not exclusively, by Liberal Democrats. The groups included many people who worked for the council, but who did not live in the area that was to be affected by the increases. It was only after pressure from Conservatives in local government in Dorset that the county council expanded the consultation process to include people who were readers of local newspapers. It was even accepted that people who wrote to county hall would have their views taken into account.

Having gathered all that information, the council then had the gall to reject the verdict on the basis that a large number of those who responded were pensioners. Those people are on fixed incomes and resented the fact that they would have to pay an increase in their council tax that was substantially above the rate of inflation, as a result of which they would have to cut back on other items of household expenditure. At its meeting, the Liberal-controlled county council dismissed those representations from pensioners on the grounds that they did not really count. That was the most appalling snub and insult to a key group in Dorset; they are people who have worked hard throughout their lives and have chosen to spend their twilight years in the county, where they make a major contribution to the community. Why should their views count for less than the views of others?

New clause 6 commends itself to me because it makes it clear that referendums would have to be held on a universal basis, reinforcing democracy in those council areas where the local authority does not keep in regular contact with the wishes of the people. I support the new clause and condemn the way in which the Government are imposing a new capping regime on local authorities. Before the election, the Labour party suggested that it was in favour of expanding local democracy, but in practice the Government are doing the reverse.

Mr. Oliver Letwin (West Dorset)

I shall speak on new clause 6. If the doctrine espoused at a late stage of yesterday evening by probably the most impressive Member on the Labour Benches, the right hon. Member for Birkenhead (Mr. Field)—that there is no point in sitting in the Chamber for a long time because the Government will get their business through anyway—were carried to its conclusion, it would be entirely footling to make speeches in this place. Indeed, the right hon. Gentleman came to that conclusion and suggested that the Opposition should restrict themselves to engaging in what he called a five-year election campaign.

Ms Armstrong

He did not say that at all.

Mr. Letwin

Speaking from a sedentary position—as she has often done throughout these debates—the Minister said that the right hon. Gentleman did not say that. As a matter of fact, the record shows that he did, and, as he is a deep thinker, he may have expressed a view that is widely held by Labour Members. Nevertheless, I retain a touching faith in the parliamentary process. I hope that it is not naive and that it may become more important if the House comes to its senses and realises that it needs to adjust its proceedings, so that it has an impact on Bills rather than merely discussing them.

New clause 6 is a vital clause and the whole House—indeed posterity—will owe a great debt to my hon. Friends who introduced it. I hope, too, that the Conservative party will realise that it owes them a debt, because I hope that the essence of the clause, if not the detail, will be accepted in due time as party policy. The reason lies in the origins of capping. I freely admitted last night, and continue to admit, that capping was a mistaken policy from the start. The then Prime Minister my right hon. and noble Friend Baroness Thatcher and others justified the policy on the grounds that it was impossible to leave to local democracy decisions about the level of expenditure, which could have a macro-economic impact, when most of the people in an area did not even bother to turn up at the polls, and when many people could be hugely disadvantaged by high rates of the then domestic rate because they were among the few people who paid it. My right hon. and noble Friend adduced examples of councils such as Hackney, which had relatively few inhabitants who actually paid any domestic rate after various subsidies were taken into account, and which could raise its domestic rate, more or less without limit, affecting only those voters who never voted for it anyway.

It is important that the Government should realise that the initial argument for capping was a democratic deficit. The new clause would reverse that democratic deficit and ensure that there would not be capping if the majority of the population turned up at the polls and made it clear that they favoured the level of expenditure proposed by the council. In other words, new clause 6 undermines the only logic—although they have never expressed any—that the Government could be using.

I hope that, even if it has no impact on the Government, who obviously do not intend to pay the slightest attention to the debate, the profound significance of the new clause will register on the minds of my hon. Friends on the Opposition Front Bench, because it might form the basis of a highly productive train of thought about local government policy and the relationship between local government and central Government. If the Conservatives became the party that reasserted the need to allow councils, where there is a genuine democratic desire on the part of their population to raise taxes, to do so, we would be using democracy to overcome the inherent deficiencies that were in the system when we first introduced capping.

5.30 pm
Dr. Alan Whitehead (Southampton, Test)

I am fascinated to see the new Conservative doctrine on local government unfolding before our eyes. Is the hon. Gentleman suggesting—judging by his analysis so far, he is—that the referendum principle should apply to anything a council might want to do, regardless of the initial policy of central Government?

Mr. Letwin

No. I shall not dwell on the matter in detail, save to say that there is a specific point that differs from that which applies in respect of anything else that local government does. We are talking about central Government interfering grossly with the actions of a democratically elected authority. Our view is that, where local democracy is shown on a wide scale to yield a certain result, such intervention should not occur.

Ms Armstrong

I: am delighted to be able to respond to a debate on the Bill, and I welcome hon. Members who were not members of the Standing Committee to these deliberations. I was interested in the remarks of the hon. Member for West Dorset (Mr. Letwin). I welcome his conversion to democracy that is not limited to four-yearly elections, and his recognition of the ideas that the Government set out in our White Paper to encourage far more public consultation, which are at the centre of all our proposals. Indeed, the draft Bill presented today includes specific proposals on referendums on the form of governance used in localities.

New clause 6 would impose limitations on the use of the reserve powers so that they could not be used following a referendum in which a simple majority had endorsed the council tax and at least 50 per cent. of the electorate had voted. The endorsement by local people of an authority's budget would be consistent with our modernising agenda and our drive to encourage local authorities to engage the local community more effectively; and such consultation or endorsement may influence any decision on whether to use our reserve power. However, a referendum is only one form of consultation that a local government body might choose to undertake, so we do not think it appropriate to put referendums into the Bill as the sole form of consultation to be used.

This morning, I met members of a citizens panel that is used effectively by the local authority. They were adamant about the importance of their ability to debate issues and to form an understanding of the complexities with which councils frequently have to deal. They are considering ways of ensuring that other people in their area do the same. Although they welcomed our proposals on referendums, they wanted to maintain the use of other forms of consultation.

The Bill already allows the Secretary of State or the National Assembly for Wales to determine categories of authorities taking into account any information considered relevant. The extent to which a local authority has taken steps to consult and involve its local community may well be considered relevant information for that purpose, and I hope that it will be. Conservative Members have referred to the referendum in Milton Keynes. I saw my hon. Friend the Member for Milton Keynes, North-East (Mr. White) in the Chamber a short while ago, but he has gone now. The Bill allows deliberations such as that to have an influence on the Government, whereas existing legislation passed under the Conservative Government, does not allow us to take into account such consultation, because it cuts out any such considerations. It is precisely because we want such considerations to be part of the process to decide whether or not capping takes place that we have introduced the Bill in its current form.

Mr. Sanders

Does the Minister accept that an expensive full referendum of all of the people is not the only way in which a local authority could go about public consultation, and that focus groups might suffice to test the public's views on what was needed?

Ms Armstrong

I have spent about five minutes saying that other forms of consultation are important and that central Government should not, in the Bill, restrict an authority's choice of the form of public consultation it wants to employ. Consultation should be thorough, but different methods or even a combination of methods may be appropriate at certain times.

Over the next few years, wide-ranging reform and modernisation of local government will take place, so it is impossible to predict how central Government will use their reserve powers in future. We hope that we do not have to use them—indeed, we have constructed the powers with that hope in mind—but we need the flexibility to respond to changing circumstances in future years.

Mr. Swayne

Will the Minister give way?

Ms Armstrong

The hon. Gentleman was not a member of the Standing Committee, so it is right that he, as a Member of Parliament, should attend these debates on the Bill. As was spelled out clearly in the White Paper, we are trying to provide for a more flexible relationship between central and local government, so that local government has greater control. Only when a local authority is clearly out of step with local people's interests and flouting the national interest shall we intervene, but we need the flexibility provided by the Bill to do so. Having explained that, I am happy to give way to the hon. Gentleman.

Mr. Swayne

Will the right hon. Lady acknowledge that, precisely because of the lack of predictability that she describes, it is proper to insert in the Bill the use of a referendum as a decision-making mechanism—not as a means of consultation, but as a proper means of making a decision and holding the Government to account?

Ms Armstrong

The idea is to hold the council to account through a referendum, but I shall let that pass.

Mr. Burstow

To return to the question of different forms of consultation, we welcome the Government's openness on the range of methods of consultation that could be used. However, in considering what is relevant, will the Secretary of State adopt different views on the various forms of consultation and give different weighting to each? Will he give different weighting from one year to another? We need to know that, and so do local authorities. If the Secretary of State can accept as relevant one local authority having consulted a focus group or held a referendum, but completely disregard the same actions taken by another local authority, the system of consultation will fall into disrepute.

Ms Armstrong

We have to make sure that the consultations carried out are those that have enabled the widest group of people to make representations, and that they have been carried out in a clear, straightforward and honest way. The hon. Member for Torbay (Mr. Sanders) will know that I made it clear in Standing Committee that the Government would have to take into account, for example, the nature of the questions asked and the turnout in a referendum. Those are matters to which we would have regard in considering whether there had been a genuine attempt to engage with local people in coming to the decisions that were taken. We would want to see that there had been that full engagement and that the council had taken an honest approach to consultation and any more direct decision taking that it was offering to the public.

Mr. Sanders

Will the right hon. Lady give way?

Ms Armstrong

I want to facilitate debate, but I do not want to be accused of taking up too much time.

Mr. Sanders

I appreciate the Minister giving way again. We are dealing with an important point. Is she saying that it is not the quantitative but the qualitative value of the consultation that will be taken into consideration?

Ms Armstrong

I think that I have expressed our approach as fully as possible. I would not accept one focus group. Someone may tell me, "This is a very high-quality focus group," but I would not think that that was the basis for a high-quality consultation exercise. However, I do not want to be pushed into being so rigid as to say that, for example, a rural area that had developed a good devolved system of involving local people had to proceed in a certain way. Clearly, such an area would want to act in some respects in a different manner from an inner-city authority.

I do not want to be pushed into a position where we in central Government determine the method and local government feels that it has to get through our hoops. I want local government itself to be serious about how it consults and engages the public on one of the most important decisions that it has to take, which is the level of council tax that it will be setting. That is inevitably closely linked to the best value aspects of the Bill.

We want the flexibility to be able to respond to changing circumstances. We do not wish to restrict the principles that could be implemented. The hon. Member for West Derbyshire (Mr. McLoughlin), who is also not in his place, pressed the hon. Member for Eastbourne (Mr. Waterson) on what would happen to Derbyshire. Had the Bill been in place, we could have brought in representatives of Derbyshire county council, talked to them and made it clear that in our view what they had done was excessive, but that we did not want to subject the authority to re-billing. We could have made it clear that we were giving them notice that if they did not take account of our position in the following year, the council would be designated and that council tax capping would be implemented.

That, to me, seems to be the right sort of flexibility between central and local government. Far from being more draconian, it involves engaging in mature debate with local government on the basis of clear criteria and recognising that local government is grown up. It would be giving local government the chance to amend what it is doing in future budget setting so that it can come within the national criteria of which it should be taking account.

I move on to amendments No. 98 and No. 117, which seek to change the heading of clause 28 and the heading of part 2 of schedule 2 so that they read: Regulation and Limitation (Capping) of Council Tax and Precepts". It is sometimes helpful for Opposition Members to suggest amendments to improve Parliamentary Counsel's drafting. However, we take the view that the regulation of council tax that is referred to in the heading includes the new reserve powers and the limitation of council tax benefit subsidy. As one word is to be preferred to four, we prefer to leave the drafting as it is.

5.45 pm

As I have said before, council tax benefit subsidy limitation is not capping through the back door. Authorities can set budgets above the guidelines if they wish, provided that they do not set budgets that are considered excessive and would require the use of the reserve power. In fact, four out of five councils in this budgetary round have set increases that are different from their guidelines. I believe that they should be able to continue to do that. The confusion of Opposition Members about capping and council tax benefit subsidy limitation is not helpful to councils when they are seeking to set their budgets. I believe that the restrictions that are identified in the amendments are unnecessary and I hope that the Opposition will not press them.

Amendment No. 1 would put a time limit on the use of the new reserve powers to limit council tax increases, ending their use after 1 April 2005. Official Opposition Members made it clear in Committee that they would re-table their amendment so that it might be debated on the Floor of the House. Liberal Democrat Members made it clear in Committee that they opposed any capping of local authorities' budgets. The official Opposition are still somewhat unsure about where they are going in this instance. However, I welcome the confessional conservatism on the Opposition Benches. I often feel that we should be here as members of the cloth taking the real confessions of Conservative Members. I have a deep respect for confession.

Sir Paul Beresford

On confessions, I would like the Minister to be selective and subjective.

Ms Armstrong

I accept that the hon. Gentleman does not want to see the end of capping and is not one of the confessional Conservatives.

The Liberal Democrats made it clear this week that they think the Government have no role to play in protecting local taxpayers from irresponsible increases in taxes. I happen to disagree. The Government disagree, and we made that clear in the Labour party's manifesto. We are putting our money where our mouth is on the basis of that manifesto. The Government have a role to play and we cannot shirk our responsibilities. I made it clear in Committee—I think Opposition Members listened but did not agree—that these are reserve powers and we will hold them in reserve.

As I have been at pains to emphasise, we are working in partnership with local government to improve and modernise it. We therefore hope and expect that we will use the reserve powers increasingly rarely, and not at all by the year 2005, if not earlier. However, we cannot rule out the possibility that some local authorities may decide to act irresponsibly. If they do, we need to be able to protect their local taxpayers. For that, we need to retain the reserve powers. I ask Opposition Members to withdraw the amendment.

Amendments No. 101, 102, 105 and 106 would provide that the factors referred to by the criteria used to decide whether the budget requirement is excessive for the council tax benefit limitation scheme must apply to categories of authorities and not to different authorities. I acknowledge that the hon. Member for Mole Valley (Sir P. Beresford) is rather frightened that we would be partisan. I hope that that is not because of his experience of exercising powers in the past. I can assure him that we wish to be anything but partisan. Indeed, the list that was read out by the hon. Member for Eastbourne (Mr. Waterson) demonstrated clearly that we are not partisan. I would say to Opposition Members that the subsidy limitation kicks in only as a result of a local council's decision, not a Government decision. Many of the councils that the hon. Member for Eastbourne identified have taken decisions that bring them in well below the guideline. They have taken that decision and, therefore, their council tax payers will not suffer in the way that he mentioned because they have taken decisions that keep them outside the guideline.

Mr. Waterson

The right hon. Lady correctly makes the point that councils can make individual decisions to try to protect themselves from those provisions, but that is a separate matter. Given that we are all in confessional mode, is she now admitting that the 10 councils whose names I read out, most of which are Labour controlled, are most likely to be affected on the basis of the calculations?

Ms Armstrong

We are getting into difficult territory. I am not of the Catholic faith and confession is not part of my good Methodist tradition. I am trying to tell the truth, which is that it is up to the council to decide its council tax levels. If it exceeds a guideline level, we expect it to share with national taxpayers the burden of council tax benefit. The councils in the list that the hon. Gentleman read out have overwhelmingly decided not to exceed the guideline.

Sir Paul Beresford

The Minister is carefully glossing over the fact that a council's decision on the level of its council tax for a particular year may be related to its SSA and revenue support grant, which are in the Government's hands.

Ms Armstrong

Of course I acknowledge that. However, given that this year, all councils received at least as much as they did last year, and that the increase in the overall Government grant to local authorities through RSG and the uniform business rate was higher than the hon. Gentleman was ever able to deliver, his point is a little bogus.

We used the same criteria and factors for all authorities. However, some authorities thought that we should have used different criteria and factors for different authorities, and they made representations to us to that effect. Some district authorities, for example, thought that they should be treated differently from counties because districts are responsible for collecting arrears of community charge, and that affects the level of council tax set in districts but not in counties. Other authorities argued that particular individual circumstances applied to them and that those should be taken into account.

It is possible that in future years there might be good reasons for differentiating. There may be an argument for treating an individual authority differently because of its particular circumstances. We discussed that in Committee. In accordance with normal principles, the Secretary of State would be required to act fairly, but fairness may require different treatment. That is one of the problems with the working of the current law. We need to have the ability to act accordingly and respond to particular needs in exceptional cases. We would not be able to do that if we accepted the amendments, so I ask hon. Members not to press them.

Amendment No. 103 seeks to give local authorities that budget below SSA protection from the council tax benefit subsidy limitation scheme, where the criteria refer, as they do for 1999–2000, to the budget for the year beginning in 1998. Conservative Members seem to have forgotten the principle underlying that scheme. Perhaps I should remind them of it.

When council tax rises, so do the costs of council tax benefit, and that cost is borne by the local taxpayer. Where there is a large increase in council tax, we do not believe that the national taxpayer should pay for the costs arising from those local decisions, and that is the aim of the scheme. The national taxpayer will continue to bear significant costs, but the scheme would limit them.

Mr. Burstow

That provokes a significant question about the application of that principle. The Secretary of State for Education and Employment has been writing to local authorities, urging them fully to spend their education SSAs. In doing so, some authorities, at least in principle, could exceed the guideline and, as a consequence, face the Minister's wrath and have benefit clawed back. Surely that is wrong because it sends the wrong signal to councils that the Government want to spend on education.

Ms Armstrong

I am afraid that the hon. Gentleman is wrong. This year's criteria allow an increase of either 4.5 per cent. or an amount commensurate with the increase in SSA. An increase in SSA that is higher than 4.5 per cent. is accounted for.

Sir Paul Beresford

Will the right hon. Lady give way?

Ms Armstrong

No. The hon. Gentleman is just enjoying himself again.

I assume that the purpose of amendments Nos. 84 and 85 is to prevent the scheme applying for 1999–2000. As I have already explained several times, the clause simply provides for regulations that will require major participating authorities exceeding the guideline to make payments to billing authorities. It does not affect the establishment of the scheme as a whole.

We have already made regulations to change the tax-setting equation so that the local authority contribution to council tax benefit costs is raised from council tax. Councils took that into account when setting their council tax for 1999–2000. The amendments would therefore have little effect, and I ask that hon. Members not to press them.

Amendment No. 42 seeks to exempt from capping councils that budget below their standard spending assessment. We made it clear in the White Paper that we would be taking reserve powers that allowed us to cap in those circumstances.

The new reserve capping powers in the Bill are designed to enable the Government to step in and protect council tax payers if a local authority increases its council tax unreasonably. Standard spending assessments are a simple measure that the Government use as a basis for distributing the revenue support grant. They have no more significance than that. It follows that the relationship between a council's budget and its standard spending assessment has no bearing on whether a particular year's increase is deemed to be excessive.

We need only consider some councils' behaviour in setting council tax rates for 1999–2000 to realise that. South Cambridgeshire has increased its council tax by 175 per cent.; Tewkesbury's increase is 49 per cent.; and Wandsworth, which Conservative Members have mentioned, has made a 21.5 per cent. increase. All those councils are budgeting below SSA, but making large increases in council tax.

Sir Paul Beresford

The Minister has touched on a point on which I should like clarification. The significance of council tax increases must lie in the increase in money rather than the percentage increase. When the Minister considers her restrictions, will she examine percentages or money?

Ms Armstrong

I am interested that the hon. Gentleman intervenes on that point. Perhaps he would have a word with the hon. Member for Christchurch (Mr. Chope), who was complaining that Dorset council did not take account of people on fixed incomes who are affected year on year by the percentage increase. That is why we seek to have the power to impose restrictions.

I am not pre-empting any decisions that will be made this year, but it is reasonable that the Government should have the power to intervene if the level of increase makes it necessary. People would think that we were strange if we did not seek such a power. It is important that the Government take seriously their responsibility to local taxpayers, and we shall continue to do so. I hope, given those explanations, that hon. Members will withdraw that amendment.

Amendment No. 43 is designed to exempt from capping any council that spends less than 12.5 per cent. above its standard spending assessment. The Conservatives seem to be trying to reintroduce their policy of capping councils that budget at more than 12.5 per cent. over SSA. This is another amendment that demonstrates the schizophrenia of the official Opposition, with some Opposition Members being confessional and some not. However, there is a slightly different twist—no authority budgeting below that level will be capped. That is a change from the situation when the Conservatives were in power, but I suspect that that is where they got the figure of 12.5 per cent. Most of the authorities that they capped would have been exempt under this principle.

6 pm

Standard spending assessments are no more than a measure that the Government use to distribute revenue support grant. Our new reserve capping powers are designed to protect council tax payers. We are not prepared to shirk our responsibility. The amendment would remove from two thirds of councils the possibility of Government intervention. That is not what people want.

I assume that amendment No. 108 is intended to make it difficult for the Secretary of State to apply the reserve powers to local authorities with a low band D council tax, and to limit him to using his reserve powers in relation to those authorities with the highest band D council tax within a category. We have had this debate before. I do not understand what Opposition Members are trying to achieve. Would they be happy for such authorities to make massive increases in their council tax, to the detriment of the council tax payers in their area? We are not prepared to accept that. Again, I ask hon. Members not to press the amendment.

Amendments Nos. 113 and 114 would prevent the Secretary of State from determining categories of authorities, and thus from applying different sets of principles to each category. We have discussed this on several occasions. I used the basis of the argument in response to a previous amendment, so the House understands the Government's view. We want to make sure that we move at the pace of the best, and that we are not held back by the worst, which would have been the effect of the sunset clause that the Opposition moved yesterday. We want to give powers and opportunities to the best. We do not want to go down the rigid path towards which the Opposition are pushing us through these amendments.

Amendments Nos. 109, 111 and 110 would require the Secretary of State to determine categories of authorities. That rather contradicts some of the arguments that we have heard. I do not believe that the amendments would be helpful. The Secretary of State may not need to determine categories. It may be appropriate to apply the same principle to all authorities. We have heard many examples today in which that would not be appropriate. That is why we need flexibility. I hope that hon. Members will not press the amendments.

Amendment No. 115 would limit the information that the Secretary of State may take into account in determining categories of authorities—

Mr. Gray

On a point of order, Mr. Deputy Speaker. I cannot help noticing that the Minister has been speaking longer—32 minutes—than any Back Bencher during last night's debate, about which she complained so much. She said that that was a filibuster. Is she filibustering her own Bill?

Mr. Deputy Speaker (Mr. Michael Lord)

That is not a point of order for the Chair.

Ms Armstrong

I am trying to get through the notes. This is a large group of amendments, and I have taken a substantial number of interventions. I have been responding to the debate. Opposition Members know that they were offered negotiations through the usual channels, but they refused to come and talk about what would be possible. They have created the problem.

Amendment No. 115 is unnecessary. Every Secretary of State must consider the reasonableness of his use of powers granted by statute. 1 cannot think of circumstances in which information that was relevant would not also be reasonable. The amendment adds nothing of substance to the intention of the Bill. It is not needed, and I ask hon. Members not to press it.

Sir Paul Beresford

The Government are adopting the same approach as in Committee—nice words, then comes the crunch. New clause 6 and the amendments were intended not to stop capping, but to ease the pain. I shall therefore press the motion to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 170, Noes 335.

Division No. 130] [6.5 pm
Ainsworth, Peter (E Surrey) Collins, Tim
Allan, Richard Colvin, Michael
Ancram, Rt Hon Michael Corrnack, Sir Patrick
Arbuthnot, Rt Hon James Cotter, Brian
Ashdown, Rt Hon Paddy Cran, James
Atkinson, David (Bour'mth E) Dafis, Cynog
Atkinson, Peter (Hexham) Davey, Edward (Kingston)
Baker, Norman Davis, Rt Hon David (Haltemprice & Howden)
Baldry, Tony
Ballard, Jackie Day, Stephen
Beggs, Roy Donaldson, Jeffrey
Beith, Rt Hon A J Duncan Smith, Iain
Beresford, Sir Paul Evans, Nigel
Blunt, Crispin Faber, David
Body, Sir Richard Fabricant, Michael
Boswell, Tim Fearn, Ronnie
Bottomley, Peter (Worthing W) Flight, Howard
Bottomley, Rt Hon Mrs Virginia Forsythe, Clifford
Brady, Graham Forth, Rt Hon Eric
Brake, Tom Foster, Don (Bath)
Brand, Dr Peter Fowler, Rt Hon Sir Norman
Brazier, Julian Fox, Dr Liam
Brooke, Rt Hon Peter Fraser, Christopher
Browning, Mrs Angela Garnier, Edward
Bruce, Ian (S Dorset) George, Andrew (St Ives)
Bruce, Malcolm (Gordon) Gibb, Nick
Burnett, John Gill, Christopher
Burns, Simon Gray, James
Cable, Dr Vincent Greenway, John
Campbell, Rt Hon Menzies Grieve, Dominic
(NE Fife) Hague, Rt Hon William
Chapman, Sir Sydney Hamilton, Rt Hon Sir Archie
(Chipping Barnet) Hammond, Philip
Chope, Christopher Hancock, Mike
Clappison, James Harris, Dr Evan
Clark, Dr Michael (Rayleigh) Hawkins, Nick
Clifton-Brown, Geoffrey Hayes, John
Heald, Oliver Robathan, Andrew
Heathcoat-Amory, Rt Hon David Robertson, Laurence (Tewk'b'ry)
Hogg, Rt Hon Douglas Roe, Mrs Marion (Broxbourne)
Horam, John Ross, William (E Lond'y)
Howard, Rt Hon Michael Rowe, Andrew (Faversham)
Howarth, Gerald (Aldershot) Ruffley, David
Hughes, Simon (Southwark N) Russell, Bob (Colchester)
Hunter, Andrew St Aubyn, Nick
Jack, Rt Hon Michael Sanders, Adrian
Jenkin, Bernard Sayeed, Jonathan
Johnson Smith, Shephard, Rt Hon Mrs Gillian
Rt Hon Sir Geoffrey Shepherd, Richard
Jones, leuan Wyn (Ynys MÔn) Simpson, Keith (Mid-Norfolk)
Jones, Nigel (Cheltenham) Smyth, Rev Martin (Belfast S)
Kennedy, Charles (Ross Skye) Soames, Nicholas
Key, Robert Spicer, Sir Michael
Kirkbride, Miss Julie Spring, Richard
Kirkwood, Archy Stanley, Rt Hon Sir John
Laing, Mrs Eleanor Steen, Anthony
Lait, Mrs Jacqui Streeter, Gary
Lansley, Andrew Stunell, Andrew
Leigh, Edward Swayne, Desmond
Letwin, Oliver Tapsell, Sir Peter
Lewis, Dr Julian (New Forest E) Taylor, Ian (Esher & Walton)
Lidington, David Taylor, John M (Solihull)
Lilley, Rt Hon Peter Taylor, Matthew (Truro)
Livsey, Richard Tonge, Dr Jenny
Loughton, Tim Townend, John
Luff, Peter Trend, Michael
Lyell, Rt Hon Sir Nicholas Tyler, Paul
MacGregor, Rt Hon John Tyrie, Andrew
MacKay, Rt Hon Andrew Viggers, Peter
McLoughlin, Patrick Wallace, James
Malins, Humfrey Walter, Robert
Maples, John Wardle, Charles
Mates, Michael Waterson, Nigel
Maude, Rt Hon Francis Webb, Steve
Mawhinney, Rt Hon Sir Brian Wells, Bowen
May, Mrs Theresa Whitney, Sir Raymond
Michie, Mrs Ray (Argyll & Bute) Whittingdale, John
Moore, Michael Widdecombe, Rt Hon Miss Ann
Moss, Malcolm Wilkinson, John
Norman, Archie Willis, Phil
Oaten, Mark Wilshire, David
Ottaway, Richard Winterton, Nicholas (Macclesfield)
Page, Richard Woodward, Shaun
Paterson, Owen Yen, Tim
Pickles, Erin Young, Rt Hon Sir George
Prior, David
Randall, John Tellers for the Ayes:
Redwood, Rt Hon John Mrs. Caroline Spelman and
Rendel, David Sri David Madel.
Ainger, Nick Betts, Clive
Ainsworth, Robert (Covtry NE) Blackman, Liz
Allen, Graham Blizzard, Bob
Anderson, Donald (Swansea E) Blunkett, Rt Hon David
Anderson, Janet (Rossendale) Boateng, Paul
Armstrong, Ms Hilary Borrow, David
Atkins, Charlotte Bradley, Keith (Withington)
Austin, John Bradley, Peter (The Wrekin)
Banks, Tony Bradshaw, Ben
Barnes, Harry Brinton, Mrs Helen
Barron, Kevin Brown, Rt Hon Nick (Newcastle E)
Battle, John Brown, Russell (Dumfries)
Bayley, Hugh Browne, Desmond
Beard, Nigel Buck, Ms Karen
Beckett, Rt Hon Mrs Margaret Burden, Richard
Begg, Miss Anne Burgon, Colin
Bell, Stuart (Middlesbrough) Butler, Mrs Christine
Benn, Rt Hon Tony Byers, Rt Hon Stephen
Bennett, Andrew F Campbell, Alan (Tynemouth)
Benton, Joe Campbell, Mrs Anne (C'bridge)
Bermingham, Gerald Campbell, Ronnie (Blyth V)
Best, Harold Campbell-Savours, Dale
Cann, Jamie Gibson, Dr Ian
Caplin, Ivor Gilroy, Mrs Linda
Casale, Roger Goggins, Paul
Chapman, Ben (Wirral S) Golding, Mrs Llin
Chaytor, David Gordon, Mrs Eileen
Church, Ms Judith Griffiths, Jane (Reading E)
Clapham, Michael Griffiths, Nigel (Edinburgh S)
Clark, Rt Hon Dr David (S Shields) Griffiths, Win (Bridgend)
Clark, Dr Lynda (Edinburgh Pentlands) Grocott, Bruce
Grogan, John
Clark, Paul (Gillingham) Hain, Peter
Clarke, Charles (Norwich S) Hall, Patrick (Bedford)
Clarke, Eric (Midlothian) Hamilton, Fabian (Leeds NE)
Clarke, Rt Hon Tom (Coatbridge) Hanson, David
Clarke, Tony (Northampton S) Heal, Mrs Sylvia
Clelland, David Healey, John
Clwyd, Ann Henderson, Doug (Newcastle N)
Coaker, Vernon Henderson, Ivan (Harwich)
Coffey, Ms Ann Heppell, John
Cohen, Harry Hesford, Stephen
Coleman, Iain Hewitt, Ms Patricia
Colman, Tony Hinchliffe, David
Connarty, Michael Hodge, Ms Margaret
Cook, Frank (Stockton N) Hoey, Kate
Cooper, Yvette Hood, Jimmy
Corbett, Robin Hoon, Geoffrey
Corbyn, Jeremy Hope, Phil
Corston, Ms Jean Hopkins, Kelvin
Cousins, Jim Howarth, Alan (Newport E)
Cranston, Ross Howarth, George (Knowsley N)
Crausby, David Howells, Dr Kim
Cryer, Mrs Ann (Keighley) Hughes, Kevin (Doncaster N)
Cryer, John (Hornchurch) Humble, Mrs Joan
Cummings, John Hutton, John
Cunningham, Rt Hon Dr Jack (Copeland) Iddon, Dr Brian
Illsley, Eric
Curtis-Thomas, Mrs Claire Ingram, Rt Hon Adam
Dalyell, Tam Jackson, Ms Glenda (Hampstead)
Darling, Rt Hon Alistair Jackson, Helen (Hillsborough)
Darvill, Keith Jamieson, David
Davey, Valerie (Bristol W) Jenkins, Brian
Davidson, Ian Johnson, Alan (Hull W & Hessle)
Davies, Rt Hon Denzil (Llanelli) Johnson, Miss Melanie (Welwyn Hatfield)
Davies, Geraint (Croydon C)
Dean, Mrs Janet Jones, Barry (Alyn & Deeside)
Denham, John Jones, Helen (Warrington N)
Dismore, Andrew Jones, Ms Jenny (Wolverh'ton SW)
Dobbin, Jim
Donohoe, Brian H Jones, Jon Owen (Cardiff C)
Doran, Frank Jones, Dr Lynne (Selly Oak)
Dowd, Jim Jones, Martyn (Clwyd S)
Drew, David Jowell, Rt Hon Ms Tessa
Drown, Ms Julia Kaufman, Rt Hon Gerald
Dunwoody, Mrs Gwyneth Keeble, Ms Sally
Edwards, Huw Keen, Alan (Feltham & Heston)
Efford, Clive Keen, Ann (Brentford & Isleworth)
Ellman, Mrs Louise Kelly, Ms Ruth
Ennis, Jeff Kemp, Fraser
Fatchett, Rt Hon Derek Kennedy, Jane (Wavertree)
Field, Rt Hon Frank Khabra, Piara S
Fisher, Mark Kidney, David
Fitzpatrick, Jim Kilfoyle, Peter
Fitzsimons, Lorna King, Andy (Rugby & Kenilworth)
Flint, Caroline King, Ms Oona (Bethnal Green)
Flynn, Paul Kingham, Ms Tess
Follett, Barbara Kumar, Dr Ashok
Foster, Rt Hon Derek Ladyman, Dr Stephen
Foster, Michael Jabez (Hastings) Lawrence, Ms Jackie
Foster, Michael J (Worcester) Lepper, David
Foulkes, George Leslie, Christopher
Fyfe, Maria Levitt, Tom
Galloway, George Lewis, Ivan (Bury S)
Gapes, Mike Lewis, Terry (Worsley)
Gardiner, Barry Linton, Martin
George, Bruce (Walsall S) Lloyd, Tony (Manchester C)
Gerrard, Neil Lock, David
Love, Andrew Rowlands, Ted
McAvoy, Thomas Roy, Frank
McCabe, Steve Ruane, Chris
McCafferty, Ms Chris Ruddock, Joan
McDonagh, Siobhain Russet, Ms Christine (Chester)
McDonnell, John Ryan, Ms Joan
McFall, John Savidge, Malcolm
McGuire, Mrs Anne Sedgemore, Brian
McIsaac, Shona Shaw, Jonathan
Mackinlay, Andrew Sheldon, Rt Hon Robert
McNamara, Kevin Shipley, Ms Debra
McNulty, Tony Simpson, Alan (Nottingham S)
MacShane, Denis Singh, Marsha
Mactaggart, Fiona Skinner, Dennis
McWalter, Tony Smith, Rt Hon Andrew (Oxford E)
McWilliam, John Smith, Angela (Basildon)
Mahon, Mrs Alice Smith, Rt Hon Chris (Islington S)
Mallaber, Judy Smith, Miss Geraldine
Mandelson, Rt Hon Peter (Morecambe & Lunesdale)
Marsden, Gordon (Blackpool S) Smith, Jacqui (Redditch)
Marshall, David (Shettleston) Smith, John (Glamorgan)
Marshall, Jim (Leicester S) Smith, Llew (Blaenau Gwent)
Marshall-Andrews, Robert Snape, Peter
Martlew, Eric Soley, Clive
Maxton, John Spellar, John
Meacher, Rt Hon Michael Squire, Ms Rachel
Meale, Alan Starkey, Dr Phyllis
Merron, Gillian Steinberg, Gerry
Michie, Bill (Shefld Heeley) Stevenson, George
Miller, Andrew Stewart, Ian (Eccles)
Mitchell, Austin Stinchcombe, Paul
Moffatt, Laura Stoate, Dr Howard
Moonie, Dr Lewis Stott, Roger
Moran, Ms Margaret Strang, Rt Hon Dr Gavin
Morgan, Ms Julie (Cardiff N) Straw, Rt Hon Jack
Morgan, Rhodri (Cardiff W) Stringer, Graham
Morley, Elliot Stuart, Ms Gisela
Morris, Ms Estelle (B'ham Yardley) Sutcliffe, Gerry
Mountford, Kali Taylor, Rt Hon Mrs Ann (Dewsbury)
Mudie, George
Mullin, Chris Taylor, Ms Dart (Stockton S)
Murphy, Denis (Wansbeck) Taylor, David (NW Leics)
Murphy, Jim (Eastwood) Temple-Morris, Peter
Naysmith, Dr Doug Thomas, Gareth (Clwyd W)
O'Brien, Mike (N Warks) Thomas, Gareth R (Harrow W)
O'Hara, Eddie Tipping, Paddy
Olner, Bill Todd, Mark
Osborne, Ms Sandra Touhig, Don
Palmer: Dr Nick Trickett, Jon
Pendry, Tom Truswell, Paul
Pike, Peter L Turner, Dennis (Wolverh?ton SE)
Plaskitt, James Turner, Dr Desmond (Kemptown)
Pollard, Kerry Twigg, Derek (Halton)
Pond, Chris Twigg, Stephen (Enfield)
Pope, Greg Vaz, Keith
Pound, Stephen Walley, Ms Joan
Prentice, Ms Bridget (Lewisham E) Wareing, Robert N
Prentice, Gordon (Pendle) Watts, David
Prescott, R Hon John White, Brian
Primarolo, Dawn Whitehead, Dr Alan
Prosser, Gwyn Wicks, Malcolm
Purchase, Ken Williams, Rt Hon Alan
Quinn, Lawrie (Swansea W)
Radice, Giles Williams, Alan W (E Carmarthen)
Rammell, Bill Winnick, David
Rapson, Syd Winterton, Ms Rosie (Doncaster C)
Raynsford, Nick Wise, Audrey
Reid, Rt Hon Dr John (Hamilton N) Woolas, Phil
Robertson, Rt Hon George (Hamilton S) Wright, Anthony D (Gt Yarmouth)
Wright, Dr Tony (Cannock)
Robinson, Geoffrey (Cov'try NW) Wyatt, Derek
Roche, Mrs Barbara
Rogers, Allan Tellers for the Noes:
Rooker, Jeff Mr. Mike Hall and
Ross, Emie (Dundee W) Mr. Keith Hill.

Question accordingly negatived.

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