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Local Government Finance

Part of the debate – in Westminster Hall at 10:41 am on 3rd April 2001.

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Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 10:41 am, 3rd April 2001

It is a great pleasure to be in this Chamber under your chairmanship, Mr. Amess.

I congratulate Mr. Darvill on securing this important debate. It would be unfair to describe those who are assembled here as "anoraks". We are not sad people--at least, not in this context. The hon. Gentleman raised some important matters and gave us the opportunity to probe the Government, in the estimable shape of the Minister, about their intentions. The Govt have published the Green Paper, taken consultations and had time to mull things over.

One of the problems about a Government coming to the end of their natural life is the tendency of Ministers to kick things into what is known in Whitehall as the long grass--the grass has never been longer or more widely spread than under this Government. The fly in the ointment is the postponement of the election to 7 June or whenever, because that means some things that are now in the long grass--hunting and so on--will have to be extracted from it.

On the more arcane issue of local government finance, we are entitled to know, in the dying days of this Government, whether Ministers will produce a White Paper on the subject. The last date for responses to the Green Paper was 8 December and it is high time that Ministers gave us their definitive views on the subject.

A problem with postponing local elections to June, or whenever, is that some fragile budgets have been put in place by regimes that expect to be booted out. My county, East Sussex, is a prime example. The Lib-Lab pact has made a complete mess of the budget and has left behind--or is hoping to leave behind--a fragile budget replete with booby traps for the incoming Conservative administration. It will be interesting to see how the Lib-Lab pact manages to soldier on, trying to operate the budget for the early part of the new financial year.

The comments made by the hon. Member for Upminster were thoughtful, although it was unfair to blame the Opposition for the lack of time available to debate the rate support grant, which is a matter for Government business managers. However, he was right to mention some of the defects in the current system. He touched on the Government's centralising agenda. Under this Government, local government finance is a major weapon for imposing a tighter grip from central Government on local democracy.

The hon. Gentleman mentioned best value, which has got completely out of control and which will need radical review under the next Conservative Government. He also talked about capping. With the effrontery that only politicians can manage, he denied that he would go into the subject of special pleading, of which he then gave us a lengthy example as it affects Havering. He was not alone in doing so--he thought that the settlement was not as good as it looked and talked about underfunding. He also mentioned large increases in council tax in his area.

The most useful parts of the hon. Gentleman's speech were his comments on floors and ceilings. A complaint about the Government's attitude to local government finance is that they claim to be in a period of stability, as they persist in calling it, with a freeze on standard spending assessment methodology. There are problems with that so-called freeze. At the start of the period, the Government made the conscious decision to shift resources away from shire areas and London--to the tune of hundreds of millions of pounds--and the three-year period of stability cemented in those unfairnesses for a significant period.

The Government are also bumping up against the problem of area cost adjustment. As Mr. Kidney said, opinions differ on that subject, depending which part of the country an hon. Member represents. A Government faced with new data informing the calculation of area cost adjustment are in a predicament. Do they allow the new figures to be put into effect--that may cause even more steam to come out of the ears of the hon. Member for Stafford and his friends in the F40 group--or do they tinker with the system? In that respect, the hon. Member for Upminster put his finger on a major problem. Havering is one of a group of councils, which includes Newham, that have suffered a 0.2 per cent. loss in grant because of the introduction of floors and ceilings. The hon. Member for Stafford said again that it is a matter of top-slicing the money and redistributing it; it is not new money for people who are being given extra help, but money that is being taken away from all local councils, especially those on the list that includes Havering, which is losing even more grant because of the new ceiling arrangements.

In the middle of a so-called freeze of methodology, when the Government are supposed to be sitting in a darkened room taking account of representations on the Green Paper and taking serious decisions about the future of local government finance, they are merely tinkering with the system at the edges. They are just dipping their toe in the water; if it works this year and the Government think that they can get away with it, it is a wonderful opportunity for Ministers to make politically informed decisions about distributing grant around the country.

It was fascinating to hear the hon. Member for Upminster touch on that issue when he sounded a warning bell about ministerial discretion. There are two schools of thought on the Government Benches: first, that they do not want plan-based funding, and secondly, that they want a simplified formula. The only problem is that one authority's simplified formula is another's gross unfairness. The Minister will warn us about the search for undue simplicity in the formulas, but there is a consensus on the Labour Benches that plan-based funding is not the answer. In large measure, that is because of their suspicion and, if they are suspicious, what are the rest of us to say of ministerial power and the centralising power of Government over local authorities? It we are not careful it will be yet another mechanism that the Government will put in place to control the agenda of local authorities.

If there is not to be a simplified formula-based system, there is growing support on the Labour Benches for ministerial discretion, or interference, and we all know what that means. Already, specific grants under this Government have risen dramatically; they have gone up even in this year by more than 18 per cent. as a proportion of total grant. The growth in competition for particular pots of money is often time wasting and expensive for local authorities, especially those who do not succeed and now there is to be a system of floors and ceilings, which will allow Ministers to interfere, subject to representations from their hon. Friends--