Local Government

Consolidated Fund (Appropriation) (No. 3) Bill – in the House of Commons at 3:44 pm on 15th October 2008.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government) 3:44 pm, 15th October 2008

I beg to move,

That this House
has considered the matter of local government.

I welcome this debate on local government and look forward to the contributions that hon. Members on both sides of the House look set to make.

The Department for Communities and Local Government does what it says on the tin. We are committed to local government delivering for communities. We challenge local government to be the best that it can, and we champion local government because we believe that it has a vital role to play in the way that our country and our communities prosper.

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

I am very early on in my speech, but I am delighted to give way to the hon. Gentleman.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne

The Minister referred to championing local government. As he will know, local authorities of all complexions are struggling with losses as their money is locked up in Icelandic banks. Can he assure the House that he is helping counties such as Hertfordshire and Kent to get their money back from those banks and that he is working closely with the Chancellor to ensure the right outcome in the next few months?

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

I can indeed. I am working closely not only with Treasury Ministers and the Treasury but with the Local Government Association and local government itself. If the hon. Gentleman will forgive me, I will deal with the position of councils and the Icelandic banks later, having met the LGA and Treasury Ministers earlier this afternoon.

Some may ask why local government is important when the eyes of the country are on national Government and international governance during this global economic crisis. In these circumstances, local government is even more important. It touches people's lives—from keeping streets clean, maintaining parks and open spaces and collecting rubbish and recycling, to providing schools and care for the elderly. Local authorities run the services that people see and need every day.

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Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I am extremely grateful to the Minister, who is as gracious as ever.

On supporting the elderly, the biggest challenge facing local government is the provision of social care for an ageing population. The hon. Gentleman will be aware, not only as a Minister but from his constituency work, that in many cases only those with serious or severe needs receive support in their homes from local authorities. Will he comment on that and on his plans to ensure that local government can be there to help people when they most need it?

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

Again, I can give the assurance sought. The hon. Gentleman is right: the population changes that we face over the next decade or two, and the changes in the population profile, pose enormous challenges for us all. That is why we are preparing a Green Paper to open up some long-term debate on this. It is why we commissioned an independent review of the guidance on how the entitlement is working in local authorities. It is also why, as he will have noted, when we were able to set the three-year spending review for local government for the first time ever, the authorities with social care responsibilities rightly saw the biggest increases in their budgets over those three years. When we combine the contribution of our formula grant with the grants that the Department of Health is making for these services, we see that over these three years there is a real-terms increase of about 6 per cent. each year for those authorities and for those services. In the longer term, that will not be enough, because the population pressures that the hon. Gentleman rightly mentions require us to rethink how we design, fund and deliver social care for the adult population, particularly for the increasing numbers of elderly people.

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Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I am grateful to the Minister for mentioning three-year financing. Am I right in thinking that the level of finance going to local authorities and thus to social care is a fraction of that given to health? He said that attempts to create a joined-up system between health and social care will be looked at in the rethink. Will we try to ensure that those areas move together? It would make no sense to pour extra funds into health while a great deal less goes to social care, which is often just as needy.

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

I hope that we will have something of a debate, as well as a discussion, but the hon. Gentleman is right. We see throughout the country that local authorities and parts of the health service, particularly go-ahead primary care trusts, are looking to create a joint budget and to joint-plan and joint-manage the sort of services that people need. In the end, people need the services that they need; they do not much care about which agency is responsible for delivering them. That institutional divide should not be apparent to them, and we should make every effort to reduce it further.

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Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

I entirely agree with what the Minister is saying. The provision of care, particularly long-term care, is of no consequence to those receiving it—other than that they get it—but the Minister will have to think long and hard with his Treasury colleagues about the impact of the economic downturn. In my constituency, we have an elderly population, a lot of whom are cared for in the longer term by social services, but a lot are privately cared for, and an element of them will no longer be able to afford to pay fees for nursing homes, care homes and so forth, so they will be necessarily thrown back to the public sector. What assessment is the Minister making of long-term care provision for elderly people as a result of the economic downturn?

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

The hon. Gentleman anticipates an area of my remarks that deals with the impact of the credit crunch and the pressure on local government. If he and other hon. Members will forgive me, I shall make a little progress to get to those points. If they feel that I have not adequately covered them, I will give way again.

Local government is important because it affects and touches directly people's lives. Local government knows its area. It knows what affects its residents and what concerns them most. It also spends our money, and more than a quarter of public sector spending is spent through local authorities. It would be a mistake for anyone to overlook the capacity, authority or influence of councils. Beyond that, I believe strongly that in this day and age, no part of Government—no Department or agency—can deal with the challenges it faces, or deliver the services it is charged with, on its own. The Home Secretary's local policing pledges, the jobs ambitions of the Secretary of State for Work and Pensions, and the skills aims of the Secretary of State for Innovation, Universities and Skills all increasingly require the alignment and the effort of others.

No part of Government can any longer deliver a centralised and standardised service if it is to meet successfully the needs, aspiration and performance required in widely differing local areas, and no part of Government can any longer deliver successfully without considering the contribution of local government.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

The Minister talked about the interaction of various Departments with local government and we have seen two particular schemes—one from the Department for Culture, Media and Sport on swimming and the other originating, I think, from the Department for Transport on concessionary fares—where the funding formulas have been extraordinarily crude and inappropriate, especially for two-tier local government. Can the Minister explain to the House the procedures for ensuring that when Departments other than his own deal with local government, they do so in a way that makes sense for local government, and that they consult his Department before they make detailed funding proposals?

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

I can indeed. The Government have a principle of new burdens financing. It is one that the Secretary of State worked hard to insist upon with strong support from the Treasury. If any other Department or Secretary of State wishes to see things done that place a new burden of activity with new cost on local government, they pay for it. In the case of the concessionary travel, which was widely welcomed across the country, local authorities are receiving an additional £212 million this financial year to pay for the additional right for elderly people to travel free on buses, not only in their local authority area but anywhere in the country. [Interruption.]

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Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

David Howarth was worried not about the effect on the whole package, but the funding formula.

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

If David Howarth checks Hansard, he will read that he raised two concerns in one intervention. He mentioned the formula, and the answer to that point is simple. We held extensive consultation before this financial year, which included the Government's responding to local government's points. Local government wanted the funding for the additional part of the free travel right to be provided, not through the formula grant, in which we had already invested, but through a specific grant to local authorities. We have done that.

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Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The Minister stated that £212 million extra will be provided for concessionary travel and he also said that the Secretary of State for Transport should provide extra capital straight away. Why, therefore, was that funding unavailable last year, when taxpayers in Shrewsbury had to subsidise the local concessionary bus travel?

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

The hon. Gentleman is wrong. Funding was available last year and the previous year. Two years' funding went into the formula grant—I believe that the amount was around £360 million. The money was available and given to local government. At that stage, it was designed precisely to fund for those two years the right of elderly and disabled people to travel free on buses in their area. As a result of the consultation—the hon. Member for Cambridge asked me how we went about that, and I told him—local government wanted the additional money to be paid instead through a specific grant to local authorities. We are doing that, and we consulted about the basis on which to do it. Clearly, there were options and we chose the one that we regarded as likely to produce the best result. However, no one could say with certainty before the introduction of the new right precisely how people would respond. The Secretary of State for Transport and I believe that, with £212 million this year alone to fund the additional right to travel free, there is enough money, according to anybody's best modelling, to cover the costs to local authorities.

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Photo of Mike Penning Mike Penning Shadow Minister (Health)

The Minister is generous. Does he realise that another matter is causing concern? Bus companies are encouraging my constituents to take out the free concessionary pass, regardless of whether they will use it, and charging the local authority £30 to do that. There is no point in issuing the pass to those who will not use it. If they intend to use it, it is wonderful, but if not, the bus companies get free money, which costs my constituents and the Treasury.

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

The hon. Gentleman makes a specific point about his local area, and I am happy to ensure that the Secretary of State for Transport considers it.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

Many Opposition Members are trying to make a point about the distribution formulae, which seem constantly to disadvantage specific sorts of authority—namely, those that provide many services to the surrounding area and to people who do not live in the local authority area. That means that local authorities with swimming pools provide swimming services to people outside their area, yet the funding formula gives them no credit for that. Those authorities also effectively pay for the bus journeys of people from outside their district. I do not want to seem ungrateful for the money—the total is very welcome—but the accumulation of the same error, affecting the same authorities over and over again, should surely be looked into.

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

I do not accept that there has been an accumulation or repetition of the same error. We have done our best in consultation to reflect the likely demand in areas such as Cambridge, which are places to which people will wish to travel, particularly with the new right to free bus travel.

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Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The problem facing the Isle of Wight, which is not subject to people travelling in from outside, at least not by bus, anyway— [ Laughter ]—is that normally we pay about £2 million towards the cost of travel for elderly people, but that has increased to £5 million. Can the Minister say whether he would be willing to look into that for the rest of this year, so that a new sum could be agreed that was nearer to £5 million, which is the cost of providing bus travel for elderly people?

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

I have seen some of the estimates of projected cost from local authorities, which understandably want to make the case for their area. Of course Ministers are watching and want to receive reports on how patterns of travel appear to have been affected by the new right. We want as many people as possible to take up the new right, so we will do what the hon. Gentleman encourages us to do. However, I do not want to raise any expectations among local authorities, not least on the Isle of Wight, that when the picture is clearer as a result of that work they may be in line for extra money. A significant amount is going in this year, next year and in the third year of the current spending review, precisely to cover the cost of the new entitlement.

Let me return to a point that was raised earlier. Local government is not immune to the credit crunch. Like families, firms and central Government, councils too must tighten their belts. Local government faces direct pressures as a result of the credit crunch, as well as the rising cost of fuel and other goods. It is more expensive to borrow, which has implications for local authorities, as it does for everyone else. Some councils report losing revenue from planning fees, for instance, as fewer applications are made for building projects. Finally, some councils also report increased demand for local government services and support. All that is happening within a tight financial climate.

Let me turn to the consequences of the collapsed Icelandic banks. The Government have had two priorities. Our first is to do everything that we can to help councils, alongside other creditors, to get back the money that they had in the Icelandic banks. Our second priority is to work with the Local Government Association to assess the position, council by council, and agree action that we will take together where some are struggling. Indeed, along with the Economic Secretary to the Treasury I met local government leaders earlier this afternoon.

As things stand, the LGA reports that there are 116 local authorities with £858 million in deposits in the four collapsed Icelandic banks. The LGA also tells us that 13 local authorities have reported that they might face short-term difficulties, but that they have no reason to think that wages will not be paid or that services will be put at risk.

However, we want to be clearer and more confident about the position of these councils, and we want the message to go out that councils that could have severe short-term problems will not be on their own. I can therefore report to the House that financial experts are going into three authorities today, and that the LGA and I expect initial reports by the end of the day. Experts will continue to work with those councils after that. Specialists are also contacting the other 10 authorities today, and offering to help them to assess their position and their options. The Government and the LGA will provide further expertise to those councils if necessary.

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Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

At the end of the day, one has to ask oneself why those councils invested taxpayers' money in an Icelandic bank. Shropshire county council and my local borough council were under the same pressure to maximise the return on their investments. Fortunately, however, they did not make that mistake. Why does the Minister think some councils in our country are having to invest their money abroad? Is it not simply because they are not getting enough from the Government?

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

In 2004, fresh guidance was put in place for local councils considering their investments. Those authorities were not under pressure to maximise their investments, as the hon. Gentleman puts it. They were required to make investments prudently, and to give the highest priority to the security and liquidity of the investments that they made, and only then to consider yield in that context, and only to the extent that it was consistent with security and liquidity. I hope that that addresses his point.

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

The result of the Minister's discussions has already started to be reported in the media. For the sake of openness, and to prevent rumours from going around, does he think it is now appropriate to tell us which local authorities are in that difficult situation? Furthermore, the level of exposure is sometimes now quoted as having moved up to about £950 million. Is it not time for the Government urgently to publish a comprehensive list not only of the local councils affected but of all the other authorities involved, including fire and rescue authorities, housing associations, regional development agencies and local authority-driven private finance initiative projects? As he rightly says, there is much collaborative working in the local government-related sector, and we really need a comprehensive understanding of all the exposure in the sector. We do not have that yet.

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

That is precisely what we are working with the LGA to achieve. Having met its representatives just before this debate started, I can confirm that the figure they gave me was their best available figure, and that the current position is that £858 million has been invested by 116 local authorities, including fire and police authorities, in those four collapsed Icelandic banks. Our job, and our top priority, is now to work with the LGA to ensure that any council that reports that it might now face short-term difficulties is not left without support. That is why we are stepping in immediately to the 13 that have reported that they might face such short-term difficulties. As I have said, financial experts are going into three of those councils this afternoon, and the LGA and I expect an initial report by tonight. Those experts will then continue to work with those councils. Specialists are contacting the other 10 councils today, and offering to help them to assess their position and their options before reporting back to us.

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

I am listening carefully to the information that the Minister is giving us. Clearly, things are moving on with every hour that goes by. He has still not answered the question asked by Robert Neill, however. Why is he choosing not to reveal the names of the local authorities at this stage? People will be concerned that, although we were initially told that no council had done anything reckless and that no one would suffer short-term problems, we are now hearing that some people might. We appear to be hearing this information after the event, rather than in advance. To continue that theme, may I ask the Minister how many authorities the LGA is waiting to hear back from? If it has not heard from certain authorities, is not that a reason for concern?

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

The LGA is pretty confident that it has the full picture, but that will change as the nature of these investments becomes clearer, and particularly as the dates of their maturity become clearer, as the consequences may be different for different councils.

I would like to identify these councils, but I am not in a position to do so this afternoon. The reason is that those councils provided the information to the LGA, which then shared it with us, but it was given in confidence. It is in everyone's interest—and not least in the interest of having an open and full debate in the House and elsewhere—to identify the councils, but it is equally important to have discussed the issue and cleared it with those councils first. That is our first duty. The second duty then becomes ensuring that the information is made public as soon as possible so that people can see what action we are taking, form their judgments of it and, if that is what they feel, urge us frankly to do more.

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Photo of Eric Pickles Eric Pickles Shadow Secretary of State for Communities and Local Government

The hon. Gentleman is being very gracious in giving way. I understand his position on disclosure because we are in the same position in having a list of roughly 116 councils and we will not release the information until the Government do, for the same reasons. There comes a point, however, when it is better to release than not to release. A number of people who do not understand local government finance may become unduly concerned about cuts in services and reliability, which is why it would be better for the information to be out in the open. Is the Minister relying on the LGA to look at housing associations, PFI bids and regional development agencies; and if not, where is he getting that information from? I crave his indulgence for a few seconds longer and ask him to outline the sort of remedies that will be applied, involving the release of payments both from and to the Government, so that taxpayers can have a reasonable assurance about what is likely to be available in respect of indebtedness.

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

I will do my best to answer that triple-pronged intervention. First, I am grateful that the hon. Gentleman and his party adopt the same view as I do on disclosure. I share his view that it is important to be able to disclose and debate the issue fully and I hope that the LGA will be in a position to disclose that information so that we can all do so shortly. Secondly, we in the Department are beyond the local authorities, ensuring that we can gather the information about the position of other bodies that the hon. Gentleman mentioned.

Finally, I have been clear from the outset, as I was with the LGA last week, that the first and most important step is to get financial experts into any councils that may face short-term difficulties in order to assist with their position, clarify their options and deal with any implications. If necessary—it is not necessary to speculate on this at present—we will look at the financial flexibilities that might be required to help the councils to deal with the situation. In the past, we have been able to do a number of things for councils that, for different reasons, faced severe financial difficulties. We are ready to consider the case for taking such steps again, as and when required, but it is important to do so on a council-by-council basis rather than look towards some generalised bail-out or underwriting of all local government deposits.

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

I am grateful. The Government's response to the banking crisis has included a backstop and I wonder whether the Minister and his Department should make it clear that the same backstop will be there for local authorities as well. Even if there is no underwriting of debts, the Minister should perhaps clarify that capitalisation of any debts that cannot be recovered would provide a way forward for some councils that are unable to recover their deposits. Then, at the very least, council tax payers can be assured that they will not see in-year cuts or significant increases in council tax in the future in order to pay off any losses in one go.

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

Capitalisation is a step that we have taken previously when councils have faced severe financial problems. If councils found themselves in such circumstances as a result of the problem with the Icelandic bank deposits and there was a case for doing so again, we would of course consider it.

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Photo of Mark Hunter Mark Hunter Leader's Parliamentary Private Secretary, Cross-Portfolio and Non-Portfolio Responsibilities, Shadow Minister (Transport)

The Minister has referred repeatedly to financial experts from the Department offering help to local authorities that have found themselves caught up in this crisis. Speaking as a former council leader, I am sure that councils would welcome any help and support that the Government are able to offer, but may I ask the Minister about another form of financial expertise which, although it has not been mentioned so far today, is central to the subject we are discussing? I refer to the consultants who have been giving advice to local authorities about their investments in Icelandic banks. Does he share my concern about that advice, and does he agree that his Department ought to hold an inquiry into it to establish whether there are—as many suspect—direct links between its quality and consistency and the investments made in those banks in Iceland?

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

I do not accept the case that the hon. Gentleman is making. As Local Government Minister, I am responsible for the investment guidance that provides the framework within which local authorities, drawing on advice that they regard as sufficiently expert and informed, make their own investment decisions.

In 2004, we changed the system that had previously involved central Government telling councils which institutions they should and should not invest in. As I said earlier, important local authorities now have access to good professional advice. Many have well-trained and qualified people on their staff.

Local authorities are now well-informed investors and are in a position to make and explain judgments, including judgments on whom to use for advice and information. Ultimately, the Government's responsibility is to ensure, through the general requirements set out in our investment guidance, that they invest prudently and give proper priority to the questions of how safe and how readily redeemable the cash will be. In other words, the guidance makes it clear that they must make security and liquidity their top priorities.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

I was actually waiting to intervene on the subject of housing in a moment or two, but, as a member of the Chartered Institute of Public Finance and Accountancy, may I suggest to the Minister that local government is better supplied with top-quality accounting and financial advice than the civil service? I am not being sarcastic. It is clear to anyone who examines the availability of professional people at the top levels of the civil service that those in local government are better qualified than those in central Government to reach a conclusion about these matters.

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

My hon. Friend made the same point to me when I held other ministerial posts, commenting—from a highly qualified and expert viewpoint—on the professionalism in some parts of central Government, particularly in relation to financial affairs. In many ways, our responsibility in central Government is similar to that of local authorities as defined by Mark Hunter. We must ensure that we can pick, and draw on, the best possible advice. If we do not have it in-house, we must ensure that we have access to it from outside.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

The Minister mentioned the guidance issued by central Government, which does not strike me as particularly specific. Authorities are advised to take into account security and liquidity, and then to obtain the best return that is possible given those two concerns. However, it seems that the Government have made a judgment on whether or not local authorities acted recklessly. Do the Government believe that trading on a single A rate for long-term debt and an F1 rate for short-term debt was all right or not at the time?

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

All I can say to the hon. Gentleman about that is that, as far as we have seen, there has been no clear evidence that local authorities acted recklessly in the investments they made in these four Icelandic banks.

Let me say this to Conservative Members: in the current economic circumstances more than ever, an ideology that drives arguments about a smaller state that does less in the modern world would fail the country and would fail the people who need support now and need confidence for the future. The current problems underline the need for active government and an active public sector to protect the poorest, to correct flaws in the market and to exert the sort of leverage needed to secure the proper role and contribution of the private sector. That is true now, in the current economic difficulties, and it is also true in the future for the long-term success of the economy in all parts of the country. This means we in central Government must give more strength to the leadership in local areas and give more scope to local authorities to set the priorities for their area.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

The Minister knows I have considerable respect for his talent and his integrity, and I welcome the promotion to Privy Council status that he enjoyed a few days ago. Nevertheless, I have yet to hear in his contribution of the last 37 minutes the facts to bear out his opening remark that central Government have a considerable respect and regard for the potential of local government. I cite the example of housing, and ask whether he—or his ministerial colleague in winding up—will attempt to justify the rationale for excluding local authorities from the direct provision of affordable, decent, well-managed housing within an accountable framework? That is not what we have at present; instead, local authorities—such as that in north-west Leicestershire, with its 4,700 tenants—are currently testing the waters on coerced stock transfer. This is not a vote of confidence in local government's ability to shape the priorities for the areas for which it is responsible, and I greatly regret that.

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

In fact, we have recently been changing the circumstances; we have been changing the potential, including for local authorities to begin to build again. If my hon. Friend wants further information on that, I am sure the Under-Secretary of State for Communities and Local Government, my hon. Friend Mr. Khan, will deal with it when he winds up.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

The point is that local authorities should operate on the same level playing field as housing associations. If they have demonstrated a capacity, a track record and the experience to manage properly decent housing stock within their area, why are they not able to access the funding that is routinely and automatically given to housing associations if a stock transfer has occurred? That cannot be justifiable, either politically or financially.

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

In the current circumstances, we are ready to rethink, and to reinforce the role of local authorities in the provision of housing and in support for people who need some help to stay in their homes. My hon. Friend will have seen some evidence of that in the housing support package we announced several weeks ago.

My hon. Friend has also challenged me to demonstrate how central Government show their respect for the importance of local government. I simply say to him that there have been 11 successive years of above-inflation increases in Government grant to local councils. He, more than anyone, will recognise what a sea change that was after 1997, when the previous three years had seen a year-on-year real-terms cut in central Government funding for local government.

The job is not done, which is why this year an extra £2.7 billion is going into local government. Next year there will be an extra £3 billion, and the year after that a further £3.15 billion on top. That means that every council in every part of the country will get an increase in its core grant from the Government in each of the next three years.

This is not just about the amount of investment that we have made in local government. We have also put in place the first ever three-year funding settlement, so local authorities now have greater certainty and greater flexibility to make long-term plans and investments. Neither is it just about the three-year certainty of the core grant. Alongside that, last November and this February I was able to confirm 61 specific grants from seven different Departments, also for the three years of the current spending review period. Local authorities now get 43 grants paid in a single sum each month through the new area-based grant, with no strings attached to how they spend it.

On top of that, ring-fenced restrictions on the spending of an extra £5 billion over the three years are being removed, giving local government more money and, crucially, more flexibility to make the decisions that are necessary and right for a particular area. We have also reduced the staggering 1,000 or so performance indicators required of local government to just under 200.

On the other hand, we can examine the recent period and say that local government has responded with its own achievements. It has responded on service standards, with the Audit Commission showing four out of five authorities now rated good or excellent and three out of four improving well or strongly. Of course, for the second year running none is in the lowest performance category. It has responded on setting this year's budgets, with the average council tax rise at 4 per cent., the second lowest since the tax was introduced 15 years ago. It has responded also on council tax collection rates, which are up for the eighth year in a row.

Finally, local government is making the running on efficiency. I was able to announce last month that the local government efficiency gains from the 2004 spending review period totalled £4.3 billion. Three quarters of that saving has directly released cash for reallocation to local priorities or to help to hold down council tax. That has been good news for households feeling the bite of the credit crunch, and it is the equivalent of £193 off the average band D council tax bill.

Of course, local government can and must do more. Satisfaction with council services is decreasing despite a significant increase in service improvements across all local authorities. That is a performance paradox, but when satisfaction decreases it is important for local councils to deal with it.

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

Does the Minister think that the reason for increasing dissatisfaction might be the lack of a clear link between what council tax payers pay and the proportion of their services that that money funds? Would it not be better to raise and spend more money locally than to continue to depend so much on central Government grants?

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

No, I do not think that. That is an argument either for massively higher council tax—perhaps the hon. Lady is arguing for that—or, as a substitute, for a massive increase in income tax for many of those who work. She may or may not be advocating that, too. It is not quite clear what the Liberal party stands for in that regard at the moment.

The other area of concern is shown in the latest citizenship survey, which told us in December that fewer than half of people feel well informed by their council about the services in their area, and that although two in five feel that they can influence decisions in their local area, the majority still do not. Just as politics does not end with politicians, so local government cannot stop in the town hall or the county hall. In times of uncertainty, democracy, at all levels, is more important than ever. People need to know that they can have a say in their circumstances and they need to know where their money is being spent on their priorities. Our White Paper "Communities in control" aims to pass more power into the hands of local people and local communities.

Local government is important, more so than is properly recognised in a British parliamentary and political system that is traditionally very centralised. It is my long-held belief that local government is the point at which people can best connect with politics, that local democracy is central to strong communities and that local involvement with and trust in people is how we make public services respond best to people's needs. Local government can do more, and our Department's job is to see that it does.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party 4:31 pm, 15th October 2008

I acknowledge the Minister's comments about the importance of local government and its traditions, and the contribution it makes to democracy and this country's way of life. Local government is hugely important, and I say that as someone who started his political career in local government and spent about 16 years in it. I, like my Conservative colleagues, value the work that is done by men and women in local government; the work of officers and members should not be understated. I agree with the Minister on that point. He is right to say that much good work is done and to point out the degree to which local government is often better at achieving efficiency than centralised government—it is worth remembering that.

Having said that, we must step back a little; the traditions that created local government were largely based on considerable local discretion, but that has been eroded over a number of years. That erosion is, cumulatively, the biggest threat to the future of local government. I do not make a partisan point, as the process happens under parties of all kinds. There is a tendency in the British state for central Government to suck in more power to themselves. That applies in respect of all people, and we have to be alert to it. Not for nothing do some independent academics describe Britain— certainly England, post-devolution—as the most centralised state in the western world. It is important to find remedies to that process.

I am grateful to the Minister for updating us on his discussions, because this aspect of local government is uppermost in people's minds in the short term—I shall return to other, long-term matters later. I am grateful for his candour with us thus far, but I wish to press him again on two points that my hon. Friend Mr. Pickles and I have raised.

First, there is a need for comprehensiveness in the list of where the exposure lies. I think that the Minister has understood that point, but it is important to hammer it on to the record. With respect, it may not be enough to rely simply on the Local Government Association in these circumstances, because we all know that many local services are delivered through housing associations and local private finance initiatives. We are aware that some universities are exposed, but what about the position of schools with devolved budgets? What about the position of the regional development agencies? We need a clear statement of the overall exposure of the local government sector. Secondly, I ask the Minister to consider again the question of setting out which local authorities are involved, as that is an important question of openness. Conservatives do not say those things in any partisan spirit, because it would assist everyone, including those in the local government sector, if we had clarity on both those points. I hope that the Minister will reflect on that as matters unfold.

In the longer term, it seems that there are threats to local government from a number of underlying structural problems to which I have already alluded. The Minister said that the Department for Communities and Local Government does what it says on the tin, but I would say that it does so only up to a point. The Department has presided over a number of measures whereby local government does what it can and achieves what we have referred to despite central Government rather than because of them. It is important that we recognise that.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

I worked in the field for a long time and was an elected local government member for quite a period, too. Does the hon. Gentleman recall major local government restructuring in 1973-74 and 1996-97? Both cases sprang from decisions made by the Government of whom he was a supporter and were poorly consulted on, ill-conceived and cost vastly more than was ever promised at the time. Does he recollect those years?

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

I made it clear at the outset and have always said that a centralising tendency applies across the piece. Given that the hon. Gentleman recognises that fact and given that he has experience in the field, I am sure that if it ever comes to it he will vote against the three unitary reorganisation proposals that are being pushed forward with no consultation and no local support. I hope that he will follow through the logic of his argument.

I want to consider the areas where there are impediments, and finance is one of them. The Minister quoted gross sums, as he has done on a number of occasions. However, he has to reflect on the fact that for the vast majority of local authorities and many people in this country the picture that he paints does not tally with reality. The distribution of the grant—never mind the size of the cake—is opaque, offers a number of perverse incentives and means that many local authorities have found themselves on the floor for years. Those authorities will find no benefit in the total increase in the cake, and we have never tackled the perverse incentives that are created for local authorities through a range of schemes. I hope that the Government will be prepared to consider on a cross-party basis the way in which indices of deprivation are sometimes changed and the lack of transparency in the criteria to see whether we can make the system more transparent.

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

As the hon. Gentleman says, he has long experience of local government. He will remember that we introduced the system of floors in 2000. Would he abolish them?

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

It seems to me that the Minister needs to reconsider the whole system of floors, caps and the grant formula. Would it not be much better if we could have greater independence in the setting of the criteria and if, rather than leaving local authorities caught with the cap, we adopted my party's proposal that council tax increases of a certain size should be put to residents in a referendum? That would surely be democracy.

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Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

My hon. Friend is making a powerful argument about the huge differences in funding for local areas. May I give him an exact example? Every child in Shropshire receives only about £3,300 a year for their education, whereas the figure in other parts of the country can be as high as £8,000 or £9,000. Those huge regional differences have put various primary schools in Shropshire under the threat of closure.

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

My hon. Friend makes a valid point that can be recognised across the House, and it strikes me, representing as I do a suburban constituency—[Hon. Members: "Certainly on our side."] My hon. Friends say that that point is certainly recognised on this side of the House, and the lack of transparency in the system creates a fear and a belief in many parts of the country that the formula can be manipulated in a way that is, frankly, not objective. That brings local government into disrepute and prevents it from delivering. We need to look more broadly at local government finance.

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

I am listening to the hon. Gentleman very carefully, and I agree with much of what says about the vagaries of the existing funding formula. However, does he agree that his own party's proposals for council tax rebates would reinforce the problems? The better funded councils would be in a better position to offer no increase in council tax, and would benefit from what would in effect be a direct grant from central Government. In contrast, councils funded at the lowest levels would find it most difficult to hold down council tax increases.

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

With every respect to the hon. Lady, I think that she misses the point. We want to tackle the problem that, despite the supposedly record levels of spending, the way in which the money has trickled down has meant that council tax has doubled under this Government. That is of increasing concern at a time of economic pressure—and I do not think that it would be much helped by a local income tax, either.

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

I shall finish my point, and then happily give way. Julia Goldsworthy fails to take on board the point that we are not seeking to compel local authorities to keep council tax down—rather, we want to work with local authorities and give them an incentive to do so by releasing funding identified from central budgets. If they can get to 2.5 per cent. they will get match funding, which will mean that they can reduce their budget and so have a council tax freeze. In the current circumstances, I would have hoped that the Liberal Democrat party welcomed a proposal that reduces costs to householders. We have come up with a specific proposal: it would lead to savings and could be implemented, but it is clear that the Liberal Democrats prefer high levels of taxation.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

The hon. Gentleman is a well regarded and respected local authority member for the part of Greater London that he represents. I am sure that he will recall the regular allegations during the Conservative years—and they were often substantiated—of a skew towards the London area. Particular beneficiaries were the London boroughs of Westminster, where we are now, and of Wandsworth, which is about 3 miles down the road. However, my key point has to do with his remark that council tax has doubled over the years of this Government. That is true, but the average rate of increase in the 11 and a half years that this Government have been in power has been less than it was in the first five years after the previous Conservative Government introduced council tax in 1992.

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

With respect, the fact that the hon. Gentleman feels that he has to resort to that type of allegation shows that he is rather behind the pace of the argument. Certainly, no one who represented an authority in suburban London that has been on the floor for six or seven years would say that Westminster or Wandsworth were benefiting from some illicit screwing—I am sorry, I mean skewing—of the system. [ Interruption.] Some might say that I was probably right the first time.

The system is getting to the stage where it is close to being broken. The Government are unwilling to grasp the nettle and make a serious change to the system: instead, they prefer to continue to apply a sticking plaster to it, and that is what is causing the ongoing problems.

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

I am grateful to the hon. Gentleman for giving way a second time, and I was very interested in his council tax proposals. Good spin, flaky substance—it is not clear whether the 2.5 per cent that he has mentioned would be a budget increase or a council tax increase. However, does he recognise who said, "Talking about an efficiency drive is the one of the oldest tricks in the book, but the trouble is that too often it is just that—a trick"? It was his party leader, in a speech made in Birmingham in May.

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

In a previous incarnation, the Minister was not beyond referring to efficiency drives himself. The Gershon review was not without an interest in efficiency drives, so that might not be the best point for him to make. Moreover, if he will forgive my saying so, I will not take a lesson in spin from him, given the sudden detour into the ideology of the big or small state in local government.

There is a lack of transparency in the local government finance system. David Howarth made a very useful point about a number of perverse incentives attached to specific grants and to the distribution formula. As it happens, that situation is mirrored in my local authority. The swimming project, for example, does not take account of our population demographics. Bromley would actually be worse off under the scheme. Despite the Minister's laudable ambition, there does not yet seem to be a co-ordination of criteria across the various Departments that fund local government.

The multiplicity of funding streams is also an issue. A very high percentage of grant remains ring-fenced and, although I acknowledge there has been some reduction in that practice, its application reduces local discretion. If local authorities are squeezed as a result of the caps-and-ceilings regime and face a higher percentage of ring-fencing, their scope to shift money around within their budgets to reflect local priorities is significantly reduced.

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Photo of Mark Hunter Mark Hunter Leader's Parliamentary Private Secretary, Cross-Portfolio and Non-Portfolio Responsibilities, Shadow Minister (Transport)

The hon. Gentleman was dismissive of the comment made by my hon. Friend Julia Goldsworthy, who is on our Front Bench. That is particularly unfair given the vagueness of the alternative local government finance proposals that the Conservative party is putting forward. I have listened closely to what he has to say, and I agree somewhat with the Minister: the hon. Gentleman is good on analysis, but there is not actually any Conservative alternative. Perhaps he could use some of the time remaining to him to tell us what the Conservatives propose as an alternative to the current arrangements. He may not agree with us, but he knows that the Liberal Democrats advocate local income tax because it addresses the fundamental problem with the current system, which is that council tax is not related to ability to pay. Until that nettle is grasped, the system will continue to be unfair to many millions of people across the UK. He may not agree with our policy, but at least we have—

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

It is interesting that the hon. Gentleman is anxious to get away from council tax; I am not surprised when I look at the rates of council tax charged by Liberal Democrat authorities, which are among the highest in the country. I am conscious that that is a sore point for him. With respect, the figures in my party's proposal were checked by the Institute for Fiscal Studies, and are based on savings identified by the National Audit Office, which indicated that there is something like five times the spend on the same items in the private sector.

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

I have been generous to the hon. Lady, and I would like to make a little more progress. The reality is that there is a failure to grasp the fact that a doubling of council tax, particularly in current circumstances, is unacceptable. Only one party in this House has come up with a proposal to freeze the burden of council tax on householders. The others just argue about the level of the increase, and that is not what people are looking for. There is a real issue as far as financing is concerned. There is a link, of course; because there is a lack of transparency and a multiplicity of funding streams, and because there is still too heavy a reliance on ring-fencing, it is difficult to give local communities incentives to take on board growth, new populations and new developments. They do not see any return. They lose out as a result of the perverse operations of clawback. Only yesterday, the Minister had drawn to his attention what seems to be a perverse consequence of the Prime Minister's initiative, introduced when he was Chancellor, to change the rules on empty commercial property relief. There are still too many opportunities for perverse and unintended consequences to occur in an over-complicated system.

Another thing that reduces local authorities' discretion is micro-management through the targets regime. I appreciate that the number of targets has been reduced from about 1,000, but I have to ask the Minister: who brought in the 1,000 in the first place? It is a case of the sinner repenting a bit. However, there are still 198 "sins" in place. Moses managed with 10 commandments, and I do not see why the Government cannot get a bit closer to that, frankly. It seems that there is still a significant measure of micro-management. Again, many independent observers note that a perverse consequence of the current target system is that very often, local authorities and their officers are pushed to tick the box, rather than deliver the service. They have to tick the box to get the funding, although ticking the box may not deliver what is needed locally. That situation cannot be allowed to continue.

As well as the centralised target regime, the third aspect that reduces local discretion is the artificial regional agenda. It is artificial because most of the Government offices bear no relation to anybody's sense of community, identity or history, or to patterns of economic activity. It is very difficult to see how the Government can claim to be giving powers back to local communities if they are taking more and more powers in relation to issues that really matter, such as what housing is built where, how planning decisions are taken and by whom. How can the Government make that claim if they transfer, for example, regional planning and housing powers from an indirectly elected regional assembly to an even less directly elected regional development agency? That is just shifting the deckchairs around on the Titanic. If the Government are serious about returning powers to local government, they should scrap the regional planning regime and the regional spatial strategies, and hand those powers back to local authorities. That would be a real transfer of power back to local people, but the Government shy away from doing that.

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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 targets and priorities that are set by local councils. The number of targets may have been reduced, but I know of local authorities that have been very reluctant to set some of the priorities imposed by the remaining targets, such as the preventing violent extremism priority.

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

The hon. Lady makes an interesting point. There is real concern about the relevance of some of the targets, and I shall touch on some of those later. However, my hon. Friend Mr. Goodman has taken a particular interest in work on extremism and community cohesion and he will deal with that specifically when he winds up. I hope the hon. Lady will therefore forgive me if I do not go into more detail.

The artificial regional agenda also inhibits councillors in doing their job. They are inhibited by an over-engineered Standards Board regime, which should be scrapped. Failure to tackle the gold-plating of the code of conduct by many monitoring officers inhibits many councillors in representing their constituents honestly and openly when it comes to planning applications. When the Local Government and Public Involvement in Health Act 2007 was considered in Committee, the Minister's predecessor promised to take a look at the concerns that are regularly raised by councillors of all political persuasions about the operation of the common law predetermination rules in relation to the consideration of planning matters and how they interface with the code of conduct. We have heard nothing more since. It is daft if local councillors feel inhibited about saying whether they oppose a particular development on open space in their ward because of a fear that they might then be regarded as having pre-determined the issue. That is the sort of thing that undermines local democracy, and the Government are not tackling it, despite the opportunity to do so.

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Photo of Mark Hunter Mark Hunter Leader's Parliamentary Private Secretary, Cross-Portfolio and Non-Portfolio Responsibilities, Shadow Minister (Transport)

I agree entirely with the hon. Gentleman about the iniquity of the planning system. Does he agree with me that to tackle that problem truly we would need to give objectors the same right of appeal as applicants? Until that unfairness is addressed, the system will continue to let down many people.

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

That is an interesting point, but I shall not commit myself on it. We have to try to strike a balance. People need to feel that they have had their say, and that is why we are concerned about aspects of the Planning Bill, which will make it harder for people to have their say on planning matters, especially those on a large scale, by removing the right to representation and to cross-examine and—through clause 151—restricting the ability of authorities to take action when nuisance and pollution arise as a result of developments.

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Photo of Susan Kramer Susan Kramer Cabinet Office, Shadow Secretary of State, Liberal Democrat Spokesperson (Cabinet Office)

I have been in for a while.

Does the hon. Gentleman agree that there is a real problem in the planning system because of the lack of authority for local government to rule in the best interests of the local community? There is a developer bias because of law imposed from Whitehall.

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

We dealt with that point before the hon. Lady arrived. We need to get the balance right, and it is currently wrong for the reasons that we have set out. Restrictions are placed on councillors in the operation of planning.

I have referred to the needless reorganisation of structures in local government. We have seen the Government's proposal for large unitary councils, which is based on a methodology that has been comprehensively discredited. If anyone has not read the book "Botched Business"—the title is appropriate—by Professors Chisholm and Leach, I urge them to do so. It demonstrates that the financial claims for that reorganisation were based on fundamentally flawed methodology. We have seen that work out in practice in Northumberland, where what was alleged to be a saving of about £17 million is turning into an overspend of about £55 million. To use the Minister's phrase, it simply did not deliver what it said on the tin. Against that background, it is not surprising that Professors Chisholm and Leach describe the Department's conduct as verging

"upon corrupting the body politic".

That is their allegation as independent academics. When one reads the book—I am sure that the Minister has read it, because I know that he is diligent—the case is compelling.

In the current circumstances, where local authorities face financial issues, is it not time for the Minister quietly to kill off any further structural change, particularly when local authorities are doing a great deal of good work together? In Somerset, for example, the county council and district councils of different political persuasions are working together on development, waste and other key issues. Successful local authorities are working together in Devon, and I know that a district and county council in Essex have a jointly appointed chief executive. There is considerable collaborative work in Kent, and a number of London boroughs are working more closely not only among themselves, but with other organisations, such as strategic health authorities and primary care trusts. If the Minister were to get away from the obsession with structural change, we could get on with collaborative working, which would leave governance systems and accountability in place so people would still have a sense of ownership of their communities rather than alienation, which we risk at the moment.

There is a different way forward. The Minister has referred to the White Paper, which is not the way forward—if it is the answer, then the question is wrong. The idea that we will achieve the laudable objective, about which I agree with the Minister, of getting more people from a greater range of backgrounds engaged with local government in more imaginative ways is not met by the White Paper. I do not dispute that the White Paper includes some useful and helpful ideas. At the end of the day, however, the idea that one can cure the democratic deficit, which genuinely exists in this country, by offering people who turn out to vote a free doughnut or entry into a prize draw to win an analogue radio, or by allowing people who are elected not to attend council meetings and text in their vote, trivialises rather than enhances local government. What would enhance local government is the abolition of all the central controls and constraints to which I referred earlier.

This is an opportune time for a debate on local government. I never doubt the Minister's good intentions, but I fear that he and the Department are presiding over a litany of missed opportunities. I have heard nothing today, and I have seen nothing in the White Paper, that suggests that things will get any better until there is a central change, which many people hope for in due course.

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Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley 4:59 pm, 15th October 2008

I feel a bit old when I mention this, but I am reminded of 1969, when I was elected to the local authority as a young lad. I remember the first meeting that I went to. I knocked on the door, went to the chamber and sat down, but there were no agendas. I was told that they would come later and that they were being debated next door in a sub-committee or some such. Later, I put all that down to the right-wing Stalinists—in the Labour party, I might add, Minister. They controlled everything and would come into the meeting saying, "This is what we are going to do." So I had a rough time when I was first elected.

In those days no members of the public were allowed into the committee meetings, and of course none of the press were. I remember fighting with a Liberal on the council to reopen the meetings and get the press in. I was not very popular with the Stalinists, of course, but we did fight. As I listen to the debate today, it is obvious that local government has come a long way since then. It is wide open, and, up to a point, I am very proud of it.

I could be away home—like everybody else, it seems—but I am here to talk about Northumberland. Northumberland is to be one of the unitary authorities mentioned by the Minister; incidentally, the people of the county did not want that. They still do not want it, and we had a ballot to say that we did not want it, but nobody took any notice—perhaps we are back to the Stalinists again. We have to be careful not to drift back to the old days of 1969: we have to listen to what the people say.

The Minister has been up to Northumberland a few times, but I am sorry to tell him that he has been told a few porkies. I said as much in a couple of letters that I sent him—but he replied that, no, everything was rosy in the garden. I am afraid that it is not. Northumberland is in a big plight. The six district councils are being taken over next April and neither I nor anybody else knows what is going to happen; Northumberland is like the banking industry in many ways. It really is in a plight. I am told by our colleagues who sit on the council that no savings of any kind will be made in Northumberland in the next five years—so much for the points made by those who wanted the unitary authority. They said, "We'll save this and save that. We'll save £18 million a year." I do not think that that is on the cards, Minister—that has all gone.

Cuts will be made. This year, the authority is looking at £27 million of cuts—this year alone, until April—and it is talking about a cut over the next five years of £69 million in local government in Northumberland. Where will that come from? The issue is services. Northumberland has an ageing population; just the other day, we got the figures for Blyth Valley constituency—51 per cent. of people there are old. A lot of them will depend on a lot of services. A cut of £69 million would be pretty heavy on social services and the like.

Amalgamation has brought the added problem of redundancies. It is a minefield. There is untruth upon untruth—figures here, figures there, but we are all fighting in the dark. I am afraid that the Liberal Democrats are the biggest party on the council and they are running it at the minute. TUPE does not exist for the Liberals—so much for the trade union connections that they like to claim; they do not even recognise those regulations. At least our side does, and does a little bit with them.

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M

I agree with all that Ronnie says but can point to one way that Social Services department can save money. Stop ferrying children to school in taxis, the cost of providing people to accompany the children ia also wasteful. Too many parents do not take responsibility for their children and this is putting too much pressure on LA finances. Perhaps you can ask Superman whether he really means it when he says he will listen to the general public.

Submitted by Maureen Bessant

Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley

They do not recognise them; the hon. Lady should get in touch with the leader of Northumberland council and ask him what TUPE is—he will not know. It is a trade union arrangement for those who are made redundant or sacked, so that things are done properly. But they are not being done properly, and I will say for why. Blyth Valley and Wansbeck are the most populated areas in Northumberland, which has a total of about 300,000 people; the other areas are all rural. When they did the interviews for the chief executive, not one came from Blyth Valley or Wansbeck. Three or four came from Berwick, Alnwick, and Hexham. Blyth Valley council has two "beacon" statuses and an "excellent" status. Last week, it was announced that it is in the top 10 of the best run district councils in Great Britain, yet not one chief officer has been elected to the new unitary authority.

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Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley

Sorry, not elected—appointed. They should be elected; that is a good idea.

I wonder what is going on. Could it be that they do not have a Liberal party card? Is that how it works? These are the two biggest district councils in Northumberland, and not one of their chief officers has been appointed. That worries me.

Now there are going to be redundancies because the six councils disappear next year. The £69 million debt is creating problems. Figures have been bandied around. Even the Liberals on Northumberland county council have said that 20 per cent. of staff will lose their jobs next April. We think that it will be 1,900 to 2,000 people, or perhaps 3,000. What is even worse is that workers at the county council and the shire council are being told that their jobs are safe and that all the jobs that are to be lost will be at the district councils. All the people sitting in the ivory tower in county hall are going to be saved. I do not know how that works, because under the trade union laws they should all be applying for their own jobs. We will leave that to one side and work that one out when it happens.

It is a right plight. Now we are going to have cuts—£27 million this year, £69 million over three years. There have been cutbacks on some projects. The Liberal-controlled authority is already telling the district councils that they cannot spend on the capital programme. We should remember that these councils had a capital programme that they put to the people and got elected. Now they are being told they cannot spend that money—"You can't do this, you can't do that, we need all that money because we've got a black hole here." In all fairness to the Liberals, I do not blame them entirely for the black hole, because our previous administration made a mess of it as well. [ Interruption . ] However, they are not making a very good job of it at the moment—I can tell them that for nothing.

An even bigger problem in Northumberland is that of the Icelandic banks. My local financial officer, Simon Potts—an excellent officer who did not get a job, by the way; if he put in for one, he did not get anywhere—was told in April that Blyth Valley borough council should get its money out, which he duly did. In April, Northumberland county council was putting money in—in fact, it was doing it as recently as June and July. Everybody seemed to get the news in March or April that they should get their money out because it was not very steady out there, yet Northumberland was still putting it in. The Minister mentioned a few councils—Northumberland must be one of them. I am sure that his lads will come back with the truth—I hope so, because every time anybody goes up there so many porkies are told it is unbelievable.

The officers who were putting money in when they should not have been—when everyone else was told—are now on higher salaries. Of course, not only had they put that money in, but news has just come in, hot off the press, that they had put £11 million of pension money into Lehman Brothers. We are told that that money is okay and is safe, and that we are going to get it back. I hope that the Minister is listening and that he has his team up there. He can inquire about the £11 million in the pension fund for Northumberland county council, which is with Lehman Brothers. Will the council get anything back now that Lehmans has gone bust? That is a problem in itself.

What will happen in Northumberland? Services are going to be cut. It is too late to let the districts run their own councils, as the Tories wanted. I agree with that—I did not want a unitary authority. It is too big, and too far removed from the people. It is better if we have smaller councils running a lot of services, because they are near people and can handle things better. The Minister nearly spiked my guns by announcing that councils are being inquired into. He might have a team up there now, but I was going to ask him to have an inquiry into the running of Northumberland to ascertain the truth.

It is a bit of a bind when the Minister comes to Northumberland—he has been up a couple of times—to make statements but those statement are wrong. He is becoming a bit of a laughing stock. I would rather have the truth. I would rather the Minister sent a team up to Northumberland to find out the truth. It is not all down to the Liberals; most of it happened beforehand, but the way the Liberals are going about things now is just as bad. If it is not too late, I would like an inquiry team to go to Northumberland to find out what the situation is really like. I hope that I can be around at that time.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government, Department for Communities and Local Government 5:12 pm, 15th October 2008

I was pleased to hear that Mr. Campbell got on well with the Liberals when he was first elected to the council, but sorry to hear that relations seem to have deteriorated somewhat since then.

Listening to what the hon. Gentleman said, and what Robert Neill said, I found they seemed resistant to change. There is a real danger in local government that one can turn into a pointy-headed policy wonk who obsesses about finding the right structures to deliver services and interesting new ways of financing local government. It is easy to be sucked into that, but we should not be resistant to change for the sake of it. From the experiences I have had in my constituency in Cornwall, I can agree that the unitary experience has not been perfect, and it may not be right for every community, but we have tried to look at where we would like to be, and the journey we might take to get there, in order to draw down more powers and deliver more locally than the districts have done. We should have ambitions, not just simply say that the status quo is right and should not be changed at any cost.

I can think of countless examples of people coming to me who have tried to navigate their way through the local government system, which can be confusing and complicated, and the existing structures sometimes do not help. An individual came to see me because the roads had not been cleaned on Falmouth sea front. That sounds pretty straightforward. What actually happens is that Cornwall county council give a pot of money to Falmouth town council, which then subcontracts the work to Carrick district council. When we try to find out what has gone wrong, we are sent round in a circle by people saying, "It's not really our responsibility—the pot of money has gone somewhere else." If such inefficiencies can be tackled, change surely has to be welcomed.

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

I thank the hon. Lady for reciprocally giving way. Do the Liberal Democrats support or oppose the unitary proposals in her neighbouring county of Devon and in, for example, Norfolk? Do they support the proposals for enhanced two-tier working, along with the pathfinder schemes that all the district councils in those authorities have presented?

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

Unlike the Conservative party, we are not trying to impose a central party view unilaterally on our local government representatives. It is interesting to note that many councils that make unitary proposals are Conservative controlled—clearly, the issue is not settled in that party. It is a case of horses for courses. Having witnessed the unitary process close at hand, it is clear that there are problems with it, but we should not throw away opportunities.

The Liberal Democrat party has its roots in pavement politics and local government, as the hon. Member for Blyth Valley remembers. We cannot disagree with the sentiments that the Minister and the hon. Member for Bromley and Chislehurst expressed about the importance of local government, its record on delivering local services and the potential to deliver even more. However, although there may be consensus about talking the talk, perhaps we part company on walking the walk—neither the Government nor the Conservatives are yet in a position to do that. The challenge is not only to talk about but to deliver localism.

I shall focus on local councils' exposure to the collapse of the Icelandic banks because we have not had an opportunity to debate that on the Floor of the House. We had a statement yesterday, but there has been no opportunity for discussion since the story broke some 10 days ago. It is a fundamental issue for local government and has a massive impact on council tax payers' confidence in their local authorities. We know that 116 authorities—not only councils, but police, fire and transport authorities, as well as other organisations, such as hospital trusts and charities—have been affected so far. Although, on average, the exposure is less than 10 per cent. of authorities' short-term investment, the experiences of those affected vary greatly.

Some councils have reported investments that they made a year or even longer ago. It was difficult to get out of them and they now have to deal with the problems. I have heard reports of councils that made investments as late as the end of September or the beginning of October, when, as we now know, those banks were experiencing serious troubles and were not a good investment choice.

The extent of exposure has also been different. For example, Kent is at one extreme, with an exposure of £50 million. However, some of the smaller amounts might prove more troublesome. For example, a small amount in absolute terms that is frozen or in a bank in Iceland might represent smaller district councils' reserves.

I am slightly troubled by the noises from the Local Government Association and the Department to date. We were initially told that no councils had made reckless decisions or faced immediate short-term difficulties, but that statement was subsequently qualified, and we heard that many councils had made sound investment decisions. However, finance officers and rapid response teams are going into several authorities to assess their situation and their ability to deal with the short-term position. That suggests that matters are more serious than we were first led to believe.

Local authorities may struggle in the short-term with their ability to pay Government business rates, because maturing deposits were intended to cover those payments. There might be difficulties in balancing the agreed budget because interest receipts are a major source of revenue, especially for smaller councils, in funding services. Capital projects may have to be rescheduled and there may be a need for greater short-term borrowing, which could prove more expensive. In an extreme case, if there is no repayment for some of those affected, their reserves may be exhausted.

Given that context, it was worrying to hear a claim that nobody would be affected in the short term and that all the bills would be paid. There is potential for significant problems and I hope that the Minister can comment on that. Could he give us any indication of the kinds of councils that are alerting the Government to the shorter-term problems? Is it the smaller authorities that are struggling, or is it those across the whole gamut of authorities that have been exposed? Any detail that the Minister could provide might help us to understand the more general problems. The feedback that I have received suggests that district councils might be experiencing the most difficulties in managing the treasury services that they offer, because they do so on a much smaller scale.

Yesterday's statement was helpful in providing more details about the Government's programme of support. We support the action that the Government are taking. We know that officials have gone to Iceland and that there are discussions with the UK subsidiaries. There have been indications on BBC news that Ernst and Young has said we may know by mid-November how much of those assets could be returned. Will the Minister say how optimistic he is that all those deposits will be returned and when councils might hope to see them back in their accounts?

I also welcome the analysis of the effects of the exposure that the Department has commissioned, but will the Minister say when he expects it to be completed? From what he said earlier, it sounds as though it should be completed fairly shortly, but can we expect an oral statement, so that there is an opportunity to discuss the issue in the House?

I was going to ask whether the rapid response unit had been called out, but we now know that it has been. It is reassuring to know that there is a team of experts going out to support those councils that need support. My only question is whether they are in-house experts or whether the Department is seeking advice from external organisations. If so, could the Minister say which ones?

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

The financial experts who have gone to the three councils that I have mentioned today are from other local authorities. It is entirely within the spirit of the arrangements in place for the sector to offer support within the sector wherever possible. These experts are not people from our central Department.

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

I am grateful to the Minister for that helpful reply. Councils are concerned not only that some councils have deposited money in Icelandic banks, but that they have made loans to other councils. If those councils are affected, that might have a knock-on effect on other councils. Can the Minister therefore enlighten us on what contact there has been with those councils that are not directly exposed, but which might be indirectly exposed?

We have a five-point plan, but there are other things that the Department could be doing. I hope that the Minister will reassure us that the Department is keen to take steps to ensure that it stays on top of the situation. Concerns have been raised that responses could have been made a bit quicker. I feel that we are learning that the Government are responding to events rather than anticipating them. Part of that worry is down to the fact that there is still such a lack of clarity about what is going on. For example, we do not just need an urgent analysis of the effects of local authorities' exposure to those banks; we need an analysis of what the causes might be.

When I raised that with the Secretary of State yesterday, I was accused of trying to play the blame game when we should be trying to resolve the issues. However, unless we know what has gone wrong, how can we prevent it from happening again? With so many councils affected, we are not talking about one council making a fundamental mistake; we could be talking about a structural problem that needs to be addressed. We need to find out what went wrong.

There also needs to be an investigation into whether the guidance was explicit enough. It seems to be widely drawn and has been interpreted in many ways. Councils have responded to the guidance in different ways, either by looking ahead to see whether the banks' ratings would be downgraded in future or by reacting only when the ratings have already been downgraded, when it is too late.

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Photo of Ronnie Campbell Ronnie Campbell Labour, Blyth Valley

Is it not the case that, when local authorities have money to invest, they will go to wherever they can get the highest interest? Obviously, the Icelandic banks were offering high interest and the investments looked very good. I take the hon. Lady's point that some of the authorities might have been encouraged to invest in those banks, and that perhaps they should not have done so, but everyone goes for the highest rate.

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

I am not saying that councils have been reckless; I am saying that there have been some very different responses to, and interpretations of, the guidance.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

My information is that, in many cases, the councils were not going for the highest rate when they placed their money with the Icelandic banks, and that there were other, more risky, offers being made to them. The situation is therefore rather more complex than the hon. Member for Blyth Valley suggests.

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

I am grateful to my hon. Friend for that contribution.

Another question is whether the Government should be looking at the advice given by the credit rating companies and by those third-party organisations that advise the councils. My colleague Lord Oakeshott of Seagrove Bay has raised some issues of considerable concern. He pointed out that

"two advisory firms, Sector Treasury Services and Butlers...appear to have given councils advice and an A-rating for Landsbanki and Heritable virtually up to the moment that that firm bit the dust".—[ Hansard, House of Lords, 13 October 2008; Vol. 704, c. 557.]

He has raised the concern that there was perhaps some kind of kickback or remuneration from the banks, in relation to the payment that the councils were making. This issue needs to be urgently explored, and the Government should be taking an interest in it, rather than trying to stand back from it.

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Photo of John Mann John Mann PPS (Rt Hon Tessa Jowell, Minister of State), Cabinet Office

I do hope that the hon. Lady will do her homework a bit better. The credit ratings are available, and anyone can see that the ratings for two of the three Icelandic banks in question did not change until 22 May. Until that point, they had not changed, but on that day, they did. That information was made available to local authorities. The hon. Lady needs to distinguish precisely between local authorities that were, on the face of it, investing rationally up to 22 May—many of which were doing so over a 12-month period and were caught up in all this as a result—and certain others. She should also perhaps look in more detail into why a handful of local authorities chose, after 22 May, to invest new moneys when the special report on Iceland, produced that day, made pretty clear reading. Having read the report, I certainly would not have wanted to put my money into an Icelandic bank, and it seems strange that a handful of local authorities did so after that date. The hon. Lady needs to distinguish between the various local authorities in that regard.

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

There is a difference between local authorities that have been caught up in the problems because of long-term investments and those that made their decisions more recently. The timing has not been uniform across the ratings agencies, and the drafting of Treasury reports also seems to have triggered different responses. For long-term investments, ratings from AAA all the way down to BBB are considered to indicate a low to moderate risk. Some of the Treasury guidance to councils suggested that, as long as their investments fell within that band, they would be okay. Other councils, however, were prepared to invest only in the top rating bracket. Differences in councils' strategies resulted in some councils responding to the rating changes when others were looking further ahead.

There are also examples of councils having genuinely been given inaccurate advice. For example, the counterparty list that Cambridge used listed Heritable as a UK bank. On the basis of Cambridge's investment strategy, Heritable counted as a UK bank and a safe investment. In reality, however, it was not. These issues need to be investigated, and I would like the Government to take an interest in the wider effects, rather than saying that they do not want to get involved in the advice that councils seek and receive. Perhaps the Minister will also be able to tell me whether the independent advisers are regulated by the Financial Services Authority. It is not clear to me at the moment whether they would be, but that adds the matter of regulation to the advice that is supposed to have been given.

I would appreciate any further information from the Government on whether they have a full picture of who is affected. We know from what the Minister said this afternoon that the LGA has a pretty clear picture of all the councils involved: it is not yet finalised, but there are no blanks in the number of councils affected. What about other public organisations, however? There are concerns that registered social landlords and regional development agencies might be affected. When will the Minister be able to tell us categorically whether they are?

Many people are concerned at the prospect of the problem migrating to other public bodies. What was particularly disturbing for many was the fact that all this came out of the blue. Many of my constituents said, "I did not know that my council had that kind of money to put in a bank in the first place". People do not want any further nasty surprises.

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Photo of Dan Rogerson Dan Rogerson Opposition Whip (Commons), Shadow Minister (Communities and Local Government)

My hon. Friend is making some excellent points about the recent crisis. I, too, have been contacted by a number of constituents concerned about bank problems. There is a lack of understanding of local government in the wider community, but we expect the White Paper to help people to understand how local government functions, so that when something like this occurs it is not such a big surprise to them. The extent to which certain councils are exposed might still be a surprise to them, but they should not be surprised at the way in which local government functions. People need to be far more involved in their councils' decisions.

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

My hon. Friend is absolutely right. The situation is not helped by the fact that council tax funds such a small proportion of local services. Many people still think that business rates fund local services, whereas the council simply collects them on behalf of the Government. Given that councils make payments only twice a month and that much is invested, has the Minister made any assessment of how much of the money caught up in Icelandic banks is earmarked for the Government? It was their income that the councils were investing before they passed it on to the Treasury. I wonder whether the Government have any sense of the extent to which they will be affected.

I have made it clear that the Government need to review and update their guidance. Treasury strategies need to be updated in the context of vastly changing economic circumstances. It seems ridiculous that, in the light of recent changes and the impact of the crisis, the Government do not believe that they should do the same as councils. I appreciate the Minister saying that the Government have allowed councils to capitalise losses in the past, but I think that a statement saying that councils will be able to do so in future would provide some certainty so that people, councils and council tax payers would know that if, at the end of the day, the councils cannot recover all the money, it will not impact on council tax next year. That sort of backstop should be used only as a last resort, but it should be there.

Local authorities also need to provide clarity. I hope that all the affected councils will conduct a review into their circumstances. Depending on the timing and the extent of their exposure, it might need to be an independent review, but it could be an internal one. I know that some councils have already initiated such a process. Kent county council, for example, has initiated a review from PricewaterhouseCoopers and I know that North-East Lincolnshire is planning an internal review. I would encourage all other councils to do the same.

Flagging up some of these structural issues might help, and best practice can be shared. I have spoken to councils that pulled out. The successful ones are not those that simply ratify their Treasury strategy at the time of the full Budget; they may have twice-yearly full council meetings to discuss their strategy; some have member panels to review the position regularly; representatives and third-party advisers may look at what is going to happen in the future. As I say, best practice can be spread and I hope that the LGA will focus on it because it is really important to restoring confidence.

I shall move on to some broader issues. I know that many Members still wish to speak, so I will not dwell on them too long, as I know that the hon. Member for Bromley and Chislehurst has already touched on them.

The current problem highlights a much wider lack of transparency and a huge complexity in the workings of local government finance. Councillors have told me, "We assumed that those in the treasurer's department knew what was going on, so why did we need to do anything?" Similarly, the public do not understand how the system works. They ask "How come the council has all this money?"

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Photo of Susan Kramer Susan Kramer Cabinet Office, Shadow Secretary of State, Liberal Democrat Spokesperson (Cabinet Office)

Is there not a deeper problem? When a millionaire with a millionaire's lifestyle is living in a high-grant authority area and paying very low council tax while a postman is living in a low-grant area and paying very high council tax, it is clear that deep unfairness is built into the system and that it requires a major overhaul.

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

My hon. Friend is right: unfairness is built into the system. It is also very difficult for people to understand what they are getting in return for the money they pay at local level. Council tax finances only a small proportion of local government spending in most authorities, although I know that it is the other way around for my hon. Friend. The rest is determined by a complex funding formula that has floors and ceilings and enables gives councils to claw back money. The system is confusing enough for councillors, let alone the taxpayer.

Business rates should be raised and spent locally. That would be a very good way of increasing the revenue that councils can raise and spend. Every year people see their council tax rise above the rate of inflation, while also hearing about pressures on their key services. Furthermore, through the complexities involving Iceland people are learning that their council is having to invest money to secure additional revenue. There are so many complexities before we even start thinking about all the other public services that are funded locally with no democratic accountability and with huge sums being spent.

Handing over many of those resources to local authorities would simplify the process and make it much more transparent for the users of local services. How can we expect people to have confidence in the system if they do not understand how it works? The problem with the financial system at the moment is that it is so complicated that people have no confidence about the future.

We have seen some action from the Government. The Minister referred to the removal of ring-fencing in some instances, but there is still far too much ring-fencing. Yesterday I attended the launch of the Sustainable Communities Act 2007. The Act has the potential to make a huge difference to the way in which the allocation of resources is decided and to return power to local communities, but real concerns remain about how the Government will deliver that, and in particular about how effective local spending reports will be in casting a spotlight on where public money goes at local level.

The empowerment White Paper is all motherhood and apple pie—there is very little in it with which to disagree—but unfortunately it does not change the relationship whereby so many resources trickle down from central Government. That fundamental issue must be addressed, along with the need for councils to understand that they are expected to push more resources down to people. It is a two-way process, but the empowerment White Paper is only about what councils should be doing; it does not say what the Government should be doing.

There has been no action on council tax. As my hon. Friend Susan Kramer said, the present system is fundamentally unfair. Council tax is not a buoyant form of taxation. It does not keep pace with inflation, which is the reason for the above-inflation increases that we have seen. It is also currently based on property valuations that are 20 years out of date. Those who seek to defend council tax as the most appropriate system cannot continue to do so unless they acknowledge that there must be property revaluations at some point. That is the fundamental flaw in the Conservatives' arguments. They will have to say something about revaluation, or their policies will not be credible.

There are other authorities in which there is no democratic accountability. Police authorities, for instance, are not directly accountable. Why are the Government not doing more to drive the agenda forward so that people can see who is accountable for spending decisions in those authorities? More resources should be transferred to local authorities from quangos such as the regional development agencies. There should be a much more transparent funding formula, there should be a change in the balance between what is raised and what is spent locally, and council tax should be replaced by a fairer system, buoyant and based on ability. The Minister hangs his head. He has heard all the arguments before.

Council tax is becoming increasingly unacceptable. Thousands of pensioners in my constituency are struggling to pay their council tax. Some of them might even be entitled to council tax benefit but they have not applied for it and do not receive it. Many people are angry because they see no link with the services they get. There needs to be a fundamental review not only of how resources are allocated, but of how funds are raised; simply tinkering around the edges will not solve the fundamental problem.

Finally, I seek a few thoughts from the Minister. We have been busy dealing with the current crisis, and there has been a huge change in the stability of financial institutions throughout the world. I do not think anybody expected local authorities to be a victim of some of these changes, but I wonder how much time the Department are dedicating to looking ahead to identify other possible impacts. The Minister spoke about fuel costs and a potential increase in borrowing costs. Clearly, housing will be a major issue in future; if the predictions about the numbers of people who are struggling to pay their mortgage or who are likely to be evicted from their property are proved right, there could be huge increases in housing pressures.

What other areas is the Minister looking at as potentially presenting future problems for local government as a result of the credit crunch? I know that some councils are already reporting concerns about large-scale capital projects, often where they are dependent on the sale of property to part-fund them. They are also concerned about private finance initiative schemes, particularly those under negotiation at present, because increased borrowing costs are suddenly making them a lot more expensive.

I am also concerned about a lot of the excellent joint working undertaken across local authorities. Local health and education services and local authorities have often worked well together to provide services. My concern is that this is always seen as the added bonus, and that as soon as the funding settlement gets tight such joint working is often the first thing to go—I am seeing that on the ground in my constituency.

It would be helpful to hear any comments the Minister might have on what is being done to try to pre-empt these potential problems so that we can see them coming down the line rather than having to respond to them after the event, because one thing is certain: while our local communities are very important, we are operating in a changed world now, and we need reassurance that everything is being done to understand what those changes mean to local communities.

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Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art 5:42 pm, 15th October 2008

It is regrettable that this debate is so thinly attended, not only because the problems with the Icelandic banks will have a difficult knock-on effect on our local authorities, but because the general economic situation is creating tremendous uncertainty. It is unfortunate that the Minister has just left the Chamber because I am about to be polite to him: I agree with much of what he said—albeit with some caveats that I shall outline in my speech—not least the fact that for a lot of people local government is the only kind of government they encounter.

My hon. Friend Robert Neill was candid enough to admit that successive Governments of all political persuasions have tinkered with local government, usually to its cost. However, although sins were committed in the past, that is no excuse to visit the sins of our forefathers on our successors, and that is why I shall devote my comments this evening to why the Government must re-examine their drive towards forcing unitaries on various parts of the country, not least in Devon in my part of the world.

In Devon, unitary status was originally the idea of Exeter city council, which wished to achieve it based on its existing city boundaries. That proposal was given huge endorsement at the time by the Minister for the South West, who is the Member for Exeter, but he has gone strangely silent now that the proposal is no longer an option. Probably, his thinking was that he could create a citadel city from which to defend himself against the creeping Tory votes that, I suspect, will cause him some trouble at the forthcoming general election.

The issue of local government reorganisation is the elephant in the room this afternoon. It has been touched on only briefly, perhaps because of the presence of the Minister for Local Government. I wish that he were still in his place, because I think that having been at the Treasury, when he wears his Treasury hat—or hairshirt—he views a move towards unitary status and its implied costs with a wry sense of déjà vu at best. I do not believe that he is a roving ambassador for unitary status, and in that I submit that he is entirely right.

The situation in which we find ourselves is that the boundary committee will report just after Christmas, I believe, to the Secretary of State and will come up with one of two solutions. The favoured solution is a unitary Devon without Plymouth and Torbay, both of which have already been accorded unitary status. An alternative hybrid scheme, which seemed to me to come out of nowhere and make no sense at all, is a combined Exeter and Exmouth unitary and the rest of Devon in another unitary. I do not know where these people get their ideas from, but it is certainly not from anyone to whom I have spoken in the county of Devon.

I believe that the committee can recommend to the Secretary of State that there is no better alternative than the status quo. Everyone's suspicion is that it will not do that, and that it will recommend some kind of unitary status—I suspect for the whole of Devon. At that point, the Secretary of State will be able to listen to those of us who represent that part of the world and make her judgment. I shall explain why, in the changed circumstances in which we find ourselves, she should make the judgment that the status quo should be preserved, with enhanced working of the two-tier system.

It is worth mentioning briefly the five criteria for a review of local government. The first is that it must attract a broad cross-section of support, which the proposals in my county certainly did not. The original proposal for unitary status came not from a groundswell of opinion and public support but, as I have said, from Exeter city council. The bid was flawed, and its finances were called into question. It was thought that Exeter would not be able to repay the costs of the change within the statutory five years, and we are all having to suffer this period of uncertainty as a direct result. The Minister will know that there have been an enormous number of representations from all kinds of stakeholders— much as I loathe that word, there is perhaps no better word in this context—including district councils and Members of Parliament, who it seems to me are often overlooked in such matters, to say nothing of parish councillors.

The second criterion for a review of local government is that it should provide for

"strong, effective and accountable strategic leadership".

I believe that the current arrangements provide for just those things. I make no partisan point, because Devon county council is temporarily under the stewardship of the Liberal Democrats. It received a three-star rating from the Audit Commission in its 2007 comprehensive performance assessment, and the commission reported that the council was working with partners and improving the economy and the environment. I have my disagreements with Devon county council, as does my district council, but on the whole it is working well. The system whereby some of my district councillors are also county councillors is good, and it encourages co-operation. It is not ideal, but then show me a system that is better and I will support it. Certainly moving towards unitary status is not better.

In proposing the single Devon unitary option, the boundary committee has flown in the face of submissions from a number of experienced local councils, including my own, which contends that a unitary council would not be as efficient and would be too remote for a dispersed urban and rural community. I cannot conceive of how a unitary would represent my more remote communities, including some of my more remote urban communities, if that makes sense, in the same way as the present council.

The third criterion for a review is that it must deliver

"the empowerment of citizens and communities, so that all communities have power and resources to influence the decisions that affect them in their localities."

A county-wide unitary authority that had a population of approximately 704,000 and covered an area of 1.6 million acres would be one of the largest authorities, geographically, in England, so a council that is both distant and remote from the people whom it is meant to serve would be created. All the proposals that I have examined for Devon, Norfolk and Suffolk are fundamentally flawed; in each case, power is being taken away from local people. The real effect of such vast areas of unitary administration would be to deprive towns of their individual and distinctive voices in representative local government.

One of the proposals in moving to some form of unitary status is the setting up of community boards, but I simply do not understand what they will do. They will be locally based committees of the unitary council; their meetings would be where local concerns are discussed, community priorities are agreed and decisions are taken about what the unitary council's local budget should be spent on. However, democratically elected parish councils already do an extremely good job locally. In addition, the Devon Association of Parish Councils has regular meetings, hosted, in rotation, by all the towns and parishes in the area. The meetings are attended by: county, district and parish councillors; the police; the fire brigade; health officers; and representatives of the voluntary sector. The meetings achieve nearly all the objectives of the proposed community boards and, thus, another forum is simply unnecessary.

The fourth criterion is to

"provide value-for-money services—services should be provided effectively, efficiently and in an integrated and coherent way, ultimately driving up customer satisfaction".

That seems to be the kernel of the argument. I am not sure whether the affordability and value for money criteria can be met in the current circumstances. Debt has increased, particularly that of the Plymouth, South Hams and Exeter authorities—I believe that Exeter city council has £20 million in Icesave alone. Lessons should be learned from the places where these unitary changes have taken place, not least Cornwall and County Durham. Everyone, even the Liberal Democrats, would admit that Cornwall's authority is not working properly, and County Durham's went completely over budget, as we have heard. My hon. Friend the Member for Bromley and Chislehurst, who spoke from the Front Bench, alluded to Professor Chisholm and Professor Leach's book "Botched Business", which articulates in an almost frightening way what has gone on with these changes.

Another thing that no one has touched on is staff morale. We have paid lip service to staff by saying what a great job they do in local government. I would argue that some of them do a great job in local government. On the whole, people working for local authorities do the job that they are set to do. If they do not do so, they should not be doing the job. There is an enormous degree of uncertainty among employees. I am not talking about the councillors, who will move on to whatever council organisation is in place—if they are lucky enough to get selected. That is part and parcel of being a democratic politician. The existing structures contain people who have devoted their careers to working for the organisations, and feel closely associated with them. Their morale is very low, and they will be delivering their services in a difficult time. So, the sooner the Government can scotch this approach, the better.

The changes should be affordable. I alluded to why the Exeter city council bid for unitary status was turned down; it was not affordable or workable. I do not believe that any of these changes would be workable. East Devon district council, my local body, is debt free, whereas Devon county council is more than £500 million in debt. Its debt has risen steeply, from £365 million in 2003 to £614 million now. That is an increase of about £250 million in five years. When the Minister talked about the effects of a credit crunch, he was perhaps underestimating the effect that the economic downturn will have on the delivery of local services.

One needs only to look at the different sections of the front page of The Times today, which state:

"Nearly 10,000 jobs are to be lost and up to 100 courts could close as budget cuts hit the public sector."

Mark Serwotka, the general secretary of the Public and Commercial Services Union, articulated the union's fears when he said:

"Banking bailouts should not be at the expense of public services."

The article also states:

"With most experts forecasting that unemployment will exceed government estimates, the bill for welfare payments is almost certain to rise further... £1 billion of policy initiatives are in jeopardy".

It also states that cuts in jobs in the prison, probation and court services,

"along with a freeze on new recruits or the use of agency staff, could lead to the closure of up to 100 courts."

That is just the beginning. To use an Icelandic analogy, it is the tip of the iceberg. Things will be very serious for local authorities in the months ahead. It is more important than ever that they should deliver first-class services in an affordable and efficient manner while they are under that great strain.

Others have spoken in far greater detail than I shall about the emergency intervention that the Government will make with the LGA, about the £300 million of English and Welsh councils' assets that it is hoped will be recovered from the two Icelandic banks and about the 116 councils and other organisations that are affected by that problem.

In this debate, we are talking about what local government is meant to deliver in these difficult times. In my local council area, there are concerns about the move by Government to help first-time home buyers, which will take millions of pounds out of the regional budget for business investment according to the South West of England Regional Development Agency. Ministers have decided that the £300 million HomeBuy Direct scheme to support first-time home buyers should be funded through a partial reallocation of existing RDA budgets. That will mean that £20 million or £30 million will effectively be taken out of the RDAs' budgets for their current projects. That reallocation will largely affect the RDA expenditure in 2010-11 as things stand.

The leader of my district council, Sara Randall Johnson, has asked the Minister for the South West and the RDA to ensure that that money is spent in the south-west. It is important, if money is to be taken out of the south-west's RDA, to ensure that that money is spent in the south-west region. We have yet to receive an answer, so I would be grateful if the Minister could respond in due course.

East Devon district council, incidentally, is also asking to use the £5.4 million that it has in housing revenue subsidy, which is paid back to Whitehall, to fund new housing initiatives in east Devon. Other local councils might take note of that. It will be enormously important if the council can get that money back to fund housing because we already have about 4,500 people on the housing waiting list in east Devon. That figure grew during the last financial downturn. Inevitably, people with small businesses borrow against their properties and when the business closes the mortgage becomes unaffordable. That means that they hand their key back and turn up at the housing authority asking to be housed. We will see that happen over the coming months. The Government should consider seriously the bid made by East Devon council, as a locally and democratically accountable organisation, to be given back that £5.4 million to spend on the ground, where the council is best able to identify the need.

The Secretary of State was asked yesterday, I think, about the accountability of regional Ministers. It seems to me that regional Ministers are phantom Ministers. In my case, the Minister for the South West, Mr. Bradshaw, has a pretty full-time job, I should imagine, at the Department of Health. There is no way in which one can hold a regional Minister to account in his capacity as regional Minister. He is not accountable to Parliament and I do not believe that he has an additional secretariat provided by Parliament to do his job. If he is a spokesman for the south-west, why do we not hear him speaking up for the south-west a little more than he does? I am not singling out the Minister for the South West—I would make the same comment about every regional Minister.

We know that there is an internal Government wrangle between those who want to set up regional committees to hold the regional Ministers to account and those who resist the idea of such committees. We do not know how much they will cost or how they will be staffed. Would employing professional staff mean that Government grew even bigger?

The present situation is hopeless. The Prime Minister is committed to setting up the unelected and unaccountable regional assemblies that are the brainwave—if that is not an oxymoron—of Mr. Prescott. We would be glad to see the back of those, but getting rid of them would mean that planning and other powers were transferred to the RDAs, which are far from satisfactory in other ways.

We need to look at how local services are delivered. There was an extremely good debate on 7 October in Westminster Hall on regional spatial strategy in the south-west. More than 20 Members of Parliament attended, but none had any clear idea about who would be responsible for the delivery of local housing and budgets after the regional assemblies were abolished. The Minister and the Government need to look urgently at how local democracy is delivered.

I shall end by saying that this is not the time to look at changing local government in my county of Devon. To paraphrase what the Minister for Local Government said at the start of the debate, local government should do what is written on the tin. In Devon, it is working: it could do better, but the two-tier enhanced system is by the far the best and most affordable. In these times of economic uncertainty, affordability must become the key criterion.

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Photo of John Mann John Mann PPS (Rt Hon Tessa Jowell, Minister of State), Cabinet Office 6:01 pm, 15th October 2008

There seems to be a consensus that Government at all levels will need to consider some belt tightening, given the rocky state of the world economy, and we could contribute to that by looking at the number of politicians that we have. There are far too many in Britain today: there are not too many in the Chamber at the moment, although the total of 16 who are here is akin to the number who would turn out for a debate in local government in some areas. However, reducing the presently vast numbers of MPs to 400 would be a good first step in cutting our cloth to fit the times, and reducing the membership of the House of Lords from more than 700 to a maximum of 100—I could be persuaded that it should be zero—would be a good second step.

Local government is the third area where there are too many politicians, and we all know that all political parties in many parts of the country struggle to find sufficient people—not just people of the right calibre, but sufficient people full stop—to stand for local government elections. As well as having too many national politicians, we also have too many local ones, and there may well be a consensus in society that politicians should be seen to cut their cloth appropriately.

One problem that is exacerbated in local government is that many of the politicians at each level are employed. The fact that increasing numbers of them are paid for the position that they hold is a change of culture, and it is not necessarily a change for the better. One reason why changes have progressed more slowly than they should have in some parts of the country is that the turkeys have not voted for Christmas—that is, the people involved in local government have not opted for irrational amalgamations in size or structure.

There are two arguments for having unitary authorities in areas such as mine. The first is that neighbouring unitary authorities in south Yorkshire can charge an average of £200 per household more for a band C property, whereas we have to pay for a two-tier structure. Where does the money go? The chaos of the floods showed us that; we saw officers from the district and the county councils meeting to discuss who had the responsibility for sorting out the problems arising from the flooding. It was a classic example of how an irrational local government structure leads to the involvement of too many people, and I hope that the Government will continue to pursue the policy of establishing unitary authorities. The unitary structure is the rational one, and it would be very welcome in areas such as mine. Indeed, I would go further: if councillors are not prepared to move forward on that issue, we should make it much easier for the local electorate to determine whether they wish to have a unitary authority, whether the councillors like it or not. In some parts of the country, that would be welcome.

The term "democratic deficit" has been mentioned; that is an issue that does not get enough of an airing in the Chamber. There is a democratic deficit, but the problem goes much deeper than whether central Government are taking powers from local government. There is a different level of democratic deficit. Let me illustrate the point with a couple of examples.

The village of Misson in my constituency has got the country's only mushroom composting operation. That agricultural operation repeatedly creates a rather pungent odour. The legislation to deal with that is national legislation, but the authority that has to police the legislation is a small district council that is loth ever to spend any money on taking anybody to court, be it to impose an antisocial behaviour order or to deal with companies that pollute the air—illegally, in most people's estimation. It is clear that when the parish council and all local people wish action to be taken, they should be able to get national Government to override the powers that they gave to local government and take power at the behest of the parish council, which represents the views of the local community. That would be democracy in practice. For many years, there has been circular argument about how one gets the district council, which has no specialism in the subject—and why should it?—to police and monitor a specific, bespoke operation.

Let me give a second example: the aggregates levy. In Nottinghamshire, that levy—taken from and paid for, of course, by those quarrying aggregates—goes, via central Government, back to local government and into a central pot. The money is not earmarked for areas affected by aggregate extraction or transportation, but is in a central pot. That is clearly nonsense. Again, the local community and local parish councils in Misson and Scrooby, in transport areas such as Harworth, and in Sturton le Steeple should be able directly to request an element of the aggregates levy, rather than it being circulated back into a central pot for one tier of local government to spend as it wishes.

I give a third example: neighbourhood renewal money. I represent two neighbourhood renewal areas, Warsop and Manton. The money goes to a neighbourhood renewal team. In one case, there is a parish council, and in the other there is not. The funding is managed by the district council on the basis that the money goes to local people. Perhaps that money ought to go through a parish council. I would be interested to know whether the Conservative party even intends to maintain the neighbourhood renewal money; perhaps Mr. Goodman could give us an answer in his winding-up speech.

On the local authority business growth initiative, Bassetlaw district council has £1.5 million from the Government for local business growth, but half that money—£800,000—has been earmarked in its budget for job evaluation. The answer that I got to my written question on the subject was, "It's up to local government to decide how the money is spent." Why is money to promote local business growth being spent on job evaluation? Of course job evaluation needs to be paid for, but not from money that is critically needed for business growth. At this of all moments, it is absurd for local councils to make secret decisions to squirrel away business growth money. It is precisely now that we need businesses to grow, so that we can ensure that jobs are available for local people.

The Travellers policy in my locality is a classic case. All the local authorities in Nottinghamshire came together to decide on their Travellers need assessment. There was to be one assessment and one need determined for all Nottinghamshire. Bassetlaw, in its ultimate wisdom, went it alone, and went first. Surprise, surprise, it suggested that it needed 43 Traveller emplacements. There is currently only one Gypsy living in a caravan in the district, but based on a perceived Gypsy/Traveller requirement, it seems that 43 places are needed. That was put in without any consultation with anybody. I asked the Minister to intervene, because local people were not consulted—the matter did not even go to a meeting of elected councillors; the decision was made arbitrarily by one cabinet member—but central Government have no powers to intervene.

Who should receive applications, such as the Showman application to build a site three times the size of Oldcotes village, but Oldcotes parish council? Out of the blue, it received that planning application, because Bassetlaw arbitrarily assigned it that way. That is not local democracy at work.

The ability of local parish councils and communities to approach central Government directly and have their views considered needs to be greatly strengthened. In planning especially, we need proper powers for local parishes, especially when they have gone through the whole rigmarole of determining their own local development plan and having it agreed as part of the local plan. They should have a bigger statutory role in such matters.

My final, and best, example is the Elkesley bridge. The villagers of Elkesley have needed a bridge over the A1, which has left their village almost inaccessible to the outside world, for 30 years. The decision has to be made by central Government, but the district and county councils do not make that bridge a priority in the regional transport plan. It is left to me and the local parish council to persuade central Government that they should fund that bridge. If we took out those two tiers of local government and allowed the parish council to access central Government directly for a decision, it would enhance local democracy.

My final point concerns the Icelandic situation. The Fitch report for 22 May, given out to local authorities by Butlers, is straightforward. It unequivocally gives the Icelandic banks a negative rating for the first time. We need a proper investigation—at a later stage, as it is not a priority now—to discover why the handful of councils that took decisions after that date did so. Why did they not read the ratings from Fitch? If they did read them, why did they ignore them? Such speculation with council taxpayers' money is a step too far for any authority.

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g

It seems quite clear that Michael Penning is scared of being knocked off the gravy train. Does he really think that the majority of MPs....the silent,unknown, frequently absent so-called peoples representatives are a neccessity!
For most members of the general public 650 members of Parliament is excessive and most are surplus to requirements.
Mr Mann is quite correct. There are far too many and they they should be severely pruned back.

Submitted by gordon taylor

Photo of Mike Penning Mike Penning Shadow Minister (Health) 6:13 pm, 15th October 2008

It is a convention to be courteous to the previous speaker, but I would be misleading the House if I were to be courteous to John Mann. Many of the issues that he has just waffled on about were debated hours ago. If he had been here for the opening speeches or for any of the debate, he would have heard that and not wasted the House's time.

I want to talk about an issue that is very important to my constituents—that is why I am so passionate about it—and that is the Buncefield situation. The incident occurred nearly three years ago on 5 December 2005. Dacorum borough council is not the largest—or the smallest—local authority in the country, but it did fantastically well with that incident and subsequent events. However, many of the issues it has to deal with every day are too big and too complicated. Some are also delicate national issues, but that small local authority still has to deal with them every day.

One issue, which is plain common sense to anyone who understands planning, is that the existing safety planning—the control of major accident hazards regulations—for the depot, which was blown to smithereens by three explosions and the subsequent fire, still exists and can be used by the oil companies, should they wish to rebuild the depot. It is ludicrous in the 21st century that the legal safety regime allows the depot, which was obviously dangerous—the inquiry is still going on three years later—to be rebuilt.

My local authority, like all local authorities, cares passionately about the safety of its residents. I am sure that all hon. Members care about that as well. It would love to say, "Let's suspend the legal planning regulations for that depot at least until the end of the inquiry." The inquiry is still going on, and many of us would like to see a subsequent public inquiry. However, the local authority is fearful of doing that, because litigation would be brought by the large oil companies almost immediately to attack it in the courts on the basis that it does not have the legal grounds to do so. That is where central Government—I have met the Minister for Local Government, who knows my views, and I am sorry that he is not in his place to hear this again—should come in and help local authorities. I am all for local authorities doing as much as they can and for devolving power to them, but when the issues become too big, too complicated and too dangerous, central Government have to help.

The regional authority has provided a degree of help. Frankly, I do not want help from the regional authority; I want central Government to say what is right and what is wrong for the safety of my constituents. The Government cannot continue to say that the powers have been devolved and that it is down to the borough council to get legal advice and to challenge three of the biggest oil companies in the world on the future safety of my constituents.

I am pleased that the Under-Secretary of State for Communities and Local Government, Mr. Khan, who is responsible for housing, is on the Front Bench, and I welcome him to his new role—we have exchanged banter on many subjects over the years. Believe it or not, there is a proposal to build 12,000 houses around the Buncefield site. Everybody knows that the safety zone around the site—it is known as the consultation zone—must be expanded, yet English Partnerships and the Crown Estate, which own the land around the Buncefield site between the M1 and the boundary of Dacorum borough council, propose to build housing on the site.

As it happens, if there is going to be housing in and around my constituency, I would prefer to protect the green belt, which has been earmarked for development since the new town was built, so I would rather that the housing went on the land around the Buncefield site. In that case, we would need a lot of infrastructure, and there would be a lot of problems because the land crosses borough and district boundaries, but if the Government are going to force 12,000 houses on us, the houses should be put there. However, the housing should not be put there if Buncefield is allowed to be rebuilt.

The greatest concern for my constituents is that Buncefield will be rebuilt without learning from the mistakes of the past. There are pressures on the Government and the oil companies to rebuild Buncefield, because the aviation fuel is needed for Heathrow. The simple question that my constituents put to me is why is Buncefield needed for Heathrow, when Heathrow has operated successfully for the past three years without Buncefield? Other methods have been used, such as bringing in fuel from other depots.

Huge pressure is being exerted on a small borough authority that wants to do the best for its community. I am also under pressure, because I have attended meetings with large oil companies at which they said that the Buncefield site was a piece of national infrastructure that they must be allowed to rebuild. When I meet Ministers, speak to Departments and secure Adjournment debates, the responsibility is always pushed down to the local authority, which does not have the expertise, let alone the funding back-up, to take on the oil companies.

I have discussed Buncefield on many occasions in this House, but I will touch on a related point—only briefly, however, as I want my colleagues to have more time to speak than me. The point is the change in the rules on the business rate for an empty property. The Government have changed the rules so that if a business property is empty, 100 per cent. of the business rate is payable rather than 50 per cent. That may be right or that may be wrong—I do not want to get into the debate about whether it is right nationally—but it cannot be justified in and around the Maylands industrial debate, which is located at the side of Buncefield, where properties were blown to smithereens. Businesses were going to be charged 50 per cent. of the rate, which I still think is an abuse, but they will now be charged 100 per cent. of the business rate, while companies are still trying to decide whether it is safe for their employees to return to those buildings, if they were to decide to rebuild them.

It is morally wrong to penalise an organisation and for jobs to be lost in a constituency simply because there has been an arbitrary change that does not allow a local authority—which, as everybody knows, has no control over business rates—to say, "Hold on a second. We need to protect jobs."

I ask the Minister to speak to his colleagues to ascertain whether there is any way for businesses in my constituency which have been devastated by the explosion—through no fault of their own whatever—to go back to at least the 50 per cent. rate while we assess the problems caused by the Buncefield incident.

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g

It seems quite clear that Michael Penning is scared of being knocked off the gravy train. Does he really think that the majority of MPs....the silent,unknown, frequently absent so-called peoples representatives are a neccessity!
For most members of the general public 650 members of Parliament is excessive and surplus to requirements.
Mr Mann is quite correct. There are far too many and they they should be severely pruned back.

Submitted by gordon taylor Read 1 more annotation

Photo of Brian Binley Brian Binley Conservative, Northampton South 6:20 pm, 15th October 2008

Patience has its own reward, and I am delighted to take part in this debate. May I declare an interest? It is well known that I am still a county councillor, having served for almost 12 years. I will cease to be one come May, because my constituency and electoral division are not coterminous, but I shall leave with great regret. I join the many who have said tonight that local government has a massively important role.

I want to take issue with the White Paper and its broad aims as stated by the Secretary of State for Communities and Local Government in July this year. She said that the broad aims were twofold:

"to rehabilitate local political activity as a worthwhile activity" and to pass more power to the people, so that they feel that if they get involved, it will be worth their time and effort. She said that the key themes were about "power, influence and control" for local authorities and local people. I wish I could accept that with any real fervour, but the truth is that for many in my constituency, the very opposite of those words applies to the Government's actions with regard to local government.

The poor Government funding formula under which local government in my area—especially my county council—has to labour year after year has massively reduced local power, undermined influence and detracted from good local government. The major reason is plainly the Government. The funding formula is a disaster for Northamptonshire. The ad hoc adjustments that the Government have made from time to time have proved a disaster for the county and they have meddled unfairly in the distribution of moneys that rightly should have come to Northamptonshire, but have gone to other areas of the UK, seemingly for political reasons. That makes my constituents angry; it is right that that should be said in this place. The shift of resources away from shire counties to other areas—Labour areas, dare I say—has been nothing short of disgraceful. My constituents are well aware of that, and I shall make sure that they continue to be so until the next election.

Let me give some facts to support that assertion. In 2006-07, per head of population, taxpayers paid £2,313 for health and social services in Scotland; for the same services in England, the taxpayer paid £1,915. When we take free prescriptions into account, the gap widens. Nobody can tell me that that is fair in any circumstances; my constituents would certainly not believe that it was. Let me proceed: taxpayers spent £2,109 per head on patients in Wales—more than £194 more than the same per capita payment in England. When we add the fact that the divergence within England is sizeable, we recognise that the funding from national Government for local services in my county and constituency is among the poorest across the board. Again, I say that that is unfair.

In July 2008, when the Institute for Public Policy Research looked into how the Barnett formula was put into effect, it found that Scotland was getting 11 to 18 per cent. too much money for the nation to be treated fairly and that England was getting 1 to 2 per cent. too little—an overall gap of 12 to 20 per cent. Nobody can tell me that that is not partly political. I have heard all the arguments about deprivation. Perhaps this is about the deprivation of future Labour candidates who might not win their seats, for there certainly has to be a better reason than deprivation for that great gap to have occurred.

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Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I congratulate my hon. Friend on his excellent speech. Is he aware that in the borough of Kettering, for every £4 that council tenants pay to the council, the council is forced to pay £1 to the Chancellor of the Exchequer, not for redistribution to poor housing areas in other parts of the county but to be used in general Government expenditure? Does he agree that that is a stealth tax on council tenants?

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Photo of Brian Binley Brian Binley Conservative, Northampton South

I fear that it is. I am grateful to my hon. Friend for that interjection. I well know how strongly he feels about the subject, and it is worth repeating many times.

We raised this matter with the then Minister for Local Government, who recognised that local funding for both revenue and capital can be "lumpy" in places. That is a gentle way of putting it; my constituents would put it in slightly harder terms. The formula does not take into account the proper population figures, as was recognised by the Minister some time ago when he told me that the Office for National Statistics had stated that there had been no growth in Northampton and the surrounding areas between 2001 and 2008. It might come as a surprise to him to learn that that figure was wrong. We have had 13,824 new houses built in that time, and I can assure him that they are not all empty—in fact, people love living in my part of the world and are queuing up to get there. Schooling is very good there, and that has added enormously to the population, but that is not recognised in the funding formula. I could go on about this, Mr. Deputy Speaker, but I know that you will be keen to end the debate at the time you have decided, and I do not want to be cut off in mid-flow.

Another matter that my constituents feel strongly about is the setting up of a quango to make major planning decisions affecting my area, thereby taking those decisions away from local authorities. The quango is called West Northamptonshire development corporation and, by golly, my constituents feel angry about it. Its job is to oversee 100,000 new dwellings and a commensurate increase of 200,000 new people by 2021. That underlines how my constituency and those of my neighbours are growing in population terms. By that time, we will need six upper schools, 18 primary schools, 400 additional hospital beds and 26 doctors' surgeries, to say nothing of policing, leisure services, transportation, sewerage and water facilities—I could go on ad infinitum.

The growth is to be massive, so who is to guarantee the money for that big list of infrastructure requirements? The Government say that they will not do so, but hope to raise it from various means such as section 106 agreements and roof tax. The plans are quite vague. I do not need to tell the Government that house building has dropped off the edge of a cliff, not only in my constituency but in many other areas of the country, and the chances of getting that money are almost non-existent.

What we are going to see? Are we going to see more social housing? There is a need for it. Are we going to see council housing? I support council housing. I know, however, that we will not get the money via the means set out by the Government—from developers or from land taxes of whatever kind. That creates a sizeable concern for my constituents.

Furthermore, not only is the quango in control of planning decisions, but it takes decisions in total defiance of the stated will of the local population. I shall give two examples. There is a new development in the Grange Park area of my constituency. Planning permission was submitted, and all three district councils involved objected. The Environment Agency, Anglia Water and the Highways Agency all objected—I could go on and on, but we know the end of the story. Planning permission was given in spite of the fact that there were no guarantees for the schools, roads and policing that will be needed once those houses are built to help and sustain those who move into them.

All the councillors on the planning body advising the urban development corporation argued that an application for a wind turbine of 147 m on an industrial estate should be rejected. What has happened? The decision was deferred by the officers of the quango, who have every intention, I am told, of passing it on the next occasion. So much for local democracy. So much for encouraging people to take part in local government in a worthwhile and interesting fashion. Why should they when local issues are so deliberately disregarded, and when their role is so deliberately demeaned?

Fine words butter no parsnips, as my grandmother would say. I know that you understand the saying, Mr. Deputy Speaker, but perhaps many young people would not nowadays. The actions of our local quango make the point that the Secretary of State is happy to issue fine words, but the Government's action tells us that they do not really mean very much. That is what my local constituents and other people in surrounding areas believe. So what should the Government do? Let me be bold—let them be bold, too—and see whether I can get a response from them. We should remove the planning function from the urban development corporation forthwith and restore it to the local authorities that were elected to carry out that function. The very fact that something does not suit a Government plan is one of the reasons why we have local government. It is one of the very reasons why we devolved power. That is what the Secretary of State says we need, but the Government's actions deny their words.

Secondly, we should review the funding formula and simplify it to make it more robust. It should react to population increases in real time and ensure that the people I represent are treated fairly. They are not at the moment, and local government is suffering. When I was a finance portfolio holder, I had to cut £45 million and another £41 million in two consecutive budgets. Finally, we should scrap the Barnett formula and create a new one that more fairly distributes taxpayers' money between the various regions of the UK, taking into account the factors that it needs to, but not allowing for the sort of political manipulations we have seen. The Government should stop the spin, act upon their fine words and restore faith to the system. If they did, my constituents would be delighted, but I fear that the Government are not going to have the courage to act in that way.

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Photo of Paul Goodman Paul Goodman Shadow Minister, Communities and Local Government 6:34 pm, 15th October 2008

Although my hon. Friend Robert Neill cheered us all up with his knockabout attack on the various follies and errors in Government policy, the debate has necessarily been rather sombre, given the background. It has also been thoughtful and constructive, and I want to respond to some of the main points.

I am sorry that the Minister is not in his place—doubtless, he will scurry in shortly—because I wanted to congratulate him on his elevation to the Privy Council. In the light of that good news, I expected many Government Back Benchers to flock in to support him. However, at the start of the debate, only two were present, neither of whom—how can I put it politely and diplomatically?—is famous for supporting every dot and comma of Government policy. Nevertheless, the Minister did his usual excellent job, in his polite, thoughtful and constructive way—and we are grateful for his comments about the Icelandic banks—of defending the indefensible.

Julia Goldsworthy presented the argument, as I expected, for local income tax. To put it mildly, we do not agree with her. We do not believe that, at this point in the economic cycle, with a downturn looming, we should impose more taxes on hard-working families. However, I am determined to agree with her about something, and I agreed with her intervention about IN35, one of the indicators that measures PVE—preventing violent extremism. She was right to point out that the Government should ensure that money does not go to extremists, but that local councils should have the maximum flexibility to use PVE money as they want.

Mr. Campbell, who has not returned, made a doughty defence of his local interest. John Mann asked me for a commitment on neighbourhood renewal money. I am sorry to disappoint him, but I am not in a position today to write on the Floor of the House our general election manifesto on every pot of money that the Government produce. I know that he will be disappointed, but I am afraid that he must live with that.

My hon. Friend Mr. Swire made, as always, a polished and assured speech, and demolished the various follies of unitaries. He made a telling point about parish councils, which do a job that the Government seem to want to reinvent.

My hon. Friend Mike Penning reverted, as one might expect, to the Buncefield fire, a subject that he has raised many times. It proved again, were proof needed, that he is capable of phenomenal hard work on behalf of his constituents.

My hon. Friend Mr. Binley brought all his council experience to bear—I am sorry to hear that he is finally to leave his local government post—on various aspects of Government policy with which he disagrees.

I want to ask a few questions about community cohesion, especially about the way in which the Department perceives the role of local government in helping prevent violent extremism—an aspect of local authorities' work that we have not discussed so far. I will make three brief points about that.

First, it is wrong to assume that violent extremism is the monopoly of any particular ethnic or religious group. It is worth noting that, in the past year, a neo Nazi from Yorkshire was sentenced for serious offences under terrorism legislation for designing violence to be committed specifically against Muslims.

Secondly, we must recognise, however, that the main threat to public safety—to Muslims and non-Muslims alike—comes from those who would exercise violence in the name of Islam. I would like quickly to make the point that it is not often appreciated that Muslims face a particular difficulty, because the aim of al-Qaeda is to drive out mainstream Muslim leadership and replace it.

Finally, many people talk about the causes of violent extremism and give different reasons for it—the failures of multiculturalism, foreign policy, discrimination, and so on. The point is that local government has to pick up those issues and deal with them. They are not just a matter for national Government. I appreciate that the Minister will not have time to answer all my points, so I would be grateful if he indicated that he will write to me about any that are outstanding.

Government policy on preventing violent extremism has been through three main phases since 2007 and the horror of 7/7. The first was to work through the preventing extremism together programme, with which I know the Minister was involved, with partnership organisations at a national level. The second phase, begun after Tony Blair rushed out his famous—or notorious—12-point plan, saw the Department for Communities and Local Government in the driving seat and the start of the preventing violent extremism programme or PVE, the flagship DCLG scheme. The third and current phase sees the Home Office back in control, seeking a more targeted approach. We must all hope that the latest strategy works, and of course we entirely support its aim of preventing extremism and supporting moderation. However, it raises questions about the future of PVE and the role of local authorities.

As I have told the House before, we must recognise that targeting taxpayers' money at one faith community is problematic. None the less, given the seriousness of the threat of violent extremism, we have supported PVE and continue to do so. Indeed, I pay tribute to some of the good work that I have seen up and down the country. However, we must recognise that considerable sums are being invested in PVE—some £45 million this year and the next two years, on top of the £7 million or so that was spent on it last year. It is vital to ensure that the money is effectively spent.

The Department should therefore surely support an independent study of the scheme's effectiveness in achieving its indispensable aim of preventing violent extremism. If Ministers will not commission such a study, questions are increasingly bound to be asked about whether the scheme, which works through local authorities, is achieving its aims. We have to be sure that it is doing so. Will the Department commission an independent assessment of the effectiveness of PVE?

In July, the Secretary of State announced that she planned to establish a new board of academic and theological advisers. I previously floated the idea of a privately financed institute of British Islam to achieve the same aim and we have some reservations about the danger of the state being seen to impose a preferred model on British Muslims. Will the Minister say whether members of the board have been appointed yet and, if so, who they are, whether they have met, whether they will publish any reports and what role local authorities will play in the process, if any?

We are aware that the Mosques and Imams National Advisory Board published a draft constitution last year and obtained responses, and has since published a second draft constitution in the light of those responses. We would be grateful if the Minister said when MINAB will publish a fully fledged constitution and what plans there are, if any, for links between MINAB and local authorities.

In closing, I make no apology for returning to the implications for community cohesion and local government of sharia courts in the UK, a matter on which the new Minister quite properly opined last weekend and which we discussed yesterday. As both I and the Minister intimated yesterday, my hon. and learned Friend the shadow Home Secretary has received a letter from the Home Secretary confirming that Muslim arbitration tribunals were established in Britain last year. We have no objection in principle to the use of arbitration vehicles, including such tribunals, to resolve private family and contractual disputes. However, those tribunals will clearly be run by sharia judges and are therefore likely be marketed to Muslims as state-licensed sharia courts. There are, in particular, important questions about whether Muslim women will always come before such tribunals voluntarily.

I want to put it on record that we are deeply concerned about the paucity of information that we have received from the Home Office and about the implications, therefore, for community cohesion. This is a subject of great public interest, as the Archbishop of Canterbury, for one, will confirm.

Ministers do not appear to have announced the establishment of these tribunals last year. They have not said how many there are, or who was consulted. They have not told us who the mediators or judges are, how many cases have been heard or what measures are in place to protect women. The House and the public are being told very little. I was grateful to the Minister for confirming yesterday that he will use his good offices to clear up these matters, by ensuring that we get answers in writing, but our message to Ministers this afternoon is that they should not take refuge in letters that conceal more than they reveal.

I could close this debate in the manner in which my hon. Friend the Member for Bromley and Chislehurst quite properly opened it, by attacking all the flaws and follies of Government policy in relation to centralisation, the target culture, the planning quangocracy, the gimmicks—such as doughnuts for voting—to which my hon. Friends have referred, and people pressing buttons when councillors are not even in the chamber. Or I could refer to the absurdities of the Standards Board for England, about which so many councillors complain.

However, given the questions that I have just raised, to which I am seeking answers from the Minister, I would like to end on a note on which I think the whole House can agree. The challenges of violent extremism are clearly serious. If we are to succeed in tackling it, much of that success will depend on the effectiveness of an unwritten social contract between British Muslims and non-Muslims. Non-Muslims, such as me, all the non-Muslim Members of Parliament and others, have to make Britain a warm place for mainstream Islam and acknowledge the contribution that Islam has made to the west in the past, is making now and will surely make in the future.

The other side of that social contract is that Muslims themselves must continue—as the majority do—to seek to drive out support for terrorism and extremism. The success of that social contract will depend on what is effected not only at national Government level but at local government level, where local councils have responsibility. That is the forum in which many of these great issues will be decided. I look forward to hearing the Minister's reply.

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Photo of Sadiq Khan Sadiq Khan The Parliamentary Under-Secretary of State for Communities and Local Government 6:47 pm, 15th October 2008

It is a pleasure for me, Mr. Speaker, to wind up a debate for the first time with you in the Chair, and that its subject should be local government. I was a councillor for 12 years, serving with great pride in the ward of Tooting in the London borough of Wandsworth. Robert Neill, who opened the debate for the Conservatives, also has considerable experience in that regard.

When the Minister for Local Government opened the debate, he spent almost an hour talking about local government, and he rightly went into huge detail about the consequences for local authorities of the problems in Icelandic banks. The fact that we have ended our debate with a discussion on the means of preventing extremism demonstrates the depth and breadth of the issues that local government covers, from the free doughnuts proposed by the hon. Member for Bromley and Chislehurst to the pungent smell of mushrooms in the constituency of my hon. Friend John Mann.

I want to begin by paying tribute to the thousands of local authority employees; who do a tremendous amount of work, and who often dedicate their careers to public service through being council employees, and to the many others associated with local government. I also pay tribute to the thousands of councillors who do such a huge amount of work around the country. Many distinguished Members of Parliament are former councillors; some are about to be former councillors; and some might have become better parliamentarians had they had the experience that some of us have gained in council chambers.

I have only a few minutes in which to touch on many of the points made in the debate. I enjoyed the passion with which the hon. Member for Bromley and Chislehurst talked about the Icelandic bank crisis. He is a West Ham fan, and one can appreciate why he has been quite troubled over the past few days. We were not sure where his passion came from, but we gave him the benefit of the doubt and decided that it was a passion for local government.

The hon. Gentleman brought a smile to my face, as someone who served in the London borough of Wandsworth for 12 years. He will remember when, in 1991, the then Prime Minister decided to set a huge dampening grant for certain local authorities. Westminster and Wandsworth were the two beneficiaries that ended up with a zero council tax. When the hon. Gentleman referred in his speech to "screwing the system", I, of course, knew that he had recently re-read the John Major autobiography, so he knew why some local authorities got a huge whopping dampening grant and could set such low council taxes.

I particularly enjoyed the hon. Gentleman's analysis of local government finance and the robust approach that he took to it, as well as the detail with which he explained the issues. I have to say, however, that although he spent a lot of time—almost 30 minutes—offering a critical analysis, I do not remember any beef in terms of what his party would do if, God forbid, it were to form the next Government. That silence spoke volumes.

The hon. Gentleman spoke about the bonfire of regional bodies that have huge levers to do a huge amount of good and about the bonfire of the standards regime and accompanying regulations that ensure that councillors maintain minimum standards. He will be aware that, in the current climate, there is a debate to be had about the bonfire of regulations in the mid-80s, which some say led to today's problems. We await with interest the evolution of Conservative policy on local government.

My hon. Friend Mr. Campbell spent considerable time talking about his concerns about Northumberland. I know that my hon. Friend the Minister for Local Government has visited Northumberland and that he was making copious notes as my hon. Friend was speaking. I am sure that some of the points raised will be dealt with via correspondence.

Julia Goldsworthy spoke about issues ranging from the White Paper and localised business rates to the unfairness of council tax, as she sees it, but the interventions on her demonstrated how unfair we think her proposals are as an alternative. The hon. Lady talked about police authorities and revaluation, but her main concern—and rightly so—was the Icelandic bank crisis and its impact on local authorities. She wanted us to provide more detail about what sort of authorities the 16 affected were—the 13 and the other three that my hon. Friend mentioned. I cannot go into any more detail than did my hon. Friend, except to say two things. First, a joint statement has been published by the Local Government Association and the Government, which the hon. Lady can obtain at the end of the debate. Secondly, the sort of local authorities affected are wide ranging: there is no one type, as they are different councils in different parts of the country and the circumstances are different in each case.

The hon. Lady also criticised us—unfairly, I thought—for following events rather than acting in advance of them. She will be aware that we set up a rapid response team before we knew about the need to use it for local authorities and she will know that its representatives are now helping local authorities up and down the country. I also have to disagree with her analysis and agree with that of my hon. Friend the Member for Bassetlaw, who said that now is not the time for post-mortems or the blame game. That time will come, but our priority now must be to ensure that investments are safe, that jobs are secured and that local authorities are able to serve our constituents. It is not possible to have it both ways. On the one hand, we are criticised for trying to ensure some minimum standards and for trying to help local authorities through partnerships; on the other hand, we are criticised for not having given more stringent advice to councils on where they should invest their money. As I say, one cannot have it both ways: devolution means just that.

I thought that Mr. Swire made an excellent speech, and I say that in a non-patronising way. As a London councillor and London MP, I will not have experienced first hand some of the changes that he articulated. I know that he feels passionately about the subject and he made a clear case. Let me inform the House that the hon. Gentleman was correct that we are still waiting for the boundary committee's final advice to the Secretary of State at the end of 2008. Until we receive that advice, the Government have no role, so I am not going to comment further on the specifics that we heard this afternoon. I assure the House, however, that we will give proper consideration to the boundary committee's advice and that we will take note of all representations received in the allotted time before we take any decision.

The hon. Gentleman also spoke about the accountability of regional Ministers. He criticised the setting up of regional Select Committees because he saw them as further increasing the size of government, but I am sure he will be aware that Select Committees play a huge role in providing scrutiny of Governments through checks and balances. The hon. Gentleman may not be aware that on 6 November, a debate is scheduled on that very topic and we will see if the recommendations on those Committees are supported.

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

The Minister is absolutely right to say that Select Committees provide an important balance, but does he not think that if the Government were committed to demonstrating Select Committees' commitment to the devolution process, their chairmanships would reflect the political party balance of the region rather than which party is in government? It does not look as though we shall have anything other than a Labour chair of the south-west regional Select Committee.

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Photo of Sadiq Khan Sadiq Khan The Parliamentary Under-Secretary of State for Communities and Local Government

I am grateful to the hon. Lady for that helpful intervention. As she knows from her long experience in the House, those are matters for the House and its administration. I am aware from some of the minutes of the Modernisation Committee, which make pretty turgid reading, that there has been a huge amount of discussion about the issue. I gather that the meetings were more fun that the minutes.

The hon. Member for East Devon also raised a matter relating to the Minister for the South West, my hon. Friend Mr. Bradshaw. I will not go into it, for reasons that the hon. Gentleman will understand. The Minister for the South West is a friend, and an honourable friend.

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Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

The Minister is being very gracious in giving way. Let me clarify for the record that I referred to the hon. Member for Exeter in the context of the south-west, and pointed out that whatever I said about him could apply equally to other regional Ministers.

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Photo of Sadiq Khan Sadiq Khan The Parliamentary Under-Secretary of State for Communities and Local Government

I think the hon. Gentleman said that my hon. Friend was building a fortress around Exeter so that he could not be defeated. I paraphrase his remarks.

My hon. Friend the Member for Bassetlaw, who is also a former councillor, made an excellent speech. He explained why the White Paper and the forthcoming Bill are so crucial, giving examples of the problems that exist in the current system. The hon. Member for Falmouth and Camborne expressed a similar view when she said that the status quo could be improved, and that we should do our best to improve it. My hon. Friend's analysis of the Icelandic crisis was cool and measured. He rightly said observed that at some stage we must re-evaluate the reasons for the position in which certain councils find themselves, and 22 May is clearly a date that we shall want to revisit.

Mike Penning is a friend, and I always enjoy his contributions. He spends a great deal of time in the Chamber. I recall his raising the issue that he raised today back in the days when I was parliamentary private secretary to the Leader of the House. The Buncefield issue is important to him, and it should be important to the rest of us. As the Minister responsible for fire and rescue, I can assure him that we are considering all the issues relating to Buncefield in the light of the hazards report. I shall write to him, and if he is not satisfied with my response I shall be happy to meet him. I recognise that his passion arises from concerns expressed to him by his constituents, and his own frustration over what he considers to be inaction over the past two or three years.

The hon. Gentleman mentioned empty property relief for business premises. As he will appreciate, on day 10 of my new job I am not entirely on top of the subject.

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Photo of Sadiq Khan Sadiq Khan The Parliamentary Under-Secretary of State for Communities and Local Government

The shadow Deputy Chief Whip is heckling me from a sedentary position. I ask him to give me time. We shall see what we can do.

Mr. Binley made an interesting speech. He spoke of the way in which the south is deprived by the rich, the way in which the relative-needs formula is unfair on his constituents, and the way in which his council is poorly funded. Some of us talk of a victim mentality. That applies not just to certain groups or communities, but to certain Members of Parliament and councils who speak of what they consider to be partial funding. But let me add, in fairness to the hon. Gentleman, that at least he was brave enough to come forward with a manifesto on local government for his party. He wants to abolish the national standards regime, to change the funding regime, and to abolish the Barnett formula. We shall see whether his suggestions are taken up by those on his Front Bench.

Mr. Goodman spoke, characteristically, in a partial, unbalanced but witty fashion. I enjoyed his contribution, as I always do. I think that he and I agree on the ends—such as community cohesion—and also on some of the challenges that we face, although I suspect that we disagree to an extent on the means. He was wise to point out that issues of terrorism and extremism are not the purview of a single faith, religion or race, and I am pleased that he gave other similar examples. I shall write to him to answer some his questions, but if he considers a meeting with me to be desirable, I shall be happy to meet him—with or without officials—to discuss the issues that he raised. We need national unity during the times of crisis that he described, as well as at times of economic crisis.

This has been a very important debate, and I congratulate all who were able to take part in it.

It being Seven o'clock, the motion lapsed, without Question put .

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Photo of Mike Penning Mike Penning Shadow Minister (Health)

On a point of order, Mr. Speaker. I do not want to pick on any particular Member, but many of us have sat in the Chamber for hours today during this very important and detailed debate with contributions from all sides, and it is enormously frustrating for those of us who have sat here for so long to find that a Member has walked in and sat on an empty Bench in another part of the Chamber and got preferential treatment because a Deputy Speaker had no choice but to call them, even though they have not participated in the debate and do not know what comments have been made from the Front or Back Benches. As I have said, this is not particularly an attack on the Member who did that, but it is hugely frustrating for Back Benchers who sit here for hours on end trying to speak in an important debate. What protection can you give us, Mr. Speaker?

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

Order. This is difficult. I am the custodian of the rules, and anything that happened here tonight was within the rules. If it is any comfort to the hon. Gentleman, let me tell him that these things happened to me in 1979—that is going back a wee bit—when I was sitting on the Benches the hon. Gentleman is sitting on now. So these things have happened before. However, perhaps I can use this opportunity to put on the record that I expect Members—if possible, as I know there are other pressures on them—to be present for the opening speeches. They should at least hear the Government Front-Bench and official Opposition speeches; that is no disrespect to the Liberal Democrats, but that is the way it should be. If Members then have to leave the Chamber, perhaps they can come back and hear as much of the debate as possible. It has also come to my attention that sometimes official Opposition spokesmen and women and Government Ministers do not return for the wind-ups—that has not been the case in this debate, but it has happened in other debates—and I am putting on the record that I expect the same of Front-Bench Members as I expect of Back Benchers. With that little lesson over, I think we can move on to the Adjournment debate.

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