Local Government Finances

Part of Opposition Day — [1st allotted day] – in the House of Commons at 7:17 pm on 8 December 2009.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party 7:17, 8 December 2009

The hon. Gentleman makes an entirely fair point. I have only to look at the circumstances of my outer-London borough, which has many pockets of deprivation but is on the floor again for the seventh or eighth year running. When we see that fully two thirds of all London boroughs-of any kind-have ended up on the floor, we wonder about the reliability of the calculations that gave rise to that situation.

Although the floor system worked in the past, it has stretched many local authorities to such an extent that the gearing, particularly in shire districts, places very high burdens on them. The floor for a shire district is set at 0.5 per cent. Such districts are far more dependent than most local authorities on investment income, which has now fallen to about 0.5 per cent. so as their floor funding is limited to the same figure, the gearing effect means that their council tax rise is much more significant than in any other part of the country. Shire areas are significantly disadvantaged by the operation of the formula system.