I beg to move,
That the Local Government Finance Report (England) 2003–04: Amending Report 2005, HC 241, a copy of which was laid before this House on 27th January, be approved.
With this it will be convenient to discuss the following motion:
That the Local Government Finance Report (England) 2005–06, HC 242, a copy of which was laid before this House on 27th January, be approved.
I am pleased to be able to tell the House that I am confirming in its essentials the grant settlement that I proposed for all local authorities on
The Minister just said, as he says every year, that every local authority would receive a real-terms increase in formula grant. Will he confirm, however, that when we look at the total grant received by local authorities, we see that not all authorities have received real-terms increases? Indeed, a considerable number have received real-terms decreases.
No, I will not confirm that. The hon. Gentleman will know from the system that the specific and special grants come on top of the formula grant. If every authority has an increase in formula grant at least matching inflation, any additional grant will be a benefit ahead of inflation. This is pretty rich, coming from the hon. Gentleman. When his party was in government, year after year local authorities faced real-terms cuts in their grants—a point that the Prime Minister made quite forcefully in response to the hon. Gentleman during Prime Minister's Questions earlier today. He ought to recognise the real change that there has been: local authorities have received real-terms increases in grant in all parts of the country.
I am grateful to the right hon. Gentleman for his generosity in giving way so early in his speech. His Government are, however, considerably less generous to the borough of Bromley, where the Department for Education and Skills has made a mistake to the tune of 30 per cent. of the additional formula grant. The Department for Education and Skills and, I think, the Minister's Department have told Bromley that it will receive the money only if an amending report is issued for 2005–06. I understand that it is rare for such reports to be issued, but if one if not issued the borough will not get the 30 per cent. Will the right hon. Gentleman be generous enough to commit himself, here and now, to publishing an amending report, or else give Bromley the 30 per cent. today?
The hon. Lady makes a fair point. From time to time problems do occur in the highly complex process of local government settlements. This problem was drawn to my attention fairly recently, but when similar problems have been identified in the past I have agreed to amending reports. Indeed, this year we have made an amending report in respect of a number of mistakes in the census calculation for a number of authorities.
I need to understand the figures better. As I said, I have not had a chance to look at the details because the matter has only just been drawn to my attention. We have a de minimis rule that is obviously necessary for good administration, but if the figures show a significant difference that affects the authority adversely, I shall be more than happy to put it right with an amending report.
The problem with Bromley is compounded by the problem faced by a number of other authorities. The DFES inadvertently allocated Bromley's data to Buckinghamshire, while Bristol's data were allocated to Bromley. I understand that five other authorities are involved. Something needs to be amended. One other amendment with regard to the capital adjustment mechanism and the flow calculations affects East Sussex and a number of other authorities. If it is a question of making time available, clearly, the Opposition will co-operate on this matter. It is not de minimis: these are significant sums of money.
I agree with the hon. Gentleman that it is not de minimis. However, it is important to have a de minimis rule. That is why I undertook to look at the matter. If it is a significant problem, I am prepared to bring forward an amending report. As he will understand, if there are consequences for other authorities, those will need to be looked at, too. Only one amending report can be done for any single financial year—that is the rule laid down by the House—so we need to be certain that all the relevant factors have been taken into account. We will be prepared to do that, assuming that we are satisfied, having looked at the evidence, that there is a significant problem.
All regions have benefited from the settlement, so let me knock on the head once and for all the entirely misleading claim put about by the Opposition that authorities in the south of England have been penalised by the grant distribution formula. There is no truth whatever in that claim. The figures speak for themselves. Many southern authorities are benefiting from some of the largest increases: Wiltshire, with a 9.4 per cent. increase; West Berkshire, with an 11.3 per cent. increase; and Wokingham, with a 13.2 per cent. increase—[Hon. Members: "What?"] Some of my hon. Friends express perhaps understandable surprise. On average, authorities in the south-east are receiving precisely the same level of grant increase as authorities in the three northern regions, so I hope that we will hear no more unjustified complaints from Conservative Members, whose councils in the south of England are generally getting a far better settlement under this Government than they got when their own party was in power.
The Minister has been utterly predictable in giving to the London borough of Havering the usual ungenerous settlement: half the average London increase and half the increase of the neighbouring borough of Redbridge, despite having a similar population. Will he join me in congratulating the London borough of Havering and its cabinet member for resources, Councillor Roger Ramsey, who have wrought a minor miracle in bringing in the lowest council tax increase in 10 years through good Conservative house keeping?
I suspect that, when the hon. Lady has heard these figures, she may have to go back to the councillor and discuss with him the rather changed circumstances compared with when her party was in power. Over the four years that the Conservatives were in power and the council tax applied—that is the only fair comparison; there was a different local government finance system before that—from 1993–94 to 1997–98, Havering received on a per capita basis an increase of just 2 per cent. in grant. That was all it got. On a like-for-like basis, in the seven years in which this Government have been in power, Havering has received on a per capita basis a 44 per cent. increase in grant. I sincerely hope that she will not only talk to her Conservative councillors and ensure that they understand that it is this Government who have made possible prudent budgeting in Havering, but have the decency to explain to the electorate of Havering that it is this Government who are ensuring that the council can deliver services cost-effectively.
I am very happy to hear how well southern Conservative seats have done out of the Labour Government, but that will not go down too well in County Durham, which has received far less than the figure that has just been highlighted. Did not the Conservative Government skew money to their local authorities? Why are we not doing it?
On the same per capita increase basis that I just used, during the seven years in which we have been in government, the county of Durham has received a grant increase of 53 per cent. I hope that my hon. Friend understands the point that I am making, which is that we have been ensuring a fair allocation of grant to authorities in all parts of the country. The Opposition's argument that the south has been penalised and treated badly simply does not stack up. However, we are ensuring justice and fairness for authorities in the north, as well as in the south.
No; the point that I was making is that every authority is receiving a real-terms increase in grant on a like-for-like basis. [Interruption.] In formula grant, which is the fundamental grant, there is a real-terms increase for every authority. There will of course be variations when per capita factors are taken into account. I used these figures because those used by Angela Watkinson were based on a per head of population calculation. I felt it right that a proper comparison be made on a fair, per capita basis, which is what I have done.
The Minister mentions boroughs in the south-east that have done very well by getting more than 10 per cent. However, a published table of all-purpose authorities shows that Bournemouth, Brighton and Southend-on-Sea have all received 4 per cent. Bearing it in mind that seaside towns have a multitude of social problems associated with, for example, houses in multiple occupation and asylum seekers, can he name any all-purpose borough in England that has received less than 4 per cent.? Does he agree that he has discriminated against seaside towns?
No. I cannot name any unitary authority in the whole of England that is getting less than that figure because that is the floor, which guarantees that every authority gets at least 4 per cent. That shows our commitment to ensuring such an increase irrespective of demographic changes, which sometimes result in authorities being entitled to less under the formula. I should point out, however, that if we use for Southend the same formula that I used in response to
My right hon. Friend is fully aware that in recent weeks, Cumbria has suffered severe flooding and storm damage, as a result of which hundreds if not thousands of properties will be empty for long periods. That could have a serious impact on the budgets not just of Cumbria county council but of other local authorities such as Carlisle city council and the police authority. Is he willing to meet representatives of those authorities to consider how to resolve this unique situation?
My hon. Friend makes an absolutely fair and important point. My hon. Friend Mr. Martlew has already been in touch with me about this issue, and we have discussed the significant potential impact on Carlisle's council tax revenue of the large number of properties made uninhabitable by the flooding. There is a convention whereby we do not alter the basic figures that underpin a settlement after November, for the obvious reason that everything has to be done on a particular fixed date. Because the flooding took place after that date, it is not possible to alter this year's settlement in the way that my hon. Friend the Member for Carlisle asked us to do. I am, however, dealing with this issue as a matter of urgency, and I undertake to meet my hon. Friend the Member for Workington and representatives of the relevant authorities to discuss how we might respond to these rather exceptional circumstances. We are also looking urgently at the possibility of making available assistance though the Bellwin scheme, in order to help not just Carlisle but the surrounding authorities cope with the pressures that they face.
I want to make a little progress before taking further interventions. It is only a three hour debate, and I shall have to make some progress if others are to contribute.
The settlement builds on sustained grant increases over the years since 1997. A real-terms increase of 33 per cent. in grants to local government since then compares with a 7 per cent. real-terms cut in the previous four years. We are looking to the future, too, with the introduction of three-year settlements for local government, to be phased in from 2006–07. That will provide more stability and predictability and enable councils to plan more firmly for service improvements and moderate budget and tax increases. Stability is very valuable, but we should not neglect to re-examine the fundamentals of local government funding. That is why we appointed Sir Michael Lyons, whose inquiry is now under way. In response to what he says, we will carefully consider the detailed case for making changes to the present system of local government funding in England and take note of any recommendations.
Where Government initiatives lead to increased cost burdens on local authorities, we are committed to meet them. Sometimes lengthy discussion is, quite rightly, needed with local government partners to get the details right. I mention, in passing, the implementation of the Freedom of Information Act 2000, where initial estimates from local government implied a potential cost of more £100 million, but after detailed discussion, a figure somewhat less than £20 million was agreed. It is important to bottom out the figures and ensure that they are accurate. The commitment is there to provide the additional funding. That has been done.
Similarly, my right hon. Friend the Secretary of State for Culture, Media and Sport has conducted two rounds of consultation and agreed proposed fee levels with local government, which we believe are sufficient to fund average administration, inspection and enforcement costs associated with the discharge of local authority functions under the Licensing Act 2003. I can also confirm the Government's plans, following the revisions made by the Office for National Statistics to its population estimates used in the original calculations for the year, to amend the local government settlement for 2003–04.
My right hon. Friend may be aware of six districts in Lancashire for which money is trapped or withheld, according to which term we wish to use. In the case of Chorley, it amounts to £1,324,000. I acknowledge the 6 per cent. increase, which is much higher than ever envisaged by the people of Chorley, but the Minister knows that 1 per cent. brings in just about £50,000—not a great amount of money. However, the money trap is very important to the future of Chorley, so when will the Minister, through the adjustment of the floors, enable Chorley and other shire districts to collect the money? It amounts to only £29 million for the whole country. Can the Minister offer us some hope in his answer?
My hon. Friend raises an interesting point, and I hope that he will bear with me as I explain the importance of the floor mechanism and how it benefits authorities that would otherwise receive an unreasonably small grant increase. In the county of Lancashire, for example, Preston is one of the authorities that is on the floor. Without the floor mechanism, it would not receive the basic grant increase of 2.5 per cent., which is sufficient to match inflation.
For reasons that I have explained, the floor is essential and all hon. Members accept it. The problem is that some people have difficulty in understanding that the floor has to be paid for and the costs have to be met. In the past, we operated a system of ceilings, under which the authorities that received the largest increases had a fairly significant reduction in their grant to meet the costs of the floor. We received very strong representations from local government: authorities did not like the ceiling, which they thought was unfair to the authorities with the largest increases. In response, we introduced an arrangement under which we reduced the grant entitlement for all authorities above the floor by a much more modest amount than would have applied under the ceilings arrangement.
This is the first year of the new system and I obviously want to reflect on how it operates before I consider any further changes. As hon. Members will recognise, I could change the deck chairs every year—[Hon. Members: "The Titanic"]. I would never dream of thinking of local government in association with the Titanic, but if I followed the request of my hon. Friend Mr. Hoyle, I could adjust the chairs on a regular basis. I hope that he will understand that Chorley's increase of 5.7 per cent. is a good one, and that most other Lancashire authorities have received good increases too. It is therefore right that there should be some reduction in the overall entitlement to meet the costs in Preston and west Lancashire. Otherwise, those authorities would get less.
Burnley is a very deprived borough, as is Pendle, yet it is losing money. We all understand the concept of the floor and that the new method—by which a little is taken from all those authorities above the floor level—is fairer than a ceiling. However, will my right hon. Friend assure us that the 2007 review will mean that areas such as Burnley, Pendle and Chorley will receive everything to which they are entitled? They have major problems and very small budgets.
I understand those concerns. I have visited my hon. Friend's constituency and seen the very considerable problems with which the local authority is wrestling in its attempt to ensure that local needs are met. Obviously, we are trying to achieve good budget settlements for authorities such as his, given the real difficulties that they face, and I believe that an increase of 5.9 per cent. is a good settlement for Burnley this year. We are conducting a review of the formula in the coming year, as my hon. Friend knows, but I hope that he will accept that instability is not good for local government. We have changed the mechanism governing floors and ceilings this year, which means that an immediate commitment to reconsider the matter would be somewhat disruptive.
I seem to be getting a lot of pressure from east Lancashire, so I will give way to my hon. Friend.
My hon. Friend Mr. Pike seems to have stolen my script, but will my right hon. Friend say why the Government cannot pay for the Prestons of this world? That would be better than depriving communities such as Burnley, Pendle and Chorley. In addition, I should like to return to the point that he was making before the intervention from my hon. Friend Mr. Hoyle. The population estimates have significantly underestimated the true population of Pendle. My hon. Friend the Member for Chorley said that the Office for National Statistics had recognised that and that changes would be made to the grant paid in 2003–04 and in subsequent years. Does my right hon. Friend have the figure for Pendle, and what does that mean in terms of additional grant?
My hon. Friend will know that Pendle's grant will increase this year by 6.6 per cent.—a very significant amount. He will also know of the dramatic change brought about in Pendle as a result of the return of a Labour Government. According to the figures that I quoted earlier, Pendle got no increase in grant over the last four years of Conservative Government. In fact, its grant was reduced by 12 per cent. One of the more deprived areas in northern England lost grant as a result of Conservative policies. Under this Government, there has been a per capita increase of 38 per cent. in Pendle, which shows that we are committed to increasing the area's grant. I hope that my hon. Friend will understand that it is not possible for us to add even more money to a settlement that is already pretty generous. That would be the implication of pursuing his request for additional Government money.
I am grateful to the Minister for giving way. I do not want to be too helpful to him, but he was keen to stress that he has been mean to authorities other than Tory-run authorities in the south of England, and I can bear that out: he has also been mean to Trafford, a Tory-run authority in the north. That is especially important because Trafford has had a worse deal in each of the past four years than the average for metropolitan authorities in the country. Does the right hon. Gentleman agree that it is time for some fairness in this matter and that Trafford's grant should increase by at least as much as other metropolitan authorities? Trafford used to have weak status when it was under Labour control, but that has been improved to fair. We want to make further improvements, but when the previous Labour administration was replaced in June, it left us with terrible financial problems.
I remind the hon. Gentleman that Trafford is getting a good increase in grant of some 5 per cent. That did not happen in the days when his party was in power. It is extraordinary that Conservative Members, who are only too happy to claim the largesse that they want for local government, have forgotten the record of their Government. When the hon. Gentleman's party was in power, Trafford—also a deprived area in the north—received a 6 per cent. per capita grant increase over four years, which was well below inflation. Since this Government came to power, Trafford has received substantially more, with a 45 per cent. increase on a like-for-like basis. I hope that we shall not hear any more about meanness and that, in future, the hon. Gentleman will use the word "generosity".
The Minister has been telling the House how generous the Government have been in their real-terms grant increases. Can he tell the House what the average real-terms increase in council tax has been during the same period?
The hon. Gentleman knows that council tax has risen significantly, but it has not gone up by anywhere near as much as the old rates used to go up when the Conservatives were in office. We might explore that later.
There has been a significant increase in council tax, which is why the Government have made it clear, against the Liberal Democrats' advice, that we will cap authorities that impose unreasonable increases. The decision on council tax increases is made by local authorities and the hon. Gentleman would do better to talk to Liberal Democrat councils that seem to have an unhealthy appetite for increasing their council tax. Last year, his party had the unenviable record of the largest increases in council tax of any party—more than the Conservatives and substantially more than Labour. I am afraid that that high-tax tag will hang round the neck of his party.
I draw my right hon. Friend's attention to the actions of North East Lincolnshire council—it is a coalition of Conservative and Liberal Democrats, so we have the worst of both worlds—which has just sent a letter to the residents of Humberston Fitties chalet park about their rent increases this year. The rent for one large plot in the chalet park is rising from £720 to £1,365. The Liberal Democrats increase not just the council tax, but every rent.
I am concerned to hear what my hon. Friend said about the very large proposed increase in rent for people living in chalet parks, who are often retired and on fixed incomes. I sincerely hope that North East Lincolnshire council, which has had considerable difficulties and whose performance has not been good recently, will look carefully at how to deliver value-for-money services and not charge unreasonable amounts.
Sevenoaks, as the hon. Gentleman knows, is a relatively well-off area with substantial resources that it can use. One of the characteristics of the hon. Gentleman's Government was that deprived areas suffered severe reductions in their grant and more affluent areas, curiously and perversely, received grant increases. We are ensuring a fairer system. The hon. Gentleman knows that in his area the aggregate of local government finance has risen considerably, because education and social services are delivered not by district councils but by county councils and account for the overwhelming majority of local government costs. Clearly, Kent county council and others in the south have continued to receive substantial, above-inflation increases.
I confirm the plan to amend the settlement for 2003–04. As I made clear to Mrs. Lait, we will consider the case that she presented.
I turn briefly to the consultation process. We received 299 written representations within the consultation deadlines from the LGA, the Association of London Government, local authorities, local authority groups and hon. Members. We met delegations from six local authority associations and representative groups to discuss the proposals. The main points made in consultation were as follows. The abolition of ceilings on grant increase was generally welcomed, as was the continuation of a floor or minimum guaranteed grant increase. I have already touched on that in response to an intervention. Most of the bodies welcomed the modifications that we proposed to the incorporation in the formula grant of the social services preserved rights and residential allowance grants. I understand, though, that not everyone can win when grant distribution is changed, and we will ensure that any transitional effects of future transfers continue to be examined carefully with local government.
We faced a dilemma in considering the use of data other than population figures based on the 2001 census. In proposing not to use 2001 census data in the 2005–06 formula spending share calculations, we balanced our desire to use the most up-to-date data against our aim of providing stability in local authority funding. Using new census data in the funding formula is not a simple task. It is technically incorrect to update the census data in the police formula. In other areas, the changes needed to incorporate the 2001 census data would break the formula freeze and could cause large changes to the distribution of FSS. We will look to incorporate 2001 census data in the funding formula once the formula freeze has ended with this settlement. That will allow us to use 2001 census data in 2006–07, assuming that agreement can be reached on an appropriate way of doing so.
After considering the points made in consultation, I have decided to confirm the basis of grant distribution proposed on
Given our substantial investment in local government and the scope for efficiency gains, there is simply no excuse for excessive council tax increases. This settlement ensures that all properly run authorities can provide a high level of service.
The supporting people programme, which the ODPM funds through local government finance, seems to have been something of a success for the Government. Is it not, therefore, a matter of regret to the right hon. Gentleman that the funding will be reduced next year and frozen thereafter? During the consultation that he was involved in, did he consult local government about a change in the way that supporting people funds are allocated? Might it not be a good idea to do so before enacting a change in the formula?
There has been detailed discussion with those involved in local government and others, because the matter affects voluntary organisations and other bodies involved in providing supporting services to people whose needs go wider than accommodation.
The hon. Gentleman will be aware, as he has obviously looked into this, that the budget for supporting people grew exponentially during the transitional period. Although original estimates were for less than £1 billion, we faced a prospect of £1.8 billion of expenditure last year, with clear indications that, in some cases, value for money was not being achieved and some additional costs had been moved into that area, because it was seen as an opportunity to recover costs that would otherwise not be met. It is therefore right and prudent that we should look at the matter very carefully, as we are doing.
We have set a budget of just over £1.7 billion for supporting people over the coming year. We will continue to consider ways of ensuring that we deliver value for money. The hon. Gentleman's initial comment was right: this is a success story. The programme has ensured more effective help, but I hope that he will agree that the work must be done in a cost-effective way.
The Minister will know that there has been widespread consultation on the local government pension scheme and that regulations have been laid before the House. Will he give two assurances? First, will Members have the opportunity to discuss those new regulations? Secondly, even at this late stage, will he meet representatives of the members involved?
There has been lengthy consultation on the local government pension scheme from 2003 onwards. Because of genuine concern expressed throughout local government at the financial implications of the increasing costs of the scheme and the implications of the actuarial valuation that comes into effect this year, we have made some modest changes—very modest changes indeed—that come into effect from
The House will have an opportunity to consider the regulations, which will be debated. I hope my hon. Friend will make whatever points he wishes to make at that time. However, I stress to him that the Government's objective is to maintain the viability of a good pension scheme which ensures that the recipients can receive funded pensions based on final salary. That is not available to quite large numbers of other people. Calls for increased funding going into the local government pension scheme, which would have an immediate knock-on effect on council tax, are not likely to be well received by council tax payers whose own pensions are rather less secure, and in some cases less generous, than those available to local government employees. So there are difficult issues that need to be addressed.
In exchange for the good increases in grant that we are making available to local authorities, we expect to see a continuing downward trend in council tax increases in 2005–06. We will be looking to all authorities to budget prudently and to minimise demands on council tax payers, and we will expect to see an average council tax increase of less than 5 per cent. in England. Hon. Members will recall that we took capping action against 14 authorities in the current financial year. We would prefer not to have had to use those powers, but make no mistake—if necessary, we will take capping action once again in 2005–06 to deal with any excessive increases in council tax.
Nobody should presume that the capping principles that we applied in 2004–05 are a benchmark for 2005–06. We are prepared to take even tougher capping action this year if that proves necessary. That applies to all authorities, including fire and police authorities. I have already written to all local authority leaders to make clear the Government's views on council tax and capping. None of them can reasonably claim to be unaware of our intentions. We are in a new era now, in which high council tax increases are a thing of the past. We will not tolerate excessive council tax increases in 2005–06 or in years to come.
Perhaps, then, the Minister will answer the question that I put to the Prime Minister earlier and to which I did not receive an answer. How is an authority such as Runnymede, which has received a 0.4 per cent. increase in per capita total grant between 1998 and now, expected to deliver high quality services and keep council tax low?
The hon. Gentleman speaks for one of the most affluent local authority areas in the country. He knows that the authority does not face anything like the serious disadvantages that most other authorities face. We expect all authorities to budget prudently. We do not expect them to increase the council tax. They have a substantial council tax base and they have no need to make an unreasonable demand on council tax payers. We expect them to budget prudently and to ensure that demand on council tax payers is kept to the lowest possible.
Our plans for 2005–06 constitute another excellent settlement. We are continuing the Government's provision of a stable and well funded platform for local service improvement. Working with local government, we will continue to develop our proposals for improved financial systems for the future. In return, we can and do expect councils to plan for reasonable council tax increases this year. I commend the settlement to the House.
Today in the United States of America is groundhog day. The irony of the fact that the Government have chosen this day to present the revenue settlement for local government will not be lost on the House. The repetitious nature of the argument means that we can move backwards and forwards in time, measuring the continuing rise of council tax under the Government. A 70 per cent. increase in council tax since 1997 is a monument to the endurance of stealth taxation under this Labour Government.
The Opposition have a much better record on predicting council tax levels than the Minister, and while I am sure that most authorities will achieve a rate increase below 5 per cent., the Government are deluding themselves if they think that the public will quickly forget the massive increases of the past. This year's figures are just a rest while Labour gathers its strength for a planned massive onslaught on the middle classes of rebanding and revaluation, subject to the will of the electorate.
During this brief pause in squeezing middle England, the Minister continues in the grand tradition of the entertainer of the House on the complicated matter of local government finance. This year he is the impresario of a unique three-ring circus. The first ring is the fiddled funding that punishes Conservative-controlled authorities and rewards Labour ones. The second ring contains the floors to mitigate the violence of the first ring. The third ring, which grows steadily each year, is the bung to cover the inadequacies of the first two rings.
Let us examine the bung. Each year the size of the bung gets bigger. Last year it was £340 million, and this year, with £350 million ring-fenced, it rises to £1 billion. Surely the chairman of the Local Government Association, Sir Sandy Bruce-Lockhart, was right when in December he commented:
"The money won today is a one-off and doesn't help address the fact that the burden on council tax is unsustainable and is far higher than local councils believe people can afford to pay."
"The whole process will be repeated next December".
So despite the bung, many of the features of the previous settlements that have brought great discredit to the process remain in place.
I am sure that the hon. Gentleman recognises that we are dealing with the 2005–06 settlement today, and did not Sir Sandy Bruce-Lockhart, on the morning that the Minister made his initial announcement, say that the Local Government Association wanted £1 billion extra to make it a good settlement that would keep council tax rises low and keep services going forward? That is precisely what my right hon. Friend delivered, so are not the Local Government Association and Sir Sandy entirely satisfied by what was produced?
The hon. Gentleman has considerable experience in running a council, and I am mortified that he seems somehow to have lost his grip on the facts. He needs to remember that Sir Sandy was talking about the burdens on local authorities, and a one-off bung will not take care of those. I will come to that point later in my speech.
As I was saying, some of the features of the previous settlement, which brought great discredit on the formula, remain the same. Once again, four authorities are expected to passport their full increase in grant straight across to the schools budget—Bromley, Poole, Richmond upon Thames and West Sussex. Some of those authorities have not seen an increase in the budget for three consecutive years for the other services.
The Minister measures the increase in grant, but fails to address the increase in costs for local authorities. For example, between 1997 and 2000 the cost of educating a primary school child increased by 29 per cent. in real terms. He was equally silent about the extra burdens imposed on local authorities by the Government. Has he forgotten so quickly the report of the Audit Commission on the causes of higher council spending in the last financial year? It said:
"National cost pressures taken together account for about £2.3 billion of the total increase in councils' spending of £4.3 billion. In other words, slightly more than a half the total increase is due to national pay and price inflation, increased national insurance and general population growth".
All Members of this House will be familiar with the service pressures on their authorities, including pressure on child services and care for the elderly in social services, and in relation to the environment, including waste management and the effects of EU landfill directives. Not so long ago, we had a debate about pressures on licensing and planning fees and freedom of information, and reference was made a few moments ago to increases in pension and insurance costs.
Let me use one item to speak for all those issues—supporting people. We all have supporting people schemes in our constituencies and we are aware of the progress and independence that they can engender among the most vulnerable in our society. The total amount of supporting people grant for England has been cut by 5 per cent. in cash terms to £1.6 billion, and the Government propose to hold it at that level for the next two years. I am aware that the new formula is being consulted on, but it puts into sharp relief a situation in which schemes have been started and seed money offered, after which they have been abandoned. The alternatives for local authorities are to meet the growing needs or cut provision to the most needy in society.
The hon. Gentleman raises a legitimate and predictable point, which goes to the very heart of the way in which local government is currently funded by the Government. We can no longer continue with a position whereby the Government want to direct from the centre all the sums that they want to deal out. According to the Government, the supporting people grant was never intended to meet the total amount of the services provided, although that was not clear from the beginning. What the Opposition want is a total end to these specific grants, allowing local authorities maximum discretion to deal with such problems. I know that a number of local authorities are not merely waiting to do so but have been prepared to put in a significant sum themselves.
Does the hon. Gentleman accept that we have a commitment to reduce ring-fencing and that we have achieved a significant reduction this year? With regard to the supporting people programme, there was wide concern, not only in the local government sector but in the voluntary sector, that without a ring fence during the transitional phase in which the programme was introduced, there was a risk of leakage of funding away from some of the most vulnerable people in the country. That is the reason why there is a ring fence, but it is a temporary provision, and just as we have withdrawn other ring fences, it is our intention to reduce the ring fence on supporting people in due time, as and when the system has bedded in.
That is an interesting contribution. I doubt whether there is any hon. Member in the House who does not have such schemes in their constituency. They are an example of the growing cost base of local government and of interaction between two of the most difficult issues—provision of services for children and for the elderly. In many ways, projects such as supporting people are the future for social services. With great respect to the Minister, he can talk about the amount of increase and what he is doing about grants, but the programme is an example of how the cost base of local authorities is completely out of kilter with the grant regime. It might be helpful for the Minister who responds to the debate to give us some indication of where the Chief Secretary to the Treasury is on the promise to local authorities to look at costs in relation to the retail prices index and tell us what progress has been made on devising that formula.
The Minister referred to the census. There is a lack of equality of treatment on population matters. The Office for National Statistics made, if we are honest, a bit of a horlicks of the last census. The way in which it moved literally millions of people around the country was like a virtual game of pass the parcel. It missed populations equivalent to major urban centres, while other areas had additional, but non-existent, people added to them. I suppose that it gives a new meaning to the expression "missing millions". After pressure from aggrieved local authorities and hon. Members, the ONS realised its mistake.
The situation was wholly the fault of the ONS—it was not the fault of a single council—yet councils must pick up the tab. It is unfair that local authorities have to pay, because as Mr. Stringer robustly put it, the national statistician
"just could not count up to 60 million."—[Hansard, 15 January 2003; Vol. 397, c. 257WH.]
Quite rightly, Manchester now has a true count of its citizens and receives an additional £7.8 million, but other places are less fortunate. Worcestershire loses £1 million, Norfolk loses nearly £500,000, South Yorkshire police lose nearly £1 million and, worst of all, Surrey loses £2.3 million. As the leader of Surrey county council recently put it to the Minister:
"Why should the people of Surrey pay for a mistake made by central Government?"
That remark by a Labour Member gets us to the heart of the distribution system, because it is all about penalising Tory authorities, regardless of whether that is right or wrong. When the Government make a mistake, where do they look for the money but Tory authorities? The distribution system should be based on something better than straightforward class hatred.
I did not make the comment, so the hon. Gentleman should withdraw that statement.
The hon. Gentleman says that there is a class war, but I do not think that that is the case. The Government are genuinely trying to ensure that there is a fair settlement throughout the country. Does he agree that there was a class war under the previous Government, when the likes of Westminster city council received much more help than all other authorities, and does he want to apologise for that now?
I am glad that the hon. Gentleman wants to distance himself from his colleague who made the comment, and I welcome the fact that he is looking towards equality. However, it is only right for me to respond to such provocation from a Labour Member.
Going back to the census, a total of £26 million must be repaid by the counties. What is the justification for asking council tax payers to pick up the tab for central Government's blunder? Contrast that situation with the same Government's refusal to incorporate demographic details from the 2001 census in the final settlement.
The settlement is using data that are 14 years out of date—they were fresh when Baroness Thatcher was a Member of the House. The Government estimate that that costs counties £116 million, which is the equivalent of 2 per cent. on council tax bills. County authorities have been hit especially hard, as have unitary authorities, such as that covering Southend. I know that my two hon. Friends who represent that fine seaside town wish to catch your eye, Mr. Deputy Speaker, and I look forward to their contributions with interest. Surely this must be the last year before the most up-to-date data are included. There seem to be two standards. The Government will use information if it will allow them to get money back from authorities, but if the information would mean that authorities would receive money, they do not use it.
On the question of political bias, is the hon. Gentleman aware that Labour Derbyshire county council was treated appallingly under Mrs. Thatcher, but that it has just come out as the top performing authority in the comprehensive performance assessment? In contrast, Tory-controlled Amber Valley borough council received an increase that was eight times the size that its leader predicted when he asked me to lobby for more. The council has received on average a 5 per cent. increase each year during which the Conservatives have controlled it.
As I said, we know that the formula is about rewarding the Government's friends and punishing their enemies. There were very few complaints about the impartiality of the grant distribution system. The great, lasting monument to the Minister and his hon. Friends is a complete distrust of the system, which an incoming Conservative Government will have to deal with.
Against that backdrop, on Monday the Government announced plans to introduce yet another structural reorganisation of local government. It is as if the Deputy Prime Minister sees local government as his own personal train set. Having done much to mess up the real railways, ruined our roads and dug up our countryside, he seems intent on destroying the one remaining, enduring institution within his grasp—local government. Cannot he take a hint? His desire for mayors has been rejected in countless referendums, and even when he gets one the electorate rarely pick a candidate of his choosing. The people of the north-east could not have been clearer in their message, yet he still insists on pulling local government out of the ground to check for growth in its roots.
When will this Government learn that what councils need now, more than anything, is a period of stability so that they can plan and provide for their residents free from the latest fad from the centre? The Government have to understand that localism cannot be enforced from the centre. For localism to flourish, the centre has to get out of the way, make a bonfire of regulations and restrictions, and allow councils to plan diversity and innovation in peace. The right hon. Gentleman might feel good about capping authorities, although the cost of sending out the bills is rather greater than the money saved, but council tax payers regard that as a rather hollow gesture.
I welcome what my hon. Friend said about the 2001 census. Is he aware that if the size of Southend's elderly population, which showed a massive increase in the 2001 census, had been taken into account, we would have been entitled to an extra £1.5 million? Is it not desperately unfair and unreasonable that Southend should lose that money because the main figure was included, but not the breakdown?
The fate of Southend is a good example of where the Government have got this wrong. Its location is central to the economic interests of the Government with regard to the Thames gateway. It is a major provider of education, and it endures some of the problems that are common to most seaside towns, with a high proportion of asylum seekers and a great deal of social pressure relating to the elderly. The Government have not recognised that.
Bringing the hon. Gentleman back to his attack on the Government's failure to go forward with the localist agenda, can he explain why the Conservatives want to take control of education out of the hands of local authorities and run it from Whitehall? Where does that fit in with his party's supposed commitment to local government?
The hon. Gentleman has not grasped the localist agenda. We would not take education out of the hands of local government and run it from Whitehall, but give teachers and parents more power to run their local schools. The previous Government moved towards per capita funding for schools, and this Government sensibly continued with that. Is it not more honest to give the people who know how to run education better—teachers, head teachers and parents—the opportunity to do so?
How would Southend fare in the context of the article that appeared in last week's edition of the Local Government Chronicle under the headline, "Tories promise grant distribution with a rural twist", in which the leader of the Conservative group in the Local Government Association announced that the Tories would redistribute funding away from towns and urban areas to rural areas? Surely a place such as Southend would suffer, unlike, as my right hon. Friend the Minister said, areas such as Wiltshire that are gaining under this Government.
We promised to do away with fiddling and ensure fairness in the grant distribution system.
Let us consider what the Government have in store next. It is not the incoming Conservative Government's intention to use the revaluation process to increase taxation or make a significant shift in banding in the form of a stealth tax. The Government have been clear about their aims. The Minister is on record as saying:
"Council tax should be made more progressive—in other words, it should reflect more closely people's ability to pay and should more accurately reflect variations in property values.
There are ways of doing this—for example, through a new banding system".
Any council tax system inevitably requires some form of revaluation, but the recent revaluation in Wales, two years ahead of England, highlights how the system has been abused. One in three houses have moved up a band and only 8 per cent. of houses have moved down a band. In wards in Cardiff, Wrexham and Flintshire, more than nine in 10 houses have moved up a band.
A re-elected Labour Government will use revaluation further to increase tax by stealth and transfer funds from specific parts of England. If the Welsh experience were repeated in England, 21 million households would be liable for local tax. Seven million homes in England would be moved up a band but only 1.5 million would be moved down a band.
The tax on a band C home that moved to band D would increase by £128 a year. The tax bill for a band F home that moved to band G would increase to almost £2,000 a year. Areas where house prices have risen above the national average since the previous revaluation in 1991 run the greatest risk of soaring bills. As the Minister conceded:
"Where the change in a property's value is significantly above or below the average, it is likely to change bands."
That means a double whammy, because the Government grant to those areas would be cut as a result of the change. As figures that were released by the Halifax over the weekend suggest, London, the south-west, East Anglia and the south-east are likely to bear the brunt of revaluation.
There will be many other towns in property hot-spot areas in England. They include Knutsford, Altrincham, Ilkley and Chepstow. They will all be hit by Labour's new redistribution tax. Surely the Daily Mail was right when it described it as:
"Another surreptitious scheme to squeeze hard-working families until the pips squeak."
Will the hon. Gentleman confirm that it is Conservative party policy to retain the council tax system?
I am glad that the hon. Gentleman intervened, because I was about to say that rebanding is not only the Labour Government's scheme but Liberal Democrat policy. On two separate occasions, Liberal Democrats could have stopped the process but decided to vote with the Government. When Liberal Democrats knock on the doors in the election campaign and try to warn people about increasing revaluation, the electorate will ask, "If you think that's the case, why is it Liberal Democrat policy?"
Does the hon. Gentleman accept that I have made it clear on many occasions that there is no read-across from Wales to England? We are not committed, like the Welsh, to increasing a band at the top of the scale with no adjustments at the bottom. There is therefore no parallel to be drawn. Secondly, we have given an absolute undertaking that there will be no increase in yield through revaluation. Adjustments, based on bands, will be made for individual council tax payers because there is no logic in using figures that date back to 1991 as a basis for valuation. The hon. Gentleman made a point about census data. I hope that he accepts that revaluation is necessary, but that the Government have made it clear that it will not result in an increased yield and that there is no plan to increase the overall take from council tax through revaluation.
Much as I like the Minister, I would find that easier to accept without the experience of non-domestic rates revaluation. We would also take it better if we had not read several quotations from him about the need for council tax to be more progressive,
"in other words, it should reflect more closely people's ability to pay and should more accurately reflect variations in property values."
In plain, simple language, he has made the case very well that this settlement is going to be used as a method of social redistribution, to soak the rich, and to make middle-class people squeak to the point at which their pips pop out.
Frankly, this settlement has as much long-term viability as the Deputy Prime Minister's desire to build uninsured houses on flood plains. It stands about as much chance as the possibility of seeing a popular regional assembly in the north-east. While it might try to repair the damage of eight years of Labour, it will store up massive increases for the future. Thankfully, however, it will be the last one before the people deliver their verdict.
This is an excellent settlement for local government. As I said in an earlier intervention, on the morning on which my right hon. Friend the Minister made his initial statement, the Local Government Association asked for an extra £1 billion to keep council taxes down and to keep improving services. That is precisely what my right hon. Friend has delivered. I do not know whether he has yet received a letter from Sir Sandy Bruce-Lockhart saying, "You've given me precisely what I asked for. I'm very grateful indeed." Perhaps not. That is probably borne out by the response of the Conservatives.
My right hon. Friend probably knows that I am not a great fan of the capping process. I believe that local authorities should be left to set their own tax levels, and that the electorate should then make it clear what they think of them. That should be part of the local democratic process. Capping orders were introduced after the last settlement, and that was one of the very few occasions on which I found myself unable to support the Government in this House. However, I see no need for capping orders to be introduced on this occasion, for the simple reason that I see no need for excessive council tax increases. Local authorities have the funds to enable them to keep increases down and to maintain their services.
It was interesting to listen to the Conservatives. I could not understand where they were coming from at all. They are committed to making £4 billion of cuts to local government funding, yet they offer no description of how they would operate if, by some mischance, they were on this side of the Chamber. For all their moaning about the poverty and dire straits that some Tory authorities in the south find themselves in, we were never given a clear explanation as to whether they were asking for more funds to rectify that, or precisely where that money was to come from. Is Mr. Pickles proposing that local authorities such as mine, in Sheffield, should give up money so that Tory authorities in the south can have more?
The hon. Gentleman should pay more attention to what we are saying. We are offering grant increases in line with the rate of inflation for local authorities, and looking towards improvements in health, policing and education. We would also release more than £1 billion of extra resources to local authorities. The hon. Gentleman has a distinguished record on local authorities. Given what we are offering, perhaps he will be tempted to vote Conservative at the next election.
I am probably more confused now than I was before, and I do not think that it is my fault. The hon. Gentleman is promising more money for health, for the police and for education, while proposing cuts overall. What, then, would happen to road maintenance, the built environment, waste management, housing and leisure and arts facilities at local level? Given that those areas represent a fairly small part of the total local government expenditure, the cuts to those budgets would be absolutely massive. It is time for the Conservatives to come clean with the electorate, and to explain precisely what the level of the cuts would be, and what damage they would do to the built environment, which most people regard as very important. In passing, I should like to say that I am very pleased that my right hon. Friend the Minister has recognised that important area of local expenditure in this settlement, and taken steps to safeguard it. My own authority in Sheffield is bringing in council tax increases within the guidelines that my right hon. Friend has laid down. In addition, it is doing a lot to improve road maintenance and the street scene. It has the extra funds to do that because of the 5.8 per cent. increase in funding that it has received.
I am also pleased to support my right hon. Friend's continued emphasis on the freeze in the formula. It is important that formula revisions should happen only every three years. That gives stability to local authorities and it should be continued for the future. There will always be complaints that anomalies do not get dealt with for another three years, but the stability is important.
On that issue, therefore, may I raise a point that comes genuinely from colleagues in local government who say that this is an excellent settlement for this year? The £1 billion is welcome, but will it be incorporated in the starting base for the settlement for 2006–07? If it is just a one-off amount that is then taken away, the stability that I know my right hon. Friend wants in local government finance will not be achieved. Local government is looking for some certainty in its plans and spending for this year. Will the extra money it has received—those who are genuine will call this a generous settlement—be in next year's base so that what is given this year is not taken away next?
There are some big issues around, such as extra spending on waste management. That, again, is important and to be welcomed; it is not something that anyone is against. My own authority in Sheffield already has advanced plans for a new incinerator and has a long-term policy of developing heat through burning waste, which is supported in the city. My authority is a long way down the road, but there will still be extra costs in paying the contractors. The issue of equal pay is around and although the supporting people programme is excellent, some of its projects are at risk and authorities might want to fund them out of mainstream funding. That could be another burden for the future.
I am sure that my right hon. Friend and his colleagues will listen, however, because of what happened when local authorities put the points about the introduction of the new licensing arrangements for public houses to them and said, "We don't think we can fund this without having to divert money from other services under the indicative licence fees that have been given to us." Ministers listened. There was genuine consultation and increases have now been agreed, plus an independent review process. That is genuinely welcomed and very pleasing for those who are involved.
On the other hand, I hope that my right hon. Friend will begin to listen to the debate on education. I know that he is passionately committed to reducing specific grants and ring-fencing, but to some of us the whole approach to funding schools directly and giving guarantees rather smacks of a large element of ring-fencing. I am still not sure about the amount of joined-up thinking, or even joined-up talking, that has gone on between Ministers at the Department for Education and Skills and the Office of the Deputy Prime Minister on the whole issue of school funding.
I am quite concerned by some of the talk I hear about new localism. I very much support bringing into play the roles that parents, teachers, tenants' representatives and others can play in running local services, but separating out the funding and making the running of those services completely disparate leads to new localism being in danger of becoming new local fragmentation. There is a lack of joined-up government and of people working together to deliver services, because they think of themselves as being apart and they do not connect with each other. I warn the Government about that and hope that there can be some thinking on the issue, because this trend worries me considerably.
Like other hon. Members, I await the report on the balance of funding and Sir Michael Lyons's inquiry. It is important that we give local authorities more responsibility to raise the money. That would lead them to connect more with their local electorate and it would enhance and support the whole process of local democracy.
At the same time, we need greater fairness in who carries the burden for local services. It is welcome that council tax increases this year will, on average, almost certainly be under 5 per cent., but the reality is that the increase in the business rate is an awful lot less. Year on year, the domestic council tax payer pays a greater percentage of the cost of local government and the business rate payer pays a lower percentage. That is not fair; in the long term, it is not sustainable.
I feel that the logic is to move the business rate back into local government and tie it into the council tax increase so that both go up by the same amount each year. That is a step forward that would be fair in getting more responsibility back to local authorities for raising their own finance. It would also ensure that business rate payers paid a fair share towards their local services.
I also very much welcome the campaign to increase council tax benefit take-up. In the end, more fundamental reform will be needed, but in terms of what comes out of the Lyons inquiry, if we can achieve a better system of council tax benefit and a higher take-up among owner-occupiers, and at the same time stretch the bands at the top end, we can make council tax a progressive form of taxation. At present, it is broadly neutral, the problem being that at the bottom end it is regressive, because many people entitled to benefit do not take it up, and it is also regressive at the top end. If we can tackle those two issues, we can make council tax broadly progressive, which will mean much wider support.
I say to the Liberal Democrats that I have some sympathy for an additional local income tax for larger authorities of the sort that the Chartered Institute of Public Finance and Accountancy has been promoting. But if one takes away any form of property tax to fund local government on the basis that one wants to be more progressive, and if one moves purely to a system of local income tax, the reality in London and the south-east is that none of the very wealthy foreign nationals who live in this city and surrounding areas will pay a single penny in tax towards the local services that they enjoy as local residents. To my mind, it is not a progressive form of taxation to let off all those millionaires from paying any contribution towards the cost of local services. The Liberal Democrats know about that issue, but they simply refuse to address it.
I shall conclude, as I know that other Members wish to speak. The settlement is very much welcomed, certainly in my constituency and by my local authority, and I commend my right hon. Friend for introducing it. It has my full support.
I agreed with a few of the points made by Mr. Betts, and particularly his point on education funding, on which I shall touch later. His vital point was that if the Government go down the road of ring-fencing all funding for schools, that is a big step towards centralisation, which will undermine local authorities and local democracy and be one of the biggest retrograde steps under this Government. Certainly, I share his views on that.
Tonight, we are debating not just the settlement but some of the changes made to the provisional settlement in the final settlement tabled early this week. One or two changes to that provisional settlement, although small, have gone in the right direction. That has been beneficial for the council in my constituency—the Government have listened to the representations from the royal borough of Kingston, and I want to put on record my gratitude for that.
On the night of the statement of the provisional settlement, there were many worried people in Kingston. The school settlement looked extremely low, and when we examined the small print we were even more worried. Apparently, nearly 400 children had gone missing and, even more worryingly, a whole school, the Mount school in Norbiton, had gone missing. The House can therefore imagine our relief when we managed to find them and convince the Government that they had been rediscovered. That made a significant difference to the funding for education in Kingston. It did not help the funding elsewhere, because as the Minister for Local and Regional Government knows, that money had to be passported through, but it helped those schools, for which we were grateful. That shows the importance of the consultation period between the provisional and final settlement.
That aside, the whole strategy of the settlement is a pre-election strategy—a strategy to try to get the Government through the election and limit the political damage done to them by their disastrous acceptance of the Conservatives' unfair council tax. The settlement is a mixture of one-year-only bribes and arm-twisting bullying to force councils to cut services and to have low tax rises, all to avoid the real issue of tackling the local government finance problem. The Government may think that if they manage to get council tax rises below 5 per cent. on average, they have been successful. For the ordinary household, however, it is not the rises that are key but the level. The level is already far too high, and the above-inflation rises that are likely will make that worse.
The hon. Gentleman really ought to know that my party is in favour of scrapping council tax. I do not think that we have made any secret of that.
Let me return to this year's settlement. It means that council tax will still rise faster than inflation, which means that, yet again, many pensioners will see their council tax bills rise faster than their pensions. I do not think Ministers should be as happy about that as they seem to be.
Let us examine the record. The Institute for Fiscal Studies Green Budget, which analysed the subject in some detail, showed that council tax receipts, net of council tax benefit, have risen by some £5.8 billion since 1997. That is a rise of £521, or 81 per cent., in the average band D council tax. Because council tax is so unfair, that rise dwarfs the minor giveaways in other parts of the system, such as tax credits. According to the IFS, as a result of those tax and benefit changes the average household has gained 84p a week under Labour. That is before account is taken of council tax rises. For the average household—these are not my figures, but those of the IFS—there has been a council tax loss of £4.46 a week. When we add up all the figures and study dispute analysis of tax and benefit changes since Labour came to power, we see that the average household is £3.62 a week worse off. That means that the council tax, by itself, has been Labour's biggest stealth tax on ordinary families.
The Minister tried to say that real-terms grant increases had been very significant. Mr. Pickles rightly pointed out that, to offset that, there had been huge real-terms rises in the costs incurred by councils. To be fair, the Minister agreed. But the problem for our constituents—the problem for council tax payers—is that there have been massive real-terms rises in council tax. Between April 1997 and April 2001, council tax rose by 17 per cent. in real terms. Between April 2001 and April 2004, it rose by 18 per cent. in real terms. Those real-terms rises mean that council tax has increased faster than any major tax under Labour, although it is the most unfair tax in Britain today.
In some respects, Labour has made progress with making Britain a fairer society, but how can it expect to make Britain as a whole a fairer society when its favourite tax is the most unfair tax? It just does not add up. Even this year, when Ministers are so pleased with themselves, council tax is rising faster than any other tax—although, to meet Government guidelines, many councils have introduced an awful lot of cuts.
I am sure that many councils will be mentioned today. The Minister tried to suggest that Liberal Democrat councils would be profligate. I refer him to Newcastle, Liverpool and Watford, where Liberal Democrat councils are already suggesting below-inflation tax rises which are likely to be among the lowest in the country.
There are Liberal Democrat councils—and Labour and Tory councils—that are under severe pressure because of this grant settlement, despite the Government's assurances. Councils represented by all parties are trying to juggle with the various pressures, and having to make very difficult decisions about services and tax. That, I think, is why at the end of his speech the Minister raised the spectre of capping. Councils are having to make tough decisions, and it is likely that despite the best endeavours of many councils of all parties, some with particular local problems may have to consider above-average tax rises. It looks as though the Minister will come down hard on those councils.
In 2003, Liberal Democrats fighting the election in City of Durham promised everyone a £100 council tax rebate. Can the hon. Gentleman tell me when the Liberal Democrat council will honour that commitment? If the answer is that people will have to wait for a local income tax, I refer him to the Liberal Democrat website, which shows that two average earners in a house in City of Durham would pay more rather than less council tax under the local income tax proposals. Will he come clean and tell the electors of Durham when they will get their £100 back?
The majority of the people of Durham would certainly gain under a switch to local income tax. I hope that the hon. Gentleman will tell his constituents that. As regards the £100—
I would just like to answer the hon. Gentleman's first intervention. In the run-up to the 2003 elections, we set out the policy that we wanted a 50p top rate of tax on incomes above £100,000 to generate the cash to enable councils to do that. That is the policy that councillors fought on throughout the country. We stick by the idea that we can reduce local taxes by using the money that we get from that higher rate of income tax on people earning over £100,000. I wonder whether he wants to tell the House whether he is in favour of, or against, that 50p rate on incomes above £100,000.
I would like the Liberal Democrat council in Durham to be honest with the electorate and fulfill its commitment to give a £100 rebate. Can the hon. Gentleman confirm that under the proposals on the Liberal Democrat website, which I checked this afternoon, two average earners in a household in Durham, or any other place, would pay more council tax than they pay now? The website has a rider at the end that points out that they will pay more, but that that will help poorer people.
There are Conservative scare stories—perhaps the hon. Gentleman is quoting those—that if a household's income totalled above £50,000 those people would pay a little more, but most households in his constituency would pay far less. Nearly 90 per cent. of pensioners in pensioner couple households across the country would benefit from our proposals. I hope that he will tell that to his constituents.
Such a foreign national would make a lot of contributions to the national Exchequer, which funds the grants—[Interruption.] I presume that they would pay stamp duty if they bought a property, and other taxes, so that argument does not work.
I was speaking about the capping threat that the Minister repeated tonight. I wonder whether he will tell the House to which councils he has written. There have been rumours and speculation in the press that a number of councils have been threatened already. I wonder whether he, or at least his colleague who is answering the debate, is prepared to say which councils are his targets, and whether he will publish the letters that he has written.
There is concern about the timing of these capping threats and capping decisions. Will the Government make decisions on capping before the general election is called? Can they give that undertaking? One presumes that as soon as the election is called, it will be too late to make the decisions and councils will be in limbo. They will have to set their budgets, but they will find out whether they will be capped only if Labour is returned after the election. Should Labour be returned, they could face the problem of re-billing if they are capped later, in May or June.
We could reach the absurd situation that we saw last year, when councils with budgets only slightly in excess of the Government's guidelines had to re-bill and the cost of re-billing was more than the so-called budget excess. I hope that the Minister will set out the planned timetable with regard to capping, particularly as we all suspect that there will be an election in due course.
The hon. Member for Sheffield, Attercliffe put his finger on it when he talked about the fact that the £1 billion in the pre-Budget report was for one year only. There is concern that it has not gone into the base budget. There is a fear across local government that problems are being stored up for the future, which could result in a hike in council tax directly after the election if the Government do not put money in.
Let us consider the £1 billion figure. More than £400 million of it was one-off cash paid for from one-year raids on other departmental budgets. Will the one-off £350 million increase in revenue support grant be repeated? Will the pre-election £50 million increase in police grant be repeated in 2006–07? Is the one-year only extension of grants such as that for "Safeguarding Children" going to be repeated? Councils need to know the answers to these questions. The Government are talking about moving to three-year budgeting, but they will not tell councils whether these grants are just pre-election or longer term.
There is a real problem here. The Local Government Association has estimated that not making permanent these so-called one-year gifts—the one-year increases in revenue support grant, police grant and "Safeguarding Children", for example—will lead to the equivalent of an average council tax rise of 7.5 per cent. The Minister can be pretty pleased with himself for achieving—so he thinks—a lowish rise, but he has achieved it only because of this one-off money. There is a 7.5 per cent. rise coming down the track, which Labour Members should be rather worried about.
Those future difficulties are exacerbated by pressures that have simply been postponed. The amended guidance on pensions has led to a £100 million saving this year, but the money will have to be found in future. The re-profiling of waste targets means that £50 million does not have to be spent this year, but it will have to be spent next year and the following year. The recent announcement on fees is certainly a step in the right direction, particularly for the licensing regime, but the Minister will hopefully acknowledge the Local Government Association's worry that its costs will still not be covered.
Because of future pressures arising from those one-off grants, there are problems heading councils' way after the election, and in years to come. That should worry this House. Those pressures and the lack of baseline budget increases could have been more manageable had the Government not pressed ahead with various other disastrous reforms of local government finance, particularly the ring-fencing of education and the proposed introduction of a dedicated schools grant. If a council that suffered all these pressures could bring all the money together and control it—if it were not shackled by ring-fencing—it might be able to manage by taking a flexible approach. If it had autonomy, it could move money around to deal with the pressures that it faced in a given year. But under the regime of a dedicated schools grant, such autonomy and flexibility will be gone. The problem is that the Office of the Deputy Prime Minister has been defeated yet again by the Department for Education and Skills.
We have always said that that should be a decision for local education authorities, not for Whitehall. We would not go ahead with the dedicated schools grant model because it represents one of the biggest centralisations of local government finance ever seen. It is supported by the Conservatives, and I am surprised to discover that Labour is working with the Tories—yet again—on this issue.
I would like to understand how the Minister is going to reconcile this model with three-year budgeting. Moving to such budgeting, as has happened in Whitehall, is a very sensible local government finance reform, which we totally support. But if it happens, how will it fit alongside dedicated schools grants and capping? The whole point of three-year budgeting is surely to enable schools and local authorities to take a longer-term view and to get over the blips that come along occasionally. But how can they do that if they do not know what the capping regime will be during those three years? How can they take best advantage of that extra freedom if ring-fencing is to be increased? It will not be possible.
It is not just the dedicated schools grant that will cause problems in future; there is also the council tax revaluation. The hon. Member for Brentwood and Ongar was right to mention it because it is the biggest ticking tax time bomb in Labour's hidden manifesto. Anyone who has seen their house price increase faster than the national average had better beware: Labour is gunning for you.
No. In Wales, 33 per cent. of houses have gone up by one or more bands, and only 8 per cent. have gone down. In Cardiff, 64 per cent. of households have been moved up by one or more bands and only 2 per cent. have moved down. In some wards—indeed, in some of the poorest wards in Cardiff—90 per cent. of households have been moved up one or more bands. How are the Government going to explain that unfairness to the people of England?
It is rather unlike the hon. Gentleman not to have listened to what I said in response to Mr. Pickles earlier. I pointed out that there was no parallel whatever with what is happening in Wales, where a decision was taken to add a band at the top of the scale but not at the bottom, which clearly excused the whole arrangement, as compared with any arrangement in this country, where no decision at all has been taken. Does the hon. Gentleman accept that the sort of speculative figures appearing in the press—prompted by the Daily Mail, which is renowned as a propaganda sheet that is always trying to damage the Government—should never be given the time of day? Frankly, I am astonished that the hon. Gentleman and his party have given credence to those entirely spurious figures, which are designed to stir up unjustified anxiety among the public.
The Minister is trying to have his cake and eat it. He is trying to say that revaluation will happen, but that it will not be the same as in Wales. What the House and the electorate would like to know is how revaluation will be designed. We want to know the Government's policy on revaluation. [Interruption.] Unlike the hon. Member for Brentwood and Ongar, who is shouting from a sedentary position, we do not know what the Government's revaluation policy is. They have not set out how many bands will be affected, what the change in the multipliers will be, whether there will be regional banding or anything like that. I believe that this House—and, far more importantly, the electorate—should know what the Government's policy on revaluation is. Will the Minister tell the House what Government policy is?
Does the hon. Gentleman accept that it would be foolish—though a typical example of Liberal Democrat policy—to try to take decisions before seeing the figures? We are quite rightly and properly waiting until we see the actual values in April 2005, the valuation date, before deciding on any changes to the structure of council tax banding. Is it not highly foolish—I accept, of course, that it is typical of the Liberal Democrats—to plunge in and give commitments before seeing the figures?
The Minister commissioned a balance of funding review, which met for 15 months. All its results are on the Office of the Deputy Prime Minister's website, and the New Policy Institute, as the Minister well knows, investigated the effects of council tax revaluation across England. It looked at four particular scenarios, so the evidence is out there on the ODPM website. That is what people are looking at. What they see is that, for example, in three of the four scenarios envisaged in the report commissioned by the Department, a council tax band C home owner in London would face double-digit council tax rises as a result of revaluation. When the Minister intervenes, I hope that he will answer that point. Is he really going to say that there will be no losers under council tax revaluation? No losers?
The hon. Gentleman will know, because there was a Liberal Democrat member of the balance of funding team, that the review's conclusion was that it would be inappropriate to make any recommendations on changes to the banding system—or, indeed, to local government finance—without considerable further work, which should be based on the latest up-to-date figures. The values are not yet known and we are still three months away from the date of valuation, so how can the hon. Gentleman possibly provide these forecasts? He is scaring people by talking about huge increases, but he simply does not know what he is talking about.
There is an awful lot of information out there about house prices, as the Minister well knows. He criticised the Daily Mail, but I am afraid that he is wrong about that. The Halifax source, used by the Daily Mail, is one of the most authoritative sources on house price rises at local level. The Minister knows perfectly well that boroughs across London will be badly hit because their house prices have risen far above the national average.
No, I am engaging with the Minister. I will come to the hon. Gentleman in moment.
Many people are concerned—because they have seen from what happened in Wales—that if they move from a band D to a band E as a result of revaluation, they are likely to face a 22 per cent. increase in council tax. When I visited Cardiff the other week, I met a pensioner on the basic pension whose house had been revalued, and had moved up three council tax bands as a result. She now faces an increase in her council tax of more than 40 per cent. That is why people are worried about revaluation. It is not good enough for the Minister to say, before the general election, that what has happened in Wales will not happen in England. People need to know more about this very significant decision.
The problem is made worse by the double whammy effect of the grant system—
I am worried about the hon. Gentleman's health, so I will give way to him this time.
I could not be happier. Will the hon. Gentleman say why, if he feels so strongly about the matter, he, with his Liberal Democrat colleagues, twice voted in favour of the extra bands? Was that a mistake? Did they not mean to do it? What are the Liberal Democrats' policies in this matter?
Time and again, Liberal Democrat Members have voted in this House to scrap council tax altogether. I am sure that the House would be more interested to learn the Conservative party's plans for council tax reform. Conservative Members talk about revaluation and an unfair council tax, but despite many nods and winks, we do not know what their policy will be at the general election. My party has put its policies forward again and again. We want to scrap council tax, stop the revaluation, and introduce a fair system of local income tax.
The final problem with revaluation is storing up huge difficulties. If a council's council tax base increases above the national average, that council will lose grant. That is the double whammy that has hit Wales, and the same thing will happen in England. Councils in London, the south-east and the south-west, in particular, will have council tax bases way above the national average, according to the new figures. As a result, their grants will be cut significantly and council tax will have to rise.
We need reassurances that the one-off increases in the pre-Budget report will become permanent, that the concerns about the dedicated school grant will be dealt with, that the council tax revaluation will be dropped and that council tax itself will be replaced. Otherwise, although the Government may survive this year's round of council tax increases, they will be storing up huge problems for the future.
We have listened to Mr. Davey make his presentation for 25 minutes. I was waiting to hear what the Liberal Democrat programme would be if that party ever had the chance to introduce a local income tax, because that is what people want to know. Will parish, district and county councils, as well as the metropolitan authorities, levy the local income tax?
In my area, the parish and town councils would raise the tax, as would the police and fire authorities and the district council. Is that what the Liberal Democrats propose as a mechanism for raising local authority revenue? If so, it would cause panic. People would not understand what the Liberal Democrats were trying to achieve. In 25 minutes, we heard nothing about the party's policy in that respect.
There is plenty of evidence about our policy, if the hon. Gentleman wants to read it. All the bodies to which he referred levy council tax already, and they could therefore also levy a local income tax. That is what happens in America, most of Europe and most industrial countries around the world. The Liberal Democrats did not invent local income tax. Many countries around the world use it already.
The difference is that it is clearer to use a property tax to raise money for parish and town councils, and for police and fire authorities, and so on. In contrast, a local income tax would mean that local people would be asked for details by all the bodies whose services they use. That approach would not be accepted by the electorate.
No, I must move on.
I pay tribute to my right hon. Friend the Minister for the award that he has made to local government, which builds on what has happened in the past. During 14 years in opposition I served on the Front Bench as spokesman for local government and the environment, and then for Northern Ireland. During that period, we defended local services and local government against the cuts that the Tory Government introduced. My right hon. Friend the Minister and his Department have had to build from a low base to maintain and improve services, and to introduce additional services. The Tories' last measure before the 1997 election was to introduce nursery vouchers, and the Labour Government's first action was to scrap them. That was a wise move, because the vouchers were unfair.
The Tories cut social services and highways maintenance. I served on the Standing Committee that considered the Bill to introduce the poll tax. Mrs. Thatcher declared that she would abolish the rating system and introduce the poll tax. It was implemented for 12 months, but caused great anxiety, so a lot of public money was spent on scrapping it. That is the Tories' record on local government. My right hon. Friend has made local government credible with improved services. People in local government now understand where their resources come from and what they are provided for.
I draw my right hon. Friend's attention to the environmental protection and cultural services block, because more consideration should be given to those services. The EPCS block provides the majority of funding for many local priority services that deal with liveability, antisocial behaviour, street lighting, libraries and waste collection and disposal. Local authorities want to develop those important services. The Government have recognised the importance of those priorities and it is vital that adequate resources are provided to support that agenda. The EPCS block receives the lowest funding, and I plead with my right hon. Friend to reconsider that when the formula is reviewed, because the services involved are important.
I also draw my right hon. Friend's attention to the neighbourhood renewal fund, which, with the co-operation of the Treasury, has provided many resources to help deprived areas. It should continue to contribute to our strategic objectives of improved funding for employment, education, crime prevention, health, housing and environmental matters. In areas such as the former mining community that I represent, where closure of collieries has led to deprivation, the neighbourhood renewal fund needs to continue. It is one way to tackle social exclusion and help deprived areas. We should continue to support deprived communities through the neighbourhood renewal fund.
A further point concerning areas of deprivation is the fact that we are subject to data loss whereby authorities lose resources when people move out of the area. The population is reduced, but the people who are left are usually the most vulnerable and therefore most in need of care and attention. The settlement should take that data loss into consideration, particularly in metropolitan areas, which sustain most of the loss. My right hon. Friend the Minister is aware that SIGOMA has constantly made representations on that issue.
I draw attention to the "Balance of Funding" report published by my right hon. Friend, who also set up the independent inquiry into local government funding by Sir Michael Lyons. That review's terms of reference are such that local government will benefit when the report is published later this year. One of the problems facing local government, the effects of which we have witnessed in the distribution of resources and grant, is gearing. The Select Committee that considered the "Balance of Funding" report is convinced that gearing has a negative impact on local authorities because it distorts accountability and magnifies any weaknesses in the formula and the grant system, making the entire system less clear.
The Select Committee report accepted that gearing was a major factor in the grant system, making a difference of, on average, a 12.9 per cent. increase in council tax bills in 2003–04. Questioning of the Office of the Deputy Prime Minister has confirmed that there is no evidence that gearing has any positive effects on efficiency. I am pleased to note that in the ODPM report, the Government accept that gearing can cloud the accountability and transparency of local spending decisions. The possibility of abolishing gearing is to be welcomed, and I ask the Minister to ensure that there is no repetition of gearing in future.
There is also the question of the three-year rolling programme of grant for local authorities. The Select Committee made it clear that that would enable authorities to publish at least indicative budgets and associated local taxes for the same period. The Government are to be commended for that programme because it helps local government to plan the provision of its services.
Hon. Members on both sides of the House have referred to council tax. The Select Committee reported that council tax should be retained, provided that it and council tax benefits are reformed in line with other recommendations in its report. In addition, local authorities need greater freedom in the use of their other resources and the revenue that is collected at local level, to ensure that council tax payers are not exposed, as at present, to a large increase in annual bills. The Minister gave an assurance today that there would be a cap on large council tax bills. From the point of view of metropolitan authorities, SIGOMA considers that the award outlined by my right hon. Friend is a good award, from which the majority of local authorities throughout the country will benefit. I therefore commend the award to the House.
Listening to the debate, I am reminded of the dramatic monologue, "Albert and the Lion". Finding
"nothing to laugh at, at all", everybody has been
"seeking for further amusement", so we had a nostalgic trip down the tunnel of love that is represented by Mrs. Thatcher, and one or two rollercoaster rides on futuristic rebanding and revaluation. I thought I might be rather eccentric and speak about the settlement.
The first thing to say is that it is all a phoney war. There is not going to be a war this year about the settlement. Local authorities will come in uncannily at 4.9999 per cent., they will be able to get in under the threshold, and they will wave the tattered banner of Gershon in order to do so. It is a pretty unconvincing banner because it is a rather unconvincing piece of work. I shall be surprised if the Minister has to do more than utter the occasional mildly blood-curdling threat. The settlement is relatively generous and the reason for that is obvious. Both a national election and local elections are approaching, and the one thing that unites councillors and Members of Parliament is an anxiety to be able to continue in their current employment.
There is none the less a series of wrinkles about the settlement, which it is worthwhile examining. The Minister made a wonderfully Kafkaesque remark about the census: the Government would not apply the census because that might lead to redistribution. I thought the purpose of the census was precisely in order to decide how to distribute and redistribute funding. I can see the arguments for stability, but the Minister omitted to say that stability has a price as well, in the non-gain as well as the non-loss. As a result of not applying the new census data for the service-specific formulas, North Yorkshire county council has a loss of £3.4 million. The council may well appreciate the stability, but there is a cost because of the data not being applied.
There is also a wonderful underpayment for Westminster and Manchester. I served on the Standing Committee that considered the Identity Cards Bill. The Government told us about the potential individual cost of identity cards, based on the number of people who would come forward for them. I wondered whether that would be based on the same data as had led the Office for National Statistics to lose a significant part of Manchester and to miscount quite a large area of Westminster, in which case the cost might be actuarially somewhat different from that predicted by the Government.
The Government are obliged to pay the money due, but in order to do so they are taking back money that councils have already spent. In 2005–06, North Yorkshire will have to pay back £1 million from its 2003–04 spend, and in 2006–07 it will pay £1 million from its 2004–05 spend. That can come from only one place. If North Yorkshire were to post a council tax increase of 4.9 per cent., 0.6 per cent. of that would be to raise the funds to give to the Government to distribute to Westminster and Manchester because of the faults in the distribution system. It is curious that this rebate, as it were—this recapturing—has been applied only to the upper-tier authorities in two-tier areas, and the districts have got away scot-free.
The interesting thing about the settlement is that it is marooned between the Raynsford report and the Lyons report. I hope that it is the last in quite a long line of settlements promoted by the Minister, but for which in many ways I think he is not responsible. He is a very able Minister, but he works in a difficult environment. The settlements have been improvised, they are hole-plugging, and panic stations is written all over them. He has been talking about stability, but there has been absolute panic quite a large part of the time.
When the Minister says that the settlement is not manipulated to help Labour-controlled councils, of course he is dead right—it does not need to be. The previous settlements are the ones that were manipulated. This is based on the previous ones, for 2003 and 2004, and it follows the same arithmetic. He will recall the wonderful rumpus over education expenditure to which that miscalculation gave rise. The sad thing about that in many ways is that the much-vaunted stability has meant that the Government are now too petrified to change anything at all. The Government have offered a minimum education funding guarantee. They will centralise school funding, and given that the Home Secretary was previously the Secretary of State for Education and Skills, I wonder how long it will be before we have pupils under house arrest in order to secure the efficiency of the settlement.
I recognise that the Government have tried to help education and social services, but I agree with Mr. O'Brien when he said that yet again the services that will experience the greatest stress fall under what is now called environmental and protective services, which do tend to be closest to the citizen. Ironically, it is just those sort of areas that the Deputy Prime Minister has been talking about in Manchester this week when he talked about clean, green, safe cities. The money to deliver that comes specifically out of the blocks that are under the greatest pressure in the settlement.
I am tempted to say that this settlement is as good as it gets. It might well be the best settlement of the decade. I say that because from now on the skies will be dark with the chickens of the Government's spending splurge coming home to roost. I suspect that whichever party wins the general election, the next settlements will not be as welcome as this one. The Minister said clearly that he did not expect to increase the yield from a rebanding and revaluation. I happily accept that, but of course it will be significantly redistributive as well. If, as he hinted, there is not merely an increase in the bands at the top, but there might well be a new lower band, and given the large number of properties that fall under that bottom band A threshold, particularly in, for example, the towns that have had quite a vocal representation here today, and which are part of the pathfinder projects, then the redistribution will be quite significant. I would not exclude the possibility that the Government might decide that they need to find some cash to throw at stabilisation at the upper ends of the bands to prevent too great a disruption in the system.
My hon. Friend Mr. Pickles was right to say that if we do have a regional banding there will be areas that outperform the region and where individual householders could find that they are moving up bands. As we all know, those who benefit tend not to indicate their gratitude, while those who are penalised tend to be vocal in their discontent.
I echo what my hon. Friend said about stability. We will get the Lyons report. I agree with Mr. Betts about the business rate. There has been an inversion in the proportions of business rate and council tax towards local government funding. The structural reorientation of the business rate solved part of the balance, but it does not solve any part of the funding. We need to solve the funding as well as the balance. However, I do think that local government will look for stability. I understand that the Minister has said that the Government's latest wheeze is that the structures of local government will be voluntary ones, and that there will be no central prescription. I hope that that is the case. A facultative system where local government could decide whether it is in its interests to move to one system or another would be sensible. What matters most of all is having a predictable and clear funding flow that delivers accountability more realistically locally, and means that local government looks rather less as if it has been occupied by an army of occupation that is occasionally enabled to operate a form of token democracy.
I hope that this is the last of a line of improvised settlements. Once we have been batted about because of particular pressures, there will be an opportunity with the Lyons report to establish a basis for stability in the system. I hope that whoever wins the general election will regard that as their most urgent priority.
This is a very important debate, as we are talking about local government and its financing and future. I thank my right hon. Friend the Minister for Local and Regional Government for the 5.7 per cent. increase that he gave to Chorley, and I recognise that it is significant by comparison with what we have had for many years.
The history of Chorley is simple, however. Prudence was not born in the Treasury across the road; it was born in Chorley. Chorley has always been a low-spending authority, and it has prided itself on low spending, but that has always been its difficulty. Unfortunately, Chorley was not historically a large-spending authority. It saved money and, because it had good balances, it encountered problems with the Conservative Government. It was penalised for prudence in the past, and as it was a low-spending authority, it always had a low base to begin with. Tragically, whichever Government were in power, it never seemed to get its fair dues, and it was heavily penalised historically under previous Governments.
It is that problem that comes through today. A 5.7 per cent. increase is a huge amount of money, but on a small base it means only £370,000-odd in reality. The difficulty that I face, along with the local authority and council tax payers, is that the way in which the floors have been set means that £1,324,000 is trapped. That is the case because of three years in which the ceilings have been removed, but in which the floors have been set at a certain level and the money has never been allowed to come through.
Looking to the Minister, I need some good news for those council tax payers. I do not believe that they should have been penalised because the money has been withheld. People might not like the terminology, but that is the reality, and I am not on my own. There are six other districts in Lancashire, and a total £9 million is being withheld from those local authorities, along with the ability to set a fairer budget for council tax payers in Lancashire. Throughout the country, the total for the districts from which money has been withheld is only £29 million, which is an absolute pittance. The Department probably spends more on window cleaning over three years than the amount involved in giving the money to those districts.
Even if the Minister cannot tell me now that we will get the money, I look to him to tell me that he will look at the formula that will release that money to ease the pressure on council tax payers in Chorley and the other districts in Lancashire and allow them to have the fair share that they would have had if the floor had been moved slightly. I am not asking for other local authorities to be penalised, although that argument might be used. I do not want to pick on other authorities, and the amount involved is a small one in the budget of the Department. Surely, there is a way of rectifying the situation not only for Chorley and Lancashire, but for the whole country. A total of £29 million is involved. Let us resolve the matter and ease the pain for the future of Chorley. It is only right to do that.
I therefore not only congratulate the Minister, but ask him to please look at the problem, not least for Chorley and the other Lancashire districts. The amount is £9 million for Lancashire and £29 million for the country. I know that that situation can be resolved. What we want is a green light from him in his winding-up speech and an assurance that he is willing to look at the problem when the Government reconsider the formula. That is the only fair thing to do by those council tax payers in Chorley, who should not be penalised for something that is not their fault, but is a historical problem that has arisen because of the Conservative party.
It was the previous Conservative Government who put in place that trap for us. They were unjustified in sweetening their own authorities around London. Whether it was Westminster, Wandsworth or wherever, the Conservative authorities were the flagship authorities that always got all the trimmings and extra presents going to local government. We were the ones who had nothing on the table when it came to Christmas, because unfortunately we were penalised. Let us put those wrongs right; we have the chance to do so, although it has been a long time coming. I hope that my friends the Ministers will take that point on board. Many hon. Members wish to speak, so I shall take no more time, except to say to my friends, "Please look after the good council tax payers of Chorley."
The whole House will wish to congratulate Mr. Hoyle on being so kind to other Back Benchers who wish to speak, by making his effective point briefly. In view of the number of hon. Members who wish to speak, I hope that we will all try to do the same.
I wish to put a basic point to the Minister about which I hope he will think carefully: although everyone accepts that the local government settlement for 2005–06 is relatively generous, it is desperately unfair to Southend-on-Sea and other seaside towns in the south-east. Procedures have been applied irrationally and unfairly, and despite Southend's massive social problems it has been obliged to cut vital public services in the fields of leisure, recreation and social services.
The document detailing all-purpose authorities lists just under 50 authorities with a summary of their percentage increase in grant. As the Minister said, Wokingham gets a 13.2 per cent. increase. West Berkshire gets 11.3 per cent., as does Milton Keynes, and Peterborough gets 10.1 per cent. The obvious question is: what problems do those authorities face that Southend does not experience?
Southend is a seaside town with a multitude of social problems and many houses in multiple occupation, so we have more problems than most. For example, I heard this morning that we now have 310 children in the care of the local authority. Which of the authorities that I cited experience such a problem, in addition to the problems with asylum seekers that we face? So what is the percentage for Southend? It is 4 per cent., and as I said before, I challenge the Minister to find any other all-purpose authority throughout the length and breadth of England with a lower figure. The figure is the basic amount—as low as it can go—but the basic percentage is only part of a wider story.
We have been pursuing the question of the population level for years. Formulae have been based on the 1991 census, and Ministers have been reluctant to use the updated 2001 census figures because of the substantial changes that they could make to funding. In a letter to me dated
The effect on Southend has been catastrophic. The 2001 census tells us that our population has gone down from 176,000 to 160,000, but the council and I think that those figures are wholly wrong. For a start, the 2001 census excluded many addresses, and even if we ignore that basic point, our general practitioner patients figures show that there are 178,000 patients in Southend, although the Government clearly ignore 18,000 of them. When we pursued those issues with census officials, they advised us that the numbers were all part of the margin of error.
Even if we accepted such a remarkable fall in population, which is certainly not accurate when one bears the number of asylum seekers and houses in multiple occupation in mind, the council is really infuriated that the details of the new assessed population are not taken into account in the funding formula. Even if we assume that the 2001 figures are totally correct, which we do not, they show that there has been a big increase in our elderly population, which in itself should justify an additional £1.5 million in the funding formula. How can it be fair for the Minister to bring in the basic figures, which have led to us facing a massive reduction, but not incorporate other changes, such as the increase in the elderly population that should have given us an extra £1.5 million? It seems unfair and irrational to use the 2001 figures but not include the details.
Then we have the consequences of the unfair settlement. If a council was given a bad settlement, the logical thing would be to look for savings across the board. If the Minister looks at the figures, he will see that Southend has a budget of £197 million and spends £97 million—about half the total—on education. That is an area that the council would obviously consider cutting. However, the Government did not tell it, "You can cut back on that and other areas", but instructed it that although its increase is £5.1 million, it must spend an extra £5 million on education because of ring-fencing. As the council is obliged to spend that sum of money on education, in effect there is no increase at all. What about social services—again, a huge spender? How on earth can the council cut down on social services, given the multitude of problems faced by Southend and other seaside towns? Furthermore, some spending increases cannot be avoided—for example, the financing of pension funds for the staff, which involves an extra £1.5 million. There are many other such items.
The Minister is obviously enjoying the conversation that he has been having with his neighbour during the past six minutes while I have been speaking, but I hope that if he cannot listen now, his officials will at least ensure that he reads about this and considers it carefully. Incidentally, although I asked for a meeting to discuss it, I was told for the first time in 40 years as a Member of Parliament that that was not possible.
The one and only area where the council does have freedom is in leisure, recreation and arts. That has necessitated an horrendous and cruel list of cuts in vital services for the community. There are plans to close five community centres, some of which provide vital services in deprived parts of the town, and to close the Palace theatre. There is a significant and detailed plan of 12 separate cuts. As I am sure that my hon. Friend Mr. Amess, who attends to these matters vigorously at all times, will confirm, the council does not want to go ahead with these proposals, but what on earth is it meant to do if it wants to stay solvent?
I appreciate that drawing up complex funding plans can be difficult, but I hope that the Minister will accept that his proposals are brutally unfair to Southend and its people. If he had time to come and visit us, he would realise that it is an area where more help is required and the needs of the community are very substantial.
The Minister said at the beginning of his speech that he intends to bring forward some revised plans to take into account certain changes. He should bear in mind the fact that the census has denied us £1.5 million to which we are entitled and that Southend, like other seaside towns, faces massive social problems. I hope that he will think again about a settlement which, although generous overall, has done a brutally unfair service to Southend-on-Sea and caused great distress to its people, including borough councillors of all parties.
I should like to say one or two things about the impact of the settlement on Birmingham and what it is likely to mean for my constituency, then draw a few conclusions in relation to the national scene.
I welcome the settlement, which is very good for Birmingham. We have received a 6.73 per cent. increase in formula grant, which is generous by any stretch of the imagination, and is one of the better settlements in the country. Like every other town undergoing rapid change, I am sure that we could use more, and I reserve my right to come back in the future and say that we want it, but we must recognise what the Government have done for Birmingham on this occasion—in fact, not just on this occasion but following year-on-year above-inflation increases.
We wait to see how the Conservative and Liberal Democrat coalition that now runs Birmingham reacts to this settlement. Given what Liberal Democrat Members have said on several occasions, including today, and knowing the views of some Liberal Democrats in Birmingham, I cannot understand how they have accepted the Birmingham leadership taking them into bed with the Tories, but I guess that is up to them. The focus is now on their management of Birmingham city council. They cannot claim that they have had a bad deal from the Government, though perhaps they could explain what over £4 billion of cuts under a Conservative Government would mean for them.
I want to consider youth facilities and play facilities for younger children and the amount of money that is available for them. In my constituency, a recent report was made to the district committee—a pioneering new structure that the former Labour administration set up to devolve power and influence in Birmingham. The report highlighted what we already knew: there are not enough play facilities in my constituency. When I talked to residents on estates throughout Northfield, they emphasised the importance of improving provision for young people. We have set up a youth commission locally, with cross-party support—people of good will from different parties in Northfield all support that—to ask young people what they want.
The previous Labour administration secured an extra £8 million of Government money for meeting various performance targets, and £7.3 million of that sum was allocated to improving facilities for young people and estate clean-up projects. It worries me that, in the past few weeks, the Tory-Liberal Democrat coalition that now runs Birmingham has decided to cut that £7.3 million from those priorities for my constituents. It claims that it has done that because it has to cope with an overspend in the social services budget.
It is true that social services in Birmingham have longstanding problems. That is not a party issue; even the former Labour administration had a long way still to go to tackle them. However, party is important when it comes to the need to exercise proper financial monitoring and financial control throughout the year and not simply panic half way through or towards the end of the year and end up cutting the money from youth facilities, which the Tory councillors in my area—we have no Liberal Democrat councillors—say that they want to increase. The administration in Birmingham must therefore answer some questions. It cannot complain about lack of money, but it must answer questions about its management of the council.
I want to consider the way in which spending by local authorities, other agencies and the Government translates into, for example, neighbourhood renewal. The first speech that I made in this place many years ago was about the fact that, in my constituency and many others, deprived areas exist alongside areas that are not so deprived. Consequently, when figures for deprivation are compiled at ward level, averaging occurs and so- called pockets of deprivation miss out. In Birmingham, where there are wards of 17,000 to 20,000 people, the pockets are pretty large.
I am pleased that, last year, the basis for calculating deprivation changed to become much more local through Government action on what are called "super-output areas". Let me make a plea to my hon. Friend the Under-Secretary: can we think of another name? No one understands what the term means. However, changing the basis for calculation means that issues can be addressed and it is important that they be tackled in the context of local policy. Pockets of deprivation should be identified and their needs met when policy is decided locally. Birmingham is simply too big to try to do everything centrally and dealing with deprivation locally is therefore especially important.
Devolution has made a good start in Birmingham. There are local projects, such as safer neighbourhood projects, in my area that have an impact on tackling crime and antisocial behaviour. However, the money needs to reach local level to back up those good initiatives.
Much estate development work is happening in Northfield. In the medium term, the prospect of that is good. However, in the short term, people cannot get their repairs done. It is galling for someone who sits on the edge of an estate and sees that another person's home is scheduled for redevelopment to know that their home is not and to be unable even to get repairs done. More local control of matters such as repairs budgets is important and of more than academic significance. I ask my hon. Friend to consider what the Government can do to encourage that process locally.
I have written to the city council about all the issues that I have raised but I ask my hon. Friend the Under-Secretary to consider how the Government can encourage such processes. The grant figures that have been announced and that we are debating are good, but the way in which they are used locally is vital. We need to tackle that in Birmingham.
There seems to be a growing consensus, at least on the Government Benches, that this is a fair and generous settlement. Perhaps that is to be expected, but it is not a sentiment that I acknowledge or recognise; nor is it shared by my constituents in East Devon—[Interruption.] The Minister says that it is a shame. It is; or perhaps not, if we take into account what many of my councillors and constituents believe: that the settlement is merely the latest instalment in the Government's determination to drive through a regional agenda and to undermine local government infrastructure so that it becomes unpopular. Perhaps they could then replace it with a unitary authority in advance of their regional programme.
East Devon district council has been debt free for many years, with capital reserves of about £20 million. However, it is now being encouraged to spend that money. The Government do not want any council to be debt free, because they could not then insist on that council complying with their ever increasing number of directives.
We have heard a lot about a replacement for council tax, and that is an entirely legitimate discussion to have. I commend any Government who want value for money. Building on the Gershon report, the James report has also identified great waste. All Governments have a duty to ensure that they deliver value for money to the taxpayer. I have looked into the possibility of a local income tax. On the surface, it would have some attraction in a constituency such as mine with very high property values and a high pensioner population. However, on reflection, and after much study, I have concluded that any fair means of raising local council tax has to retain an element of property valuation.
Over the past seven or eight years, there has undoubtedly been a shift from central Government providing the funding for local government to local government having to find increasingly large amounts for itself. The Government's announcement that they are likely to cap local councils is only to be expected in the run-up to a general election. No Government holding an election in May or even sooner would want to have it on the back of council taxes increasing as they have done in the past few years.
Furthermore, capping involving a blanket figure is manifestly unfair. East Devon is the lowest-charging council in Devon. To apply the same maximum increment to East Devon as to the others will continue to make the gap in its overall receipts much wider, while its statutory responsibilities remain exactly the same as those of any other council. Where would be the incentive to be prudent and to deliver value for money, as East Devon does? It has the lowest council tax in Devon, as I have said: the average charge for a band D property is £102.09, compared with the county average of £124.33. Where would be the incentive for a district council to behave in a manifestly honourable way, and to deliver good value for money? The answer is that there would be none. Nothing in the settlement—or nothing that we have heard this evening—would contribute towards remedying that.
East Devon has been judged by the Audit Commission, and it achieved a good rating while continuing to give the best value for money. However, the council tax now pays for only about 23 per cent. of the £24.5 million needed to provide the necessary services. As the Government have withdrawn their funding, local authorities such as East Devon have been boxed in, in terms of finding the deficit funding. They are faced with a simple equation. In order to keep the increment down, they have to reduce what they do.
This Government over the past few years have increased the statutory requirement on local government year on year. Local government has no option but to perform to those new targets. What does that leave? It leaves a district council faced with having to cut those non-statutory responsibilities. That is what is happening in East Devon: the double whammy of a council tax increase and a cut in services. I do not blame the council for that—it has performed extremely well. It provides good value and has some exciting projects such as the regeneration of Exmouth and Seaton, and bringing its remaining housing stock up to standard to meet the statutory requirement.
All those things are positive, but equally the Government must accept responsibility for the crisis that they find themselves in. I shall use technology as an example of the additional work that councils have to do without receiving financial compensation for doing it. The Government require East Devon to invest between £4 million and £5 million by the end of this year, but what is their contribution? It is £1 million, so the deficit in respect of that requirement alone will be £3 million or £4 million. Also, the cost of recycling in East Devon next year will be about £1.5 million. Where will that come from?
On reflection, what do we face? The council has the lowest grant in the country, and 75 per cent. of the council tax money, which we have been using to prop up our precept over the years, is to be confiscated from East Devon and redistributed around the country. That is the crisis we face.
I want quickly to touch again on the Liberal Democrat plan to replace council tax with a local income tax. I was intrigued to see a letter in the Express and Echo of
"try to understand the correct facts about local income tax."
Well, I think they did understand those facts, because 57 per cent. of them voted for a Conservative councillor. That proved to Margaret Rogers that they understand the Liberal Democrat alternatives.
It is worth pointing it out to the Liberal Democrats that they cannot have it all ways. They cannot say they want to abolish council tax and yet vote on two separate occasions to reband houses under the council tax.
There is much that I want to say—much that I hope to have another opportunity to say—about the unfair settlement that we face, but other hon. Members wish to speak. I urge the Government, therefore, to look again at those councils that are delivering good value for money, such as East Devon.
Other colleagues want to speak, so I shall be brief. Although I do not want to be the only person to spoil the party on this side of the House, there are certain things that I want and need to say.
The 6.6 per cent. increase for Pendle is welcome and we need it. Pendle is a deprived area, sitting next door to Burnley, with a huge number of social problems that need to be tackled, but our difficulty goes back to the introduction of the new formula grant system in 2003–04. It has produced such a situation—my hon. Friend Mr. Hoyle outlined this—that money that should come to Pendle and other district councils in Lancashire, and indeed across the country, is being withheld.
As Mr. Curry said, the introduction of the new formula grant system has a purpose. That purpose is to redistribute resources to those parts of the country that need the extra money. The perversity is that, three years into the new system, a lot of resources that should come to local authorities in Lancashire such as Pendle, Chorley, Burnley and Hyndburn have been withheld. We are talking about significant sums, and we are entering the third year of transition. Pendle borough council is waiting—I do not know whether we will ever get it—for £1.8 million that would have come to it had the new formula grant system been applied. My hon. Friend the Member for Chorley spoke earlier about the £1.3 million that would have gone to Chorley; my hon. Friend Mr. Pike spoke earlier about the £1.5 million withheld from Burnley, with all its problems; my hon. Friend Mr. Pope spoke about the £1.5 million withheld; and so it goes on.
Those are significant sums. For a small district council such as Pendle, whose budget comes in at about £13 million, £1.8 million is significant, so while we celebrate the 6.6 per cent. increase, we want to know when we will get the money that was promised to us as a result of the move over to the new funding system. It is all a question of fairness and giving local authorities the resources that they need to tackle the problems that we face.
The Under-Secretary will say, I am sure, that there is not a big pot of cash somewhere that we can raid. He will say, I am sure, that the money must be used to ease the pain of the losers under the new system, and that we must let the losers down gently. The Minister for Local and Regional Government told us at the beginning of the debate that one of the losing authorities is Preston in Lancashire. It is totally unacceptable, however, that local authorities such as Pendle, Chorley and Burnley—for God's sake—should be bailing out local authorities such as Preston. That is the reality. It is the Government who should ensure that local authorities such as Preston do not go into financial free fall, not local authorities such as mine which should gain from the new financial system.
I want to finish on the Liberal Democrats and local income tax. My hon. Friend Mr. O'Brien tried to coax some information out of Liberal Democrat Members about how that would work in practice, but got absolutely nowhere. Local income tax is an idea that is shrouded in mist. When we try to get details about how this local income tax would work in practice, those details are not forthcoming. We heard today from one Liberal Democrat Member that all sorts of tiers would be able to vary the rate of local income tax—not just county councils or district councils, but parish councils.
Not unless the hon. Gentleman wants to correct that for the record. That did not relate to council tax but specifically to local income tax. The cost of administering such a byzantine system is ludicrous. If the hon. Gentleman, who calls himself an expert on such matters, wants to intervene and tell me that I am wrong, I would welcome that.
I am more than happy to intervene. We have published a huge amount of details on local income tax and how it would work, dealing with all those issues. Mr. O'Brien refused to allow us to intervene to answer the question that he posed. The hon. Gentleman is therefore completely wrong, again.
That was a complete non-answer. I invite the Liberal Democrats to initiate an Opposition day debate on local income tax. Let us discuss it in detail then.
Let me return to the point I made earlier about the sums that have been withheld as a result of the introduction of the new grant system. My hon. Friend the Member for Chorley said that the cost would be only £29 million nationwide. That is de minimis in the context of the Government's budget: it is absolutely nothing. To right the injustices in Lancashire, a derisory £9 million would be required.
I do not know what the answer is. I know that my right hon. Friend the Minister has a busy schedule, but like Sir Teddy Taylor I tried to arrange a meeting with him and was astonished that his diary was so full that he could not meet me—along with representatives of the six local authorities in Lancashire that are wrestling with this problem. I hope that the Under-Secretary will be able to give some comfort to local authorities such as Pendle that need resources that are being unfairly withheld from us.
A year ago I initiated an Adjournment debate entitled "Southend Borough Council (Financial Settlement)", to which the Under-Secretary replied. Sadly, many of the points that I made then are still pertinent this evening.
Southend borough council is an extremely well run local authority, and I pay tribute to all the women and men who work for it, but unless the Government do something to help it in its present financial crisis, services will be decimated in the town of Southend—and let there be no doubt that if that happens the Government will be entirely to blame.
It is not. I will come to the Minister's remark in a moment.
When I first arrived in Southend, the authority had decided to become unitary. At first that worked extremely well financially, but unfortunately—as the Minister of State knows only too well—it has recently not been to the authority's financial advantage.
In Southend we had many brilliant leaders of our council. Norman Harris and Norman Clarke, for instance, are well known as local government pioneers. The leaders who have followed those two gentlemen are every bit as able, but because of the Government's continual interference with local government, they have not been able to develop Southend as they would have liked to. Last year Southend borough council had to make savings of £7 million to bring spending levels down to the formula spending share, and council tax increased by 6.8 per cent.
I would have expected the Under-Secretary to listen to the points I made a year ago about the census. If the Minister of State had allowed me to intervene when he opened the debate—
The Minister of State is wrong. I am the only Member to whom he did not give way. All I wanted to ask was, would he please meet a delegation from Southend to discuss issues relating to the census? In the 22 years for which I have been a Member of Parliament—I have listened to many of his speeches—it has always been common courtesy to see delegations led by Members of Parliament. I think it very regrettable that he is not prepared to meet a delegation from Southend to discuss the census.
I am sorry that the hon. Gentleman has not understood something that I have explained on several occasions. In a year in which there is no change to the formula and it is therefore not possible to respond for requests for changes of the kind that he and his colleagues sought, it is not right for us to see delegations from some areas and not others. When we accept delegations, we always accept the principle that any local authority that wishes to come and see us is free to do so. We made it quite clear this year that because there were no formula changes we would not see individual delegations from individual authorities but would accept delegations from bodies representing local government—and we did see members of a body representing unitary authorities on which Southend was represented. It is simply not the case that we have not listened to Southend's views.
It certainly is the case that the Minister of State has not listened, because he is pre-judging the meeting that would take place. During his opening remarks, he agreed to meet one of his hon. Friends on a specific issue. I ask him to reconsider his decision not to meet a delegation from Southend, because the impact of having 20,000 fewer people on the census than there actually are is tragic in financial terms.
The Minister of State may laugh, but there is nothing funny about the issue. I represent a huge number of elderly people. In fact, my constituency has more people aged between 100 and 120 than any other—[Interruption.] Sorry, between 100 and 112; I was slightly exaggerating. Florence Reeves is the eldest.
Unless the Minister of State meets a delegation and listens to what we have to say, there will be further cuts of £5 million, which will mean redundancies, restructuring of services, withdrawal of free school transport to voluntary-aided schools, with the exception of the transport for disadvantaged children, a reduction in school uniform grants to children from disadvantaged families, closure of the Palace theatre, closure of community centres, closure of a mobile library, a reduction in park ranger services, a reduction in grounds maintenance, the withdrawal of all bus route subsidies for elderly people, and a 3 per cent. increase in charges for Southend borough council services.
It actually gets worse than that. Because there is likely to be a council tax increase of over 9 per cent. and the Government will cap it, there will have to be another £2 million of cuts. A number of libraries will be closed. The boat patrol will be cut. There will be a further 2 per cent. increase in charges for Southend borough council services. All non-statutory services will be abolished and there will possibly be even more redundancies.
It is no good the Minister of State shaking his head. I have been overwhelmed by the number of local residents who have made telephone calls. There has been a rally. I have received umpteen letters. Misery is being piled on the good residents of Southend because the Government will not listen to the points that the local authority is making about the census. I ask the Minister of State not to behave churlishly and to reconsider meeting a small deputation.
The need for brevity will perhaps lead me to be less courteous than I would like to be in my comments, but I start by congratulating my right hon. Friend the Minister and his team on delivering the eighth consecutive inflation-plus rise to local government since the Government came to office. I say that with all sincerity. Those of us who served in local government before coming to the House remember the rises below inflation that were delivered year on year to local government by the Conservatives. However, I say to him sincerely how dissatisfied we are in Northampton with the settlement. He will remember that when he gave the figure in November, I questioned his language because he said that he had listened very carefully to the needs of those in growth areas, yet he delivered to Northampton borough council a settlement of 2.7 per cent., compared with settlements in neighbouring districts of 10.5 per cent. for East Northamptonshire district council and 7.4 per cent. for Wellingborough borough council. There seems to be an imbalance between the amount given to them and that given to Northampton borough council, which will have to take on a lot of that growth.
I blow to pieces the assertion of Mr. Pickles that this is some sort of class war or that we are taking a partisan approach. I am here representing—or trying to—the needs of a Conservative-led administration in Northampton not because it deserves it, but because it is unfair that it be required to cut back substantially on the services that it offers.
I take the point made earlier that rather than looking for savings across the board, local authorities tend to go just for the big figures in the hope that they can cut out the fat. Conservative-led Northampton borough council is making a right hash of trying to ensure that it achieves the figure that it is supposed to achieve. It is making some incredible mistakes, such as offering its leisure centres to private management, with no thought as to whether anybody wants to purchase them. That is supposed to be achieved before March, but we all know that it will not be possible. It is increasing car parking charges, increasing charges for leisure services across the board and increasing cemetery charges by 10 per cent., which proves that even the cost of dying goes up under a Conservative-led council.
There is a further staggering initiative that I did not believe when I first heard it. The council is introducing a £12 charge for the collection of large items from outside people's houses, such as fridges and furniture. I suppose that there is nothing wrong with that in itself, although it should be noted that an increase from zero to £12 is huge. The council says that those who pay the £12 can have their large item picked up within a week, but only last week it announced that dealing with fly-tipping was one of its priorities and that any fly-tipped item would be picked up within 24 hours. So under a Conservative-led council, lawful citizens of Northampton can pay £12 to have their items collected within a week, while others can dump them outside, phone them in as fly-tipped and have them picked up within 24 hours. That is the level of competence that we are dealing with in Northampton, against the backdrop of a very poor settlement. [Interruption.] It is a Conservative-led council, under which the cost of dying goes up by 10 per cent.
I want my right hon. Friend the Minister to take this issue seriously. In November, the Lords Select Committee on the West Northamptonshire Development Corporation looked very seriously at the Office of the Deputy Prime Minister's record in consulting on the imposition of an urban development corporation for west Northamptonshire. We are having a hard time convincing our electorate that it is good for them, and it is even harder to do so when we are asked to deliver growth against the backdrop of a 2.7 per cent. settlement that is in no way adequate for what is the largest non-unitary council in the country. It should be unitary, and Mr. Gummer—he is not in the House today—admitted that the previous Conservative Government made a mistake in that regard. I ask my right hon. Friend to start correcting some of these wrongs. Let us make sure that Northampton does become a unitary council and that it can deliver growth. But let us also ensure that the Government and the ODPM take seriously the need to treat us fairly. Then, we can bat on their side, rather than suggesting that the figure granted to us is wrong.
I am grateful for being called, Madam Deputy Speaker, and grateful to my colleagues for being brief, thereby enabling me to be the final Back-Bench contributor this evening. It would be churlish of me not to congratulate the Government on another generous settlement for Worcestershire this year. I do not want my comments on what I regard as an inconsistency in the local government funding formula to be taken in the wrong way. I want to tackle the long-standing issue of the area cost adjustment, which my colleagues on the Front Bench know all about. The Government have not yet dealt with it, and it is causing much disquiet among my constituents.
I want to deal briefly with how this inconsistency arises by looking at the example of the education formula spending share. The EFSS has an element of top-up under the category of deprivation, and the three deprivation factors used—income support-level claimants, low-achieving resident ethnic minorities, and working tax credit claimants—are all residence-based. However, in calculating the area cost adjustment, instead of using average earnings according to a residence-based criterion, a workplace-based criterion is used.
What does that mean for my constituents? Some of the deprived, low-earning areas in the west midlands conurbation rightly qualify for additional top-ups for deprivation, but some of them also qualify for a top-up for high earnings under the area cost adjustment scheme, because the Government use work-based qualifications to assess average earnings.
How the system hurts Worcestershire so much can be seen in the latest local council figures, particularly in the comparison between residence-based earnings and work-based earnings in the west midlands region. Unsurprisingly, Solihull is the highest on both the residence and work-based criteria and receives the area cost adjustment. Warwickshire is the second highest on residence-based earnings, third highest on work-based earnings and also receives the area cost adjustment. Worcestershire is the third highest authority with respect to residence-based earnings, but only the eighth highest when it comes to workplace earnings and it does not qualify for area cost adjustment. It is the inconsistency between residence-based qualifications and workplace-based qualifications that I want the Government to address by making changes to the funding formula.
What adds insult to injury is the fact that some areas within the west midlands conurbation have lower earnings on the work-based criteria than Worcestershire—in theory, they should not qualify for area cost adjustment—but because the Government recognise the large grouping of the west midlands conurbation, those areas end up benefiting from the area cost adjustment, even on the flawed basis adopted by the Government.
In conclusion, I am grateful for the opportunity to make a brief comment on the area cost adjustment and I urge the Government to look carefully at the Blanchflower-Oswald report on area cost adjustment. When the changes are made, I urge the Government to consider carefully their impact on places such as Worcestershire, which seem to suffer on both the work and residence-based criteria for local government funding.
We have had an interesting and lively debate, though we have occasionally witnessed what I think could be described as tired and emotional interventions from the Opposition Whips. We have, I think, dealt with them. We have heard a variety of views about the adequacy of the total grant settlement proposed for next year.
The views expressed have included a welcome from my hon. Friends the Members for Sheffield, Attercliffe (Mr. Betts), for Chorley (Mr. Hoyle) and for Normanton (Mr. O'Brien), who all referred to a "generous" settlement for the forthcoming financial year. Mr. Curry, who is no longer in his place, described it as the best settlement of the decade—and we have not yet reached the end of it, Madam Deputy Speaker, so we are clearly doing extremely well. I am pleased to see that our debate on the Government's substantially generous and good settlement for local government has, perhaps with only one exception, been positive. We want local government to provide better, more efficient and more effective services in the next financial year.
We have also heard Members propose some novel and ingenious methods for distributing the total differently. The area cost adjustment was mentioned a few moments ago. Other subjects mentioned included census figures, amending reports, the question of stability versus turbulence, redistributing rebates and even a discussion of super output areas and pockets of deprivation. Interestingly, if not perhaps coincidentally, the changes advocated by different Members would benefit their own constituents and their local authorities. That is par for the course.
It always amazes me that Conservative Members stand up and demand more money for their councils at the same time as supporting a manifesto commitment not just to freeze spending on local government, but to make massive cuts of some £4.8 billion to the Office of the Deputy Prime Minister budget.
Let me remind the hon. Gentleman before he stands up that we have had interventions from Tories such as the hon. Members for Altrincham and Sale, West (Mr. Brady), for Rochford and Southend, East (Sir Teddy Taylor), for Beckenham (Mrs. Lait), for Runnymede and Weybridge (Mr. Hammond) and for Upminster (Angela Watkinson), Mr. Swire and for Southend, West (Mr. Amess), all of whom have complained about insufficient funds for their local councils. It is entirely acceptable for right hon. and hon. Members to champion the councils in their constituencies, but they cannot do so while at the same time supporting a manifesto commitment that would clearly cut funding to their own councils.
The Minister must be clear about Conservative policies. We are saying, clearly and unambiguously, that we will protect education, health and the police service. In addition, we guarantee that local authorities will get, at the very minimum, an increase that will protect them against inflation. On top of that, we have identified £1 billion in savings that local authorities will be free to use as they choose. Councils will be removed from the shackles of control that the Government impose on them.
We have just heard an Alice in Wonderland contribution from the hon. Gentleman. His fantasy world will not be tolerated in this House. My hon. Friend the Member for Sheffield, Attercliffe specifically asked about waste and housing. The Opposition are proposing cuts of £35 billion in public services, part of which is a cut of £1 billion in housing.
I am grateful to the Minister, as he mentioned me in his list of Opposition Members. Does he understand that if the Government stopped insisting that local councils must meet so many targets, and if they also abandoned their policy of taking 75 per cent. of capital receipts from the sale of remaining housing stock, East Devon district council would not need any more money?
I may be wrong, but I think that it is the Conservative party's policy to sell off housing association stock under the right-to-buy scheme. That would strip out all affordable housing for people on low incomes. The hon. Gentleman cannot make an intervention like that and think that he can get away with it.
The Opposition ask for money and then whinge about council tax rises. I remind the House that, on average, Tory councils raised council tax last year by 5.4 per cent. That is in sharp contrast to the rises imposed by Labour councils of an average of 4.7 per cent. For far too long, Tory councils have hiked council tax and then sent their local MPs to Parliament to blame the Government. Neither we nor the electorate are fooled. Opposition Members would be better advised to use their time persuading their authorities to keep council tax levels down.
I turn now to the Liberal Democrats. I was interested to hear Mr. Davey say that the Labour Government have made Britain a fairer society. I am grateful for that generous recognition of what we have done over the past eight years to support our poorest people. After that welcome contribution, however, he then trotted out more details of the Liberal Democrats' proposals to replace council tax with their uncosted, unworkable and unfair local income tax.
My hon. Friend the Member for Sheffield, Attercliffe reminded the House about the loophole in the Liberal Democrats' schemes that means that the very wealthy would pay no local income tax at all. My hon. Friend the Member for Normanton pointed out that, when challenged, the Liberal Democrats refuse to define their policies, which do not stand up to scrutiny. They do not want to be reminded of the policies that they would pursue because they do not want us to remind the electorate of the record increases in local government funding that this Government have made. In addition, they want to distract attention away from the record of Liberal Democrat councils, which last year raised council tax by the largest amount—5.8 per cent. on average.
The Liberal Democrats were challenged too by my hon. Friend Mr. Jones, who said that they had announced, during the Brent, East by-election, that they would give pensioners vouchers worth £100. Those of us who worked the streets in that election remember that promise. However, as soon as the election was over the £100 voucher disappeared. Moreover, I remind the House that this Labour Government have made available £100 for every household with a pensioner over 70. That money is in pensioners' pockets now, and is helping pay the cost of local council tax.
The Liberal Democrats then described their daft proposals, which would remove the need for council tax revaluation. Their so-called research has created headlines that are factually wrong—ludicrously so. Those headlines, in newspapers such as the Daily Mail and the Evening Standard, reveal how ill informed, ignorant and, frankly, how stupid the Liberal Democrats really are.
Let me repeat what I and my right hon. Friend the Minister have said many times in this House. The revaluation does not mean that individuals will pay more council tax just because their house has gone up in value. The council tax for their house will depend largely on how much their property has increased in value compared with the average. If their property has increased in value in line with the average, it will not go up a band. Even properties that have increased in value by more than the average will not necessarily move up a band if they are currently valued towards the bottom of an existing band. Yes, some properties may go into a higher band, but many will stay in the same band and some will go into a lower band and pay less council tax.
The crucial point is that the revaluation will not increase the amount of money raised overall from council tax, because we have made that commitment. Ignorant speculation like today's that a fairer council tax system will lead to huge increases in council tax is simply untrue. The hon. Member for Kingston and Surbiton quotes the example of Wales, but it has been made clear that it is not a parallel model and cannot be read across to England. Interestingly, by the way, it was Conservative and Liberal Democrat Assembly Members in Wales who voted in favour of the banding system that Wales has introduced.
We have had contributions from various individual Members and I shall make a few comments in response. My hon. Friend the Member for Normanton emphasised the importance of spending on liveability, and he was right to do so. As MPs, we know from our surgeries that people are concerned about how clean, how safe and how green their communities are. We are doing much to support local government to provide better services in their areas. The Clean Neighbourhoods and Environment Bill, in particular, contains measures to increase the liveability of local communities. A recent MORI poll pointed out that the track record has greatly improved in recent years.
My hon. Friends the Members for Chorley and for Pendle (Mr. Prentice) asked us to look again at how the floors operate. I wish to emphasise that no money has been withheld—my hon. Friend the Member for Pendle was right to say that—because the money has been distributed to pay for the floor to help councils such as Preston. We understand the concerns that my hon. Friends raised. The formula is being reviewed and we will want to look at those questions, but stability in local government funding is also important. We have to get that right.
No, because time is running short.
My hon. Friend Richard Burden welcomed the generous settlement that Birmingham is to receive, but he made the clear point that it is only good money if it is spent well. He has been a real champion for his constituency in standing up for youth and play facilities. I hope that the Conservative-Liberal Democrat coalition that runs the council in Birmingham gets the decision right, to ensure that facilities are protected for young people.
My hon. Friend Mr. Foster, whom I have met on many occasions to discuss the particular issue that he raised—[Hon. Members: "Oh!"] I should emphasise that the meetings were not about this particular settlement. We are not making any changes to the way in which we calculate the area cost adjustment during this formula freeze, but we will listen carefully to my hon. Friend's representations, and those from other hon. Members, about the ACA in the future.
The hon. Member for East Devon made a point about what appeared to be a regional plot and then mentioned the James review. As he knows, the James review is not about savings, but about savage cuts to local government.
There will never be a local government settlement that is universally welcomed, but if there were to be such a mythical beast, it would look pretty much like this year's settlement. It includes an increase in formula grant of £2.6 billion, or 5.6 per cent. All councils will receive a formula grant increase at least in line with inflation, with extra on top from specific grants. As my hon. Friend Mr. Clarke said, the settlement builds on sustained grant increases over the years since 1997. The choice is clear. Do people want massive Conservative cuts in grants to councils, followed by the inevitably huge increases in council tax, an uncosted, unworkable and unfair local tax system that would mean a massive increase in income tax, or this settlement, which is a good deal for local government and for the council tax payer?
Question agreed to.
That the Local Government Finance Report (England) 2003–04: Amending Report 2005, HC 241, a copy of which was laid before this House on 27th January, be approved.
Madam Deputy Speaker then put the remaining Question required to be put at that hour.