Local Government Finance Bill

HL Deb 23 January 1992 vol 534 cc954-68

3.34 p.m.

Baroness Blatch

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Baroness Blatch.)

Lord Williams of Elvel

My Lords, I have to apologise to the House and to your Lordships for the fact that my noble friend Lord McIntosh is not at the moment in his place. I should be grateful if your Lordships would give that point a little consideration. We expected the defence Statement to come after the Private Notice Question but I understand from the Chief Whip's announcement that it is to come later. I very much hope that my noble friend will appear immediately.

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Schedule 5 agreed to.

Clause 5 [Different amounts for dwellings in different valuation bands]:

The Chairman of Committees (Lord Aberdare)

I call Amendment No. 42. If this amendment is agreed to, I cannot call Amendment No. 43.

Lord McIntosh of Haringeymoved Amendment No. 42: Page 3, line 17, leave out subsection (1) and insert: ("(1) The amounts of council tax payable in respect of dwellings situated in the area of any billing authority (or the same part of such an area) shall be in proportion to the rateable value of the property in that area held on the valuation list.").

The noble Lord said: Before I enter into the substance of the amendment I want to register as strong a protest as I can against a statement of the Minister for Local Government and Inner Cities, Mr. Portillo, in the House of Commons yesterday. During oral answers to Questions Mr. Portillo said (at col. 305 of the Official Report)—

Baroness Blatch

I am not certain that the noble Lord is in order. Amendment No. 42 has been called and I do not know whether that opportunity can be taken to talk about a matter that is wholly unrelated.

Lord McIntosh of Haringey

If any Member of the Committee wishes to move that I be no longer heard, that is his privilege. At present, I have something very strong to object to which relates directly to the conduct of this Bill; and I propose to do that.

Lord Hailsham of Saint Marylebone

I beg to move that the noble Lord be no longer heard.

Moved, That the noble Lord be no longer heard. —(Lord Hailsham of Saint Marylebone.)

Lord Stoddart of Swindon

This is a debatable Motion. If people want to waste the time of the Committee before listening to what my noble friend has to say, then so be it. As far as I know, the rules of the House do not preclude any Member of the House in moving an amendment saying what he believes is right in accordance with that amendment—

Lord Graham of Edmonton

And germane.

Lord Stoddart of Swindon

And germane, as my noble friend says, to that amendment. Unless we hear my noble friend we will not know whether what he has to say is germane to the amendment. I therefore hope that if this absurd Motion goes to the vote Members of the Committee on all sides will, in the interests of free speech, vote it down unanimously, or nearly unanimously.

Baroness Blatch

Perhaps I may intervene. My point at the beginning was that I believed that what the noble Lord, Lord McIntosh, was doing was out of order. Amendment No. 42 was called and the Committee would expect Amendment No. 42 to be addressed and not for there to be a continuation of a debate that took place in another place yesterday.

Lord McIntosh of Haringey

In moving Amendment No. 42, which I have done, I propose to speak to Amendment No. 42, but I propose to do so in my own way.

The Chairman of Committees

The Question is that the noble Lord be no longer heard.

Lord Hailsham of Saint Marylebone

With the agreement of the Committee, I beg leave to withdraw my Motion. I say in parenthesis that I had assumed from the way in which the noble Lord, Lord McIntosh, accepted the view of my noble friend Lady Blatch that he was accepting that he could not do so within the terms of the Motion. If he now says that he can, there is no purpose in my Motion.

Motion, by leave, withdrawn.

Lord McIntosh of Haringey

We are concerned this afternoon with a number of individual amendments to the Bill and we are concerned with the issue of the progress of the Bill. As has been stated on a number of occasions during the Committee stage of this Bill and during proceedings on many other Bills, it is the responsibility of the Opposition in this Chamber to produce from the consideration of a Bill the best possible result within a reasonable time. In introducing the amendment I should like to seek the confirmation of the Minister that the timetable for the Bill, which has been a matter for discussion in Committee—it can only be a matter for discussion on individual amendments in this Committee—was agreed between the usual channels. The Government asked me whether six days would be adequate for the Bill and I agreed to the six days which were offered. I wonder whether the Minister will be good enough to agree to that statement.

Baroness Blatch

I am not absolutely certain what I am being asked to agree with. I know that there are to be six days for the Committee stage of the Bill. I also know that a number of noble Lords have thought that rather excessive because it is unusual for the process to take six days. However, I am afraid I was not privy to all the negotiations that took place through the usual channels.

Lord McIntosh of Haringey

That is the Minister's privilege. However, yesterday in another place Mr. Portillo, speaking as a Minister—and therefore I am able to quote him—said: On the question of abolishing the community charge, it is the Labour Party which has done what it can to delay the progress of the Bill through the House and another place". —[Official Report, Commons, 22/1/92; col. 305.] I take the greatest possible objection to a Minister in another place accusing my party of something which is strictly and factually not true and which in any case is completely outwith the rights of Ministers in another place. I suggest to the Committee that it is totally wrong for the Government to make such statements criticising the conduct of proceedings in this Chamber. I shall gladly give way if the Minister wishes to intervene; if not, I shall continue with the content of the amendment.

Baroness Blatch

It is not for me to defend, or otherwise, what was said in another place. I still believe that the matter has nothing to do with Amendment No. 42. However, perhaps I may say that I have no doubt that my honourable friend was doing no more than expressing his surprise, as indeed many people have done, that there are to be six days for the Committee stage. But the fact that it was agreed through the usual channels is not in doubt.

Lord McIntosh of Haringey

The fact is that six days were offered and six days were accepted. If that is some form of apology for the behaviour of the Minister's honourable friend, I accept it in the form that it has been offered.

Amendment No. 42 deals with one of the most important aspects of local government finance and with the credibility of the council tax as an alternative to the poll tax. I remind Members of the Committee that it has always been the Government's position that there was nothing wrong with the poll tax in itself: it is simply that it did not achieve the confidence of the people and they failed to be satisfied that it was fair. There are many reasons for that. But the reason I suggest above all is that the poll tax was seen not to be related to ability to pay, which is a condition not only for the fairness of taxes but for their collectability.

In the Bill before the Committee we have a version of a property tax, combined with a poll tax, which is apparently deliberately designed to be as unfair as possible and to be as far as possible from any system of local government finance which would actually reflect ability to pay. The proposed amendment would replace the provision in Clause 5(1) which provides that the charges in the different valuation bands—and we shall deal with those bands in a further amendment to subsection (2)—shall be assessed according to the proportions set out in the list which, in summary, vary from six to 18; in other words, a proportion of three at the highest to one at the lowest. It will be obvious to the Committee that that in no way reflects the distribution of income in the country.

Even if one were to ignore the extremes of income on the grounds—with which I do not necessarily agree—that there is a limit to which you can tax millionaires or multi-millionaires and those with the lowest incomes are protected from taxation, including taxation by the rebate system, nevertheless the distribution of income in the country bears no relationship to the relatively flat distribution which is proposed in the legislation.

We have before us a proposal that gives very crude bands which do not reflect the differences in income. Indeed, they do not just fail to reflect the differences in income in total; they fail to reflect them in terms of the valuation of property. For example, because we have such crude bands, the situation could arise where two houses with a difference in valuation of only £2,000 could be taxed differently by as much as 20 per cent. or even more, whereas two other houses with a difference in valuation of £20,000 could be taxed exactly the same.

There may be no absolute measure of fairness, but I suggest to the Committee that such a situation will be seen to be unfair and not to reflect ability to pay. Therefore, the system will bring upon itself the same level of incomprehension and reluctance to pay which has been so evident with the poll tax. Mr. Major may say, as he said in the Daily Mail article of October 1990 which was quoted by my noble friend Lord Stallard earlier this week, that the Government have one more opportunity to get it right and if they do not do so this time they will never be forgiven. But I suggest that the opportunity to get it right has not been taken by this legislation and that we are about to embark upon the introduction of a new tax which will arouse the same sort of antagonism, although perhaps not to the same degree, as the unlamented legislation which it replaces. The bands proposed for the council tax do not adequately reflect the differences in property values, let alone in ability to pay.

There are other problems about the proposed bands—and they will be a matter for future amendments—which centre on the fact that in most parts of the country there will not be an even distribution of properties within the bands or an even distribution of households paying different amounts reflecting their ability to pay. What will happen very largely in the North of England is that there will be a concentration of properties in the lowest bands of the eight proposed and in other areas, especially in London, without very great differences as between poverty and riches, there will be a concentration of properties in the highest band. The effect of that, whether it is in Bury, Hackney or somewhere like Chelmsford or Barking and Dagenham, where there is a concentration in the middle band, will be that most people will pay the same. They will perceive that as being unfair and as being closer to the poll tax than any rational system of financing local government.

In turn, that means that people will not believe in the valuation system. Ministers appear to think—or at any rate they claim to whether they do or not—that the fact that there are crude and wide bands means that there will be fewer appeals. They seek to make that a self-fulfilling prophecy by not telling people what their actual valuations will be and where their properties stand within the bands. I suggest to the Committee that the contrary is the case. If there are wide bands, by definition, the difference between one band and another will be worth fighting for. If someone can get 20 per cent. off his council tax by winning an appeal and moving into a lower band, there is much more chance of him wishing to do so rather than appealing against his assessment—as the noble Baroness, Lady Gardner of Parkes, charmingly confessed she did—for the sake of an extra £5 or £10 off the rates as was the case in the old days. I suggest to the Committee that the Government will end up with a system that will be much more litigious than the rating system, although perhaps not quite so litigious as the poll tax.

Another reason why the banding system will not work effectively is that it is based—as became clear at Question Time this afternoon—on a series of valuation figures, and the relationship between individual figures, produced in 1991 which is supposed to be valid for all time. We all know that that is not the case. What is proposed is fundamentally regressive.

It is worth spelling out again what is meant by regressive and progressive, because some people do not seem to realise what is meant. I shall spell it out by example. A flat rate poll tax is regressive. A property tax like the rates is mildly progressive. A property tax like the council tax is mildly regressive, and income tax, whether a local or a national income tax, is progressive. It is especially progressive if there is a higher rate of taxation at higher rates of income. What is proposed is the nearest in the scale to the completely regressive taxation of the poll tax which could possibly be imagined. It is not fair. It will not be seen to be fair. For that reason it will fall, subject to the Government's own strictures. I beg to move.

3.45 p.m.

Baroness Blatch

It is extraordinary that the noble Lord should be so critical of the system proposed in the Bill when he knows that his party, when in office, never faced the pain of a revaluation. That was pointed out by either my noble friend Lord Renfrew or my noble friend Lord Jenkin of Roding. What is even worse, he advocates returning to a system that is already 19 years out of date.

I am sure that this will not be the last attempt by Members opposite to return to the Labour Party's proposal for rates. Amendment No. 42 deals with what I can only presume to be an integral part of the Labour Party's rates proposals. I say "presume" because Members opposite have not been very explicit about the detail. I had hoped today that this Committee might learn what the term "fair rates" actually stands for. Alas, having studied the amendment and listened to the arguments put forward in support, I am afraid I have gleaned almost nothing.

Lord McIntosh of Haringey

Perhaps the Minister will allow me to intervene. I hope that the noble and learned Lord, Lord Hailsham, is paying attention.

Lord Hailsham of Saint Marylebone

I am paying very great attention.

Lord McIntosh of Haringey

The Minister is talking about fair rates. Where in the amendment does she find the words "fair rates"?

Baroness Blatch

I am dealing with the amendment. The noble Lord has been saying that his party has a better system. He used a good deal of his time to criticise the proposed system. The amendment proposes to return us much closer to the Labour Party's fair rates proposals where each house is uniquely valued according to its rateable value. That is to be coupled with some form of income-related system which will require that the details of occupants' incomes be known so as to make individual adjustments to the rates payable.

We have already debated a number of amendments proposed by Members opposite seeking to abandon valuation bands in favour of precise capital valuations. The Committee rejected those amendments as impracticable and unnecessary. The amendment would take us a step towards the Labour Party's proposal of convoluted assessments of valuation based on capital and rental values, repairs and rebuilding costs. All that on an annual basis.

I would remind the Committee however that under the old rating system high value properties faced disproportionately large local tax bills. That is an arrangement which the Labour Party proposes going back to and which is implicit in the amendment. All those people whose income is above the level for reduction or rebate under Labour's proposals will suffer greatly if we are to believe what the noble Lord, Lord McIntosh, has told us about proposals to introduce a form of income tax with the property tax. An interesting question for the noble Lord is: in each household whose income will be taken into account —the liable person and/or everybody who lives in the house? How will that information be collected? Will it be via the Inland Revenue or will local authorities use their assessment of income? Could this be the beginning of a Lib/Lab pact on the issue? Couple all of that with the 50 pence in the pound top rate tax increase and no limit on national insurance contributions, and hundreds of thousands of people on middle incomes will indeed suffer greatly. All that is reminiscent of squeezing the people until the pips squeak.

The amendment poses a threat to those people who are, as I said, just above the level for rebate and those on middle incomes. A banded system of local taxation ensures that everyone is asked to make no more than a reasonable contribution to the cost of providing local services. Those with high value properties will pay more, but not too much more. We believe that the range of bills we have proposed, where the highest can be no more than three times the lowest, is fair and sustainable. I urge the Committee to reject the amendment.

Lord Monson

Perhaps I may suggest to the noble Lord, Lord McIntosh, that the flaw in his argument is that the proposed council tax, just like the poll tax and the rates before it, is partly a genuine tax in so far as it covers services from which not every resident benefits, such as education, libraries, swimming pools, sports facilities and so on, and partly a charge from which every resident does benefit, for services such as street lighting, refuse collection, road and street repairs and so forth.

To the extent that it is a tax the noble Lord is right that it should be progressive; but to the extent that it is a charge I cannot see any argument for it being progressive any more than people pay different prices for food and clothing according to their income. By recognising that the council tax is partly a tax and partly a charge, and making it mildly progressive in that respect, the Government have it more or less right.

Baroness Gardner of Parkes

As the noble Lord, Lord McIntosh of Haringey, drew attention to the fact that I had always argued about my rates, I should say that I have always sought a revaluation. I have never obtained as little as £5. I should have been very disappointed if that were all. I did the whole street at one stage. The minimum reduction was £150 and the highest was about £700. They were large savings. The whole point about the banding system—this is the point that the noble Lord is missing—is that people who are irritant types like myself and who argue over small amounts will have nothing to gain, because unless one falls close to the boundary one will not be moving into the next band. The bands are so wide that for most people it will not be worth arguing.

I also take issue with the noble Lord's comment that the tax will not be related to people's ability to pay. I understood that that is what the rebates were for. I believe it to be right that a value should be attached to each property. The point has been made that if all the occupants were students they would all be exempt. I do not know that I go along with that, but perhaps I have misunderstood. There should be a charge related to each property which should then be fully rebated, according to the incomes or circumstances of the occupants, up to a possible full rebate. I believe that the banding system is good. Built into the proposal is the ability of people to pay.

Baroness Hamwee

Has not the noble Baroness, Lady Gardner, made the point by telling us that her being an irritant achieved savings of as much as £700? I thought that we were going to have another argument today about the balance between administrative convenience and fairness but I believe that we are talking about fairness only. The Minister did not mention administrative convenience.

I was interested to hear the Minister lay the blame for the failure to face up to revaluation entirely on the Labour Party. That may give rise to some further private amusement at some point. The point again is whether the proposed system is fair. We on these Benches do not believe that it is. I support the amendment. The amendment would provide a mechanism for making the tax rather fairer than it otherwise would be.

We keep hearing about the penalty that will be paid by those who live in high value properties. I am much more concerned that we should be fair to those on middle and lower middle incomes who find themselves in property of a high value. We have talked about this a great deal and we know that they will find themselves badly off as a result of the tax. The banding system will cause immense resentment, and although we do not support the rates as a system, as we have made perfectly clear, in supporting this amendment all we would be trying to do is to make the system fairer.

4 p.m.

Baroness Blatch

Will the noble Baroness allow me to come back on two points that she made? First, she made a comparison about how fairly middle income people would be dealt with. Under the proposals before the House, middle income people are protected because of the dampening effect of the banding system proposed under the Bill. Middle income people under a local income tax, and middle income people under the system proposed by Members of the Committee opposite (which has no limit whatever) would, I am afraid, be substantially worse off.

Secondly, on revaluation, I should make the point that it was this Government who faced the pain of revaluation. It was also this Government who determined that that factor was decidedly unpopular with the electorate. I made the point that we shall not go back to a system that requires frequent revaluations, but Members of the Committee opposite advocate not only going back to a system that is 19 years out of date but they also plan annual revaluations. That is the point I was making.

Baroness Hamwee

Perhaps I may respond to that. There is nothing in the amendment about annual or rolling revaluations. The point has been made before and will be made again, particularly in debates later today about banding, that house prices and values do not necessarily reflect people's incomes or ability to pay. In many cases people are forced to pay for houses of a high value because of the area in which they live. They pay far more than they comfortably can. That is the short point to which we shall return.

Baroness Elles

I wish to support my noble friend Lady Blatch. If I understand the banding system properly, surely the one strength of it is that people who own properties can spend money on them and improve them rather than letting them deteriorate. One of the housing problems in the country is the number of houses in a bad state of repair. The landlord resents spending money when it will increase the rateable value of the property. Surely banding is the one system that gets rid of the problem. It should therefore improve the number of houses for rent and for suitable accommodation rather than having them deteriorate under the old system which, as I understand it, the noble Lord, Lord McIntosh, supports.

Lord Stoddart of Swindon

There is just one point that I wish to make. The noble Baroness criticised the amendment on the grounds that it goes back to the rates. It does not. It merely tries to find a system of valuation which is related to something which people understand and of which they have experience.

We find that under band D the scale is from £68,000 to £88,000, so the difference is £20,000 between the lower and the upper range. When people consider the cost and value of their houses, £20,000 represents about 30 per cent. of the value and it is a lot of money. In valuation band F, we find that the difference between the lower and the upper figure is £40,000. Again people will simply not understand the enormous difference in value between one house and another, although the difference in the houses themselves may not be all that great.

In band G we find that the difference is no less than £160,000. How on earth will people relate to such bands? The contention that my noble friend makes is that we shall reach a position where people do not understand the system and are unable to relate it to their own circumstances. That is precisely what has happened with the poll tax. Thus, the Government are making the same mistake again. All the Opposition is trying to do is to help them not to make that mistake because we think more about local government and its future than about party politics.

Lord Stallard

I wish briefly to intervene on the point my noble friend raised about the differences and the disadvantages of living in London. I listened carefully to the noble Baroness and did not hear her comment on that point. She spoke about a hypothetical Bill that is not yet before the House that concerns the Labour Party's electioneering. At this point I am not interested in that Bill although I shall be when it comes before us. For the time being I am interested in this Bill, and I had hoped that the noble Baroness would address her remarks to it rather than to something that may come up in the future. She did not satisfy me, nor will she satisfy the people in Hackney, which my noble friend mentioned. I could use the example of Camden or any other place, but she did not mention them.

Baroness Blatch

Does the noble Lord agree that the amendment before the Committee takes us back to a unique revaluation of each property based on rateable values? That takes us away from what is in the Bill and back to what Members of the Committee opposite advocate.

Lord Stallard

That was adequately explained by my noble friend; it takes us back to a basis for valuation. At the moment it has nothing to do with the issues that might arise next April, May, June or whenever. We are dealing with this Bill now and it was perfectly reasonable to put forward this amendment. The point raised by my noble friend was that the average household in Hackney will, on the Government's figures, pay £520 council tax compared with, for example, £346 in Scarborough for the same size dwelling. How would the noble Baroness explain that? She has not mentioned it.

I am also concerned about the widow whose plight comes up under every Bill which concerns privatisation. The noble Baroness, Lady Elles, mentioned the difficulty of maintaining older properties which is one problem on which we have always campaigned. Elderly people who are capital rich but income poor bought their houses when they were cheaper. The houses have increased in value and as a result they will be put in a higher band. Those people are only living on their pensions plus a few shillings and they may have some money in the bank to pay for their funerals. They will now be taxed at a far higher level than anywhere else in the country.

Baroness Blatch

The noble Lord makes my point for me. First, there would be a reduction for a widow for the lost partner. That is not so under the scheme advocated by Members opposite. Under the system advocated by the Bill, the house would be in no higher band than H; but there would be no limit whatever for that same widow under the scheme advocated by Members of the Committee opposite. Nothing would be done for the widow who previously paid rates. Under the scheme advocated by Members opposite, there is to be no ceiling on the value of the property.

Lord Stallard

I do not wish to go into what the Labour Party would do but I can say what they did before. Many Labour local authorities had a special hardship scheme on rates which took care of most of the widows. They simply applied on a hardship basis and said that they could not afford the higher rates because of their circumstances. A rebate was granted by most Labour local authorities, certainly in London. No doubt that would be one of the principles that would still obtain.

I see nothing in the Bill to justify what the noble Baroness suggested about the rebates to widows in the circumstances I describe. Those who have money in the bank and are therefore outside the benefits are a subject to which we shall come later when we deal with benefits. That is our consideration. The noble Baroness did not refer to it, nor to the massive difference in the average council tax proposals for London compared with exactly the same circumstances for the same properties in other parts of the country.

Lord Monkswell

I hope I may suggest another way of looking at the clause we are discussing. I believe we would all accept that one of the big problems over public acceptability of the poll tax was that it was seen to be unfair. I have heard a number of people say on their doorsteps, "Yes, my local tax has gone down with the introduction of the poll tax, but I am fairly well off. I know that the local authority expenditure has not decreased, therefore if my tax rate has gone down, other people must be paying more tax".

What happened, effectively, was that fairly well off people paid less and poorer people paid more. One of the difficulties with the valuation of the bands is that well off people will pay less compared with people who are not so well off. I hope I may remind the Committee of the words of my noble friend Lord Desai on Second Reading, when he explained the theory and practice of rates. Effectively this council tax is a form of rates in the sense that it is a tax on property.

Tax on property, whether it is rates or the council tax, is effectively a tax on the notional income stream from that capital. The way the Government seek to implement the council tax and the banding system means that the tax on the income stream of well off people whose property has a high value will be less than the tax on the income stream of people with low capital assets. That will be seen to be unfair. That is why this council tax will not succeed. British people will not put up with unfairness. I make a plea to the Committee to accept this amendment because it seeks to tackle the basic unfairness of this Bill.

Baroness Gardner of Parkes

The previous speaker appears to be rather confused on this matter. He has overlooked several points. I do not wish to take up the time of the Committee in going over those points. However, I should say that central Government have taken on a much greater burden of expenditure—85 per cent. That accounts for one part of the difference we have been discussing. Further, the Bill proposes a 100 per cent. rebate for those who cannot afford the new tax. That point is extremely significant.

The noble Lord, Lord Stallard, was right to refer to the position in London. I understand that in another place the Minister has talked about some help being given to London although I do not know what has come out of that. At one time great pressure was exerted to establish a different banding system for London, or some special concession for London. However, if one lives in a place that incurs higher expenditure, it seems fair that properties in that place should be valued more highly in terms of banding. However, I appreciate that London might lose a sum of £300 million. I believe that was the figure mentioned. Therefore there is something to be said for giving special consideration to the position in London.

4.15 p.m.

Lord McIntosh of Haringey

We have tabled amendments which address that matter. I hope that when we reach those amendments, we shall gain the support of the noble Baroness, Lady Gardner. I am grateful to all Members of the Committee who, unlike the Minister, have spoken to this amendment. The Minister completely ignored the amendment and gave an election speech of her own. However, that is an election speech we have heard before and no doubt we shall hear it again.

The noble Lord, Lord Monson, made an interesting point about the distinction between a tax and a charge. He will recall as well as I that during discussion on the Local Government Finance Bill in 1988 the pretence was maintained that the poll tax was a charge for services rather than a tax. It is obvious that that pretence has not been sustained. The Government have, in effect, abandoned it by calling the new provision a council tax. I suggest to the noble Lord there is no significant element of charge as opposed to tax in the council tax as now proposed. What there is, however, is something which is quite different; that is, a system of discounts, which is a clumsy and inadequate way of providing for rebates. When we debate the difference between discounts and rebates, no doubt we will pursue this matter further. Charges, other than individual charges for using a swimming pool, tennis court or any particular minority service of a council, are no part of the council tax. They could not effectively be part of any system of local government finance other than the charges made directly by a local authority for specific purposes.

The noble Baroness, Lady Gardner, puts herself out on a limb in the nicest possible way by saying she is an awkward person who would appeal over relatively small amounts. I congratulate her for obtaining rather larger amounts for people living in her street. I hope when the noble Baroness thinks about this matter she will realise that the very fact that there are significant differences between the bands, combined with the fact that no individual knows where he stands in a band, make it an attractive temptation to appeal on the off chance that one might be towards the bottom of a band and therefore might save as much as 20 per cent. or even 22 per cent, on one's tax.

Baroness Gardner of Parkes

I believe the point the noble Lord has overlooked is that the amounts that will be demanded from people under the council tax will be nothing like the amounts that were demanded under the rates through a poundage system. One could devote much effort to moving to another band, but that would not make a huge amount of difference. One would benefit more if one's income was low enough to merit paying less.

Lord McIntosh of Haringey

I am sorry that the noble Baroness should seek to defend a system which allows 80 per cent. of local authority expenditure to be controlled by central Government. That is not our policy and has never been our policy. It is not a policy that anyone who is concerned with the true independence and integrity of local government ought to support.

I now wish to discuss the later intervention of the noble Baroness, Lady Gardner. If she thinks that the fact that the expenditure of this central Government is being raised in a different way justifies the regressive nature of the council tax, I am afraid she is not taking account of the changes in central Government taxation which have taken place under this Government. While there has been an overall increase over the past 13 years in the proportion of people's income which has been taken up in central Government taxation—there has not been a decrease as Conservatives so often claim—the way in which that taxation has been levied is substantially less progressive than it was in 1979. That is the case for two reasons. The first is because a much higher proportion of taxation is levied in indirect taxation with valued added tax at 17.5 per cent. instead of 8 per cent. Secondly, income tax has been made more pleasant for the rich and therefore, by definition, more unpleasant for the poor.

Noble Lords

No!

Lord McIntosh of Haringey

That is the effect of it. The effect of the whole taxation system of central Government has been that the rich are relatively better off and the poor are relatively worse off.

Baroness Blatch

If there are to be no limits on what local authorities spend, will that burden fall on local people or will government raise to some unlimited level their grant to local authorities?

Lord McIntosh of Haringey

The Minister has asked a question to which she knows the answer very well. She knows perfectly well that it has been the practice in the past both of Labour and Conservative governments to tailor the grant they make to local authorities according, fundamentally, to the needs of the latter. They are perfectly at liberty to penalise local authorities—Labour governments have done this in the past —by reducing grant on occasions when they think local authorities are charging excessively. That is not the same as capping. However, I do not think we should anticipate debates which will take place next week. I shall not be tempted into defending capping either in individual cases or in the wholesale form proposed by the Government in this legislation.

My noble friends Lord Stallard, Lord Stoddart and Lord Monkswell made it very clear that this is not merely a matter of what the taxation does but of what the taxation is seen to do. I must point out that the Government's own chosen battlefield is the perceived unfairness of the taxation system, not that it is genuinely unfair. They still think that the poll tax is right but they moved away from the poll tax because they recognised that the public perceive it as unfair. I suggest to the Government that this tax will be perceived to be unfair in very much the same way as the poll tax and for very much the same reasons. I suggest that it would be in their interest to accept the amendment and recognise the reality of the situation. I wish to take the opinion of the Committee on the amendment.

4.20 p.m.

On Question, Whether the said amendment (No. 42) shall be agreed to?

Their Lordships divided: Contents, 78; Not-Contents,136.

Division No. 1
CONTENTS
Airedale, L.	Donaldson of Kingsbridge, L.
Ardwick, L.	Donoughue, L.
Aylestone, L.	Dormand of Easington, L.
Beaumont of Whitley, L.	Ennals, L.
Birk, B.	Ewart-Biggs, B.
Blackstone, B.	Falkland, V.
Bonham-Carter, L.	Gallacher, L. [Teller.]
Boston of Faversham, L.	Gladwyn, L.
Bottomley, L.	Graham of Edmonton, L.
Bruce of Donington, L.	[Teller.]
Callaghan of Cardiff, L.	Greene of Harrow Weald, L.
Carmichael of Kelvingrove, L.	Grimond, L.
Carter, L.	Hamwee, B.
Cledwyn of Penrhos, L.	Hirshfield, L.
Cocks of Hartcliffe, L.	Hollis of Heigham, B.
David, B.	Holme of Cheltenham, L.
Dean of Beswick, L.	Hooson, L.
Desai, L.	Houghton of Sowerby, L.

Hughes, L.	Rea, L.
Hunt, L.	Redesdale, L.
Hutchinson of Lullington, L.	Richard, L.
Jeger, B.	Sainsbury, L.
Jenkins of Putney, L.	Seear, B.
John-Mackie, L.	Sefton of Garston, L.
Judd, L.	Serota, B.
Kagan, L.	Shackleton, L.
Kennet, L.	Stallard, L.
Kilbracken, L.	Stoddart of Swindon, L.
Listowel, E.	Strabolgi, L.
Llewelyn-Davies of Hastoe, B.	Taylor of Blackburn, L.
Lovell-Davis, L.	Tordoff, L.
McIntosh of Haringey, L.	Turner of Camden, B.
Mackie of Benshie, L.	Underhill, L.
McNair, L.	Wallace of Coslany, L.
Mayhew, L.	Warnock, B.
Monkswell, L.	White, B.
Morris of Castle Morris, L.	Williams of Elvel, L.
Mulley, L.	Wilson of Langside, L.
Phillips, B.	Winchilsea and Nottingham, E.

NOT-CONTENTS
Abinger, L.	Gridley, L.
Acton, L.	Grimthorpe, L.
Aldington, L.	Hailsham of Saint Marylebone,
Alexander of Tunis, E.	L.
Allenby of Megiddo, V.	Halsbury, E.
Alport, L.	Harding of Petherton, L.
Ampthill, L.	Hayter, L.
Arran, E.	Henley, L.
Astor, V.	Hesketh, L. [Teller.]
Auckland, L.	Hives, L.
Balfour, E.	Holderness, L.
Belhaven and Stenton, L.	Holmpatrick, L.
Beloff, L.	Hooper, B.
Belstead, L.	Howe, E.
Bessborough, E.	Hylton-Foster, B.
Blatch, B.	Ironside, L.
Blyth, L.	Jeffreys, L.
Boardman, L.	Joseph, L.
Boyd-Carpenter, L.	Kimball, L.
Brabazon of Tara, L.	King of Wartnaby, L.
Brigstocke, B.	Knollys, V.
Brougham and Vaux, L.	Lauderdale, E.
Butterworth, L.	Lawrence, L.
Byron, L.	Long, V.
Caithness, E.	Lucas of Chilworth, L.
Campbell of Alloway, L.	Lyell, L.
Carnarvon, E.	Mackay of Clashfern, L.
Carnegy of Lour, B.	Manchester, D.
Carnock, L.	Mancroft, L.
Carrington, L.	Marlesford, L.
Cavendish of Furness, L.	Merrivale, L.
Cockfield, L.	Mersey, V.
Colnbrook, L.	Middleton, L.
Constantine of Stanmore, L.	Milverton, L.
Cork and Orrery, E.	Monson, L.
Cottesloe, L.	Morris, L.
Cross, V.	Mottistone, L.
Cullen of Ashbourne, L.	Mountgarret, V.
De Freyne, L.	Mowbray and Stourton, L.
Denham, L.	Moyne, L.
Denton of Wakefield, B.	Munster, E.
Downshire, M.	Nelson, E.
Elibank, L.	Newall, L.
Ellenborough, L.	Norrie, L.
Elles, B.	Northbourne, L.
Elliot of Harwood, B.	O'Cathain, B.
Elliott of Morpeth, L.	Orkney, E.
Elton, L.	Oxfuird, V.
Erroll of Hale, L.	Pender, L.
Faithfull, B.	Perry of Southwark, B.
Ferrers, E.	Peyton of Yeovil, L.
Flather, B.	Plummer of St. Marylebone, L.
Fraser of Carmyllie, L.	Reay, L.
Gainford, L.	Renfrew of Kaimsthorn, L.
Gainsborough, E.	Renton, L.
Gardner of Parkes, B.	Rippon of Haxham, L.
Glenarthur, L.	Saltoun of Abernethy, Ly.

Sandford, L.	Terrington, L.
Savile, L.	Teviot, L.
Selsdon, L.	Thomas of Gwydir, L.
Shannon, E.	Thorneycroft, L.
Skelmersdale, L.	Thurlow, L.
Slim, V.	Trumpington, B.
Soulsby of Swaffham Prior, L.	Ullswater, V.
Stanley of Alderley, L.	Waddington, L.
Strathclyde, L.	Wade of Chorlton, L.
Strathmore and Kinghorne, E.	Westbury, L.
[Teller.]	Wharton, B.
Swinfen, L.	Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.29 p.m.

Baroness Blatch

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.