Local Government Finance (England)

– in the House of Commons at 6:17 pm on 31st January 2001.

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Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government) 6:17 pm, 31st January 2001

I beg to move, That the Local Government Finance Report (England) 2001–02 (HC 158), which was laid before this House on 29th January, be approved. We would normally debate the two motions on local government finance in one debate, but I understand that some Conservative Members objected to that idea. I apologise to the House for that because I know that many Back Benchers want to speak on the main motion, but that is not in the hands of those on the Government Benches. Juvenile games seem to be the order of the day among Conservative Members, so we will just have to indulge them.

High-quality public services are the foundation of strong communities. The investment that we are announcing today will help ensure that councils throughout the country can continue to improve the quality of our local environment, to help tackle crime, to raise standards in our schools and to care for the most vulnerable members of our society.

The Government believe in the value of public services and are committed to ensuring that all our public services have the investment that they need to meet the aspirations and expectations of the public. That is why, since we came to office, we have invested an additional £8 billion, an increase of 14 per cent. in real terms, in grant support, compared with a 7 per cent. reduction during the last four years of the previous Administration's period in office. It is why I am pleased to announce that this year's settlement—£44.6 billion in total support from Government grant and business rates, an increase of £3 billion, or 7.2 per cent. —represents the best settlement for local government since the introduction of the council tax.

That does not mean that I am oblivious to the difficult choices that many authorities have to make and the challenges that face local communities.

Photo of Paul Beresford Paul Beresford Conservative, Mole Valley

The Minister seems to be judging the quality of services by the amount of other people's money spent on them. In that case, will she comment on the fairly strong story that the new Mayor, a monster that she has unleashed on London, proposes to put his precept up by some 33 per cent., bearing in mind that, at the referendum, the Government said that the increase would be 3p a week for Londoners?

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I made it absolutely clear that budget setting is for local councils; it is not for the Government to determine what those budgets should be. We seek to provide sufficient resources for authorities to budget in a manner ensuring that, with best value, services improve annually. I also know that the Greater London Authority is considering with great alacrity the Mayor's budget proposals.

We are also providing for substantially increased capital investment by local government in long-term infrastructure improvements. Total local authority capital investment is planned to be £6.1 billion in 2001–02, increasing to £8 billion in 2003–04. That has been welcomed across local government. Furthermore,we have replaced the boom and bust and cuts climate of the previous Conservative Government, which undermined local public services, with economic stability and reasonable certainty about future funding. To be wise spenders, councils need to be able to plan ahead.

We already publish three-year plans for total general grant and limit the extent to which the grant formula will change. From this year, we are going further and providing information on the majority of capital allocations and specific grants on a three-year basis. Councils across the country have welcomed that change.

As I made clear to the House in November, the operation of the general grant distribution formula for 2001–02, if left unchecked, would produce an unacceptably wide range of outcomes. Some authorities would receive grant increases of about 10 per cent., whereas others would see their grant cut in real terms. That cannot be right. The reasons for the variation are large changes in the estimated population of local authority areas and changes in the earnings data used to calculate the area cost adjustment.

We have always made it clear that we shall take new data into account in the formula. However, as I also explained to the House in November, to prevent those changes in data from undermining delivery of the Government's priorities of education and social services—I believe that people and their local councils agree about those priorities—I announced that I would set a floor and a ceiling on the general grant increase received by any authority with education and social services responsibilities.

Photo of Linda Gilroy Linda Gilroy Labour/Co-operative, Plymouth, Sutton

May I thank my right hon. Friend for the floor that she introduced which has given Plymouth an additional £2 million over and above what it would have received under the formula invented by the Conservative Government? However, may I ask her to nail the story being put about in Plymouth by the leader of the local Tory-controlled council, who claims that Plymouth is always at the bottom of the pile when it comes to local government finance? [Interruption.] Will she also nail his claim—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Lady must know that there is very limited time for this debate. Interventions must be extremely brief on this occasion.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I am very happy to nail that claim, and suspect that other hon. Members in the Chamber have nailed it fairly effectively. Almost every authority that comes to see me claims that it is at the bottom of the pile. The reality is that all local authorities have benefited significantly since this Government came to power. We have reversed the cuts that were made by the previous Administration and built on the available new investment.

In November, I proposed a floor increase of 3.2 per cent. and a ceiling of 6.5 per cent. As expected, a broad range of views emerged from consultation on that proposal.

Photo of Paul Beresford Paul Beresford Conservative, Mole Valley

I thank the Minister for giving way. The reality of the floor and the ceiling is of course that the floor is just a damping system—a continuation of the system operated by the previous Administration and dealt with, as I understand it, in the next report on special grant. As a result of the ceiling, however, those councils whose standard spending assessments reveal greater need than others will lose out. Moreover, those authorities will lose again because of the funding reshuffle between the ceiling and the floor. Approximately 400 authorities across the country will receive less than that necessary to deal with their problems, as revealed by the needs indices.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

The hon. Gentleman—for reasons that I totally understand—has absolute faith in the SSA system and the distribution system, but I do not. I think that there are still flaws in that system, and that the use of the mechanism of floors and ceilings recognises that system's problems and tries to ameliorate them. He is right that the previous Conservative Government—he was an Environment Minister in that Administration—introduced damping grants. However, they never introduced anything like a base level grant increase of at least 3.2 per cent.

There was broad agreement on the concept of the floor, but views differed on how it should be paid for. Given that the overall total for distribution is fixed, I could not agree to proposals for funding the floor with extra resources. I considered carefully the proposition that the burden should be shared among local authorities by top-slicing the total grant—which was the method usually used by the Conservative Government—but that would require authorities to contribute in proportion to their council tax base. In other words, the authorities that were not receiving a large increase would have had to contribute even more to the floor than they would using the scaling factor that I propose.

I therefore concluded that a better approach was to allocate contributions to the floor in relation to the size of the increase received by authorities above the floor. It is still my view that it would be best to set limits on what would otherwise be a very wide range of grant increases because that would have made service planning very difficult for authorities.

I am therefore confirming my proposal to set a floor of 3.2 per cent. and a ceiling of 6.5 per cent. on general grant increases for authorities with responsibility for education and social services. A 6.5 per cent. increase in general grant should be sufficient for most ceiling authorities, even after allowing for the fact that they have growing populations, and particularly when many of them are receiving substantial sums in other grants. A 3.2 per cent. increase is reasonable for floor authorities, taking into account the fact that most of them face population reductions. Those increases will be topped by significant increases in other grants.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I do not think that it is fair simply to have a debate with the hon. Gentleman. I am sure that he will attempt later to catch the eye of the occupant of the Chair.

Following careful consideration, I proposed to make one exception to the ceiling rule. Quite exceptional circumstances apply to the Isles of Scilly council, and it is always treated separately within the settlement. It cannot avoid substantial capital expenditure to maintain essential waste disposal services. That capital expenditure should receive revenue support in the usual manner, through Government grant. If I treated the Isles of Scilly council on exactly the same basis as all other authorities with education and social services responsibilities, however, that extra revenue support would take its grant increase above the ceiling. Its annual budget is extremely small, and it would clearly have exceptional difficulty accommodating the expenditure. I shall therefore not limit its grant increase this year.

For local authorities that do not have education and social services responsibilities, no floors or ceilings will be imposed. I intend to continue the guarantee provided for the past two years that no such authority will receive less central support from the Government in 2001–02 than in 2000–01.

Of course, I know that the grant distribution system that we inherited attracts a lot of criticism—not least from Labour Members. It has not made it easy for authorities to plan ahead to improve their services. It does not encourage authorities to take responsibility for their budget choices. It is also very difficult for people to understand. It is small wonder that authorities continue to doubt its fairness.

Photo of David Drew David Drew Labour/Co-operative, Stroud

I am grateful to my right hon. Friend for receiving representations in regard to Gloucestershire's fire and rescue service, but will she listen again to our special plea about our standard spending assessment? Having managed to negotiate an increase of 1.4 per cent. down to 1.3 per cent., I hope that I can be more successful when I lobby her in the future.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

There are special problems in Gloucestershire that I discussed with my hon. Friend earlier today. They result from a blip in the figures this year. It is not right that the formula should respond in the way that it has, and that is why we are reviewing the distribution system. I hope, by taking account of matters such as that, that we can create a fairer system.

We are not rushing to hasty solutions, as some would urge. We are building a consensus on the way forward with local government and other stakeholders. We have received a massive response to our Green Paper—more than 16,000 replies. We are currently finalising our analysis of those responses and the details will be published on the Department of the Environment, Transport and the Regions website by the beginning of March.

However, this settlement must not been seen in isolation. The Government have responded to specific pressures in four areas. First, we have looked again at the funding position of authorities with the most serious deprivation problems. My right hon. Friend the Deputy Prime Minister announced on 24 January a doubling of the provision for the neighbourhood renewal fund in 2001–2002, from £100 million to £200 million. These additional resources will help local authorities improve their mainstream services in the most deprived neighbourhoods.

Secondly, in some areas where there have been serious floods this year, authorities faced the prospect of an increased levy from the Environment Agency to cover the costs incurred in dealing with them. My hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, who has responsibility for the countryside and fisheries, announced on 26 January that he will provide an additional £11.6 million for the Environment Agency, to limit the burden falling on local authorities.

Photo of Don Foster Don Foster Shadow Spokesperson (Environment, Transport and the Regions)

Is the £11.6 million genuinely new money, or is it part of the £51 million over four years announced by the Chancellor some months ago?

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I understand that £11.6 million was included in the spending review, but not in the £51 million announced by my right hon. Friend the Chancellor.

Thirdly, my hon. Friend the Under-Secretary of State for Social Security, the hon. Member for Wallasey (Angela Eagle), announced on 26 January additional funding of £25 million to help local authorities facing significant increases in the cost of housing homeless households in temporary accommodation. This will help all authorities that are in that position, including those accommodating large numbers of asylum seekers.

Finally, my right hon. Friend the Secretary of State for Education and Employment announced on 29 January a new grant of £52 million to provide help in meeting education spending pressures to those education authorities with the lowest increases in education funding from other sources.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire

In recent years, Leicestershire has languished at the bottom of the county league table in respect of the amount of SSA granted per pupil in both primary and secondary schools. The extra £100,000 announced just days ago compares with a shortfall of £12 million. On that basis, it will take more than a century for us to reach the average county level. By the time that gap has been fully bridged, children in Leicestershire will probably be rather too old to benefit.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I understand the concern of my hon. Friend, who has constantly paid attention to these matters and made representations about them on behalf of his constituency. However, he has not taken into account the ring-fenced grants that Leicestershire has received this year. They amount to an increase of about 24.6 per cent. My right hon. Friend the Secretary of State for Education and Employment took that into account in calculating the money from the £52 million.

Photo of Steve Webb Steve Webb Shadow Spokesperson (Work and Pensions)

Before she moves away from the subject of the money announced on Monday, will the Minister explain the exact mechanism by which Bristol council received £700,000? None of the other three former Avon authorities, which include South Gloucestershire, are Labour controlled. They received only £100,000. What formula lay behind those allocations?

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I have already said that other funding that councils have received was weighed against the pressures that they face. [Interruption.] The Department for Education and Employment gave a clear indication of the criteria that were taken into account when calculating the amounts disbursed. It allocated £100,000 to all authorities that have not benefited from the neighbourhood renewal fund. The sum involved totals £8 million. Those authorities that face the greatest pressure as a result of the transfer of adult education funding to the Learning and Skills Council were also compensated.

I suspect that gains and losses would have been equally distributed among the authorities that the hon. Gentleman mentioned. A note from the Department for Education and Employment shows that consideration was given to the way in which pressures on authorities from pay, prices and increased contributions to the standards fund compared with their increase in education SSA and the funding that I have outlined. It is clear, therefore, that the Department for Education and Employment took into account pressures faced by authorities, and the moneys that they had already received. It made its calculations on that basis.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

It is clear that the formula has produced some anomalies. For example, outer-London boroughs facing severe teacher shortages are not getting significant sums in additional benefit under this formula, but neither are they getting it from funding under the education action zone or excellence in the cities schemes.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

My hon. Friend must take that up with the Department for Education and Employment. Under this settlement, outer London did especially well overall.

No doubt Conservative Members will predict council tax increases, as they have every year since we came to office. I understand that they are talking about an increase of 9.1 per cent. Every year they are proved wrong. The rate of council tax increase continues to decline. They were miles out last year, and I suspect that they will be miles out again this year.

The Government will not indulge in such fruitless speculation, and it would not be right for me to make predictions about what are essentially local decisions made by authorities accountable to local people. What is important is that local authorities consult local people and consider fully the scope for cost effectiveness before setting their budgets.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I should have thought it customary to give way to the Opposition Front-Bench spokesman in a debate such as this. The Minister cannot get away with what she has said. She has suggested that she expects increases to be below 6.1 per cent. Will she give the House some idea of how much below that figure the increases will be?

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I have continually said that I expect that, for most authorities, the rate of council tax increase will continue to decline. Labour authorities have the lowest council tax bills, whereas councils controlled by the Conservative and Liberal Democrat parties cost people £100 a year more, on average. In line with our commitment to local accountability, we abolished crude and universal capping and no longer set authorities' spending limits in advance. In general, councils have responded well to this approach in the past two years. Local authorities also made representations on council tax benefit subsidy limitation. I have considered these carefully, but have decided to make no change to the scheme that I proposed on 27 November, as amended on 15 December.

This local government settlement forms an important part of the Government's commitment to public services. We are working together with local government to provide a stable financial and planning environment for delivering better services. We have consistently put additional investment into local government and, by managing the economy in the way that we are, we will continue to seek to do so.

Our proposals for 2001–02 have been widely welcomed by local government because they complement the reform and the work in which local government is involved. It is true that local government continues to want to do more and the Government will work with it to ensure that that is possible.

I commend the motion to the House.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 6:41 pm, 31st January 2001

This is a Government who live and will die by spin. As we have seen in the events surrounding the second resignation of the right hon. Member for Hartlepool (Mr. Mandelson), this is the Government of the short cut, the quick fix, the nod and the wink.

The Minister would have us believe that this financial settlement for local government is arrived at gravely and deliberately, with no political input. She talks about stability and even of a freeze in standard spending assessment methodology. Nothing could be further from the truth.

The plain truth is that the Government have found themselves in a tight corner over the new earnings data for the area cost adjustment. So before the recent statement, we had the introduction of floors and ceilings, despite the fact that we are supposed to be having a freeze while Ministers mull over the reaction to their Green Paper.

There are three real concerns about the floors and ceilings. First, they provide the prospect of distortion by introducing these mechanisms, complicating an already complex system. Secondly, if the statistical data are reliable and show that a particular council has sustained these extra costs in their area, they should be fully reflected in the grant system. The system would surely be more defensible if it related to what happens in the real world. Thirdly, there is the real possibility, now and in the future, of political interference by Ministers in how the grant is distributed between one part of the country and another. We see the system as a way of shifting resources to some Labour-run authorities and marginal seats around the country.

We must remember that shire counties will have lost out in this Parliament to the tune of £700 million as a direct result of changes in methodology at the beginning of the Government's term in office. All this talk of stability merely cements in these unfairnesses. The London boroughs have lost out by some £350 million.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

I thought that the hon. Gentleman was interested in the plain truth. The plain truth is that if we had continued with the Tories' figures, all authorities would have lost substantially more. What the hon. Gentleman means is that by changing methodology, we achieved a fairer system of distribution. All authorities have gained by substantially more than the figures that he has quoted, including London and the shire counties.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Somebody who does not agree that we have a fairer system is the Mayor of London, the hon. Member for Brent, East (Mr. Livingstone). He said the faceless bureaucrats normally hidden in the bowels of John Prescott's super ministry deserve a good kicking because of the Government's whacking cuts to the poorest London councils.

Ever since the statement on the provisional settlement, the ground has shifted again. The Times reported that there were crisis talks between the Secretary of State and the Chancellor. It said: the package was agreed on after crisis talks between Mr. Prescott and Gordon Brown, the Chancellor. There had been fears that the impact of projected increases of up to three times the rate of inflation would cost Labour dozens of seats at the election. I see that some of those seats are represented in the Chamber tonight.

Lo and behold, Ministers rushed out an announcement of a £100 million emergency package—money diverted from the neighbourhood renewal fund—to keep down council tax increases in a large number of marginal Labour seats such as Enfield, which has a majority of 1,433, Bristol, West, where the majority is 1,493 and Hastings, where it is just over 2,500.

Photo of Linda Gilroy Linda Gilroy Labour/Co-operative, Plymouth, Sutton

I am following the hon. Gentleman's argument with interest. Is he saying that the Tory-controlled Plymouth city council should not have been given the £2 million that it received as a floor for the area cost adjustment, and that we should not have the neighbourhood renewal fund?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

No, of course I am not saying that. I am simply saying that it is curious how a significant number of Labour marginal seats seem suddenly to have benefited from this largesse.

Another £25 million popped up so that some councils could tackle homelessness. It is interesting that the problems caused by asylum seekers featured prominently in the relevant press release, despite the Government's dismal failure on this aspect of their policy.

Another £11.6 million was suddenly found to help councils that have suffered particularly badly in the recent flooding. Similarly, a sum of £52 million has been found for education. There are concerns as to whether that is all new money or merely recycled or reheated announcements of old money.

We all know about the problems faced across the country, including in my area, with regard to bed blocking and the crisis in social services. That is addressed only partly by recent extra funding in some areas for the national health service.

This all amounts to what some commentators have called a pattern of behaviour in the context of the resignation of the right hon. Member for Hartlepool. As The Times put it, this brings to £189 million the amount of cash the Cabinet has rushed together since the Government unveiled their initial local government settlement in November.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Is the hon. Gentleman saying that under a Conservative Government, that money would not have been provided to those areas where it is clearly urgently needed?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I think that the answer is clear: we need to look at the settlement in the round and see the unfairnesses that are being created across the country.

Photo of Paul Beresford Paul Beresford Conservative, Mole Valley

Does my hon. Friend agree that the muddle between the floors and ceilings has enabled the Government to have more money to distribute by selection rather than by an assessment of needs?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

My hon. Friend is absolutely right.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

No, I will not give way any more at the moment.

What comments have come forth on this extra largesse? Sir Jeremy Beecham, the Labour head of the Local Government Association, said: we do regret the increase of expenditure being passed through specific grants, which are too tightly controlled by Whitehall, and therefore limit the degree of choice in assessing particular local needs. The hon. Member for Stafford (Mr. Kidney), who I see is in the Chamber, is one of a number of Labour Back Benchers who feel that their areas have been treated unfairly. He said in a recent letter: Outrageously, the data benefits those authorities already gaining from Area Cost Adjustment…To deflect criticism of this further injustice, DETR has put forward the 'floor and ceiling' proposals. The hon. Gentleman makes the obvious point, made by my hon. Friend the Member for Mole Valley (Sir P. Beresford) a moment ago, that as a result of bringing in the ceilings and floors, all other authorities must receive less grant to pay for the difference. This means that the 103 authorities between the floor and the ceiling lose about 4 per cent. of grant that they would have received under the old system. [Interruption.] The Minister says no, but she must sort out her differences with the hon. Member for Stafford in some other place.

The hon. Gentleman talks about making representations to the Minister. He said: It was evident that the DETR has a block of money to distribute. The Minister can slice the block one way or another way". Clearly, a decision has been taken to slice it in a way that might help electorally.

The hon. Gentleman talks about meetings with the Secretary of State and the Chancellor and ends on a forlorn note: I doubt that we will persuade them to meet us in person".

Photo of David Kidney David Kidney Labour, Stafford

In areas such as Staffordshire, the great anger is that the area cost adjustment has nothing to do with need—it is not a proven figure on which to rely. Will the hon. Gentleman say on behalf of the official Opposition whether he will stand by the area cost adjustment as a legitimate way to dispose of money to local authorities?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The hon. Gentleman makes a reasonable point. When we find out what situation we have inherited, with all these floors and ceilings, we will take a view on the matter.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I will not give way again.

Of course, some areas benefit substantially from the area cost adjustment, as the hon. Gentleman knows.

Those are the verdicts of some people who ought to know about the figures. Why are Ministers and Labour Back Benchers panicking so much in the run-up to the election? It is because we are talking about yet another broken election promise. When the Prime Minister said, we have no plans to increase tax at all", he clearly hoped that people would assume that he was not talking about council tax. The fact is that the average band D council tax increased this year from £689 in 1997–78 to £847, or by 23 per cent. On average, it has soared by three times the rate of inflation. By the time of the next election, the average British family could be paying an extra £200 in council tax alone.

This year, the Minister for Local Government and the Regions is being coy, but last year she predicted that council tax would rise by an average of 4.8 per cent. It rose by 6.1 per cent. Have we any reason to believe that her predictions this year would be any more reliable? The Department talks about a 5 per cent. increase in the coming year. The Minister declines the opportunity to predict the rise, talking about "fruitless speculation".

Incidentally, the Minister trots out the old chestnut, trying to suggest that comparing band D bills is not appropriate. Peter Kellner—not exactly a Conservative commentator—said: Homes in Labour areas tended to fall into lower council tax bands and this was why average council tax was lower … The proper way to judge the figures was to compare like with like … Band D figures, council by council". He went on to point out that Labour's claim is as misleading as it ever was…On this issue, Labour is wrong and Tories are right.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Will the hon. Gentleman give way on tax increases?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The hon. Gentleman can try to catch the Deputy Speaker's eye.

The Minister will not engage in what she calls "fruitless speculation", so we have been doing some research of our own. We have done a sample survey of councils throughout England. Our survey reveals—it is early days, as councils are still setting their budgets—that council tax could increase by 9 per cent. this year, putting £77 on the average band D council tax bill.

What is particularly worrying—it may worry the hon. Member for Croydon, Central (Mr. Davies) as much as anyone—is that council tax has risen by 25 per cent. in the past three years in Labour's top 25 marginal constituencies. The projected percentage change in council tax in those seats, from 1997–98 to 2001–02, is a staggering 33 per cent. That is a staggering extra stealth tax on the British people. For all the hon. Members whose names are on that list of marginal seats, it is a worrying development.

Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

I am sure that my hon. Friend wants to hear from Worcestershire, where there are three marginal Labour seats and three Conservative-held seats. A Labour council has been in charge for the past four years, during which time council tax has risen by 50 per cent. This year everyone has a choice. On a Worcestershire council website one can choose a council tax increase of 7.5 per cent., 10.5 per cent. or 13.5 per cent. Only with the latter figure will there not be a cut in services.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

That says it all about what is happening in the real world.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

In a moment, but let me finish on this point. There is no need for the Minister to get aggressive.

I enjoyed meeting my hon. Friend the Member for Bromsgrove (Miss Kirkbride) recently with the delegation of head teachers from Worcestershire, who brought to this place all the concerns of hundreds of teachers and thousands of parents about the massive problems being caused in the education system by lack of Government funding.

Photo of Hilary Armstrong Hilary Armstrong Minister of State (Local Government and Housing), Department of the Environment, Transport and the Regions, Minister of State (Department for Environment, Transport and the Regions) (Local Government)

Is the hon. Gentleman saying that he wants to encourage large tax increases? I refer him to Essex, which is a county that the Conservative party runs, although only just. The leader of that council said that this year it would have the largest council tax rise of any county council. That is against the background of Essex county council receiving a total increase in spending of 7.3 per cent. this year, and that does not include the extra £100,000 that it is getting in education money. Should any authority be talking about high council taxes and rises when it is getting an increase of 7.3 per cent. from external funding?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

That shows what the Minister is seeking to achieve. By starving Conservative-controlled councils of the funding that they need, she is trying to provoke a situation in which they are blamed for having to increase the council tax beyond what is reasonable.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I will not give way any more at the moment.

Those council tax rises hit some of the most vulnerable people in our society. The figures show that one third of the increase in the state pension under this Government has been eaten up by soaring council taxes. In the past three years, the state pension has risen by £421, whereas the average band D council tax bill has risen by £158, which is equivalent to 38 per cent. of the pension rise. That is a staggering amount for elderly people to have to find.

Despite what I was saying about the Government starving many Conservative-dominated areas of funding, Conservative councils still have the lowest council taxes. In the coming year, a typical band D household is paying £724 under the average Conservative-controlled council compared with £124 more—almost £2.50 a week—under a Labour-controlled council.

In case the Liberal Democrats think that they are going to escape scot free. I should point out that the average band D tax in the councils that they control is £803, which is over 10 per cent. more than in Conservative-controlled councils. Of course, the Liberal Democrats now preside over Liverpool, which is the council with the highest council tax in England. A band D tax payer there now pays nearly £100 a week.

That is not the end of the bad news for ordinary citizens, as it is evident for all to see that, far from delivering greater efficiency and accountability in local government, the Government's best value regime is producing a bloated bureaucracy and heavy additional costs for already hard-pressed councils. The Government have allocated £40 million for best value and the Local Government Association has demanded an extra £175 million.

The Government are forging ahead with their centralising agenda for local government. They are busily imposing the cabinet system on the majority of local authorities. Only a few days ago, they forced through the House their misguided plans for greater secrecy in local government. The inexorable rise of specific grants as a proportion of Government grant means the tightening of central Government control over local government—there has been a rise in just one year of 18 per cent. in the proportion of specific grants.

On top of that, we have the Minister's continued boast that capping has been abolished. Of course, no such thing has happened. The Government have not scrapped crude and universal capping—I notice that in last year's Hansard that came out as "cruel" and universal capping, but in the Minister's lexicon, that amounts to the same thing. That remains as a reserve power. There is also the so-called "refined" capping on the council tax benefit limitation scheme.

As if all that were not bad enough, the Labour Government are planning a raft of new taxes on local communities: congestion taxes; workplace parking taxes; and supplementary business rates. The Government have been an unmitigated disaster for local government and for the communities served by local government. I urge my right hon. and hon. Friends to vote against the report.

7 pm

Photo of Jeff Ennis Jeff Ennis Labour, Barnsley East and Mexborough

Thank you, Mr. Deputy Speaker, for allowing me to speak in the debate. I am sure that many other Members want to speak, so I shall try to keep my contribution brief. I must point out, however, that the amount of time allowed for this important debate is scandalous; many hon. Members will not have an opportunity to contribute.

Members on both sides of the House will agree that what local government needs more than anything else is a fair funding grant system, based on definable need. I am sure that one thing that will emerge from the debate is that the current system does not fulfil that basic criterion. I imagine that the reactions of hon. Members to this year's settlement, which was announced in the House on 18 December, will largely depend on the class of authority that they represent.

The average settlement for metropolitan authorities outside London was 3.8 per cent; for shire and unitary authorities, it was 4.9 per cent; and for London authorities, it was 6 per cent. Barnsley received an additional 3.2 per cent. and Doncaster received 3.6 per cent.—both of which are below the metropolitan average.

I know that the Minister for Local Government and the Regions has received many representations from all classes of authority, especially from non-London metropolitan authorities, about this year's settlement. There is no doubt that the Government have listened to their representations. They can be proud that they have increased standard spending assessments by an average of 4.3 per cent. in each year since taking office. The average of the last four years under the Tories was a paltry 1.5 per cent.

Additional support outside the rate support grant settlement has been found so as to ease specific pressures on councils. The Government have increased by £100 million the first-year allocation to the new neighbourhood renewal fund; that is targeted support for local authorities representing the 88 most deprived neighbourhoods. Indeed, Barnsley received an additional £1.3 million and Doncaster received an additional £2.2 million in such funding.

There is no doubt that my constituency is one of the most deprived in the country. Last year, it was calculated that the gross domestic product per capita in Barnsley, East and Mexborough was only 62 per cent. of the European average. I understand that is the lowest in the UK—no wonder Barnsley and Doncaster and the rest of South Yorkshire qualify for objective 1 funding from Europe.

Barnsley and Doncaster will also benefit from the additional £11.6 million flood relief funding allocated to the Environment Agency to relieve pressure on council tax payers in flood-affected areas. They will share the additional £52 million education budget support grant for local authorities that received more modest increases in education funding from the RSG. Doncaster will receive an additional £880,000, but unfortunately Barnsley will receive only an additional £180,000.

The Government have thus responded positively to local authority concerns, but local authorities such as Barnsley and Doncaster, languishing at the bottom of the SSA league, need not additional pockets of grant aid but fundamental changes to the local government funding system. I know that the Government are committed to such changes. Until we address the inherent problems embedded in the current SSA formula-funded grant system, local authorities at the bottom of the SSA league will always struggle.

Next year's budget for Barnsley and Doncaster—the two local authorities that I represent—will be extremely tight, but of the two, Barnsley's position is by far the more difficult to address. Data changes and the area cost adjustment have resulted in a loss of about £2.2 million to Barnsley.

The Government's ceilings and floors concept is good in principle, but, as it operates at present, it does not close the gap. Indeed, it has a perverse impact, as the poor pay for the poor. Barnsley pays £100,000 into the fund to ameliorate Liverpool's losses and Doncaster pays back £218,000. Even after those additional resources, Barnsley still faces estimated cuts of about £11 million over the next two years.

I fully support the Government requirement to passport moneys to key priority services, such as education, social services and highways, but it means that nearly all the reductions under consideration will fall on the "other services" block. By how much will the "other services" block grant be increased next year?

That block covers general community services, so the impact of cuts will be felt in reductions in, for example, welfare rights—a service that Barnsley can ill afford to cut. One in three households in my constituency include at least one disabled person. As a Government, we are trying to encourage the take-up of initiatives such as the minimum income guarantee. If we cut welfare rights officers in Barnsley, we shall not achieve that.

Barnsley is having to consider reductions in land reclamation. Our reclamation programme is extremely large because of the legacy of the former mining industry. The need to clear up our industrial eyesores is drastic if we are to succeed in attracting new inward investors to Barnsley. We shall have to consider reductions in economic development and regeneration initiatives. Barnsley and Doncaster are in an objective 1 area, yet no additional resources can be allocated to meet councils' contribution to capital and revenue schemes.

We might have to consider reducing services such as trading standards, environmental health and street cleansing. The irony is that those reductions would fall on the very services that have been determined as priorities by the local community, through local area forums and strategic local partnerships. The Minister is aware that Barnsley has probably led the way in adopting the cabinet system; we did so long before it was made compulsory, as it were. We are working hard to the Government's modernisation agenda.

Significant job losses are expected because of Barnsley's budgetary position. It is anticipated that about 225 full-time equivalent posts will be lost, with an associated cost of about £1.8 million. Unfortunately, such costs cannot be prudently met from balances; the authority's external auditor has already determined that they are inadequate, so such additional one-off costs will have to be met from further cuts. Will the Minister consider our authority for additional help—for example, via the capitalisation of such one-off costs with an appropriate allowance from supplementary credit approvals?

I know that the Government are wholly committed to the successful future of local government and the valuable services that it provides. The Government must realise, however, that the current SSA system was set up by the previous Conservative Government specifically to disadvantage certain classes of local authority, which include Barnsley and Doncaster in the traditional Labour heartlands. The only way in which we can successfully address the bias inherent in the existing system is to introduce a more transparent and simpler funding regime based on local need. The sooner after the general election that the next Labour Government bring in such a system, the better it will be for all concerned.

Photo of Don Foster Don Foster Shadow Spokesperson (Environment, Transport and the Regions) 7:10 pm, 31st January 2001

I am delighted to follow the hon. Member for Barnsley, East and Mexborough (Mr. Ennis). I share his concerns about the lack of time allocated to this very important debate and about the current mechanism for funding local government, which, as he rightly pointed out, was introduced by the previous Government but which many of us hoped would have been changed by now.

I do not want to belittle some of the improvements that the Government have made to the funding arrangements for local government, not least the significant improvements in capital funding, but I do suggest that the Minister over-egged the pudding in her statements tonight and over recent days.

How can it be, as the Minister tells us, the most wonderful settlement for local government ever, when her hon. Friend the Member for Barnsley, East and Mexborough told us about the cuts in services that his local council will have to make, which I fear will be reflected in many other councils around the country?

We welcome the money that has been announced in the past few days, in addition to the amounts that were announced in the statement in November 2000, but even the recent announcement contains an element of hype. For example, the Minister tells us that there will be an additional £100 million for the neighbourhood renewal scheme, which she would argue brings the total to £200 million. She does not tell us that when the Chancellor initially announced £100 million for the scheme, the Red Book shows that he was also cutting £160 million from the new deal for the communities scheme, which was designed to do the same thing. As a result, even with the additional £100 million that has just been announced, the net increase is £40 million.

Similarly, when I intervened on the Minister a few minutes ago, she acknowledged that the £11.6 million of so-called additional money to help with flood defences was not new money at all, but was from some pot—she could not quite recall which—that the Chancellor had previously announced.

Despite all the arguments that we could have about likely council tax rises, the reality is that increases will be significantly above the inflation rate, despite what the Government are doing. The electorate want to know how that is the case.

Photo of John Bercow John Bercow Shadow Spokesperson (Home Affairs)

I understand and sympathise with the thrust of the hon. Gentleman's argument, but in judging the adequacy or otherwise of revenue spending will he tell us what assessment he has made of the effect of the change in the rules on the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Photo of Don Foster Don Foster Shadow Spokesperson (Environment, Transport and the Regions)

The hon. Gentleman makes an interesting point, but I do not want to be drawn into discussing all the details. One of our current problems is that the capital financing system for local government is hugely complex. The one thing that I would love to see more than any other is the introduction of a system that enables our local councils to borrow the money that they judge they need, pure and simple, without all the bureaucracy and complexity. Our problem derives from the decision by the current Government and the previous Conservative Government to adopt a model that is designed to keep as many hands on the tiller as possible, denying local authorities freedom.

That observation leads me very nicely to the subject of freedom for local government, and the problems associated with funding mechanisms. Increasingly, central Government want local government to do more and more—for example, with personal social services—but do not necessarily make available the necessary resources. Our social services departments had already decided that, in the current financial year, they would have to spend well above standard spending assessment, especially on children's services. On average, social services departments are spending 27.4 per cent. more on children's services than the Government expected them to spend. That amounts to £550 million.

Only yesterday, the Local Government Association completed a survey of social services departments, which showed that they budgeted to spend much more than the Government expected. Those departments, collectively, are already £205 million overspent at this stage of the financial year. No wonder local councils up and down the land are unconvinced that the settlement for next year, as described today, will be sufficient to help them to repay the losses that they are making this year, let alone take account of their rising costs.

Rising costs are certainly not being funded by the Government. My local authority, Bath and North East Somerset council, has drawn my attention to the fact that a huge inconsistency between the capital asset thresholds determined by the Department of Social Security and by the Department of Health is to be introduced. That inconsistency will cost my local authority £100,000 in additional costs, which will not be met.

It gets worse. I welcome the Government's announcement in their NHS plan that they intend to boost the quality and availability of intermediate care to reduce the phenomenon of bed blocking. They say that, over three years, that will cost about £900 million, but they expect local government to provide most of the services to meet that aspiration. I have checked today with the Local Government Association, which has analysed the Minister's statement today and can see no evidence of any resources being made available in next year's settlement to help personal social services departments to pay for the boost to intermediate care. It is a further additional burden that local authorities are obliged to fund from their own budgets, which are already stretched to breaking point.

The Government will undoubtedly make an announcement about the teachers' pay award in the next few days. I hope very much that it will be a good settlement; we desperately need it. Last September, we were 4,000 teachers short. Pupil-teacher ratios in secondary schools are now at their worst for more than 20 years. We desperately need to do something about that shortage. However, if that good teachers' pay award—some are now talking of figures as high as 3.7 per cent.—is not fully funded by the Government, it will impose huge pressures on our local councils, whose education budgets, too, are already massively overstretched.

It is no wonder, given those additional pressures, that council taxes are set to increase by significantly more than the rate of inflation. The Minister is not prepared to put a figure on it. The hon. Member for Eastbourne (Mr. Waterson) put a figure on it of about 9 per cent. I shall place on the record our figure, because I gave it last November and the evidence suggests that I am yet again likely to be right. I predict an increase of 6.7 per cent., but time will tell. However, the Minister, with her indication, the hon. Member for Eastbourne and I all predict that council taxes across the land will increase by more than the rate of inflation. That is the fault not of local government but of the local government finance settlement from this Labour Government.

The speech of the hon. Member for Eastbourne fascinated me. He says that we should deal with what is out there in the real world, but when he trots out the figures he uses council tax band D figures when it suits him and percentage increases when it suits him better. Let me choose one measure at random—the percentage increase—and remind the House that, for the financial year that has just been completed, the average council tax increase was 6 per cent. under a Liberal Democrat authority, 6.2 per cent. under a Labour authority and 8.5 per cent. under a Conservative authority.

I was staggered that the hon. Gentleman chose to introduce Liverpool into the equation. Of all the councils that he could have chosen, he should not have chosen to attack Liverpool, where, in the two years since the Liberal Democrats took over, the council tax rise was 0 per cent. and 0 per cent. I should have thought that he would welcome that.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Surely the hon. Gentleman accepts that all the experts and pundits agree that the fairest comparison is the band D council tax. If he does, he must also accept that on average it is much more expensive to live under a Liberal Democrat or Labour-run council than under a Conservative council.

Photo of Don Foster Don Foster Shadow Spokesperson (Environment, Transport and the Regions)

I said that when the hon. Gentleman wanted to attack authorities, on some occasions, he chose to use percentages and, on others, council tax band D. I therefore chose one of those methods at random. I am sorry if he does not like the figures, but they are correct.

Another important issue relates to the point made by hon. Member for Buckingham (Mr. Bercow), who referred to the global settlement for local government. The amount of money available is part of the problem, but the strings attached to the sum allocated is the second part of the problem. I agree with the hon. Member for Eastbourne that there has been a significant increase in the sums provided by special and specific grants—the strings that central Government attach to local government—but I slightly dispute the figure that he gave. I understand that the increase from the current year to next year is more than 20 per cent. I hope that he will agree that the proportion of local government money that came from specific grants, with strings attached, was 4 per cent. in 1997, but that it will increase under a Labour Government to about 10 per cent. next year. In some areas, the increase is considerably more than that.

Specific grants for education amounted to £250 million in 1997, but next year, under a Labour Government, £2.6 billion will be constrained in that way—a tenfold increase. The problem is worse than that, because if a local authority reaches out and takes some of that money, with all the strings attached, it must also find matching funds. Therefore, about £3.3 billion is effectively tied up in specific grants. All evidence clearly shows that the Government talk about reinvigorating local government, but simply cannot let it go. Rather like old, imperial Britain, they are trying to run a huge empire from the centre. They have decentralised tax raising without decentralising the power to match.

As the hon. Member for Barnsley, East and Mexborough said, no progress is being made in distributing the money more fairly. I shall choose some examples at random. Why is a secondary school pupil in Westminster worth £4,271, when a child in Warminster is worth only £3,077? Mr. David Laws of Yeovil has advised me that a child in Somerset is worth more than £200 less than the national average. Many hon. Members acknowledge that there are real problems in urban areas, but there are real problems in rural areas, too. We have not yet devised an area cost adjustment, or another funding distribution mechanism, that truly takes account of real need, so I agree with the hon. Gentleman on that point.

Photo of David Kidney David Kidney Labour, Stafford

The hon. Member for Eastbourne (Mr. Waterson) could not say that, as a matter of policy, the current area cost adjustment should be reformed. Will the hon. Gentleman at least say that the Liberal Democrats believe that it should?

Photo of Don Foster Don Foster Shadow Spokesperson (Environment, Transport and the Regions)

I say absolutely categorically that the area cost adjustment should be reformed. I entirely agree with the hon. Member for Barnsley, East and Mexborough that we need a simple, fair funding system that takes account of local need.

A redistribution mechanism is necessary, but other proposals would make life much easier. For example, why cannot local councils raise a far greater percentage of the money that they spend, with a corresponding reduction in national income tax, so that the local piper can call the local tune? Why has the current, unfair council tax been continued? Elderly people, for example, live in much larger houses, which are more expensive, yet their income is much lower. Why do not we adopt a much fairer system of local income tax? As other hon. Members have said, why is local government expenditure capped in any way? Why must we have this so-called sophisticated system under which the nearly poor pay for the really poor?

I welcome the introduction of floors because it makes sense to ensure that the councils that will lose money are given time to prepare, but why do ceilings need to be introduced? Surely that means that councils with real and immediate needs will not be provided with the support that they require.

The net effect is that, after four years of a Labour Government, Whitehall's tanks are still on our town hall lawns. The tanks may have changed colour, but they are still as heavy and powerful as ever. Local people want to feel more, not less, in control of the issues that are important to them. If all the decisions that count are taken hundreds of miles away, is it any wonder that people lose interest in the political process?

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South 7:26 pm, 31st January 2001

The time allocated to this motion is pretty short to say the least, which is a shame because this was developing into an interesting debate. Both sides of the House have their positions to defend; nevertheless, my hon. Friends have not been afraid to say where we would like to see improvements and, for that reason alone, this has been a useful exercise.

The Opposition say that the Government have somehow used the area cost adjustment for political purposes, but I seem to remember from my time in local government that we could have argued the same way when they were in government. I met various Ministers to discuss the issue. In fact, I used to deal with someone who now sits on the Opposition Benches.

I agree with my hon. Friend the Member for Barnsley, East and Mexborough (Mr. Ennis) that the SSA issue must be addressed. I am glad that the Minister says that she is doing so, but I urge a little caution. Anyone who knows anything about the formula—no one knows everything about it because it confuses everyone—says that any change in the SSA must be dealt with carefully. We must be careful, and people both inside and outside local government have debated that often.

I sometimes think that it is dangerous to come from a local government background, certainly when debating the issue in the House, but I am struck by the fact that, even with the best of intentions, those in local government, especially the employees, feel constantly under attack. More should be done to improve the morale of local government employees. A bit of dignity should be reintroduced, because they have all been at the butt of competitive tendering by successive Governments. We have all seen the experiments of the past 20 years, and it is about time that they were called to a halt.

It is time to build up public confidence in our local services because, in one way or another, most of the major political parties are committed to public services. Whether we are talking about teachers' bargaining rights or ordinary local government workers' concerns about the Transfer of Undertakings (Protection of Employment) Regulations 1981 and being transferred into the private sector, we must rejuvenate public confidence in local services. Those are some of the issues that concern me.

Having said that, I welcome the Government's £8 billion increase in local government expenditure, but there could still be a £3.5 billion shortfall. The Government cannot put such matters right overnight, and we must bear in mind that there are still major problems. For example, during the past two or three years, the social services department in Coventry has found itself with a shortfall of £4 million or £5 million. The projected shortfall is £5 million and £6 million for the next year or two.

There is a trend to move social services away from local government control. We must give social services, especially the personal service aspects, more serious consideration than we have given them in the past. We must consider the impact on services for various age groups, including those for children and elderly people, and the fact that it is difficult to recruit social workers and people to provide other services, such as home care for the elderly.

I return to a point that I made earlier. We must stop knocking local government and start supporting the people who work to deliver the services. I draw my hon. Friend the Minister's attention to the problems in Coventry, which have created two or three crises in the past two or three years in the delivery of social services. The increase in the assistance that Coventry has received for social services is about 2.6 per cent. below the national average. I readily acknowledge that the Government have provided assistance, but we must deal with such problems.

I welcome the £6 billion for capital investment. That will help to some extent. Although I know that things cannot happen overnight, I would like to see more done.

I also welcome the £52 million that will be spent on teachers' salaries to aid recruitment. As a trade unionist, I have always thought that teachers should have the same negotiating rights as everybody else. I know that the review body is due to report shortly, but I hope that it will consider not only salaries, but negotiating rights and the way in which performance-related pay is working in practice and affecting teachers' morale.

Time is short, but I want to say in concluding that we must do more about training in local government and about capital investment for data changes and computer equipment. We should want everyone to participate in service delivery. I would have liked to mention a range of other issues, but I know that other hon. Members wish to speak.

Photo of David Curry David Curry Conservative, Skipton and Ripon 7:31 pm, 31st January 2001

This has been the year of the sticking plaster. The fact that the Government have had to put so much sticking plaster on to their original settlement should not disguise the real thrust of the settlement. The hon. Member for Bath (Mr. Foster) was right: there has been a remorseless advance in direct grants at the expense of unhypothecated expenditure.

The Government proclaim that they like local government and local government freedoms. They say that they are giving more liberty to local government, but every year the amount of money that is directly controlled by the Government increases as a proportion of the settlement. As the hon. Gentleman said, it has increased by £2.6 billion for education alone this year, so the Government's proclamations of independence for local government are entirely hypocritical.

Labour Members have been wailing about the area cost adjustment, but when the Minister and the right hon. Member for Holborn and St. Pancras (Mr. Dobson) were in opposition four or five years ago they told us how easy it would be to sort out the area cost adjustment. They said that it was a matter of lack of will on the then Government's part and that anyone who applied a couple of iotas of intelligence to the matter would soon sort it out. After four years of a Labour Government, the solution has not advanced by a single comma. We have had a series of fertile little ruses—a sort of "petite astuce"—to make the settlement work.

Of course, the settlement does not work, which is why we have had improvisations. No one would object to additional money for neighbourhood renewal, except for the fact that that money has not had to be bid for; it is allocated at the Minister's pleasure. As several hon. Members have pointed out, it is curious to see the local authorities to which it has been allocated.

No one would object to additional money to meet the teachers' pay settlement. In the inner cities and London in particular, retaining teachers is a gargantuan problem. If the pay increase is to be 3.5 per cent. or thereabouts, it will go only a tiny way to helping with that problem. In addition, no one objects to helping local authorities to deal with asylum seekers.

Another bit of sticking plaster is the attempt to deal with the problems of the Environment Agency and the cost of flooding. The Government need to do a little more, and it is not just a question of money. They have failed to address the issue correctly in three respects. First, the Bellwin scheme comes in only when spending is 0.2 per cent. of the whole of an authority's budget. It is a curiously perverse phenomenon that the mass of teachers' salaries governs how much an authority would receive from the Bellwin scheme. Secondly, no help has been given to make good the damage to roads and bridges.

Thirdly, the increase in the Environment Agency levy is accounted for not in the year in which the increase bites, but subsequently. Thus there is a cash-flow hit on local authorities that can only come out of the council tax or services. That is particularly true of my authority of North Yorkshire. Of course, we are pleased with the additional money, which has meant that the demands on the council tax will be rather less than they would otherwise have been, but the announcement was about meeting historical costs, and the Government have to do that in any case. The sum is £500,000 short of the cost, and it is not all new money. The Government are recycling £2 million of the £51 million, and there is no provision for future investment.

The commitment to increase the rate of grant support for new capital works to 65 per cent. is welcome. However, the need to carry out enhanced maintenance as a result of the floods and to fast track capital schemes in areas that have been flooded not once but twice means that more cash is needed. The Government must pay attention to that problem and I draw their attention to the report published today by the Select Committee on Agriculture, which deals with it.

In the little remaining time that I have left, I wish to focus on the crisis facing social services departments. The Government have fast tracked and tried to passport money into education departments over a number of years. That is part of the business of untying the non-hypothecation of local government funding and making sure that Ministers control the money. However, the ragbag at the end of that process has been personal social services departments that have been asked to co-operate with health authorities and which have faced new demands from the housing authorities. It is no surprise that the members of personal social services departments are deeply demoralised.

As the hon. Member for Bath said, the Local Government Association has made calculations about the national scene, but the position in North Yorkshire is even worse. In North Yorkshire, a third of the elderly people who go into care have put themselves into care. They become a charge on the local authority when they run out of money, and no account is taken of that charge in local government funding. That is entirely unfair, and we know about the consequences that it has for bed blocking.

In my local authority, there is an overspend of £300,000 on children's services, and the costs of placements in foster care and secure accommodation are 29 per cent. over the SSA. The overspend on the placements of adults and older people in residential and nursing home care is £1.3 million. There is a £1.6 million overspend and a funding gap of £3.5 million in personal social services. That is not because the local authority is inefficient—the inspectorate said that it was rather good at delivering social services—but because the Government do not take account of demography and the increasing propensity for some social workers to err on the side of caution for reasons that we all understand in the face of the habitual barrage of criticism that they receive.

Therefore, there has been a 10 per cent. increase in the number of children who must be looked after. We have lost £600,000 in the children's SSA to fund the leaving care grant. As I said, 30 per cent. of older people who are newly referred for assessment have placed themselves in homes and reached the capital limit. That limit will rise, which will place an additional burden on local authorities.

The health service is demanding speedy discharge, because the number of blocked beds obviously causes concern. However, a couple of weeks ago, 108 older people were waiting for placements because of the phenomenon to which I have referred.

On the costs of rural care, a community councils network study, which was undertaken this year, considered the cost of delivering domiciliary care and suggested that North Yorkshire could justify an additional 2.8 per cent. of funding—or £600,000—for these services.

The social services department is under strain; there is no point pretending that it is not. Of course, the settlement is higher than previous settlements and money is being passported to education, but when that happens the focus inevitably shifts. For the same reasons that demographic changes make life difficult for the health service, they are also making it more difficult for personal social services departments. The Government rightly wish to see the two integrate much more effectively, but the pieces of sticking plaster are tinkerings with the system. They do not deal with the fundamental distribution problems and the Government have backed off from giving councils more freedom. Despite all the rhetoric, the apron strings are being tied tighter and tighter.

The Government claimed that they would provide more freedom, but the settlement is more interventionist. They said that the settlement would be simpler, but it is more complex. They said that the settlement would be fairer, but, as result of the famous topping and tailing, it is more arbitrary. We have a veneer of generosity, and the reality of prescription and inadequacy.

Photo of Beverley Hughes Beverley Hughes Parliamentary Under-Secretary, Department of the Environment, Transport and the Regions, Parliamentary Under-Secretary (Department for Environment, Transport and the Regions) 7:39 pm, 31st January 2001

We have had an interesting debate and some worthwhile contributions have been made, but our discussion has been all too short because of the antics of some Opposition Members. I agree with my hon. Friend the Member for Barnsley, East and Mexborough (Mr. Ennis) that Opposition Back Benchers have done little more than sabotage this debate. [Interruption.] I beg the Liberal Democrats' pardon; I am speaking only about Conservative Members.

However, despite the Opposition's entirely predictable rhetoric, hon. Members clearly recognise that this year's settlement continues the sustained and substantial investment in local government services that the Government have provided during the past three years, notwithstanding the pressures. That investment is but one strand of the wider and more fundamental reform of local government. That reform will put local government back where it should be. I agree with the comments of my hon. Friend the Member for Coventry, South (Mr. Cunningham) in that respect.

We have a clear programme of reform for local government. We want it to plan for community well-being in the broadest sense, consult local people and work out the best way of providing services at a price that they are willing to pay. As our performance during the past few years demonstrates, we accept that local government needs a stable platform of adequate funding to achieve those aims. It must be able to rely on sustained real growth in funding so that it can plan for some years ahead.

As my right hon. Friend the Minister for Local Government and the Regions said, this year's settlement is the best since the introduction of council tax. Total support from Government grant and business rates will constitute more than £44 billion. That is an increase of £3 billion, or 7.2 per cent., which comes on top of the substantial increases that have been made every year since we formulated the budget. In those four years, Government grant to local government has risen by 14 per cent. in real terms. That investment contrasts starkly with the 7 per cent. real-terms cut made by the Tories in the four years before the last election.

I have been concentrating on the general grant because the House is considering the overall settlement, but I should point out that it comes in addition to substantial ring-fenced grant increases this year. There has been a total increase of 34 per cent., with a 48 per cent. increase in the ring-fenced grant for education.

During the consultation period, we listened carefully to what local authorities, their associations and hon. Members from all parties told us about the difficulties faced by local government. As my right hon. Friend the Minister for Local Government and the Regions mentioned, we took the view that there were four problem areas. It is curious that the right hon. Member for Skipton and Ripon (Mr. Curry) called that response to pressures "sticking plaster". That says a lot about the Tories' view on what consultation should be about. Indeed, when they were in government, they never listened or did anything in response to what people told them about their experiences. We are not like that. On top of providing a good settlement, we think that it is right to respond to the four problem areas.

It will be up to local authorities to finalise their budget plans. The right hon. Member for Skipton and Ripon did not seem to understand that point. Whatever protestations Opposition Members make, we expect that this year's very good settlement will enable council tax increases as a whole to continue on the downward trend that we have established. The majority of local authorities will be able to set a lower council tax increase this year than they did last year.

Let me put the increase in context. The right hon. Member for Skipton and Ripon described a litany of problems, but North Yorkshire has been given a 4.8 increase in the general grant and a 26.2 per cent. increase in the specific grant. That constitutes a total increase in Government funding of 6.5 per cent., plus £100,000 from the extra £52 million education grant. North Yorkshire county council has received a minimum increase of £19 million this year.

Obviously, any big organisation must make decisions on priorities and on the pressures to which it wants to respond, but let us make no mistake: this Government are continuing to give local government the best settlements that it has ever received, certainly in my memory. Local government needs the ability to manage its budgets.

Photo of David Curry David Curry Conservative, Skipton and Ripon

Does the Under-Secretary accept that, three years ago, North Yorkshire lost £3 million because the social services formula was changed? That was an enormous hit against a county with a rising demographic trend. More elderly people needed care and more children were being taken into care—issues on which the Government claim to want delivery.

Photo of Beverley Hughes Beverley Hughes Parliamentary Under-Secretary, Department of the Environment, Transport and the Regions, Parliamentary Under-Secretary (Department for Environment, Transport and the Regions)

The right hon. Gentleman's presentation of the circumstances that existed three years ago is completely erroneous. Investment in local authorities was increased at that time. That included North Yorkshire, where total Government investment increased.

Photo of Beverley Hughes Beverley Hughes Parliamentary Under-Secretary, Department of the Environment, Transport and the Regions, Parliamentary Under-Secretary (Department for Environment, Transport and the Regions)

It was not a cut. Many councils' aspirations on total income are not met, in terms both of Government contributions and their own charges.

Photo of Beverley Hughes Beverley Hughes Parliamentary Under-Secretary, Department of the Environment, Transport and the Regions, Parliamentary Under-Secretary (Department for Environment, Transport and the Regions)

No, I shall not give way again.

Every year, the Opposition have predicted that local authorities would act irresponsibly and introduce huge average council tax rises. Each year since this Government have been in control, councils have proved Opposition Members wrong. The increase in average council tax has fallen as a result of our additional investment.

I was surprised at the hon. Member for Bath (Mr. Foster), who is usually sensible, for falling into the trap on council tax. He should know that council tax rises are the result not of Government funding, but of councils' overall spending decisions, for which they will be accountable to their electorates. On the comments made by the hon. Member for Eastbourne (Mr. Waterson) about political interference, I can say nothing more than that his arguments were breathtakingly shameless and that we shall take no lessons from Opposition Members on local government matters.

Under the previous Government, local councils were battered and bruised and their money and powers were systematically removed. It is this Government who have provided stable and substantial funding to all councils. This year's settlement continues our commitment to invest.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 16(1).

The House divided: Ayes 292, Noes 167.

Question accordingly agreed to.


That the Local Government Finance Report (England) 2001–02 (HC 158), which was laid before this House on 29th January, be approved.