HL Deb 23 February 2005 vol 669 cc1211-4

2.50 p.m.

Lord Greaves

asked Her Majesty's Government:

Whether they intend to adjust council tax bands to take account of inflation and other factors before the revaluation of properties takes effect in 2006.

The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

My Lords, the Local Government Act 2003 provides for the revaluation of all English domestic property on 1 April 2007 using the 1 April 2005 property values. The independent inquiry into local government funding headed by Sir Michael Lyons, which is due to report by the end of this year, will inform decisions by Her Majesty's Government on council tax hands.

Lord Greaves

My Lords, I thank the Minister for that reply and note that he has confirmed that the report will come out at the end of this year. But is it not the case that the revaluation will seriously affect millions of people—millions of poorer people if Wales is anything to go by? There, four times as many people found that their council tax went up, as opposed to those who found that it went down, as a result of the revaluation. Is it not the case that taxation will be a major issue in the coming general election and that council tax is a major part of that? People want to know where this Government stand and whether their council tax will go up or down. Why will the Government not tell us now what they intend to do about the banding and the council tax system?

Lord Rooker

My Lords, I gave the reason in my original Answer—that is, the Government have set up an independent inquiry chaired by Sir Michael Lyons, who has impeccable credentials on this issue. He is due to report by the end of 2005, following which, if action needs to be taken, there will need to be a full public consultation and parliamentary debate. That will inform decisions taken by the Government. We are not going to make decisions on the hoof as we go along. That is why we have set up an independent inquiry.

Earl Attlee

My Lords, does the Minister agree that it would be quite wrong to increase pensioners' council tax by more than the rate of inflation after the election?

Lord Rooker

My Lords, I shall not go down the road of answering questions on issues that might he raised after the election—presumably questions asked of a Labour government, which is quite an admission. As I said, we have set up an independent inquiry, and local government has been flooded with money from central government. All local authorities have had inflation-led or higher than inflation-led grants for this year and, since 1997, local government has had a 33 per cent real terms increase in funding. So we do not expect any substantial or unreasonable council tax increases this year.

Lord Marsh

My Lords, does the Minister agree that a dangerous and serious situation surrounds this issue? I live in a village where a high proportion of the houses are former farm workers' cottages. They are selling at £350,000 plus and they have been handed down through the families. The people who live there could not afford to sell their houses because, first, they would have to find somewhere else to live and they would not find anywhere else cheaper and, secondly, they could not afford to pay the tax and the agents' fees. We have the absurd situation whereby people are assessed for tax on an asset which they cannot get rid of.

Lord Rooker

My Lords, these are the very issues that we expect Sir Michael Lyons to inquire into. He is not limited to looking at the present mechanism of council tax. We all understand the reason for the council tax: it was a substitute for the poll tax. Nothing in the legislation of the early 1990s required a revaluation of the council tax figures. It is true that the business rates are revalued, but not domestic property. The situation has changed since then. The very issues raised by the noble Lord, Lord Marsh, will be dealt with and considered by the Lyons review.

Lord Tebbit

My Lords, the Minister suggested that this matter would require a long period of discussion, a long period of consultation and then proper extended parliamentary consideration. In view of events in the other place today, is that not a rather unfashionable view for a Minister in this Government?

Lord Rooker

My Lords, I am an unfashionable Minister.

Lord Stoddart of Swindon

My Lords, is the noble Lord aware that some people who have experience of local government are not very happy with government money flooding to local authorities and believe that local authorities should have the power to raise more of their own money? In conjunction with the report on the investigation into revaluation, can he say whether the Government would consider returning responsibility for the business rate to local authorities and whether they should find other forms of income which would help them to balance their books rather than be beholden to the Government?

Lord Rooker

My Lords, I imagine that all the points raised by my noble friend—he is still my noble friend—would naturally be covered by the independent review, to which people will probably submit evidence to that effect. I am not pronouncing on that, but the review goes much wider than simply considering council tax bands. It is much more open than that. Sir Michael Lyons can come forward with any and every suggestion that is practical, and he will do that because of his experience. Nothing is ruled out in that sense.

We have said that taxation on property is cheap to raise, and that was always said about the old rates system. It is very cheap to collect because property does not move. But it has other consequences because it is not based on ability to pay in the normal sense. As the noble Lord, Lord Marsh, said, and for historical reasons that we all understand, people can end up living in very expensive properties but with a very low income.

Lord Roberts of Conwy

My Lords, will the review cover the increasing imposition laid on local government by central government, which is really the root cause of its need for extra money and why taxation has to rise?

Lord Rooker

My Lords, I repeat that the review is open, but I reject what the noble Lord implies in his question. When new burdens are placed on local authorities by central government, central government departments are required to fund those new burdens. That has not always been the case but it is what happens at present. When ideas float around Whitehall, I always see a reference to "new burdens", and the departments must be able to fund those new burdens if they are imposed on local government.

Lord Greaves

My Lords, the Government have subsidised council tax this year, just before an election, with something like £1 billion extra money. Is that permanent money or will it be withdrawn next year before the settlement is discussed?

Lord Rooker

My Lords, anyone would think that central government had not assisted local government every year. That is quite normal and one year does not differ from another. It is true that there are fluctuations, and there have been big fluctuations in recent years. We are seeking to assist local government. On the other hand, the proportion is very small because the total amount of government grant and business rates in the year 2005–06 will be £60 billion. That is £3.5 billion, or 6.2 per cent, more than in the year 2004–05, and I do not apologise for that.