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Orders of the Day — Local Government Finance

Part of the debate – in the House of Commons at 4:40 pm on 1st February 1995.

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Photo of John Gummer John Gummer Secretary of State for Environment 4:40 pm, 1st February 1995

The House should hear the comments of the hon. Member for Greenwich. He said, "That is a backhander." It is what local authority associations have universally ask me to do. It is a pretty wide backhander if we give it to every local authority. The hon. Gentleman should be ashamed of himself for saying that.

This is a fair arrangement, phasing out transitional support so that grant can be redistributed elsewhere. I propose also to pay a special grant to police authorities whose combined SSA and entitlement to police grant next year will be reduced by more than 2 per cent. as a result of the move to the new police funding formula. Perhaps the hon. Member for Greenwich would say that that universally asked-for change is a backhander. Special grant report No. 12 will establish those grants for 1995–96. Some £261 million of special grant will be distributed to local authorities in that way.

The capping of local authority budgets—I come to the last point that I want to make—[HON. MEMBERS: "Hear, hear."] Opposition Members have asked me to give way. I have no means of orchestrating the Labour party, nor does anyone else. The hon. Member for Nuneaton (Mr. Olner) rose, but he was unable to intervene. He cannot complain because other hon. Members had an opportunity to put their points of view.

I have considered carefully the representations that Ministers in my Department and in other Departments have received from a range of authorities. In the light of those representations, I have decided to make one change to the intended capping criteria announced in December.

Last year I announced in a similar debate an adjustment that benefited authorities that had been the subject of a substantial reduction in SSA as a result of the SSA review implemented in last year's settlement and which, under the initial criteria, would have been required to reduce their budgets in cash terms. I propose to make a similar change this year. It will apply to any authority whose SSA was reduced as a consequence of the 1993 review by more than 10 per cent. as measured for the purpose of SSA reduction grant. The effect, as last year, is that any such authority will be required to freeze its budget rather than to reduce it in cash terms.

I also announced in December my proposals for the calculation of notional amounts for authorities whose boundaries or functions will change from 1 April. They provide the base from which I shall measure increases in budgets in determining whether those increases are excessive. In addition, I announced provisional criteria which made allowance for that expenditure on care in the community which is being met this year by the special transitional grant.

Apart from the changes which I have described, my intentions as regards capping criteria remain as I described them in December. The House will recognise that capping is an essential tool for retaining the effective control of overall spending required by the Government—indeed, any Government's—economic strategy. I understand that there are even suggestions that capping would form part of a Labour Government strategy. We will not hesitate to use our capping powers should it prove necessary.

This .year's settlement will give local authorities some difficult decisions to make, but, in the interests of the national economy, local government—like central Government—must restrain spending and make each pound it spends go further. The settlement also demonstrates the Government's continuing commitment to a fair distribution of available resources, on a basis which uses up-to-date information and objective formulae. I commend the settlement and these reports to the House.