Local Government Finance
8:14 pm
Mr Adrian Sanders (Torbay, Liberal Democrat)
That is a tragedy and all too common. Indeed, it has even cropped up in my area.
In addition to the demographic time bomb, there is a pensions time bomb. Local authority pensions, like hon. Members' pensions, are an end-of-life deal in which people receive a proportion of final salary. That has been underfunded over the years by central Government. They have not recognised the additional costs that have to be met for pensions, which come out of local authority budgets.
The Government impose costs themselves. Best value has been mentioned. The inspection regulation regime is necessary to provide a common standard of service, but if a council is not recompensed for the full costs of implementing that administrative system, the money has to come out of cuts or from increases in council tax. Again, that is where the settlement does not meet actual need.
There is also the whole agenda of corporate government to consider. This year's increased settlement will be swallowed up chasing the extra costs that Government impose. It does nothing to help a council that is disadvantaged by the grant formula to catch up. Funding gaps will have to be filled by increased council tax, cuts in services, asset sales, privatisation, stock transfers, increased charges or borrowing. Councils can use a raft of measures, but most of them are negative. They are not wanted and should be unnecessary.
Most councils will increase their charges—my hon. Friend the Member for Bath has studied those at some length—way above the rate of inflation. They will bear no relationship to the retail prices index. Council tax is part of the problem, together with the formula. It hits the poorest hardest, in particular people on fixed low incomes, who tend to pensioners. Let us change the formula and have one that is based on local needs. Let us scrap the council tax altogether and have a taxation system that is based on the ability to pay—a local income tax.
The Minister is on record as saying that he wants to improve service delivery, and service delivery is the key. The settlement leaves a gaping hole in some local authority budgets. There are spending shortfalls almost across the board. We have highlighted social services, but no doubt it would be as easy to talk about the gross underfunding of transport and highways. The Minister tells local government to stand and deliver while he robs the highways budget. The Secretary of State has admitted that the funding formula is unfair. The Labour party promised five years ago that the problem would be fixed. Sadly, we are still waiting for treatment.
I conclude with a final quote from the right hon. Member for Holborn and St. Pancras. He said:
"The incoming Labour Government will be based on the supposition that democracy depends on the people who take the decisions carrying the can and the people who carry the can taking the decisions. So we shall be honest in our relations with local councils and we shall take responsibility for our share of those decisions. We shall not roam around the country blaming local councillors for decisions that we have taken in the House of Commons."—[Hansard, 3 February 1997; Vol. 289, c. 701.]
It would be nice if the Minister endorsed those comments. My question for him is the question that every council tax payer will ask: who is to blame for council tax rises and the cuts to services—Government or local councils?