Council Tax (Hansard, 7 January 2004)

§ 3. Mr Andrew Mackay (Bracknell) (Con)
If he will make a statement on the level of council tax in 2003–04. [145886]

§ The Minister for Local Government, Regional Governance and Fire (Mr. Nick Raynsford)
In 2003–04 all councils had an above-inflation grant increase for the first time ever. Given this, we were very disappointed that local authorities chose to raise council tax so substantially with an average increase of 12.9 per cent. That trend in council tax rises is not sustainable and we have made it clear that we expect councils to budget prudently in the coming year with a view to council tax increases in low single figures. We have also made it clear that we will use our capping powers if local authorities persist in unreasonable council tax increases.

§ Mr. Mackay
What does the Minister say to my hard-pressed council tax payers in Bracknell who face a council tax increase next year that will be many times the level of inflation? Does he appreciate that even though an extra £700,000 has been granted as an additional payment because the Government realised that the passporting of money to schools was far too high, there will still be many other costs that Bracknell Forest borough council will have to meet? Those costs, which the Government force on the council, will not allow it to restrict its council tax increase to a modest amount. What is he going to do about that?

§ Mr. Raynsford
I have spoken to the leader of the right hon. Gentleman's council, and made it clear that I expect it to budget prudently and introduce a modest council tax increase. That is entirely possible, because Bracknell Forest borough council has received a grant increase in the current year of 5.7 per cent., which is double the rate of inflation, and will receive in the coming year, following our provisional announcement, an increase of 7 per cent., which is three times the rate of inflation. We expect it to budget prudently.

§ Mr. Bill O'Brien (Normanton) (Lab)
Does my right hon. Friend accept that the majority of local authorities appreciate the way in which the Government have helped local authorities with council tax and benefits? The formula that was recently introduced has helped local authorities considerably, and will he agree to continue to meet SIGOMA—the special interest group of municipal authorities, of which I am chairman in the House of Commons—to discuss further policies and progress on the formula? We do not want to return to the problems of the poll tax, which was introduced in the early days of the Tory Government.

§ Mr. Raynsford
I thank my hon. Friend for his kind remarks about the grant distribution formula. I had an enjoyable visit to his local authority just before Christmas, and was impressed by the steps taken by the new management team and the leader of the council to ensure improved services for people in the area and, indeed, prudent budgeting. I assure him that there is absolutely no question that the Government will go back to the nonsense of the previous Government, particularly the poll tax.

§ Mr. David Curry (Skipton and Ripon) (Con)
Whatever the size of this year's settlement, the Minister will be aware that the Government are still incapable of managing change competently. Is he aware that for many district councils the change in the method of paying rent allowance and council tax benefits, which is now done entirely by grant, and the removal of the population-based revenue support element mean that almost the entire increase in Government grant is swallowed up by the loss of revenue associated with those benefits? A council such as Harrogate will get the princely increase of 35p per inhabitant next year to cover all its additional costs. Does the right hon. Gentleman therefore accept that the safety net proposed by the Department for Work and Pensions is inadequate, and will he strengthen it before councils set their budget? Will he draw the lesson that, yet again, the Government cannot manage change and are simply incapable of joined-up government?

§ Mr. Raynsford
That is somewhat rich coming from the right hon. Gentleman, whose Government had a remarkable record on change in local government finance. I need say no more but, on his specific point, the change from the current framework, whereby local authorities are reimbursed for costs incurred in paying council tax grant and housing benefit, is complex. There are two separate elements, but it is generally accepted that it is sensible to have a single element, and the reform is broadly welcomed by local government. The right hon. Gentleman understands these matters, so he will appreciate that any process of change involves transitional difficulties. The Department for Work and Pensions has proposed a transitional framework, which it is continuing to discuss. I hope that representations from his authority and other authorities with concerns wilm be taken into account—I am sure that they will.

§ Mr. Curry
Last year, the Greater London authority precept was increased by 29 per cent. Given the strictures that the Minister has just repeated about the need to limit increases in council taxes and precepts, and given the fact that he has capping powers over precepts, what figure has he given Mr. Livingstone, his new party friend, for the maximum permitted increase in the GLA precept?

§ Mr. Raynsford
We have told all local authority leaders, including the Mayor of London and the leaders of all London authorities, that we expect them to budget prudently and introduce increases in low single figures. As the right hon. Gentleman knows only too well, we have said that we will use our capping powers if necessary, and intend to do so if authorities are not responsible or prudent. That applies to all authorities, and I remind him that the largest increase in London last year was in the Conservative-controlled London borough of Wandsworth, which increased its council tax by a staggering 57 per cent.

§ Dr. Nick Palmer (Broxtowe)(Lab)
Does my right hon. Friend accept that despite the help in the pre-Budget report, shire boroughs are still having some difficulty because of the changes in the formula? Does he also accept that much of the public resentment related to local government spending is linked to the fact that the 245 council tax is not sufficiently progressive, and that widening the range of bands that councils can impose would be a useful step forward, which many councils would welcome?

§ Mr. Raynsford
First, for the second year running, all district councils in the country are guaranteed an above-inflation grant increase. This is the first time that it has happened, and despite the concerns raised by my hon. Friend and by the right hon. Member for Skipton and Ripon (Mr. Curry) in relation to the transitional arrangements for support for housing and council tax benefit grant, I believe it will be possible for district councils to budget prudently. I am sure they will. Secondly, with regard to the wider issue—the banding system—this is one of the issues that we are considering in the context of the balance of funding review that is currently taking place.

§ Mr. Edward Davey (Kingston and Surbiton) (LD)
In the light of his answer to the right hon. Member for Skipton and Ripon (Mr. Curry), the Minister will know that the Deputy Prime Minister's newly rediscovered friend has published his draft budget, which proposes an increase of 12 per cent. in council tax band D for the GLA precept. Will that level be capped?

§ Mr. Raynsford
I am sure the hon. Gentleman will recall his days on the Standing Committee of what became the Greater London Authority Act 1999, which created the Greater London authority. He knows that the budget is a complex process whereby the Mayor may propose a budget but it is subject to the approval of the assembly. The assembly has not yet discussed the Mayor's proposals. I am sure that its members will want to examine them very closely indeed, and I hope that they will ask searching questions about an increase that certainly does not meet our expectation of low single figures.