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The right hon. Member for Yeovil issued a call to arms in his letter, saying, "I hope that everybody will be there and vote on and discuss the issue." He has not done that. The Liberal Democrats wish to abolish capping—at least we know where they are coming from—and the area cost adjustment. I hope that they know what the consequences of that would he for some inner-city authorities, irrespective of what political control they are under, in terms of the impact on some of the most deprived people in the country.
Two subjects are of great importance, and I wish to refer to them briefly. On capping, there is genuine debate about the balance between central and local government funding. I acknowledge that there should he such a debate. However, as the hon. Member for Stretford (Mr. Lloyd) said, local government spends 25 per cent. of public expenditure, and any Government must exercise ultimate control over that. A 1 per cent. relaxation of capping for education authorities would add £200 million to the public expenditure totals.
Equally, I am sensitive to the arguments about local accountability and the wish of people to differentiate themselves financially in order to differentiate themselves at the ballot box. We are specifically addressing that matter, and we have put before local authorities a series of suggestions under the private finance initiative which would allow local authorities to use their capital receipts in a better way. We have invited them to establish joint companies with the private sector, and to do that within the compass of central financial controls. We are hoping also to extend that into housing. That is the way to target and mobilise all the community's resources to tackle problems, particularly deprivation, about which we are all concerned.
Methodology is always central to debates such as this, and I should like to deal with the area cost adjustment. I have said in previous years that the system is robust. I said last year that we needed to improve the methodology in the south-east, and we have done so. I also said that I would investigate whether we could find something that gave us what we needed to know, better.
I have told local authority associations that we are exploring whether we can apply a travel-to-work test to the whole country. We are having discussions with the Department of Employment about the necessary data. We are tendering urgently for research projects which would help us to hammer out a methodology. The system would have to work, and it would have to deliver what we need.
I cannot promise—I shall not give an impression to the House which could mislead it—that the system would be as robust as the present one, but I guarantee that we will pursue it with great energy to see whether it delivers more effectively. If it does, it will become part of a methodology in which we have consistently incorporated improvements.