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

My hon. Friend may be aware that her local authority has received an extra £18 million this year. She makes a very valid point, but the reaction that she describes is perhaps an inevitable part of human nature. There will always be more complaints from those who believe that they should have got more than there will be praise from those who have been protected by the system. She is absolutely right to make that observation. My firm belief is that not only in this year, but in previous years, the Government have worked hard to get the balance right between the ceiling and the floor, to ensure that the pace of change is reasonably predictable and understandable by local authorities.

I was speaking about how I resisted the call of the Opposition last year to cut my Department's grants to local authorities by several hundred million pounds. The councillors who wrote to The Daily Telegraph may have been embarrassed by the truth, which is that the councils that have loaded most burden on to council tax payers have been Conservative. Of the 50 councils with the highest increases in council tax over the first 10 years of this Government, around 30 are Conservative-controlled. Labour controls just five.

The current settlement means that we can expect the average band D council tax increase to fall to a 16-year low. Many councils have already indicated that they plan for modest council tax increases or none at all, including all eight London Labour councils, which have committed to a council tax freeze while protecting front-line services. Our expectation this year follows last year's average increase of just 3 per cent., the lowest since 1994-95.

That is good news for council tax payers from the Labour Government. What would they get from the Opposition? An apparently attractive but empty and unfunded promise. On 30 September 2008 Mr. Cameron told the BBC that council tax would be frozen for two years under a Conservative Government. The Conservative party press release of 29 September 2008 said that the cost would be £500 million in the first year and £1 billion in "subsequent years". It said that that would be funded from cuts in advertising and consultancy budgets.

Latest costings show that the Opposition have seriously underestimated the cost. A two-year freeze starting this year would cost £1.970 billion-£650 million in the first year, and £1.320 billion in the second year and every year after that. Even on the Opposition's own figures there is a £470 million gap, so I wonder whether that is likely to happen.

On 7 January the Leader of the Opposition told the BBC:

"No, no we have a pledge to do that"- the two-year freeze-

"because we found the money to do that by cutting government advertising and government consultancy."

Asked by the BBC's admirable Evan Davis:

"Hang on, why don't you cut the government advertising and other budgets in order to reduce the deficit, not council tax?", the Leader of the Opposition insisted that the freeze would go ahead. So would it happen? Is it a promise, or merely another vague aspiration? Apparently it will go ahead. [Interruption.] Well, those taking part in council tax debates throughout the country need the answer today.

Last Sunday, the shadow Chancellor had a different use for cuts in advertising and consultancy.

"To reduce the deficit," he said,

"we can move quickly on the advertising budget, the big government consultancy budget".

Yesterday, asked by the BBC's equally admirable Nick Robinson about cutting spending to cut the deficit, Mr. Osborne said:

"We pointed to the advertising and consultancy budgets."

Which is it? Cuts in advertising and consultancy to reduce the deficit or to reduce council tax? It cannot be both. The House and local councils need to hear some answers today before promises are made at local level. There have been many candidates from Opposition parties dropping leaflets through letterboxes over the past few weeks promising a freeze in council tax without any explanation of how even part of it is to be funded.

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