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Local Authority Expenditure

Volume 301: debated on Thursday 27 November 1997

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What studies the Treasury has undertaken into the impact on (a) the national economy and (b) prospects for meeting the convergence criteria for economic and monetary union of the removal of local authority self-financed expenditure from the control total. [16598]

I am not aware of any specific studies of that sort, but I look forward to hearing the hon. Gentleman's supplementary question.

The Government's insistence on retaining capping and on keeping local authorities' self-financed expenditure within the control total is a major reason for many local council cuts. It is therefore an important issue. Will the Minister explain why the Government are so insistent on that policy? If a council, reflecting the democratic wishes of its voters, raises £1 million more in council tax and invests it in employing 40 or 50 more teachers, those teachers will live and spend their money locally. Much of the money—perhaps a quarter or a third—will come back to the Treasury in increased taxes. How does that have a disastrous effect on the national economy, or prevent us from signing up to something with Europe? It is nonsense and I should like some explanation.

The hon. Gentleman will be aware of the £1 billion extra that we have given to schools, which is £1 billion more than even his party asked for. On the narrow question of the control total, with which he seems to be obsessed, he, his local authority and other local authorities should consider what they can do in partnership with the private sector. We are introducing legislation to enable them to do that and we have set up a new energetic task force in the Treasury, run by the private sector, to get private-public partnerships going with local authorities. That is where he should put his efforts.

Will the Minister confirm that, before spending any available money on schools or social services, local authorities are under a legal obligation to put money into their pension funds to make up the cost of his July tax measures?

The hon. Gentleman knows that that question will not arise for two and a half years. It is being studied and we are in discussion with local authorities to find a proper resolution to it in due course.