Local Government Finance

Points of Order – in the House of Commons at 7:31 pm on 4th February 2008.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government) 7:31 pm, 4th February 2008

I beg to move,

That the Local Government Finance Report (England) 2008-09 (House of Commons Paper No. 262), which was laid before this House on 24th January, be approved.

On 6 December, I announced plans for Government grant allocation to local authorities in England. I announced grant to councils not only for the next year but—for the first time ever—for the next three years. Councils now know what they will get, and can plan and manage ahead. I also announced not only the core formula grant, but the allocation of 61 other grants from eight different Departments. Local government will therefore get a total of £2.7 billion extra next year, with overall increases in each of the next three years of 4 per cent., 4.3 per cent. and 4.3 per cent. That continues the inflation-busting rises given by the Government to support local councils each and every year since 1997.

Photo of David Clelland David Clelland Labour, Tyne Bridge

I have to challenge my hon. Friend on his comment about inflation-busting rises. He has said that the settlement would

"make the system fairer to authorities with a relatively low council tax base."

Why, then, has Gateshead—91 per cent. of whose households are in bands A to C—been given a settlement of 2 per cent. when inflation is almost 4 per cent. and the average for the metropolitan authorities was 4.1 per cent.? Why is that four-star authority, which is often held up by Ministers as a beacon of good Labour local government, constantly given such poor settlements? What is wrong with the formula, and when will the Minister put it right?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

There is nothing wrong with the formula, which is the best and fairest way that we have established for distributing the money available. Last year we consulted on whether to alter the formula, and I confirmed the decisions that I took as a result of that in my statement to the House on 6 December.

The fact is that next year Gateshead will get more than £6.5 million extra overall. Gateshead is also protected by the system of floors, which means that all councils in all regions will get an increase in the core formula grant in each of the next three years. I can tell my hon. Friend that there were, and are, those who argue against the floor system that the Government introduced in 2000. If I had listened to their arguments and representations, my hon. Friend's authority might not have been as well off as it is today.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

My hon. Friend mentioned inflation-busting increases. For Lancashire county council, which is based in my constituency, we are seeing inflation-busting increases of 8.1 per cent., 5.7 per cent. and 5.1 per cent. for the next three years—well above inflation. However, for some reason the district council is getting increases of only 1 per cent., 0.5 per cent. and 0.5 per cent. again the following year. Why is there that shift of resources away from the district council towards the county council?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The principal reason is this. In preparing for the spending review decisions that we took last year, we—with local government, including the Local Government Association—went through a detailed exercise in which we analysed the pressures that councils face in meeting population changes, service demands and people's rising expectations of local services. It was clear that, as many have told me, there are two main issues—social care and waste disposal—on which the analysis demonstrates that the pressures are likely to be greatest. The larger part of the increase in the core grant to local authorities this year is therefore going to authorities with social care and waste disposal responsibilities. That is one of the principal reasons why Lancashire county council has a larger increase than the district council.

Photo of Alan Beith Alan Beith Chair, Justice Committee

On that very point, the three district councils in my constituency are at almost 1 per cent., going down to 0.5 per cent. They are very small authorities, and with a settlement as tight as this, it is extremely hard for them to make the savings necessary merely to keep pace with inflation. Does the Minister understand that problem?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I do indeed. A little later I shall talk about the importance of savings and efficiencies. I recognise that things will be different, and harder, for some councils than for others. Nevertheless, I think that the right hon. Gentleman would agree that there are pressures, particularly on social care budgets, and that we should recognise them. That is what we are doing in this settlement, to help councils provide the services that older people, in particular, need in the next three years.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

The Minister says that he is confident about the fairness of his formula. How does he reconcile that with the announcement only last week, by his colleagues at the Department for Children, Schools and Families, that the formula for the dedicated school grant needs to be completely rewritten?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Even by his standards, the hon. Gentleman has grossly caricatured and misrepresented the Department's announcement. If the hon. Gentleman is concerned about rural schools, he should know that we have always been clear in our guidance to local authorities with responsibility for local schools and about the additional support that we give authorities that have to support rural schools. Some such authorities will be smaller, by and large, than other authorities.

If the hon. Gentleman wants me to check his point, I shall do so. However, I think that he will find that the additional money from the Department for Children, Schools and Families specifically to help areas under pressure to support local schools is £188 million this year.

Photo of Frank Field Frank Field Labour, Birkenhead

I have had to express disappointment with eight of the Government's previous settlements as they affected Wirral. Indeed, I so expected that record to continue that I did not thank the Minister when he made the announcement. I should like to put on the record that at least one authority represented here is grateful to the Government for implementing more fully the formula by which they said that they would distribute the money. That formula was based on fairness.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I appreciate my right hon. Friend's remarks—although I am a little taken aback by them. I hope that this year, unlike previous years, he will not have cause to revise his observations. At the centre of the settlement is the implementation of changes to the social services formulae that were decided in 2005, introduced in 2006 and double-damped for the following two years. We are moving to a situation whereby we allow those formulae, which represent our best assessments of relative needs, to reflect the settlements that we give. That is a fairer settlement, based on the principle of the analysis that we have carried out. Let me say to hon. Members on both sides of the House that although this is clearly the right thing to do, the general system of floors damping means that it will take not just this spending review but probably the next as well, before the formula is fully unwound. In that way, we can avoid the extreme changes and volatility that characterised the finance system before this Government introduced the system of floors.

Photo of David Kidney David Kidney PPS (Rt Hon Rosie Winterton, Minister of State), Department for Transport

It is true that the stability provided by a three-year settlement is welcome in Staffordshire. However, despite my best promptings Staffordshire has not responded positively to the White Paper about unitary authorities or enhanced two-tier working, and this year the shire districts, notably Staffordshire borough council, have very poor settlements. Does any part of the calculation of the settlements suggest that areas with two-tier local government should be encouraged to move to unitary authorities?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The short answer is no. The slightly longer answer is that I am reluctant to get tempted into the territory of local government reorganisation, because this is a finance settlement debate. [ Interruption. ] I am glad that my hon. Friend Mrs. Dunwoody calls from a sedentary position, "That's very wise."

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

The Minister mentioned pressures. Cambridge city council is another example of a district council with increases of 1 per cent. and then 0.5 per cent.—well below inflation—and one of the pressures on it is caused by the Government: the concessionary fares scheme. That is a good scheme—but because Cambridge is an urban area in the middle of rural areas, the Government are offering £600,000 for a scheme that is costing it more than £2 million. On a net budget of only about £20 million, that is an enormous charge.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The settlement that I announced on 6 December included £212 million extra from central Government to support the additional right to national free bus travel that people will have, which is of value to perhaps more than 11 million elderly and disabled people. The funding that continues to support the existing concessionary travel will remain, and will continue to be paid through the rate support grant, so this is additional funding just to cover the extra required to fund the new entitlement in April. Clearly, none of us quite knows what the impact of that will be, but the travel figures suggest that at present only 4 per cent. of people's bus journeys go beyond the county boundary. The cost of the additional journeys that we look to fund is about £1, so the hon. Gentleman could use that amount as a proxy for each additional journey.

The hon. Gentleman has the figures and I do not, but if—through a specific grant to allocate this extra funding, which was what the LGA urged upon us—his authority has indeed been allocated £600,000 next year for the new national travel entitlement, that is the equivalent of about 600,000 journeys from Cambridge. Unusually from the point of the view of the Treasury and the Government, all the assumptions that we built into the aggregate of £212 million extra for next year err on the side of generosity—but we will have to see how it works in practice. The overall provision that we are making for people's additional responsibilities and rights is generous; even in his own local case, the hon. Gentleman would have to recognise that there would need to be a lot of additional journeys over and above those made and funded at present for it to be insufficient.

Photo of David Burrowes David Burrowes Shadow Minister (Justice)

How can this be a settlement for Enfield based on the principles of stability and fairness, when on the one hand the Government give a 4.5 per cent. grant increase, which appears generous compared with the rest of London, but on the other hand they take away £5 million in clawback through the dampening effect? That is the equivalent of the adult social services bill that the Treasury had previously determined was needed. How can the Minister justify that, and how can he look council tax payers squarely in the face and say, as it does on his press release, that we can make a £60 reduction in their council tax bills?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Quite easily. The hon. Gentleman cites his constituency of Enfield. I have the figures for his authority here: a 4.5 per cent. increase in the core grant next year and 3.4 per cent. the following year, on top of an increase next year for all grants of more than £18.5 million. I hope that he will put pressure on his authority and say that he expects it, as I do and as do residents in Enfield, to make the same 3 per cent. efficiency savings next year as we expect in the rest of the public sector. Then it will have not only an extra £18.5 million for services next year but another £6.5 million on top of that—money that it can use to improve services or to keep council tax pressures down.

Photo of Lyn Brown Lyn Brown PPS (Rt Hon John Denham, Secretary of State), Department for Innovation, Universities and Skills

I welcome the continued increases of some 45 per cent. in local government finance by 2011. That is a stark contrast with the record of the Conservatives, who made real cuts in budgets of some 7 per cent.; as a local councillor during that time, I know just how difficult those days were. As I am not one for complacency, however, the Minister will understand if I press the case once again for Newham to be classed as an inner-London not an outer-London borough, because it has inner-London needs that are not yet reflected by its area cost adjustment allocation.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

My hon. Friend hits the mark in two respects. First, Newham will get a substantial increase in its overall grant from Government next year—more than £25 million. That gives the lie to the idea that this settlement works systematically against the interests of all London authorities. Secondly, she is right that there are problems with the area cost adjustment as a mechanism. She argued the case very hard for Newham to be part of a new arrangement. The fact is that we need to take a much more widespread look at how the ACA works, not only in London, and we will do that once this final settlement is passed by the House, as I hope it will be.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

Before the Minister departs from the subject of London authorities, will he, first, take on board the fact that Newham has the highest and best settlement of any London borough, whereas in the first year 29 of 33 are on the floor? Secondly, if he wishes to assist London boroughs, will he respond to the representations that have been made to include short-term migration figures in the settlement, which otherwise severely disadvantages boroughs such as that of my hon. Friend Mr. Burrowes?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

First, the hon. Gentleman is wrong about Newham having the highest formula grant settlement of all local authorities in London; in fact, Barking and Dagenham has. Secondly, I share the concerns of many authorities about how good our population statistics are. They are the best and the latest that we can use, but there are clearly ways in which we can improve them to reflect general migration as well as general population changes. I will come to that subject in a moment, which I hope the hon. Gentleman will welcome.

Photo of Adrian Bailey Adrian Bailey PPS (Rt Hon Bob Ainsworth, Minister of State), Ministry of Defence

May I further compound my hon. Friend's earlier astonishment by saying that my local authority, Sandwell, is extremely grateful for the extra that it has received? Historically, it has not had the sort of settlement commensurate with its levels of need. However, one puzzling element of the settlement is the difference between the provisional and the final settlement. Sandwell was informed that it had lost £300,000 as a result of the redistribution of the funding mechanism for family law fees. Sandwell is incurring £400,000 in family law fees, and is somewhat mystified as to why it has lost out on that particular distribution. I would be grateful if the Minister would explain that.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I am aware of my hon. Friend's point. It was put to me by a number of local authorities that I dealt with during the consultation, and also by the Local Government Association. The money in the settlement is intended to cover the full cost of family law settlements as a result of a change in approach by the Ministry of Justice. What we had not done, but will do—I shall confirm this—is reflect that situation in the baseline figures that we use to calculate the floor. I think that that may help my hon. Friend and his authority of Sandwell.

Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

The Minister was kind enough to meet the leader of Southwark council, the leader of its opposition group, myself and others. Will he explain how the people of Southwark—it is a social services authority, so could be classified as a unitary authority in that sense—will get increases of only 2 per cent., 1.75 per cent. and 1.5 per cent.? Clearly, they will lose about 2.2 per cent. in real terms during the coming year—about £5 million. How can that be generous to social services, on which there is huge pressure, and how does it reflect the huge migration in a borough such as Southwark, where there is a population turnover of up to 25 per cent. a year?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I did indeed meet the hon. Gentleman and representatives from the offices of my two colleagues who serve as members in his local borough area. I was impressed by the way in which he put the case, and the way in which the leader of the council and its Labour group jointly put their case. The short answer is that his authority benefits from the protection of the floor system. Secondly, his authority will have an interest, as we discussed, in ways in which we can increasingly improve the population and migration statistics at our disposal for making distribution decisions in the future.

The third area, which the hon. Gentleman did not mention, but which we discussed in detail, was the concern the council has to continue progress in regenerating some of the areas where a lot still needs to be done, and to continue the programme started by the council when it was Labour led, which continues now that it is controlled by the Liberal Democrats.

Photo of David Drew David Drew Labour, Stroud

My hon. Friend knows as well as anyone in this House that we in Gloucestershire are still recovering from the impact of the floods, and we are grateful for some of the help that the Government have given us. However, in an answer to a written question from Mr. Clifton-Brown published in Hansard on Friday, in which he asked about particular flood resilience help, my hon. Friend said, to put it in a nutshell, that money could be found from within existing resources. Does he accept that there are problems ongoing in the county, and will he look for ways in which specific grant aid might be given so that we can deal with the aftermath of what, in one way or another, has been a pretty horrendous year? What does he have to say about that?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Resilience, to use the jargon, is a question of how homes and areas can be better protected against flooding in the future. It is increasingly a feature of the way in which we wish to see the planning system used where there may be a risk of flooding. With regard to housing or other development, resilience is principally a matter of the investment that may be available for the sort of defences that can protect areas and homes. My hon. Friend will know, because he has pressed his case equally hard with Ministers in the Department for Environment, Food and Rural Affairs, that we are set to increase investment in flood defences still further over the next three years, having doubled it already. That programme of work will bring a good deal of benefit in its acceleration of some important and necessary schemes.

In this local government settlement, our concern is to reflect the circumstances and service circumstances of all local authorities. That is why the additional help we put in place for Gloucestershire and other areas since the summer floods has been paid alongside the funding system, but separately. That is a better and more flexible way of dealing with the matter for the future.

Photo of Rosie Cooper Rosie Cooper PPS (Mr Ben Bradshaw, Minister of State), Department of Health

While I appreciate that the Government will have increased funding to local authorities by 45 per cent. by 2011, and that the Tories made a real-terms cut in such funding in the four years leading up to 1997, I am sure that I am not the only one who tires of Tory-controlled councils continually complaining about Government funding while taking the credit for Government-funded initiatives. Does the Minister agree that councils such as my own, the Tory-controlled West Lancashire district council, instead of wasting time and resources on doing things such as building a new town hall in Ormskirk, ought to get their priorities right and invest their Government cash in front-line services? The council need to begin with the cemetery, which we badly need.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

To be fair to my hon. Friend's council, I cannot judge whether its proposals for new civic buildings are the right thing for the town. However, I can tell the council—she may wish to say this to it herself—that if it takes the steps that we support, and which we expect it to take, to do what it does more efficiently, to cut out waste and to do things in new ways, it will free up significant extra resources next year and each year during the spending review period, which it can then invest in the services that my hon. Friend rightly wants to see.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody Labour, Crewe and Nantwich

My hon. Friend has made great play of the need for transparency, openness and efficiency, and suggested to all my hon. Friends that, although they are faced with real problems, only a certain amount of administration is required to ensure that all will be well. If he has such total confidence in his formulae and the suggestions of his Department, why did he refuse a freedom of information request to reveal straightforward figures on which decisions for the county of Cheshire have been based? Surely that does not sit too comfortably with what he has been telling us about the need for openness.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The simple answer to my hon. Friend is that the matter concerned advice to Ministers and by tradition and convention, such advice does not fall within the remit of such requests. I have no problems with that. We will have the opportunity to debate the Government's proposals—I am sure that she will be first to speak in that debate and the first to intervene on me—and an order that seeks to restructure local government in Cheshire, a subject that she feels strongly about and has pursued closely.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I shall give way one more time and then I will try to get off the first page of my notes.

Photo of Nick Hurd Nick Hurd Opposition Whip (Commons)

I am grateful to the Minister for giving way; he has been extremely generous in taking interventions.

The Building Schools for the Future programme is a core Government programme. Hillingdon council tells me that as a direct consequence of its grant, £15 million of capital spend it would like to deploy to support the programme is at risk because the revenue grant has taken them through the floor. An element of borrowing that was supported is now unsupported. Is that joined-up government, and what guidance would the Minister give to authorities such as Hillingdon that are in that predicament?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

It is joined-up government. The hon. Gentleman has received an inadequate briefing from Hillingdon council. I shall write to him to explain in some detail, but the fact is that where supported borrowing is awarded by central Government to local government, the revenue costs to support that borrowing are built into the settlement, as they were this year and as they have been before. That will mean that as part of the formula grant allocation the hon. Gentleman's council will have the amount of revenue to support the borrowing that it has been granted. It will have that even before the amount that it gets each year is increased to bring it up to the floor. The idea that authorities that are below the floor—the hon. Gentleman argues this for his local authority—are penalised and unable to carry out supported borrowing is entirely a misunderstanding of the system. If it helps him and his council to see the picture more clearly, I am more than happy to write to him in detail to set out what I have explained more clearly.

Formally, we are debating the core formula grant distribution for 2008-09 that covers the totals of redistributed business rates and the revenue support grant, the final details of which I laid before the House on 24 January. The House will have the opportunity to debate the formula grant for 2009-10 and 2010-11 as usual each year. However, let me make it clear that the policy on three-year settlements means that I am unlikely to change the distribution that I have already proposed and published, except in entirely exceptional circumstances.

This is a tight settlement, but public finances are limited for central and local government. Unlike six other departments, which have seen a reduction in funding over the spending period, local government has seen an average 1 per cent. real-terms rise. My distribution decisions mean that every council in every region will have an increase in core grant in each year over the three-year period. So, the settlement is tight, but it is also fair and affordable.

There will be a rise of almost £1 billion in the core grant for councils next year, but if they make the same 3 per cent. efficiency savings that we expect of other parts of the public sector they will have another £1.5 billion available to improve services and to keep council tax pressures down next year. I hope that that approach has the support of hon. Members on both sides of the House and that all hon. Members will ask their authorities what they are doing to realise those savings.

Central Government can and will help local government to cut waste and to do things differently and better. We are therefore investing more than £380 million over the next three years for council improvement and efficiency, including £185 million for the local government-led regional partnerships. However, councils must look for such improvement and efficiency not because Ministers say so or because it benefits the Government, but because it frees up cash for councils and is therefore directly in the interests of local services and local people.

I want to equip local residents to challenge their council on whether it is running more efficiently, as they have a right to expect. From 2009 information on waste and better working will be set out with council tax bills, so that local people can see what is happening in their council's search for greater efficiency. I will consult on that later this year.

In framing our spending plans, we have worked closely with local government. We are delivering the important reforms for which it rightly argued. Local government pressed for greater certainty and so we made the first ever three-year settlement. Local government asked for greater flexibility and so we will move £5.5 billion into grants with no restrictions on spending. Local government wanted less red tape and so we radically streamlined the targets system from 1,200 targets for some councils to about 200 national indicators for all. Local government analysed the funding pressures with us and so we covered them in the settlement and gave the biggest rises to councils with social care and waste disposal responsibilities. Finally, local government made the case for more financial freedoms and so we will give councils new powers for business rate supplements, the community infrastructure levy and transport charges alongside recent borrowing and trading powers.

Following my consultation, I can confirm my proposed grant distribution in all major respects. I have decided to accept representations from the LGA and others, as my hon. Friend Mr. Bailey urged me to, and have adjusted the calculation of grant increases for the purposes of the floor to reflect the transfer to local authorities of full funding for family law cases, a matter on which the Ministry of Justice announced a consultation on 19 December. That adjustment does not affect the amount of grant available in 2008-09, which already covers that spending pressure. However, it ensures that the floor increase is calculated on a like-for-like basis that includes the funding change. I also made corrections to the data used where it was justified. In other respects, the grant distribution is as I proposed on 6 December.

In particular, I can confirm that we will implement fully the relative needs formulae for social services, which were decided in 2005 and introduced in 2006 but have been damped over the past couple of years. We will make the system fairer by increasing by 2 per cent. each the size of the relative needs and relative resource blocs. We will set the grant floors to give all authorities guaranteed minimum increases over the next three years at the same levels as I announced on 6 December. As in previous years, the floors will be paid for within each group by scaling back the grant increase above the floor.

Let me deal briefly with some of the other points that were raised in the consultation and that have been incorporated in associated announcements. Local authorities and hon. Members have raised the issue of population and migration data with me in their representations during the consultation and in debate. As I have consistently made clear, councils welcome the three-year settlement. They welcome the certainty and the knowledge about what they will get over the next three years. To deliver a three-year settlement, we have to use the best and latest data that are available consistently across the country at the time we calculate the three-year settlement. We therefore use the most recent set of local population projections produced by the Office for National Statistics, which were produced on 27 September 2007.

I can confirm that we will put in place a cross-Government programme of work driven by senior officials from central Government and the LGA, and led by the national statistician. That will accelerate the work that has already begun to improve population statistics, including on a local level. The senior programme board will aim to meet for the first time this month. To support that programme of work a ministerial group, jointly chaired by me and the Minister for Borders and Immigration, will be set up, while the independent statistics board will ensure the quality of the statistics that are produced.

Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

It is a consolation that the work will be done as the Minister has announced, although it is not necessarily an answer. When does he expect and by when will he, as the chair of that group, require the work to be completed and implemented for the first time so that it can impact on settlements in the future?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The Office for National Statistics has set out a programme of improvements, which will be accelerated and amplified by the contribution that local government can make to the work. The hon. Gentleman and I have discussed the problem that faces us all. Local authorities often say that they have electoral registration data, GP registration data and national insurance registration data, but that they do not have sources of administrative data, such as those that I mentioned, that are consistent throughout the country and therefore form a suitable basis for the funding distribution decisions that local authorities wish to make. In the end, such data measure what they measure: they are not necessarily measures of population or migration but they can give us useful double-check and triangulation information. I hope that that can happen without undue delay, especially if the work is accelerated in the way in which my hon. Friend the Minister for Borders and Immigration and I intend. However, the data must have the statistical reliability that we all need.

Photo of David Burrowes David Burrowes Shadow Minister (Justice)

Will the search for more accurate population statistics mean taking full account of the impact of short-term migration, especially on councils such as Enfield? Will that lead to an opportunity for making a case for exceptional circumstances and thus readjusting the three-year settlement figure?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

In all honesty, I cannot give the hon. Gentleman the sort of guarantee or assurance that he seeks. Surely he accepts that, first, we need to improve the analysis and data that we have on population and migration movements. Our population is changing rapidly and becoming more mobile, and our sources of data struggle to keep up with that. We use the best and the latest that we have, but we clearly need to improve. Making a case for saying that the nature of a specific population imposes additional costs on particular public services and that that needs to be recognised in the distribution of funding support from central Government is a step beyond the data step. The decisions that I have been taking as part of the current settlement follow. If we can find better data and formulae, how and whether they are used becomes a question of policy.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

What my hon. Friend has just told the House genuinely advances the debate and shows a way out of an intractable problem. However, he knows that his grant data are in three-year slabs, with no system of retrospective adjustment. Can he offer at least the possibility of a specific grant in future years that will correct matters for the vexed issue of population?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Again, I cannot give my hon. Friend the specific assurance that he seeks. However, the Government make specific grants available alongside the mainstream settlement. As a member of the Treasury Committee, he knows better than anyone that it is important to improve matters, not only for the funding decisions that Ministers—not just me but those in other Departments—make, but because we must have better population data on which to base the 2011 census if we want to avoid some of the worries and weaknesses of the 2001 census.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

To follow the question that Mr. Burrowes asked, will the Minister confirm whether the group will specifically consider the impact of short-term migrants? Although I welcome the review, we knew that the EU would expand—that has caused many short-term increases in population—so why was it not established in anticipation of the expansion?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Short-term migration poses a genuine challenge to us all. The increasingly obvious phenomenon poses several questions. First, many short-term migrants are light users of local government services and strong contributors to local economies and the local tax base. Secondly, it is fair to say that five, let alone 10 years ago, the sort of population change and mobility that we are currently experiencing would have been difficult to predict.

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

The Minister's point about migrants' burden on local government services being light may be true of the upper tier of services, such as social services and education, but it is not true of the lower tier, which consists of simple things such as rubbish collection. Does not that show how wrong it is to assume that the only movement of money should be from districts to counties?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I have explained the reason for the main elements of the distribution. On migration in district councils in two-tier areas, the purpose of giving the Local Government Association a place at the heart of the work is to ensure that—as the LGA does—all council interests are represented, irrespective of type and political control. Surely that is right.

Photo of George Mudie George Mudie Labour, Leeds East

Given that 0.04 per cent. persuaded the Minister to take Leeds out of the working neighbourhoods fund, thus removing £42 million from Leeds in the next three years, and leaving Leeds as the only big city in the country without money from the fund, is he prepared to reconsider that statistical blip? Otherwise, the inner city of Leeds could suffer the consequences.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I know Leeds well, although not as well as my hon. Friend. It has been successful in many areas in the past 10 years. We have carefully considered the methodology and the figures that we use. However, if one sets a threshold and criteria, some authorities will meet the criteria and others will not. Some authorities will come close to fulfilling the criteria and others will not. My hon. Friend's authority is one of 22, including mine, that have been eligible for money from the previous neighbourhood renewal fund but that are not eligible for payments from the working neighbourhoods fund. However, he knows that, to ensure that there is no cliff edge in funding, we will provide transitional funding of 60 per cent. for next year and 40 per cent. the following year. He should also bear it in mind that, by removing the strings that are attached to much funding for local councils, there is scope for them to make decisions about what they want to do to regenerate, improve the economy and make progress in areas such as some of those in his constituency.

Today, I have published on the Department's website the confirmed allocations for next year from the working neighbourhoods fund. Twenty-two authorities will get transitional rather than full funding, and 65 authorities will get the full funding. In the next three years, our support, drawn for the first time from both the disadvantaged areas grant of the Department for Work and Pensions and our regeneration funding, will total approximately £1.5 billion, designed to concentrate our support on areas where deprivation continues to be most deep seated and difficult to dislodge.

Also today, I have published on the Department's website the results of the refreshed consultation on the supporting people distribution formula, which closed last month. Following consideration of the responses, I am today confirming final allocations for next year.

I am conscious that other hon. Members want to speak, so I turn to the local authority business growth incentive. Earlier this year, in the light of new legal challenges, I announced that the Department intended to reconsider all aspects of the approach used to distribute the resources available for year 3 of the scheme. We have also looked again at payments that were made previously for years 1 and 2. I have today laid a written ministerial statement confirming that, in order to avoid the additional delay and uncertainty likely to be caused by further legal challenge, we intend to reward authorities on the basis of a wider set of rateable value change codes than was used previously, in years 1 and 2.

The statement also discusses year 3 payments. It confirms our determination to achieve the policy aim of providing incentives to encourage business growth for local authorities. However, the inclination of a small number of authorities to pursue legal action has created greater complexity, uncertainty and delay. Given that, I consider that it will be necessary to retain a portion of year 3 funding, as a contingency in this final year of the current scheme. I will make further announcements providing more detail on payments for all three years as soon as possible.

Finally on announcements, following the comprehensive spending review in October last year, we announced that a third round of local area agreement reward grant would be available. I can now confirm that the total amount available will be at least £340 million, plus an additional £50 million available in reward grant for more deprived areas, via the working neighbourhoods fund.

In conclusion, the settlement does what it says on the tin. It builds on 10 years of continued real-terms investment; it covers three years; it is tight, fair and affordable; and it reflects many of the arguments that were put to us by local government. It is now for local government to deliver.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party 8:22 pm, 4th February 2008

I thank the Minister for the usual courtesy that he showed in making the statement.

I welcome one or two aspects of the statement. The first is the straight face with which the Minister managed to deliver it, which is always welcome. Secondly, I welcome his announcement that the Government are going to look at migration figures. As he will know, hon. Members from all parts of the House have repeatedly raised the issue in the Chamber, but have been repeatedly ignored. I therefore hope that his arrival in the Department will presage a genuine change of heart. I hope, too, that when he responds to this debate he will say that not only will the process be internal, but that senior representatives of local government will be involved in all the discussions and working parties from the beginning, because local government has thus far done far more work on the issue than any Government agency.

I welcome, too, the optimistic way the Minister dealt with the Government's retreat in the LABGI fiasco. The simple truth is that the Government have had to back down because legal challenge by local authorities in the courts demonstrated that they had got it wrong. On the basis of welcoming the sinner who repenteth, I take the Minister's comments in the spirit in which they were meant. We hope to have a better scheme in future.

I could not help but smile at the way the Minister presented the settlement as freeing up local government from the dead hand of ring-fencing, when ring-fencing as a percentage of expenditure has increased from one fifth to two thirds under this Government. The Minister's imitation of the grand old Duke of York is therefore immensely welcome.

Finally, I thought that the Minister looked extremely cheerful on the pages of Local Government Chronicle Plus, in the image of him smiling, standing before a weather map of the grant settlement. Mr. Clelland raised a concern previously, so I am sorry that he is not with us, because a glance at that photograph would have shown a black cloud over Gateshead, a lot of black clouds over London—that will come as no surprise—and cheerful sunshine somewhere in the direction of Rotherham. I am sure that that is pure coincidence—or, as the right hon. Lady, the Minister of State, Department for Transport is here, perhaps there was a good result at Doncaster races.

Having said that and having welcomed the fact that there is a three-year settlement, which gives certainty—that is one thing that local government has wanted—I remind the Minister that when I was practising as a barrister, I would sometimes sit in the cells with clients who would say, "What I want most of all, Mr. Neill, is to know where I stand." The Minister has ensured that local government knows that; indeed, he has given "three years' hard labour" a whole new meaning.

Now that we have heard all the warm words about greater consultation, I hope that it will be carried forward, because the other serious point raised by Government Members—this is about migration, but the concern runs through the piece—is that if we are to have three-year settlements, to which there are benefits, it is all the more important that the methodology is accurate, robust and transparent. However, huge concerns remain on all those fronts.

The Minister brushed over another significant anniversary this year that has a consequence on the settlement. This year, after 10 years of a Labour Government, is the year that statistics will officially confirm that council tax has doubled, with band D now at £1,374. Now I understand why the Secretary of State is not with us to support the Minister in making the announcement—there is a rumour abroad that she is away tonight modelling for the image that will replace Britannia on the back of the 50p piece, in celebration of Labour's achievement in doubling council tax.

To move on to some elements of the—

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I do not understand why the hon. Gentleman uses band D council tax figures, when fewer than one in six households in the country are in band D.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I simply followed the practice that his Department has always used, including its press office, and which every independent expert has used. If the Minister wants to use the figures for bands A to C, as the hon. Member for Tyne Bridge did, which comprise 91 per cent., I should be quite happy to deal with that, too.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Let me give the hon. Gentleman some other figures then. If he takes the average council tax rises across all dwellings, he will find that the rises this year are less under Labour authorities than under Conservative authorities, that council tax under Labour authorities is lower than under Conservative authorities and that both are lower than under Liberal Democrat authorities.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

The Minister makes an interesting point, but it is a shame that he did not mention certain other figures, which suggest that families will be spending an extra £53 on top of their council tax, thanks to this Government, and which demonstrate that, when considered across all tiers of local authority, Conservative authorities consistently come in at some £50 a year less than Labour authorities. The Government's attempt at obfuscation hides the real concern that underlies this settlement.

The settlement does not address the key issues. We have debated the impact of migration at some length—it is a serious issue—but we have not dealt with the persistent transfer of financial burden and risk that has occurred under this Government. The settlement compounds a move that has taken place right across the period of this Administration to increase the financial risk placed on the local council tax payer and to reduce the exposure of central Government. That is illustrated by the way in which much of external aggregate financing is a recycling of the business rate. The amount of support for revenue support from general taxation is again reduced by the settlement, by a further 29 per cent. That is an enormous shift, and the burden is increasingly being placed on local communities while being taken off the balance sheet of whichever Macavity happens to be in charge of the Treasury. That is all part of the hidden smoke and mirrors with which the Government operate.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

The hon. Gentleman will be pleased to know that I am not going to claim bragging rights as a result of what happened between West Ham United and Wigan on Saturday. Will he tell the House, however, whether he is making a commitment on behalf of a future Conservative Government that shifts of money to local level would not happen, and that the Conservatives would give a lot more money to local authorities from central Government?

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I congratulate the hon. Gentleman on Saturday's result, because I would not want to see Wigan go down. If that prevents West Ham from getting into Europe, however, we will have to have a conversation outside.

The key test that we want to apply is to determine whether a system is fair, transparent and open. However, the amount of ring-fencing that exists at the moment militates against such a system. Unfortunately, the methodology that underpins the settlement does nothing to reassure anyone about fairness or transparency.

Photo of Rob Wilson Rob Wilson Shadow Minister (Education)

Does my hon. Friend agree that fair funding is one of the main unresolved issues this evening? Let me give him an example. Reading and Wokingham authorities are next door to each other, yet Wokingham is the second-worst funded unitary authority in the country. It pays 80p out of every pound towards council tax, whereas Reading pays only about 50p. That is having a massive impact, particularly on social services. In Woodley, in my constituency, that is a major concern. This is all to do with the unfairness of funding, even within a local area.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Before the hon. Gentleman responds, may I just say that these are very important and complex matters, but that long interventions—and, perhaps, long responses— mean that time is now moving on? A large number of people are still seeking to catch my eye.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

Thank you, Mr. Deputy Speaker.

My hon. Friend's point brings me to an issue that I was going to address anyway, namely, the question of getting a transparent methodology. Mr. Turner also referred to this. What we have now is not transparent. Some of us have spent years grappling with damping and double-damping. Before that, we had various other kinds of massaging, all of which is virtually incomprehensible to the average council tax payer. The present situation is coming rather close to a local government version of the Schleswig-Holstein question, and with similar consequences. Of the three people who understand it, one is dead, one is mad and perhaps the other is sitting in the officials' box; I do not know.

The reality has a similar impact in other places. Comparisons that ought to be readily achievable on a like-for-like basis are not. We have just heard of an example in Berkshire. The Department has made it clear that emphasis is being placed on the relative needs and relative resources formula this year, and the Minister has said that particular advantage was given under the formula to authorities responsible for social services and waste disposal. Against that background, however, 29 out of the 33 London boroughs—all of which have such responsibilities—now find themselves on the floor. Tower Hamlets, Hackney, Lambeth and Southwark all now find themselves receiving about three times less support than that going to Rotherham, and about five times less than that going to Blackburn.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I shall give way in a few moments.

I do not believe that anyone would say that that fits any set of objective analyses, particularly in respect of the treatment of London, which has some of the most deprived local authority areas in the country. That does not seem consistent with an open, transparent and rational system.

Photo of Sharon Hodgson Sharon Hodgson Labour, Gateshead East and Washington West

I am grateful to the hon. Gentleman for giving way. He mentioned the complexity of local government finance, including damping and double-damping. People who are less accomplished than hon. Members participating in this debate might not understand the finer points, but what my constituents in Gateshead and Sunderland and I understand is that we now have a better and fairer settlement in the constituency than we had before.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I am not sure whether the hon. Lady heard the observations of the hon. Member for Tyne Bridge, who spoke earlier and said exactly the reverse. Still, there we are, I suppose that that is the level of consistency that we should expect from Labour Members.

Photo of Sharon Hodgson Sharon Hodgson Labour, Gateshead East and Washington West

To clarify, I understand that my hon. Friend who spoke earlier represents Tyne Bridge. That constituency includes only a part of Gateshead, with the remainder being other parts of Gateshead and parts of Newcastle and Sunderland.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

It seems that it is damper one side of the river than the other. All I can say to the hon. Lady is that when I was a local councillor and was chairman of the social services committee in the 1980s, I was not under pressure to work out how I could fund the meals on wheels service; and when I was chair of an environmental services committee, I was not under pressure to increase charges to provide key services such as bin collection. Perhaps we can talk only on the basis of our experience, and it is increasingly the experience of many local authorities that this is a bad settlement that fetters them. Where authorities have been efficient, it seems that they have not just cut the fat, but had to get right down to the bone. That is the reality of this settlement.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

The hon. Gentleman mentioned the Minister's comments about increases to social services and waste authorities, but is it not the case that much of the increase in grant to cover waste will simply be recycled straight back up to central Government through landfill taxes?

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

The hon. Lady makes a valid point and it is compounded by the Department's announcement earlier this year that it will no longer commit to a hypothecation back to local government of the revenue raised through that system. The hon. Lady is perfectly right; and the Government are making it worse. It seems to us that that is hardly a localising settlement. There is a lack of transparency in the methodology.

Secondly, there is a failure to grasp key issues such as changing demographics. Pressures on adult social care, and increasingly on children and young people, were rehearsed last year by my hon. Friend Mr. Pickles—and they are getting worse. As a consequence of medical advances, more people are living longer, which often requires more complex interventions. We are also aware of the need for much earlier intervention to help young people with particular difficulties. All those raise significant burdens for the responsible authorities, but they are not adequately recognised in the settlement. What we have seen, then, is failure to tackle the demographic time bomb in respect of adult care and young people, failure to make the system more transparent and, indeed, a shifting of ground on some key issues.

All that in the present context inevitably gives rise to a suspicion, particularly when the methodology lacks transparency, that indices of deprivation can be changed or altered conveniently so that certain parts of the country suddenly become more deprived than they were, which does not fit with people's experience across the piece. If the Government really want the public to trust the system of local government finance, which I do not think they do at the moment, they would have to put it beyond suspicion that the system can be tinkered with to advantage one's friends and disadvantage one's opponents. That is a serious missed opportunity that should have been examined further when we moved towards three-year settlements. It will obviously be down to others to sort that out.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I suspect that some reference to some part of west London is about to be made.

Photo of Andrew Slaughter Andrew Slaughter PPS (Lord Jones of Birmingham Kt, Minister of State), Department for Business, Enterprise & Regulatory Reform, PPS (Rt Hon Lord Malloch-Brown KCMG, Minister of State), Foreign & Commonwealth Office, PPS (Lord Jones of Birmingham Kt, Minister of State), Foreign & Commonwealth Office

The hon. Gentleman might enjoy such a reference or he might be rather embarrassed by it, but he will have to wait for a while.

All I have heard from the hon. Gentleman is a lot of waffle, preceded by an anecdote about serving meals on wheels in the 1980s. Will he address the central statistical point, which is that in 10 years of Labour Government there has been a real-terms funding increase of almost 40 per cent., whereas in the last term of the Tory Government there was a 7 per cent. real-terms cut? Is that not worth rather more than his anecdotes and waffle?

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I am grateful to the hon. Gentleman for not mentioning Hammersmith, but I must tell him that the statistic that hits most people, including those who voted for him, is that council tax has doubled under Labour. That is probably why the voters evicted the Labour council in his constituency so promptly when they last had a chance to do so, and why he will be next.

Photo of Andrew Slaughter Andrew Slaughter PPS (Lord Jones of Birmingham Kt, Minister of State), Department for Business, Enterprise & Regulatory Reform, PPS (Rt Hon Lord Malloch-Brown KCMG, Minister of State), Foreign & Commonwealth Office, PPS (Lord Jones of Birmingham Kt, Minister of State), Foreign & Commonwealth Office

I can give the figures from the top of my head. During the first nine years of Labour Government, Hammersmith and Fulham council, controlled by Labour, increased its council tax by an average of 3 per cent. a year. That compared with 9 per cent. in the country as a whole, about the same as the retail prices index. As the hon. Gentleman wants to talk about Hammersmith and Fulham council, he may wish to explain why the budget that it is agreeing tonight makes £36 million-worth of cuts.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I am sure that the hon. Gentleman will wish to applaud the steps taken by the current Conservative council—which has been able to reduce council tax by 3 per cent. in fulfilment of its election commitment—and to condemn his party's Government for having increased the floors by what is, by any measure, less than the rate of inflation, thereby imposing a real-terms cut in support for social care and waste services in authorities such as his own. He cannot have it both ways.

My third and final point is this. We must view the settlement in the context of the broader picture of the burdens placed on hard-working families throughout the United Kingdom. All the surveys regularly show that council tax figures are among the top three or four issues identified by people who are concerned about the cost of living. As we know, disposable incomes are being squeezed more and more under this Government. Data produced today demonstrate that they have been reduced by some £1,300 over the last four years.

If we take into account not just the household costs of mortgages and council tax, but the increasing number of charges being imposed for what were once core local government services—of which the Minister insists there should be more rather than less—we see yet more squeeze on people who, in most parts of the country, are hard-pressed already. The settlement does nothing to help that. It will not, I am sorry to say, assist hard-pressed local authorities; it will keep them in a straitjacket. More to the point, it will force householders and families throughout the country to fork out yet again, paying more and getting less. That will be the Government's epitaph, and whether it is written on the back of a 50p bit or on the back of their redundancy notice does not much matter.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office 8:42 pm, 4th February 2008

Let me begin by correcting something that I said in a point of order last Wednesday. I said that Mr. Wallace was paid by the Tote. That information was given to me and I used it in good faith, but I have since checked it and found it to be untrue. I therefore withdraw the remark.

I welcome the settlement. Obviously it is a difficult settlement, as we all knew it would be. As was pointed out by my hon. Friend Mr. Slaughter, in the past 10 years there has been a 40 per cent. real-terms increase in the amount given to local government, and clearly it is not possible for that to continue.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

I wonder whether the hon. Gentleman knows what the 45 per cent. real-terms increase turns into once the ring-fenced schools budget is removed from it.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

Whether it goes to schools or to the rest of local government, it is still a 45 per cent. increase from central Government for local government services. How it is divided up is neither here nor there.

The settlement puts the emphasis on ensuring that the local authorities with the greatest needs receive the most resources, and I hope my hon. Friend the Minister will ensure that that is continued in the next comprehensive spending round. The Local Government Association called for a three-year settlement which has been agreed to, and I think that all Members welcome that. It gives authorities stability, certainty and an opportunity to plan the services that they will provide over those three years.

Photo of David Heyes David Heyes Labour, Ashton-under-Lyne

I agree with my hon. Friend in welcoming the three-year settlement; it gives local authorities such as his in Wigan and mine in Oldham and Tameside the ability to plan in a way that has been absent for many years. Does he agree, however, that we still need to press for continued redistribution to the authorities that are most in need, such as his and mine?

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

Yes, I do. We should look at the distance from target—the difference between the amount of money a local authority should be getting in accordance with the formula and the amount it actually receives. Even though both of our authorities have received very generous settlements, over the three-year period my authority will still have had about £25 million less than the formula says it should have had. The settlement is much better than in previous years, but we are still significantly underfunded. That is why I say that the next comprehensive spending review must work towards payment in full according to the formula, so that we can make sure that that direction of travel is continued.

The Government have maintained the mechanism of floors, which I welcome even though my authority suffers from it, as the alternative would be much worse—not only for my authority but, possibly, for all local government. We should look back to what happened in Wigan in the 1990s: in one year, we suffered a loss—a cash reduction—in external support of some £15 million. That has not happened to any local authority in the past 10 years; not one of them has received one penny less in cash terms, let alone £15 million less. Therefore, I hope that Alistair Burt will give a commitment in his winding-up speech that a future Conservative Government would continue with a floors arrangement. I should add that that cash reduction took place in 1993-94 and we did not manage to receive the same amount of money as before until the first year of the Labour Government.

The formula is complex, as it is difficult to encapsulate in one formula all the different needs throughout the country; nevertheless, the Government and the Local Government Association negotiate on that formula, and the changes are worked in slowly in order to allow time to adjust. I strongly welcome the end to double damping. It is a tremendous achievement that the Minister has agreed to that—double damping was unsustainable and any phasing that was needed because of the changes to the personal and social services element of the formula could have been achieved by single damping.

The needs and resources element in the formula is also welcome. Because an extra 2 per cent. has been shifted into that element, authorities such as mine and that of my hon. Friend Mr. Clelland—which face difficulties and have reduced ability to raise money from their councils because of the number of houses in bands A to C—are better able to fund areas of need. That is extremely important when we also take into account the gearing effect that can arise in authorities with a low tax base.

It has been said—Robert Neill intimated as much—that this is somehow a London and the south versus the north and the midlands settlement, or an urban versus shire settlement, or a Tory versus Labour settlement. I do not believe that at all; it is none of those. It is a settlement that is about the haves versus the have-nots—and, quite properly, the have-nots have won. The London and the south versus the north argument is clearly wrong: Torbay has an 8.6 per cent. increase whereas Gateshead has a 2 per cent. increase, and Redbridge has a 5.2 per cent. increase whereas Liverpool's increase is 2 per cent. On urban areas versus the shires, Reading's increase is 2 per cent. whereas Lincolnshire's is 9.8 per cent., and South Tyneside's increase is 2 per cent. whereas Somerset's is 9 per cent. On Labour areas versus Conservative or Liberal Democrat areas, Labour Sunderland's increase is 2.9 per cent. whereas Conservative Rutland's is 12.7 per cent., Labour Salford's increase is 3.6 per cent. whereas Conservative Dorset's is 11.8 per cent., and Labour Wolverhampton's increase is 3 per cent., whereas Liberal Democrat Cornwall's is 9 per cent.

I am sure that any hon. Member in this Chamber could produce a different set of statistics. The point I am trying to make is that saying this is north versus south, Labour versus Tory or urban versus shire is not a sustainable argument. The only consistent thing is that authorities whose needs are greatest are getting the greatest sums. That is the only pattern proven valid by the statistics.

The movement on the needs and resources element is greatly to be welcomed, but it could be subverted if the floors were too high. That is why I was pleased when we reduced the floors to 2 per cent., 1.75 per cent. and 1.5 per cent respectively over the next three years. If we are to make the necessary changes and allow those resources to move to the authorities that need them at a rapid and sustainable pace, the floors need to be as low as possible. I hope that that approach will continue into the next comprehensive spending review round.

The change from the neighbourhood renewal fund to the working neighbourhoods fund is equally welcome, and I congratulate the Minister on it. One of the things that this Labour Government have shown over the past 10 years is that ensuring that people get into proper, decent, trained work is the best and most sustainable way to tackle, and make a big difference to, poverty and deprivation in this country. Changing the focus from the broader renewal fund to the working neighbourhoods fund, which will tackle worklessness in areas of severe deprivation, will have a huge impact on those local authorities. Building that into the Department for Work and Pensions and having a single fund will be a major step forward in tackling deprivation in our authorities.

I have always been opposed to capping, which was introduced by the previous Conservative Government. We toyed with getting rid of it, but we have had to go back to it for what are, in my view, slightly questionable reasons. Local authorities are answerable to their constituents, so we should not have capping. It should be up to that local—

Photo of Ben Wallace Ben Wallace Shadow Minister (Scotland)

I am sorry for intervening having just arrived, but I understand that the hon. Gentleman referred to me at the beginning of his speech, Mr. Deputy Speaker. Given that I was not present then, perhaps it might be in order if he were to repeat what he said.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

The hon. Gentleman will be able to read my comments in Hansard.

Photo of Ben Wallace Ben Wallace Shadow Minister (Scotland)

On a point of order, Mr. Deputy Speaker. I understand that it is the custom of the House for an hon. Member to notify another Member should they refer to that Member in a debate or at any time. Given that I have received no such notification, either by e-mail or in writing, from Mr. Turner following his scandalous accusations against me last week, surely it is in order that he repeat what he said in my absence.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Obviously, the behaviour of hon. Members is a matter for them. I would just say to Mr. Turner that in these circumstances it is normal for an hon. Member to advise another hon. Member if they are going to withdraw the kind of remarks that he made. Perhaps, on reflection, he might want to say a brief word about that. If not, the remarks are on record in Hansard and they have been withdrawn. Unless he feels it appropriate to say a word about them, I trust we shall move on.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

In view of your good offices and good words, Mr. Deputy Speaker, I say to Mr. Wallace that I was given the information in good faith and I used it in good faith. I did not have the time to check it, but I subsequently checked it and found it to be untrue. I have therefore withdrawn my remarks.

I have always opposed capping. It is right that the people who elect a local authority should be able to make choices about the level of services and the council tax that they want. Some local authorities have enjoyed overfunding for several years. In the past, they will have put that money either into reducing the council tax or into additional services. If we restrict the amount of money that they can raise through the council tax, we are saying that their only option is to reduce services. That is not the right approach, and services—especially those relied on by the poorest and most deprived—should not be cut because the Government have requested that the council tax should be reduced. I urge the Minister to review the situation and consider ways in which floors can be removed, so that local authorities can raise the council tax to preserve their services.

Photo of Richard Younger-Ross Richard Younger-Ross Shadow Minister, Culture, Media & Sport

The hon. Gentleman makes a good point about capping. Does he agree that the situation is even worse in areas where the overspend is not due to decisions by the local authority but to impositions by central Government, such as the concessionary bus pass scheme? In some areas, the scheme will cost more than the authorities are being allowed by the Government. In small authorities such as Teignbridge, that can have a significant impact on the council tax and on other services.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

The hon. Gentleman provides just one example of what can happen, and we could all give other examples of what will happen if council taxes are not increased to the level necessary to preserve services. As I have said, it is important to have the direct relationship between the electorate and the council, and between the services that the council provides and the amount that it charges. That should be the responsibility of the council, not at the behest of the Government. I hope that the Minister will review the situation and allow local authorities to charge above the 5 per cent. level that has been suggested.

The council tax system is a bad system. The bandings favour the rich and the failure to revalue locked in the growing inequities. It was designed to be unfair and it has become even more unfair as the basic band D council tax increases. The Lyons review proposed several good ideas and we should have a national debate on what kind of system we want for local government. The council tax is not sustainable in the longer term, so we need a system that is sustainable not for just 10 or 15 years, but for 30, 40 or even 50 years. We cannot just change the formula, because that will not solve the problem. We need a change in the system.

The settlement is tight, and we always knew that it would be, but it is fair. It gives those authorities with the greatest needs the resources that they need to address the difficulties that their communities face. I congratulate the Secretary of State and the Minister of State on producing a local government settlement that does that.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government 8:58 pm, 4th February 2008

It is a pleasure to follow Mr. Turner, especially given his closing remarks, which will chime with much of what I have to say. He opened his remarks by saying that he welcomed the settlement; the Liberal Democrats welcome the fact that it is a three-year settlement, but we do not welcome the settlement itself.

I looked back at last year's Hansard and the then Minister—now the Minister for the Environment—heralded that settlement as nothing short of "revolutionary", which speaks volumes about the limits of the Government's ambitions. If the Government had been truly ambitious, we would have had a lot more to welcome today—as the hon. Member for Wigan said.

Instead, we heard the familiar barrage of statistics, with claims and counter-claims about increases and cuts, although the Minister shows an impressive command of the statistics. One of the figures that sticks in my mind was mentioned by the hon. Members for Wigan and for Ealing, Acton and Shepherd's Bush (Mr. Slaughter): the 40 per cent. real-terms increase in local government funding over the past 10 years. However, neither Member took into account the fact that education is ring-fenced. If we take education funding out of the equation, there is still a real-terms increase of 14 per cent., but it pales into insignificance when compared with things such as health funding.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

Of course I do not oppose those increases. All I am saying is that if we are talking about trying to tackle the pressures on many services, such as adult social care, the headline figures fail to capture the fact that real-terms increases in local government funding have not been as good as they seem when it comes to their capacity to meet additional demands. That fact is clear, and I am not trying to have it both ways at all.

We can compare the local government funding figures with some equally well-known figures, to which Robert Neill referred: council tax has doubled over the past 10 years and will be more than doubled when the three-year settlement is taken into account. When we add to that the fact that take-up of council tax benefit is not 100 per cent., we can see that the pockets of many vulnerable people will be hit hard as a result of the settlement.

Today, and in the initial statement in December, the Minister described the settlement as tight but fair and affordable. Our concern is that it will be more than tight for many people; it will be unaffordable for people who are yet again experiencing above-inflation council tax increases.

The real disappointment is that there were huge opportunities for reform. Since the last settlement, the Lyons inquiry has reported to the Government and raised some valid issues, but they were kicked into touch by the Department. The proposals were not the most ambitious, but were simply suggestions about how to tackle some of the difficulties that people on the lowest incomes face in paying their council tax, recognising the fact that the tax consumes an ever-increasing proportion of their disposable income. Lyons proposed extra bands at the top and bottom of the scale, and the automation of the council tax benefit system to end the scandal that millions of pensioners who are entitled to the benefit do not claim it.

Those proposals for interim improvements were rejected; instead we are left with a complex and centralised system. Members on both sides of the House have talked about the complexity of the formula. They have pointed out that central control has been retained and that the threat of capping still hangs over the head of authorities that feel they simply do not have the resources to focus on what they consider their priorities.

Ring-fencing is still in place, although there has been some erosion. More than half the external income of local authorities is still based on ring-fenced grants. All the talk about damping and double damping, and the fact that it will roll into the three-year settlement, means that it has been difficult for many authorities to get to grips with what their situation really is, and it is extremely difficult for members of the public to understand what is going on.

My local authority in Cornwall has been awarded significant increases, but because they are near the ceiling they have been clawed back to meet the damping on the floor; increasing sums of money are being clawed back. If everything is supposed to be moving towards convergence I do not understand why those amounts are increasing.

The hon. Member for Bromley and Chislehurst pointed out that control and centralisation are being exercised at a time when the Government's contribution to local government funding is decreasing. More and more emphasis is being placed on business rates, and direct funding from central taxation is decreasing by 29 per cent. this year. No wonder we face such a difficult settlement. As a result, some areas will find it extremely difficult to cope with its impacts.

My concern is that the settlement leaves many local authorities with a lack of flexibility, especially in terms of dealing with the key issue of demographic change. We welcome the Minister's announcement of a cross-governmental programme of work on the issue with the Local Government Association and the national statistician. However, I am concerned because the opportunity to predict some of those changes has been missed. We have seen the expansion of the European Union, and perhaps it would have been better if the changes that resulted from it had been predicted.

I wonder whether the Minister will comment on how such things might relate to students. In my constituency, the town of Falmouth has experienced an 80 per cent. increase in the 18-to-24 demographic in the past three years. Clearly, that is very dramatic, and it is happening very quickly. So I very much hope that the cross-departmental review will consider issues such as the allocation of housing in the regional spatial strategy, and other significant projects that will clearly have an impact on populations.

I also have concerns about short-term migrants. In rural areas there is a lot of transitory agricultural labour. As well as the extra work that will be generated—for example, in refuse collection, which my hon. Friend David Howarth has referred to—I know from speaking to my local district councils that they have felt the pressure of trying to ensure that a lot of those migrant workers are accessing everything that they are entitled to, and that there is compliance with gangmaster legislation. That has taken up significant resources, which might need to be factored into some of the work that they will do.

Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

My hon. Friend is making it clear that migration and population are big issues just as much in counties such as Cornwall as in inner London. Does she agree that until we have annual registration for electoral purposes that really works and is up to date, and possibly five-yearly censuses, as opposed to 10-yearly censuses, we will be always playing catch-up, whatever the best intentions? We need a much more effective census and registration process, both for electors and for the other people who may not have the vote in this country but who are entitled to live here.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

My hon. Friend makes a very good point.

Whether the real cost of providing services is being recognised is an issue, and the best example of that was mentioned by my hon. Friends the Members for Cambridge and for Teignbridge (Richard Younger-Ross): concessionary bus fares. That is a new responsibility, and local authorities are concerned that the real cost simply has not been met. My hon. Friend the Member for Cambridge was trying to make the point that the responsible authority must pay for the outward journey. There is a lot of commuting into Cambridge, and it is paid for by the authorities outside Cambridge, but the return journeys are paid for by Cambridge city council. Clearly, that will have a massive impact on its costs. Can the Minister tell me whether the Government have assessed the true cost of the scheme, as well as the cost of extending it? If they judge that there will be a shortfall, will they meet it?

Photo of Richard Younger-Ross Richard Younger-Ross Shadow Minister, Culture, Media & Sport

Is my hon. Friend aware that in Devon the scheme has been extended in the past to allow the companions of disabled people to travel? With the new scheme, because funding is so tight and given the fear that, with a good summer, so many tourists will arrive that it will run into deficit, the allowance for companions has had to be withdrawn. Therefore, under the Government's proposals, fewer disabled people will be able to travel.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

My hon. Friend makes a good point. I wonder whether there will be regional differences, because areas with a large number of visitors from within the country will face greater costs. That is the same for my local authority as it is for my hon. Friend's.

Clearly, although the Minister spoke about recognising additional cost pressures, those pressures and costs are increasing faster than the grant increase. Waste is an example. The Office for National Statistics corporate services prices index indicates that prices are rising annually well above the settlement figures, at between 5 and 7 per cent. per annum.

Of course, the obvious example is adult social services, where the gap between funding and demand is growing quickly, where cost pressures are increasing rapidly, and, of course, where the human cost of failing to meet those cost pressures will be felt most acutely. Last week's report by the Commission for Social Care Inspection made it clear that local authorities across the country are facing similar challenges. Two thirds of local authorities now support only those who have substantial and critical needs, even though councils overall have increased their expenditure on social care for adults in real terms.

The UK's population is ageing rapidly. The change is more rapid in some parts than in others, but it is clear that Government financial support does not reflect that adequately. The Department of Health's response to the report was yet another investigation. Perhaps the Department for Communities and Local Government should consider its response, too. The social care reform grant, to which the Minister referred, is back-loaded. A lot of the resources are loaded towards the end of the three-year period, but the Commission for Social Care Inspection has suggested that they should be front-loaded. Will the Minister look at the issue again when he deals with the remaining two years of the settlement?

I am also concerned about another way in which vulnerable people will be affected. The Minister mentioned the supporting people budget, to which there will be a real-terms year-on-year cut of 12 per cent. by 2011. The programme assists the elderly, those with disabilities and mental illnesses, and those fleeing domestic violence. A lot of those people will go on to rely heavily on adult social services. That is yet another pressure.

The settlement is not just tight; it badly affects the most vulnerable. My concern is that there may be more cost-shunting from other services. Indeed, that is already apparent. A gentleman whose wife is terminally ill with a brain condition came to see me a couple of weeks ago because an argument is taking place about who is responsible for providing his wife's care. To begin with, it was funded under the continuing care programme, then responsibility was transferred to adult services. The hours of care were then cut, and then he had a telephone call to say that responsibility for provision was moving back to the primary care trust. Clearly, it is an incredibly distressing time for him. He is trying to work to support his family, but he has no certainty about what support he will receive and who will fund it. The concern is that such arguments will continue as cost pressures get ever tighter.

Another issue of great concern is the effect on excellent cross-agency working. Representatives from local children's centres tell me that the first cuts that they are experiencing are to cross-agency working. Health agencies are pulling out because they cannot support the costs. My concern is that local authorities will soon feel the same. We are losing huge benefits.

There is a familiar theme to all those problems. Responsibility is increasingly being passed to the front line, but without adequate resources. The Government are not being honest about the real pressures facing local authorities. That is reflected in the fact that their grant increase is 1.5 per cent. or less in real terms over the next three years. However, the Government are working on the assumption of council tax increases of up to 5 per cent. If there was parity in funding, council tax increases would match increases in central Government grant. There should also be parity in the increases for Government Departments. Overall, there is to be a 2.1 per cent. real increase in public expenditure. There is to be a 3 per cent. increase for education, 3 per cent. for transport, and 3.7 per cent. for health. There is no parity there.

The Minister says, somewhat disingenuously, that local authorities could deliver council tax cuts if they were more efficient, but local authorities are performing well on efficiency targets. According to the latest published figures, councils are set to beat the overall efficiency target by 41 per cent., achieving £4.25 billion of savings, compared with a target of £3 billion. The figures are even more pronounced when we consider cashable efficiency gains: councils beat their target by 122 per cent. In any case, assumed efficiency savings are factored into the settlement that we are debating.

In many respects, local authorities are doing better than the Department. One need only consider the 60 per cent. overspend on the FiReControl IT project to realise that perhaps there are lessons that the Department for Communities and Local Government could learn from local authorities, rather than it being the other way round. The Government are using the efficiency debate to sidestep the accusation that none of their actions on local government finance sit easily with their proclaimed fervour for the devolution agenda. There is no transparency and, most importantly, it is difficult to see a clear line of accountability.

It would be better if the Government acknowledged that council tax is fundamentally flawed, and that there is desperate need for its reform. The Conservatives accept the need for reform but have not come up with an alternative. The Government's performance is disappointing, and again real opportunities for effective change have been passed up. The local government finance system should be designed to be fair to local taxpayers and open in its procedures and finances, and it should reflect priorities at local level. It must be local, so that decisions are made and cash is raised in a manner accountable to local voters, as they simply do not understand how that is done at present. It must be fair, so that it reflects people's ability to pay—the current system does not do so—and open, so that people can see what they get, and could reward or punish their local council accordingly.

Local income tax will achieve much of that: it is fairer on the individual, because it is related to their ability to pay; there is no need for council tax benefit, so millions of people who are entitled to it but do not claim it would benefit; and it is a more buoyant form of revenue, which would give authorities the opportunity to focus on their priorities. However, it is not enough on its own. We need a fundamental change in the balance of central and local funding. The gearing system means that 75 per cent. of local expenditure is still funded centrally, and only 25 per cent. is raised through council tax, which is one reason why there have been larger increases in council tax. Addressing that balance would make the system more transparent. We need to move away from capping and ring-fencing.

Photo of Neil Turner Neil Turner PPS (Mr Jim Murphy, Minister of State), Foreign & Commonwealth Office

Does the hon. Lady not accept that if the gearing were shifted, we would have to ask the local council tax payer for an awful lot more money in the first place? Is she proposing that council tax payers should pay substantially more?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government

We have proposed cuts to national income tax as compensation, so there would be a much clearer relationship between what people pay for local services and what they receive. As I said, we need to move away from capping and ring-fencing, and we need a simpler grant mechanism, so that people can understand its relationship to the services that they receive. Surely that is in the spirit of the central-local concordat: indeed, that is what it was designed to achieve. If the Government do not make those changes to local government finance, they will reveal their true colours. They are not committed to devolved decision making, because they are not putting their money where their mouth is.

The Minister who introduced last year's debate said that council tax was not broken. Does the Minister of State accept that this year's settlement pushes it further towards the point of no return, if it has not reached it already? Surely it is time the Government faced up to that reality.

Photo of George Mudie George Mudie Labour, Leeds East 9:16 pm, 4th February 2008

I shall be quick, because a number of Members wish to make speeches.

I raised my concerns in an intervention on the Minister, so he will not be surprised to learn that, while I welcome the statement, I am upset—and so is the city of Leeds—by the fact that Leeds has been excluded from the working neighbourhoods fund. He was dealing with statistics when I raised the matter, but some of his statistics put a gloss on the problem, so they should not have been used. If it had been in the fund, Leeds could have expected to receive £54 million over three years. In fact it will receive £12 million. The first year, it will receive over £8 million; the second year, it will be down to £4 million; and in the third year, it will receive nothing. A ratio of 60:40 sounds good, but it disguises or masks the fact that in the third year, Leeds will receive nothing at all from the fund for work in deprived neighbourhoods.

It gets worse. The Minister suggested that funds from the Department for Work and Pensions are tied to the working neighbourhoods fund. The £42 million that we will lose could be the tip of the iceberg if, as a result of the linkage, we do not get into the relevant list of authorities and thus do not get the DWP money. I should like the Minister to deal with that figure when he replies to the debate.

On the same issue, in his final sentences, the Minister indicated another, I think, £30 million—perhaps it was £50 million—was going in to deal with immigration in cities. He said that he had put the figure on the website, and that that money would be distributed. However, it will be distributed only to those authorities in the working neighbourhoods fund, so that is another pot of money that could be used to help the Government and Leeds city council, which is not Labour-controlled, to deal with the huge problems in inner-city Leeds. I would like the Minister to send the leader of Leeds city council and me information on exactly how much we will lose in the three years.

The worst aspect is the fact that we lose the money because of maths—we come down to statistics again. There is a calculation that means that 20 per cent. of areas have to be in the most deprived 10 per cent. nationally. Leeds has 95; if it had 96, it would have qualified for £52 million. In three years' time, it will get nothing because it is one short. That 95 as a percentage of 400-odd works out at 19.96 per cent. The city is excluded for the sake of 0.04 per cent. The Minister will say, and I understand this, "That's tough. When you draw a line, you're either on one side of it, and you cheer"— as my hon. Friend Mr. Turner cheers—"or you are on the other, in which case, tough!"

As Julia Goldsworthy knows, because we have debated the issues in Westminster Hall, if people meet the criteria for social care and home care, for example, they get it. What is not said is that, if people do not meet them—many do not, despite their grave problems—they do not exist as far as the Government and local authorities are concerned. There are 149,000 people in deprived areas of Leeds who in three years' time will effectively not exist. There will be no help for them because they have not qualified by 0.04 per cent.

The other aspect is about working neighbourhoods funding and trying to get people into work, which is laudable. In Leeds, 63,000 people are on benefit of one type or another, and are not working. That is the fourth highest level in the country, but Leeds does not qualify for working neighbourhoods funding because of 0.04 per cent.—which will be on the Minister's gravestone at some stage.

I finish by saying this. I plead with the Minister to come to Leeds. I will personally drive him around; he can bring his whole office for protection if he likes. I would not have to take him anywhere other than my constituency—it is desolate. I have made speech after speech, and got into trouble with Whip after Whip, because of what I see in my constituency in the inner city after 10 years.

Every city bar Coventry, which is smaller—Liverpool, Newcastle, Manchester, Birmingham, Middlesbrough, Newcastle—gets the funding because big cities in the western world have prosperous centres, prosperous suburbs and dire poverty in the middle. We all know that, but in the eyes of the Government Leeds has done what New York, Paris and Rome have not managed: its inner city has disappeared. That happened at an administrative stroke because of 0.04 per cent. Poverty, deprivation, crime, drugs, bad health and bad housing have been abolished in Leeds—hallelujah! The reality is pretty dire.

The Minister has said that he is not content with statistics. I hope that there will be a review to see whether the statistics justify taking Leeds, one of the major cities of this country but one with severe inner-city problems, away from Government help on those important issues.

Photo of David Curry David Curry Conservative, Skipton and Ripon 9:24 pm, 4th February 2008

The first thing to say about this settlement is that it takes place under the iron hand of capping. Capping works, because local authorities do not have to rewrite their budgets, and, as this is a three-year settlement, the next three years will be governed by capping—that is as plain as a pikestaff. Secondly, the reason why that is happening is that the Government's finances are in a mess. Years of profligate and ill targeted public spending increases have led to the current difficult prospects. The Government say that the settlement is tough but fair, which is a very British formulation. In a sense, council tax is atrophying because of capping.

The most interesting background to this matter is the report by the Audit Commission, "Positively charged", which shows that £11 billion now comes from fees and services. I did not realise that car parking would emerge as one of the great functions of local government, although it is certainly one of the major functions of Network Rail. That is an important development that can have a disproportionate impact. Some councils are in a position to benefit substantially from charges while others are much less so. The Government have picked at the Lyons report, and Sir Michael has moved on to grander things. He must be disappointed at the small amounts that have been picked out of his report.

I have to say to my own Front Benchers that to the extent that Tory policy is represented by Salome, she is very largely still clothed, and I look forward to having greater revelations than just the ankle, which appears to be the proposal to threaten councils with local referendums so that local people impose the capping instead of the Government, with precisely the same effect as far as councils are concerned. Meanwhile, the Liberal Democrats recite the case for local income tax rather like old believers in a remote monastery hoping that somebody will eventually attend the services. It has very little to commend it other than the fact that it exists as a policy, which is somewhat distinctive for that party. On business rates, a total silence has descended right around the Chamber—it is a subject that does not speak its name any more.

Three-year settlements are even more subject to things going wrong than annual settlements, and the problems that are faced could get worse. We see rising commodity prices, most particularly in energy, but I also draw the Minister's attention to what has been happening to food prices and the impact that that could have on the costs of local government. We see the relentless demographic pressures. Care of the elderly is the most obvious example, and the cuts there are the easiest to make because they are the least visible. Cuts in education are pretty visible because an articulate group of people has an interest in fighting them. In social services, the impact is much more scattered and so the ability to resist is much reduced. We could see more abnormal weather phenomena, as the Environment Agency calls them. One need only drive on any road that is not a main road to see its deteriorated, rutted, pot-holed condition.

The move to single status has a major impact on many local authorities. Let us hope that in seeking to deal with this settlement at least some councils will have the courage to remove some of the surplus school places, which are a major problem. However romantic it might be to save village schools from closure, the fact is that we cannot afford to maintain in the education system capacity that is not needed.

The Government make great play of what they have done about devolving power—there is supposedly a great devolution agenda. However, as in the case of Lyons, there is precious little real substance. It is desirable, but it does not deal with the issues of financial resources and autonomy, or redress the essential balance of power and competence. It remains a sort of constitutional alms-giving, handed down by Government to a grateful and supplicant local authority.

I want to raise one local issue. On concessionary bus fares, the Government have not got it right, and I hope that for the next two years of the scheme they will look again at the formula. This is bad government. Places such as Harrogate and Scarborough are in exactly the same position as Cambridge; a huge shortfall is projected from any reasonable forecast. The Minister is not going to alter that now, but I hope that he will consider it for future years. He should realise that for district councils, which have a budget of £20 million to £25 million, little pressures such as damping arrangements costing £200,000 or increases in Audit Commission fees accumulate into a significant hit.

Huge issues remain to be addressed in local government: how accountability can be achieved in the important public services of policing and health, one of which has no level of accountability at all; the assertion of representative democracy, rather than the irresponsible empowerment of national quangos or small local boards; and how agendas based on choice can be made manageable and affordable. The settlement does not address those crucial issues and, in effect, the devolution proposals do nothing else.

Meanwhile, we drift. The Government will not take decisions. The Opposition are by and large happy to impale the Government on the unpopularity of council tax increases and coo as far as devolution is concerned, and the Secretary of State is a cheerful cooer. Concordats get us nowhere. I leave the Minister with the thought that there have been two famous concordats in history: one between the Pope and Napoleon, and one between the Pope and Mussolini. I hope that this one has a better fate than those two did.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central 9:30 pm, 4th February 2008

I came to the debate thinking it likely that I would vote against the Government on the settlement. In Newcastle, there has been a failure to recognise a new and growing population of short-term residents, many of whom are young and many of whom have special needs. They are not counted properly in the figures. Tonight, my hon. Friend the Minister has made a statement that gives me some hope that we will sort that problem out. I was also concerned about the Government backing down on the issue of giving councils an incentive to grow business in their area. I acknowledge that my hon. Friend told us that he will move forward on that front. He will make changes, and he will not back down in the face of legal action.

I am also concerned that we cannot build long-term success for children and families and people with care needs in a city such as Newcastle on the basis of minimum grants that get smaller year by year. In his opening remarks, the Minister made a brief reference to the Government's review of care. I hope that when he replies, and at a later date, he will come back to that point because it is important.

I say to Julia Goldsworthy that we have a Liberal Democrat council in Newcastle, and it has just said that because of the minimum floor, it will have to cut care provision, including the closure of a respite and day centre care home in Shieldfield in my constituency. I also say to her that 300 yd from Napier house, the respite care centre that is being closed down, the same council has bought out the lease of a run-down furniture warehouse at a cost that I believe to be equal to the entire cost of the care budget cuts that the council is considering. Those decisions cannot be passed off on to the Government. This Liberal council says that it cannot modernise Napier house, but its capital funding from the Government has doubled in the last four years. Through economic benefits, it has raised £35 million in capital receipts from non-housing assets. The money was there to modernise that care home.

I can also tell the hon. Lady that tonight in Newcastle another top manager has been appointed in the civic centre, at a cost of £130,000 a year. Top management costs in Newcastle have risen by £1 million a year since the Liberal Democrats took over. The use of consultants is on a spectacular scale, and probably runs to more than another £1 million a year, including the employment of consultants to operate the bulk of the council's internal audit service. That is a poor record, which shows that there is plenty of potential for dealing with those problems. Those matters must be addressed.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

I am afraid that I cannot give way to Conservative Members, because I must conclude my remarks.

I must also tell the hon. Lady that the Liberal council in Newcastle declared reserves of £100 million at the end of the last financial year. What was that money for, except a rainy day? According to her logic the rainy day has arrived, but the £100 million is in reserve. We must do better.

We must come back next year and see where the Government have got to in recognising population change, in providing local authorities with an incentive to grow business, in funding schools and children's services, and in funding care. Again, I tell the hon. Lady that since the Liberal Democrats took over in Newcastle we have lost 1,000 children from our schools. Another 1,000 children go over the border each day to be educated in other authorities. We would have had an extra £8 million a year in our schools had it not been for the combined effect of that.

For the moment, my hon. Friend is on notice in respect of what he must do in the next 12 months. I shall tell my constituents in Newcastle that in dealing with those issues through the local council we should freeze the cuts, the increases in top management, the use of consultants, and council tax for the next year. We should look closely at the council's reserves. Local and national Government are now under question. I ask questions of the local council and the Government tonight. Over the next year, we will seek to resolve those issues.

Photo of Robert Syms Robert Syms Conservative, Poole 9:37 pm, 4th February 2008

I intend to make a few brief remarks about Poole borough council. It is an excellent, well-run council but it is 43rd out of the 46 unitary authorities when it comes to funding. Its formula funding per head is £191.95 whereas the average for unitary authorities is £376.96, nearly twice as much, and the highest is £603.31, which is three times as much. The authority is struggling and having great difficulty containing council tax because of all the burdens on it.

We mentioned the concessionary transport scheme earlier. Poole loses out: there is a funding gap of some £500,000 in that scheme, which falls on the council tax payer. Poole has had to put an additional £1 million a quarter into services for older people, £481,000 into services for those with disabilities, and £91,000 into waste services. Equal pay is also a major issue for local government, and Poole council will probably have to put £500,000 into that. However, in the three years of the settlement, Poole's increases will be 2.2 per cent., 1.8 per cent. and 1.5 per cent. That is about half the increase announced earlier by the Minister.

Nobody would expect Poole to be at the top of the table, or even necessarily in the middle of the table. The real concern for Poole borough council is the spread of funding between those at the top and those at the bottom. A lot of services cost the same anywhere, such as teachers' salaries and so on. That is putting real pressure on my constituents.

The Minister said that the settlement is tight. It is a tight settlement nationally, but it is a very tight settlement for those authorities that are funded at similar levels to Poole borough council. Things will be very difficult over the next three years. Poole has brought in some very low council tax increases for two or three years, but it looks like this year the increase will have to be 4.9 per cent. That is a pity. Many of my constituents have assets in the form of homes but are income poor and struggle to pay the rising council tax bills. The Local Government Association pointed out the major costs that local authorities face this year, for example, social care and migration. It stated that, in its opinion, there was a £1.3 billion shortfall. As we have heard, specific taxes on local authorities, such as landfill tax—the £144 million that goes back to the Treasury—and the changes in court charges, will place a much larger burden on local government.

My principal point is that I believe that my constituents are being unfairly treated. That applies not only to local government but police, fire and rescue and a range of other matters. Our outcomes are not too bad, but that is difficult to maintain against a general background of poor funding. I suspect that, to do the subject justice, I need to apply for an Adjournment debate, but I wanted to make those brief comments in the debate tonight.

Photo of Andrew Slaughter Andrew Slaughter PPS (Lord Jones of Birmingham Kt, Minister of State), Department for Business, Enterprise & Regulatory Reform, PPS (Rt Hon Lord Malloch-Brown KCMG, Minister of State), Foreign & Commonwealth Office, PPS (Lord Jones of Birmingham Kt, Minister of State), Foreign & Commonwealth Office 9:40 pm, 4th February 2008

I pay tribute to the Government for the increase in local government finance of 20 per cent. on average nationally that they have provided over 10 years and for the three-year settlement, which is welcome. It provides some certainty as well as scope for considerable growth over time. As my hon. Friend Jim Cousins said, it focuses the spotlight on the competence of not only central Government but local government. I shall please Robert Neill by using Hammersmith and Fulham as an example of the way in which councils can go off the rails.

Before I do that, I cannot resist commenting on the remarks of Julia Goldsworthy. She related again the story of the magic money tree, in which the amount of money from central Government was too little, the council tax was too high and services were too stretched. Given all those parts of the equation, from where do Liberal Democrats expect the money to come, except out of taxpayers' pockets? It is always their way, but I thought that, given that they have had some experience of government locally, even though they have none nationally, they would be less naive in proposing such policies.

In response to the interest that the hon. Member for Bromley and Chislehurst showed in what happens in west London, yes, it is possible to maintain and improve services while keeping council tax increases low, as was done under a Labour Government and a Labour council for nine years. As I said, the average increase in that time was 3 per cent. in council tax against 7 per cent. for London or nationally. Even with a tighter settlement, 3 per cent. efficiency savings and some difficulty, it should be possible to continue to protect council services. Yet, as I have said, the council cabinet in Hammersmith and Fulham will tonight agree £36 million of cuts. I doubt whether that figure will be equalled by any other local authority in the country. It is a rejection of the increases in funding that the Government have provided over years.

That may not be as bad as it sounds because, when one examines the detail, £12 million is described as efficiencies from outsourcing. I am not sure what sort of bank loan one would get if one asked for £12 million on the basis of such a one-line comment. Every contract that has been let—a £10 million refuse contract is being let tonight—has come in over budget. The chances of achieving any of those savings is therefore slim. There is a figure of £2.5 million for savings from debt reduction. Yet only 25 per cent. of the asset sales have been achieved so far, against officer advice that many of the sales were to the detriment of the local authority. Perhaps that should be cause for a cheer because those cuts will not go ahead. However, because the budget is being set in a way that demands such cuts, those perhaps innocent-sounding cuts will now constitute further cuts in front-line services and services for vulnerable people.

The authority had its comprehensive performance assessment almost a year ago. It has not been published because the authority is challenging, for the third time, its content, on the basis—I assume—that it is not happy with the findings. Last week, an arm's length management organisation in the authority was given one star, with poor prospects of improvement. If that is not turned around in the next year, decent homes money of tens of millions of pounds will be lost to council tenants.

The overall effect for my constituents will include a 40 per cent. increase in meals on wheels charges; a 50 per cent. increase in parking charges in some areas; all charges, including rents, increasing by at least twice the rate of inflation; charges for recycling; a consultation on charging for home helps, despite an assurance to the contrary in the manifesto less than two years ago; the sale of assets from youth clubs, community centres, homeless hostels and secondary and primary schools; the closure of public toilets; the cutting of maintenance for pavements, again against officer advice; the cutting of the play schemes subsidy; the cutting of grants for school uniforms for poorer families, and for music and drama awards; the closure of reference and mobile libraries; an overall cut of up to 25 per cent. in voluntary sector budgets; the withdrawal of home help services for 1,400 people; and the sacking of 166 home helps. In addition, concierge services on housing estates will be reduced and residential caretaker services ended, even though they are the main measures that control crime and antisocial behaviour on estates, and there will be a 5 per cent. year-on-year cut in the housing revenue account budget.

I appreciate that such levels of cuts—or abominations—are not typical even of Conservative authorities; all that I would say to the Opposition is that if they wish to disown them, they now have an opportunity to do so. If they wish to associate themselves with those cuts, that will be the sort of standard in public services expected of them if they ever get back into government.

Photo of Alistair Burt Alistair Burt Opposition Whip (Commons), Deputy Chair, Conservative Party 9:46 pm, 4th February 2008

I congratulate my hon. Friend Robert Neill on his performance at the Dispatch Box in opening for our side and on dealing so ably with such a cunning fox on the other side. The Minister is a good man and handles his brief incredibly well, but his cunningness is such that he was able to carry off with great insouciance some of the things that he had to say, which my hon. Friend picked up so well.

To use a football analogy that will be familiar to one or two hon. Friends, when a defender has ruthlessly cut down the forward running through and committed the most atrocious foul, he protests to the referee with the grandest of gestures, claiming that it could be nothing to do with him. When the Minister talks about a tight financial settlement as if it were an act of God and not the responsibility of the Government, who have spent a colossal amount over the past 10 years and are now having to pull the horns in, it is the political equivalent of spreading one's arms out to the referee and saying, "Nothing to do with me, guv," but we know that it is. That is what my hon. Friend spotted, and I look forward to his contributions on the subject for some time to come. I am glad that he is there and I am not.

The settlement is wrong for two reasons. First, it is disingenuous. The general public understand inflation and think that if a council gets more than inflation, everything must be all right and that the money should be coming through effectively, but with the rise of 1 per cent. above inflation or whatever it is, the Government are giving the public the sense that, should there be any rises or cuts in services, they must be the council's fault. However, the Minister knows full well—this has been well documented by hon. Members in all parts of the House—that the cost pressures in local government in some areas go well beyond 1 per cent. or whatever the gentle increase above inflation represented by the three-year settlement is.

Social services have been mentioned, and they include not only care for the elderly, but special needs care for the youngest. Fortunately, more young children with complex and special needs now survive infancy. The cost of that generation as it grows is substantial and mirrors the cost at the other end of life, when those who are fortunate to be living longer have a greater need for more expensive care. These pressures have not yet been fully compensated for in the settlement, and it will be some time before they are.

Colleagues have mentioned waste and highways. Some local examples from Bedfordshire will illustrate the disingenuousness. I pay tribute to the three local authorities in Bedfordshire with which I have close dealings, but they are coming to an end, because of local government reorganisation. The Conservatives have run two of them and been the majority party on the other, and all three have done remarkable things over the years. Bedfordshire county council has moved from having a rating of no stars to three in less than two years. Mid-Bedfordshire district council gets consistently good ratings for its local government performance, and Bedford borough council, on which Conservatives are in the majority, is rated an excellent council.

I pay tribute to those councils in passing, but each of them can provide an example of the difficulties that the settlement will produce. In regard to social services care for the county, there is the floor issue. For the third consecutive year, the county council will lose money. Being a floored authority has cost it £5.8 million, which has put £39 on the council tax. The local authority business growth incentives scheme—LABGI—will also cost it money.

Bedford borough council reports that the next three years' increase in the amount given for the concessionary fares scheme has been calculated by the Government at £450,000, £460,000 and £470,000. The extra £10,000 a year hardly covers inflation increases, and does not say much for the anticipated increase in the numbers of people using the buses. Two or three years ago, Mid-Bedfordshire district council was rate-capped for having the audacity to raise its band D council tax by £1 per month. Mr. Turner will understand this. It is now trying to provide weekly waste collections and to do the recycling that the Government want it to do, but it is not getting the support that it needs and will be in difficulty.

My first charge is that this is a disingenuous settlement, and that it will not deliver what the public expect. We could have seen better. The second thing that is wrong with it is that it does not take the opportunity given to it by the three-year change of delivering one of the things that Lyons spoke of, and that my right hon. Friend Mr. Curry mentioned. It could have taken the opportunity to cut through the question of who is responsible for the increases and what the respective responsibilities of the Government and the local authorities are.

Many of the contributions tonight have dealt with that dilemma. Colleagues have tried to say that, if the Government are responsible for one thing, the local council must be responsible for another. The Government just sit and let the blame be passed on. The Lyons report said that

"an independent and authoritative voice is needed to provide better information on funding to inform the public and parliament about the impact of new burdens on local government and the evidence of future pressures".

Lyons could see that the confusion between the responsibilities of the Government and of local government was eating away at the public's understanding of local government and of where responsibility for public finance lay. That is reducing the public's confidence. If all they ever see of national and local politicians is an endless passing of the buck, they will end up saying, "A plague on both your houses."

The need for greater transparency is something that we have all recognised in the past few days in another context. The Government could have taken this opportunity to do what Lyons suggested, and to put in place a mechanism to provide that independent voice and to look authoritatively at the responsibilities of local government and of Parliament and central Government, and at the future pressures. The Government need to answer the conundrum by asking where fault and responsibility lie, and who should be credited with certain changes. That would address the serious issue that is affecting the heart of local government and people's relationship with it.

The Minister is a fair man who is interested in these issues. I think that he heard me speak on this subject at the local government finance conference in December. I truly would like to see the Government take away that suggestion in the Lyons report and do something with it. If they did so, we would not have to deal with a disingenuous settlement in future. Instead, we would be dealing with a measure that met the concerns of colleagues on both sides of the House. We would have an honest and authoritative arrangement in which we could attach blame where blame truly lay, and in which credit could be given where it was rightly due. That would provide better settlements in the future, and I hope that the Minister will address that point. I hope that those on our side will also do so in due course.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government) 9:54 pm, 4th February 2008

It would be fair to say and would be acknowledged that I gave way a great deal during my opening speech and answered many of the pressing questions put by hon. Members on both sides of the House. It would also be true to say that all Members from all parties have worked closely with their councils and raised strong concerns in their contributions to the debate. Some speak with significant experience of local government and central Government finances—

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

At this stage, given that I gave way so much earlier, I shall not.

I was talking about hon. Members with significant experience, and they include my hon. Friends the Members for Leeds, East (Mr. Mudie), for Wigan (Mr. Turner), for Newcastle upon Tyne, Central (Jim Cousins) and for Ealing, Acton and Shepherd's Bush (Mr. Slaughter). It is also true that some Opposition Members speak with the same significant experience, including Mr. Curry, and the hon. Members for Bromley and Chislehurst (Robert Neill) and for North-East Bedfordshire (Alistair Burt). We have heard some reflective contributions in a good if slightly short debate.

My experience of seven or eight months of doing this job and being in the position to take decisions on how to distribute £27.5 billion suggests that almost every one of the 456 authorities in England feels that it has a special case and that it has in some way been uniquely disadvantaged by previous Government decisions. It is also the case that doing this job is not generally likely to win one many friends. However, let me read out to the House brief excerpts from two representations that I received during the consultation—in total, 340 representations were received from 246 authorities and organisations.

The first said that the settlement in December

"turned out to be a pleasant surprise for the... Council... We felt it only right and proper to write and say thank you for your work and your decisions this time".

The second said:

"We all know resources are significantly constrained under CSR07 settlement... That is why it was crucial to ensure that how the resources allocated to local government were suitably sub-allocated to individual authorities was done fairly. I believe you have got that allocation in the form of the provisional settlement broadly right", which is why the letter was written to "express thanks" to the Department. The first came from the Labour leader of Lancashire council and the second from the Tory leader of Kent council. I say to the hon. Member for Bromley and Chislehurst that it could not be clearer that that gives the lie to any accusations that this settlement is somehow riddled with geographical or political bias.

I also have to tell the hon. Gentleman that it does local government a disservice when he dismisses it, saying that people are getting less from more funding for local government. The latest Audit Commission figures show that four out of five councils—up from two thirds a year ago—are rated either good or excellent. They show that nine out of 10 councils provide good value for money and that where more than half of people are satisfied with their council, they rightly expect it to save money. In doing so, councils must show that they have maintained or improved local services in order to count any of their savings as efficiencies.

My hon. Friend the Member for Wigan chairs the all-party SIGOMA—special interest group of municipal authorities—and I welcome his welcome for the settlement. I thought that, by and large, he made a balanced speech. He was right that the settlement means that those with the greatest needs will get the resources. He also reminded us of the experience of local government under the previous Conservative Government—four years of real cuts under the Tories running up to 1997 have been followed by 10 years of above-inflation rises.

This settlement and those increases, combined with tough capping action, have helped bring down council tax increases, and, following its introduction in 1993, three of the four lowest rises in council tax have occurred in the past four years.

We will not hesitate to use our capping powers to protect taxpayers from excessive increases, but this is a settlement for three years. It provides greater flexibility and more resources, and is backed by more than a third of a billion pounds to help councils improve, innovate and cut inefficiency. Responsibility for delivering the settlement now rests with councils. I commend the settlement and the report to the House.

Question put:—

The House divided: Ayes 278, Noes 45.

Division number 69

See full list of votes (From The Public Whip)

Question accordingly agreed to.

Resolved,

That the Local Government Finance Report (England) 2008-09 (House of Commons Paper No. 262), which was laid before this House on 24th January, be approved.

A

What a lot of waffle from New Liebore! All I know for certain is that my Council Tax rip off has more than doubled since these cretins came to power! I'm just so sick and...

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