On a point of order, Mr. Speaker. Would it be in order to ask whether you have had any communication from the Home Secretary about coming to this House to give a statement on the increasingly worrying situation of the 90 hunger strikers from Zimbabwe, and particularly the case of Timbha Mqhubeli, who has now been on hunger strike for one month? This is a very serious situation. Have you heard anything from the Home Secretary?

It is not a matter for me.

Further to that point of order, Mr. Speaker. Yesterday, I visited Yarl's Wood detention centre in my constituency and met several of those who are currently refusing food. They are extremely distressed at reports of the situation in Zimbabwe, and their concerns about what might happen to them on their return appear to be vindicated by a story in this morning's edition of The Times. Have you received any communication from the Foreign Office to the effect that the Foreign Secretary wishes to address the House on whether the situation is safe for detainees to be deported there?

I can tell the hon. Gentleman and the hon. Member for Vauxhall (Kate Hoey) that when Ministers wish to make a statement, they inform me, and they have not informed me today. Had it been the case, we would have heard from Ministers today. If hon. Members, including Back Benchers, feel that matters are so urgent and of such deep concern, there is nothing to stop them putting in a request for an Urgent Question. That does not mean to say that I would grant it, but it is a facility that I can use. However, Back Benchers have not done that.

I inform the House that I have selected the amendment in the name of the Prime Minister.

I beg to move,

That this House notes with concern the increasing burden of local taxation; awaits the outcome of the Lyons Inquiry but rejects the proposals for a local income tax; asserts that a local income tax would entail higher taxation on hard-working families and crippling compliance costs on local businesses and would undermine the incentive to work; believes that council tax must be reformed, with the introduction of an automatic discount for pensioners and other measures, but rejects proposals to move from a local services tax based on fixed property bands to a wealth tax; calls on the Government to reject the Mayor of London's proposals for a regional income tax in London and to cancel its plans for a council tax revaluation and higher bands in England, which would be a further stealth tax, particularly on those living on fixed incomes.

We sought this debate on local government taxation because the subject of council tax and local government finance was notable by its absence from the post-general election Queen's Speech, although it is anticipated that the Government will take measures to reform local government finance in this Parliament. We seem to have been waiting interminably for the outcome of the Government's review of local government finance, and while the issue of council tax burns the Government continue to fiddle—in this case, the figures.

It is the moment when people write their cheques for the council tax that they associate most directly with the role of local government. However, that is an increasingly misguided association, because since 1997 the Government have riven apart the connection between council tax and the provision of local services. It is certainly not the case that the cost of local services is met by local taxpayers; now, local taxpayers merely top up the Chancellor's coffers. From the Chancellor's point of view it makes perfect sense: by turning local authorities into tax collectors, he hopes to escape the blame for a whopping 76 per cent. increase in council tax.

However, the electorate are increasingly sophisticated. According to MORI, 78 per cent. of the population blame national Government for council tax increases—and they are right. Furthermore, they know that the figures are being fiddled. The Government have systematically engineered the redirection of central funding from efficient Conservative-run councils to inefficient Labour-run councils.

At the same time, the Government have set about loading unfunded cost burdens on local authorities and transferring costs and duties from national Government to local government. I call that stealth taxation by statute. The net effect is that receipts to the Treasury from council tax have increased by more than £9 billion since 1997. Without doubt, council tax has been used as the ultimate stealth tax. While pensioners protest on the streets, the Chancellor is coining it.

I am sorry to interrupt my hon. Friend's flow, but is she aware of the deep anger not only in my constituency but throughout Hertfordshire, where pensioners are finding that their council tax bills have nearly doubled under the Government? Does she share their concern?

I share that concern and feel it deeply. We all read the headlines about people being threatened with prison for not paying their council tax. We are all lobbied by organisations that call for the abolition of council tax and we all witness the growing disregard for local government among voters.

Instead of trying to arrest the drift, the Government are moving in the wrong direction and hastening it. The warning signs are so clear and the symptoms are so obvious that ratcheting up council tax must be part of a broader plan. How else can we explain the forthcoming revaluation, which is hanging like a sword of Damocles over people's heads? Despite claims that it will be revenue neutral, the revaluation shows every sign of punishing people simply because the value of their property has appreciated.

Is it Conservative party policy that there should be no revaluation? If so, how is leaving the level at that of 1991 compatible with a system that is based on property values?

I am sure that the right hon. Gentleman's colleagues are sorry to lose him, with his expertise and knowledge, from the Front Bench. However, he knows as well as I do that the point of revaluation should be to address growing disparities in property prices when they arise. Those disparities are narrowing.

Let us consider the Welsh revaluation experience. Four times as many homes moved up a band as went down. The revaluation, which the Government solemnly promised would be revenue neutral, was used to jack up council tax bills by 10 per cent. in the first year alone.

Does the hon. Lady accept that, when the Conservative Government introduced the council tax, revaluation in general was part of the principle? Why has she decided to depart from her Government's revaluation policy and invent a spurious new version of revaluation, which appears to have no possibility of working in the real world?

The hon. Gentleman may want to discuss extensively the history of my party's introduction of the council tax. However, if he gets the chance to make that speech, he should deal with the fact that the revaluation measure was not part of the council tax when the Conservatives introduced it. The Labour Government's legislation introduced the revaluation.

On the basis of the Welsh experience, council tax payers in England have every reason to fear revaluation. Even worse, it transpires that, unlike in Wales, the Government will not fund transitional relief when homes in England are revalued. I wonder who will end up footing the bill for transitional relief. I received a parliamentary answer last week, and yet again it transpires that council tax payers will foot the bill—the same council tax payers who will have an army of clipboard inspectors descending on their homes and listing any improvements so that they can be taxed on them. Perhaps there is scope for a new generation of home makeover shows, in which Carol Smillie and workmen dismantle home improvements to help people reduce their council tax. It could be the window tax of the 21st century. We could end up explaining to our grandchildren why extra bedrooms and bathrooms had to be mothballed to avoid tax.

As if revaluation were not bad enough, the Government are keen to introduce new, higher tax bands. The inevitable consequence is higher council tax bills.

It so happens that I was in Cheadle this morning. That is precisely the kind of prosperous area that will be hit be the revaluation. If the Welsh experience is repeated there, the average home will go up by two council tax bands, adding more than £500 to the average bill. There is also every sign that the imposition of cost burdens from the centre will continue to rain down on local authorities, forcing up costs and driving up council tax bills. There is no better example of that than the case of identity cards. On 8 June, the Minister of Communities and Local Government stood at the Dispatch Box and refused to rule out local authorities having to pick up the bill for administering that invidious scheme.

My hon. Friend mentioned her visit to Cheadle this morning. Would it be in order for me to ask her whether she knows which way the Liberal Democrats voted on council tax rebanding and revaluation?

My hon. Friend will not be surprised to learn that I can provide the answer to that question in glorious detail. On 10 March, 17 July and 10 September 2003, the Liberal Democrats voted with the Government to introduce rebanding and revaluation.

Will the hon. Lady give way?

The hon. Lady will have her chance to speak. At the moment, I am addressing my remarks to the Government.

In tandem with what the Government are doing, they are also stripping away services that were previously centrally funded. Community and neighbourhood wardens are a case in point. In the light of that, I must return to one central question: why are the Government determined to drive up the council tax? Why are they manipulating the funding formulas and pushing ahead with the ugly twin sisters of revaluation and rebanding? Is it because the cost of providing local services has gone up disproportionately? Is it because people are using a lot more locally provided services? Is it because town halls across the country need to amass funds? No, it is because the Government are systematically turning council tax into a proxy for central taxation in order to fill the Chancellor's economic black hole.

Has my hon. Friend noticed that there is not one single Labour Member of Parliament in the Chamber today? Does she agree that that might be because they are thoroughly ashamed of the way in which the Labour Administration in the Welsh Assembly told people that there would be winners and losers under this system, when in fact one in three people have seen their council tax go up while money has been squandered by the Labour-run Welsh Assembly?

On a point of order, Mr. Speaker. In order to be courteous to the hon. Gentleman, would it be in order for me to pass my spectacles over to him, so that he can see the Labour Members who are present today?

My hon. Friend the Member for Monmouth (David T.C. Davies) has excellent eyesight, Mr. Speaker, and he has made the very astute observation that there are no Welsh Labour Members in the Chamber today. I wonder why that might be—the hon. Member for Cardiff, West (Kevin Brennan) has taken his place—just in time![Interruption.] I see that

Some Labour Members might welcome council tax inflation as a means of wealth redistribution. The last time we debated this matter, I detected a real enthusiasm among them for new upper council tax bands. But council tax is not a wealth tax; it is a local services tax that is partly based on property to reflect the fact that larger properties typically make slightly greater use of public services. The swingeing increases that we are now seeing have hurt some of the poorest people, and that is what is so unjust. People on fixed incomes, notably pensioners, suffer more than others as a result of the Government's abuse of the council tax.

The hon. Lady is quite right: the system is tough on those on fixed incomes. But how would that be helped by the policy proposed by the Conservatives—at least at the last election—to freeze Government support to local government, which would push council taxes up even further?

The hon. Gentleman fundamentally misunderstood our policy at the last election, and I cannot believe that he is suffering either shortness of sight or deafness. We campaigned at the last election on giving a 50 per cent. discount on council tax to over-65s, which was fully funded and costed.

The Government will counter that with talk of council tax discounts, but the truth is that take-up of those discounts is abysmally low. There are several reasons for that: the length and complexity of the paperwork is daunting; the questions are demeaning, particularly for pensioners; and let us face it, the present scandal surrounding the tax credit system could hardly be a greater deterrent to would-be claimants. Soaring council tax bills not only present problems for people in terms of meeting the cost; a series of contingent problems arise from the way in which the system has been abused. It is a perverse system, which penalises efficient councils by giving them a relatively small central Government grant, forcing them to put up council tax. Council tax duly goes up, and the Government hit that authority with a capping order. That is a crazy way to proceed—it is the fiscal equivalent of splat the rat.

Is my hon. Friend aware that the rumour in local government circles, emanating from the Local Government Association, I think, is that this year an increase of 1.7 per cent. in the revenue support grant is being planned, with the exception of education, for which it is said that an increase of 4 per cent. is being planned? Does she consider that that will extend the concept of stealth tax?

My hon. Friend is right to point to a pattern that we have seen before. After the general election of 2001, the pattern was of council tax rising steeply as the Government recovered their financial position. Once again, after the 2005 election, we fear the worst. Not only is the process flawed and costly but it puts local authorities in the position of having to cut services on which local people often rely. Typically, those tend to be the sorts of services used by some of the most vulnerable in our society.

As the situation stands, everyone except the Chancellor loses out. I sincerely hope that he had a pang of guilt when he offered a one-off £200 payment to pensioners for this election year only. The Conservative party proposed a 50 per cent. discount for over-65s, year on year, properly costed and fully funded.

The hon. Lady has made several elusive suggestions that she might reform council tax, but has not provided any options for its reform. In fact, she seems very much in favour of keeping it exactly as it is, and probably making it a good deal worse. Would she like to explain?

I am about to come on to the Liberal Democrats. A great deal can be said on the subject, but I was hoping that the hon. Lady might use her intervention to tackle the question of her party's stance—voting three times with the Government for rebanding and revaluation, which we opposed.

Will the hon. Lady give way?

No, the hon. Lady has an opportunity to reply, and I have a series of questions that I want to ask about Liberal Democrat policy. She might wish to cover those points when she makes her speech.

Will my hon. Friend give way?

I would like to make a little progress.

The Liberal Democrats voted in favour of revaluation and rebanding, despite telling people on the doorsteps that they were opposed to both. There is nothing like saying that one is a principled party of opposition—because, let's us face it, such actions are nothing like those of a principled party of opposition. As for the local income tax plan, it was certainly interesting, not least because of the rancour that it has created within the Liberal Democrats. As the Liberal Democrats' president, the hon. Member for North Southwark and Bermondsey (Simon Hughes), said:

"I don't think in the end it worked well".

What local income tax has in its favour is that it is easy to market, but it is often the case that the devil is in the detail. The campaign pitch is simple enough—the amount of tax that one pays locally is determined by one's level of income. But I think the Liberal Democrats should be had up by the Advertising Standards Authority for their slogan, "Axe the Tax". The Liberal Democrat Treasury spokesman—the hon. Member for Twickenham (Dr. Cable)—himself admitted that two full-time earners in a house would pay more tax, and said that the tax would bite when a combined salary was between £30,000 and £40,000 a year. A pensioner with savings or investments would be taxed on them, so it is rather disingenuous to suggest, as the Liberal Democrats have, that local income tax is a panacea for pensioners. It certainly is not.

The biggest pressure on councils such as Shrewsbury is caused by the Labour Government's targets for affordable housing. The council must provide 500 affordable housing units in the foreseeable future. Yet in 2003, the Government took away Shrewsbury's local authority social housing grant. That has placed a tremendous financial burden on my council, which must provide for a target set by the Government.

That is a very good point, which illustrates what I was trying to say. The Government, in a sense, set up well-run councils to fail through their system of targets and fiddle-funding of the central grant.

The local income tax would also ratchet up bills for hard-working families, especially those with dual incomes. A typical working family in England would pay an extra £692 a year, an increase of two thirds. Not only would the tax apply to people who have hitherto been exempt from council tax; students with part-time jobs are a particularly striking example of people who could ill afford being heavily taxed under the Liberal Democrats.

So that the hon. Lady does not keep repeating things that are not true, I should tell her that every member of our party stood on the basis of abolishing the council tax and agreed with that, and every member of our party stood on the basis of replacing it with a local income tax, and agreed with that as well. Yes, there were criticisms of some of the presentation—I criticised it myself—but the substance is clear. The policy of the hon. Lady's party is "Council tax: we want to keep it". We had a clear alternative, although we can argue about whether it was right. The hon. Lady never had one.

I am not sure that the hon. Gentleman's intervention has really helped his party. He does not deny that his policy has not worked very well. The local income tax would not be a win-win; it would be a win-lose. Pensioners with savings would lose out, hard-working families would lose out and young people, typically sharing accommodation, would certainly lose out. As for the councils that would have to administer the tax, their ability to plan would be hampered in the medium term because revenue derived from income is by nature less predictable than revenue derived from house values.

Councils would also become slaves to Whitehall funding. The tax would necessitate more equalisation. A local income tax offers limited redistribution of the tax burden, but disregards the feelings of many pensioners who instinctively dislike the idea of their tax liability being transferred to their children and grandchildren. As I said earlier, pensioners are proud people and are prepared to pay their way. It stands to reason that they would be distinctly uneasy about their families picking up the bill for them. Let us take a practical example. A typical working family in Cheadle would see their average tax bill rocket by over £1,000 under the Liberal Democrats' income tax.

Perhaps the hon. Lady could explain how the Conservative proposals in the motion to give pensioners a permanent rebate on their council tax—which would presumably have to be replaced by central taxation to provide a Government grant—differs fundamentally from the Liberal Democrat proposals as she has described them.

The hon. Gentleman misses the point, in terms of what his Government have done to pensioners by abusing the council tax. One third of the increase in the basic state pension has been snatched back because they are having to pay council taxes that have been increased by more than the rate of inflation.

Before we leave the question of revaluation, which was supported so avidly by the Liberal Democrats, may I ask whether my hon. Friend agrees that it would be absolutely wrong if it led to areas with large increases in property values being at a disadvantage in comparison with areas with smaller increases? Services would cost approximately the same, but areas with higher property values would receive less money from the Government.

I thank my hon. Friend for that intervention. He accurately points out that such a measure is redistributive. It is very attractive to a party that calls itself new Labour, but which is at its heart still socialist. I understand where it is coming from.

Permit me to give an overview of the impact of local income tax on a typical community. A pensioner with savings and investments would be taxed. A young person who is sharing a flat or in part-time work as a student would be taxed. A young family with a dual income and a mortgage, trying to make their way, would be taxed to the hilt. On top of all that, a local income tax would co-exist with a whole raft of other taxes, including regional income taxes to fund the network of unelected and undemocratic regional assemblies that have leached power away from local communities.

Presumably, the Liberal Democrats support London Mayor Ken Livingstone in his quest to introduce a London-wide regional income tax. As the Association of London Government has recently observed, this could mean up to 6 per cent. on the basic rate of income tax for Londoners.

The hon. Lady says that she is opposed to rebanding, to revaluation, to local income tax and to the Lyons review. She says that she would give £500—or was it £50?—to all pensioners, be they Margaret Thatcher or my granny, who was pretty poor. What about the other groups about which she has been talking? What are the measures that she is going to promote?

Before making an intervention that is an attack on my party's policy, the hon. Lady should acquaint herself with its detail. In addressing her very real concerns, I remind her that the sum in question is not £50. We are talking about a 50 per cent. increase, which is a significant increase, as I am glad she acknowledges. I further remind her that the figure is capped at a maximum of £500 in order to address the very point she makes. So we did take into account those two important details.

Earlier, the hon. Lady kindly offered to give away some glasses. Perhaps she might repeat that offer, because if she looks at the small print of her party's proposal, for which one might well need glasses, she will see that—unlike the Chancellor's offer, which will help 19 out of 20 pensioners—it would help only one in four pensioners.

The underlying point is that our proposals would help more than 5 million pensioners. Moreover, it is a year-on-year payment, not this one-off payment of £200. Under such a proposal, what happens the following year? How does the hon. Lady think pensioners felt about that proposal during the election?

Perhaps the Liberal Democrats should listen to the words of Andy Mayer, director of their think-tank, Liberal Future. He said that

"we're not convinced that the association of income tax with fairness is correct".

My frustration with local income tax is that it purports to be the cure-all that it patently is not. Many Liberal Democrats know it and have admitted as much; as the proposal comes under greater scrutiny, the voters will also come to know it. It is a distraction from the important question of how we can make local taxation fairer to everyone. By persisting with local income tax—that said, I understand that its future as party policy is in some doubt—the Liberal Democrats are effectively ruling themselves out of this fundamental debate.

rose—

All this is taking place against a backdrop of uncertainty as we await the outcome of the Lyons review—a review commissioned to assess the previous review of local government finance. But the fact is that this Government have hidden behind reviews, sympathetic words and one-off pre-election handouts, instead of grasping the nettle and addressing the fairness issue that bedevils the current situation. I think that I am safe in presuming that we are some time away from another general election, so this is the time when—away from the heat of battle—we can really engage with the problems of local taxation and restore a genuine link between local taxation and local services.

rose—

That is critical. We need to abort the process of subordinating local government and reinvigorate local democracy instead because the alternative is to foster more resentment and more economic hardship: we will then have witnessed the still birth of a new localism.

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"welcomes the Government's continuing support for local government with its 33 per cent. grant increase since 1997; notes that the average increase in council tax in 2005–06, at 4.1 per cent., is the lowest increase in a decade, the second lowest ever, and lower than the last three council tax settlements for which the previous Government was responsible; welcomes the Government's engagement with councils to facilitate the delivery of 2.5 per cent. annual efficiency gains in local government; and looks forward to the conclusions of Sir Michael Lyons's inquiry as an important contribution to securing a fair and sustainable system of local government finance for the future."

I welcome the debate and hope that, at the end of it, the watching millions are as informed and passionate on the subject of local government finance as the small band of experts who follow these matters carefully. I hope that the House will agree that, among the small band of experts who follow local government, and particularly local government finance, one man stands out. I pay tribute to my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), and remark that this particular debate on local government matters is unusual in that he is not speaking from the Front Bench. By the end, many may wish that he were, but I know that I speak for the whole House when I say that he was always the most courteous Minister. However naive or inane the question, he always tried to answer it fully. Anyone who believes in the health of—[Interruption.] The hon. Member for North-East Bedfordshire (Alistair Burt) should listen to this; if he did, he might agree with it. Anyone who believes in the health of local government must believe that my right hon. Friend's contribution was immense.

When I took up the post, my right hon. Friend congratulated me and told me that it was the best job ever, yet I now read in this week's "Municipal Journal" that he believes local government finance is "a nightmare subject", so it turns out that he is a bit of a spin doctor himself in these matters.

I also want to welcome the hon. Member for Brent, East (Sarah Teather), who was cruelly denied the opportunity to speak to us during the Queen's Speech debate, but will now be able to do so. She may not realise that Opposition motions are usually a chance for the Opposition to attack the Government. It must be strange for her to feel that this time she is the Government, given that she was so often the subject of the speech of the hon. Member for Meriden (Mrs. Spelman). Listening to that speech, I began to feel that the two Opposition parties were becoming concerned about the fight for second rather than first place—[Interruption.] I hope that the hon. Member for Brent, East will take it as a compliment to be so roundly attacked by the hon. Member for Meriden, but she must look out for Martin Miller on the side track in Cheadle, as he is mounting a strong campaign for the governing party. She had better not take her eye off him.

I want to make three main points in the debate. First, it is possible to talk about local government taxation and, therefore, income for local government, only if one is willing to talk about expenditure as well. Secondly, there is a balance of income sources for local government and they need to be understood together. Thirdly, the Lyons inquiry, following the balance of funding review, offers a special chance for the country to find a sustainable way forward for this important issue for our quality of life and the quality of our democracy.

In that context, I have to tell the hon. Member for Meriden that it was disappointing that, after 27 minutes of her speech, she should turn to our proposals and then finish before the 28th minute had passed. I am sure that we shall get to hear the details of the Conservative party proposals—[Interruption.] Yes, it must have been an oversight on her part. I am sure that among the many sheaves of paper that she has with her are her detailed proposals. We look forward to hearing all about them in due course.

Let me talk first about local government expenditure, because it is expenditure that drives taxation—national and local. Local government is at the heart of national life and it has a unique role in championing the communities that we live in and helping them to prosper. The four pillars of local area agreements for local authorities over the next two years cover enterprise and economic development, safer and stronger communities, healthier communities and older people and children and young people. They provide a clear and sensible way of thinking about the arithmetic of local government.

In 2004–05, local government in England spent £127 billion—a quarter of all public expenditure. The largest share, at 37 per cent., goes on education. Social services spending represents a further 18 per cent. and the police another 11 per cent. Those three services make up 65 per cent. of the total net current local government expenditure. Of that share, 65 per cent. goes on the pay of teachers, police, fire fighters and other local government workers. The share of spending on staffing costs varies, from transport, where it is relatively low, to education, where it is quite high.

In preparing for the debate, I was interested to see that, over the last 30 years, local government spending has risen at more or less the same rate as national spending. The pressures do not follow the business cycle as central Government spending did in the 1980s, but instead reflect real need in areas such as social services, where an ageing population, higher dependency costs and increases in areas such as care home fees are placing pressures on local authority budgets. The same goes for community safety—the hon. Lady mentioned neighbourhood wardens and I hope that we can take it from her remarks that she will support the drive to extend that scheme all over the country. It also applies to waste services, where we must manage ever-increasing quantities of municipal waste in ways that minimise its impact on health and the environment.

Local government is responsible for spending decisions in all those areas, but the imperative to control cost is clear and present.

Will the Minister confirm that the passporting of school budgets and ring-fencing of other budgets has made it more difficult for local authorities to manage their budgets prudently?

That is often said, but the hon. Gentleman will know as well as I do that many local authorities spend above the ring-fenced or passported level on education, to some 108 per cent. to 110 per cent. nationally. My impression is that the commitment of the Government to make education the No. 1 priority is widely shared across the country.

If education and the like are ring fenced, the growth in other services that do not have that benefit that the Minister mentioned is distorted. After all, 12 local authorities received no additional grant once the money had been expended on education. Does he accept that the more areas the Government control, the more they distort the market?

The Government make no apology for saying that the money we raise for education—our top priority—needs to go on education, and I am pleased that local authorities have supported that. On the hon. Gentleman's wider point, if money is specified for one function, it cannot of course be spent on another. However, I am sure that he is pleased, as I am, at the development of the local area agreements that allow local authorities to move money across the piece, because such agreements contribute to the vibrancy of local government, in which I know he believes.

The evidence of the Government's determination to control costs as well as to support local government can be seen in the average increase of 4.1 per cent. in council tax this year, but it is also evident in our drive for efficiency. The Government can play a lead role in that area. That is what we have done through the Gershon review, which has set challenging efficiency targets for local authorities of up to £6.5 billion by 2007–08. For our part, we will continue to work with local government to ensure that those targets are met and the money is then properly spent.

The Minister will know better than most that, although he says that local authorities have control over various spending decisions, they in fact do not, because various matters are controlled by the Government—in particular, the increases in taxes that they have put on local authorities, in the form of pensions tax and national insurance. The Government also keep putting unfunded duties on local authorities—for example, local authorities have to comply with the waste directive and face increases in the landfill levy. The Government have also reduced local authority housing grant, as my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) mentioned earlier. More than the entire increase that the Government have given local government in the past seven years has been taken up by increased taxes and duties.

We can have a debate about national insurance every day of the week as far as I am concerned, but the Conservative party made no proposal to reverse the 1p increase in national insurance that the Government introduced and it is money that has been well spent by the national health service. It is also churlish of the hon. Gentleman not to thank the Government for the £120 million increase in grant for his local authority in the past eight years—in stark contrast to the performance of his party in power.

Can the Minister confirm, off the top of his head, that, over the past 20 years, the amount of spending raised by local councils has been some 25 per cent. and the amount provided by the Government has been 75 per cent., irrespective of the ever-growing burden that this Government are alleged to have put on local councils?

My hon. Friend makes a good point. The amount is certainly about 25 per cent. at present. Of course, there was a certain rupture in the way that local government was organised under the poll tax and, although I am sure he and I could talk for a long time about the vagaries of the poll tax, we are trying to look forward today.

Is the Minister confirming that there is an irrefutable link between the amount of money that local authorities receive from central Government and the amount they have to levy through council tax?

There is an irrefutable link between the amount of money that local authorities raise from a range of sources and the amount that they have to raise in council tax, because they have to bridge the gap, but, as the hon. Gentleman will know and as I shall explain in a moment, local government income is from a range of sources, which I shall set out, as it may be helpful.

Council tax raises about £21 billion, which is equivalent to 25 per cent. of local revenue expenditure. Government grant accounts for about £48 billion and 53 per cent. of revenue expenditure. I urge those who decry that level of Government grant to remember that a smaller contribution from central Government means more from someone else. At the last election, the hon. Gentleman's party proposed to freeze grants to local government for two years—[Interruption.] The hon. Member for Meriden (Mrs. Spelman) says, "We didn't," but let me quote her the words of the then shadow Chancellor, because the policy was clear:

"I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all these departmental budgets, including local government, will be 0 per cent."

Nothing could be clearer than that—[Interruption.] The hon. Lady says that that was before the James review, but we know that the review proposed cuts of £1 billion in local government expenditure for which it had no way of accounting. It is important that the House knows that the Conservatives were claiming £900 million of savings from reduced costs as a result of inspection and the like but, when pressed, they were forced to rely on a study that concluded that low morale cost £400 million. Their sums simply do not add up.

To set the record straight, the then shadow Chancellor, before the election, following the savings identified by the James review, gave a commitment to increase funding to local government.

I very much look forward to taking that matter forward. We have quotes from the right hon. Member for West Dorset (Mr. Letwin) and, although I know that he is something of a man of the past in the Conservative party because he is not running for the leadership, we shall certainly pursue the matter.

Council tax raises about 25 per cent. of income, central grant raises 53 per cent. and the national non-domestic rate about £18 billion, linked to the retail prices index. Thanks to the new prudential capital finance regime that took effect on 1 April 2004, local authorities are, for the first time, free to borrow for capital projects without Government consent. Those are the main sources of local expenditure.

That is all good knockabout political stuff, but where the hon. Member for Meriden (Mrs. Spelman) was right was in saying that we should all be thinking about the future of local government finance. Does my right hon. Friend accept that in no other western democracy is local government in thrall to central Government as it is in the UK? Will he look into the constitutional settlement between local and national government, because that is the only long-term way in which local people can take control of their own affairs and have a say in raising money locally in the way they feel is appropriate?

My hon. Friend makes an important point and, as he will know, the balance of funding review addressed that matter directly, as shall I. It was generous of him to focus on the 28th minute of the contribution of the hon. Member for Meriden and I shall try to do so, too.

Will the Minister return to a point on which there is more consensus: the Gershon savings of £5.6 billion a year? How will we know when they have happened and, as a taster, can he tell us how much was saved in the first year of the programme?

I am pleased to say that I can. Our analysis of plans submitted by authorities suggests that councils are not just making real efforts but achieving real success. The efficiency gains achieved already and those expected by the end of the year add up to £1.9 billion. That is good news, and I think we can all agree on the importance of that.

The property base of local taxation, through the council tax, provides an efficient and workable foundation for taxation.

In response to the intervention about local government not being in thrall anywhere else in western Europe, may I cite the fact that local authorities in Germany and Austria get respectively 15 and 18 per cent. of the total national tax take, and they get it from central Government? They are almost entirely funded from the central Government, not from local people.

The hon. Gentleman makes a good point. Of course, there is a big difference between local taxes and assigned national taxes, and the degree of thrall differs according to those two measures. Before hon. Members become too focused on the idea that those in local government are lying inert on the floor underneath the weight of central Government, they should go to any town or city in the country, where they will see a lot of dynamism, with those in local government exploiting quite a lot of freedom in performing their roles. I am sure that every hon. Member can point not just to isolated examples, but to a real drive by those in local government to lead their communities, economically and socially—and in my part of the world, culturally as well.

Ahead of the Lyons announcement, as a matter of philosophy, does the hon. Gentleman personally as a new Cabinet Minister—and does his party—believe in giving more power to local councils? Do they believe that more of the money spent locally should be raised locally?

The balance of funding review concluded that there was a strong case for more money to be raised locally. In respect of devolution, I believe that it is a good principle that power should be exercised as close to the people as possible, and I tell the hon. Gentleman in all seriousness that that is not just about power for the town hall; it must be about moving power from the town hall to the citizens as well. In that sense, this is not just a devolution deal between local and central Government—it must engage people beyond the town hall. That is important.

The property base of local taxation provides an efficient and workable foundation for taxation. For groups on low income, the council tax is, of course, reduced—for single people, by 25 per cent; for poor families, by council tax benefit, which is received by 4.9 million family units a year and is worth £13 a week on average, although we would all like take-up to be higher. Of course, there is a welcome boost for pensioners, pioneered by my right hon. Friend the Chancellor of the Exchequer.

rose—

Will the hon. Gentleman just let me make this point?

The Government's help in the form of a £200 contribution to the cost of council tax goes to 6.2 million pensioner households, nearly twice as many as would be covered by the Opposition's proposal, which excludes many pensioners because they do not live with other over-65s. Less than one quarter of pensioners would get the £500 of which the Opposition boast. In fact, the majority would get less than the £200 that is delivered under our proposals.

What about next year?

Tempted as I am to make Budget statements in advance of the Chancellor, it would probably be audacious for a new Cabinet Minister to do so.

I should like to bring the Minister back to the take-up of council tax benefits, which he skirted over. The unsettling fact is that about a third of pensioners who are eligible for council tax benefit do not take it up, apparently owing to the complexity of the process. What will the Government do about that, apart from just stating an aspiration that take-up will increase?

I agree that take-up is an issue. I will write to the hon. Gentleman, though, because he is somewhat mistaken about the number. My understanding is that the figure is actually 53 per cent., but I will check that for him. However, neither 53 per cent. nor 33 per cent. is anything to be proud of. Take-up is certainly an issue to be considered, but it is not just a matter of publicity, however important that is, and a range of other issues is associated with it. It is certainly something that my right hon. Friend the Secretary of State for Work and Pensions is considering, because it is a long-term issue.

The Minister compared the Government's £200 contribution with the £500 that the Conservatives would have delivered but ours was a year-on-year contribution, not a one-off, so I do not know how he can compare the figures.

I am sorry, but any of us can promise any amount of money if we do not have to say where it will be paid from. I can magic commitments out of the air, but, frankly, in the scheme of things, when the Conservative party proposes a £35 billion reduction in Government spending by 2011, for the hon. Lady to suggest that there is a sudden outburst of generosity in respect of pensioners strikes me as fanciful to say the least.

I thank the Minister for allowing me to reply to that point. The Institute for Fiscal Studies confirmed that our proposal was fully costed and fully funded, and among the savings was the scrapping of the best value comprehensive performance system, which costs £1 billion a year.

I am sorry, but this £1 billion cost for inspection is completely erroneous. As I said to the hon. Lady, the figure is based on a local government information unit study that ascribed £400 million of savings to increased morale. I am happy to pursue the point, but I think that I should bring my remarks to a close. [Hon. Members: "Yes."] I am sorry that Conservative Members have not been able to enjoy the past 20 minutes, but there is more to come.

The Government are determined to balance the commitments to spending on front-line services, a strong efficiency drive and a prudent council tax policy as part of a balanced package to support local government. The balance of funding review, which reported last July and included senior figures from central and local government, the academic world, business and professional bodies, found a strong case for shifting the balance towards more local funding. But that case depended on the feasibility and desirability of any measures to achieve it. It concluded that a variable local income tax might increase local accountability, but that a more complex funding system might be harder for taxpayers to understand, and there were potentially serious risks and disadvantages that would need to be considered in great detail, including the additional costs and burdens that the system would impose and the complexities of administration. That is notwithstanding the further point that, for dual-earner households, a local income tax presents, by any stretch of the imagination, a significant tax rise. Opposition Members must explain that.

Will the Minister give way?

I will not have a big go at the hon. Gentleman but let him speak for himself. The hon. Member for Brent, East (Sarah Teather) will no doubt cover this point in a moment.

The balance of funding review reached consensus on a broad range of issues. It concluded that council tax had important advantages as a local tax and should be retained but reformed to help people on low incomes and to reduce the impact of revaluation. In the context of that, the House will be interested to compare the remarks of the hon. Member for Meriden today with her comment, as recently as 2 March 2005, that

"a property-based tax must take account of changes in the value of the property".

[Interruption.] The hon. Lady says that it is not true, but it is written here in Hansard.

My hon. Friend did not say that.

I am sorry but I have the full quote here. If the hon. Gentleman will contain himself, he will hear that the hon. Lady said:

"The answer to the question about revaluation is that, of course, a property-based tax must take account of changes in the value of the property."—[Official Report, 2 March 2005; Vol. 431, c. 983.]

She said that. I hope that the hon. Gentleman will accept that the quotation is accurate.

All I said from a sedentary position was that I had already covered that point in response to the intervention of the right hon. Member for Greenwich and Woolwich (Mr. Raynsford). The point was that the revaluation exercise is to tackle the disparities in property prices, but the fact is that the gap is narrowing. That takes away the need to act now and in the way that the Government intend.

The watching millions can draw their own conclusions from that.

To follow up the work of the balance of funding review, we invited Sir Michael Lyons to undertake his inquiry into local government funding. We asked him to consider the detailed case for changes to the system of funding and make recommendations on any changes that are necessary and how to implement them.

Will the Minister give way on that point?

I have been extremely generous in giving way, and I hope the hon. Gentleman will now allow me to finish my speech.

In particular, we asked Sir Michael how best to reform and revalue council tax and to look at the case for supplementary revenue raising by local authorities and options for reforming business rates and other local taxes and charges. Since starting work, he has visited each of the English regions and Wales to take evidence from stakeholders. He has met groups and individuals with a wide range of interests, and key stakeholders have been encouraged to submit written evidence. I look forward to his report.

I have a sneaking feeling that the minds of the drafters of both Opposition motions may be less on the finer points of the Lyons inquiry and more on their intense political rivalry for the vacant Cheadle seat. When the hon. Member for Meriden started talking about "Bash the rat"—[Interruption.] I am sorry but "splat the rat" is known as "Bash the rat" in the more refined parts of the north-east. However, when she started talking about "splat the rat", I thought she was talking about us. It turns out that we on this side are the drainpipe in this competition and the rat is sitting on the Liberal Democrat Bench. Be that as it may, the Government are fully focused on promoting serious engagement with the difficult choices raised by the pressure for more local spending in an acceptable way. It is to that end that I welcome this debate and look forward to its conclusions.

As the Minister of Communities and Local Government suggested, it is a great pleasure, in my debut on the Front Bench, to be defending our party's most popular policy from Conservative attack—[Laughter.] The Conservatives laugh; let them laugh.

We have had an interesting debate so far, although it has turned up some of the worst and most anodyne of soundbites—goodness knows what "splat the rat" relates to. However, it has also shown clear philosophical differences between the parties, as well as a gaping hole in Conservative party policy. The Conservatives have nothing to say about the balance of funding crisis or the need to reform council tax, but of course the truth is that they do not want to do that. They have flip-flopped all over the place on revaluation. Their claim appears to be that house prices are converging across the country. What land are they living in? I assure them that house prices in my constituency have gone up a good deal faster than they have in neighbouring areas.

The hon. Lady is wrong on two material facts. First, there is not a question of convergence. However, the relationship between north and south is roughly what it was.

indicated dissent.

Yes, it is; the relationship is exactly what it was when the council tax was introduced 10 years ago. Secondly, we have voted against revaluation on every single occasion, but on every single occasion, the Liberal Democrats voted for it.

I understood that the Conservative party was advocating five-yearly rather than 10-yearly revaluations, so the hon. Gentleman is perhaps misleading us.

I have a the hon. Member for Brentwood and Ongar (Mr. Pickles), who just said that we are wrong. On 7 January 2003, he said:Hansard quote from

"We support . . . revaluation being made on a regular and predictable basis."—[Official Report, 7 January 2003; Vol. 397, c. 64–65.]

The Conservatives really do not know what they are doing, do they?

On a point of order, Mr. Speaker. Am I correct in thinking that the hon. Lady said that my hon. Friend was misleading us?

I think that the hon. Lady meant to say "inadvertently misleading".

I absolutely meant that the hon. Gentleman was inadvertently misleading us Mr. Speaker.

Now that the Conservatives oppose revaluation, it is clear that they are not attached to the council tax because they believe in the philosophy of a property tax. They have said that they oppose a wealth tax and want a local service tax. The hon. Member for Meriden (Mrs. Spelman) said that it costs the same amount to every person to empty the bins in every area. That shows her view of the role of local government. The nonsense that the Conservatives talk about wanting localism is underlined by that statement. It is the kind of thinking that spawned the poll tax, so the party has not moved on intellectually.

There is real tension in the Conservative party because although some say that they want localism—some of the brighter Back Benchers advocate the return to localism and getting rid of the centralist state—the hon. Lady continues to argue for a local services tax and against giving any powers back to councils. She argues for a regressive tax system.

I am grateful for the opportunity to reply to the hon. Lady's point, which is definitely misleading, and not inadvertently. I make it perfectly clear to her that in the balance of funding review—

Order. We had best stop here. No hon. Member would be misleading in the House and certainly not the hon. Member for Brent, East. I hope that the hon. Member for Meriden (Mrs. Spelman) will withdraw that remark.

Of course I withdraw any remarks that might cause offence. A proper reading of Hansard tomorrow will reveal the words that I actually said in my speech, not the words that are being put in my mouth.

I am no clearer, I am afraid.

At least the Tories are honest enough to acknowledge that the council tax is a poor proxy for a wealth tax, whereas the Government claim to be interested in progressive taxation, but fail to tackle the main problem with council tax by grasping the nettle that it is fundamentally unfair. I will be interested to find out whether they finally grasp that nettle when the Lyons review reports, or whether they will institute yet another review.

We have been arguing for the abolition of the council tax and its replacement with a local income tax since the Conservatives introduced it.