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Local Taxation

Part of the debate – in the House of Commons at 4:00 pm on 4th July 2005.

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Photo of David Miliband David Miliband Minister of State (Communities and Local Government), Office of the Deputy Prime Minister 4:00 pm, 4th July 2005

There is an irrefutable link between the amount of money that local authorities raise from a range of sources and the amount that they have to raise in council tax, because they have to bridge the gap, but, as the hon. Gentleman will know and as I shall explain in a moment, local government income is from a range of sources, which I shall set out, as it may be helpful.

Council tax raises about £21 billion, which is equivalent to 25 per cent. of local revenue expenditure. Government grant accounts for about £48 billion and 53 per cent. of revenue expenditure. I urge those who decry that level of Government grant to remember that a smaller contribution from central Government means more from someone else. At the last election, the hon. Gentleman's party proposed to freeze grants to local government for two years—[Interruption.] Mrs. Spelman says, "We didn't," but let me quote her the words of the then shadow Chancellor, because the policy was clear:

"I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all these departmental budgets, including local government, will be 0 per cent."

Nothing could be clearer than that—[Interruption.] The hon. Lady says that that was before the James review, but we know that the review proposed cuts of £1 billion in local government expenditure for which it had no way of accounting. It is important that the House knows that the Conservatives were claiming £900 million of savings from reduced costs as a result of inspection and the like but, when pressed, they were forced to rely on a study that concluded that low morale cost £400 million. Their sums simply do not add up.