Local Government Finance

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 4:33 pm on 3rd February 2010.

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Photo of John Denham John Denham The Secretary of State for Communities and Local Government 4:33 pm, 3rd February 2010

Before I come to the main body of my remarks, may I say that it was and is the intention that the Under-Secretary of State for Communities and Local Government, my hon. Friend Barbara Follett, should reply to the debate? Timings in the House are uncertain and she will be dealing with an Adjournment debate in Westminster Hall for half an hour. I hope that it will be acceptable to you, Madam Deputy Speaker, and to the House if she replies to the debate-she has undertaken much of the individual correspondence and meetings with local authorities and she might be in a good position to respond to particular cases that are raised.

Before I discuss the good financial settlement that is on offer for councils again this year, I want to draw the House's attention to the 2010-11 "Housing Revenue Account Subsidy Determination" that the Government have issued today. It confirms that next year's local authority average guideline rent increase will be set at 3.1 per cent., not 6.1 per cent. as was previously agreed, because the Government believe that the previous increase would not be fair or affordable for tenants. Those considerations have always been our priority, and that will not change. What we have put in place this year will not mean steep rent increases for council tenants in the next few years.

The same concern about affordability has informed the decision that was announced by my hon. Friend in November, that the Government were capping the police authorities of Cheshire, Leicestershire and Warwickshire because of previous excessive increases. Cheshire and Leicestershire have accepted the budget caps that we have proposed, whereas Warwickshire exercised its right to challenge. After careful consideration, I have laid an order for the House's approval to set Warwickshire a maximum budget requirement of £90,395,000 for 2010-11. The intention is to limit all three authorities to the equivalent of a 3 per cent. increase in council tax over 2009-10 and 2010-11. No other capping decisions have been taken for 2010-11, but we will not hesitate to cap excessive increases that have been set by individual authorities, if necessary.

Let me address the main subject of the debate-the financial settlement for local government. This is the final year of the first ever three-year settlement, which involves an £8.6 billion increase over three years, with an average increase of 4 per cent. over each of the three years and of 4 per cent. again for the coming year. The increase for this year is made up of a 2.6 per cent. increase of formula grant, bringing the total to £29 billion; a £5 billion area-based grant, which includes funding for the supporting people programme, the working neighbourhoods fund and the rural bus subsidy; and specific revenue grants of £42.2 billion, which includes, for example, the dedicated schools grant. Every council will receive an increase in funding.

This year's settlement comes on the back of a 39 per cent. increase in real-terms funding in the decade up to 2007-08. In that decade, power and responsibility were transferred to councils, giving them greater stability, freedoms and flexibilities. Almost £6 billion has been moved into such budgets with no strings attached. The performance framework has been slimmed down from 1,200 targets to fewer than 200. Next year, councils will also gain responsibility for commissioning education and training, which will be worth a further £7 billion.

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